Why Section 1332 Could Solve the Obamacare Impasse

By Stuart Butler, PhD
The JAMA Forum, April 28, 2015

Section 1332 of the ACA, known as “State Innovation Waivers,” allows states, starting in 2017, to apply to the federal government for 5-year renewable waivers from key provisions of the legislation. For instance, states could request changes to or exemptions from the individual and employers mandate, the market exchanges, the exchange subsidies, the Essential Health Benefits requirements, and other provisions. Moreover, states can combine waivers from ACA provisions with waivers from Medicaid provisions (so-called 1115 waivers), Medicare, the state Children’s Health Insurance Program, and waivers available through “any other Federal law relating to the provision of health care items or services.”

Section 1332, however, is not a blank check for states to ignore the whole intent of the ACA, even assuming the White House or the next administration were open to that. It has important fine print. To obtain a waiver, a state’s proposal must retain important protections, such as guaranteeing that health plans accept an applicant regardless of their health status or other factor. The proposal’s coverage must be “at least as comprehensive” and cover “at least a comparable number of its residents” as the ACA, and insurance must be as affordable. Any state plan must also be budget neutral for the federal government.

Even with these limitations on state plans, section 1332 could lead to state health plans in the future that change the ACA beyond recognition. A Republican state like Arkansas, Utah, or Texas, for instance, could use the section to take the federal money for Medicaid expansion as a block grant and turn it into subsidies for families to buy private coverage. These or other states could also end the mandates on individuals and employers, perhaps using government-encouraged auto-enrollment for insurance to meet the ACA’s coverage projections. Meanwhile, states like Vermont, Oregon, and Hawaii could design waivers to create a form of single-payer health system.

The political ramifications of this wide flexibility under section 1332 are immense. For instance, Republican opponents of the ACA, recognizing that the foreseeable congressional makeup means outright repeal of the ACA is not feasible even if Republicans win the White House in 2016, would have a strategy for states to exit much of the ACA. Meanwhile liberals in other states would have a tool to move closer to their dream of a single-payer system. And the White House could claim that even in the Republican states with sweeping waivers, the ACA had been fully implemented. Moreover, the 1332 waivers would allow many of the technical problems of the ACA to be fixed at the state level without going to Congress.

http://newsatjama.jama.com/2015/04/28/jama-forum-why-section-1332-could-…

Stuart Butler’s name may be familiar to you as he was the policy expert that described the Heritage Foundation’s model of health care reform that was a counter proposal to the Clinton effort, and later became the model that formed the basis of the Affordable Care Act. We should take heed of his words on the potential of the state innovation waivers authorized by Section 1332 of the Affordable Care Act.

After ultraconservative Sen. Jim DeMint became president of the Heritage Foundation, Stuart Butler moved to the Brookings Institution and was thus less handicapped than he had been with the extreme right-wing political polarization at Heritage. His recent messages have been directed toward solutions that supposedly defuse the politics so that we can move forward on policy.

Without repeating any of his points made above, obviously he believes that the states should move forward with their own concepts of reform that would comply with their respective political climates. However, most of the flexibility he suggests would appeal to conservatives, though he mentions single payer to appease those in liberal states.

The problem is that Section 1332 is quite amenable to piecemeal measures that would gradually move health care further in the direction of a system that places more of the responsibility on the individual, making health care less affordable and less accessible (as if it were not bad enough already). Yet Section 1332 waivers cannot lead to single payer without enabling comprehensive federal legislation. Section 1332 is a setup for conservative policies, yet hardly opens the door for single payer. Acting on a state level alone, liberals cannot expect much more than tweaks to the Affordable Care Act.

Stuart Butler is now even better positioned to drive the dialogue on reform. If the politicians continue to listen to him, forget the dream of a more egalitarian system.