MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. When Congress passed the Patient Protection and Affordable Care Act in 2010, Maryland and Virginia embarked on divergent paths.

MR. KOJO NNAMDIMaryland's top elected leaders became outspoken champions of the law embracing its more controversial elements, but also beginning the complex work of building health exchanges from scratch and retrofitting the state's health safety net. Virginia's top elected leaders helped launch the Supreme Court challenge against Obamacare. They passed a state law expressly prohibiting an individual mandate and many believe hedged its bets that the law would be struck down.

MR. KOJO NNAMDISometime this month, the Supreme Court will render its verdict on the Affordable Care Act. If the court upholds the law, Virginia may find itself playing a high-stakes game of catch-up. If the Justices strike it down, Maryland may find itself with expensive new commitments and no way to pay for them.

MR. KOJO NNAMDIThis hour, we're getting a state-level view of what's at stake. We're also exploring whether any of these new ideas and institutions will actually make care more affordable and accessible for families in our region.

MR. KOJO NNAMDIJoining us to have this conversation is Jack Meyer. He's a professor of the Practice School of Public Policy and the School of Public Health at the University of Maryland. He's managing principal at Health Management Associates where he's helped numerous states set up health exchanges in advance of the Affordable Care Act. Jack Meyer, thank you for joining us.

PROFESSOR JACK MEYERGood to be here.

NNAMDIAlso with us in studio is Rosemary Gibson, co-author of "The Battle Over Health Care: What Obama's Reform Means for America's Future." She edits the "Less is More" series at the Archives of Internal Medicine. Rosemary Gibson, thank you for joining us.

ROSEMARY GIBSONThank you, Kojo.

NNAMDIAlso with us is Edmund Haislmaier. He is senior research fellow in Health Policy Studies at the Heritage Foundation. Ed Haislmaier, thank you for joining us.

MR. EDMUND HAISLMAIERThank you.

NNAMDIJoining us by phone is Dr. Joshua Sharfstein, secretary of health and mental hygiene for the State of Maryland. Dr. Sharfstein, thank you for joining us.

DR. JOSHUA SHARFSTEINGood afternoon.

NNAMDIJack I'll start with you. As we await the Supreme Court's verdict on the health care law, the entire country seems to be divided. Dozens of mostly blue states that have tried to implement this law and dozens of mostly red states that have either challenged it directly in court or seem to be dragging their feet in implementing it and here in Washington, we seem to have great local examples of both strategies. Tell us what's happening in Maryland, D.C. and Virginia.

MEYERWell, I'll be brief about Maryland because Dr. Sharfstein is on, but they've been moving ahead vigorously. They've had a number of committees. The Lieutenant Governor Brown was on this early on.

MEYERThey're planning to figure out how to qualify health plans and how to do the information technology and so they're moving ahead vigorously. What I'm finding is not a lot of red state/blue state competition, but I see a lot of purple out there.

MEYERThere are about 13 states, including Maryland and the District, that have passed enabling legislation to move ahead. But there are a number of other states, their official position may be that they're opposed to the Affordable Care Act. They're skeptical, but they're moving ahead with contingency planning. I think that would characterize Virginia and many other states. They don't want to be three years behind if this law stands.

MEYERAnd all of these states are wrestling with the following kind of problem, which I'll be brief on. You take a median income family in America that makes $50,000 a year. If they're not lucky enough to work for an Intel or Cisco Systems that gives them comprehensive employer coverage, they have to go and buy family coverage on their own. That costs at least $12,000 a year, that's a fourth of their income.

MEYERUnder the Affordable Care Act, whether you like it ideologically or not, that family would get a subsidy of $8,745 toward that $12,000 premium. If their income is only $36,000, they'd get a subsidy over $10,000 that would pay 88 percent of that $12,000 premium.

MEYERThe states are going to need that kind of federal help for low, moderate and middle-income people. They can't shoulder that entire burden, plus Medicaid. They're wrestling with their Medicaid programs, which are growing sharply. So that's essentially what I see, some moving ahead rapidly, some cautiously, a few not playing at all.

NNAMDIJoshua Sharfstein, if you could call it the Mother of all Open Seasons if this law survives its Supreme Court challenge, states will face a huge challenge for the fall of 2013. By the end of September, you have to have systems in place to accommodate thousands of new health care customers. Give us a sense of what Maryland is doing right now.

SHARFSTEINWell, you know, I'm a pediatrician, that's the kind of challenge I like, the challenge of how to get people into care that they need. I go around Maryland, the governor, the lieutenant governor and we hear from a lot of people who simply cannot afford coverage. And so we see the Affordable Care Act as a great set of tools. It doesn't guarantee a particular outcome, but one that states can really use to help advance the call for health.

SHARFSTEINSo we've been working with the entire Maryland community, businesses, brokers, insurers, doctors, hospitals, advocates to put together a plan that works for the state. And we're looking forward to being able to implement that and really making a big dent in the number of uninsured. But, you know that's a big number, but then it really boils down to the families, the moms, the dads, the kids who can really be helped by the law.

