Throwing a lifeline to his signature health care reform law, which is under attack in the courts and in Congress, President Obama told governors today he supports a proposal to give states more flexibility to determine how they provide health insurance to their uninsured residents.
Under the current law, states could opt out of the requirement mandating they establish insurance exchanges if they demonstrate that they can provide coverage to the same number of people. Those waivers will be available in 2017. Obama now supports a congressional proposal, co-sponsored by Sens. Ron Wyden, D-Ore., Mary Landrieu, D-La., and Scott Brown, R-Mass., to allow states to opt out beginning in 2014, the year that the exchanges would kick in. Last week, the administration said it would loosen restrictions on state Medicaid programs if they were significantly contributing to state budget deficits.
The move reflects two realities. The first is that the health care law remains unpopular nationally and faces significant legal challenges over the next several years (there are two dozen pending lawsuits). The second, however, is more favorable: the structural debate about health care reform changed forever after the Herculean debate in Congress. States believe the status quo ante is not acceptable, and many of them are scrambling to come up with ways to meet the law's requirements for broader, better health insurance coverage without it.
"I am not open to refighting the battles of the past two years or undoing the progress that we have made, but I am willing to work with anyone, governors or members of Congress, to make this law better... and fix what needs fixing," Obama said today.
If the White House was conveying a more subtle message, it was this: If states don't like the new law and want to cut costs, they are more than welcome to figure out how to do it on their own.
The "state innovation waivers" won't do much to address the immediate concern of many governors: Medicaid. Governors have long complained about the spiraling cost of program that provides back-stop insurance to the poor and is the main source of coverage for some types of long-term care.
States have shared their burden with the federal government, and the degree of flexibility permitted by this interdependent relationship has been a source of tension. Since the beginning of year, Obama's Health and Human Services secretary, Kathleen Sebelius, herself a former Kansas governor, has been briefing new governors on what's expected of them in the wake of the new health care law.
As states continue to slash spending to balance their budgets, their demand for Medicaid funds has grown beyond what the federal government has been willing to pay. The prolonged recession has increased Medicaid's burden on state debts. Even in Wisconsin, where Republican Gov. Scott Walker has turned the budget fight into a referendum on labor unions, about half of his state's projected deficits over the next few years is attributable to Medicaid. The new law requires states to maintain their eligibility standards through 2014, at which point the tab for the newly covered will be picked up by the federal government.
States have to make sure that people who are eligible for the program get coverage without that level of federal assistance until then. The administration insists that most of the complaints amount to posturing and that Republican governors are moaning about fulfilling obligations they would have had to meet without the new law. Indeed, depending upon how a state structures its benefits, it could save a significant amount of money when the federal government begins to fund the expansion.
The state-run exchanges, in theory, would take some of the pressure off of Medicaid and Medicare. But they've become politically toxic, and the individual mandate, which is the main instrument of cost containment because it broadens the number of people paying into the system, has taken most of the salvos.
Federal judges in Florida and Virginia have declared it unconstitutional, although other courts have upheld the requirement that most individuals must buy health insurance in some form or pay a tax penalty. The administration contends that the mandate, championed at the state level by former Massachusetts Gov. Mitt Romney, passes muster. The administration has argued that providing health insurance and reducing health care costs are legitimate goals for the federal government to pursue and certainly goals that cannot be accomplished without rules that bind states and individuals. But it is worried that the Supreme Court will not agree for purely partisan reasons.
The Roberts court, they believe, will use the opportunity to reduce the federal government's ability to impose mandates of any kind on states. Worried that Obama's olive branch will be interpreted as a retreat of some sort, administration officials hastily organized a conference call with a senior administration official, who stressed that the underlying goals of the law are still paramount, that the president's decision today reflects his desire to see more people covered more rapidly, and that he is not concerned about the politics of the moment.
"The states have been an enormous amount of flexibility under the law," the official said. And the White House is "impressed" with many innovations that states have inaugurated. "Moving that date doesn't have any real legal impact on the cases that are being argued. The only impact maybe one could point to is that states really do have flexibility to design these programs to reflect... the make-up of their states."
As Republicans have promised to defund the parts of the health care law that fall under the purview of congressional authorizing committees, Democratic strategists wonder whether the administration is prepared to call their bluff. If the public now accepts the goal of universal insurance, if they accept (and like) the restrictions on insurance companies -- but if they see their premiums begin to increase markedly because there aren't enough people in the new system, or the system is declared unconstitutional -- then maybe the fallback option will be the simplest: an expansion of the Medicare program to everyone who lacks insurance.
Indeed, that may be one reason why a conservative Supreme Court would refuse to declare the bill unconstitutional. It lacks a "severability clause," meaning that the baby will drown along with the bathwater regardless of whether the baby is healthy. Knowing that the alternative -- even for a Republican president -- might have to be a Medicare expansion, conservatives could be willing to settle for a quasi-federalized system that allows them to experiment with their own approaches. Still, it'll be hard to find a Republican who embraces what the GOP almost universally dismisses as "ObamaCare" anytime soon.