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States would take the lead in controlling health care costs under plan unveiled by Democrats

FILE - This March 11, 2009 file photo shows Dr. Ezekiel Emanuel speaking at the American Medical Association's annual conference in Washington. Borrowing from a Republican idea, a group including former senior Obama and Clinton advisers proposes to let individual states take the lead on controlling health care costs. The states would set their own targets for health care spending and pocket a share of federal Medicare and Medicaid savings if they succeed. But they’d have to maintain coverage and quality. (AP Photo/J. Scott Applewhite, File)

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FILE - This March 11, 2009 file photo shows Dr. Ezekiel Emanuel speaking at the American Medical Association's annual conference in Washington. Borrowing from a Republican idea, a group including former senior Obama and Clinton advisers proposes to let individual states take the lead on controlling health care costs. The states would set their own targets for health care spending and pocket a share of federal Medicare and Medicaid savings if they succeed. But they’d have to maintain coverage and quality. (AP Photo/J. Scott Applewhite, File)

WASHINGTON - Borrowing a Republican idea, a group including former senior Obama and Clinton advisers is unveiling a novel proposal to let states take the lead in controlling health costs.

Individual states would set their own targets to curb the growth of health care spending. If they succeed, they'd pocket a share of federal Medicare and Medicaid savings, ranging from tens of millions to $1 billion or more, depending on the state.

The plan, released Thursday, comes from the Center for American Progress, a public policy think-tank closely associated with the White House. The centre's former president, John Podesta, currently serves as counsellor to President Barack Obama.

Called "Accountable Care States," the new option would be voluntary, reflecting longstanding Republican preferences. To address Democratic concerns, participating states would have to maintain insurance coverage levels and enforce consumer quality standards to claim their financial dividends.

The state spending targets would encompass private spending, as well as Medicare, Medicaid, state and local employee insurance plans, and subsidized private coverage under the new health law. States would not have to expand Medicaid under Obama's health care overhaul to participate.

Release of the plan follows a government report earlier this week that projects a return to unsustainable levels of health care inflation. Spending has been held in check the past five years largely because of a weak economy.

The proposal is also a sign of Democratic sensitivity to a major piece of unfinished business for Obama's Affordable Care Act — cost control. "Obamacare" remains politically risky for Democrats in this fall's political campaigns.

"Given the current political gridlock, it is unlikely that the federal government will take the lead on reforms to control health care costs systemwide," the proposal said. "States must therefore play a leadership role, with the federal government empowering ... them to act."

Authors include Neera Tanden, a former top policy adviser to Obama as well as to Hillary Clinton; Peter Orszag, Obama's first budget director; Joshua Sharfstein, former deputy commissioner at the Food and Drug Administration under Obama, and Ezekiel Emanuel, a physician, former Obama health policy adviser and older brother to the president's first chief of staff, current Chicago Mayor Rahm Emanuel. Podesta was not on the list.

"It's got some Republican roots to it, and it's got some Democratic roots to it," said Ezekiel Emanuel. "We wanted to create a bipartisan proposal that does take advantage of some Republican ideas and is cognizant of Democratic concerns, and use it to transform the whole delivery system."

Authors plan to shop the idea around to top policymakers on Capitol Hill and in the administration. Congressional approval is needed to fully develop the concept.

That seems like wishful thinking given the polarized politics of health care in Washington. Most congressional Republicans remain adamant about repealing Obama's health care law, in place since 2010 and now providing coverage to millions. Many Democrats don't want to be dragged into another health care remake. But there have been openings for dialogue, such as a 2011 Medicare plan from Oregon Democratic Sen. Ron Wyden and House Budget Chairman Paul Ryan, R-Wis.

A key feature of the new proposal is the idea of cost targets that combine spending by private insurers and public programs. Emanuel said that would be nearly impossible to engineer nationally, but states may be able to pull it off. A handful of states are already experimenting.

"All health care is local," said Emanuel. "You can probably get all the players in one room."

The target would keep per-person state health care spending roughly in line with economic growth by squeezing waste and inefficiency. It could not be met by shifting costs to patients.

An economic analysis with the proposal sees total savings of $1.7 trillion over the first 10 years if about half the states embrace the idea. Of that amount, the federal government would save $350 billion, net of payments to states.

State savings would range from about $80 million for Wyoming to $5.9 billion for California, and about $4 billion each for New York and Texas. Twenty-one states could receive $1 billion or more.

Emanuel said the financial risk to states is low: If a state exercises a plan option to receive expected savings up front, it would have to repay Washington if it fails to meet the target.

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Online:

Centre for American Progress: http://tinyurl.com/ls4w9nl

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