NNAMDII'd like to talk about the pressures facing states across the country. We spoke with your counterpart from Virginia, Dr. Bill Hazel, the secretary of health and human resources for the Commonwealth of Virginia and he explained the challenge as he sees it.

DR. WILLIAM HAZELLook, Virginia is typical of many states. we have, due to the recent recession, have increased numbers of individuals come into the Medicaid program. When I came into office two years ago, or more than two years ago, we had 835,000 individuals in Medicaid and now we're over 940,000. We have the twin problems of expanding Medicaid population and folks who are really relying on the safety net of free clinics or have no insurance.

DR. WILLIAM HAZELWe, like other states, have seen issues related to soaring costs of health care. We have - our cost increases have been a little more modest than elsewhere, but they're real and cost is the main reason people are unable be insured. And I think we also have to look at our public health and population now. We have a population in Virginia that's getting a lot older and we have some suggestion that in 2020, Virginia will look very much like Florida does today.

DR. WILLIAM HAZELSo when you have a population aging, you have individuals typically with more complicated medical needs, more demands on services and that gets us into a whole other category of issues, that's not only who is going to pay for it, but who actually is going to take care of these people?

NNAMDIDr. Sharstein, are you facing something similar in Maryland?

SHARFSTEINLike, for Dr. Hazel, I think we were recently on a panel together and, you know, even though our elected leaders may clash on different topics, I think that we have a pretty similar, you know, general approach that we want to take advantage of tools that are available to us. That's why Virginia has, in fact, been planning for an exchange.

SHARFSTEINBut I also agree with him that this is really just one piece of the puzzle. I don't think that the Affordable Care Act and even the exchange is the entire puzzle. It's a critical piece. You have to have that ability to expand access that the exchanges provide, but it, by itself, will not solve the kinds of challenges of cost and quality that you also need to see solved.

SHARFSTEINAnd, you know, we have a whole approach in Maryland where we are very focused on curbing the rise in health care costs through a number of very innovative ways that health care providers can be paid and ways that care can be delivered. Our ultimate goal is really to support families and businesses with affordable coverage.

NNAMDIWe're talking about health care bracing for a Supreme Court decision and inviting your calls at 800-433-8850. What are the biggest problems you see in the American health system as it currently exists? Do you think states will be able to address these problems under the Affordable Care Act? 800-433-8850. How should states be preparing for the imminent Supreme Court decision? You can also send us a tweet at kojoshow or email to kojo@wamu.org

NNAMDIRosemary Gibson and Ed Haislmaier, this for you, Rosemary, I'll start with you first. We know that states, unlike the federal government, need to balance their budgets and we know that health spending is eating into all states' abilities to pay for other services. One of the hopes was that health care reform could begin to bend the curve in terms of the cost of medical services both for states and for individuals. Will any of these innovations actually do that?

GIBSONWell, the American people are looking for more affordable health care, whatever they think of health care reform. And I think we should look at the reality of what it's going to cost them. So if we look at estimates from the Congressional Budget Office and the Kaiser Family Foundation, and again these are estimates projected to 2014, if you have a 60-year-old person earning $48,000 a year, he or she will end up paying $10,000 a year for a health insurance premium, plus up to $6,000 in out-of-pocket payments.

GIBSONThat's extraordinary. Now, for a family that earns say, $45,000 a year, a family of four, they'll have to pay, say, $2700 a year. That could be a real blessing, but it could also be a substantial burden. I think one of the things we have to bear in mind is that the health care reform law really did not do much to stop the increase in the cost of private health insurance.

GIBSONIt didn't take out the enormous waste, the 30 percent waste in health care that's driving costs up and up. And how much is that waste? It's actually equivalent, actually more than the GDP of countries like Sweden, just the waste in health care. So unless and until we tackle that -- and, of course, every dollar we spend is a dollar in revenue that goes to somebody. We have to have that conversation and neither Democrats nor Republicans find it easy to have that conversation, but that is what's going to make health care affordable for the American people.

NNAMDIEd Haislmaier, what say you?

HAISLMAIERWell, there is widespread agreement, I think, on the cost of quality as my colleagues have said, that those are the big issues. I like to boil it down to really even something more basic than that and that is value. I mean, look, we have the most expensive system in the world. Everybody knows that, okay. And in many cases, it's very, very good.

HAISLMAIERPeople come here from around the world for expensive and, you know, cutting-edge medical care. But in many places, it also has problems. We have too many uninsured people, as my colleague has pointed out. The care quality is often uneven even within the system. There's a lot of waste et cetera. So it's really a question of value.

HAISLMAIERI think what we can agree on is that we're either paying too much for what we're getting or we're not getting enough for what we're spending. And so the debate philosophically comes down to how do you improve value in health care? And that's where I think the supporters and opponents of this particular legislation disagree.

HAISLMAIERThis legislation is premised on the idea that a bunch of experts can improve value in health care. And the alternative view is that, look, the only way you're going to get better value in health care is if you empower patients and consumers and force everybody else to work for them and for the insurers and the doctors and hospitals to earn their business by offering better results at a lower price and so that the philosophical difference behind it.

