States have a lot to lose under Obamacare. Beyond representing a huge overreach of Congress’s constitutional authority, the new law includes several provisions that restrict states’ ability to reform their health care systems in ways that best serve residents’ specific needs.
Obamacare requires all states to extend eligibility for Medicaid to an additional 18 million citizens. This will have serious implications for state budgets, which are already stretched thin by the cost of the program.
The law also requires that states set up health insurance exchanges, for which the rules and regulations will be defined by the federal government. Indiana Governor Mitch Daniels writes that Washington “assumes that [states] will set up and operate its new insurance ‘exchanges’ for it, using our current welfare apparatuses to do the numbingly complex work of figuring out who is eligible for its subsidies, how much each person or family is eligible for, redetermining this eligibility regularly, and more. Then, we are supposed to oversee all the insurance plans in the exchanges for compliance with Washington’s dictates about terms and prices.”
Areas in need of change differ greatly from state to state, so efforts to reform health care should be driven by the states to target these varying needs. Recognizing this, Senators Ron Wyden (D–OR) and Scott Brown (R–MA) have co-sponsored legislation intended to help states take a different direction in reform under Obamacare. But their proposal falls short of the mark.
Obamacare allows states to pursue alternate paths to the new law by applying for a waiver from the Department of Health and Human Services (HHS) and maintaining the same quality and level of coverage as would otherwise exist. The Wyden–Brown measure would simply advance the date on which states can apply to waivers from 2017 to 2014 so that states would not have to implement the major provisions of Obamacare and then wait three years to take an alternate route. This may seem logical, but as Heritage expert Stuart Butler explains in The New England Journal of Medicine, the proposal is not sufficient to remove the obstacles to state flexibility.
First, Butler explains that Wyden–Brown “locks the states into guaranteeing a generous and costly level of benefits. True, a state could propose alternative benefit requirements if they had the same actuarial value as those in [Obamacare]. But the requirements go well beyond basic coverage, and the HHS secretary is the one who defines ‘at least as comprehensive’ benefits.”
Furthermore, states would not be able to include other health programs, like Medicaid and SCHIP, in waiver requests, making it more difficult to propose innovative alternatives that would create savings and give patients more control in existing health programs. Finally, since the Secretary of HHS will ultimately decide which states receive waivers, they would be susceptible to the preferences of the Administration.
Wyden–Brown sheds light on a major flaw of Obamacare, but it does not go far enough to provide states with the changes they really need. Even before passage of Obamacare, more flexibility was needed for states to implement the kinds of reform that would best serve their residents. The first step to putting states in the driver’s seat is to repeal Obamacare, after which Butler proposes creating a bipartisan waiver commission to receive reform plans and to approve “a balanced slated of state proposals,” thus allowing states to innovate without Washington getting in the way.