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Critical Condition

NRO’s health-care blog.

Health-Care Reform and Women



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Each day this week, supporters of President Obama’s health-care overhaul are praising it for a different reason. Today’s reason: the wonderful things it does for women. Planned Parenthood Action calls it “the greatest single legislative advancement for women’s health since Medicare and Medicaid.”

At the Center for American Progress, Eesha Pandit lists the “Top Five Ways Health Reform is Helping Women and their Families,” which include:

“Stopping the worst practices of the insurance industry” — This means stopping the denial of insurance to people with preexisting conditions, the end of annual and lifetime limits, and the MLR ratio requirement.

“Keeping kids and young adults covered” — Young adults can stay on their parents’ insurance up to age 26, and kids with preexisting conditions can’t be denied coverage.

“Focusing on prevention” — All new insurance plans are required to cover preventive health care without any cost-sharing, and Medicare is expanding coverage for preventative care services.

“Keeping health care affordable” — New “high-risk” pools are an option for people with preexisting conditions, and the “donut hole” in Medicare is getting fixed.

“Helping small businesses do the right thing” — Small businesses can get tax credits to help them provide coverage for their workers.

Whew, where to start. Independent Women’s Voice has developed a great resource over at SavingOurHealthCare.org with the “Full Story on ObamaCare.” The detailed page on women can be found here. Most fundamentally, CAP’s blind praise of Obamacare’s “benefits” to women ignores much of the story.

To briefly review Pandit’s points:

“Stopping the worst practices of the insurance industry” — This means telling insurance companies how to do business. Although the “preexisting condition” mandate may be the most popular part of Obamacare, it comes with consequences. “Guaranteed issue” and the elimination of annual and lifetime limits raise costs for insurers. As their costs increase, so do our premiums.

“Keeping kids and young adults covered” — Young adults face some of the highest unemployment rates of any group. Obamacare’s effect on the job market will hurt them more than just about anyone. It wouldn’t be necessary to stay on Mom’s insurance if you could find a job of your own. Just watch this video.

“Focusing on prevention” — There’s no such thing as new “free” anything. There’s no “free” preventative care. And about the mammograms — the government rated them “C” for women between 40–49. (That means unnecessary. I didn’t say “rationing,” but hey, they can’t make them “free” for everyone!)

“Keeping health care affordable” — The high-risk pools have been less utilized and more expensive than hoped, and the donut-hole fix is not really a fix. And for Americans and their families, the “Affordable” Care Act will only raise their taxes and their premiums.

“Helping small businesses do the right thing” — Very few small businesses will benefit from this tax credit, and the credit diminishes as a company grows or raises wages. The real consequences for small businesses will be higher health-care costs, more paperwork, and less growth. American women are impassioned by the health-care-reform debate because women are often the caregivers within the home, and they often make important health-care decisions — not just for themselves, but for their dependents.

While this debate continues, it’s important that we give women the full story on Obamacare instead of highlighting only the “free” new “benefits.” When choices become limited and costs increase because of government involvement in the health-care system, women will be disappointed.

— Hadley Heath is a policy analyst at the Independent Women’s Forum specializing in health-care policy and economics.

Obamacare’s First Anniversary. Let’s Hope There Aren’t Too Many More.



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This week marks the first anniversary of the passage of the Patient Protection and Affordable Care Act, aka “Obamacare.” The Obama administration and its allies will be hawking the law’s achievements, while its critics (present company included) will be touting its myriad problems, unintended consequences, and budget-shattering costs. 

For policymakers who want to move the country in the direction of a more market-oriented health-care system, the key to “repealing and replacing” Obamacare will be to define a narrative that links health care to the nation’s broader economic woes, and to avoid the trap of pigeonholing the Obamacare debate as a debate just about health care. It’s really a debate about the future of the American economy, and that’s a debate that should resonate with moderates, conservatives, and independents.

Here’s the key question: Will the U.S. economy (including in health care) be led by private sector entrepreneurs and consumers, who can pick and choose from a wide variety of innovative products and services, at a wide range of prices? Or will the economy be defined by Washington bureaucrats picking winners and losers (think: ethanol) with the spoils going to the players who can afford to hire the biggest lobbying firms? The first approach is about encouraging wealth creation, the second about capturing wealth transfers.

Framed this way, Obamacare is just a symptom of a world-view where the government tail wags the private-sector dog. It stretches government expertise and competence far beyond providing a health-care safety net for the poorest and sickest Americans, to the point where the government will tell you what health insurance you have to buy, what the policy must cover, what it must cost, and (eventually) what doctors and hospitals will be limited to providing in the name of ”universal health care.”

It doesn’t have to be that way. American health care has many problems, but it has many of the same problems as other sectors of the economy — like education — that are heavily regulated and subsidized, extraordinarily expensive, and ”boast” a long track record of uneven quality and little transparency.

Call them MINOs: markets in name only. In health care and education, costs keep going up and up, and yet insiders fight tooth and nail against any reforms (like school choice or vouchers for Medicare) that would actually give families control over how money is spent in their name — and produce real accountability and competition.      

Obamacare shares its central problems with every other government-centered sector of the economy:

Prices? What prices?  There are few consumer price signals in health care; on the contrary, Americans pay only about 12 cents for every dollar in health care, largely because the tax code favors open-ended subsidies for employer-based health insurance. When consumers think they’re getting a service for free, they have much less incentive to ask whether the new benefits and services are really worth the additional costs. Obamacare exacerbates this problem by adding a whole new set of subsidies on top of the ones that are already distorting health insurance and health-care spending. Because the subsidies in the exchanges will be richer than what many private-sector workers enjoy today, and the penalty for companies who drop coverage is relatively low, many companies may decide to dump their low-wage employees into Obamacare — exploding the costs of the program for taxpayers.

