Public Option Health Care Is Slipping Through the Back Door

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A doctor appraises X-Ray images of a child's spine at Children's Hospital in Boston on May 14, 2013. The authors write that the prevailing political presumption is that public option health care would need Congress’s consent. Not so, they say. Brian Snyder/reuters

This article first appeared on the American Enterprise Institute site.

The Obamacare exchanges continue to struggle. It's estimated that Obamacare insurance premiums will spike an average 25 percent next year, according to analysts. The three major insurers are largely pulling out of the exchanges, and most of the government-sponsored co-ops are already folding.

These travails have reignited efforts on the progressives left for creation of a "public option." This would be a government run health plan that would "compete" with the private options offered on the exchanges.

The prevailing political presumption is that creating a public option would require legislative changes that are unlikely to pass Congress. Not so.

Writing on the Wall Street Journal editorial page on September 14, I noted that the most expedient route to single-payer health care is through an obscure section already contained in Obamacare (section 1332). This provision can be used by the feds to give states ample latitude to stand-up their own publicly run, even single-payer health care schemes.

Hillary Clinton has largely endorsed this concept. At one point, among the Obamacare reforms that she touted on her campaign website was her commitment to "empower states to establish a public option choice" in 2017. Some states have already taken steps to advance these ideas in legislation introduced, and even passed out of their state legislatures. These schemes provide a leitmotif of what's to come.

Among these political efforts, Maine sought to leverage a 1332 Waiver in pursuing a single payer through a series of measures introduced into the state's legislature. This includes LD 815, a proposed law that was "an act to establish a unified-payer, universal health care system" known within the state as the Maine Health Care Plan.

The bill's fiscal note made explicit its reliance on a 1332 Waiver, stating, "the creation of the Maine Health Care Plan is contingent upon the receipt of a waiver, from the United States Department of Health and Human Services, under Section 1332 of the federal Affordable Care Act."

The Maine legislature proposed similar measures that also relied on 1332 to provide for a public option. For example, the Maine legislature passed LD 384, which would have permitted the study of options for introducing both a single-payer model and a public option. Ultimately, the legislature failed to override the governor's veto.

The bill's preamble betrayed its political goals and its tight reliance on section 1332. The aim, it said, was for:

a national universal system of health care [and that] until such federal legislation is enacted, it is the intent of the Legislature to study the design and implementation of a universal health care plan that complies with the requirements for innovation waivers [Namely 1332 Waivers] available to states pursuant to the federal Patient Protection and Affordable Care Act.

Colorado has taken similar steps. In November, Coloradans will be voting on Amendment 69 to add an article to their state Constitution that effectively establishes a single-payer system known as ColoradoCare.

Although ColoradoCare states that it's "not an agency of the state and is not subject to administrative direction or control by any state executive, department, commission, board, bureau, or agency," its purpose—as described by the Amendment—is "to finance health care services for all Colorado residents [and] to administer state and federal health care funds.… "

The 1332 Waivers are central for enabling ColoradoCare. In the Amendment's introduction, it states: "Section 1332 of the Affordable Care Act allows Colorado to obtain waivers from the insurance exchange program in order to create a unique Colorado health care system."

Not only is the 1332 Waiver necessary for the conceptual advent of ColoradoCare, but it's a required element for the program's function. Amendment 69 concludes with a kill switch that would "shut down operations" if ColoradoCare is denied a 1332 Waiver.

Rhode Island and Minnesota provide still more examples of states where legislators are seeking to co-opt the 1332 Waivers as a way to advance public options. Both Rhode Island and Minnesota have proposed legislation that rely on 1332 waivers and other federal legislation to develop a single-payer model.

The Minnesota bill states this point, writing in its section on funding that "[a]ll federal funding received by Minnesota including the premium subsidies under the Affordable Care Act, Public Law 111-148, as amended by Public Law 111-152, and as authorized by the Affordable Care Act section 1332 state innovation waiver, is appropriated to the Minnesota Health Plan Board to be used only to administer the Minnesota Health Plan under chapter 62W.

Federal funding that is received for implementing and administering the Minnesota Health Plan must be used only to provide comprehensive health care for all Minnesota residents."

Legislators in Rhode Island stated in their proposed bill that, in establishing the Rhode Island Comprehensive Health Insurance Program, the required funding will be obtained by "seeking the maximum amount of existing and future federal government funds available for Rhode Island residents' health care" in addition to other state revenue measures.

Scott Gottlieb, a practicing physician, has served in various capacities at the Food and Drug Administration, including senior adviser for medical technology, director of medical policy development and deputy commissioner for medical and scientific affairs. He has also served as a senior policy adviser at the Centers for Medicare & Medicaid Services.