Recognizing the political difficulties facing Obamacare, Sen. Tom Carper of Delaware has been floating the idea of a “public option” consisting of state-run programs instead of a federal Medicare-plus. For Democratic waverers, this may sound appealing — Ben Nelson said it “makes a great deal of sense” and Kent Conrad said “it is important that we really take a close look at this” — but it’s likely to be nothing more than Medicaid-plus.
That would be bad.
Truthfully, I think the conservative position should be that if there is any need for government action to provide a health-care safety net, it should be done entirely at the state level, through subsidized risk pools for those with serious preexisting conditions and properly structured welfare programs for the truly poor. But to set up another joint program with Washington and the states offering health-care entitlements would be disastrous. It would set off another round of perverse incentives, as states would score more cash if they enrolled more people and added more benefits. It would separate the taxing power from the spending power, always a blow to accountability.
Yes, states can be laboratories of kleptocracy from which policymakers can learn what not to do, as Peter Suderman wrote in the WSJ today. And states can do some useful things to advance health care freedom, via deregulation of insurance benefits and occupational licensure. But the biggest single problem in the market for health care was created by the federal government — the special exclusion of employer-provided health plans from income tax, payroll tax, and (essentially) from state taxes and regs that burden competing family coverage — and it must be addressed by the federal government.