QUESTION VI – How do you propose to fund state expansions?

Before your group discusses financing for health reform expansions, it is important to consider the political and economic climate in your state.  This will likely be the most difficult section for your group to complete, and is typically the graveyard of many good ideas.  The best selections from the menu of financing options will depend on your state’s environment, and it is imperative to recognize the major opponents to each financing method, as well as the benefits.  You may have to recognize that nearly every effort to raise or redistribute funding will be met with resistance by at least one group.  

In this section, we offer a number of financing options, but by no means an exhaustive list.  The purpose of this list is to provide ideas about adequate funding for health reform proposals.  The first three places to look for funding for health care reform are:  federal matching funds; your state’s existing health care spending on the uninsured; and existing funds in the larger health care system that can be captured and used for expansions.  These are the three easiest methods of obtaining necessary funds; after these are exhausted, a state may need to raise new taxes.  Also in this section, we discuss the pros and cons of employer “pay or play” and individual mandates to achieve participation from all stakeholders.

1. Can you get more federal money for your expansion?
   1. Federal Medicaid and SCHIP matching funds
      Click here for more information about how to maximize federal matching dollars.
   2. Federal grants
      
2. Is there a way to reallocate existing funds, or increase funding from existing sources?
   1. Existing state spending on programs for the uninsured
      
   2. Existing state spending on health care
      1. Uncompensated care funds
         For an example, click here for Massachusetts’s uncompensated care fund model.
         Hospital and provider subsidies to cover the uninsured
      2. Savings from coverage expansions
         For an example, click here for Maine’s savings generated from coverage expansions.
   3. General funds
   4. Other existing revenue, such as funds from a tobacco settlement
      
3. What new revenue sources are possible?
   Many states find difficulty in funding health care expansion without new revenue sources.  These potential revenue-generators are likely to be controversial and attract opposition from other stakeholders.
   Click here for further information on taxes and assessments.
   1. “Sin taxes” on tobacco or alcohol
   2. Gross receipts tax
   3. Other broad-based taxes
   4. Provider assessments
   5. Assessments on health insurers
4. Do you want to require employer contributions to fund your expansion?
   1. Would you introduce a pay or play system?
      1. How would you design the employer assessment?
         Click here for some examples of pay or play systems.
      2. What about ERISA?
         
      3. Would you levy a broad tax on all employers?
         
5. Do you want to include an individual mandate, and require all people to obtain health insurance?
   Click here for further information individual mandates.
   
   1. How will you implement an individual mandate?
   2. What method of enforcement will you use?
   3. What system will you put in place to allow people to waive the individual mandate or appeal a penalty for noncompliance?