The Health Policy Hustle
Election years generally feature shorter and less complex policy agendas, but that won’t be the case in 2020.
Battles over cost — such as the public option, total cost of care, reinsurance, and affordability standards -— will provide much of the action in health policy.
Given the decennial U.S. Census and momentous state and national elections, the drama won’t end with the session in May.
The most dramatic storyline will involve hospitals squaring off against the Department of Health Care Policy and Financing (HCPF) and the Division of Insurance (DOI) over a proposal to create a “public option” insurance program. Hospitals and insurance carriers already have signaled their opposition to the proposal, and it promises to revive — and ramp up — existing conflicts between those industries and the state over government efforts to reduce the cost of care. The tilt is set against a backdrop of uncertainty involving the state’s economics, politics, and policy context in a year that has much on the line.
On the economic front, the possibility of a recession seems increasingly likely. Colorado is still enjoying a record-long economic expansion, but economists seem to agree that the good times have to end, perhaps within the next year or two. The long boom has emboldened legislators to devote state funds to expensive new priorities in recent sessions, and Gov. Jared Polis’ priorities are far from cheap, raising questions about whether the state can keep these programs going in the future.
In Colorado and nationally, there is a lack of agreement about health policy direction. A recent survey by The Commonwealth Fund, Harvard T.H. Chan School of Public Health, and The New York Times found that approximately equal numbers of respondents expressed support for Medicare for All, building on the Affordable Care Act (ACA), and a conservative plan to reduce federal involvement and increase states’ autonomy over payment and care delivery. And while Democrats are firmly in control of Colorado’s state government this year, there isn’t always agreement on the right way to use the state’s limited funds, especially when it comes to expensive health care initiatives.
The combination of a presidential election year (that also involves elections for three-quarters of seats in the state legislature), impeachment proceedings against President Donald Trump, and increasingly partisan politics means that tensions are high and rising. Political pressures may influence policy debates during the session. Legislators will likely be torn between campaigning on one hand and lawmaking on the other.
The new legislative session, which begins today, will feature hundreds of important policy proposals, including those dealing with mental health, immunizations, pharmaceuticals, and tobacco. In addition, legislators will consider next steps on ambitious new insurance and cost control initiatives set in motion in 2019 by the Polis administration. Objective resources and thoughtful discussions will be more important than ever as a tool to cut through the noise.
And the debate won’t end in early May when the legislature adjourns. With a major election in November and the decennial U.S. Census going into the field, this year will involve numerous consequential decisions for health policy. It’s been said that there is no quality more lauded or rewarded in America than hustle, and the entire policy community — from elected officials to those who watch, challenge, and support them — will need plenty of it to achieve their ambitious goals in 2020.
The Political and Budget Landscape
While 2020 is another year of Democratic control of the state government, the session will rarely see unified agreement. The margin in the Senate is close — 19 Democrats and 16 Republicans — meaning that Democrats can only afford to lose a single vote and still pass a bill if they don’t have Republican members on board. Since the beginning of the 2019 session, Republicans have charged Democrats with overreach and resistance to finding common ground. The overt politics of a major election year will be difficult to escape, and some legislators already are agitated by six attempted recall campaigns during the interim that aimed to remove the governor, two Democratic representatives, and three Democratic senators. None were successful.
Results from the November 2019 election paint a complex picture of politics at the state level and point to Colorado’s persistent libertarian streak. A clear example is the defeat of Proposition CC, which would have removed the Taxpayer’s Bill of Rights (TABOR) requirement that the state issue refunds to taxpayers for revenue it collects above an allowed amount. For years, voters have rejected new statewide taxes and resisted perceived attacks on fiscal conservatism, even while sending an increasing number of Democrats to the statehouse. A “yes” vote on CC would have immediately helped the governor secure additional funding for his priorities, but the “no” vote means the General Fund will have to continue paying TABOR refunds.
Colorado voters were split on Proposition DD, which asked them to legalize and tax sports betting, with proceeds funding the state’s water plan. The measure barely passed, showing that residents are divided over “sin taxes.” Clearly, Colorado is not a solid blue state no matter what national maps might show.
