Health policy on November 6, and on November 7, too: Part II

This is a continuation of a previous post.

For the next four days, Americans will finish the dogfight of the 2012 election. But what about November 7? What shall we do then? However the election is decided, I hope that policy experts and advocates on both sides find a way to more constructively cooperate when the campaign is done.

In at least a few areas, I see some real possibilities for bipartisan progress.

Getting the fine print right on premium support. Republicans’ Medicare policy vision places great weight on premium support. Many Democrats find this broad model appealing, within Medicare Advantage and maybe more broadly, too. As Austin has covered very well, the policy fine print and the political economy of premium support are incredibly complicated. Adverse selection is a particularly important concern. Firms have many tools to attract and retain healthier patients. More broadly, Republicans propose to convert Medicare into a premium support system with private plans aggressively competing with traditional Medicare. If risk- selection issues are handled badly, traditional Medicare could fall prey to an adverse selection spiral. Both parties have a strong stake in designing more effective mechanisms to guard against such a disaster.

The commonsense dichotomy between defined-contribution and defined benefit plans doesn’t capture the range of issues in-play. Governor Romney’s (incompletely-specified) plan was in some ways a hybrid between the two types of plan. Much work needs to be done in developing a feasible and safe model.

Health care for unauthorized residents of the United States. ACA will leave millions of undocumented immigrants uninsured. This is an incredibly hard political and administrative challenge. At various moments, George W Bush, John McCain, and other Republicans have worked with Democrats on immigration reform. These efforts have stalled. Lack of credible immigration enforcement and deep resistance within the Republican party base undermined possibilities for progress.

Immigration politics have proved especially poisonous in health reform. During the 2008 campaign and the legislative fight over ACA, Dick Morris wrote notorious op-eds falsely claiming that the Obama health plan would cover undocumented immigrants. President Obama’s restatement that ACA would not provide such coverage prompted Joe Wilson’s famous “You lie!” outburst at the 2010 state of the Union address.

I am nonetheless optimistic that some progress might be made, and for two reasons. The first is simple politics. If President Obama wins reelection, many Republican political professionals will rightly blame their loss on the antipathy their party attracts from huge and growing Latino constituencies across the country. If Governor Romney wins, he will read the same demographic trends, and see the huge strategic opportunity in reaching out to Latino voters.

The second reason is more structural. Health reform will create a complicated mix of winners and losers, as tens of millions of people become insured. In Chicago, where I live, providers on the far south side may be huge financial winners because their low-income African-American patients will become insured. County hospital, and safety-net providers serving our huge immigrant communities, will face a more mixed picture because they provide more care to the undocumented. States and localities across the country will face some significant and complicated burdens dealing with this population. Red state governors in places such as Arizona, Florida, and Texas, have strong reasons to request additional resources from Washington.

Lightening Medicaid’s burden on state and local government without compromising the integrity of the Medicaid program. Opponents worry that ACA imposes new burdens on the states, and that ACA fails to address heavy Medicaid burdens states now face independent of the new law. On the immediate merits, this is a weak argument. Over the next decade, ACA will provide roughly a 19:1 federal match on newly-eligible Medicaid recipients. States such as Florida and Texas–whose governors fiercely oppose the new law—ironically stand to gain tens of billions of dollars annually in subsidies from ACA. Hospitals, city and county governments, and many other local stakeholders are clamoring for their states to take these funds. As occurred with Medicaid in the late 1960s, these states eventually will sign on.

If much of the current political posturing is disingenuous, governors have more of a point that Medicaid causes real fiscal damage in their states. Medicaid policies would be more effective and secure if the federal government permanently assumed a larger fraction of the costs. Moreover, governors have new bargaining power as a result of the Supreme Court’s ACA decision, which removed one pillar of post-New Deal federal-state relations. If the federal government cannot force states to expand Medicaid, Washington may be more willing to grant waivers to accommodate state concerns and to expand implicit federal subsidies for state efforts. Hopefully, this can be done without further compromising the quality of Medicaid services.

Improving services for dual-eligible Medicare-Medicaid recipients. Care is inherently challenging for this costly, complex, and vulnerable population. The Affordable Care Act included some provisions to improve coordination. More can quietly be done in partnership between HHS and state governments.

Curbing tax expenditures for high-income families. The Romney tax plan, as I understand it, contains one valuable idea that I would embrace: capping deductions and income-exclusions to high-income households. The Romney team would use the resulting revenue to lower top rates. I disagree with this approach, whose mathematics doesn’t work anyway. Yet the idea of a dollar-cap on deductions and exclusions deserves further discussion. This is especially pertinent to the health insurance issue. Many of us with decent incomes and generous insurance policies receive large hidden subsidies, and are induced to over-consume medical services. A dollar cap on deductions and exclusions may be a smart approach to such distortionary policies. The Romney team has also suggested charging affluent people more for Medicare services. This, also, deserves careful consideration.

I’m not sure if the circumstances are right to proceed on any of these ideas. It’s time to start thinking, though. The two parties need to work together. The problems are too big for either to tackle alone.

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