Price controls, price controls, price controls.  In any sector where the government sets prices, the behavior of buyers and sellers is woefully distorted, producing too much of some goods, and too few of others. Still, the allure is nearly irresistible for policymakers who want to promise everything, but not pay for it. Instead of letting consumers decide what they are willing to pay for health insurance and health care, the government dictates the prices providers must accept through programs like Medicare and Medicaid (and, given the way Massachusetts is evolving, eventually private insurance as well). How well has that turned out? Medicaid is the poster child for the failures of price-controlled medicine. Medicaid has a rich set of benefits on paper, but chronically underpays providers for their services — leading many doctors to limit or avoid Medicaid beneficiaries altogether. The result: worse health outcomes for Medicaid patients. Obamacare’s faux deficit savings also relies heavily on cuts to provider payments that the Medicare actuary believes are unsustainable. This doesn’t bother the Obama administration though: They’ll be long gone by the time Congress has to unwind this mess — and taxpayers have to foot the real bill.

Government regulation reduces competition from innovative entrepreneurs.  Harvard University professor Regina Herzlinger is the best at explaining why a thicket of regulations and price controls actively discourages entrepreneurs from offering better and cheaper ways to keep Americans healthy. Perversely, hospitals and doctors that keep costs down and quality high are actually paid less by programs like Medicare and Medicaid, unlike every other sector of the American economy. The few bright spots in the law that might encourage innovation — like the health-insurance exchanges — will likely be stifled by federal regulations that limit states’ ability to offer truly innovative insurance designs. The flexibility that the exchanges really need — and that many governors have called for — for spurring innovations that offer higher quality care at lower cost is not likely to be forthcoming from the Obama administration.    

Over the next several days there will be no dearth of op-eds — including from my friend and colleague Dr. David Gratzer — trumpeting the many flaws of Obamacare. Grace-Marie Turner, James Capretta, Thomas Miller, and Robert Moffit have developed an excellent book explaining “Why Obamacare is Wrong for America.” Stephen Parente and I offered our own prescription for reform. The solutions that we advocate include tax reform, entitlement reform (Medicare and Medicaid), and true competition in health care and health-insurance markets. Extra financial help should be carefully targeted, probably through high risk pools, to the relatively small number of Americans with pre-existing conditions who don’t have group health insurance and can’t afford to buy health insurance in the individual market. 

These reforms focus on making markets work better by empowering families and individuals, and controlling costs through competition and innovation. It’s a recipe for reforming not just health care, but for ensuring that America retools its economy and government to meet the economic challenges of the 21st century.

We will likely have to live through at least one more anniversary of Obamacare. But if policymakers link market-based health-care reforms to keeping America’s private economy strong and innovative, while also rethinking Washington’s unaffordable appetite for entitlements, Obamacare may be thrown on the scrap heap of bad ideas before its third birthday.     

 

 

 

 

 

      

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Who Got Obamacare Waivers?



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I was going to do this myself, but these folks did it better. The Sunlight Foundation reporting group has published an analysis of which groups have received Obamacare waivers.

It looks like a pretty mixed bag of outfits to me. I can’t see any rhyme or reason to the waivers. Some are just strange: Aetna received an exemption for plans that it offers to firms with more than 209,000 enrollees. So, what happens when a firm with 210,000 enrollees closes a plant and the headcount drops to 200,000? It loses its waiver, too?

Also, note that these waivers are for one year, i.e., most will be expiring in the first quarter of 2012, and the scrambling to defer the pain of Obamacare will begin again — just in time for election season.

Bobby Jindal Makes the Right Choice for Louisiana: No Obamacare Exchange



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Louisiana governor Bobby Jindal has told POLITICO Pulse that he will not establish an Obamacare Health Benefits Exchange in his state. According to Politico, this is the governor’s first definitive statement on the question.

As I discussed a few days ago, Georgia governor Nathan Deal also took some time to make a final decision on a Health Benefits Exchange. But he eventually made the right decision: No exchange.

A shrinking number of Obamacare’s opponents continue to insist that states can establish narrow exchanges, like Utah’s apparently ineffective one, which will serve as a “firewall” against Obamacare. Governors like Deal and Jindal know that any exchange can only serve as fertilizer that will allow Obamacare’s roots to grow deeper into the soil — and making repeal more difficult.

(Plus, I suppose that Deal and Jindal would like to avoid President Obama campaigning in Georgia, Louisiana, and nationwide in 2012 saying “Health reform is very flexible and responsive. Look: I made a deal with these Republican governors!”)

The President Can’t Run on Obamacare



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On Obamacare’s first anniversary, let’s give the president his due: It wouldn’t be in law today without his persistent push for its passage.

Not that his policy arguments carried the day or were persuasive. They weren’t. No, in the end, Obamacare was passed because the president had so tied his political fate to it that it became quite literally impossible for most members of his party in Congress to oppose it. And so it passed.

Other presidents have staked their presidencies on early legislative initiatives too, and then used their success in securing their enactment to aid their re-election. President Reagan certainly comes to mind in that regard, with his 1981 tax cut featuring prominently in his 1984 campaign. And Bill Clinton made his tax-hike and deficit-reduction plan of 1993 the centerpiece of his economic message in 1996.

The problem for President Obama, however, is that, unlike the Reagan tax cut, Obamacare will do almost nothing worth running on before 2012. The main selling point for the law — the supposed “universal coverage” proponents erroneously say the law will deliver — doesn’t kick in until at least 2014. That’s when the “big bang” of Obamacare comes into play: the individual and employer mandates; the new entitlement expansions; and the one-size-fits-all insurance plans.

Between now and then, there’s a lot of regulation to be issued, but there won’t be any real action on the ground where Americans get their health care (other than some tax increases and Medicare cuts the administration will never mention anyway). And so the law’s apologists are left with nothing to talk about except the supposed “early benefits” of Obamacare, like coverage of 26-year-olds on their parents’ plans and the new high-risk pools for those with pre-existing conditions.

But these provisions are minor matters in the scheme of things. They certainly did not require a 2,700-page bill to address. And so few Americans have benefited from them that they hardly register at all in the public consciousness. Only about 12,000 people have signed up for the poorly constructed risk pools, and no one expects the other insurance regulations to help more than a tiny percentage of the population. For most Americans, these “early benefits” are simply non-events. If the president were to feature them as large achievements of his presidency in 2012, it would strike most voters as the trumpeting of the trivial.

With so little to work with, and intense opposition among those pushing for repeal, the president is unlikely to feature Obamacare at all in his 2012 campaign, and certainly not in the way Reagan touted his 1981 tax cut in 1984. President Obama will no doubt defend the new health law from every attack, even as he tries to deflate the repeal push with minor concessions. But, having exhausted his first term securing passage of Obamacare, the president will have to find some other rationale to justify requesting a second term.