HAISLMAIERBesides the philosophical difference, this legislation, whether it's upheld or not, has huge technical problems in implementing it, particularly when it comes to the states because they're asking states to do things to implement it, but the states don't, beyond maybe political support, have any real vested interest in doing this. I mean, it's really federal rules and federal money and the states are sort of saying, well, why am I doing this?

HAISLMAIERSo even in a state that is supporting the legislation, there's some hurdles to actually getting it done.

NNAMDIJoshua Sharfstein, would you agree?

SHARFSTEINUm, not entirely. I think that it's certainly true that there are hurdles to getting it done so I certainly agree with that. I think that Maryland is genuinely interested in a state solution. I've been on a number of panels with other states where there's this irony that the people who are rallying against the Affordable Care Act there. State legislators, for example, they may be stuck with the federal government coming in and setting up an exchange in that state. Whereas Maryland, which is a state that's supportive of the Affordable Care Act as a great set of tools, we think that that tool can best be used if we configure it.

SHARFSTEINAnd that's what's been going on and it's not a heated political debate in Maryland. It's a roll-up-your-sleeves kind of work session with all the key people at the table. We really do see the value of having health care move forward in this way. And we also see -- I don't also particularly agree with the, you know, dichotomy between, you know, expert run and not expert run. I mean, what we're going to get is a health care marketplace, which is the exchange, and some basic ground rules.

SHARFSTEINAnd I understand that some people think health plans should be able to compete by not offering certain kinds of benefits. So if you happen to get a certain type of cancer or something, you're out of luck, you know. But I think that the real competition comes when you have a ground rule about what should be covered. And then let people compete to do it well, to provide value in health care. And that's really what we hope the exchange provides. Not compete on ways to, like, cherry pick patients or, you know, keep out the sick, but compete on delivering health care well. That's really the solution that'll drive down health care.

NNAMDIGot to take a short break. When we come back, we will continue this conversation. If you'd like to join it, give us a call at 800-433-8850 or send email to kojo@wamu.org. You can also go to our website kojoshow.org and ask a question or make a comment there. I'm Kojo Nnamdi.

NNAMDIWelcome back to our conversation on state health care bracing for a Supreme Court decision. We're talking with Dr. Joshua Sharfstein, Secretary of Health and Mental Hygiene for the State of Maryland. Jack Meyer is a professor of the Practice School of Public Policy and the School of Public Health at the University of Maryland. Ed Haislmaier is Senior Research Fellow in Health Policy Studies at the Heritage Foundation. And Rosemary Gibson is co-author of "The Battle over Health Care: What Obama's Reform Means for America's Future." She edits the "Less is More" series of the archives -- at the Archives of Internal Medicine.

NNAMDIAllow me to clear up something here, Jack. Jack Meyer, you can help me with this.

MR. JACK MEYEROkay.

NNAMDIWe got an email from Christina who said, "In your setup, you referred to Obama Care, a derogatory name coined by Republicans for the Affordable Care Act. I don't care what your views are, but as a journalist, it is your responsibility to not use propagandistic language. Not that you're alone. I hear it all the time. Please don't start calling it the Democrat Party now." It seems to me that that may have been how the term started out, but from what I have been seeing people who support it and oppose it both use the phrase these days.

MEYERWell, Kojo, I don't let my students at Maryland use the term Obama Care. I encourage them to -- because I think it's pejorative. I agree (unintelligible) ...

NNAMDISo you agree with the emailer...

MEYERI agree with the caller.

NNAMDI...yes.

MEYERBut I encourage them to oppose or favor it. So I encourage lots of lively discussion, but I think it has been used in a pejorative sense. But I think the real point is that we can get some consensus on is we need a government federal and state that makes smart investments in health care. Imagine if we said -- imagine an America in which one in six kids couldn't go to public school. We wouldn't do that, and why? Because we know that an educated kid is a good investment. They'll be working. They'll be paying taxes. But that's what we do in health care. One of six Americans has no health insurance.

MEYERSo nobody wants, that I know, a government takeover of health. They want to make an investment to help people buy private insurance with choice but also help them afford it. And one other thing, a smart government invests in realigning or resetting the incentives when they're all wrong. In health care every incentive is to do more and more. Order more tests, order still more tests, order more drugs, hospitalize people more, keep them longer, re-admit them. And if you invest in programs that would reduce that you'd lose money.

MEYERAn important part of the health reform law is that it sets up a number of programs, first on a pilot basis but they can be put into law automatically if they work, that allow hospitals and doctors if they can demonstrate savings and better outcomes, to share the savings with those who are paying the bill. So Medicare or Blue Cross, others will share the savings. So they're investing in primary care medical homes -- Maryland has an active program on that -- in trying to reduce admissions, in trying to reduce hospital acquired infections and trying to -- better care management for patients with diabetes and asthma. So these things are smart investments.

