The GOP’s first attempt to replace the Affordable Care Act may have faltered, but they should not let the opportunity for healthcare reform go to waste. Instead of trying to construct a comprehensive agreement, they should instead handle it like the task of shifting a bulky piece of IKEA furniture through a narrow doorway – disassembling it into manageable pieces, and carrying each section through with the approach that suits it best. Although the budget reconciliation process is ill-suited to the task of fixing insurance regulations, it was specifically designed for entitlement reform, and offers Congress a chance to reform the Medicaid program. By doing so, the GOP could facilitate the cost-effective delivery of care to the neediest Americans, while improving the risk pool for those purchasing coverage on the exchange.
Medicaid is managed by states, with the federal government providing around $2 for every $1 that states spend on healthcare services to eligible adults. In theory this arrangement facilitates innovative service provision. In practice, as covered benefits, payment systems, and access to care vary widely between states, federal policymakers have only the vaguest idea of what services are being purchased. This makes it difficult to assess the appropriateness of resource allocations and to ensure that federal funds are spent where they are most needed.
By subsidizing states according to their ability to put in their own money....
Christopher Pope is a senior fellow at the Manhattan Institute.