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Nathan Deal Makes the Right Deal for Georgia



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Very good news from Atlanta, where Gov. Nathan Deal has reconsidered his previous decision to collaborate with Obamacare by establishing a Health Benefits Exchange in Georgia. Although a bill was moving through the legislature, Governor Deal reconsidered and decided to stall an exchange, according to the Atlanta Journal-Constitution. This follows my column opposing exchanges in that same newspaper a few days ago.

Governor Deal has undoubtedly realized that any collaboration with the Obamacrats merely allows Obamacare’s roots to grow deeper into the soil. Now, instead of wasting time on a Health Benefits Exchange, Georgia’s legislators can spend their time considering more effective health reforms, a task which they appear to be taking up with gusto: They are going to debate an interstate compact for health insurance, which can eliminate the federal government’s control of health care entirely.  (For my take on a health-insurance compact, please see here.)

The Perfect vs. The Good: Mitch Daniels’s Medicaid Reforms



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Michael Cannon and Grace-Marie Turner (aided and abetted by Robert Goldberg) have started a real dispute on the effectiveness of Indiana governor Mitch Daniels’s Medicaid reform.

I think that this is really a proxy war over Obamacare. Like me, Cannon encourages absolute non-collaboration with Obamacare, so that its roots cannot grow into the soil before it can credibly be overturned. Because Governor Daniels has been shaky on this front (as I’ve already described), Cannon’s arguments against the Healthy Indiana Plan (HIP) and against Governor Daniels’s accepting federal Obamacare grants have blurred together into an almost ad hominem criticism of Daniels. Turner, on the other hand, not only supports HIP but has made the unfortunate decision to advise governors to establish bare-bones Health Benefits Exchanges, an approach that I have long believed jeopardizes the defeat of Obamacare.

But this has nothing to do with HIP, which launched in January 2008. When it comes to HIP, I lean more towards Turner’s conclusions than Cannon’s.

Cannon notes that Governor Daniels has roped more people than necessary into Medicaid by raising eligibility to 200 percent of the federal poverty level (FPL). However, he dramatically overstates the consequences of this. Yes, between the launch of the Healthy Indiana Program in January 2008 and the end of June 2010, Medicaid enrollment grew 21 percent in Indiana, versus only 18 percent in the rest of the United States. However, if one examines the previous 30-month period (June 2005 through December 2007), as I have done here, one sees that Medicaid enrollment in Indiana grew 5 percent, versus only 1 percent in the rest of the country. This trend indicates that there are other reasons for extraordinary Medicaid growth in Indiana than HIP.

It’s also important to remember the history of HIP. Governor Daniels did not just wake up one morning with a clever new way to dupe the federal government into throwing more dollars his way. He took advantage of an opportunity offered through President Bush’s Affordable Choices program, which offered waivers to states that attempted to move federal safety-net dollars from providers, especially hospitals, to patients. It didn’t spend more federal dollars, but redirected money that was already allocated. Perfect? Certainly not, but subsidising poor people’s demand for health care, instead of rich hospitals’ supply of health care, is clearly a positive marginal reform.

One of the critical consumer-directed elements of HIP is its POWER accounts, whereby taxpayers and the HIP beneficiary fund an account out of which the beneficiary pays for the first $1,100 of health spending every year. Importantly, any balance left at the end of the year rolls over. This has led to a significantly higher retention of beneficiaries than in traditional Medicaid. Turner thinks this is a feature; Cannon thinks it’s a bug.

One of the problems with traditional Medicaid is that people enroll when they’re sick and drop out when they become healthy. But beneficiaries who remain enrolled in order to keep their POWER balances do not cost taxpayers much, because they are healthy. Plus, HIP habituates them to a system where they continuously own a long-term policy for catastrophic health expenses (to which they submit claims infrequently) alongside a personal account to pay for most of their health spending. Those of us trapped in the employer-monopoly system should be so fortunate!

Cannon does not think that Medicaid beneficiaries should be happy with the program, because satisfaction breeds dependence. In other words, my friend thinks that Medicaid should be a crappy program because we don’t like Medicaid. Well, I support school choice, but I don’t think we should encourage public schools to hire crappy teachers in order to increase the demand for school choice. (Nor do I expect to see politicians successfully campaign on such a platform.)

HIP contains another important characteristic that I would have expected Cannon to cheer a little: sliding-scale subsidies to POWER accounts. Sliding-scale subsidies are not perfect, but they mitigate the problem of income-tax-rate “cliffs” as people’s incomes rise above the eligibility level for a benefit. If, for example, Medicaid eligibility is cut off completely at 100 percent of FPL, dependents approaching that income level have a disincentive to increase their incomes. Cannon himself has written a sterling analysis of such “poverty traps” in Obamacare.

Finally, we are making a mountain out of a molehill. At the end of 2009, HIP had 45,460 members, and it’s now got a waiting list (probably because the Affordable Choices waiver prevents it from drawing down more federal dollars). Indiana Medicaid overall had almost a million beneficiaries.

Faced with a federal government whose position on consumer-driven health care has veered between lukewarm (mostly rhetorical) support and outright hostility, Governor Daniels has succeeded in introducing a margin of consumer direction into health care in his state. In doing so, he has overcome significant bureaucratic odds and deserves congratulations. Now all he has to do is stop accepting Obamacare grant money!

One Way Massachusetts’ Commonwealth Connector Beats Utah’s Health Exchange



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The range of current libertarian-conservative expert opinion on Obamacare’s Health Benefits Exchanges has well-defined boundaries. On one hand, there are those who believe that states are obliged to establish some sort of bare-bones exchange along the lines of the Utah Health Exchange in order to prevent the federal government from coming into a state and imposing a bloated contraption like Massachusetts’ Commonwealth Connector. (For an example of this approach, see here.) Others (including myself) believe that the Utah Health Exchange is unimpressive, that no “exchange” can overcome certain bureaucratic necessities, and that states should therefore refuse to collaborate with Obamacare while waiting for it to be overturned by the Supreme Court or a future Congress and president. (The Cato Institute’s Michael Cannon has also arrived at this conclusion.)

