What Would Have Happened to ObamaCare If More States Had Set Up Their Own Exchanges?

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by John Graham,

from NCPA,

Politico‘s Kyle Cheney and Jennifer Haberkorn have made the case that Republican non-collaboration with ObamaCare has brought a completely federally controlled healthcare system closer to reality.

This is a complete misreading of the implications of the unexpected fiasco of the exchange rollout. It is also similar to an argument that was respectable in limited-government circles back in 2010.

When ObamaCare was being rammed through Congress, many believed that Republican governors and legislatures should get a “seat at the table” by establishing exchanges. They could then ameliorate the worst aspects of the law.

However, others held that any collaboration with ObamaCare, beyond the strictest letter of the law (which is more than President Obama can say for his own administration’s performance), would leave the stain of ObamaCare on those who rolled with it. In October 2010, I wrote that:

States establishing ObamaCare exchanges are making a one-way, lose-lose, bet. If ObamaCare persists, exchanges will become bloated administrative nightmares. If ObamaCare is defeated, states will have wasted time and energy that should have been directed towards that effort. ObamaCare is President Obama’s problem. Don’t make it your state’s problem.

The latter argument clearly won the day; and no subsequent development shakes it. Although states retain a large amount of regulatory power over health insurers, that power is no different in a state with a federal exchange than in a state with a state exchange.

Compare ObamaCare to Medicaid. State revenues fund almost half of Medicaid, which should allow them some measure of sovereignty over that program. Nevertheless, Medicaid is micro-managed by a bloated federal bureaucracy, and states complain bitterly about the tight strings attached to federal funds. A state health-insurance exchange could hardly mitigate federal control of ObamaCare, given that all the money flowing as tax credits through exchanges is federal.

If Republican-governed states had set up ObamaCare exchanges, they would have either “succeeded” (like Connecticut’s) or failed (like Oregon’s). States where exchanges had “succeeded” would have been dug in deeper to ObamaCare, with newly empowered state bureaucrats invested in the law’s progress, undermining the state’s attempts to advance alternative, patient-centered reforms. States where exchanges had failed would simply shut them down and yield to a federal exchange: The same outcome as not having set up a state exchange at all.

States which did not set up ObamaCare exchanges should remain confident that they made the right choice.

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