Health Care Reformers Turn to Laboratories of Democracy
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Justice Louis Brandeis noted that “a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” This notion of states as the laboratories of democracy finds itself at the core of two competing health care proposals in Congress.

On the Republican side of the aisle, Senators Lindsey Graham of South Carolina and Bill Cassidy of Louisiana seek to repeal and replace Obamacare with a bill that relies heavily on block-granting Medicaid money to the states to provide for flexibility and innovation. Democrat Brian Schatz of Hawaii looks to expand Medicaid by allowing states to offer it for all of their citizens.

On one level, the proposals seek very different outcomes. The Republicans look to end Medicaid expansion and Schatz attempts to make Medicaid more widely available. But in providing choices to states and consumers the proposals aim for something similar.

The Graham-Cassidy bill repeals the individual and employer mandates of Obamacare. It kills subsidies that do not, as of yet, lower premiums and the related concepts of community rating, essential benefits, and the prohibition on denial of consumers with preexisting conditions. It sensibly eliminates taxes on various medical-related expenses, which, when predictably passed on to consumers, inflates the cost of coverage. It allows larger contributions from citizens to medical savings accounts.

All of these provisions save money, and with Americans exceeding $3 trillion in medical expenses this year, that remains the primary point of serious reform if merely the stated point of the Affordable Care and Patient Protection Act. The aspect generating the most attention in Graham-Cassidy involves Medicaid, which accounts for about a tenth of federal spending.

By block-granting Medicaid money to the states, the bill eliminates the favoritism in Obamacare that perversely gives more than a third of funding to Massachusetts, Maryland, California, and New York, coincidentally four of the bluest states. More importantly, the block grants allow for experimentation and eschews the cookie-cutter ethos of Obamacare. Something will work, something will fail, and Americans will be the better for the mistakes and successes in the states.

Hawaii’s Democratic Senator Schatz pushes an idea from across the aisle but also rooted in a federalism of sorts. He proposes Medicaid for all, but with a twist. States that do not wish to participate need not do so. And within states that embrace the idea, the plan does not force anybody to enroll. If a Bernie Sanders supporter wants insurance from the government, the proposal lets him or her do so. If a Trump supporter wants insurance from a private company, the proposal lets him or her do so. People who wind up unhappy with their choice, theoretically, need only change their plan — not lobby to change the entire health-care system — to achieve satisfaction. And given the differences within the 50 states, the differences in the cost and quality of care may vary greatly and provide models that better serve public policy.

Readers may find serious flaws in either or both plans. But the genius of such legislation involves allowing states and citizens to discover flaws in them to correct. The national, one-size-fits-all Obamacare model lacks this. And so, rather than harm individuals in one state, the law’s defects hurt everyone. A laboratory for democracy cannot succeed when making guinea pigs of us all.

Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.

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