The Laboratories of Democracy

If “Obamacare” was a federal takeover of health care, states failed to get the memo.

The House Republicans and three Democrats who voted to “repeal and replace” it with something that provides “lower health care premiums through increased competition and choice” might want to take a look at Utah. Its new internet-based insurance exchange was designed by free-market advocates.

It provides small businesses, individuals and even some large employers with access to competitive insurance plans. The state’s Republican leadership, aided by Michael Leavitt, the state’s former governor and secretary of Health and Human Services in the Bush administration, believes their exchange “could be a national model for market-based health care reform.”

Closer to where they go to work every day, the “repeal and replacers” in Washington might also want to follow onrushing events in Virginia, whose state attorney general sued to void the individual mandate in the national law. Last month, using a $1 million planning grant from the federal government, the state’s Republican secretary of health Bill Hazel, an orthopedic surgeon, issued a “Virginia Health Reform Initiative” that outlined the state’s vision of reform under the federal Affordable Care Act.

It’s centerpiece? The proposal, which was introduced in both houses of the state legislature this month with bipartisan support, calls for setting up a health care insurance exchange that will “try to promote effective competition” within the state, said Len Nichols, a professor of health policy at George Mason University, who consulted with Hazel in coming up with the proposal. Virginia desperately needs some competition since one carrier – Anthem Blue Cross Blue Shield – currently controls over 60 percent of the market, Nichols said.

True to Supreme Court Justice Louis Brandeis’s observation that states are the nation’s laboratories of democracy, it would appear that 49 flowers are blooming on the health care reform front (every state but Alaska has accepted federal planning grants). Given that a large majority of statehouses and state legislatures are now controlled by Republicans, it’s likely that most exchanges will wind up looking something like Utah.

But not all reform’s opponents were on the right. Many liberals initially backed single-payer, but fought during the reform debate for a public insurance option to compete with private insurers, and dismissed the new health care reform law as a sell-out. The new law’s state-based focus will also provide them with an opportunity to shape reform.

They may take their lead from Vermont, where newly-elected Democratic governor Peter Shumlin this week received a comprehensive report that could lead to the nation’s second statewide single-payer system after Hawaii. Its “exchange” would essentially offer a range of policies offered by a single insurer and financed by a payroll tax on every employer and employee.

The single-payer could turn out to be an insurance company administrator, which would have to bid on the work. That’s similar to the way Medicare works now. “It’s not a sure bet,” said Anya Rader-Wallack, a former top aide to single-payer advocate Howard Dean when he was governor of Vermont and is now a top health care adviser to the new governor. “We will have to get waivers from the federal government.”

There’s precedent for that. Vermont already has a waiver from Medicaid to get its federal share money in a block grant. Rader-Wallack said that could easily be funneled into a state-run single-payer system.

House progressives may want to closely follow events in nearby Maryland, where Gov. Martin O’Malley just appointed former Food and Drug Administration deputy administrator Josh Sharfstein, a former top aide to Rep. Henry Waxman, D-Cal., to head up his reform implementation program.

Press coverage of the health care reform debate made its reliance on state-based exchanges to provide coverage for the uninsured seem like Massachusetts writ large. It was the only state that had adopted such a program (signed into law, don’t forget, by then Gov. Mitt Romney, a Republican). It was assumed during the debate that most states would adopt something similar.

But the law gave states leeway to design their own systems as long as they met the national standards on coverage, overhead costs and consumer protections. As consultants have fanned out across the country to help states get their programs up and running, diversity appears to be the hallmark of state approaches. That reflects both the conditions of the health insurance markets in individual states and their political situations.

Assuming reform weathers the political storm in Washington, the comparative performance of these differing state-based approaches won’t be known for a decade. Which will be the most successful in insuring most of their residents? Which will provide the great consumer satisfaction? Which will provide near universal coverage at the lowest cost?

That’s the great thing about the laboratories of democracy approach. It can provide an objective answer to those questions.

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect and The Washington Post. His most recent book, “The $800 Million Dollar Pill – The Truth Behind the Cost of New Drugs ” (University of California Press, 2004) has won acclaim from critics for its treatment of the issues facing the health care system and the pharmaceutical industry in particular. You can read more pieces by Merrill at GoozNews, where this post first appeared.

4 replies »

  1. John I think most of the governors are just being prudent, plan for the exchanges in case the unlikly event obamacare is upheld. I have heard more then a couple say they exact thing. They fully intend to beat it but just in case they will be ready for the worst outcome. The alternative is the federal government gets to come in and set up an exchange so an ounce of prevention is worth tons of cure

  2. Of course every state wants Federal money, which only means that groups of people will gladly take free money from any other groups of people. That no-one cares enough about the attendant handcuffs only means that humans will take “free” money today and worry about the consequences tomorrow. None of this means anything except that the oldest dogma about human nature — that it is essentially corrupt — is empirically verified daily.
    The architects of America didn’t doubt it. So they made a central government that was hamstrung by design, and a central treasury that was tiny by design. They argued that human nature would inexorably create bad math wherever political power could concentrate.
    We’re smarter than that now. We have computers. We can make big bureaucracies and make them work well because…we study the problems really hard. We can type plans into the computer and show the numbers all adding up.
    I’m eternally amused by journalists who think that objectively bad math is somehow altered by how the recipients feel about the math. So we’re constantly hearing how Medicare is a “success’ (while trying to figure out to prevent it from killing us), how Social Security is “universally judged a success” (of course it is for me. I’ll get the money. It will be universally acclaimed until the morning the checks stop.)
    And here we go again. The States will all try something different — all built on FEDERAL GRANTS — and then we’ll all judge which cold fusion machine seemed to be most efficient.

  3. Accepting federal grants to implement Obamacare is far from the idea of states being “laboratories of democracy”. It’s the kind of thinking that led George W. Bush to impose No Child Left Behind on states’ schools.
    It would be better to leave health care to individual choice, rather than democracy. Nevertheless, if we insist on surrendering it to government control, then at least let’s admit that increasing dependence on federal grants results only in making states more accountable to the federal government, and less to their own citizens.
    I trust that Mr. Goozner won’t take this personally, but I hope that every Republican governor who is taking federal money to develop an exchange reads this column and realizes that he is being lured into a potentially irreversible blunder. Accepting federal grants and hiring consultants to advise on exchanges will only fertilize Obamacare, allowing it to sink its roots deeper into the soil over the next two years. This will make its ultimate defeat more difficult.

  4. Those of us who saw the ACA as a first step should be encouraged by what you report. It has been disheartening that health care issues have largely been ignored by so many people. If the ACA gives politicians on the right political cover to finally take action, maybe we will generate some useful ideas that can be shown to work.