A Grand Health Care Bargain: Let States Kill the Exchanges, But Add Public Options

After President Trump hilariously blamed the failure of Trumpcare on the Democrats, no one but his most fervent supporters took it seriously. He and Paul Ryan never even tried to garner Democratic support to repeal Obamacare; nor did they have any right to expect Democrats to help repeal the first program ever passed to provide near universal health coverage. But then Trump said this: “when they come to make a deal,” he’ll be receptive. It could be total bullshit, but if Trump is genuinely willing to embrace an approach that’s not dependent on the Freedom Caucus (his new Worst Friends Forever), a very good grand bargain actually is possible.

To see the shape of one possible deal, one must start by understanding the Democrats’ actual views about Obamacare (as opposed to the caricatures fed by conservative media and politicians for seven years).

Democrats were divided in 2009 between those who wanted a single-payer system and those willing to accept more of a market-based approach, in which most insurance would still be provided by private companies. Obama pushed for the latter, based on Mitt Romney’s system in Massachusetts.

So while Democrats like many things about Obamacare, they don’t actually have a deep allegiance to the state exchanges, which have ended up as the most problematic part of the system. Democrats have defended them because right now they’re the only solution for the individual insurance market.

But Democrats should be willing to throw the state exchanges overboard for the right deal. Here’s an idea: let states kill the exchanges, but add a robust “public option” tied to Medicaid, Medicare or the Veterans Administration health system.

The concept of the public option has evolved. During the 2009 legislative process, progressives pushed hard for a provision allowing government-run insurance plans to be offered in the state exchanges. This, they argued, would help the exchanges work better by providing a fall-back plan in counties where there were too few private insurance plans. And they viewed it as a step toward a single payer system. But conservative Democrats balked and the provision died.

In the 2016 presidential campaign, a new kind of public option was born. In response to Bernie Sanders’ advocacy of “Medicare for All”—a single-payer system run through the Medicare program—Hillary Clinton proposed a “Medicare buy in” plan.  Under her plan, people between the ages of fifty and sixty-five would be able to “buy in” to Medicare, paying discounted premiums and getting the Medicare benefit system.

In the days since Trumpcare’s failure, some Democrats have revived the idea of Medicare for All. As an opening gambit for bargaining, the idea makes some sense. But in addition to it being politically impossible right now, Medicare for All would be devilishly hard to make work and would likely spark immense political opposition not only from Republicans but from seniors jealous of sharing their “earned” benefits with others who haven’t paid into the system as they have.

A more plausible idea comes from an unlikely source: Christopher Ruddy, the publisher of the ultra-right-wing site NewsMax and a big Trump pal. Ruddy suggests that Trump give up on dealing with the conservative Republicans (since they don’t want universal coverage) and instead strike a bipartisan deal in which “an upgraded Medicaid system” would “become the country’s blanket insurer for the uninsured.” Ruddy doesn’t cast it as a buy-in, but it’s pretty close, since he wants to remove the income requirement on Medicaid, which currently is limited to the poor. He notes that Medicaid is actually better than Medicare at containing costs. Indeed, some of the most encouraging experiments—in terms of lowering costs and improving health outcomes—have come with Medicaid dollars. And because Medicaid is seen as insurance for the poor, rather than the elderly, opening a buy-in option for it is unlikely to trigger the same kind of political blowback from seniors.

A third government program that ought to be part of a deal is VA health care. As Phil Longman and others have noted in this magazine for more than a decade, the VA provides as good or better care at lower cost than virtually any other health care system in the country. That’s true today, despite all the (mostly false) horror stories we’ve been told about veterans dying as a result of long waits for doctor appointments. The VA has actually been far more successful than fee-for-service Medicare at containing costs and encouraging outcome-based medicine.

What if we combined these ideas?

First, require that states allow anyone to buy into Medicaid, with premiums tied to income.

Second, make all veterans, not just those with service-related medical conditions, eligible for VA care, and allow their spouses and children to buy into it as well. Politically, veterans’ groups would probably welcome this idea, because it would shore up demand for veterans’ facilities that is currently declining along the number of veterans.

Third, do as Clinton suggested and let Americans aged fifty and older buy into Medicare. (Over the long-term, Medicare itself needs to be reformed as a way of controlling overall medical cost inflation, but that’s for another day.)

With these options available, states could choose to shut down their state exchanges if they want. They could eliminate benefit requirements for the private insurance in the individual market. Let a wider variety of low-budget plans to proliferate as Republicans have advocated. If they’re not adequate people would have the safety net of being able to get government financed health care.

In truth, these three government programs are quite different. Over time, we’d develop a sense of which of the public models—Medicare, Medicaid or VA—works best. We would be able to compare their track records in terms of not only coverage and costs, but also health outcomes. The system could evolve in the direction of one of those approaches, or could result in a hybrid that combines private insurance with a robust public option.

But since it would be voluntary, no person would have to choose “government run health care.” Indeed, the private sector would be liberated to provide health insurance with less interference. As part of a deal, Democrats could allow for more selling of insurance across state lines (something the Obama administration was open to in some forms) and medical malpractice reform (which Obama had also expressed a willingness to negotiate on in exchange for something truly substantial).

In other words, Republicans can get a less regulated private insurance market in exchange for there being a powerful public option.

I’m obviously dramatically oversimplifying the particulars of what Trump called “the little shit,” i.e., how the systems actually work.  But the elements of a grand bargain are there.

One other possible advantage: it would drain some toxins from the health care debate. Conservative who hate government involvement in health care are free to choose private plans. Others would be free to try the government-backed approach. Yes, over time there would be debates about whether to expand one approach or the other. But the choices would be mostly made by consumers, not politicians.

Steven Waldman

Steven Waldman is founder of LifePosts.com, a platform for online memorials and life milestones. He's a Washington Monthly contributing editor, journalist and author.