The announcement yesterday by Obama to the Governors was a deft shot across the bow to those who think health care reform will be the 2012 albatross around the President's neck. In the GOP House it's all about repeal or replace ObamaCare. In the hinterland 29 states have sued to block the law and 32 governors have written Obama asking for more flexibility to their states. Be careful what you wish for - as the saying goes. The man in the White House is willing to grant your wish and move the debate from his house to their state houses before 2012. And those governors eager to criticize may soon have the opportunity to show their skills at solving intractable problems.
Letting states opt out of the federal plan (ObamaCare to some) was always part of the Affordable Care Act (ACA). The hitch was that in the bill stage section 1324 that allows states this option was set to start in 2014, with the rest of the coverage expansions. Somehow in the eleventh hour, the date in the Bill was moved from 2014 to 2017. We are told that this resulted from a CBO analysis that said it would cost an additional $4B to start the program earlier. Personally, I have always believed it was a gift to the insurance lobby that prevented competition, especially the public option. It helps to know that Sen. Bernie Sanders (VT-D) was one of the co-sponsors to section 1324 (along with Sen Ron Wyden (OR-D). So it isn't a stretch to imagine the insurance industry wanting to stop the Trojan Horse from Vermont from getting into an otherwise industry friendly bill. After the ACA was signed into law, Wyden announced his continued interest in changing the date back to 2014. After all, why should states have to invest all the time and money into developing a plan they fully intended to leave in 2017 - what a waste of resources. Along the way, Wyden picked up support from Sen Scott Brown (MA-R) who believed that states should have the right to be like Massachusetts, or Arkansas. Generally speaking, the two senators agreed that one size doesn't fit all. They offered an amendment to give states flexibility. From press reports we read that Wyden has been quietly working to educate the White House on this for a few months now. Then, unexpectedly, Obama came out in support of the amendment - the first real support of a change to the ACA since the relatively minor flap over the small business reporting requirement - thought to be way to burdensome on small businesses. these are the firms exempt from offering any health care to employees - so let's not burden them any more.
That is all prologue to what will come next if the Congress passes this amendment. What will surely follow will be health care reform - the sequel. Only this time it's not playing in the nation's capitol, it will be playing in Austin, Salem, Bismark, Columbus and all the other state capitols. In a bold, deft political move, Obama kick the issue into the laps of those 28 states protesting the individual mandate and the states wanting more flexibility. Immediately, Haley Barbour (LA-Gov) commented that he'll wait to see the "devil in the details." Nikki Haley (SC-Gov) all but said it was a joke because we shouldn't have any health reform. A few GOP governors seemed interested. They probably understand that this offer is essentially a 5-year renewable block grant to states to expand and manage health care on the federal dime. They don't even have to put up matching funds.
The problem is that the protesters didn't see this coming and were really caught off guard. They have had all these scenarios about how to extend health reform as a scary divisive issue all the way through the 2012 elections. They have invested heavily in poisoning the well for the ACA. In small business surveys I have analyzed recently (it's my job), I see a significant share of the small business sector believing the ACA will "ruin" their businesses. They call it a job killer (sound familiar?) These folks are receiving the message from the GOP leadership and their supporters in the media. So now, Obama just handed them the ability to move ahead sooner in opting out of the scary ObamaCare to build their own plans. Interestingly enough, most small businesses (54%) do offer health care to employees. They worry about increasing cost - but they buy into the concept. And of the uninsured businesses, most would like to be able to afford to offer health care. Employer sponsored health care is not dead in this country - just in trouble. So don't expect the GOP message to kill health care to find traction when the debate shifts to the state capitol nearest you.
But first, if the amendment passes, states interested in opting out will need to decide whether or not to continue working on those exchange designs the got federal grants for. These efforts are all based on the assumption that the federal plan would be the only plan. Now, if a state is going to design its own, and say - drop the individual mandate in favor of juicy subsidy incentives alone, then the exchange design will need to change. By the way, when a state opts to create its plan, they can't use the IRS to assess and collect fines for non-compliance - that would be a federal activity, not a state activity. So, states have to decide if they want to mandate coverage (like automobile coverage) and use the state treasury to enforce compliance. Or forego mandates.
Then there are all those rules for employer requirements, eligibility, benefit designs, ensuring competition so there really is affordable health care. The list goes on and on. And all these issues have lobbyist - the ones who will be swarming about the state capitols for the next two years. And when people get angry - they are going to do the Wisconsin - they are going to occupy the state houses. Legislators seeking to block passage of a rip-off bill favoring insurance companies may decide to go AWOL to block the votes.
Meanwhile, the Commander and Chief can get back on message about jobs and the deficit. He's finished with health care. That now belongs to 50 governors. To add insult to injury - he praised a likely opponent for making this all possible - yep "I agree with Romney." that's the campaign slogan for 2012. "Agree with Mitt, but vote Obama." Now 50 governors can blame Mitt Romney - or they can do the grown up thing and work hard to make health care reform work in their states.
This country is a republic of 50 sovereign states. States should have the option they were just handed. And people in those states do have a responsibility to elect responsible governors. Or they can elect Nikki Haley.