Sept. 13, 2016 7:13 p.m. ET
It looks like 2017 will be ObamaCare’s worst year yet. The three major insurers, along with many smaller plans, are largely exiting the health-insurance exchanges, leaving more than half of U.S. counties with only one or two health-plan choices, according to the Kaiser Family Foundation. Nearly 36% of ObamaCare regions may have only one participating insurance carrier offering plans for 2017, according to health-care analytics firm Avalere Health. Data from analysts at Barclays and Credit Suisse project that health-insurance premiums are expected to rise at least 24% in 2017.
To rescue President Obama’s health-care law, Hillary Clinton has proposed resurrecting the “public option.” This failed idea—a government-run health-care plan to compete with private insurers—can’t save ObamaCare. But introducing it across the country would move the U.S. much closer to the single-payer system progressives have always longed for.
Mrs. Clinton positions the states as vehicles for the public option, and this isn’t because she discovered a late-in-life appreciation for federalism. Section 1332 of the Affordable Care Act, a little-known provision, allows states to renounce almost all of ObamaCare’s dictates. That includes the law’s politically sacred rules governing the medical benefits consumers are promised and the subsidy structure that helps pay for them. States only need to develop alternative schemes that can achieve the same level of similarly priced coverage that they would attain under ordinary ObamaCare.
In 2011 Vermont tried to use this waiver process to introduce a public option, only to abandon it three years later when it became clear that the scheme would yield skyrocketing taxes on small businesses. Minnesota, Maine and Rhode Island are proposing variations of this scheme for implementation after 2017. Maine’s proposed law boasts of its intent to use “federal funds to the maximum extent allowable under federal law.” Colorado is using the 1332 waiver to pursue its own single payer through an initiative on the ballot this November.
The real juice is the funding. To pay for these schemes, the 1332 waivers let states pocket the aggregate subsidies—including premium tax credits, cost-sharing subsidies, and small-business tax credits—that they would otherwise receive under ObamaCare. This federal slush fund could give states billions of dollars annually to subsidize their own publicly run health plan.
The process gives the executive branch broad authority to coax or even coerce states to pursue the creation of these public options—without congressional consent. ObamaCare requires that any new scheme be “deficit neutral” relative to the cost of the law. So long as the new public option won’t add to ObamaCare’s costs, the state can use the law’s subsidies to pay for government-run plans. The waivers give states ample ability to use savings claimed by setting price controls on medical care as a way to meet the budget goals.
Federal regulators would approve new public options based on White House budget office estimates of the program’s cost and impact on a state’s existing insurance market. The Obama administration has abused this broad discretion before: Officials manipulated “budget neutrality” by allowing states like Arkansas to expand their Medicaid programs under ObamaCare.
The U.S. Government Accountability Office in 2014 criticized the Obama administration over its “lack of transparency in the basis for approved spending limits” and “assurances that demonstrations would be budget-neutral to the federal government.” It is hard to imagine that a Clinton White House would be any more responsible.
Minnesota provides an example for how this might work. The state already pushes Medicaid enrollees into one of the state-directed Medicaid HMOs. Under one of the state’s new proposals, it could use the 1332 waiver to market similar low-cost plans on the ObamaCare exchange. The Minnesota scheme could use the state’s existing Medicaid price schedule to set provider rates under this public option.
Forcing providers to accept Medicaid-like rates could make these state-run public options an ostensibly cheaper alternative to the current ObamaCare plans. The end result? A federally subsidized, single-payer health-care system run by the states—complete with government authority to set prices. These government plans would have so many competitive advantages through federal subsidies and price setting that they would force the private plans out of the exchange market.
ObamaCare used the law’s vast authority to get control over the design and composition of health benefits. ClintonCare will try to use these same administrative riggings to get power over the pricing of these products and services. After moderate Democrats came out against the public option, it seemed like it would never be ushered into law. Yet the policy doesn’t need congressional approval. Mrs. Clinton apparently understands the law’s vices better than those who voted for it.
Dr. Gottlieb is a physician and resident fellow at the American Enterprise Institute. He consults with and invests in health-care companies.
Tags: Affordable Care Act, American Enterprise Institute, deficit neutral, GAO, government-run health-care plan, health insurance, Hillary Clinton, lack of transparency, Maine, Medicaid, medical care, Minnesota, obamacare, public option, Rhode Island, Scott Gottlieb, single-payer, three major insurers, Vermont, without congressional approval