Maryland Lt. Gov. Anthony G. Brown and health Secretary Joshua M. Sharfstein briefed lawmakers in Annapolis this week on a package of bills aimed at setting up the health exchanges states will be required to establish under the new federal health care law passed by Congress last year. Their message: If Maryland is to hit the ground running by 2014, when the most important changes mandated by law kick in, state officials had best start preparing now.
Some lawmakers, citing Republican efforts to overturn the health care reform bill in Washington, are urging Maryland to wait. That would be a mistake. The cost of setting up the exchange is minimal, and it could be an important tool to making the health care system more accessible and affordable regardless of the fate of President Barack Obama's legislation.
Under the federal health care reform act, everyone will be required to buy health insurance. To make that possible for people who aren't already covered through their employers, states would set up new places, called exchanges, where small businesses and individuals could buy insurance at rates comparable to those that big corporations negotiate for their workers. States that don't establish such exchanges could see the federal government step in and do it for them.
The legislation introduced by Gov. Martin O'Malley would create a framework for structuring the state's exchange as an independent government agency, similar to the Maryland Stadium Authority, with a nine-member board consisting of the state health secretary, the insurance commissioner and the executive director of the Maryland Health Care Commission, plus six members appointed by the governor. It would be empowered to set policy and to make any changes in the state's current health care system needed to bring it into compliance with the federal law.
Because the goal is to give the exchange both the flexibility to hire expert staff and the ability to respond quickly to market forces, it would be exempt from some of the rules normally applied to government agencies. But as a public entity, its decisions on tough issues, such as eligibility requirements and benefit levels, would all have to be made out in the open, ensuring that the state's major stakeholders — patients, doctors, hospitals and insurance carriers — all have a seat at the table.
The proposed exchange won't have the power to directly set insurance rates, but it will determine minimum benefit levels and other characteristics of the insurance packages it makes available to buyers. Unlike some states, the administration isn't proposing that the exchange be just a clearinghouse where any insurer who wishes can advertise; instead, it will select the best values for consumers at a variety of coverage levels and promote only those companies in its offerings. That follows Maryland's long-standing practice of mandating minimum coverage levels, but those running the exchange must also ensure sufficient flexibility so that insurance companies provide a variety of products and prices. (Individuals and small businesses would still be able to purchase coverage from carriers who are not on the exchange, but since they would be buying into a smaller pool of consumers they would likely have to pay more for it.)
The immediate cost of the governor's legislation to Maryland taxpayers appears minimal. The state has already received $1 million in seed money from the federal government for initial planning, and it is expected to receive another $5 million grant toward startup costs after the bills are approved by the General Assembly. In addition, the state will be eligible for several million dollars more in early-innovator grants that the government plans to award to five states that show their plans can be replicated elsewhere. That gives Maryland an even greater incentive to move quickly.
This is clearly something that is in Maryland's interest to do, regardless of what happens to the federal health care reform law. Currently, some 14 percent of the state's residents lack health insurance, and when they get sick the bill for their uncompensated care at local hospital emergency rooms is ultimately picked up by taxpayers. That's unsustainable. The bill's sponsors estimate that extending insurance coverage through the health exchange to just half of the 700,000 people who currently lack it would save the state some $850 million over the next 10 years.
In 2006, before the federal health reform act was passed, Massachusetts moved independently to set up its own health exchange as a way to curb spiraling health care costs and improve the quality of care doctors and hospitals provide. Given the burden of skyrocketing health care costs in states across the country, Maryland needs to set a course that will allow it to achieve those goals as well, no matter what happens in Washington.