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Here’s how Donald Trump could replace Obamacare without courting disaster

Donald Trump
Eric Thayer | Reuters
Donald Trump

Republicans have a problem: The promises they've made about what their Obamacare replacement plan will do are impossible to keep.

Over the weekend, Donald Trump told the Washington Post that his plan would provide "insurance for everybody" with "much lower deductibles." Oh, and don't worry about the cost. "There was a philosophy in some circles that if you can't pay for it, you don't get it," he said. "That's not going to happen with us."

There is simply no way, within the GOP paradigm of private insurance, lower taxes, and less regulation, to make that work. But perhaps he doesn't need to.

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Rep. Tom Price (R-GA) is Trump's pick to run Health and Human Services. And back in 2006, he was the co-author of a health care plan that could offer Republicans a way out. (And thanks to Brookings' Stuart Butler for reminding me of its existence!)

How Republicans can solve their health care dilemma: punt decisions to the states

In 2006, Price partnered with Tammy Baldwin, a liberal House Democrat who has since joined the Senate, to release H.R. 5864, "The Health Care Partnership Through Creative Federalism Act." The bill asked states to submit health reform proposals that would lead to "increased health coverage and access." Those proposals would be sent to a bipartisan commission for evaluation and certification. If the commission agreed that the proposal was likely to lead to better health care and more coverage, it would be sent to Congress for fast-track consideration. Funding would be provided through some combination of repurposing existing federal money and adding in new grants. The proposals would then be closely studied so other states could learn from their success or failure.

The bipartisan legislation drew bipartisan praise. "The Baldwin-Price approach recognizes that solutions to the problem of uninsurance are far more likely to be found in state capitals than in Washington," wrote the conservative Heritage Foundation.

Here, then, is what the Trump administration could do to replace Obamacare with something better without falling flat on their face: Tell the states to do it, instead.

There is even a vehicle in the health care law they could use to kick this off.

Health wonks might remember that Obamacare already has a program called Section 1332, which lets states take the law's money and build something completely different with it; Vermont, for instance, almost used it to create a single-payer system. Hawaii just started using a 1332 waiver to merge Obamacare with the state's earlier experiments in expanding coverage.

The problem, from the Republican perspective, is that Section 1332's waivers are too limited. They require that states cover at least as many people with insurance that is at least as cheap and at least as comprehensive as the Affordable Care Act. The Obama administration has also, through regulatory guidance, made Section 1332 extremely hard to use.

The Trump administration could build on the Baldwin-Price legislation and the Section 1332 to let the states replace Obamacare. They could get rid of Obamacare's essential benefits package so states had more flexibility in designing insurance, and they could lower the percentage of health costs that insurers have to cover to allow catastrophic care plans.

But they could also demand that states show they will cover more people at a lower cost than Obamacare in order to qualify under the program, and they could give grants to states to help them defray the cost of improving their health systems. (How would they pay for those grants? The same way they intend to pay for their tax cuts. Fiscal responsibility is only a constraint when Republicans want it to be.) As for the states that are happy with Obamacare, they could be left alone — if you like your health care system, you can keep it.

Turning Obamacare over to states is a win for Republicans

The upside for Republicans would be threefold. First, they could say they had replaced Obamacare without actually owning the hard — perhaps even impossible — choices necessary to replace Obamacare. Second, they could say they did it in a way that accorded with Republican principles — by handing the power over to the states rather than dictating a single solution from Washington. Third, it would be states, not the Trump administration, who were responsible for whatever went wrong, or whichever conditions went unfilled.

The upside for the country would be a blossoming of health policy experimentation. Rural states could design a health program that's a better fit for rural needs. Maryland could expand their all-payer rate setting into a model for the rest of the country. Indiana could take Mike Pence's Medicaid reforms and use them as a blueprint for a whole new system. California is more than big enough to make a single-payer system work, if it so chose. Texas is more than big enough to make a consumer-driven system work, if it so chose. Perhaps some state, somewhere, comes up with something truly fantastic, and 10 years later, half the country has adopted it.

I tried this idea out on both liberal and conservative health experts and got mostly positive reactions. Liberals liked it better than what they feared Republicans were going to do. Conservatives — who are increasingly anxious that Obamacare repeal will blow up in the GOP's face — were also open, and have in fact been discussing it among themselves.

"The state-based opt-out idea is one that is attractive to some conservatives and in fact has been pitched as an idea," says Avik Roy, head of the Foundation for Research on Equal Opportunity, who ran policy for Rick Perry's presidential campaign. "The problem is that the federal role in health care is so significant that it's not clear how you could structure something like this."

Roy is right, the details of a plan like this one will be difficult. Setting funding levels, for instance, would be critical; this would be a disaster if it was a Trojan horse for spending cuts. But that's true with any replacement plan. And for all the challenges, handing most of the work over to the states would almost certainly be easier than trying to find agreement on every single measure of a full, one-size-fits-all replacement — particularly given, as Speaker Paul Ryan admitted the other day, that a genuine replacement will need 60 votes in the Senate, and thus eight Democrats.

A state-based approach could also address one of the conceptual mistakes many right-leaning health wonks think the Obama administration made during health reform — doing too much, all at once, through the blunt tool of federal lawmaking.

"If you think of health care in the US as a separate economy, it would be the 5th largest economy in the world," says Stuart Butler, senior fellow at the Brookings Institute. "It would be larger than the French or British economy. The idea that you could redesign something the size of the French economy, in one bill, going through the American political system, is inconceivable. You need legislation that is inherently dynamic, that allows lots and lots of change to occur."

Do Republicans want a win on health care or just on taxes?

The premise of a proposal like this is that Republicans want to repeal Obamacare and replace it with a better health care system, and the main challenge is the difficulty of doing so. That's not obviously the case — it may be that Republicans just want to repeal Obamacare and replace it with lower taxes, or to repeal Obamacare and replace it with less subsidized insurance. That would be deadly for this kind of plan. There is no magic that allows states to do more with less.

"I like the plan, I am for experimentation," says Ezekiel Emanuel, who helped design Obamacare, and is now chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania. "The problem you would have with it is the main commitments Republicans have made don't get satisfied that way."

Nor will it be easy for Republicans to get Democratic support. I reached out to Senator Baldwin's office to see whether she thought Baldwin-Price could, all these years later, provide a way out of the repeal-and-replace morass.

"A lot has changed over the last decade," Baldwin replied. "At this point, the Republican agenda is clear, and they need to come to terms with the fact that repealing the Affordable Care Act and cutting Medicaid and Medicare will create chaos in the marketplace and rob people of their health care. I continue to believe the best way forward is to keep what has worked with the Affordable Care Act, and work together in a bipartisan manner to improve it and to fix what doesn't."

My guess is Democrats are not going to persuade Republicans to agree to their best way forward. But I'm also doubtful that Republicans will persuade Democrats, or even each other, on a replacement bill of their own. Perhaps handing it over to the states, with a bit of money and some reasonable conditions, could be everyone's second-best outcome.