To fix health care, look to state governors

Editor’s Note: Lanhee J. Chen is the David and Diane Steffy Research Fellow at the Hoover Institution at Stanford University. He served as the policy director for Mitt Romney’s 2012 presidential campaign and was a senior aide at the US Department of Health and Human Services during the George W. Bush administration. The views expressed in this commentary are his.

The recent collapse of Republican efforts to repeal and replace Obamacare can be blamed on disagreements about policy more than anything else.

For seven years, Republicans at all levels of government were able to articulate the simple message that President Barack Obama’s signature health care law had to go, and a set of better, market-based policies needed to replace it.

But once the GOP captured control of the White House and both houses of Congress, it became clear that the devil really was in the details. Within their own ranks, Republicans remain divided on fundamental questions of policy – whether to change how Medicaid is financed, whether there should to be tax credits to help low-income Americans afford private insurance, and how far to go in deregulating the marketplace.

So, what’s next? Republicans may soon vote on a bill that will mirror the 2015 legislation they passed (and Obama vetoed) repealing large parts of Obamacare, without an accompanying package of replacement reforms. This approach, dubbed “repeal and delay” because it offsets the repeal of Obamacare by two years, raises significant concerns. It would introduce dramatic uncertainty into the health care system, place the most vulnerable among us at risk of losing the coverage they need, and punt on the important work of replacing Obamacare with reforms that could actually lower costs and expand choices for consumers.

The Congressional Budget Office recently estimated the impact of “repeal-and-delay” and found that, while it would decrease budget deficits significantly, it would also leave 32 million more Americans uninsured in 10 years, as compared to Obamacare. Moreover, a recent survey from the Associated Press and the University of Chicago showed that, by a 2-to-1 margin, those polled believed that Obamacare should not be repealed until a replacement was available.

This suggests that Republicans would be the ones who would “own” the political consequences for rising premiums, diminishing choices, and lost coverage during the two years before Obamacare is actually repealed – a period of time that includes a crucial midterm election.

Plus, the notion that a two-year delay would be an action-forcing mechanism is sheer folly. It is an approach that has never been particularly effective at encouraging policymaking amongst members of Congress on even the most urgent of priorities (see the much-maligned budget sequester for evidence of this).

But there is another route.

Despite the many policy differences between Republicans that torpedoed the recent repeal-and-replace effort, there was common ground between Senators (and many governors, as well as members of the House) on the value of federalism and state-led reforms in our health care system. This concord should form the basis of any future GOP discussions about the fate of Obamacare, or what should go in its place. It might even jumpstart bipartisan discussions about the future of health reform, as some Democrats have suggested that state-focused solutions are a reasonable step forward.

A number of existing legislative proposals speak to this emerging consensus.

The stalled GOP Senate bill included a notable provision that dramatically expanded upon a state innovation provision contained in Section 1332 of Obamacare. This section of current law allows states to waive many of the law’s mandates and requirements so long as they establish health solutions that don’t increase the federal deficit, and furnish coverage that is at least as affordable, comprehensive and widespread as that provided for by Obamacare.

The Senate bill basically eliminated these guardrails and deemed state reform plans presumptively valid, so long as they did not increase the federal deficit. Many conservatives cheered this change and believed it would create an “escape hatch” from Obamacare for many states, particularly those governed by conservative leaders.

Earlier this year, Senators Bill Cassidy of Louisiana and Susan Collins of Maine – two skeptics of the Senate Republican legislation – introduced their own bill that, at core, would allow states the option of implementing Obamacare (with its mandates and requirements) or designing their own health systems, with some or none of Obamacare’s regulatory structure.

Their legislation would keep many of Obamacare’s tax hikes in place, but send this money to states that, at a minimum, elected to maintain protections for those with preexisting health conditions. While most conservatives balked at the notion of retaining so many of Obamacare’s tax increases, the federalist core of the Cassidy-Collins proposal should be appealing to Republicans looking for a way forward.

Finally, Senator Lindsey Graham has a proposal that mirrors many elements of the Cassidy-Collins proposal (in fact, media reports indicate that he worked with Cassidy on his plan) that would retain almost all of Obamacare’s tax hikes, as well as its protections for patients with preexisting conditions, in return for block grants to states. These grants would give states significant flexibility in each pursuing the solutions that suit their citizens best.

Republicans have long advocated for solutions that empower governors and state elected officials to address major public policy challenges. Reforms such as the landmark 1996 welfare reform legislation, which granted states significant latitude to design safety net programs that suited their populations best, illustrate the value that such an approach can have.

Health care is an area where federalism not only has the potential to lead to more innovative solutions, but to forge consensus between conservatives – and maybe even across the partisan divide.