State and local governments have several roles in the health care arena. They are purchasers and providers of health insurance. They must negotiate with health insurance companies to secure adequate health benefits for active and, in many cases, retired employees and their families. At the same time, they must monitor the costs of purchasing and offering these benefits. In addition, state and local governments may also serve as a community safety net or health provider of last resort, providing health care services to the uninsured, the under-insured, and Medicaid recipients.

Health care is now the fastest growing portion of state and local government budgets and governments have cited rising health benefit costs as one of the main contributors to budgetary pressure. These costs limit spending on other important public needs such as education, infrastructure and economic development.

Moreover, the impact of the disclosure provisions required by the Governmental Accounting Standards Board’s (GASB) Statement on Other Post Employment Benefits (OPEB), which mandates that state and local governments disclose their future health care obligations for retired employees and their families, will exacerbate these concerns.

While national health care policy is set at the federal level, health care costs fall heavily on state and local governments. For this reason, federal policy should address state and local governments’ needs and concerns.

GFOA Position

The Government Finance Officers Association (GFOA) urges the Administration and Congress to work together with state and local governments on initiatives to reform the nation’s health care delivery system in order to contain the growth of health care costs and expand access to health care for all. GFOA encourages a federal approach that includes:

• Expanded Health Care Coverage. Millions of U.S. residents are reported to have no health care coverage. The cost of uncompensated and under-compensated health care is ultimately shifted to employers who provide health insurance coverage as well as to individual purchasers of health insurance in the form of higher medical bills and premium increases. For public employers in particular, the coverage they provide to their state and local government employees makes this cost shifting especially onerous. In addition, locally funded public health systems must provide costly health care services to an increasing number of the uninsured. Expanded health care coverage would temper the effects of cost shifting. In order to effectively expand health care coverage, the federal government should promote a full range of financing and service delivery options.
• Equal Consideration for All. Federal initiatives that offer health care cost saving mechanisms such as subsidies, reinsurance, purchasing cooperatives, and other options that might arise should be offered to employers, employees and providers in both the public and private sector. 
• Adequate Federal Funding. State and local governments shoulder a large share of the cost of the health care provided to Medicaid recipients and the uninsured. The federal government should maintain funding for Medicaid as well as Medicare. It should also permit states and local governments necessary flexibility in program design, including the coordination of benefits. In addition, the federal government should ensure that there is adequate federal funding to address costs associated with the health care provided to undocumented residents by state and local governments. 
• Transparency within the Health Care System. The federal government should promote transparency in the health care system so that employers and consumers can be more knowledgeable and proactive. Transparency includes the ability for consumers to compare costs, quality, and suitability of different medical providers, hospitals, procedures, prescription drugs, insurance plans, and premiums. 
• Health Care Education. Public education programs have proven successful in modifying behaviors that drive health care costs. All levels of government should work together to continue and expand these efforts.

Health Care Information Technology. The federal government should promote the use of information technology in the health care industry to simplify and standardize health care administration, improve health care coordination, and enhance patient safety, which will increase quality of care while reducing costs.

• Performance Standards. Fewer errors, less duplication, and higher quality are critical components to more effective and less costly medical care. The federal government should promote the adoption and use of physician and hospital performance standards. Medical providers and hospitals should be required to report their performance compared to these standards. Employers and consumers can use these standards to compare the quality and cost of care provided throughout the health care system. 
• Affordable Prescription Drugs. The federal government should encourage and support initiatives to reduce the rising costs of prescription drugs. These initiatives may include: allowing the federal government the authority to negotiate directly with pharmaceutical companies to reduce the costs of prescription drugs; permitting the safe importation of prescription drugs; and studying the possibility of reducing the time frame on prescription drug patents. 
• Integrate Existing State and Local Government Programs with Federal Programs. State and local governments have taken a leadership role in developing and implementing many successful cost containment and coverage initiatives for both employees and the uninsured. These programs provide valuable models for federal initiatives. State and local government input should be solicited when these federal initiatives are considered.
• Availability of Health Care Professionals. There are significant factors that impact the availability of health care. These factors include the opportunities and affordability of education and on-going training for health care professionals, the dramatic increase in demand for health care with an aging population and the exposure to medical liability. The federal government should address all factors related to the availability of health care professionals.

GFOA is committed to working with federal policy makers to develop and support the health care reform initiatives discussed above in order to expand access to quality care and control the growth of health care costs.

• Publication date: May 2006