An amendment to an Affordable Care Act repeal-and-replace bill introduced by Senate Republicans in 2017 would have promoted state innovation in health care by converting current federal health spending programs into block grants to states. Though the amendment — proposed by Senators Lindsey Graham, Bill Cassidy, Dean Heller, and Ron Johnson — was, like the bill itself, defeated, it could serve as the baseline for the future of conservative health reform, says the Hoover Institution’s Lanhee Chen. In one of two Commonwealth Fund–supported articles in Health Affairs discussing potential Democratic and Republican health care plans for the 2020 election, Chen takes the legislation as a starting point, places it within the current health reform debate, and suggests improvements that could enhance access to affordable coverage while ensuring state flexibility.
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The Conservative Health Reform Effort and the State Innovation Model
Chen identifies four major health care policy disputes among conservatives:
- Whether achieving universal health care coverage is a desirable goal.
- How the tax code should be used to promote access to coverage.
- How to properly balance consumer empowerment and insurance regulations to slow growth in health care costs.
- Whether to roll back coverage under the Medicaid program for low-income people.
Given the difficulty conservatives have had resolving these disputes and coalescing around a single health reform proposal, Chen believes the state innovation model in the Graham-Cassidy-Heller-Johnson legislation is the likely point of departure for future reform efforts. As written, it would have repealed the ACA’s coverage expansion provisions, created block grants of federal funds for state reforms, and capped the federal contribution for each Medicaid enrollee (or, alternatively, let states accept a Medicaid block grant). This model appeals to many conservatives’ belief in federalism and state-driven health care reform.
The Next Steps for Conservative Reform
Conservative policymakers will need to address concerns voiced over the Graham-Cassidy-Heller-Johnson legislation, including:
- How can conservative reform enhance coverage affordability and accessibility? New legislation could require that a large portion of state block grant funds be dedicated to helping low-income people purchase private health insurance. States also might consider subsidizing copayments and other cost-sharing for lower-income residents in commercial plans, as well as risk-mitigation mechanisms like reinsurance.
- How should the amount of each state’s block grant be determined? Tying the size of the block grant to price inflation could reduce future federal spending, but it also could lead to more people losing coverage. Chen suggests considering a broader definition of low income — between 50 percent and 300 percent of the federal poverty level.
- Should future proposals address traditional Medicaid populations at all? A widely acceptable approach among conservatives would be to boost affordable private coverage for the Medicaid expansion population. This could expand coverage while addressing concerns about Medicaid growth.
- Should states be required to adhere to all the ACA’s regulations? Conservatives must strike a balance between regulations designed to help consumers and allowing states their desired flexibility. For example, states may be allowed to opt out of coverage mandates or cost-sharing limitations, but it is unlikely that future proposals would eliminate the ACA’s prohibitions on preexisting condition exclusions and denials of coverage based on health status, because of their political popularity.
- Should any state-based premium assistance be usable only on the ACA marketplaces? Currently, individuals are only eligible to receive tax credit subsidies when they purchase insurance on the ACA’s marketplaces. Instead, people could be allowed to use the assistance elsewhere, including individual-market plans, employer plans, COBRA coverage, or short-term policies.
- Should states be encouraged or required to help Medicaid or Children’s Health Insurance Program enrollees pay their premiums? Conservatives could address disrupted care for Medicaid enrollees by encouraging or requiring states to offer premium support to nonelderly, nondisabled adults and children.
The Bottom Line
The next Republican presidential nominee will likely embrace repeal of the ACA and reform driven by the states. A plan based on the state innovation model proposed by Republican senators — but with additional modifications — would further conservative goals of state-led policymaking, consumer choice, and reduced government spending.
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