Research & Commentary: 10 Health Care Reform Options for States

Published February 1, 2017

While most eyes are now looking to Washington, DC regarding the fate of the Affordable Care Act, there are steps state legislators can take to improve the cost and availability of health care in their states.

  1. Eliminate unnecessary state insurance benefit mandates, which increase health insurance premiums. According to the National Conference of State Legislatures, “[T]here are more than 1,900 such statutes among all 50 states; another analysis tallies more than 2,200 individual statute provisions, adopted over a 30+ year period.” Cutting back these mandates and allowing for customized plans would encourage individuals not looking for an expensive plan to buy health insurance.
  2. Expand access to health savings accounts (HSAs). As the cost of health care increases, providing health benefits for state workers has become a growing strain on state budgets. One reform states should consider is offering HSAs for public employees, similar to what has been accomplished in Indiana. Approximately the state’s total health care costs for employees by 11 percent. States can also extend preferential tax treatment to include HSAs.
  3. Expand high-risk pools for people with pre-existing conditions. Before ACA, 35 states covered these individuals through high-risk pools, state-chartered, nonprofit associations offering comprehensive health insurance through the private market.
  4. Roll back certificate of need (CON) laws These laws block competition and innovation in the health care market. At present, 35 states require CON commission approval for a wide range of expenditures, including the construction of new hospitals, purchase of major pieces of medical technology, and the offering of new medical procedures. CON laws increase the cost of health care and limit access, benefitting those with political connections.
  5. Loosen unnecessary licensing standards, such as those placed on nurse practitioners, dental therapists, and midwives. States across the country have begun to consider expanding their scope-of-practice laws to allow these trained midlevel providers to help fill health care shortages. States should also get rid of maintenance of certification (MOC), which has become a profit center for medical board organizations. While a certain degree of certification will always be necessary, physicians should not be required to pass through a quagmire of costly and expensive tests that may be unnecessary. Oklahoma provides a model other states can follow that forbids the requirement of MOC as a condition of licensure, reimbursement, employment, or admitting privileges at a hospital in the state.
  6. Allow physicians to treat patients across state lines through reciprocity. This would help states address doctor shortages. Reciprocity would be allowed only if one state agreed to set up the arrangement with another state. No state would ever be forced to accept physicians who were licensed under standards its officials deem inadequate. Reciprocity would require less regulation and paperwork than the status quo and make telehealth available for thousands of new patients.
  7. Encourage price transparency. When consumers are able to shop actively and compare prices, market pressures encourage providers to produce a more affordable, high-quality product. If they don’t, competitors will. State legislators should work to promote health care price transparency in their states to empower consumers and lower health care costs.
  8. Expand direct primary care (DPC) access. Not to be confused with “concierge medicine,” which costs patients thousands of dollars in addition to billing insurance, DPC bypasses insurers and costs less than a cable-television plan. DPC empowers patients and doctors, giving them more freedom to establish and participate in a health care provider model sweeping the country. State legislators should pass legislation specifying DPC is not a form of insurance, removing a barrier for prospective DPC physicians afraid a state bureaucracy might shut down their new practice. Lawmakers should also integrate a direct primary care (DPC) program into their Medicaid system to help reduce costs and improve care. A pilot project in Michigan suggests the state could save billions of dollars a year by enrolling Medicaid recipients in DPC programs.
  9. Remove regulatory barriers to and burdens on faith-based health care cost-sharing plans. Health care sharing ministry members pay monthly “shares” of approximately $200 per individual or $500 per family. As medical needs arise, members pay a portion of their expenses and forward their bills to their HCSM. The HCSM reimburses members for most of their expenses, with the “share” money contributed by other members. According to The Heartland Institute’s Health Care News,625,000 people in the United States have membership in an HCSM,
  10. Tort reform. The unnecessarily high cost of health care in the United States is due, in part, to flaws in malpractice insurance, litigation, and the practice of defensive medicine.  Despite the fact doctors win an overwhelming majority of medical malpractice cases, malpractice claims still impose huge costs on all doctors and insurers. States can limit these costs by capping non-economic damages for pain and requiring claimants who reject a reasonable settlement to meet a higher “beyond any reasonable doubt” standard to win pain-and-suffering damages.

States should not wait for Congress and the White House to fix health care policy. States can take health care reform into their own hands and help create more competitive, accessible, and affordable care for all residents.

The following documents examine health care reform in greater detail.

Ten Principles of Health Care Policy 
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems.

The Obamacare Disaster
This Heartland Institute study by Peter Ferrara is a comprehensive review of the Affordable Care Act (ACA) and an early appraisal of its likely effects. “Obamacare is a disaster,” wrote Ferrara. “Rather than liberate the American health care system from bureaucracy and waste, it blankets it with more of both, suffocating innovation and destroying freedom. The result is a system that is inconsistent with the freedom, prosperity, high living standards, and traditions of the American people.”

The Obamacare Evaluation Project: Access to Care and the Physician Shortage
Paul Howard and Yevgeniy Feyman of the Manhattan Institute analyze changes in access to primary care physicians under the ACA. They found population growth, demographic changes, and an expansion of insurance spurred by Obamacare will contribute to a significant shortage in primary care physicians over the next decade.

The Report Every State Legislator Should Read
Chris Jacobs writes in the National Review about a new report from the CBO which analyzes profit margins for hospitals over the coming decade and concluding Medicaid expansion will not make a material difference in hospitals’ overall viability.

