Democrats Should Negotiate with the GOP on Health Care
Congressional Democrats may be tempted to think they shouldn’t negotiate with Republicans on health care because, so far, the GOP has shown itself incapable of fulfilling its commitment to repeal and replace the Affordable Care Act (ACA). “Why rescue Republicans from their failure?” the thinking goes.
This is a short-sighted perspective. Yes, the GOP effort has stalled, but, absent some kind of bipartisan deal which brings more stability and consensus to health policy, it is still possible that Republicans will succeed in pushing substantial changes on their own, despite strong opposition from Democrats. There are many things the Trump administration can do to move away from core features of the ACA that don’t require new legislation. Moreover, the prospects for some kind of GOP-drafted legislation could improve under certain political scenarios.
The ACA delegated to the Secretary of Health and Human Services substantial authority to decide how to put some of its key provisions into effect. Among other things, the Secretary can influence how insurance is regulated, increase or decrease spending on outreach efforts to enroll individuals in the ACA’s insurance options, expand or narrow exemptions to the ACA’s individual mandate, and ease the way for states to experiment with approaches that differ substantially from traditional Medicaid and the ACA’s basic structure.
Further, administration lawyers may conclude that they do not have the authority to continue making cost-sharing reduction payments to the insurance plans participating in the ACA’s exchanges because Congress has not provided an appropriation for this spending. Such a decision would increase premiums for consumers who are not subsidized under the ACA by about 20 percent next year, according to the Congressional Budget Office (CBO).
It is also possible that the GOP effort in Congress to roll back the ACA and replace some of its key provisions could be revived depending on circumstances. Senate Majority Leader Mitch McConnell’s last resort “skinny repeal” plan failed to pass a month ago because Sen. John McCain opposed it. There are many different scenarios under which some kind of repeal and replace plan might pass, particularly if the makeup of the Senate changes unexpectedly, or previous votes are flipped based on new considerations. None of these scenarios seem especially likely at the moment, but they are possible.
Overall, it is hard to imagine the four-year term of the Trump administration passing without any significant changes occurring in health care policy. Given this reality, Democrats would be better off negotiating a deal with Republicans that invests both parties in a more politically stable framework.
Democrats would have much to gain from a deal with Republicans on health care because it would likely affirm that as many Americans as possible should be enrolled in health insurance.
It may not seem obvious that Republicans would agree to a plan based on an objective of broad enrollment in insurance, given that the plans they assembled in the House and Senate this year were found by CBO to increase the number of people without health insurance by more 22 million or more by 2026.
But the two primary reasons that these plans would increase the number of uninsured -- a full rollback of the Medicaid expansion, and termination of the individual mandate penalties without an effective replacement -- would have to be addressed very differently in a bipartisan deal. Many Republicans would have gladly supported a plan that covered as many people with insurance as the ACA, but the drafters of the repeal and replace legislation never presented such an option.
On Medicaid, both parties will need to give some ground. Democrats want to ensure that Medicaid serves as a reliable safety-net insurance program for the nation’s lowest-income households. Republicans want to reform Medicaid, by giving states more control over the program within a framework of budgetary predictability and control.
One approach would be for Republicans to accept that Medicaid should be the insurance program for all households below the federal poverty line (FPL), including in the 19 states that did not participate in the ACA’s expansion of the program. States could still provide coverage through Medicaid to households with incomes up to the ACA’s threshold of 138 percent of the FPL (with reduced federal support), but all states would be expected to provide coverage at least up to the FPL. States meeting this objective would receive bonus payments from the federal government for doing so. States that failed to comply would see their bonus payments redistributed to other states.
Establishing a minimum level of eligibility across all states could be tied to real reform of the program to attract GOP support. The current system of federal matching payments should be abandoned in favor of fixed federal payments per Medicaid enrollee (there could be different payments for the elderly, the disabled, adults, and children). States would be given substantial new authority to manage the program without needing federal approval (this flexibility would be focused on making the program more efficient, not on eligibility or covered benefits). The per-capita payments could be indexed to a level of growth that is reasonable but also below what might be expected to occur if spending were left on autopilot. Accommodations could be made to handle surges in state spending for unusual circumstances.
Finding a way to be less reliant on the individual mandate will be tricky. Republicans wanted to eliminate the tax penalties tied to the mandate immediately and replace them with insurance rules that would discourage breaks in coverage. But they never came up with an alternative that was strong enough to work. In a bipartisan deal, it will be necessary for the GOP to agree on an approach that CBO and other experts believe will serve as an adequate replacement for the mandate.
One option Republicans did not fully explore is automatic enrollment into coverage. There are many millions of people who are eligible for premium assistance under the ACA who do not use it and remain uninsured. The data that is already collected by the IRS to enforce the mandate could be repurposed to place uninsured individuals into coverage using their otherwise unclaimed premium credits to pay the premiums. The deductible for the insurance they get would be adjusted as necessary to ensure the premium for the policy exactly equaled the tax credit; thus, the enrollee would owe no additional premium. This idea should have bipartisan appeal.
In addition to automatic enrollment, insurance rules could be toughened to penalize people, especially those with adequate incomes to pay premiums, who have breaks in coverage. These penalties will need to be calibrated to increase with the length of the break to encourage the uninsured to enroll in a plan as soon as possible.
Even with these changes, it may be necessary to retain some element of direct financial penalty for going uninsured. The GOP may be able to accept an alternative to the current mandate that collected penalties through the insurance system rather than through federal taxation.
There are many other issues that the parties will need to address to find common ground on a bipartisan health care bill, including how to impose more cost discipline on the provision of medical care. But agreement on those issues should be possible if both parties come into a negotiation with the right perspective.
While in office, President Obama often remarked that the ACA relies, at least in theory and to a degree, on the Republican principles of markets and private insurance. He was right, even if he failed to note that the ACA also includes levels of governmental control and federal spending that Republicans were never going to support. If Democrats are willing to abandon dreams of single-payer and stick with a framework that features competition and consumer choice, it should be possible to find common ground with Republicans while moving even closer to the enrollment of all Americans in a health insurance plan.
The alternative for Democrats is to stand aside for the next three years and hope the GOP never gets its act together. It’s possible nothing much would happen, but it is also possible Democrats would regret not cutting a deal on health care when they had the chance.
James C. Capretta is a resident fellow and holds the Milton Friedman chair at the American Enterprise Institute.