As recent events have reminded us, North Carolina’s state government is not a precise analogue to the federal government.
Its leadership is more diffuse. The state legislature is stronger, relative to the executive branch, than Congress is to the presidency. Moreover, the executive branch isn’t unitary. Its new members include not just incoming Gov. Roy Cooper, a Democrat, but also incoming State Treasurer Dale Folwell, incoming State Superintendent of Public Instruction Mark Johnson, and incoming Insurance Commissioner Mike Causey, all Republicans.
They will all have roles to play in the key policy debates of the coming months and years. Perhaps the most obvious example is health care reform.
Whether Democrats like it or not, the Affordable Care Act is going to be repealed and replaced. Although the various Republican alternatives differ in details, their general thrust is clear: the market for individual and small-group insurance will become less regulated, allowing consumers to choose from among a wider array of less-costly options. Medicaid will be restructured and more tightly focused on its traditional caseload of the poor, disabled, and elderly, with fewer incentives for states to maximize federal matches and enrollment.
In this new environment, state governments will likely have more choices to make and authority to make them. We may see the return of high-risk insurance pools as one solution for patients with preexisting, expensive medical conditions. We may also see more flexibility for states in transitioning Medicaid enrollees to private plans and networks.
On the delivery side of the issue, states can remove barriers to competition and innovation. Professions such as nurse practitioners and physician assistants should be allowed to fill gaps and deliver some basic services at a lower cost. Barriers to such promising ideas as health savings accounts and direct primary care, in which doctors treat a set of member patients on a cash basis, should be relaxed.
The North Carolina General Assembly can initiate the fiscal and regulatory changes that health care reform requires. The Cooper administration will be charged with carrying out some of those changes, as will the Department of Insurance under Causey.
When it comes to the single-largest health plan in our state, the one that finances services for teachers and state employees, Folwell will be its administrator. The plan has significant challenges, in both the short run and long run. During his campaign, Folwell promised to seek reforms of the plan to reduce its cost and make dependent coverage more attractive.
He also promised to help address its fundamental insolvency. For decades, North Carolina politicians promised teachers and state employees that they would receive supplemental medical benefits upon retirement. These politicians never bothered to fund their promises by building up financial assets. They pocketed votes while sticking the next generation with the bill.
That bill will become due before too long. It runs into the tens of billions of dollars. While North Carolina ranks very low in budgeted state indebtedness (44th in the nation) and funded pension liability (47th), its unfunded liability for retiree health benefits ranks 13th.
Cooper and state lawmakers need to build up financial assets in response, while also changing the deal for future employees. Folwell will need to make sure this remains a priority, and Johnson will need to use his bully pulpit to help the largest share of affected workers, the state’s schoolteachers, understand how much of their full compensation depends on adequate funding of the pension system and health plan.
It’s no surprise that health care has been a top issue in American politics for decades. The effects of the system on families, the economy, and government budgets are massive. Some developments, such as consumer-driven health plans, have been positive. But many state and federal reforms, most obviously the Affordable Care Act, have been disappointing or counterproductive.
No one has all the answers. It’s a complicated set of problems. States, localities, providers, and patients need the freedom to try different approaches and learn from them. North Carolina’s new leaders are about to get it.
John Hood is chairman of the John Locke Foundation, a North Carolina think tank, and appears on the talk show “NC SPIN.”