Governor Gary R. Herbert’s Remarks to the Heritage Foundation February 10, 2011

I would like to thank the Heritage Foundation for their tireless advocacy for sensible health care reform.  The Heritage Foundation has always been especially supportive of Utah’s efforts to reshape our health care system to suit the unique needs of our state, and we are grateful.
I am a firm believer in the principles of Federalism embodied in the 10th Amendment.  I believe we must defend the rights reserved for the states or they will be usurped by the federal government.
States are not powerless agents of federal authority.  I have a duty to represent the best interests of the citizens of my state.  I believe that – as Governor of the great State of Utah – I should take every opportunity to assert the rightful authority of our state to advance Utah solutions to Utah problems.
Custom State Models Work:  The Utah Health Exchange
A balance of powers between the states and the federal government is not only right and proper, but essential if we are ever to find solutions to the complex problems we face.
Justice Louis Brandeis wrote, “It is one of the happy accidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory, and try novel social and economic experiments without risk to the rest of the country.”
In Utah, we began our health system reform efforts five years ago, long before the so-called Patient Protection and Affordable Care Act arrived on the scene.  The lessons we’ve learned in our novel experiments in health system reform can serve as a guide to other states as they begin their own reform efforts.  In fact, we have already been contacted by officials in numerous other states asking us to share our experiences with them.
The federal government has taken the opposite approach.  The federal government decreed the one-size-fits-all law of the land, and has left to the states the details of how to shoehorn the Affordable Care Act’s voluminous dictates and mandates into their agencies and budgets.
As I stated, it is both our right, and our obligation as Utahns, to say “no” to this unconstitutional federal health care program.  This is why Utah, along with 26 other states, filed suit against the federal government.   I simply don’t believe Congress can make commerce out of no commerce.
U.S. District Judge Rodger Vinson, who ruled the individual mandate in the Affordable Care Act is unconstitutional, questioned where these new-found powers of Congress would end.  “If they decided everybody needs to eat broccoli because broccoli makes us healthy, they could mandate that everybody has to eat broccoli each week?” Judge Vinson asked the government’s lawyers.
Senator Dick Durbin of Illinois was skeptical of the Judge Vinson’s reasoning.  In a Senate hearing last week, he asked Harvard Law Professor Charles Fried, if the Constitution did in fact grant Congress the power to force Americans to eat broccoli.  Professor Fried replied that it “…would be a violation of the 5th and 14th Amendments to force you to eat something.  But to force you to pay for something?  I don’t see why not.”
As many of you may remember, President George H.W. Bush banned broccoli from the presidential menu in 1990.  I’m sure the California broccoli farmers who dispatched 10 tons of the vegetable to Washington in protest are kicking themselves now.  They could have simply appealed to Congress to force the President to buy – but not eat – his fair share of their product.
Is a “broccoli mandate” really any more absurd than a federally imposed “individual mandate”?
Utah has repeatedly demonstrated we can find Utah solutions to Utah problems, particularly in the area of health care.  We have a proven record of successful, consumer-oriented health system reform.
The Utah Health Exchange is now up and running for Utah’s small businesses.  In just the first month, we have already helped more than 1,000 employees get health insurance they have chosen.  Each month, enrollment continues to climb.
As this system matures and grows, it will continue to help businesses remain competitive by giving them options to provide desirable health benefits to their employees.
This clearly demonstrates that states can use market principles to solve difficult issues in health care.
Medicaid:  A State Budget Buster
The next major problem in need of market forces is the state’s Medicaid program.  Medicaid is poised to wreak havoc on the state’s budget for years to come, threatening our ability to fund critical services, such as transportation and education.
Even before the Affordable Care Act, Medicaid was already a large and growing part of the Utah state budget.  Medicaid’s share of the overall general fund has been growing and is projected to grow even larger, creating real problems for the state.  In the 1990s, it was as low as 9%. In Fiscal Year 2010 it was 18%.  By FY 2020, it is estimated to exceed 30%, without federal reform & expansion.
In this recession, Medicaid enrollment has skyrocketed.  In December 2007, enrollment stood at 158,267 individuals.  In December 2010, enrollment stood at 230,812 individuals, a 46% increase in 3 years.
The Affordable Care Act accelerates growth in Medicaid and compounds the budget problem.  The Act prohibits the normal state tools to control costs.  It requires Maintenance of Eligibility, meaning the state must participate at federally-dictated levels.
This means Utah can’t roll back decisions we made in good budget times to help additional groups.  Those who were eligible in March 2010 must remain eligible until 2014 for adults and 2019 for children.  This limits cost-sharing and freezes existing limits on cost-sharing opportunities (e.g., a $3 co-pay for pharmacy, or a $6 co-pay for inappropriate use of the emergency room).  The net effect is that it forces the state to consider drastic service cuts to benefits in order to stay solvent
The Act confiscates state pharmacy savings.  It takes Utah’s savings from preferred drug lists and gives them to the federal government.  This costs Utah $6.3 million per year, starting from January 1, 2010.