A year into the Polis administration, it is clear that the new governor’s priorities and leadership style differ greatly from his predecessor. Former Gov. John Hickenlooper preferred to keep his distance from the legislature and focus on promoting economic development. Polis is an experienced legislator who has been keen to use the General Assembly to pass laws that advance his agenda. In health policy, that has meant a focus on cutting costs for consumers.
Two holdovers from Hickenlooper’s administration are playing key roles in shaping Polis’ health agenda: Michael Conway, the state’s insurance commissioner, and Kim Bimestefer, director of HCPF.
DOI has traditionally limited itself to the technical details of reviewing insurance prices. Under Conway, it has sought to create new policies that allow DOI to increasingly shape the insurance and health care market, not just oversee it.
HCPF insures about a fifth of Colorado’s population through Medicaid. Under Bimestefer, the agency has started to use that market power to try to drive down prices, not just for Medicaid members but for the whole state.
The state budget continues to grow, with the governor’s Fiscal Year 2020-21 request totaling about 3 percent more than the current fiscal year. This rate increase exceeds population growth and inflation, meaning Coloradans should anticipate TABOR refunds.
HCPF accounts for more than a quarter of the General Fund, the portion of the budget supported by state taxes and fees. Even larger is the Department of Education, which takes more than a third of the General Fund. At the opposite end of the spectrum, the Department of Public Health and Environment (CDPHE) consumes just a sliver of the General Fund — about half of one percent.
Polis is requesting cuts for some state agencies, such as the Departments of Local Affairs and Natural Resources. Even if some spending is trimmed, the General Fund will still increase by more than $400 million. HCPF’s increase accounts for about 55 percent of that growth. See Appendix B for more detail on the budget.
Examples of General Fund requests include nearly $30 million for expanded preschool for at-risk children, $5.5 million for a paid family leave program for state employees, $2.5 million for child immunization outreach, and slightly more than $1 million for new pharmaceutical monitoring and prescribing technology — a response to the opioid crisis and growing focus on cost control. In addition, the budget includes $17.5 million for a new inpatient and residential substance use treatment benefit under Medicaid. HCPF points out that the substance use treatment amount is less than what was expected when HB 18-1136 passed, a change the department attributes to limited treatment capacity. The governor is also asking legislators to dedicate more money for Child Health Plan Plus (CHP+) and to bolster the state reserve in anticipation of a future recession, which together require nearly $60 million.
All Eyes on the Senate
If pieces of the Democrats’ agenda are derailed anywhere, it’s likely to be in the Senate. President Leroy Garcia (D-Pueblo) will continue working to balance the will of constituents in his moderate district with the ambitious goals of some members of his party. Sen. Brittany Pettersen (D-Lakewood) is expecting to be on maternity leave for some portion of the session, which leaves Democrats with no room for error in close votes, and a vacancy committee will fill the seat of Sen. Lois Court (D-Denver) due to her illness. As campaigns take shape, all eyes will be on a handful of close races to decide whether the Senate will remain in Democrats’ control in 2021 or switch back to Republican leadership.
Battles Over Cost
In 2019, the legislature opened the floodgates for health reform bills that had been dammed up for years. It approved a reinsurance fund, authorization for community purchasing alliances, a study of a public option for health insurance, and importation of prescription drugs from Canada. It also gave the insurance commissioner broad new powers to regulate health care costs.
It’s likely that these topics will provide much of the action in health policy in the legislature, in rulemaking hearings, and possibly in the courts.
When the public option recommendations were released in October, they came as a surprise to much of the health policy community. The proposal would require private insurers operating in the individual market to offer a state-designed plan along with their other options, with coverage taking effect in 2022.
Colorado’s version of the public option is a new idea on the American health policy stage.
Instead of pushing out private insurers — as Medicare for All or a public option built around Medicaid might do — the Colorado proposal boosts their role in the market. However, carriers are fighting the mandate that at least two insurers offer the public option in every Colorado county, creating the possibility of forced participation in some counties under the authority of the insurance commissioner. Hospitals are vehemently opposed to the public option plan because it would lower reimbursement rates for their services.
