The Health Care Compact: The Best Path Forward

There is no need, at this point, to belabor the problems with the Affordable Care Act, aka Obamacare. Suffice it to say that millions of Americans have been negatively impacted by the new law, and that number will grow in the coming months and years.

The question now is what to do about it. Democrats are dividing into two camps: those who want to stand by the President’s signature achievement until the bitter end, and those who are running from Obamacare, trying to save their political careers.

At the same time, Republicans are just trying to stay out of the way. Having voted against the bill, regained control of the House in its wake, and attempted to repeal the ACA multiple times, they are enjoying their moment of vindication. They rightfully fear that any attempt to “fix” Obamacare will allow Democrats and the media to portray them as “co-owning” any problems that occur downstream. And there will be more problems.

But while the Republicans are in a much stronger position than they were at the time of the government shutdown, they are still in a strategic quandary. On the one hand, Obamacare is exacting a very real human toll in the country, and the longer they stand aside doing nothing, the more they will be painted as insensitive and unresponsive to the damage. And many voters, in the midst of a personal crisis, don’t really care who caused the problem. They just want it fixed.

On the other hand, once Republicans provide specifics on the “replace” part of their “repeal and replace” plan, Democrats will switch from defense to offense. If history serves as a guide, we can expect Republicans to propose a policy cooked up in one of the top Washington DC conservative think tanks: Cato, Heritage, AEI, Manhattan, etc. Or perhaps they will dust off Rep. Paul Ryan’s free market plan for reforming health care. But no matter its provenance, their plan will be perceived as pushing a “conservative” solution for the country, designed and implemented in Washington, DC. 

Such a move, once made, will put Democrats back on their home court, attacking Republican plans as heartless and greedy. And these attacks will continue into the 2014 election cycle.

So what can be done? Well, it might help to ask, “If you had to come up with the ideal plan going forward, what would it look like?” It might have the following elements:

• It would empower state and local governments to address the problems created by Obamacare (something they’re already doing in response to the website problems) while Washington, DC attempted to sort out the mess.

• It would not require the repeal and replacement of Obamacare all at once (something that is politically unfeasible) but would allow health care regulations to be gradually adapted and changed on a state-by-state basis to meet the particular conditions in each state.

• It would make a serious impact on the long-term federal liabilities of the health care system (liabilities that didn’t go away under ACA).

• It would support insurance markets that are overseen by knowledgeable regulators who have decades of experience and are, in many cases, directly accountable to voters.

• It would already have received strong support from elected officials of both parties.

• It would accommodate a wide variety of health care policy solutions, from single-payer to health savings accounts to accountable care organizations, and would provide the funding to support any of them.

• It would be something that can be put in place quickly to help mitigate the damage currently being done by Obamacare.

Believe it or not, such an ideal plan already exists, and its legislation has already passed in 11 state legislatures and been signed into law in eight of those states. It’s called the Health Care Compact.

There are two basic parts of the Health Care Compact. First, it provides states with a “regulatory shield” that allows them to regain control over health care regulation in their state. Second, it takes all federal health care spending in a state and turns it into an annual mandatory transfer payment to that state, indexing it for changes in inflation and population.

Unlike the 2,200+ page Affordable Care Act, the Health Care Compact is remarkably simple. Weighing in at just four pages, it can be read and understood by every member of Congress. And its purpose is straightforward: shift the responsibility and authority (both regulatory and fiscal) for health care from the federal government to compacting states. And it can happen quickly; all that is required is Congressional consent for the compact to become operative.

There are no special restrictions on the kind of health care system a state may adopt under the Health Care Compact (other than normal Constitutional constraints). Vermont has already passed legislation to create a single-payer system; Utah was well on its way to creating a private market for health insurance prior to ACA and can now restart that effort; Massachusetts has a program, popular in that state, that was passed by Democrats and signed by Republican Gov. Mitt Romney. 

These and other policy solutions would be allowed under the Health Care Compact. In fact, it is likely that we will see a different solution emerge for each state, customized for the particular demographics, policy preferences, and provider networks in that state.

Participation in the Health Care Compact is solely at the option of each state. States that wish to stay in the federal system are free to do so. And states are not required to drop federal health care programs upon joining the compact; they can stay in those programs until such time as they  are prepared to provide a workable substitute for their citizens–as long as they foot the bill. And with the transfer of federal dollars to the state, they have the resources to do so.

Now, the Health Care Compact requires Congressional consent. But the frightening situation facing both parties today makes such consent politically viable.

For Republicans, the Health Care Compact provides the optimal solution to their current challenge: how to help Americans hurt by Obamacare without pushing a conservative policy that would generate even more uncertainty, or attempting a “fix” that could leave them sharing the blame for its failure. Leave it to the states to work through, while providing those states with the funds the federal government already collects and spends in that state. And because it shaves about $3 trillion from the next ten years of federal health care commitments, it is also fiscally prudent.

For Democrats, the Health Care Compact provides a lifeline that can save them from electoral disaster. By providing an state option to take control of health care regulation, they can enable their supporters–many of whom are eager for single-payer–to pursue their goals in their state, rather than being forced to fight to the death for a system that many already feel is just a warmed-over conservative policy.

Because the Health Care Compact is voluntary for states, fiscally sound, Constitutionally licit (there are over 200 interstate compacts in operation), policy neutral (allowing blue states to pursue blue solutions and red states to pursue red solutions), and adopted by eight states thus far with more on the way, it is the only practical response to Obamacare debacle.

Rahm Emanuel famously said, “You never want a serious crisis to go to waste.” What is less famous was his next sentence: “And what I mean by that is an opportunity to do things you think you could not do before.” Three years ago, it seemed a little crazy to think that Congress might ever consent to the Health Care Compact. But with a serious crisis underway, it is not only conceivable, it is the best path forward.

So it is time for Congress to consent to the Health Care Compact, and free the states to clean up the mess they’ve created. It’s time to turn a Washington failure into an American success–one state at a time.

Leo Linbeck III is a husband, father of five, construction, real estate, and biotechnology executive, on the faculty at Stanford Graduate School of Business and Rice’s Jones Graduate School of Business, and is an education and political reformer.