None of us has had anything positive to say about Massachusetts’ Commonwealth Connector — until now! In one respect, the Commonwealth Connector is an extremely well-run government program and the Utah Health Exchange is not: The issue is transparency.

Soon after I started writing critically about the Utah Health Exchange, I received e-mails and phone calls from a businessperson with a financial interest in the success of that enterprise, scolding me for using out-of-date information. The new Utah Health Exchange, re-launched in 2011, is going gangbusters, according to a phone conversation that this businessperson had recently held with the exchange’s boss.

Sorry, not good enough. The Utah Health Exchange has never published an annual report, and its last press release was dated April 28, 2010! Massachusetts’s Commonwealth Connector, on the other hand, published a thorough report on the effect of the mandate last December, and its mandated annual report to the legislature the month before that. It also publishes its schedule of board meetings, including the agenda of each meeting and the minutes of previous meetings.

The Bay State’s Commonwealth Connector is an expensive and unnecessary bureaucracy, but at least it’s upfront about what it’s doing. Even its critics should congratulate its transparency. Advocates of the Utah Health Exchange, on the other hand, evangelize from a data-free zone of wishful thinking. Those who believe that Utah has shown how to run a health-benefits exchange should demand that the state provide data to support such a conclusion.

How Dare Conservatives Stand athwart Obamacare Yelling, Stop!



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In a column for Kaiser Health News, Michael L. Millenson, president of Health Quality Advisors LLC, laments that conservatives in the U.S. House are approaching Obamacare like, well, conservatives. He cites these frightening comments from unnamed House GOP staffers:

The Innovation Center at the Centers for Medicare & Medicaid Services?

“An innovation center at CMS is an oxymoron,” responded a  Republican aide. . . . “Though it’s great for PhDs who come to Washington on the government tab.”

There was also no reason the government should pay for “so-called comparative effectiveness research,” another said.

“Everything’s on the chopping block,” said yet another.

No government-funded comparative-effectiveness research? For my money, those staffers (and whoever hired them) should get a medal.

Millenson disagrees. He thinks conservative Republicans have become a bunch of cynics and longs for the days when Republicans went along with the left-wing impulse to have the federal government micromanage health care:

After all, the McCain-Palin health policy platform in the 2008 presidential election called for coordinated care, greater use of health information technology and a focus on Medicare payment for value, not volume. Once-and-future Republican presidential candidates such as former governors Mike Huckabee (Ark.), Mitt Romney (Mass.) and Tim Pawlenty (Minn.), as well as ex-Speaker of the House Newt Gingrich, have long promoted disease prevention, a more innovative federal government and increased use of information technology. Indeed, federal health IT “meaningful use” requirements can even be seen as a direct consequence of Gingrich’s popularization of the phrase, “Paper kills.”

He even invokes the father of modern conservatism, William F. Buckley, as if Buckley would disapprove of conservatives standing athwart Obamacare yelling, Stop!

Millenson’s tell comes toward the end of the column, when he writes that

traditional GOP conservatives . . . [have] eschewed ideas in favor of ideological declarations.

Eschewed ideas in favor of . . . ideas? My guess is that what’s really troubling Millenson is that congressional Republicans are eschewing left-wing health-care ideas in favor of freedom.

Better late than never. Now if only GOP governors would do the same.

Mitch Daniels Does Not Have an ‘Obamacare Problem’



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Cato’s Michael Cannon is misguided in his criticism of Gov. Mitch Daniels’s Healthy Indiana Plan. HIP could not be more different than the government-controlled entitlement programs created by President Obama and former Massachusetts governor Mitt Romney.

It is especially odd that Cannon would criticize HIP, since it is built on the foundation of health savings accounts, which Cato has championed for more than two decades.

Governor Daniels devised a unique plan to expand health coverage to the uninsured through a Medicaid waiver and a new cigarette tax. But rather than creating a path to dependency, as Cannon charges, HIP creates incentives for people to spend and utilize health services wisely.

Traditional Medicaid promises virtually unlimited medical services, if people can find a doctor or hospital to provide them, with few if any financial obligations.

By contrast, HIP helps people transition from an entitlement program to a plan that operates much more like private insurance. It requires members to make monthly contributions (i.e., premiums) to a Personal Wellness and Responsibility (POWER) account. The state and the member both contribute on a sliding income scale, for a total of $1,100 a year.

Anything the member spends on health care comes out of the account first. If the account is exhausted, then “catastrophic” coverage is provided through Medicaid. State spending is capped at the revenues that are available, so enrollment is limited.

Cannon calls this a “taxpayer-funded health savings account” and makes is sounds like the state is handing out cash. It’s not. He needs to get his facts straight. The state and the participants work in partnership to jointly fund the POWER account. Those closest to the income limit — 200 percent of poverty, about $22,000 for an individual — fund the account almost entirely on their own.

Three-quarters of those participating in the program make monthly contributions to their POWER accounts. (The rest don’t contribute because their incomes are below thresholds.) If people don’t make the required contribution to their account, they are tossed out of the program. Because of that, 97 percent make the payment, according to a Mathematica Policy Research study.

It sounds to me like Governor Daniels got the incentives right.

And HIP also rewards people if they get preventive care. If they get screening tests, vaccinations, etc., all the funds remaining in their POWER account at the end of the year can roll over to the next to reduce the member’s monthly contributions.

This is exactly what we want our health-care system to do: provide incentives for individual responsibility in using the system and spending health-care dollars wisely, and rewarding people who follow sensible rules. And there is cost transparency: Members receive a monthly statement showing their POWER balances.

Seventy percent of those in the program have incomes at or below the federal poverty level and would be unlikely to have coverage otherwise, yet a high proportion have serious chronic conditions that likely would have landed them in hospital emergency rooms for care rather than doctor’s offices.

Cannon is right to criticize Medicaid — arguably the worst health program in the country. But if he were to think about how we would want to transition to a more functional Medicaid program, HIP provides a successful model. It is actually a bridge to private insurance, not an entitlement trap, as Cannon charges.

Cannon also criticizes Daniels for deciding to set up minimal infrastructure for the health exchanges that Obamacare requires of the states. Because his term expires in 2012, Daniels will not be governor when the deadline comes to have the exchange in place, and he says he doesn’t want to put his successor in a bind and leave Hoosiers unprotected. If no state exchange is in place and the law is not repealed or overturned, then the feds will come in and surely institute an aggressive government-controlled program.

