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OVERVIEW

As states face another economic downturn and growing budget deficits, expanding access to coverage may seem like an impossible goal.  However, there are steps states can take to generate revenue and "stretch" health care dollars to ensure access to health care. 

Following the budget stress states felt earlier this decade, the Commonwealth Fund issued a series of reports titled, "Stretching State Health Care Dollars during Difficult Economic Times". The four reports focus on shoring up employer-based coverage, improving prescription drug purchasing through pooling and evidence-based systems, improving chronic care management, and innovative uses of uncompensated care funds.

Sources of funding include:

  • Employer Pay-or-Play Mandates: Employer mandates help ensure employers provide coverage, but for those that don't, the penalties for non-compliance can help fund health careexpansions. As previously noted, San Francisco's lawrequires employers with 20 or more employees to provide health care or pay the city $1.17 to $1.76 per hour depending on firm size.
  • Maximizing Federal Matching Dollars: As Families USA and Community Catalyst point out, it is in a state's best interest to maximize federal matching dollars, particularly during economic downturns. For every dollar a state spends on Medicaid, the federal government matches it with at least $1, and in many cases more. States can generate additional state funds to draw down more federal match dollars through provider taxes. A proposed 4% tax on providers as part of California's failed compromise reform measure would have generated an estimated $2.3 billion, in large part through additional federal match. The California hospital industry supported the measure because it would have enabled the state to increase Medicaid provider rates.
  • Tobacco Settlement Dollars: The 1998 multi-state tobacco settlement is projected to total $246 billion over the first 25 years of the settlement. Unfortunately, only three states have used their settlement dollars to fund tobacco cessation and prevention programs at or above minimum levels prescribed by the Centers for Disease Control and Prevention -- Maine, Delaware and Colorado. These funds should be allocated only towards health care purposes.
  • Cigarette and Sin Taxes: Despite being regressive, raising cigarette, alcohol and other so-called sin taxes can provide valuable revenue to fund health care expansion programs. Additionally, raising tobacco taxes has shown to help reduce rates of smoking, which is a key public health goal.
  • Ending Corporate Loopholes: Instead of cutting social services or foregoing expansions during difficult economic times, states can raise revenue by requiring corporations to pay their fair share. Options include requiring combined reporting of profits from all subsidiaries, refusing to automatically grant special interest tax breaks handed out by the Feds by "decoupling" state and federal tax codes, enacting oil windfall taxes, and requiring tax disclosure to expose corporations that are abusing the tax code.
  • Capturing Savings: A bold feature of Maine's comprehensive 2003 Dirigo Health Reform is a unique funding measure called the Savings Offset Payment - a fee paid by insurance companies that is proportional to health care savingsachieved by the Dirigo Health's cost containment provisions. Although lawmakers recently replaced the controversial fee with a premium surcharge and increased "sin" taxes, the strength of this model is that it builds health care expansions on top of cost containment, which is necessary for sustainable reform.

Funding Expansions Resources: