How Republicans Can Make a Deal on Health Care

A consensus is emerging on Capitol Hill about the need to appropriate funding for the Affordable Care Act’s cost-sharing subsidies, which help working-class Americans buy health insurance.

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But there are plenty of areas of disagreement, especially among Republicans. They can’t decide, having agreed to continue the subsidy payments, what changes should accompany them. Some have argued for eliminating the A.C.A.’s employer and individual mandates, but that would destroy the bipartisan consensus for a deal, and it might also create even more turmoil in the law’s marketplaces. Others have supported a proposal from two Republican members of Congress, Senator Orrin Hatch of Utah and Representative Kevin Brady of Texas, that provides retrospective relief from the employer mandate penalty and prospective relief from its individual mandate penalty. But those changes are considered small potatoes and hardly meaningful reform.

Finally, there is the bipartisan deal brokered by Senators Lamar Alexander, Republican of Tennessee, and Patty Murray, Democrat of Washington. Their agreement expands access to low-premium catastrophic plans, increases the usefulness of health savings accounts and makes minor changes to a provision in Obamacare that allows states to design their own health care reform plans under certain conditions. But some conservatives oppose it, arguing that it lacks changes that would fundamentally alter the trajectory of Obamacare.

In my view, Republicans should focus on revisions and improvements to the state-innovation-waiver provision in the A.C.A. As part of that provision, Section 1332 allows states to receive federal financial support in a lump sum and to waive or revise many of Obamacare’s most noteworthy provisions, including its mandates, the structure and administration of subsidies provided by it, and covered benefits. In return for this flexibility, states must certify that the changes will still result in coverage that is as comprehensive, affordable and widespread as that provided for under the law.

Only a few states — Hawaii, Alaska, Minnesota and Oregon — have had their state-innovation waivers approved by federal authorities. Other states have sought to apply for such waivers, but they have been hampered by the law’s cumbersome application process, unhelpful regulatory guidance from the Obama administration and conflicting points of view within the Trump administration.

The Alexander-Murray legislation would make it easier for states to meet Section 1332’s affordability requirement, expedite the review of waiver applications and create an automatic approval process for waivers that mirror previously approved ones from other states. These changes, while laudable, do not fundamentally reform the state-innovation-waiver process to empower states and help them engage in the type of bold reforms that could benefit both red and blue states.

There are two ways to make more dramatic improvements to Section 1332 as part of a deal on subsidies.

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First, lawmakers can give states greater flexibility on the scope of health benefits that plans must provide. The law now requires that state waivers establish plans to provide coverage that is as “comprehensive” as that provided for under the law’s essential health benefits requirement. But some states may wish to mandate coverage of a different set of benefits than that specified, or choose to minimize the benefits that plans are required to cover. It is unclear, at best, whether this would be permissible under current law. Congress could either clarify what is meant by “comprehensive” in Section 1332 or, more helpfully, simply specify that states have greater flexibility in determining the benefits that must be covered.

These changes would not permit states to eliminate the A.C.A.’s protections for those with pre-existing health conditions nor allow them to introduce differential pricing for health plans based on health status.

Second, Congress can make it easier for states to put their own reform plans into effect and narrow the discretion given to the administration to approve or deny waiver applications. Lawmakers could do this by deeming waiver applications presumptively valid, so long as they certify that a similar number of people will be covered and at a comparable level of affordability as under the law and that the state reforms will not increase the federal deficit. This would apply regardless of whether an application comes from a progressive or conservative state. Vermont, for example, considered a Section 1332 waiver to install a single-payer health system but stopped because it could not come up with a funding mechanism to support the plan.

Federal authorities would then be responsible for evaluation of the state’s reform plan as soon as six months after the waiver is approved and on an as-needed basis thereafter. States not meeting thresholds of affordability or the number of people covered would then be required to adjust their reforms accordingly.

We are on the cusp of a rare health care bipartisan agreement. Still, conservatives will (and should) insist on fundamental reforms to Obamacare as part of the deal. In so doing, they should aim for an approach that will truly give more states the opportunity to become what Justice Louis Brandeis once called the “laboratories of democracy.”