In a nutshell, reinsurance acts like insurance for insurance companies, reducing their risk by covering their highest-cost consumers and leading to lower premium prices for their customers.
Colorado’s new reinsurance program caused individual market premiums to drop by a statewide average of 20 percent for coverage this year. That’s a relief for many individual market customers who had faced annual increases of 20 percent to 30 percent in previous years.
Despite evidence that reinsurance is working to lower premiums, the program isn’t cheap and is only slated to last two years unless the legislature extends it. Joint Budget Committee meetings in December pointed out an 800 percent increase from the initial $20 million price tag for reinsurance, but the Polis administration says this is misleading, as most of the increase is tied to reinsurance’s TABOR revenue impact. Polis has also requested $60 million to cover a projected deficit in the program’s second year and to secure funding for a potential third year, which would require legislation.
The price tag for reinsurance will make it a target for legislators who would rather spend those General Fund dollars on other priorities. Hospitals have voiced opposition to this program, too, because part of the funding comes from a fee on hospitals.
Expect to see all these issues and more come up when legislators consider extending and funding the reinsurance program during the session.
Community Purchasing Alliances
Another new idea in the mix is the community purchasing alliance. The most well-known is Summit County’s Peak Health Alliance, which was launched last fall with support from Conway and DOI. Coverage through the first Peak plans went into effect on New Year’s Day.
The model saves consumers in the individual and small-group markets money by driving a harder bargain in negotiations with local providers. The idea is gaining traction. Peak has expanded into Grand County and the Four Corners region, and other counties and business groups are looking at creating their own alliances. Polis is a fan of this model and has spoken publicly about creating a similar program statewide, though details of that proposal are largely unknown.
Affordability and Transparency
Other recent initiatives change the way health care bills are paid, who pays them, and how we keep track of spending.
HB 19-1233, which passed last year, calls for greater spending by insurers on primary care. But an overlooked section of the bill might prove to be the most consequential. It gives DOI the authority to regulate the affordability of insurance policies. Conway announced at CHI’s Hot Issues in Health conference in December that DOI intends to set hospital reimbursement rates in all the health insurance policies it regulates, which cover more than 1 million people. This plan would expand the controversial idea of hospital rate-setting far beyond the public option.
DOI’s plans come amid other important changes from the 2019 session. There are new regulations and protections for out-of-network billing, which can result in hefty medical charges. According to the 2019 Colorado Health Access Survey (CHAS), nearly one in three Coloradans has received a surprise medical bill in the past year.
Hospitals are now required to publish financial reports, set to be released this month for the first time, that will help policymakers evaluate hospitals’ performance and inform future legislative efforts. HCPF is in the early stages of the Hospital Transformation Program, which shifts the way hospitals are paid to reward quality and process improvements rather than the volume of care. Finally, HCPF and some legislators are taking a closer look at how hospitals are spending community benefit dollars, which justify their tax-exempt status.
A tie that binds many of these new laws and regulations is how they impact hospitals — and how hospitals will react. In some rural parts of the state, hospitals are barely staying afloat, and legislators will hear a lot about that from their local providers and industry associations. There are also hospital systems within the state that are bringing in profits of around a billion dollars a year. Calibrating each initiative to work together and to target high hospital profits without bankrupting other facilities will be a difficult job.
NEW THIS YEAR
Total Cost of Care
Hospitals are feeling the pressure from multiple angles as they are asked to help fund or generate savings for these sizable new initiatives. They are countering with a proposal known as “total cost of care.” Six other states have something similar in place, with Massachusetts’ program being the most established.
While details are limited, this model sets goals for reducing costs across all parts of the health care system, including carriers, pharmaceutical companies, and others in addition to hospitals. Hospitals say this comprehensive approach is both fairer and more effective, and they note that it avoids rate setting, which is a component of the state’s public option plan. Hospitals say their proposal could result in $3.3 billion in system savings over the first five years based on initial estimates. Expect significant time, energy, and money to be devoted to the debate over total cost of care and the question of whether it should be an alternative to the public option.