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De Tocqueville Rewrites the Affordable Care Act

Pending Supreme Court review, the provisions of Affordable Care Act (ACA) are gradually working their way through the system. But we are still three years away from the centerpiece of the ACA – the insurance exchanges. The combination of purchase mandates, taxes, subsidies, and underwriting restrictions that govern the exchanges has never been tried and no one knows if the exchanges will work. Even the academic theorists who assembled this patchwork quilt of rules and regulations have their fingers crossed.

Given the lengthy wait between passage and full implementation of the ACA, it was inevitable that the op-ed pages would be filled with alternatives to exchanges. Some critics would scrap them in favor of some bastardized version of the status quo, leaving tens of millions uninsured. But commentators on the right and left have offered bolder ideas for expanding coverage. Some conservatives promote voucher plans. These proposals feature open enrollment periods and a few other mechanisms that will promote broad risk pools without all the other regulatory bells and whistles. Some liberals renew the call for a single payer system. Frankly, I think both of these “ideologically pure” approaches will be more successful than the mongrelized ACA.

This is why I am intrigued by a bill that is flying under the radar screen in Congress. This bill, which has the support of President Obama, would allow states to implement their own rules for expanding health insurance coverage. If the bill provides enough carrots in the form of tax subsidies (that would have otherwise funded the ACA exchanges), then several states might just play along. If that happens, we would have a golden opportunity to discover the strengths and weaknesses of alternative approaches. Unfortunately, I suspect that this legislation will not give states enough time to act or enough money to make it worth their while, and the vast majority of states will leave the problem of financing and implementing health reform to the feds.

I find this new proposal somewhat gratifying, given that this is essentially what I proposed in my book Code Red. As I did my research for Code Red, I was struck by the thoughts of the social scientist Alexis de Tocqueville, whose far more famous book Democracy in America, published in 1835, praised American federalism. De Tocqueville admired the way that states could implement their own solutions to social and economic problems and learn from each other’s mistakes. This prompted me to make the following modest proposal in Code Red:

Congress should mandate that all states reach targets for the number of uninsured…It would be up to each state to devise the most effective way of meeting these targets.

Alas, Code Red was consigned to the discount bins at Barnes and Noble (if it managed to find its way to bookstores at all), but it seems that the idea of state experimentation lives on.

De Tocqueville’s federalism represented a sort of humility, an admission that the central government does not have all the answers to complex problems. Over time, this humility was replaced by hubris; the ACA is a perfect example. Maybe it is because I don’t pretend to have all the answers that I prefer the humble approach to health reform. And perhaps President Obama’s support for state experimentation shows that he is eating just a little bit of humble pie.

It is not too late to change the rules and let the states have a go. De Tocqueville would be proud.

David Dranove, PhD, is the Walter McNerney Distinguished Professor of Health Industry Management at Northwestern University’s Kellogg Graduate School of Management, where he is also Professor of Management and Strategy and Director of the Health Enterprise Management Program. He has published over 80 research articles and book chapters and written five books, including “The Economic Evolution of American Healthcare and Code Red”.

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Nate Ogden
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Nate Ogden

How can you trumpet Federalism then follow it up with a call for a federal mandate? How about the federal government does the few things it is actually required to do, but does not, and leave state matters up to states?

J. Stefan Walker, M.D.
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J. Stefan Walker, M.D.

Great concise commentary piece. That approach would likely garner bipartisan support. A point of apt optimism that we all desperately need at this point in time. I hope Congress will give it a go to work together, keeping some of the central benchmarks of the ACA, yet leaving some of the details to the 50 ‘laboratories’ to work out…and share successes and failures.