Evidence Is Mounting: The Affordable Care Act Has Worsened Medicaid’s Structural Problems
In this paper, Brian Blase of the Mercatus Center examines the effect of the ACA on Medicaid. Blase finds expansion has only magnified many of the structural problems in the program. “The unanticipated expense casts doubt on the value of the ACA Medicaid expansion. The enhanced federal match incentivizes states to boost ACA expansion enrollment and to categorize Medicaid enrollees as ACA expansion enrollees, and also encourages states to set high fees for ser­vices commonly used by expansion enrollees and high payment rates for insurers participating in states’ Medicaid managed care programs,” wrote Blase.

Projecting Hospitals’ Profit Margins Under Several Illustrative Scenarios
In this paper, Tamara Hayford, Lyle Nelson and Alexia Diorio of the CBO calculate hospitals’ profit margins and the share of hospitals that might lose money in 2025 under several illustrative scenarios. “The hospitals we examined would have to increase the growth of total revenues or reduce the growth of total costs by an additional 0.2 percent to 0.5 percent per year to achieve the same level of average profitability in 2025 as they obtained in 2011; whether that would be easy or difficult is unclear,” the CBO report concluded.

Effect of Medicaid Coverage on ED Use — Further Evidence from Oregon’s Experiment
Amy Finkelstein, Sarah Taubman, Heidi Allen, Bill Wright and Katherine Baicker examine the effect of Medicaid coverage on ER use, they found people enrolled in Medicaid significantly increases their emergency room visits for around two years after they first sign up. “For policymakers deliberating about Medicaid expansions, our results, which draw on the strength of a randomized, controlled design, suggest that newly insured people will most likely use more health care across settings — including the ED and the hospital — for at least 2 years and that expanded coverage is unlikely to drive substantial substitution of office visits for ED use.”

Nine Things States Can Do to Push Back Against Obamacare
Grace-Marie Turner outlines nine things legislators can do to protect states against the destructive health care overhaul caused by the Affordable Care Act. “ObamaCare seems to have become a modern-day hydra—like the mythological creature that grew new heads every time one was cut off. But the opposition efforts can play the same game. The battles have only begun, and the states are on the front lines,” wrote Turner.

Power to the People
In this book published by The Heartland Institute, Senior Fellow Peter Ferrara presents a comprehensive entitlement reform agenda that would create far better results for the poor, seniors, and the sick, because they rely on modern capital and labor markets, market incentives, and competition to achieve the social goals of current entitlement programs. Markets, incentives, and competition naturally work far better at achieving these social goals than government monopolies, tax increases, and redistribution programs do.

Block Grants Would Prevent Medicaid ‘Pac Man’ from Gobbling Up Budgets
Jesse Hathaway writes in Budget & Tax News about the potential of block grants to help reform out-of-control Medicaid spending. “It’s urgent for Congress to build on the work it started more than 20 years ago and block-grant the ‘Pac-Man’ Medicaid monster before it gobbles up an even bigger proportion of cash-strapped state budgets,” wrote Hathaway.

Transparency in Health Care: What Consumers Need to Know
In this 2006 presentation hosted by The Heritage Foundation, the Hon. Alex M. Azar II, Thomas P. Miller, David B. Kendall, and Walton Francis discuss the potential of health care price transparency and how it could affect choice and pricing. “In a free market, where consumers make their own decisions, technology and techniques rapidly improve. Quality rises and prices drop. In short, freedom fosters prosperity.” 

Empowering Patients as Key Decision Makers in the Face of Rising Health Care Costs
The current trend of rapidly rising health care costs is unsustainable. Many proposed reforms to curb spending rely on some type of rationing imposed by an unaccountable government body. A better alternative would be to allow individual consumers to make their own decisions about care, including the self-rationing of medical services, based on cost and their own desires. Such a policy is compatible with the principles of limited government and individual liberty. State and federal policymakers should adopt measures to facilitate personal control of health care decisions.

Direct Primary Care: An Innovative Alternative to Conventional Health Insurance
Insurance-based primary care has grown increasingly complex, inefficient, and restrictive, driving frustrated physicians and patients to seek alternatives. Direct primary care is a rapidly growing form of health care which alleviates such frustrations and offers increased access and improved care at an affordable cost. State and federal policymakers can improve access to direct primary care by removing prohibitive laws and enacting laws encouraging this innovative model to flourish. As restrictions are lifted and awareness expands, direct primary care will likely continue to proliferate as a valuable and viable component of the health care system.

Healthcare Openness and Access Project: Mapping the Frontier for the Next Generation of American Health Care
The Healthcare Openness and Access Project (HOAP) is a collection of state-by-state comparative data on the flexibility and discretion US patients and providers have in managing health care. HOAP combines these data to produce 38 indicators of openness and accessibility. The project provides state-by-state rankings over a number of variables, including occupational licensing.

The Case for Licensing Dental Therapists in North Dakota
In this Policy Brief Michael Hamilton, Bette Grande and John Davidson ask North Dakota lawmakers, “Does licensing dental therapists in North Dakota pose a risk to public health great enough to justify depriving (1) dentists of their right to employ and supervise dental therapists and (2) patients of their right to access providers of their choice?” They argue the answer is clearly no. … Far from jeopardizing the public health, licensing dental therapists would likely expand patient access to high-quality oral care services and reduce oral care costs in North Dakota.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database. 

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.