While there are differences about this in the free-market policy community, I am advising governors to set up a minimal exchange based upon the Utah model as firewall protection. HHS secretary Kathleen Sebelius already has said the Utah model will qualify. These purchasing exchanges can be a vehicle to allow a defined contribution for health insurance, portability, and more choices for individuals and small groups.

So Mike Cannon is misguided. Governor Daniels is doing us a favor by showing how Medicaid could be transformed into a program that would encourage individual responsibility and a wiser expenditure of taxpayer dollars without expanding massive open-ended entitlement spending as Obamacare does. Rather than criticizing Governor Daniels, we should be thanking him.

A final note of caution: If Obamacare isn’t repealed, HIP will likely have a tombstone saying “R.I.P.,” since it provides far too much consumer choice and individual authority to satisfy Washington regulators.

Judge Vinson’s Master Stroke



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U.S. district judge Roger Vinson is a no-nonsense judge who clearly is annoyed with the Obama administration for ignoring his January 31 decision declaring Obamacare unconstitutional and saying its implementation must be halted.

His latest decision yesterday is being widely mis-reported in the major media as a victory for the administration. The Washington Post, for example, wrote, “Judge clears way for implementation of health-law in states that are challenging it.”

In fact, in a master stroke of jujitsu, Judge Vinson leapfrogged over the administration and said he was going to interpret the administration’s request for him to “clarify” his ruling as a request for a temporary stay of his order. And he gave the administration seven days to appeal his ruling or stop all action to implement the law.

The judge said his January 31 ruling was “plain and unambiguous” in its intent to bar the administration from moving forward with the law.

If the administration didn’t think it could comply, it should have immediately filed a motion for a stay rather than choosing to “effectively ignore the order” for two and a half weeks “and only then file a belated motion to clarify,” Judge Vinson said.

In his January decision, he ruled that the administration itself had said the individual mandate was central to the functioning of the whole law, and he “reluctantly” concluded that “Congress exceeded the bounds of its authority. . . . Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void.”

He said in January his decision was “the functional equivalent of an injunction” that would bar the administration from proceeding with implementing the law.

But the administration simply ignored him, causing significant confusion among the states.

“The sooner this issue is finally decided by the Supreme Court, the better off the entire nation will be,” Vinson wrote in his latest ruling yesterday. “And yet, it has been more than one month from the entry of my order and judgment and still the defendants have not filed their notice of appeal.” (We can only speculate that the administration wants to drag its feet as long as possible in order to sink its regulatory roots as deeply as possible into our health sector and economy.)

In order to avoid a further delay, the judge interpreted the administration’s request for “clarification” as a request for a stay, which he granted for just seven days. If the government fails to file an appeal to his ruling, then all work to implement the law must stop.

Judge Vinson’s latest 20-page decision provides a concise summary of his longer 78-page January ruling and is worth your time.

The Willful Failure of New York’s Mental Health Office



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Instead of giving New York’s seriously mentally ill the treatment they need, the state Office of Mental Health is busying itself with the “mental-health issues” of ordinary folks. D. J. Jaffe explains over at City Journal:

The problem isn’t OMH’s budget, which has plenty of money; it’s how the agency spends it. OMH claims that 50 percent of New Yorkers, including everyone from struggling students to dissatisfied spouses, will have a diagnosable mental-health issue during their lifetimes. Under Commissioner Michael Hogan, OMH continues to spend its resources on these people, rather than on the 3 to 9 percent of New Yorkers who, the agency says, are the most severely impaired, suffering from genuinely serious mental illnesses like schizophrenia and bipolar disorder. . . .

One reason to be concerned about OMH’s skewed priorities: studies show that when the truly ill receive treatment, they are no more violent than the general population, but when treatment is lacking, their violence rises. Currently, there are twice as many mentally ill people in prison on Riker’s Island as in all OMH-run psychiatric hospitals combined.

Read the whole thing here.

Obama Offers States ‘Flexibility’ . . . to Adopt Single-Payer Instead of Obamacare



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The New York Times reports:

Seeking to appease disgruntled governors, President Obama plans to announce on Monday that he supports amending the 2010 health care law to allow states to opt out of its most burdensome requirements three years earlier than currently permitted.

So the president is finally acknowledging that Obamacare is unworkable and will impose enormous burdens on the states. Or is he?

A closer look shows that the president is not lifting the burdensome requirements Obamacare imposes on states. All he’s doing is proposing to move up, from 2017 to 2014, the date when states can apply for federal permission to impose a different but equivalently or more coercive plan to expand health-insurance coverage. Here’s what the Times says about the legislation Obama will reportedly endorse, which was introduced by Sens. Ron Wyden (D., Ore.) and Scott Brown (R., Mass.):

The legislation would allow states to opt out earlier from various requirements if they could demonstrate that other methods would allow them to cover as many people, with insurance that is as comprehensive and affordable, as provided by the new law. The changes also must not increase the federal deficit.

If states can meet those standards, they can ask to circumvent minimum benefit levels, structural requirements for insurance exchanges and the mandates that most individuals obtain coverage and that employers provide it. Washington would then help finance a state’s individualized health care system with federal money that would otherwise be spent there on insurance subsidies and tax credits.

So states can “opt out” of Obamacare’s individual mandate if they cover as many people, with as many benefits and as many government subsidies, as Obamacare would. The Times quotes “administration officials” on how states might do that:

The administration officials said the so-called state innovation waivers in the Wyden-Brown bill might allow a state to experiment with ways to entice people to obtain insurance rather than requiring them to buy policies. It also might allow interested states to establish a single-payer system in which the government is the sole insurer. Gov. Peter Shumlin, a newly elected Democrat in Vermont, is pursuing such a proposal.

No such state plan can make a dent in the federal laws that are fueling the relentless growth in the cost of health care (see Medicarethe federal tax treatment of health care, etc.). Therefore, the only way that states could cover as many people as Obamacare does is by using Obamacare’s tactic of forcing people to buy exorbitantly costly health insurance. And if they’re not going to use an individual mandate, the only remaining option is a single-payer health-care system.

President Obama’s move is not about giving states more flexibility. It’s about moving the nation even faster toward his ideal of a Canadian- or British-style single-payer health-care system.

