GOP healthcare bill is fair to all states

Before Obamacare, state governments were the chief regulators of health insurance. Obamacare put the federal government in that role. The latest Republican health-care bill, sponsored by Senators Lindsey Graham, Bill Cassidy and others, would partially reverse that shift in authority. It would also give states the ability to allocate a lot of federal health-care dollars as they wish.
The fact that decentralization of power is the bill’s chief feature imposes limits on our analysis of it. We can’t confidently predict how states would use their new powers, so we can’t determine how coverage rates and premiums would be affected.
Debate over the bill thus largely reflects the assumptions that people bring to it. Liberals and conservatives have different answers on three related questions: Should states be trusted more or less than the federal government to do right by the poor and sick? How well is Obamacare performing? And is it possible for states to spend money more efficiently than Obamacare is doing?
According to the Kaiser Family Foundation, the bill will have the federal government give states 8 percent less between 2020 and 2026 than Obamacare would give them. If you think that it’s unreasonable to expect states to get much more bang for the buck than the federal government does, and that states won’t tax themselves to make up shortfalls, you’ll see that as a draconian cut.
My predispositions on these questions are the typical conservative ones, so I’m inclined to favor the bill — and to regard the criticisms of it as vastly overstated. One of those criticisms concerns the bill’s treatment of people with chronic health conditions. It allows states to apply for waivers from the Obamacare regulation that requires insurers to charge the same premiums for the sick and the healthy. Before granting them, the federal government has to certify that those with chronic conditions will still find coverage affordable.
Progressives worry that states will apply for waivers without making adequate provision for the chronically ill and the federal government will rubber-stamp its approval. I assign a low probability to that scenario because political pressure will militate against it. It’s because it is highly unpopular to put those with pre-existing conditions at risk that opponents of the bill have made this possibility one of their chief attacks.
It also seems to me that progressives underestimate the potential gains from waivers. A state could ask for a waiver that let insurers charge higher premiums — say 20 percent higher — for those without insurance who become sick and then want to buy insurance. At the same time, it could use its federal block grant to fully fund a high-risk pool for those who fall through the cracks. That policy mix would enable cheaper insurance and encourage healthy people to buy it.
There are many other constructive ways states could use their new authority. Obamacare has expanded coverage both through its exchanges and through expanding Medicaid to cover able-bodied people above the poverty line. A state could combine both groups into one pool, giving everyone in it a share of the state’s block grant to buy insurance. The result could be better insurance than Medicaid.
Another complaint about the bill is that it penalizes liberal states and rewards conservative ones. That feature of the bill is better seen as a corrective to the way federal policy has favored the liberal states over the conservative ones.
— Bloomberg