STERGIOS and ARCHAMBAULT: The way forward post-Obamacare

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The U.S. Supreme Court is hearing  oral arguments on the constitutionality of the federal health care law President  Obama pushed through Congress two years ago, the  Patient Protection and Affordable Care  Act. The court is expected to issue an  opinion by the end of June.

Not since the New Deal legislation of the 1930s has an issue of this  magnitude regarding the size and reach of the federal government arrived before the court.  If the act is struck down in its entirety or even in part, the next president  will need to articulate a new health care vision for the country.

The way forward should include the following four steps:

First, the president would do well to learn from the  last major federal entitlement reform: the Welfare Reform Act of 1996. Built on  a foundation of dozens of state policy experiments, led by Gov.  John Engler of Michigan and Gov. Tommy  Thompson of Wisconsin, among others, welfare reform was catalyzed by federal  waivers that promoted state innovation.

By 1996, the public was comfortable with key elements of the reform plan  because they had seen the ideas at work in their states. The next president  should similarly encourage states to experiment and innovate, taking into  account their unique market structures, populations and health care and  insurance challenges.

Such a process stands in stark contrast to the Obama  administration’s myopic focus on Massachusetts’ health care reform law,  which was based on the unique needs of a small, high-income state constituting  just 2 percent of the U.S. population.

But the federal government must do more  than seed and harvest innovation. As a second step, our federal leaders also  must offer solutions to key issues, like how to cover the 2 million to 4 million  Americans with pre-existing conditions who may be denied affordable coverage  when between jobs. By funding state high-risk pools for individuals with  pre-existing conditions who are seeking work, the federal government could cover those between jobs  at a cost of roughly $150 billion over 10 years. That’s a far cry from the  Affordable Care Act’s estimated price tag of $1.75 trillion to $2.5  trillion.

Key to successful implementation of this initiative would be giving states  the power to  administer the high-risk pools, determining eligibility and penalties for  insurers who try to push ineligible individuals, such as smokers and others with  unhealthy lifestyles who do not have diagnosed diseases, into the publicly  subsidized pools.

Third, a new vision for health care must reject the use of a central  bureaucracy to control costs, a strategy that can work only if innovation and  the quality of care are diminished. Instead, federal and state policies must  encourage individuals to be active health care consumers through incentives to  seek high-value plans. That would require insurance that is less tied to  employer and government decisions.

Only Congress can make this happen because  federal tax  law has created  the problem by penalizing those who buy insurance individually. But removing the  prejudicial tax advantage enjoyed by those with company and government insurance  can be accomplished only gradually.

The new president and Congress could move us  in this direction by converting the current tax preference for employer-paid  premiums into a refundable tax  credit that would  be available to small-business employees and individuals who are not in stable  employer-based insurance plans.

Again, states should administer the refundable tax credits and determine or  establish what health benefits, if any, to require in the insurance plans  offered to tax-credit-eligible customers.

Finally, Medicaid should be converted into a per-capita block grant. Giving  states broader authority over Medicaid would enable them to align regulations on  benefits, premium assistance and other features with their refundable tax-credit  policies, placing many who are currently eligible for Medicaid into the  mainstream market.

Instead of passively receiving Medicaid services, non-elderly and  non-disabled enrollees could choose among competing plans and pay extra for  additional benefits.

Under this scenario, Medicaid would provide better coverage for the poor and  rein in costs.

These four policies – replicating the experimentation that led to welfare  reform, creating a right-sized plan to deal with pre-existing conditions, doing  away with prejudicial tax treatment for employer health insurance and setting up  a thoughtful Medicaid block grant – are practical alternatives to a health care  policy doomed to fail either in the courts or in the court of public opinion.

Also seen in The Washington Times.