Governor Schwarzenegger Sends Letter to Congressional = Leaders on Health Care Reform

Governor Arnold Schwarzenegger today sent = the=20 following letter to the Congressional = leaders=20 encouraging them to act on comprehensive = health=20 reform this year, while outlining specific = concerns with the current health care = reform=20 legislation and reiterating the need to = ensure=20 that an unfair financial burden is not = placed on=20 states:

October 27, 2009

The = Honorable Harry Reid
Majority = Leader
United=20 States Senate
Washington, DC = 20510

The=20 Honorable Nancy Pelosi
Speaker of the=20 House
U.S. House of=20 Representatives
Washington, DC = 20515

The=20 Honorable Mitch McConnell
Minority=20 Leader
United States = Senate
Washington, DC=20 20510

The Honorable John A.=20 Boehner
Minority Leader
U.S. House = of=20 Representatives
Washington, DC=20 20515

Dear Senator Reid, Senator = McConnell,=20 Madam Speaker and Mr. Boehner,

I = have long=20 supported comprehensive health reform and=20 encourage you to enact changes this year = that will=20 attain our shared goals of slowing the = growth in=20 health care costs, improving the quality = of care=20 and providing health insurance coverage = for the=20 uninsured. Congress is closer to = comprehensive=20 health reform than ever before, and we = must all=20 work together to prevent this opportunity = from=20 slipping away.

Successful health = reform=20 must build upon the core principles of = cost=20 containment and affordability; prevention, = wellness and health care quality; and = coverage for=20 all. The pending House and Senate = proposals=20 include significant policy reforms that = will move=20 the nation closer to addressing these core = principles and fixing our broken health = care=20 system. Striking the appropriate balance = between=20 many factors =E2=80=93 including public = program expansion=20 and state fiscal capacity, personal = responsibility=20 for coverage and affordability, insurance = market=20 reform and health care delivery system = reform and=20 cost containment measures and = affordability =E2=80=93 will=20 be the difference between success and = failure.=20 While I believe that the elements of = successful=20 reform have been proposed in one form or = another=20 by Congress, additional work is required = to ensure=20 the reform package contains the necessary = balance=20 to ensure=20 = success.

Affordability

As=20 I have shared with you previously, my = major=20 concern is the affordability of these = proposals=20 for state budgets. The significant = mandatory=20 Medicaid expansions proposed by Congress = will=20 impose hundreds of millions, if not well = in excess=20 of a billion, dollars in new costs each = year on=20 California state government. Our state = cannot=20 afford its current Medicaid program as = structured=20 and governed by federal rules. Mandating = the=20 addition of 25 percent more people into an = already=20 fiscally unsustainable program will only = worsen=20 our situation.

New Medicaid costs = will be=20 driven not only by mandated eligibility=20 expansions, but by the necessity of = raising=20 provider reimbursement rates. The House = proposal=20 properly recognizes that provider rate = increases=20 will be required in order to maintain = sufficient=20 network capacity to ensure those covered = by=20 Medicaid =E2=80=93 projected to grow from = 7 million to 8.6=20 million beneficiaries in California under = pending=20 federal reforms =E2=80=93 can access = physicians and other=20 health services in a timely and = appropriate=20 manner. The House bill=E2=80=99s inclusion = of nearly full=20 federal funding for rate increases for = physicians=20 and other primary care providers = recognizes the=20 necessity of reimbursement changes to = ensure this=20 access for enrollees. I encourage Congress = to=20 build upon the House proposal and fund 100 = percent=20 of the mandated Medicaid eligibility = expansion and=20 rate increases necessary to maintain = adequate=20 network capacity. Without this important = step, the=20 mandatory expansion will only be an empty = promise=20 of health insurance coverage and will = force states=20 like California to cut funding for = education,=20 public safety or other important = responsibilities.=20

On a related issue, federal = reforms must=20 include support for states for the costs = of=20 implementing those reforms. The = responsibilities=20 contemplated for states, such as the=20 infrastructure for the Medicaid expansions = and the=20 health insurance exchange, are = considerable and=20 will be costly to implement. Federal = reforms will=20 fall short on their promise if states = aren=E2=80=99t=20 provided the federal resources to = implement=20 reforms appropriately and well in advance = of the=20 required timelines.