NNAMDIEd Haislmaier, that brings me back to a point you made earlier and then of course I want to go to Rosemary Gibson. But, Ed, we were talking about this before the break. One thing insurance companies have been asking for is a minimum set of requirements of what should be included in insurance packages. You say that that has not been forthcoming.

HAISLMAIERWell, the essential benefit requirements are part of the legislation. And so one of the technical issues, and it's a big one, is that the Department of Health and Human Services, the federal government is tasked by congress in this legislation with specifying those and they have not so far. And what they've done is they've suggested some ways -- they haven't even drawn a draft regulation -- they simply suggested that, well, states could use a benchmark of their own small group plans for example.

HAISLMAIERThe problem with that is that there are some benefits required in the statute that really aren't any insurance today. And so it only gets you part of the way. And so even states like Maryland that want to implement this have some technical hurdles because the insurers -- I mean, the insurers basically will play. They just need answers to two questions. One is where do you want me to put the benefit package and give me enough time to price it out. And two, how do I -- how am I assured that I get paid? And if you can't answer those questions then, you know, the insurers will say, well give me a call when you're ready. So that's a technical problem there.

NNAMDIRosemary Gibson.

MS. ROSEMARY GIBSONI think we have to step back and take a look at where we're headed. A good example is in the State of Kentucky the Pritchard Committee came out with an analysis showing that 97 percent of the increase in spending on education in the past 20 years has been for health and pension benefits of employees. Only 3 percent has been for children. So we have a big task ahead so that health care doesn't keep eating into other critical sectors of our economy.

MS. ROSEMARY GIBSONAnd as to how to fix it I think it is true that individual patients can play some role in paying out of pocket for generic drugs, a lower price than say for brand name drugs. But the reality is health care's become an oligopoly. And I think it's impossible for the individual consumer to be able to take on this large medical industrial complex. We need to go way upstream and have more price transparency with the contracts, for example, between insurance companies and hospitals as Massachusetts did. And we saw enormous variation.

MS. ROSEMARY GIBSONWe need to have price transparency on the contracts between drug and device manufacturers and hospitals that do all this purchasing. That's where an enormous amount of frankly waste can be identified and taken out of the system at a wholesale level, not at the retail -- we have to follow the money if we want to have a sustainable system and take it out where it doesn't add value.

NNAMDIOn to the telephone. Here is Sandy in Silver Spring, Md. with a specific, I guess, personal experience. Sandy, you're on the air. Go ahead, please.

SANDYYes. I'll tell you. I'm so tired of this whining about insurance costs. I have a high deductible HSA plan in Maryland. The rates are not high. The out-of-pocket is not significant. If I'm sick they pay my expenses above a certain modest level. So, you know, a year where I had $50,000 in expenses my total costs including my premiums, my deductible and my co-pay was $7,000. That sounds to me like what insurance is for. Why doesn't everybody have the same plan as I do?

NNAMDIDr. Sharfstein. Dr. Sharfstein, did you just hear our caller?

SHARFSTEINWell, a lot of people can't afford those plans, that's why.

NNAMDIThe Health Savings Accounts?

SHARFSTEINWhat's that?

NNAMDIThe Health Savings Accounts that Sandy says that he is a beneficiary of?

SHARFSTEINYeah, I mean, these high deductible plans may help some people but, I mean, the answer to the question is they're not affordable for a lot of people right now. I mean, a lot of the plans that will be made available to the exchange will be relatively high deductible also. But this -- people will still need that subsidy in order to be able to afford it.

NNAMDIWhat are your thoughts about what both Rosemary Gibson and Ed Haislmaier were talking about, where the high costs come from?

SHARFSTEINWell, you know, I think that the high costs do come from underlying problems within the health care system. And actually I think there's a fair amount of agreement that everybody has here about what's driving health care costs. When people are paid to do more then you get more and you don't necessarily get more health or better outcomes.

SHARFSTEINAnd, you know, I was recently meeting with a group of ministers in the Greater Baltimore area and I said it was -- it would be as if each of you got paid by the prayer. That's how it works in health care. Everyone gets paid by the admission, by the surgery. And I said, you know, it'd be like if each of you got paid by the prayer. And after that there was a bit of an uncomfortable silence. But one of the ministers leaned over and put his hand on my shoulder and said, let us pray.

NNAMDIHe gets a payment right there.

SHARFSTEINSo they understood that when you have this incentive that the more you do, the more you get paid that that's going to drive costs forward. And so the question really is how you get that value in health care. And, again, I think it is -- competition plays an important role but it's got to be the right kind of competition.

SHARFSTEINAnd the other thing is people really need to be inside the system. It's very hard to control costs when you have huge numbers of people who've got no access and they'll show up with a stroke or the heart attack or the asthma attack and blow costs out of the water because it's so expensive when they wind up in the ER. So you've got to have a system to bring people in to effective care. And then you need to restructure the incentive so we're just not paying more to get more.

NNAMDISandy, thank you very much for your call. I want to circle back to the Supreme Court for a minute because the court considered a whole host of questions when it heard oral arguments this year about whether it was possible to strike down the mandate and still keep the rest of the law.