The Latest Obamacare Court Ruling: Congress Can Regulate ‘Mental Activity’



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On Tuesday, Judge Gladys Kessler of the U.S. District Court for the District of Columbia handed down her decision in the fifth Obamacare court challenge, Mead v. Holder. Kessler upheld the individual mandate, along with the rest of the law, leading PPACA advocates to crow that three judges have upheld the mandate, versus two who have overturned it.

But Judge Kessler’s reasoning is weak, and her ruling demonstrates why there is a real possibility that the Supreme Court will overturn Obamacare.

1. Individuals have the standing to sue.

Kessler spends the first 24 pages of her 64-page ruling examining whether or not the plaintiffs have standing to sue. In this case, the plaintiffs consisted of five individuals: two who state that they will pay for all future medical expenses out-of-pocket, and therefore won’t “free-ride” off of the subsidized health-care system; and three who say that they will refuse all medical services for the rest of their lives.

Kessler ultimately disagrees that the plaintiffs won’t take advantage of free emergency care, but does agree that they have standing to sue, because the individual mandate will impose a financial burden on them that they must begin to address now. On page 46, she favorably cites another pro-Obamacare ruling, Thomas More Law Center v. Obama, in which Michigan judge George Steeh ruled that “as living, breathing beings … [the plaintiffs] cannot opt out of [the health-care services] market.”

2. Health care is special.

Beginning on page 25, Kessler examines whether or not the Commerce Clause allows Congress to impose an individual mandate. She goes through the familiar litany of Supreme Court Commerce Clause jurisprudence, and then gets to the heart of the matter: Are people who choose not to buy health insurance engaging in interstate commerce? On page 39, she writes:

The findings on this subject could not be clearer: the great majority of the millions of Americans who remain uninsured consume medical services they cannot pay for, often resulting in personal bankruptcy. In fact, the ACA’s findings state that “62% of all personal bankruptcies are caused in part by medical expenses.”

It’s truly amazing to see this fraudulent medical bankruptcy figure uncritically repeated in a court document. It comes from a partisan analysis published by members of Physicians for a National Health Plan, and contains numerous methodological flaws that Megan McArdle identified here and here. It included as “medical bankruptcy” anyone who declared bankruptcy who also “lost at least 2 weeks of work-related income due to illness/injury,” or who reported “uncovered medical bills >$1000 in the past 2 years,” among other absurdly broad criteria. For Judge Kessler to cite this article in order to claim that “the findings on this subject could not be clearer” is a bad start.

She then goes on to write:

To put it less analytically, and less charitably, those who choose–and Plaintiffs have made such a deliberate choice—not to purchase health insurance will benefit greatly when they become ill, as they surely will, from the free health care which must be provided by emergency rooms and hospitals to the sick and dying who show up on their doorstep. In short, those who choose not to purchase health insurance will ultimately get a “free ride” on the backs of those Americans who have made responsible choices to provide for the illness we all must face at some point in our lives.

This “free ride,” as I have written about previously, is a consequence of a clumsy 1986 law called the Emergency Medical Treatment and Active Labor Act, or EMTALA, which forces hospitals to provide free care to everyone, regardless of their ability to pay. It is nonsensical to argue that Congress can pass an unconstitutional law in order to solve problems caused by another act of Congress.

And yet, this is precisely what Kessler argues, on page 47 of her ruling. She claims that the health-care market is special, and fundamentally different from other markets; hence, we shouldn’t worry that PPACA’s individual mandate could be used to force people to buy cars, food, or housing:

This second aspect of the health care market distinguishes the ACA from Plaintiffs’ hypothetical scenario in which Congress enacts a law requiring individuals to purchase automobiles in an attempt to regulate the transportation market. Even assuming that all individuals require transportation in the same sense that all individuals require medical services, automobile manufacturers are not required by law to give cars to people who show up at their door in need of transportation but without the money to pay for it. Similarly, food and lodging are basic necessities, but the Court is not aware of any law requiring restaurants or hotels to provide either free of charge.

It should be emphasized that this distinction is not merely a useful limiting principle on Congress’s Commerce Clause power. Rather, it is a basic, relevant fact about the operation of the health care market which is critical to understanding the ACA’s efforts to reform the health care system.

Nonsense. Judge Kessler simply makes this up. There is nothing “basic” about, or inherent to, the operation of the health-care market that required Congress to force hospitals to provide uncompensated emergency care. Congress could repeal EMTALA tomorrow if it wanted to, eliminating the alleged “free rider” problem and obviating the need for the mandate.

3. Congress can regulate “mental activity.”

Judge Kessler then goes on to assert something entirely new in the history of American jurisprudence: that the Commerce Clause allows Congress to regulate “mental activity”:#more#

As previous Commerce Clause cases have all involved physical activity, as opposed to mental activity, i.e. decision-making, there is little judicial guidance on whether the latter falls within Congress’s power. See Thomas More Law Ctr., 720 F.Supp.2d at 893 (describing the “activity/inactivity distinction” as an issue of first impression). However, this Court finds the distinction, which Plaintiffs rely on heavily, to be of little significance…Making a choice is an affirmative action, whether one decides to do something or not do something. They are two sides of the same coin. To pretend otherwise is to ignore reality.

If Congress can regulate “mental activity,” then there simply isn’t anything that Congress can’t regulate, and the Constitution as we know it no longer exists.

4. The mandate is not a “tax,” and can’t be justified by the General Welfare Clause.

The defendants in Mead v. Holder tried to argue that the individual mandate is a tax, and therefore constitutional under Congress’s power to “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.”

Judge Kessler made quick work of this claim, noting that, “to date, every court which has considered whether [the individual mandate] operates as a tax has concluded that it does not.” She pointed out that the text of the law describes the mandate as a penalty, not a tax, and notes the legislative history that proves that this was a deliberate choice by Congress. This “the mandate is a tax” argument, having been rejected by all five lower courts, appears to be the weakest element of the pro-mandate case.

What does Mead v. Holder mean for the next round?

What Mead v. Holder tells us is that the pro-mandate case hinges on believing two things: one, that the “free rider” problem is insolubly inherent to the health-care market, leading to the necessity of the individual mandate; and two, that Congress has the power to regulate “mental activity,” along with essentially everything else. Suffice it to say: It’s not a slam dunk that higher courts will agree.

