Republicans May Delegate More Health-Care Policy Power to States

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Sara Hansard

Delegating more power to states to set health-care policy may be Republicans’ answer to replacing Obamacare.

States could abolish the Affordable Care Act’s unpopular mandates to buy health insurance as well as the law’s health insurance exchanges, set up Medicare-for-all health-care systems or convert Medicaid into a voucher program once President-elect Donald Trump takes office, Brookings Institution Senior Fellow Stuart Butler told Bloomberg BNA Jan. 6. “Without any legislation that may be difficult to get through the Senate, states could start to substantially change the Affordable Care Act,” said Butler, an economist who was one of the earliest proponents of requiring individuals to buy health insurance when he worked at the Heritage Foundation, a conservative think tank.

As congressional Republicans move quickly to repeal the ACA, some are expressing concerns that a replacement plan needs to be enacted to avoid possible loss of health care among the about 20 million Americans who have gained coverage under the law. Analysts are pushing ideas Republicans may support, including proposals to replace the ACA outlined in a Brookings paper released Dec. 13 and co-authored by Butler.

Administration Can Approve State Waivers

Beginning in 2017, the president can approve state waivers making sweeping changes under Section 1332 of the ACA if the health care is at least as comprehensive and affordable as what would be provided without the waivers, if a comparable number of residents of the state would be covered and if the changes don’t increase the federal deficit.

“You could see many of the insurance and other changes actually emerging from state-led proposals with a compliant administration,” Butler said.

The Brookings paper was co-authored by Alice Rivlin, director of the Office of Management and Budget under President Bill Clinton, and Loren Adler, also at Brookings and an ACA supporter.

Repealing the ACA—even if repeal is delayed—without simultaneously enacting a replacement plan likely would destabilize the individual market “and very possibly cause it to collapse in some regions of the country during the interim period before any replacement is designed,” the paper said.

Budget Reconciliation Bill

Republicans are preparing a budget reconciliation bill similar to H.R. 3762, which was passed by the House and the Senate in 2015 and vetoed by President Barack Obama in 2016. That bill, which only required a majority vote in the Senate, would have repealed major features of the ACA. The bill would have restricted federal funding for the health insurance exchanges, phased out funding for insurance subsidies, eliminated tax penalties for individuals and employers that don’t meet the law’s coverage requirements, phased out the expanded Medicaid program and eliminated taxes on medical devices and the Cadillac tax on expensive health-care plans.

The Brookings paper suggested features that an ACA replacement plan should focus on:

  •  repealing the individual and employer mandates;
  •  introducing a publicly funded reinsurance or high-risk pool program using general revenues to pay for enrollee costs above set amounts, similar to a Medicare prescription drug benefit program;
  •  loosening age-rating restrictions that drive up premiums for young adults in the individual market;
  •  allowing cheaper, lower actuarial value plans that would cover a smaller share of medical costs;
  •  reducing the ACA’s medical-loss-ratio restrictions on health insurers, which limit their profits;
  •  loosening restrictions on the Section 1332 state innovation waivers; and
  •  replacing the Cadillac tax with a cap on the tax exclusion for employer-sponsored insurance.

A number of the ideas, such as repealing the individual and employer mandates, loosening age rating restrictions and allowing lower actuarial value plans that would likely be cheaper than plans allowed in the ACA marketplaces, have been championed by conservatives.

“We were trying to think of things that would be attractive to conservatives,” Rivlin told Bloomberg BNA.

Democratic Support Needed

Rivlin said that beyond needing 60 votes to overcome a possible filibuster in the Senate, Republicans need some Democratic support. “The lesson of Obamacare is a one-party bill is easily attacked by the other party and not likely to last,” she said.

Another idea advanced by conservatives is allowing plans that don’t cover the 10 categories of essential health benefits required by the ACA.

“The main problem with the Affordable Care Act is that it mandates a very expensive, generous plan,” said Diana Furchtgott-Roth, a senior fellow at the conservative Manhattan Institute. She was a volunteer economic adviser to Donald Trump’s presidential campaign.

Allow Catastrophic Health Plans

“Health insurance companies should be allowed to offer multiple choices, including catastrophic health plans for those who want to pay for routine costs out of pocket,” Furchtgott-Roth said.

Refundable tax credits should be available to low-income people to buy health insurance on the open market, whether the plans are sold within or outside of government-sponsored exchanges, Furchtgott-Roth said. Under the ACA, subsidies are available for people with incomes of 100 percent to 400 percent of the federal poverty level if they buy qualified health plans sold on the ACA marketplaces.

A revised health-care program would be similar to food stamps for low-income people, Furchtgott-Roth said. “We don’t try to choose their groceries for them” under the food stamp program, but health care is limited to Medicaid for low-income people, she said.

“Many people do not like Medicaid,” Furchtgott-Roth said. Medicaid was expanded under the ACA in states that chose to do so, but 19 states haven’t expanded the health-care program for low-income people.

Multistate Insurance Sales

In addition, allowing health insurance sales across state lines would give insurers a chance to create larger pools of enrollees, which could reduce costs, Furchtgott-Roth said. While critics have said that it is difficult for health insurers to sell across state lines because of conflicting state regulations, Furchtgott-Roth said it would create more competition.

“If it doesn’t take off, it doesn’t take off,” Furchtgott-Roth said of cross-border health insurance sales. “There’s nothing wrong with offering choices. People don’t necessarily have to take them.”

The Manhattan Institute released a health care transition memo Jan. 9 outlining its health-care policy proposals, which included per capita Medicaid spending caps and encouraging outcomes-based payments for medical care.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

For More Information

The Brookings paper is at

Information on H.R. 3762 is at

The Manhattan Institute's report is at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Health Care on Bloomberg Law