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Congress Should Pass Consensus Group’s Obamacare Reforms

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Congress Should Pass Consensus Group’s Obamacare Reforms

June 20, 2018

The Health Policy Consensus Group, a group of scholars led by the Galen Institute and Heritage Foundation, has proposed an alternative approach to replacing Obamacare—distributing Affordable Care Act funds to states as block grants, giving them the freedom and flexibility to best supplement private insurance spending.

A year ago, the GOP’s attempt to replace the ACA with equally-sweeping reforms ran into congressional gridlock.  Incremental legislative and regulatory actions have since opened up more affordable alternatives to Obamacare, but its spending remains poorly structured to help those most in need of assistance. 

In 2016, three years after the chaotic launch of the Affordable Care Act’s reforms, average insurance premiums on the individual market had more than doubled, and despite billions in additional federal subsidies, deductibles above $10,000 were becoming common for family plans.  That November, Americans disapproved of the legislation by a margin of 53 to 42 percent, and elected Donald Trump and a Republican Congress in part on a promise to fix the problem. 

After spending much of 2017 trying, the Senate GOP was unable to agree on a comprehensive replacement for the ACA.  However, by repealing the individual mandate through the December 2017 tax reform legislation, and executive action to eliminate regulations that suppressed alternatives to ACA plans, Republicans could restore access to a wide range of health insurance options. 

Nonetheless, these achievements fall short of the broader reform hopes, which many Republicans held after the Presidential election.  In particular, the structure of spending under the ACA is untouched. This spending is distributed inequitably among states, and serves as much to pull people into costlier ACA-regulated plans as it does to fill gaps in coverage for the uninsured.

This proposal by the Consensus Group seeks to address this deficiency, and remind congressional Republicans that the job of fixing Obamacare is not yet finished.  It resembles the approach proposed by Senators Graham and Cassidy of block granting ACA funds to states ($114 billion in 2018), but drops the proposal for the federal government to cap total Medicaid funding for states ($383 billion in 2018).  By limiting itself to reforming the spending established by the ACA, it is a proposal to settle for a proverbial third of a loaf.

And yet, this modest proposal has merit.  About 40 percent of spending under the ACA went to individuals who already had insurance coverage--serving to inflate the cost of plans in which they were enrolled.  As 29 million remain uninsured, the block grant proposal would allow states to make better use of the money, by better-targeting these funds at individuals who are unable to purchase their own coverage.   

The majority of spending under the ACA currently goes to expand Medicaid, but the bulk of the uninsured are ineligible for the program.  The Consensus Group proposal would break down the wall separating Medicaid funds from subsidies for the purchase of private insurance.

The federal government currently provides one to three dollars to states for every dollar they spend providing healthcare services to low-income disabled, elderly, children, and pregnant women, but nine dollars for every dollar that states spend (without limit) on able-bodied childless adults.  This arrangement encourages states to provide free healthcare to individuals who are able to work, at the expense of ensuring good access to care for the neediest who are not.   By allocating these funds as block grants, the proposal would allow each state to target ACA funds where they can do the most good.

The distribution of funds between states would also be better targeted.  Currently, ACA Medicaid funds are allocated to states according to how much how much they can afford to spend on the program.  By distributing funds according to the states’ count of low-income residents, it would ensure that resources flow to the states requiring the most help to fill their unmet medical needs.

The consensus group proposal will doubtless be met by shrieking and scaremongering from those who built the ACA and deny that its structure could possibly be improved, but it represents another good modest step to improve the value for taxpayer money spent under the legislation.  Looming midterm elections and the slim Republican majority in the Senate makes it unlikely that it will pass in the 115th Congress, but the proposal would be well worth the GOP’s support if it makes gains in November.

Chris Pope is a senior fellow at the Manhattan Institute. Follow him on Twitter here.

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