What Would Have Happened to ObamaCare If More States Had Set Up Their Own Exchanges?

Politico‘s Kyle Cheney and Jennifer Haberkorn have made the case that Republican non-collaboration with ObamaCare has brought a completely federally controlled healthcare system closer to reality:

Right now, 36 states rely on HealthCare.gov, the federal exchange, to enroll people in health coverage. At least two more states are opting in next year, with a few others likely to follow. Only two states are trying to get out.

That’s precisely the opposite of the Affordable Care Act’s original intent: 50 exchanges run by 50 states.

The federal option was supposed to be a limited and temporary fallback. But a shift to a bigger, more permanent Washington-controlled system is instead underway — without preparation, funding or even public discussion about what a national exchange covering millions of Americans means for the future of U.S. healthcare. It’s coming about because intransigent Republicans shunned state exchanges, and ambitious Democrats bungled them.

This is a complete misreading of the implications of the unexpected fiasco of the exchange rollout. It is also similar to an argument that was respectable in limited-government circles back in 2010.

When ObamaCare was being rammed through Congress, many believed that Republican governors and legislatures should get a “seat at the table” by establishing exchanges. They could then ameliorate the worst aspects of the law.

However, others held that any collaboration with ObamaCare, beyond the strictest letter of the law (which is more than President Obama can say for his own administration’s performance), would leave the stain of ObamaCare on those who rolled with it. In October 2010, I wrote that:

States establishing ObamaCare exchanges are making a one-way, lose-lose, bet. If ObamaCare persists, exchanges will become bloated administrative nightmares. If ObamaCare is defeated, states will have wasted time and energy that should have been directed towards that effort. ObamaCare is President Obama’s problem. Don’t make it your state’s problem.

The latter argument clearly won the day; and no subsequent development shakes it. Although states retain a large amount of regulatory power over health insurers, that power is no different in a state with a federal exchange than in a state with a state exchange.

Compare ObamaCare to Medicaid. State revenues fund almost half of Medicaid, which should allow them some measure of sovereignty over that program. Nevertheless, Medicaid is micro-managed by a bloated federal bureaucracy, and states complain bitterly about the tight strings attached to federal funds. A state health-insurance exchange could hardly mitigate federal control of ObamaCare, given that all the money flowing as tax credits through exchanges is federal.

If Republican-governed states had set up ObamaCare exchanges, they would have either “succeeded” (like Connecticut’s) or failed (like Oregon’s). States where exchanges had “succeeded” would have been dug in deeper to ObamaCare, with newly empowered state bureaucrats invested in the law’s progress, undermining the state’s attempts to advance alternative, patient-centered reforms. States where exchanges had failed would simply shut them down and yield to a federal exchange: The same outcome as not having set up a state exchange at all.

States which did not set up ObamaCare exchanges should remain confident that they made the right choice.

Comments (12)

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  1. Perry says:

    What we’re saying is it’s basically a lose-lose proposition.

    • SPM says:

      Sadly, I think so Perry. There are a few people who will be helped by this law, but the vast majority will be hurt in one way or another.

      As usual, Politico gets it wrong when they say that Republican opposition has helped to consolidate power within Washington. Need I remind those authors that ZERO Republicans voted for this horrendous bill in the first place?

  2. Bill Stuart says:

    Establishing state exchanges was clearly, as John foresaw, a losing proposition. And the Medicaid analogy is accurate – having a state exchange “to reflect the uniqueness of the state market” (or some similar working that the Feds used to encourage states) was not going to allow states any control or flexibility to adapt. . . . In Massachusetts, our exchange went from No. 1 to No. 50 in the nation after we retrofitted it to comply with ACA requirements for a state exchange. It’s estimated that all health plans on the exchange spent a total of $25 million among them to interact with the reworked site. That site, which worked well for five or six years, has been scrapped. Now, the state is taking two parallel approaches – building a new state-facilitated site (long-term solution) and linking into healthcare.gov (short-term solution in case the new state site isn’t ready for 2015 open enrollment). This approach will result in even more state and federal tax dollars used to build new sites, a doubling of last year’s health plan expenditures to link to two sites (that’s about $50 million left in businesses’ and consumers’ wallets, or $50 million not spent on wellness initiatives, management of chronic diseases, etc.). If we’d just scrapped our state-facilitated exchange and told the feds to figure it out, we state taxpayers would have been much better off, we state premium payers would have paid less and – rather extraordinarily, considering how poorly the federal site performed – Massachusetts residents signing up for insurance would have their coverage confirmed much sooner than they did.

