Cannon vs. Daniels

by Tevi Troy

Michael Cannon has now broken Ronald Reagan’s 11th Commandment — “Thou Shalt Not Speak Ill of a Fellow Republican” — twice, yet he seems surprised that he is being criticized for it by other Republicans, including Bob Goldberg, Grace-Marie Turner, and Daniels aide Lawren Mills. In Cannon’s second NRO piece on the subject, a response to his critics, he writes that he “can’t believe we’re even having this conversation.”

I’m not sure why Cannon is so shocked. Cannon has essentially criticized Daniels for trying to make Medicaid work in his state. I think it is a given that all of the participants in this debate (except Ezra Klein, who gleefully recommended reading Cannon’s piece “in full”) would have designed Medicaid differently, and would like to see smart conservative changes in the system. But Daniels is the only one who is a governor and has to make it work in his state, which is why he came up with the Healthy Indiana Plan (HIP), which has been a success for Indiana. Ideas for Medicaid reform such as “deregulat[ing] health care and health insurance, eliminating any federal entitlement to Medicaid or SCHIP benefits, freez[ing] each state’s Medicaid and SCHIP funding at 2009 levels, giv[ing] states total flexibility to use Medicaid and SCHIP funds to achieve a few broad goals, [and] eventually phas[ing] out all federal funding of Medicaid and SCHIP,” which Cannon has advocated, were just not available choices on Daniels’s menu.

But Daniels did have some maneuvering room to come up with his plan, which came from the Bush administration’s effort to enhance state flexibility in Medicaid. Bush’s HHS secretary Mike Leavitt, who as governor of Utah had yearned for more flexibility in Medicaid, touted the effort and met with governors across the country to promote it. Daniels’s HIP experiment developed as a result of that policy and new authorities granted in the 2006 Deficit Reduction Act. In addition to Daniels and HIP, Jeb Bush in Florida and Brad Henry in Oklahoma used the new latitude to expand the use of private coverage in Medicaid. This flexibility is a good thing, and something conservatives should support. We may not like every plan that develops under this approach; however, if we have the courage of our convictions, we have to believe that states that take a more private-sector-oriented, value-driven approach will see better results, even if it’s in the context of a larger program that conservatives would like to see reformed in a more significant way.

Gubernatorial tinkering in Medicaid is a bit of a wonky topic, even for conservative health nerds, which means that there is likely more to the story than Cannon’s strong dislike for the Healthy Indiana Plan. I suspect that John Graham is right that the contretemps is a proxy war over the Obama health law, which is strange since all of the parties involved (except, of course, Ezra Klein) are opposed to the law, and all have been vocal and outspoken in their opposition. But there is a real question about how to handle the law: One year into its implementation, we have seen some powerful blows weaken, but not kill, its long-term prospects. From a federal point of view, it seems clear that conservatives should continue to pursue repeal from both a judicial and legislative perspective. Should those efforts fail, though, the states will be the key battlefield. Some governors want to give no quarter, risking the possibility that their state will be stuck with an exchange not of their choosing.

Daniels wanted to go a different route, sending a letter with 20 other governors demanding more flexibility in the design of the exchanges. HHS secretary Kathleen Sebelius jumped on the idea, serving up a Washington Post op-ed making the misleading claim that states can get “most” of the flexibility they want. The Sebelius op-ed shows the political danger of cooperating with the Obama administration on the new law — the Obama team will hail any such collaboration as proof that the law has bipartisan backing. But this potential trap does not mean that Daniels is in any way soft on the law or averse to conservative reforms to Medicaid or health care in general. As one smart conservative GOP Senate aide told me regarding this whole controversy, “It’s implausible [that] Mitch is trying to support Obamacare.” With that in mind, I suspect that Ronald Reagan would want Cannon to attempt to help GOP governors trying to implement conservative health-care reforms, rather than criticizing them for failing an imaginary purity test.

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