NNAMDIAs I understand it there are three contingencies to prepare for. That the law will be upheld, that the individual mandate will be struck down or that the entire law will be struck down. Any way it happens it still seems from the conversation that I'm hearing around this table that there are still some messy questions that will need to be asked, are there not, first starting with you, Rosemary Gibson?

GIBSONNo matter what happens with the Supreme Court decision, we still will have people who need access to health care. They need access to affordable health care. And while we're focusing all of our attention on the individual mandate and these other legal issues, we need to have this other conversation about how we make health care affordable. And they're not easy conversations to have because it means taking away, you know, sort of the revenue base of many companies and organizations.

GIBSONYou know, the mantra, you know, just like in the oil industry it was drill, baby, drill. In health care it's bill, baby, bill. The mantra in health care today is volume, volume, volume. And how do we turn that around? As was mentioned, a lot of this is causing excess harm to patients, unnecessary surgeries, unnecessary tests. How do we take that out of the system, come to consensus on it?

GIBSONSo recently, there was consensus in the oncology community that certain levels of chemotherapy for people that are literally dying, there's no evidence that it will work. How do we take that out and stop paying for it and put that money towards good use, or use it to reduce how much health care costs? Those are the kinds of conversations and tough decisions that policymakers have to make.

NNAMDIWhat will the Supreme Court decision settle in your view, Ed?

HAISLMAIERWell, the Supreme Court decision will settle some constitutional questions. It won't solve the health care system. And there is a fourth option. The fourth option is the Supreme Court strikes the mandate and some other provisions as not severable from the mandate but leaves some of the provision so that they could leave part of the law standing. That's difficult for the court to decide where to draw the line on there.

HAISLMAIERI'd like to make a point, though, following up here that, you know, really following what Rosemary's saying. When writing legislation -- I've done a fair amount of it over the years at both the federal and state level. The motto of less is more is one that I would encourage people to use as well. And that's one of the big problems with this particular bill is that it didn't have an editor. Because there are a lot of ways to address these problems but you really need to look at how is the simplest way the -- how can we hone it down to just the right incentives?

HAISLMAIERAnd this is where I disagree with Dr. Sharfstein. I mean, when you say -- when I say that this is incredibly overregulated that doesn't mean I'm in favor of no regulations or letting insurance companies, you know, abuse people. What I'm saying is you want the right ones and you want as few as will do the trick. And the other point, just to follow up again on what Rosemary said, and to talk about Maryland is a good example, is we have built up in various states a lot of institutional biases.

HAISLMAIERI mean, Maryland has an enormous amount of money buried in its all hospital, all payer rate setting system for hospitals. It's about half a billion dollars that's shoveled around among the hospitals to compensate them for treating uninsured people. They could've, and I've advocated this in Maryland, done what Massachusetts did and simply buy low income people who are uninsured, coverage with that money instead of propping up hospitals with it.

HAISLMAIERIt's also a state that insures that all of its hospitals stay afloat but that does it by preventing any new competitors from coming into the market through certificate of need loss. So there are a lot of things that have these institutional biases where less is more. Take some of that stuff out of the system rather than putting new rules in it.

NNAMDIAnd, Dr. Sharfstein, you first and then Jack Meyer, the State of Maryland has spent millions of dollars and man hours building up these very institutions that Ed was just talking about, necessary to comply with the Affordable Care Act. What happens if the ACA is struck down? Would this be a wasted effort?

SHARFSTEINI think the first thing to keep in mind is, you know, however we think of the Affordable Care Act, it is the law. If it's lost it's a real loss for the people who would be helped. And, you know, I've gotten emails from people who are covered under the Affordable Care Act through the high risk pools who are wondering whether they should be advancing their surgery dates because they're worried about whether they'll still be covered in July.

SHARFSTEINSo I'm really dealing with, you know, not so much the legal questions or the political ramifications but the actual consequences. And I think it would be a very serious step back for health across the country if the law really has an adverse court decision. I do think that there is a lot to be capitalized. You know, so the question that you asked was what happens if it gets struck down? And I think we would obviously need to spend some time reading the decision and understanding the implications.

SHARFSTEINWe have not actually gone that far out on a limb in Maryland. We have built some systems with some federal dollars which will have other uses. And -- but we have gone one step at a time trying to put ourselves in position to help a lot of people who are really in desperate need of help. And do it in a way that is consistent with an overall approach to health care costs that can help families and businesses alike.

NNAMDIJack Meyer.

MEYERWell, I like to put a human face on this problem that we've been discussing. Let's take two quick examples. A woman who was a security guard in my building, we got to talking and I discovered that she got no health insurance from the building. Then one night I was coming in from New York on an Amtrak metro liner. For some reason, I wanted a donut. I don't usually do that. And there she was, the same woman at the donut shop. And when I came up, she said -- she got a little embarrassed for no reason and she said, I know what you're going to ask me, Jack. Does the donut shop offer me health insurance? No, they don't.