It is clear = that=20 pending Medicaid expansions could cost = California=20 more than $1 billion. Less clear, however, = are the=20 savings that states may be able to attain = when=20 health insurance coverage is significantly = expanded. California has established a = number of=20 state programs that are targeted to = high-risk and=20 high-need uninsured populations with = specialized=20 medical conditions. States like mine will = be=20 reluctant to terminate such programs = without=20 greater clarity and confidence that the=20 specialized medical needs of these = populations and=20 the provider networks upon which they rely = will be=20 replicated in the proposed health = insurance=20 exchange. Without such assurances, it is = premature=20 to assert savings associated with the = elimination=20 of existing state programs. Rather than = requiring=20 these typically medically fragile people = to fend=20 for themselves in the new exchanges, I = encourage=20 Congress to consider federalizing these = state=20 programs.

While I agree that state = Medicaid programs represent an important = safety=20 net for low-income populations, the = proposed=20 Medicaid and Children=E2=80=99s Health = Insurance Program=20 Reauthorization Act (CHIPRA) maintenance = of effort=20 requirements, a series of = =E2=80=9Cclarifications=E2=80=9D to=20 Medicaid law and new state mandates are = troubling=20 and problematic. Such provisions will have = significant financial impacts on state = programs,=20 dramatically limit states=E2=80=99 ability = to directly=20 manage and control Medicaid costs and = likely=20 involve states and the federal government = in a=20 never-ending cycle of litigation. For = example, new=20 and expanded Medicaid rules regarding = provider=20 reimbursement reporting, the expansion of=20 mandatory Medicaid benefits and a = broadened=20 definition of =E2=80=9Cmedical = assistance=E2=80=9D would place=20 significant new burdens on states and = limit our=20 ability to control costs.

In the = absence=20 of full funding of new federal mandates, = it is=20 prudent for Congress to provide states = with=20 additional authority to manage within = available=20 state resources following the proposed=20 implementation of the Medicaid expansions = in 2014.=20 Federal assistance in this context could = take a=20 number of forms, including flexibility = related to=20 benefit requirements, cost-sharing and = Medicaid=20 and exchange eligibility. Moreover, if = Congress=20 insists on a state maintenance of effort = prior to=20 the proposed 2014 reform implementation, = Congress=20 should include a corresponding = continuation of the=20 enhanced federal medical assistance = percentage=20 (FMAP) provided under the American = Recovery and=20 Reinvestment Act (ARRA). =

Cost=20 Containment

Meaningful = progress in=20 slowing the rate growth of health care = costs will=20 require meaningful changes in the health = care=20 delivery system. While ARRA included = important=20 reforms, such as financing for health = information=20 exchange and technology and comparative=20 effectiveness research, pending reforms = must go=20 further in containing and lowering medical = costs=20 in the long term.

Toward that end, = I=20 encourage Congress to look more closely at = available cost containment ideas that have = not=20 been fully considered. One such area is = medical=20 liability reform. California has led = medical=20 liability reform, and physicians in the = state=20 operate under some of the lowest medical=20 malpractice rates in the country. Lower = medical=20 malpractice insurance rates can lower = costs=20 throughout the delivery system. A recent = analysis=20 by the Congressional Budget Office = indicates that=20 the federal government could save up to = $54=20 billion over 10 years by enacting medical=20 liability reforms. These common sense = reforms=20 should be included in national health = reform=20 efforts.

