The Big Health Policy Stories of 2014

From state health exchanges to specialty drugs and the collapse of Vermont's single-payer initiative.
by | December 22, 2014

With the start of the Affordable Care Act’s coverage expansions, 2014 was always bound to be momentous. But there were lots of other significant developments in state health policy—many of which will be felt long into the future.

Struggles for State Health Exchanges

The year started with 16 state-based insurance exchanges, where people without employer coverage can shop for health plans, but ended with 14. The federal Department of Health and Human Services technically counts 18, but a number of them aren’t fully independent.

While the federal exchange serving 34 other states was functioning reasonably effectively by January, a number of states still had to resort to paper applications and other measures to work around non-functioning web sites. Those included states like Oregon, Maryland and Massachusetts, all blue states that took implementation of the ACA seriously but botched the rollout.

Oregon and Nevada realized their web operations would cost too much to salvage, so they decided to use the federal web site while maintaining independence over things such as consumer assistance and plan regulation. Maryland and Massachusetts, however, decided to pay for new technology to fix their systems.

Maryland looked to Connecticut, which was considered one of the best state-based exchanges, and spent about $43 million to implement it. So far, things have greatly improved.

Another major Supreme Court challenge

It turns out that status as a “state-based” exchange could matter a whole lot in June. In a surprise move, the U.S. Supreme Court decided in November to hear a challenge that could invalidate federal subsidies that make insurance affordable for many in states that use the federal exchange.

The case is one of four brought by opponents of the ACA who argue the law, as written, limits subsidies only to states that created their own exchanges.

So far, the possibility of a Supreme Court ruling against the subsidies hasn’t sparked much action at the state level to get independence from the federal exchange, though.

Medicaid Expansion 

Two states reached decisions to expand Medicaid in 2014, while many others continued internal deliberations or discussions with federal officials in hopes of extracting more conservative changes, such as greater privatization or cost-sharing with patients.

Gov. Maggie Hassan, a Democrat from New Hampshire, signed Medicaid expansion legislation in late March. In Pennsylvania, Gov. Tom Corbett, a Republican, announced a deal with the federal government in August to expand starting in 2015.

The other states most actively considering joining 27 other states include Utah, Indiana, Wyoming and Tennessee. Talk of expansion has also percolated in North Carolina, Florida and other conservative states, though the prospects seem unlikely.

Maryland Becomes the First State to Cap Hospital Spending 

Maryland was already the only state in the country that still had the authority to set rates for all private and public insurers, but in January came news that the state will now have the authority—via a federal waiver—to  cap hospital spending.

Health spending has typically far outpaced economic growth overall, but Maryland’s waiver will allow it hold all of its hospitals to a growth rate of 3.58 percent in exchange for capturing $330 million in Medicare savings, reducing hospital readmissions, preventing hospital infections and other benchmarks.

Some argued it was a necessary step to take to hold onto its original waiver, which was starting to slip. Others hailed it as a major development in cost-containment at the state level. To some at the time, it was even bigger than Vermont’s then still-hazy single-payer health plan.

Vermont Single-Payer Plan Crashes

When Gov. Peter Shumlin of Vermont gathered reporters in mid-December to talk about the state’s plan to create a single-payer health system—the only of its kind in the country—many expected a long-awaited announcement about how exactly the state would pay for it. Instead, the governor announced he was scrapping plans because the payroll and income taxes it would take to finance it were too deep.

For people who always argued the ACA merely props up a failed system, the failure of the first state-level effort at single payer is unwelcome news. Some, like New York Assemblyman Richard Gottfried, will no doubt continue their yearly pushes.

But he may well be the only one, as long-time advocates such as State Sen. John Marty of Minnesota is aiming instead at a bill to merely study single payer, Pennsylvania state Sen. Jim Ferlo is retiring and advocates in California say they have no receptive sponsors. “In the 2013-2014 legislative session we wanted to find a bill sponsor,” Don Bechler of California’s Single Payer Now recently told Governing. “We could find no one who would bring one up.”

A Costly Cure for Hepatitis C

The drug Sovaldi, which promises unprecedented cure rates for people with hepatitis C, took states by storm because of its $84,000 price tag. The drug is widely considered a breakthrough because of its cure rate—90 percent in some trials—but it’s also sparked debates about what health systems can—and should—pay for.

The vast majority of states enacted restrictions that effectively limit the drug to only the sickest patients who haven’t had success with other therapies, but some people in health policy warn the market for highly effective but highly expensive specialty drugs will only grow in the coming years.

New York’s System-Wide Medicaid Overhaul

The acronym doesn’t do much to inspire curiosity, but the Delivery System Reform Incentive Payment program launched in New York State this year aims to do something ambitious: reduce overall hospital use by 25 percent over five years.

To do it, the state got a federal waiver allowing it to use the savings its reforms generate toward investments in safety-net doctors, incentive payments, and delivery system changes that use a team-based approach to solving population-wide problems.