HHS Secretary Katherine Sebelius says this morning
The Affordable Care Act puts states in the driver’s seat because they often understand their health needs better than anyone else….
Praising the virtues of state government and local control is as American as apple pie. Yet in many ways, this is a polite lie. Still, Sebellus is right to note the discretion offered the states. She would be wise to go further.
It won’t be easy. Without the right resources and safeguards, putting states in the driver’s seat in health policy is a little like putting this guy in change of your investment portfolio. With the right safeguards, I remain convinced that finding some common ground between the Obama administration and Republican governors who have specific programmatic concerns is the best hope in implementing health reform.
This thing is going to hit many bumps in the road. Some midcourse corrections, some programmatic compromise, and some shared ownership will be essential to get this right. It won’t be pretty. It needs to be done.
Let’s start with the polite lie. Most states lack the money or the administrative capacity to do health policy very well. Many of the toughest challenges are inherently national. The political and budgetary process in many states lacks the transparency, discipline, and competence we really need. Many conservatives who rail against myopic budgeting or the excessive influence of special interests in the management of state retirement benefits become strikingly incurious when the conversation turns to Medicaid or state insurance regulation. And of course, many states are simply ungenerous. In establishing income limits, benefit levels, and covered optional services for Medicaid and other programs, many fail treat the poor and the sick with the basic decency that everyone deserves. If you don’t believe me, try finding a dentist that will take Medicaid. Try finding a dentist at all if you are a poor person in a state that doesn’t take Medicaid.
Then there’s the obvious example of state TANF benefits, which people don’t talk about so much anymore in the wake of welfare reform. Caseloads fallen and stayed low in the midst of deep recession. And state benefit levels remain amazingly low by the standards of most people reading this column, Let’s consider a random state—say Indiana. The below table from a state website indicates what poor single moms can receive:
Family Size Maximum Monthly Benefit
By way of comparison, my students pay more than $400 per month for their (ok overpriced) cafeteria meal plan. Indiana is hardly the least-generous state, either. Granting too much flexibility to states grants them too much discretion to do too little for the most vulnerable citizens whom health reform and other measures were enacted to help.
As you might have guessed, I didn’t actually pick Indiana at random. Governor Mitch Daniels wrote a recent Wall Street Journal op-ed that has gotten much attention. Past all the broad political claims, the key paragraphs include the following:
I have written to Kathleen Sebelius, secretary of Health and Services (HHS), saying that if her department wants Indiana to run its program for it, we will do so under the following conditions:
 We are given the flexibility to decide which insurers are permitted to offer their products.
 All the law’s expensive benefit mandates are waived, so that our citizens aren’t forced to buy benefits they don’t need and have a range of choice that includes more affordable plans.
 The law’s provisions discriminating against consumer-driven plans, such as health savings accounts, are waived.
 We are given the freedom to move Medicaid beneficiaries into the exchange, or to utilize new approaches to the traditional program, instead of herding hundreds of thousands more people into today’s broken Medicaid system.
 Our state is reimbursed the true, full cost of the administrative burden to be imposed upon us, based on the estimate of an auditor independent of HHS.
 A trustworthy projection is commissioned, by a research organization independent of the department, of how many people are likely to wind up in the exchange, given the large incentives for employers to save money by off-loading their workers.
Ezra Klein has a few pieces on this that are very much worth a look. Klein concludes: “it seems like something could be worked out, at least if everyone involved is actually interested in working something out.”
I basically agree. I was a partisan voice during the health reform fight. After a certain point, I opposed efforts to reach out to Senate Republicans during the health reform fight. That stance didn’t reflect any inherent aversion to bipartisanship. I just became convinced that House and Senate Republicans had made a basic strategic decision to oppose, delay, and obstruct whatever Democrats wanted to do.
This is different. More so than congressional Republicans, Daniels, and other Republican governors have an actual stake in making health reform work. Most of these governors also have political or policy agendas which do not begin or end with the goal of beating Barack Obama in 2012.
Each of these governors is responsible for hundreds of thousands or millions of people who need the services and protections made possible under the Affordable Care Act. Many need to balance budgets in terrible budget times without allowing Medicaid to crowd out other critical state needs. Each governor needs some flexibility and significant resources from the federal government to get these things done. Although Republicans talk a lot about limited government, such talk is generally muted when the conversation turns to big-government efforts to provide more cash to states that really want it.
Moreover, some of the Republican agenda at the state level is consistent with what progressives should also want over the long-term.
Federal policymakers indeed have a way of imposing burdens on the states, or—more commonly—to delegate responsibilities ad tasks to states that are very unlikely to do these things well. If one transfers $1 of spending from the federal to state budgets, you get $1 worth of credit in your CBO budget score. This is unfortunate. This maneuver by itself does nothing to reduce public deficits overall. Worse, it shifts the burden to a level of government ill-equipped to handle the load.
So when I look at Daniels’ bullet point , I think liberals have some strong reasons to find common ground. I wouldn’t mind seeing more independent analysis of point , as well.
I am more suspicious of some other points. Voters are not well-positioned to monitor the crucial but boring mechanics of insurance regulation in 50 state capitals across the U.S. Loosening requirements for which insurers can participate in these exchanges and allowing greater flexibility within the essential benefit package runs the serious risk that important consumer protections will be lost.
As for point , I’m curious what others think about allowing states to put Medicaid recipients into health insurance exchanges. There are complicated opportunities and risks here. I will discuss this issue in a separate blog post. Links to good analyses would be appreciated.
I do believe, though, the Obama administration would be smart to reach out to whatever reasonable Republicans they can find who have some ability and incentive to negotiate programmatic differences. And Republican governors would also be smart to play ball. In the short-run, people are thinking about political outcomes in 2012. If you care about policy outcomes in 2030, one needs a broader view.
Postscript: As I hit “send,” I saw this nice piece from Austin Frakt on the same issue.