Additionally, Congress = must be=20 more aggressive in controlling health care = costs=20 for the dually eligible population. = Medicare and=20 Medicaid spending is approaching $250 = billion=20 annually for the dually eligible = population, and=20 this care is seldom coordinated to ensure = quality=20 or effectiveness. While I firmly believe = the=20 federal government should take full = responsibility=20 for the care and cost of providing health = services=20 for this population, many states =E2=80=93 = including=20 California =E2=80=93 would be willing to = take on the=20 responsibility of care coordination if = provided=20 the opportunity and allowed to share in = the=20 combined Medicaid and Medicare savings = that would=20 result. Even a small 5 percent savings for = this=20 group would result in tens of billions of = dollars=20 in savings over the next decade. Limited=20 demonstrations and pilot programs in this = area=20 will not be sufficient to move the health = care=20 cost curve of this high-need, high-cost = population=20 in the right direction. =

Prevention=20 and Wellness

I am = encouraged by the=20 many positive proposals to include = comprehensive=20 prevention, wellness and chronic disease=20 management programs as part of national = health=20 reform. As a nation, we must be as = aggressive as=20 possible in this area. Over the long term, = prevention and health promotion efforts = can make a=20 meaningful contribution in bending the = health care=20 cost curve.

Expanded prevention = and=20 wellness activities can also improve = health=20 outcomes and slow health care costs in the = near=20 term, as evidenced by initiatives = undertaken by=20 some prominent corporations, such as = Safeway. I=20 strongly support proposals that promote = prevention=20 in the context of an individual=E2=80=99s = health insurance=20 coverage, such as no cost-sharing for = prevention=20 services and positive incentives for = participating=20 in programs that improve personal health. = These=20 should be standards for both private and = public=20 insurance = products.

Correspondingly,=20 aggressive population-based public health=20 investments can be hugely beneficial in = improving=20 the health status of broad segments of the = population, especially those most at risk, = and=20 reducing health care costs. = California=E2=80=99s=20 nation-leading campaign against smoking is = an=20 example of the long-term benefits that can = be=20 attained from these public health = initiatives.=20 Since its inception in 1989, our = state=E2=80=99s=20 community-based anti-tobacco effort has=20 dramatically reduced adult and youth = smoking=20 rates. In so doing, California has saved = more than=20 a million lives along with an astounding = $86=20 billion dollars in health care costs. = People do=20 listen and change their behavior when they = have=20 the facts about living healthier, are = protected=20 from known health hazards and live in = communities=20 that support healthy behaviors.

I = always=20 tell people they do not need to be in = Washington=20 to impact health reform: it starts at home = with=20 healthier eating habits and regular = exercise. But=20 people need supportive environments to = make=20 healthy choices, and states need support = from=20 Congress to invest in comprehensive=20 community-based public health initiatives. = My 2007=20 health care reform effort included a major = investment in such community-based = efforts. I=20 strongly urge you to make the proposed = healthy=20 communities grant program and Prevention = and=20 Wellness Trust a central part of health = reform to=20 reinforce this lifestyle message and = ultimately=20 alter how people take care of themselves.=20

Coverage for=20 All

Finally, coverage for = all is=20 essential. I share Congress=E2=80=99s = recognition that a=20 requirement on residents to secure = coverage for=20 themselves and their children, coupled = with a=20 requirement on health plans to guarantee = access to=20 coverage and public subsidies for = lower-income=20 individuals, is the most effective way to = achieve=20 universal coverage. Without an enforceable = individual mandate, people will continue = to=20 voluntarily forgo coverage, shifting = uncompensated=20 costs to insured individuals.

As = we=20 learned in our 2007 health reform effort = in=20 California, finding the right balance of=20 incentives and accountability measures to = ensure=20 broad participation in the coverage = mandate is=20 challenging, but the mandate must be firm = and=20 enforceable. Moreover, the = responsibilities on=20 individuals and health plans must be = supported and=20 reinforced by the broader community. = Proposals=20 that incentivize point-of-service = enrollment in=20 hospitals, physicians=E2=80=99 offices, = school-based=20 health centers and general government = offices will=20 promote enrollment and ensure maximum=20 participation. Working together, we can = create a=20 culture of coverage where there is an = expectation=20 that individuals purchase and maintain = coverage=20 supported by efforts to facilitate = enrollment and=20 promote broad coverage.