    • John R. Graham says:

      Massachusetts’ story is mind-boggling: A pre-ObamaCare exchange destroyed by ObamaCare!

      If and when ObamaCare is repealed and replaced, we may see states establishing exchanges, as Massachusetts and Utah had done before. If that comes to pass, lets discuss each case on its merits.

  3. Beth says:

    Having state exchanges that can adapt to each state’s individual needs appears to be the better option. Having an large, federally-run program, similar to Medicaid, Medicare or the VA Health System, will fall victim to corruption and inefficiency. The state system, while not necessarily ideal, will be much smaller and allow more flexibility. The smaller the program, the easier it will be to manage.

  4. Ron says:

    Government exchanges will become and extension of Medicaid with limit access to providers. Government subsidies will mean more trapped sheep will vote for more subsidies since they can not advance economically without losing the subsidy. This is the same old liberal trick to keep people down and then complain about income inequality.

    What a shame. The risk to hell is paved with good intentions but here I think the spiders web was well thought out.

  5. Roger Waters says:

    Wow, maybe this is also a case of “revisionist history” by Kyle Cheney and Jennifer Haberkorn?

    My recollection, which of course is imperfect, is that this administration rammed Obamacare through Congress and ignored the interests of Republicans – setting up a situation of opposition, because the interests of the minority in Congress were ignored.

    This was political arrogance at its finest, rather than compromise, and they are seeing the benefits of their need to have their utopian policy “way” rather than do what was practically “doable.”

    Furthermore, in the past we have seen a spirit of compromise and collaboration in the form of “technical correction” bills, which appear anathema to this administration, which would rather foment confusion by repeatedly changing the regulations because they “know best” than correcting the problems legally (through legislation) after they finally “read the bill” so they could know what is in it?

    Or, is my reading of history a misread?

  6. Devon Herrick says:

    This is an interesting argument! Republican governors and legislators campaigned on the promise they would resist ObamaCare tooth and nail. By abdicating the right to run their own exchanges, states avoided mammoth problems implementing ObamaCare Exchanges. However, had the mammoth problems of ObamaCare been magnified to 50 states rather than half that, the political will to reform the ACA might possibly be much greater.

    The question boils down to the idea: is it more obstructionist to refuse to participate; or would it have been better to participate badly? An similar example from collective bargaining would be to compare union strikes versus union work slowdowns. Walking off the job stops work, but other workers can be brought in. Staying on the job and working very slowly cripples production.

    Republican governors may have actually helped implement ObamaCare by ceding control to the federal government, which had a greater incentive to make it work.

    • Bill B. says:

      “…or would it have been better to participate badly?”

      That would have been an interesting rebuttal to ObamaCare, especially if all 50 states failed in running them. That would’ve created quite a disaster.

    • John R. Graham says:

      If the mammoth problems had been magnified to 50 states, Republicans would have been equally responsible for it, and the room to maneuver would have been dramatically smaller.

  7. Matthew says:

    Well if all the state exchanges failed, they would end up on the federal exchange anyways. By not setting it up, they forego throwing millions in a hole.

  8. wanda j. Jones says:

    Guys–This argument is a good one and I fall on the side of not setting up state exchanges. Now, what should every one do or not do? Or, where is the failure point that will take this damn tent down? There are several agents of revision: Elections that bring in new leadership that has the political backing to make large changes while the disillusionment is high; crumbling via diminished budget capacity as the economy proceeds to Greek status, or item by item correction via individual bills. I opt for that one. Let’s assume for a minute that a new Senate will emerge in the next election. Can there be a dozen bills sready that do not appear to repeal all of Obamacare, but which take much of its alarming incompetency out? I think the group involved in this on-line community can come up with that dozen.

    By the way, is anyone aware of a data bank that is tracking the cost to states of implementing Obamacare, and the costs already expended by the Feds? Voters need to know the facts, as they are still in the religious phase of believing in Obama’s promise of “Equity” in healthcare.

    Thanks John and John..

    WJJ

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