A Gentleman and a Scholar



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For those who have not heard the very sad news, Jack Calfee of the American Enterprise Instutute passed away suddenly Wednesday night. Jack simply was a brilliant man who devoted his considerable talents to the improvement of public policies — that is, to the wellbeing of others — across a wide range of topics and issues. From various areas in regulatory policy to tort reform, to the defense of advertising (free speech for entrepreneurs), to the analysis of health care and pharmaceutical policy, Jack brought a rare combination of technical expertise, real-world experience, sound analytic tools, and common sense to the problems that he addressed. His work on comparative pricing of pharmaceuticals in Europe and the U.S., in particular, influenced my efforts, and I cannot count the number of errors from which he saved me by pointing out fallacies both subtle and not in my initial approach to various problems. Moreover, Jack was a truly great colleague, always making time to explore ideas and to review drafts of work, and always with the effect of enhancing the productivity of those around him. The summary of his work does not do justice to his productivity, impact, and great sense of humor. He will be sorely missed. R.I.P.

— Benjamin Zycher is a visiting scholar at the American Enterprise Institute.

Obamacare and Entitlement Reform



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Okay, maybe the Republicans are serious about reforming entitlements — especially Medicare, the Big Kahuna. Usually, politicians’ claims to be almost willing to make preparations to eventually propose having an “adult conversation” about entitlements are not worth wasting time on. But this time may be different — and I credit the fight against Obamacare with moving the goalposts.

Historically, the politician who challenged the entitlement state enjoyed a short career. As William Voegeli of the Claremont Institute recently reminded us, conservatism has “clear, categorical arguments against permitting American government to take up any task it did not perform during Jefferson’s presidency.” However, “In 1936 and 1964, the Republicans’ presidential candidates, after repeatedly expressing their commitment to these principles, won 36.5% and 38.5% of the popular vote, respectively.” This undoubtedly explains why Republican politicians have been so weak on entitlements. (On the surface, Obamacare was different: It was pretty easy to get seniors on board the anti-Obamacare express by simply attacking the president for cutting half a trillion dollars from Medicare to finance Obamacare.)

Furthermore, except for the martyrdoms of Alf Landon in 1936 and Barry Goldwater in 1964, Republican “founding mythology” does not provide strong grounds for rolling back the entitlement state. Eighty-one of 102 Republican representatives and 16 of 25 senators voted in favor of the Social Security Act in 1935. As for Medicare and Medicaid, a narrow majority of Republicans in the House voted in favor of the 1965 Social Security amendments, as did almost half of those in the Senate. When Ronald Reagan had to deal with Medicare, he accepted an increase in payroll taxes and imposed centrally fixed prices for medical procedures (laying the ground for today’s ridiculous, never-ending sequence of “doc fixes”). Let’s not get started on the Medicare Part D drug benefit, a solely Republican expansion of Medicare passed in 2003.

But the fight against Obamacare may have delivered a shock to the system that goes beyond the battle cry of “repeal and replace.” The latest Pew Research Center survey of voters’ budget-cutting priorities shows that Americans are far less enamored of traditional Medicare than they were. Yes, 40 percent want to increase Medicare spending, versus only 12 percent who want to cut it. But this is a reduction of one quarter from the 53 percent who wanted to increase spending in 2009. With respect to health care in general, 41 percent want to increase spending, versus 24 percent who want it cut. However, this is a one third reduction from 2009, when 61 wanted the federal government to increase health spending.

Whether these shifts presage a trend I cannot say, but I have little doubt that the population has generalized the arguments against Obamacare to other government health programs, especially Medicare and Medicaid. This is supported by the fact that the shift of opinion on education spending was far smaller: 62 percent of respondents wanted to increase federal education spending, versus 67 percent in 2009.

So, it is not surprising that Republicans are taking more risk on entitlements. If Speaker Boehner and his colleagues propose (inter alia) voucherizing Medicare, getting the federal government out of the business of fixing doctors’ fees, and reducing (or eliminating) federal regulation of the practice of medicine, they might discover that they are pushing against an increasingly open door.

Obamacare Will Destroy Utah’s Health Exchange



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Back in a November 2009, Utah governor Gary Herbert complained in remarks at the Heritage Foundation that the federal government was “freezing out the states” on health-care reform.

How have things gone since then? According to the governor’s remarks (as reported by Jane Norman of CQ HealthBeat) when he returned to the Heritage Foundation last week, “Utah officials waited for eight months to find out if the state would be allowed to use e-mail rather than paper to communicate with Medicaid recipients and save $6 million a year.” Herbert concluded — with bemusement – that “they sent us a denial by e-mail.”

None of this is surprising. What is surprising is that many people continue to believe that the Utah Health Exchange, launched in 2009 to increase small businesses’ health-insurance choices, can morph into some kind of foundation upon which a consumer-driven Obamacare can be built.

Like many conservative health-policy analysts, I have been skeptical that the Utah Health Exchange was as exciting a development as its promoters claimed. Although Governor Herbert and other supporters of the exchange continue to promote it as a successful consumer-driven alternative, these claims are difficult to credit: The Utah Health Exchange has never published an annual report, and its last press release was dated April 28, 2010! Nevertheless, if not for Obamacare, I doubt that the Utah Health Exchange would have caused very much harm. It only enrolled a dozen or so businesses in its initial phase, which started in September 2009.

But I agree with Governor Herbert on this: Let Utah have its exchange. Maybe someday it will find its feet and make a serious impact. However, this can never happen until Obamacare is repealed and replaced. After all, it’s hard to enroll new members if the federal government can’t even tell you whether you can use e-mail or not.

The Utah Health Exchange cannot redeem Obamacare. Instead, Obamacare will corrupt the Utah Health Exchange.

Daniels Backing Down on WSJ Op-Ed? Not Exactly



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I predicted last week that some conservatives would grumble about Gov. Mitch Daniels’s op-ed in the Wall Street Journal and the accompanying letter to Secretary Kathleen Sebelius. I was correct — my friends Jeff Anderson and John Graham have both expressed concern that the op-ed means that Daniels is giving up opposition to Obamacare too soon.

