Jonathan Cohn

Obama Calls the GOP's Bluff

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My latest column for Kaiser Health News:

With Republican governors complaining that the Affordable Care Act doesn't give them enough flexibility, President Barack Obama on Monday offered a compromise: He'd allow them to opt out of the law altogether, just as long as they had an alternative method of providing universal coverage.

Although a few Republican governors responded positively, the party's more visible leaders were quick to condemn the move as meaningless. "Flexibility," quipped Senator Orrin Hatch, a Republican from Utah, "I believe the technical legal term is baloney." Conservative intellectuals agreed. Obama's proposal is "not an actual concession," according to National Review's Yuval Levin, because "it would allow conservative-leaning governors essentially no freedom to move in the direction of greater competition and more consumer-driven health care."

Hatch, Levin and the other critics of Obama's proposal have a point: It wouldn't allow them to enact the sorts of health care reforms they would prefer. But that's because their proposals wouldn't come even close to making health care affordable for all Americans. The real problem here, in other words, isn't the lack of flexibility in the health law. It's the lack of workable ideas from critics on the right.

The actual change Obama proposed is, to be sure, modest. Under the Affordable Care Act, states are responsible for creating exchanges (the marketplaces where individuals and small-businesses can buy coverage) as well as implementing other key aspects of reform. That work must be done by 2014. The law allows states to opt out of the scheme, by getting a special waiver from the federal government, as long as they have alternative means for achieving the measure's mandated goals. But states can't do that until 2017.

The opt-out clause was the brainchild of Senator Ron Wyden, a Democrat from Oregon, who hoped it would encourage states to experiment with alternative schemes of universal coverage. Not coincidentally, Wyden is also the architect of a new bill that would let states file their waivers earlier, in time for 2014. Senator Scott Brown, a Republican from Massachusetts, is an original co-sponsor of the measure and, as of Monday, Obama supports it as well.

How significant is the date? Under the Wyden-Brown proposal, instead of building one, temporary health care system and then transforming it into something else, states could focus exclusively on building the permanent one. I'm not sure that's entirely a good thing -- for reasons I'll have to explain another day -- but governors who covet more flexibility should certainly welcome the change.

And yet, as the conservative critics note correctly, the flexibility would have limits. The administration made clear that states could opt out of the health law's requirements only if they could show they would insure at least as many people, providing coverage that was at least as comprehensive and at no greater expenses to the taxpayers. Those aren't easy conditions to satisfy simultaneously. Virtually any workable state system relying primarily on private insurance would end up looking something like the scheme envisioned by the overhaul: Prohibiting insurers from discriminating against the sick, compelling people to obtain insurance and then providing subsidies so that everybody could afford coverage.

But couldn't conservative alternatives achieve the same goals for less money? Not really. Most of the ideas that conservatives like to promote would, at best, expand insurance coverage very modestly -- and, in many cases, only by making coverage less comprehensive. That's the whole point of the "consumer-oriented" plans that Republicans and their allies are constantly talking up: To transfer a significantly larger portion of the cost burden onto individuals. This poses real hardship on both low-income people and people with chronic illness -- hardships the Affordable Care Act will minimize.

Occasionally, conservative intellectuals and Republican lawmakers embrace more carefully crafted and, yes, more ambitious ideas. But, upon closer inspection, these schemes also fail to do as much, for as little money, as the health law will. Senator John McCain, a Republican from Arizona, had such a plan when he ran for president in 2008. But, depending on whose estimate you believe, this approach, based on a vague tax credit that would have been available to all Americans, either would have covered far fewer people, cost much more money or some combination of the two.

Indiana's Governor Mitch Daniels, a Republican, introduced a Medicaid alternative for his state that conservative pundits have talked up as an alternative to the Affordable Care Act. But its coverage, which is pegged to a "consumer-directed" health saving account for low-income people who are not eligible for Medicaid, is less comprehensive. For instance, the benefit package has an annual limit of $300,000 and a lifetime limit of $1 million, which is less than some people with serious medical problems will need. And although the program has yielded some positive results, the preliminary assessments suggest that, on a per person basis, it's still more expensive than Medicaid.

None of which is to say there aren't better, more efficient ways to achieve universal coverage. Vermont lawmakers want to create a single-payer plan -- that is, a government-run insurance program, similar to Medicare. They would probably among the first to apply for a waiver if Wyden-Brown became law. And they'd probably get it, because most estimates suggest a single-payer could satisfy Obama's criteria: Covering as many people, with the same or better financial protection, for similar or even lower costs. But, of course, that's not the sort of health care alternative conservatives have in mind.

This column is a collaboration between TNR and Kaiser Health News. KHN is an editorially independent news service and is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization, which is not affiliated with Kaiser Permanente.

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