The Affordable Care Act dramatically expands Medicaid eligibility in 2014.  Enrollment is projected to grow approximately 50% under the mandated expansion.  The Act only pays for part of new costs, meaning states must cover the rest.  In Utah, these new costs are estimated to be as high as $1.2 billion over 10 years.
Why Utah Is Speaking Up Now
We have come to Washington to present creative solutions to help ease the burden on our state.
Our reform falls into four distinct areas:  administrative simplification, provider incentives, patient accountability, and expand premium subsidy options.
Our message is simple:  To have any hope of success, Utah needs flexibility to make this mandated model work in our unique state for our unique demographics and needs.  This will require that the Center for Medicare & Medicaid Services (CMS) support our waiver requests and ideas.
First, Utah needs administrative simplification.  CMS sent us a memo that essentially requires us to use paper to communicate with enrollees in the program.  In our efforts to be more innovative and efficient, we developed an approach which uses electronic technology to communicate with our clients, reducing costs by as much as $6 million a year.
If CMS allows Utah the flexibility we need to be efficient-in this one area alone-we estimate that all the states adopting this technology could save more than $600 million per year.  This seems like a no-brainer.  However, CMS has been slow to respond.  Utah’s simple request for this issue has been sitting with CMS since last July.
Second, we must change incentives for providers.  We are also trying to get waiver approval for a comprehensive reform to the way we reimburse providers for Medicaid services.  We should pay for value, rather than volume.
We are developing a home-grown solution to this problem.  We want to contract with Accountable Care Organizations (ACOs) to move toward a more provider-based care model.  These contracts will better align financial incentives for providers to keep people healthy instead of just providing services.
Providers inside the ACO will have incentives to coordinate and work together for patient’s best interest.  ACOs are expected to lead to better cost control, as well as better care.  When executed correctly, ACO contracting is different from using HMOs.  ACO contracts eliminate incentives to provide too little or too much care.  ACO contracts are conditional on providers meeting quality and access milestones.
If we are allowed to proceed, this model will be a tipping point for the Utah market, and we expect to shortly see private insurance companies follow suit, benefitting and strengthening our overall health care system.
Third, we need to increase patient accountability.  Too many people think it is someone else’s responsibility to pay for their health care.  I include Medicaid patients along with the rest of us.  Medicaid patients should have greater participation in covering the cost of their health care.
We want to explore ways to use cost-sharing to encourage patients to be more sensitive about using health care appropriately-it promotes personal responsibility and prevents abuse and waste.
Recognizing there are differences in the ability of low-income families to pay, it is time to replace the archaic limits on Medicaid copayments and cost sharing with a sliding scale copayment schedule based on family income.
Fourth, we must expand the premium subsidy option.  Under an existing federal waiver, we offer a premium assistance subsidy to people who are low-income, but not eligible for traditional Medicaid.
Those eligible for Medicaid cannot take this option, even if it results in being enrolled in a private health insurance policy they prefer.  It is time to allow all families who receive Medicaid the option of applying their subsidy towards private insurance through other sources, like the Utah Health Exchange, instead of enrolling in the Medicaid ACO product.
Real Health Care Solutions Will Rise From the States, Not Be Imposed By the Federal Government
In conclusion, the pioneers who settled Utah in 1847 headed west with only the provisions they could fit in a wagon, or carry on a handcart.  With little more than their fierce spirit of self-determination, which compelled them to face deprivation, physical challenges, and untamed mountain peaks, they sought a new home in the distant high desert.
They built irrigation systems, planted crops, constructed homes, and planned communities.  They laid the solid, principle-based foundation for the modern state of Utah.  Today, Utah is increasingly recognized for its good governance, business-friendly environment, desirable way of life, and ability to find innovative solutions to tough social and economic problems.
Our pioneer forefathers found Utah solutions to Utah problems.  Now, I have come east, defending our continued right and responsibility to do the same.
As I previously stated, I firmly believe that if we as a state fail to vigorously fight to protect and defend our rights under the Constitution, those rights will invariably be seized and usurped by the federal government.
In last November’s election, the American people sent a message that federal domination must give way to mutual collaboration.  Unfortunately, that message was promptly ignored.  Two days before Christmas, federal officials at the U.S. Department of Interior secretly prepared an order to announce a new wild lands designation on public lands in Utah.  With no public input, with no state input, this pronouncement threatens years of collaboration and rural economic progress.

This episode only serves to illustrate my point:  When the federal government leaves states out of the discussion and oversteps its enumerated powers, the resulting policy and process is misguided, costly, onerous, and contrary to the will of the people.
Today, I remind Washington, D.C.:  Utah is a state, not a colony, and I assure you, on my watch, Utah will not stand idly by.