What States Can Learn From One Another on Health Care


We know that where you live matters: There are huge disparities in health and costs across the country.

The uninsured rate in Texas is six times higher than in Massachusetts. You’re four times more likely to be readmitted to the hospital in Maryland or New Jersey than in Hawaii. One-third of low-income adults in Texas forgo medical care because of cost, but only 9 percent in Vermont do. Alaska spends twice as much on health care per person as Utah does.

If all states were to improve to the level of top performers, we’d see gains across the country: 20 million more people insured and 14 million fewer skipping care because of cost; 12 million more adults screened for cancer and 500,000 more children vaccinated; 124,000 fewer hospital readmissions and 90,000 fewer premature deaths.

How can we get there? Although it’s important to learn from states at the top, it’s perhaps more instructive to see what states with large improvements are doing, or have done, to get better.

Health care is perhaps the area most consistently recognized as ripe for state-based policy innovation, in keeping with the ideal of states as laboratories of democracy. Nearly all recent health reform proposals, especially from Republicans, focus on granting states greater flexibility to design and manage their health systems.

Seema Verma, the director of the Centers for Medicare and Medicaid Services, has promised to give states an “unprecedented level of flexibility” to devise their Medicaid programs, including the option to impose work requirements. Senators Lamar Alexander and Patty Murray have put forth a plan to make it easier for states to get federal waivers to reshape their health systems.

There are good reasons to pursue such a strategy. States have markedly different populations with varying needs, resources and cultures — and systems that work well in one state may not work well in another. But what do we know about how states use health policy freedom?

Stabilizing Marketplaces and Lowering Premiums

One fundamental challenge in the Obamacare insurance marketplaces is that a few very sick patients can increase premiums for everyone, especially in states with small individual markets. To address this problem, Alaska applied for a Section 1332 waiver to expand its reinsurance program, which brings in federal funds to cover costs for people with particularly expensive conditions.

Alaska thus “reinsures” its insurers for high-cost patients, and prevents those costs from being passed on to healthier people. Because premiums don’t rise as steeply, the federal government pays out less in premium subsidies — keeping the program deficit-neutral. The waiver is expected to lower premiums by 20 percent in 2018, and insure nearly 1,500 additional Alaskans.

Minnesota recently received a similar waiver, and several other states are exploring their own reinsurance programs.

Tackling Health Care Prices

Prices for health care services vary widely across the United States with little relation to quality. The price of an M.R.I., for example, is 12 times higher in the most expensive markets than in the least expensive ones, and can vary by a factor of nine even within the same area.

In 2011, the California Public Employees’ Retirement System (Calpers) changed how it paid for common procedures, a move that drastically reduced prices and saved the state millions. Before the initiative, prices for knee and hip replacements ranged from $15,000 to $100,000 with no difference in quality. That’s when Calpers introduced reference pricing — meaning it set an upper limit on how much it would pay for a given procedure, and patients would pay the rest.

For example, Calpers would pay up to $30,000 for knee or hip surgery at 41 acceptable-quality hospitals, defined by measures like infection and readmission rates. Patients could still go wherever they wanted, but would have to cover the additional cost of a high-priced hospital.

The results were impressive. Referrals to lower-priced hospitals increased by nearly 20 percent. The average price of the procedures dropped to about $26,000 from $35,000 — driven primarily by hospitals not initially included, and hoping to compete. There was no change in how well patients did or how much they paid out of pocket. California saved $5.5 million on knee and hip operations in the first two years. It also saved $7 million on colonoscopies, $1.3 million on cataract operations, and $2.3 million on arthroscopies. Prices fell by about 20 percent for each procedure.

Reducing Infant Mortality

The United States has one of the highest infant mortality rates among wealthy nations — and does worse than even many poorer countries like Cuba and Belarus. Mississippi’s infant mortality rate puts it on par with Botswana and Bahrain. Babies born in Finland and Japan are three times as likely to see their first birthday as those born in the United States.

Georgia, which recently had one of the highest infant mortality rates in the country, has had perhaps the largest improvement in the past decade. The state has taken a three-pronged approach to the problem.

First, it began a Safe to Sleep campaign to educate parents and health care providers about putting babies on their backs to sleep, in a separate bed, free of loose bedding or soft objects. The Department of Public Health developed “hot-spot” maps to focus the campaign on six areas with the highest infant mortality.

Second, based on research suggesting that short intervals between births lead to poorer outcomes, Georgia introduced a program to expand access to long-acting reversible contraception (LARC). The state received a Medicaid waiver so it could be reimbursed for LARC insertion immediately after births in the hospital, overcoming a major barrier to broader LARC use among low-income women.

Finally, Georgia aimed to reduce early elective deliveries, which increase the risk of feeding, breathing and developmental problems, by changing its reimbursement policy so that non-medically necessary inductions and cesarean sections before 39 weeks of gestation would no longer be covered.

Back to Basics

There’s much to learn from state-level innovations, but there are also general principles that apply across states. High-performing states have competitive and accessible insurance markets; strategies for data-sharing and health information technology expansion; more value-based purchasing; greater emphasis on primary care; and strong partnerships with community organizations. They also expand Medicaid.

It’s also important to note that many state-level policy changes do not require federal approval, and that states don’t always use their flexibility to improve population health. Proposals that allow states to weaken protections for those with pre-existing conditions, for example, could harm patients and their ability to access care.

Greater flexibility for states is an opportunity, not a solution. The enormous variation in quality, costs and access across the nation should remind us that experiments succeed and experiments fail. Having laboratories is probably a good thing. But it depends on what they cook up.


Dhruv Khullar, M.D., M.P.P., is a physician at NewYork-Presbyterian Hospital and a researcher at the Weill Cornell Department of Healthcare Policy and Research. Follow him on Twitter: @DhruvKhullar.



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