Ethics & Public Policy Center

A State-Based Initiative

Published in National Review Online on December 9, 2008


The federal government is a very powerful force in the health sector, but it’s not all-powerful. Large employers and the states still have a voice: They provide insurance to tens of millions of Americans, giving them some influence over the way doctors and hospitals are organized to deliver care.

That influence will recede if the Obama team gets its way. The president-elect, along with Tom Daschle (nominee-in-waiting for secretary of Health and Human Services) and many powerful Democrats in Congress, have their sights set on a massive federalization of American health care.

The Democratic vision for reform would effectively put the federal government in charge of all important health-care policymaking. We would see the establishment of a one-size-fits-all benefit plan, regulation of premium-setting, development of fee schedules for paying doctors and hospitals under a public-insurance option, creation of a new “facilitator” agency through which citizens would get coverage outside of employment, and jump-starting of a massive new initiative to pass judgment on what is and is not “effective” medical care. Indeed, if Obamacare is passed as currently conceived, there should be no doubt that essentially all power and control over the financing and delivery of health care in the United States would shift inexorably and perhaps irrevocably to Washington, D.C.

The most effective way to convince the public of the dangers here is to show them a viable alternative. The logical arena for such a demonstration would be a state or, even better, a number of states. Current federal law provides significant flexibility for the “laboratories of democracy” to experiment with innovative approaches in health care through Medicaid. All that’s needed is an entrepreneurial governor who is committed to markets and consumer choice, understands the complex details of health-care policy, and is gutsy enough to risk alienating established and powerful vested interests.

Does anyone fit the bill? The answer is yes, and not just Bobby Jindal, the second-year chief executive from Louisiana. Indiana’s Mitch Daniels is implementing an innovative plan to expand coverage to low-wage households in Indiana; the plan uses public funds to finance Health Savings Accounts and high-deductible insurance options. (Full disclosure: Governor Daniels was my boss at the Office of Management and Budget from 2001 to 2003.) Mark Sanford of South Carolina and former governor Jeb Bush of Florida also spearheaded aggressive Medicaid-reform programs that emphasize personal responsibility and choice instead of overbearing governmental regulation.

Still, on health care, it is only natural for conservatives to look to Jindal for leadership because of his unusual professional background. He started his career as secretary of Louisiana’s health department at the age of 26. From there, he moved to Washington to become the top staff person on a commission dedicated to reforming and improving the long-term solvency of Medicare. During the first two years of the Bush administration, Jindal was the assistant secretary for planning and evaluation at HHS — the top policy and research job in the department. Very few politicians have spent as much time studying why health care in America is under-performing.

What’s more, Jindal seems to have the necessary fire in the belly to take on the health-care challenge. He recently released an ambitious plan to reshape his state’s Medicaid program and expand coverage to a large segment of the state’s uninsured. The details of Jindal’s plan reveal a rare understanding of a central failing of today’s arrangements: Government-run fee-for-service-style insurance, as practiced in current Medicare and Medicaid, is the primary cause of low quality, fragmented, and inefficient care — in Louisiana and everywhere else.

Jindal wants to tackle this problem head-on. He would restructure Medicaid by moving toward fixed-dollar entitlement and consumer choice. Medicaid recipients in Louisiana would be given the power to select from among a number of competing networks of doctors and hospitals. The state would pay these networks a monthly fee intended to cover the costs of all necessary care, instead of a fee every time a beneficiary used a service. The expectation is that health-care practitioners would be forced to rethink how they do business to find innovative ways to keep people healthy and well — and out of the hospital. Physicians and hospital administrators who believe they can provide better care at less cost would have a strong financial incentive to jump into the reformed Medicaid program, because they would share in the savings from improved productivity.

There are other interesting elements in Jindal’s initiative. He wants to build a state-of-the-art teaching facility to bring more medical talent into the state. And he plans to invest heavily in electronic patient records

It’s worth noting that the Louisiana reform effort is not a done deal. The state must get the green light from the federal government, because the plan would work around some of Medicaid’s normal rules. (This is not at all unusual. Indeed, the Bush administration has issued scores of “waivers” over the past eight years, including for large state reform efforts in Massachusetts, Florida, and Indiana.)

Indeed, if Republicans are to survive the Obama years and find their voice on health care, it will almost certainly be because Jindal, Daniels, Sanford, Bush, and like-minded reformers in the states were able to demonstrate to the voting public that there are better and more practical ways to fixing health care than a full-blown and irreversible federal takeover.

If nothing else, that should be reason enough for the Bush administration to move with haste and let Jindal get to work.

— James C. Capretta is a Fellow at the Ethics and Public Policy Center and a health-policy and research consultant.

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