Even if the = coverage goals are met under federal = health reform=20 efforts, there will be up to 25 million = people=20 that will remain without health insurance=20 according to the Congressional Budget = Office. Many=20 of these people will be undocumented = immigrants.=20 For these reasons, I urge you to carefully = reconsider the size of the reductions = proposed to=20 Medicaid disproportionate share hospital = (DSH)=20 payments and ensure these funds are = distributed to=20 states based on the number of uninsured = and=20 undocumented immigrants present. In all = cases,=20 states should maintain control of the = distribution=20 of Medicaid disproportionate share = dollars.=20

In terms of state coverage = options, I=20 support the inclusion of language that = will=20 provide states the option of developing=20 state-based insurance options for people = with=20 incomes above 133 percent of the federal = poverty=20 level but below 200 percent. I believe = this=20 provision can be strengthened and made = more=20 effective by allowing states, especially = those=20 with higher costs of living, to serve = populations=20 up to 300 percent FPL, providing states = access to=20 at least 95 percent of the tax credits and = cost-sharing subsidies available for = eligible=20 individuals in the state and ensuring = sufficient=20 state flexibility to enable continuity of = care=20 between Medicaid and the state-based = option.=20 Providing states with the flexibility to = set=20 eligibility to 300 percent of the federal = poverty=20 level recognizes different cost structures = across=20 states and is more consistent with = existing income=20 eligibility thresholds allowed under the = federal=20 children=E2=80=99s health insurance = program, which will=20 help support the policy goal of keeping = families=20 together for health insurance purposes.=20

Finally, creating transparent and=20 user-friendly health insurance exchanges = at the=20 state level can help facilitate the = enrollment=20 process. At the same time, I believe these = state-based exchanges must be more than = simple=20 clearinghouses of information, but instead = allow=20 states to certify plans and negotiate = within=20 broadly established federal parameters to = help=20 promote competition among health plans. I = also=20 continue to believe that states must = remain the=20 primary regulator of health insurance in = order to=20 maintain the strongest consumer = protections=20 possible.

Transitional=20 Support

To help promote a=20 responsible and effective transition to = the new=20 health care model envisioned by pending = proposals,=20 I encourage Congress to work with states = to=20 develop reasonable timeframes for mandated = program=20 changes and provide short-term financial=20 assistance.

During the period = between=20 reform enactment and implementation, it is = essential that Congress maintain the = enhanced FMAP=20 rates under ARRA, provide financial = support to=20 undertake the necessary administrative = actions=20 mandated to prepare for implementation and = provide=20 interim funding for high-risk pools. To = the extent=20 that states may not already meet federal = high-risk=20 pool funding standards, funds must be = available=20 for states to make any modifications = necessary to=20 qualify for federal funding. Funds must = not be=20 limited to state high-risk pools that = already=20 qualify.

My participation in = President=20 Obama=E2=80=99s regional health care town = hall last spring=20 was intended to emphasize the importance = of health=20 reform to California and the nation and to = show=20 that this is not a partisan issue. We all = have a=20 vested interest in making sure health = reform is=20 accomplished quickly, thoughtfully and, = most=20 importantly, successfully. I look forward = to=20 working with Congress to find the = reasonable and=20 responsible balance required to achieve = our shared=20 goals of lowering the growth in health = care costs,=20 improving quality and health outcomes and = gaining=20 coverage for all. =

Sincerely,

Arnold=20 Schwarzenegger

/la

cc: The=20 Honorable Max Baucus
The Honorable = Christopher=20 J. Dodd
The Honorable Charles E.=20 Grassley
The Honorable Mike Enzi
The = Honorable Charles B. Rangel
The = Honorable Henry=20 A. Waxman
The Honorable George = Miller
The=20 Honorable Dave Camp
The Honorable Joe=20 Barton
The Honorable John = Kline

Members=20 of the California Congressional=20 = Delegation