MEYERSo here's a woman with two kids working two jobs. Now she had tried to go to the individual market and get coverage for herself but she had hypertension and diabetes and she was turned down or offered a price that was too high. One other quick example, and this is a real world example. A woman with breast cancer, income $60,000 from being a real estate agent, but she was a 1099 worker, so to speak, not an employee of that company, didn't get W2 income.

MEYERShe got breast cancer. She had been divorced the prior year, went off her husband's policy. She was turned down 20 times by 20 different insurance companies. And the 21st company offered her coverage at $28,000-a-year premium -- was on a $60,000 income so about half -- and pre-exed some of her cancer treatment. That's why we're doing health reform. Now, if we throw this law out in the political process or the court throws it out, we've got to come up with another way to help those people.

NNAMDIEd?

HAISLMAIERAnd that's exactly the paper that I'll be publishing next week, Jack. No. Seriously, I was working on the finishing touches on it this morning before coming to this radio show, because this is my point. There are ways you can do this and do this the right way and do this with reasonable rules that would address those situations, and I'm very interested by the first example that you gave, because when I originally helped work on this concept and develop this concept of an exchange, and by the way, we did that here with the commissioner of insurance in D.C. under Mayor Williams...

NNAMDIMm-hmm.

HAISLMAIER...back in 2003. The idea was to provide a way for employers to define contribution healthcare for people like that woman who, they work for two different employers so you can't give them half a health policy, but you could put together the contribution from each employer to buy coverage, and that was the original concept of the exchange, and that's what Utah is implementing. Now, it's on hold while they wait to see what the federal government does, but that was where it originally came from.

HAISLMAIERTo address some of those problems, and to address problems like the commissioner faced in D.C. when the GW health plan went away and people who had bought coverage were now being turned down for coverage. They shouldn't be turned down for coverage. You don't do that in the group market, you shouldn't do that in the insurance -- in the individual market if people have done the right thing. So there are ways to fix there.

HAISLMAIERInterestingly enough, one of the things that was most attractive to Utah about that design was that the state, when they looked at their own data, and this is where I've discovered states are all very different, when they looked at their own data, they found that they were just barely number two to Minnesota in the number of people with part-time jobs, and they had very high rates of people with multiple part-time jobs. So there are ways to do these solutions, but again, you have to do it carefully.

NNAMDIGot to take a short break. When we come back we'll talk a little bit more about building health exchanges. Dr. Sharfstein, I know you've got to go, and you've got some deadlines that you will be looking at. Hopefully after the Supreme Court decision you can rejoin us to talk about its likely impact.

SHARFSTEINSounds good. Thanks for having me.

NNAMDIDr. Joshua Sharfstein is secretary of health and mental hygiene for the state of Maryland. He joined us by telephone. We're going to take a short break. If you have called, stay on the line, we'll try to get to your call. Our other guests are still with us. The lines are currently busy, so if you want to communicate with us, shoot an email to kojo@wamu.org, or send us a tweet @kojoshow, or go to our website, kojoshow.org. I'm Kojo Nnamdi.

NNAMDIWelcome back to our conversation on health care as we await a Supreme Court decision. We're talking with Edmund Haislmaier, a senior research fellow in health policy studies at the Heritage Foundation. Rosemary Gibson is co-author of "The Battle Over Health Care: What Obama's Reform Means for America's Future." She edits the "Less is More" series at the Archives of Internal Medicine, and Jack Meyer is professor of practice at the School of Public Policy and the School of Public Health at the University of Maryland.

NNAMDIJack, I got an email from Beth who said, "A lot of us Obama supporters have been using Obamacare for years. I have a bumper sticker with a blue handprint that says, Hands off my Obamacare. We think it will be a much-loved term ten years and thereafter." Be that as it may, Jack, you've worked with a number of states across the country, red states and blue states helping them build health exchanges. Tell us about what that implies.

MEYERWell, what they're doing first of all is trying to figure out a streamlined way to enroll a lot of people in the program that they should be steered to. So some people come in, are you eligible, do you have a low enough income to go to Medicaid, or if your income's a little higher, we'll put you in the exchange. Then support tools to give people a choice of health plans, and information about the cost and quality of those health plans. So building the information technology to in real time and rapidly enable people to make a choice.

MEYERThen another thing they're working on is qualifying the health plans to participate in the exchange. Do they have an adequate network? Do they meet the solvency standards? Are they reporting the right quality information and so on. And they also have to figure out the governance, what kind of governing board they're gonna be. Do they want to set up one separate exchange for individuals and another for small firms, or do it all together? Those are some of the kinds of decision they're making about the architecture, and also, these exchanges have to be financially sustaining at the state level by 2015.

MEYERSo they get a lot of federal money at the front end to plan and design, but so they're figuring out do we have to have a user fee or charge for insurers, or how are we gonna have a business plan here. It's complicated.

NNAMDIWell, Rosemary Gibson, ideally, the health marketplace would function the way markets are supposed to work. Health care providers would offer a service, consumers would be able to differentiate between good and bad services and the magic of supply and demand would deliver an affordable product. But everyone seems to agree that the market as it currently exists does not do that. Can a health exchange correct the problems with the market?