According to today’s Politico Pulse, Daniels himself may have had some second thoughts about the idea. Pulse’s headline — “DANIELS: BACKING OFF THE WSJ OP-ED?” — was far more titillating than what he actually said on the subject, though. According to the body of the item, “When pressed specifically on how long he would wait for HHS to make his demanded changes, Daniels said, ‘That will be a ways down the trail. They deserve some time to concentrate on this.’” 

This does not exactly strike me as a full-blown retreat. As I wrote earlier, Daniels and other governors critical of the bill are in a tough spot. Unlike legislators or, ahem, pundits, they cannot afford to see if the law is overturned legislatively or judicially. If the repeal efforts fail (and I sincerely hope that those efforts succeed), governors who did not implement the law will have the federal government design the exchanges for them. This might help stoke the fire of opposition to the bill, but it will not help the citizens of states subjected to these one-size-fits-all plans. In contrast, if enough governors do what Daniels and his colleagues are advocating, we could potentially have a workable series of state networks where conservatives can put their ideas regarding value-driven health care into motion. Clearly many (mostly blue) states will implement the bad plan, but they will do so no matter what Daniels and other like-minded individuals do.

Secretary Sebelius, in a piece in the Washington Post, claimed that “the law already gives states most of the resources and flexibility they’re asking for.” According to a former colleague of mine who is now a state health official, this claim is disingenuous at best. States have already encountered a host of federal encroachments that suggest that the federal government would make it difficult for them to establish exchanges as the governors see fit. Still, the Sebelius op-ed suggests that Anderson and Graham are right on the politics: The Obama administration will point to any cooperation from Republican governors as a sign that the bill is more flexible than it really is and that opposition to it is not as great as once supposed. This is probably why, as the Pulse item indicated, Daniels is in no rush to get a response to his letter to Sebelius.

Responsible Resistance to Obamacare: Has Mitch Daniels Shown the Way?



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In an op-ed in the Wall Street Journal, Indiana governor Mitch Daniels offers up a dilemma to U.S. Secretary of Health & Human Services Kathleen Sebelius: If she wants his co-operation (and that of 20 other governors), she’ll need to twist and turn Obamacare inside out to get it.

My friend Tevi Troy cheers Daniels’s approach, noting that if the president had considered bipartisan reform he might have avoided the hostile backlash that Obamacare has created. But he didn’t. Surely it can’t be Governor Daniels’s responsibility to show the president how to find the way to real health-care reform, an approach that threatens the success of the still-monumental task of repealing Obamacare.

Don’t get me wrong: Governor Daniels issues a full-throated call for consumers, rather than bureaucrats, to decide which health insurance they choose. Daniels knows whereof he speaks: By offering policies linked with Health Savings Accounts to government workers, Indiana trimmed public-sector health costs by 11 percent, according to a previous op-ed in the same newspaper by Governor Daniels.

Daniels knows that Obamacare expects states to do its dirty work. If states boycott Obamacare, forcing Secretary Sebelius’s Obamacrats to set up Health Benefits Exchanges on their own, the results will be as pathetic as the high-risk pools that rolled out in 2010. But this simply invites the question: Why is Governor Daniels (or Governor Perry of Texas, another signer of the letter) extending the hand of peace to Secretary Sebelius — especially now, when Obamacare has been mortally wounded in the courts and the U.S. House of Representatives?

To be sure, Daniels has to manage things as they are, not as he might wish they’ll be after the Supreme Court or the November 2012 election concludes the defeat of Obamacare. Nevertheless, collaboration with Secretary Sebelius attracts risks that should be readily apparent to skilled politicians like Daniels and Perry.

Suppose, for example, that Secretary Sebelius does give way enough to make a deal with these conservative governors. Surely President Obama will exploit such a compromise for all it’s worth on the campaign trail, demonstrating the “flexibility” of his signature “reform.” I’m surprised that these Republican governors are willing to accept responsibility for such a consequence.

Furthermore, Daniels admits that he’s asking Secretary Sebelius “to abandon most of the command-and-control aspect of the law as written” (emphasis mine). Well, if the reforms that he and the other governors are demanding would require changing the legislation, there’s a heck of an easier way to do it than entering tedious, stressful, and likely inconclusive negotiations with Secretary Sebelius.

It’s called “Repeal and Replace.”

A New Path in the Fight against Obamacare



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Last week was a good one for opponents of the Obama health-care law, with Judge Vinson’s decision challenging the constitutionality of the entire law and the Senate’s close vote on repeal despite Harry Reid’s stated determination not to let that happen. But while opponents of the law still want to see repeal and have made significant progress along that road, there remains the significant possibility that the bill will not be repealed. Republican members of Congress can and will continue to take the stance that they will accept nothing less than repeal, but governors who have to implement the law lack that luxury. This is the implicit message of Indiana Governor Mitch Daniels’ Wall Street Journal op-ed laying out a solution that states can live with if the law is not repealed or overturned.

In the piece, Daniels calls the bill “a massive mistake,” but he also notes that governors “have no choice but to prepare for the very real possibility that the law takes effect in 2014.” Recognizing the need to be prepared, he lays out a series of six requests that he and 20 other governors have made of HHS secretary Kathleen Sebelius that would allow them to proceed with an approach that will work for their states. The six conditions include flexibility regarding which insurers participate; a waiver of the bill’s costly mandate on coverage; more lenience for consumer-driven plans; the ability to move Medicaid recipients into the exchanges; reimbursement for the full cost of the law; and independent, non-political assessments of the scope of people who would end up on the exchanges. The common theme in the conditions seems to be flexibility for the states to figure out what works best for them.

This is the approach with which we should have started the entire debate. There might have been a bipartisan majority in Congress for a reform plan requiring states to set up exchanges but also giving states far more flexibility to determine the shape and nature of those exchanges. Unfortunately, the Obama administration chose not to pursue that strategy, which is why we are in the unfortunate situation we have today, in which a majority of governors are being asked to implement a law that their respective states are challenging in court.

Some conservatives may wonder if Daniels is giving up on repeal. The truth, however, is that Daniels and the 20 other governors who joined him in the letter to Sebelius have opened up an additional, state-focused path, in addition to the judicial and legislative ones, for eventually ridding the country of the problematic and costly Obama health-care law.

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