Will Health-Care Federalism Ever Have a Chance?

Robert VerBruggen

Representative Ro Khanna just introduced a bill whose premise conveys a sense of déjà vu. It would allow states to take the health-care money they already receive from numerous federal programs and use it to provide health care in the way they think best, rather than the way Washington prescribes.

It’s funny, because Khanna is a Democrat who openly admits he has no chance of passing his bill under a Republican president, and the last time we encountered this notion, it was in a Republican bill with zero Democratic support. Both sides want to give freedom to the states, but they can’t seem to agree on how.

Khanna’s bill is a pretty clean illustration of “federalism for me, but not for thee.” The bill offers states access to an amazing amount of federal funding, including the money that currently flows into their borders via Obamacare, Medicaid, and even Medicare. The government would waive a lot of regulations for these states, too.

But in order to get that leeway, states would have to pursue a very specific, very lefty goal: a single-payer program that provides comprehensive coverage to 95 percent of the population within five years and the rest of the population soon after that. The bill’s drafters seem blissfully unaware that red states might want more freedom to experiment, too — and that there might be Republican votes to be had granting them some.

For all their many flaws, Republicans weren’t so selfish when they floated their own most recent attempt at federalism, the Graham-Cassidy proposal that went down in flames about two years ago. A major feature of this plan was that it replaced Obamacare’s funding with block grants to states that they could use to meet their own health-care needs — even if that meant single-payer.

At the time, conservative health wonk Avik Roy pointed out that the plan would actually make it easier for a blue state to use its grants for single-payer than for a red state to use them to expand market-based options. Still Democrats protested (among other aspects of the proposal) the freedoms it gave red states, including the freedom to relax preexisting-condition regulations and the freedom to encourage skimpier plans.

But don’t be misled: It’s not just Democrats who balk at letting the other side’s states experiment. During the debate over Graham-Cassidy, Republican senator John Kennedy suggested banning states from using the money for single-payer. (To his credit, Graham objected: “You know, federalism can’t be on your terms. . . . If California wants to go to single-payer health-care plan, let them knock themselves out. I’m not here to tell people what’s best for them, I’m here to give them a chance to decide.”) And two major conservative health plans released since come with similar constraints.

Last year’s proposal from the Health Policy Consensus Group, representing the beliefs of a wide variety of conservative health-care experts, gave states block grants but required half of those grants to be spent subsidizing private health care. The Republican Study Committee plan from last month imposed the same mandate on its “flex grants.”

It would seem obvious that a combination of the Graham-Cassidy and Khanna approaches could have some bipartisan appeal. No one seems happy with the current health-care system, so let states take the money they’re already getting from the federal government and redirect it to whatever works for them. Give wide berth to states that want market-based systems and to states that want to push everyone, including seniors on Medicare, into a single-payer fiasco. Then stand back, let the laboratories of democracy do their thing, and keep tabs on the results.

Putting that into practice would no doubt be a bear. You’d need to work out how much money each state gets, figure out what to do with the fact that current funding is hardly given out in an equitable way (thanks to the many dysfunctions of Medicaid), and make sure that states aren’t able to simply divert the funds to non-health-care uses, the way that happens with welfare block grants.

But perhaps the biggest obstacle would lie in getting both sides to recognize that national consensus on health care is not going to happen when one side wants single-payer and the other thinks Obamacare amounts to too much government intrusion — and that letting the states go their separate ways is the most viable path forward. Why let different states try different things when you still hold out hope you can impose your vision on the entire country?

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