GIBSONI think the health exchange can go a long way to rationalizing the insurance market, but it doesn't do anything to address the fact that we have a system that's geared to over treat, to push on volume, and it doesn't address some of the dislocations that are quite significant. So as we talk about in the battle over health care, and here's a factoid, the amount of money that's lost to leakage in the system to fraud and corruption, $250 billion. That's according to FBI estimates.

GIBSONThat would be enough to cover all 32 million uninsured people without spending a single penny more. We just can't rationalize the insurance market. We have to go upstream and address these really thorny issues if we want to have health insurance that's sustainable. You know, where I think the employer market is going, just because the costs keep going up, it's gonna -- just what happened to pensions. We're gonna be moving from a defined benefit to defined contribution, and we're seeing already a shredding of health insurance because health care costs so much.

GIBSONAnd I think we're in the realm of possibility that without stopping the growth in healthcare spending, we're still gonna have people that are gonna be filing for bankruptcy because of medical costs. So the subsidies and all of this is not a magic bullet unless and until we stop this inexorable growth. It's frankly pushing all of us over the financial cliff whether it's individuals, families, employers, or the federal government.

NNAMDIWell, Ed, a lot of attention has been paid to Massachusetts and its health care system which includes both an individual mandate and a statewide health exchange.

HAISLMAIERYeah. Massachusetts though did a couple of things, and it's interesting to look at the history of what happened once they enacted legislation. First of all, they did something that a number of other states like Maryland or Louisiana could do, not all states, but states like those that have current large public subsidies going to their hospitals for treating the uninsured, convert that money into buying insurance coverage for the uninsured, and that was the core of what Massachusetts did.

HAISLMAIERThe other thing that they tried to do was to -- they didn't change their misguided earlier insurance market reforms, they simply stuck a mandate on it, and that hasn't worked very well, and that should have been a lesson at the federal level. The other thing that was very interesting in Massachusetts and that didn't get a lot of attention was they created a cost equality commission to gather and publicize the data as Rosemary was talking about, and that was very quietly killed by the Deval Patrick administration once they came in.

HAISLMAIERAnd the big problem in Massachusetts is that they've, you know, hidden all that and you had these huge disparities in the cost and outcomes of care. So the view that I take is that what you need to do is you need to move the whole system to a more consumer driven market, and that starts by empowering the individual to pick the insurance plan and make the insurance company work for the individual.

HAISLMAIERAnd the point that I make is if you can choose, and many people in this city here in D.C. do, the federal employee health benefits program. If you can choose from competing insurance plans and they have to take you, so, you know, you pick one, how do you choose? Well, you look at the type that you like. One of your callers like HSAs. Maybe somebody else like HMOs, fine. You narrow it down and then you look at cost.

HAISLMAIERNow, here's the interesting question. When you look at the cost, does the answer come back that well, the insurance company keeps the cost down by making it hard for you to get medical care, or not paying the, you know, or only sending you to providers that are low cost? Because that's what they're doing today in Medicaid-managed care or employer, you know, when the employer picks the plan. They cut the cost by not paying.

HAISLMAIEROr do they do things like say, well, you can go to any provider you want, but we'll steer you to the best ones and give you a low co-pay. That would be a much more attractive, but they're not gonna do that in a system today where the employer or the government is picking the plan. They're just gonna cut the cost by not paying. And by the way, a lot of that fraud is in the public sector, not the private. It's in Medicare and Medicaid.

NNAMDIWell, supporters of the ACA say it is consumer centric because it's giving people health care a lot more than any alternative out there, and I'm sure of them are saying didn't the Heritage Foundation at one time advocate the individual mandate?

HAISLMAIERWell, what we advocated was a personal responsibility requirement, and no we didn't advocate this kind of a play or pay individual mandate. And by personal responsibility, the distinction there is to say look, if somebody has the ability to pay their medical bills, then they ought to pay them. They shouldn't, you know, they shouldn't try to freeload on the rest of the system. That's different than saying, you know, that's like saying that, you know, if you get a divorce and you have to pay child support, you know, you shouldn't skip out on the child support and expect the taxpayer to take care of your family on welfare. That's different than this kind of individual mandate that wound up in this legislation.

NNAMDIBut Jack Meyer, one of the big questions the court is confronting, is whether the individual mandate is severable from the ACA. You think it is.

MEYERWell, what I think -- yes, I do. I think that if the court strikes down the individual mandate and sends the law back to Congress, which is a very likely scenario, and said, you fix it, but we think this part is unconstitutional, that's not hard to fix. There are other ways to deal with adverse risk selection, which means sicker people all go to one plan and younger, healthier stay out on the sidelines until they get sick. So instead of a mandate, the world would be no one has to get health insurance, but if you don't, and you wait, and you decide to come in in the middle of the year, you'll have to pay a stiff penalty.

MEYERSo I don't want people to think that if the court strikes down the mandate, but leaves the law intact that the whole thing will collapse. It doesn't have to, but Congress will have to come up with carrots and sticks to incent younger and healthier people to participate.

