Promoting cooperative federalism through state shared savings

From the Health Affairs blog:

 A new commentary, being released today as a Web First by Health Affairs, discusses the concept of “cooperative federalism” in light of the Affordable Care Act. It proposes an optional shared savings program between the states and the federal government as a response to concerns that there may be increased federal control over implementation of the health reform laws at the state level because state decisions will determine the level of federal spending. For example, state decisions regarding Medicaid benefits, payment levels, and the use of managed care, and state exchange policies on rate review, qualifying health plans, and defining essential health benefits, would all directly affect health costs. In this proposed program, the federal government would share with the states any federal savings relative to expected expenditures on state-administered health programs; it would not operate through waivers; and the details of the program would develop through open rule making.

In the author’s opinion, relations between state governments and Washington have been in a state of “uneasy truce” in which the federal government has been accommodating by never exercising its full authority, and the states have put to maximum use the flexibility offered, particularly in tailoring the Medicaid program to their needs. However, this truce, the author claims, has been threatened by the expanded scope of federal control in the Affordable Care Act and fears that the federal government will show heavy handedness as implementation of the law proceeds. Proposing a new shared savings program, the author says, “In this program, the federal government would share with the states any savings in comparison to what the federal government expects it would have paid for programs that have federal financial participation.” The author would tie shared savings to performance standards and suggests that the shared savings program be based on a predetermined formula, not negotiated one state at a time. This program, concludes the author, “offers a path forward that would align states and the federal government in their quest for better performance while limiting the risk to program beneficiaries.”

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