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January 2012 Brief: Volume 19, Number 2

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Health Care Compacts: Another Option


by Deborah D. Thornton



Interstate compacts, or agreements between two or more states, are used for a variety of reasons. They are allowed by Article I, Section 10, Clause 3, of the U.S. Constitution, with approval by Congress. Initially compacts were used to settle state boundary disputes, and have often been used in dealing with natural-resource issues such as water. The Congressional approval provision is meant to “protect the supremacy of the federal government.”[1]


Currently there are over 200 compacts between states, and Congress has approved 90. The best known is that addressing driver’s licenses. For example, if you have a valid license in Iowa, it is valid throughout the United States, even if the law and process for obtaining one in another state is different. The state of Iowa is currently a signatory to 22 compacts, including ones on energy, unclaimed property, wildlife, mental health, and emergency-management assistance.[2]


In response to the Patient Protection and Affordable Care Act (ObamaCare), a group of concerned business people created the Health Care Compact Alliance, a 501(c)(4) organization working to keep health-care responsibility and financial control at the state level, instead of federal, by the establishment of health-care compacts between the states. This initiative is working in parallel with the state legal challenges to ObamaCare moving through the court system.[3]


As recently as November 30, the American Legislative Exchange Council (ALEC), a non-partisan membership association for state Legislators, adopted the health-care compact language as drafted by the Health Care Compact Alliance, as model legislation; in effect recommending it to all state Legislatures for adoption.[4]


The compact has been passed and signed into law by four states: Georgia, Oklahoma, Missouri, and Texas. It has been introduced in another 12: Arizona, Colorado, Indiana, Louisiana, Michigan, Montana, New Mexico, North Dakota, Ohio, South Carolina, Tennessee, and Washington; passing in at least one Legislative house of Colorado, Montana, and Tennessee.[5] In 2012, it is anticipated that legislation opposing ObamaCare will be introduced in over 44 states, including Constitutional Amendments, state statutes, resolutions, agency restrictions, nullification, and state ballot questions.


According to the compact language, member states would have primary regulatory authority over health care, could suspend federal health-care regulations, and would receive “block grant” type funding for publicly funded health-care costs. An advisory commission would work to publish cost data, study health-care issues, and make recommendations. The compact can be amended and a state can withdraw. Based on 2010 state health-care costs, under the compact Iowa would initially receive $8.45 billion dollars from the federal government, which would be adjusted in the future for inflation and population changes.[6]


In the fall of 2011, “Fiscal Survey of the States” by the National Governors Association (NGA) states that “Financial factors causing rapid growth in Medicaid costs for states include: increased enrollments (because of both the weak economy and expanded eligibility under health-care reform); the elimination of federal funds associated with the enhanced matching rate of state costs from the Recovery Act; and per capita health-care costs in general increasing faster than the economy.”[7]


Additionally, the report specifies that “while state general-fund spending is expected to grow slowly over the next few years, state spending on Medicaid is likely to continue to see above average growth due to increased demand as a result of the economic downturn, the loss of additional federal funds associated with the Recovery Act, and the implementation of the Affordable Care Act (ObamaCare).”[8]


Other expert reports specify that “Medicaid spending, similar to health-care spending is projected to increase faster than the economy as a whole.” The “Actuarial Report on the Financial Outlook for Medicaid” by the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary in December 2010 underscores the challenges ahead. They state that, “Medicaid costs will almost certainly continue to increase as a share of gross domestic product (GDP) in the future and will be a serious strain on states’ budgets.”[9]


In fiscal 2011, Medicaid expenses made up about 24 percent of most state budgets, more than K-12 education (20.1 percent), higher education (10.1 percent), and transportation (7.6 percent). The CMS projects the average annual increase to be over 8 percent per year, for the next 10 years.[10] At this time health-care costs and insurance costs are rising, not falling as promised. Under ObamaCare, it is not clear that either the Federal or state governments are capable of paying this bill without either significant tax increases or service cuts, or both.


The health-care compact legislation was not debated and considered during the 2011 Iowa legislative session, but is expected to be introduced and considered this year.


[1] “Interstate Compact,” Legal Dictionary-The Free Dictionary, <> accessed on December 5, 2011.
[2] “Iowa Compacts,” The National Center for Interstate Compacts, The Council of State Governments, <> accessed on December 6, 2011.
[3] “About,” The Health Care Compact, <> accessed on December 6, 2011.
[4] “ALEC Adopts Health Care Compact as Model Legislation,” PR Newswire, November 30, 2011, <> accessed on December 5, 2011.
[5] “Summary of 2011 Proposed State Legislation and Resolutions-Table 1” State Legislation and Actions Challenging Certain Health Reforms - 2011, National Conference of State Legislatures, December 1, 2011, <> accessed on December 7, 2011.
[6] “The Health Care Compact,” Health Care Compact, <> accessed on December 5, 2011.
[7] “Fiscal Survey of the States, Fall 2011,” National Governors Association and the National Association of State Budget Officers, p. 4, <> accessed on December 5, 2011.
[8] Ibid., p. 11.
[9] Ibid., p. 42.
[10] Ibid., p. 15 and 42.



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