NNAMDIHere is Lorraine in McLean, Va. Lorraine, you're on the air. Go ahead, please.

LORRAINEHi. I just wanted to make the point, I think Rosemary it up, about transparency in terms of the providers and consumers. I'm a clinical psychologist in private practice, and I'm not on any insurance panels, primarily because that allows me to use the entire 50-minute hour to speak to my clients and not have to spend a lot of my professional time dealing with insurance companies. But the other, you know, upshot that that causes is that my -- the people who come to see me know how much I charge.

LORRAINEThey can then make a decision about whether or not they feel the care that they are getting from me is worth what I am charging. It's not hidden. So sometimes those people file under their insurance, you know, paperwork for an out-of-network provider and get some reimbursement coming back, but even if they do, they know exactly what they have had to pay out of pocket, they know what their insurance company is reimbursing them for, for the time, and some of them don't use their insurance at all for confidentiality reasons, but they're clear on what they're getting from me and what they are paying for it, and that transparency I think, you know, I think that's important.

LORRAINEI think about that when I go to, you know, a primary care physician and I'm paying a co-payment, But I really don't know what my primary care physician is charging for those 15 minutes that she spends with me. Everybody who comes to see me knows exactly what I'm charging, and they know exactly what they're getting.

NNAMDIAnd allow me to add to this for your benefit, Rosemary Gibson, email we got from Mary in Kensington who says, "We're a middle-income company. My husband just had kidney stones which required two half-day stays at a local hospital for minor surgery. One of the stones was large enough to have knocked out each kidney function for him, leaning to much greater problems. The hospital billed 56,000 for each of the two surgeries, the surgeon billed 10,000 for each surgery, and there were lab fees, radiology, anesthesia, et cetera. His employer had switched this year to a high-deductible policy."

NNAMDIShe talks about how much money they spent, they've cleaned out their flexible spending account. She said "We hope nothing else happens to our family this year. The Post article said this is consumer-driven. I think it's corporate-driven." What say you?

GIBSONThat's why I think that letting individuals choose in the marketplace and to think that individuals can curb the excesses in the market is really not going to get us very far.

NNAMDIBecause individuals won't get the kind of transparency that Lorraine gives?

GIBSONWhether the transparency or the negotiating power. So where is that negotiating power really going to reside. Who's going to be negotiating on behalf of patients when they need healthcare? So what I worry about is we could have transparency out there, but sure we'll have transparency for very high prices. So who is looking out for ordinary Americans who get these exorbitant hospital bills? I talked to a gentlemen in Kentucky who had a one-night hospital stay and his bill was $224,000, for a relatively, you know, common procedure.

GIBSONWe have to have a conversation, this county, about what's driving it, and why we are even allowing it to happen, and who's stepping up to the plate. This is a market that has gone in extraordinary degrees of excess that's been relying on the blind generosity of the public and that generosity is -- we've tapped it out.

NNAMDIOn the cover of today's New York Times there's an article about hospitals and how they've already begun to change the way they deliver care. In today's Washington Post there's an article about how United Health Care, the nation's largest insurance company, plans to keep some of its changes in place whether or not the health care law survives the Supreme Court. These articles seem to imply that this law has initiated some bipartisan non controversial measures that have kind of flown under the radar. Do you buy that? First you, Ed.

HAISLMAIERThere have been some of these changes underway already, and to a certain extent I think the legislation may have accelerated some of that in the margin on the hospital sector, yeah. You know, frankly, I mean, these numbers that you throw around, the hospitals make this stuff up. I mean, these are not -- they don't know their real costs are. This is part of the problem.

HAISLMAIERThey've spent 40 years where they send a pretend number and then the insurance company cuts a percentage and it's just a circle over and over again, to the point where the number is not at all connected to the service being delivered. And by the way, is not the number that's eventually paid by anybody. And we've had this in the past in other sectors, the average wholesale price, AWP, in pharmaceutical...

NNAMDIRunning out of time. Quickly, I wanted to go to Jack Meyer on this, also.

HAISLMAIERSo, you know, yeah. Some of these changes are occurring and I think there will be more in the future.

NNAMDIJack Meyer, you've only got about 30 seconds.

MEYERThe Center for Medicaid and Medicare Innovation got 3,000 proposals to change the delivery system recently. Doctors and hospitals getting together to find new incentives, new ways. So yes, the law has spurred a lot of innovation, and also in primary care getting people out of ERs, and the sad part is 90 percent of the law Republicans and Democrats agree on. They're fighting over the other ten percent.

NNAMDIJack Meyer is professor of practice at the School of Public Policy and the School of Public Health at the University of Maryland. He's managing principal at Health Management Associates where he's helped numerous states set up health exchanges in advance of the Affordable Care Act. Rosemary Gibson is co-author of "The Battle Over Health Care: What Obama's Reform Means for America's Future." She edits the "Less is More" series at the Archives of Internal Medicine, and Edmund Haislmaier, is senior research fellow in health policy studies at the Heritage Foundation. Thank you all for joining us, and thank you all for listening. I'm Kojo Nnamdi.