Wednesday, January 9, 2013

Politics makes strange policy bedfellows


Remember the Obama health care negotiations back in 2009? I could hear you "sigh" from the other side of the screen, but here is a quick reminder of the policy run-down. 

Democrats wanted single-payer; Republicans said no. Conservative Democrats balked at going on without their Republican colleagues, so the Democratic Leadership watered down the bill to make it more acceptable. 

Democrats wanted a federal run exchange for individuals to purchase health insurance with a public option; Republicans said no. Conservative Democrats balked at going on without their Republican colleagues, so the Democratic Leadership watered down the bill to make it more acceptable.

Democrats wanted a federally-run exchange for individuals to purchase health insurance without a public option; Republicans said no. Conservative Democrats balked at going on without their Republican colleagues, so the Democratic Leadership watered down the bill to make it more acceptable.


Democrats wanted state-run exchanges for individuals to purchase health insurance without a public option - but if states did not participate then they would default onto the federal exchange; Republicans said no. Conservative Democrats finally decided to pass the bill without their Republican colleagues.

States were given three years and almost unlimited funds (within reason) to put the exchange into place. Otherwise, they would end up on the federal exchange. The main advantage to state-run exchanges is that a state can dictate more or less benefits (usually less), as well as greater of fewer regulations (usually fewer), to health insurance companies depending on the cost-benefit package they want (less comprehensive coverage, less expensive to individuals).

If states chose not to participate, the federal government would takeover and set it up in a hurry with very limited funds. Early problems are still to be expected, but in the long-run the advantages of the federally-run exchange is the lower costs associated with standardization and economies-of-scale.

Policy-wise, the expectation was that conservative states would run their own exchanges  because of  "states-rights" - a disdain for anything that is done on the federal level. Their ideology would mandate low-cost, low-benefit coverage as compared to the federal level. Liberal states would default onto the Federal exchange.

Funny, thing happened. Participating in the program and setting up an exchange became a political, instead of a policy, issue. By setting up an exchange, it signaled support for the health care law and therefore the Obama administration. Democratic strongholds chose to set up and run exchanges, whereas more conservative ones chose not to. There are exceptions to this rule (Ohio and Mississippi, for example) but even the exceptions are not surprises - Obama states with Republican governors and Romney states with Democratic governors.

Politics makes strange policy bedfellows. Where people stood on the issues only 3 years ago now means nothing.


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