The congressional GOP should allow states to emulate Romneycare, by structuring ACA funds as block grants to reward states for increasing overall insurance coverage by targeting public funds to fill gaps in private insurance. 

Over the past year, the Republican Congress failed to enact an attractive alternative to the Affordable Care Act, with the Congressional Budget Office estimating its various proposals as leaving between 17 and 23 million more individuals uninsured. Yet, the healthcare reform signed into law by Mitt Romney as governor of Massachusetts covered more people than under the ACA, despite spending less in public funds.

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Public health-care entitlements in the U.S. have traditionally been designed to supplement rather than to supplant privately purchased health insurance. About 40% of the entitlement funds disbursed under the Affordable Care Act (ACA), however, have gone to individuals who already had private coverage. This displacement of private-sector spending by public-sector activity is called “crowd-out.” While the ACA has reduced the share of the American population without health insurance, its spending has been poorly-targeted to fill gaps in care, and 28 million remain uninsured.

This paper reviews estimates of ACA crowd-out and examines the potential for block grants to allow states to target assistance at individuals otherwise lacking coverage. Under such a reform, the same level of federal funding could do more to expand access to care and to provide protection from catastrophic medical costs for those who need help the most.

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Congress should enact waiver legislation that clarifies the availability of federal subsidies for the purposes of evaluating waivers’ deficit neutrality, including all potential federal spending that could be offset by a waiver, and evaluates its impact over a long (8-10 year) time period after an initial pilot period. Federal “guardrails” to prevent unintended consequences on patient outcomes and the deficit should focus on collecting data on costs and impact on vulnerable populations, while expanding consumer choices around affordable, high quality plan options.
Congress should also instruct HHS to create a set of standardized, expedited waivers that could be quickly approved, to enhance confidence in the process. Congress should also allow states to form multi-state compacts to share costs and develop the necessary implementation infrastructure.
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President Trump has proposed a budget that increases government spending from $4 trillion today to $5.5 trillion in 2027. Only in the alternative reality of Washington can this be described as “budget cuts.” Looking at individual programs, it is a gross mischaracterization to state that spending on Medicaid programs will be cut. The new budget proposes to increase federal Medicaid spending from $378 billion a year today to $524 billion a year in 2027. It shows how far removed Washington is from everyday Americans for this increase of $146 billion to be called a cut. The fundamental problem is that special interests are addicted to the rising path of spending. Altering this path by increasing spending at a slower rate opens change-makers to extraordinary attacks.

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President Trump, the House and the Senate have all taken the first steps toward repealing the Affordable Care Act. Yet many critics (and even supporters) of the move share a common concern: With the ACA gone, what comes next?

We hope any replacement plan engages the states as true partners and allows for greater local accountability. Fortunately, there is already a mechanism to let states take the lead — a shift that would generate bipartisan consensus the ACA never achieved.

The Department of Health and Human Services has discretion under the ACA to offer states waivers from many of the law’s most expensive and onerous regulations. The Trump administration can use the waivers to immediately signal its commitment to promoting market competition and empowering patients and consumers. Along with new reforms to promote transparency on pricing and quality, the administration and Congress can facilitate a health care revolution from the ground up.

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Obamacare has made America’s $3.2 trillion health-care system more costly and bureaucratic, while still leaving many millions of Americans uninsured. To lower costs and improve care, a healthy dose of competition and deregulation is urgently needed. Here are four steps that Congress and the new Trump administration can take:


  1. Repeal Obamacare and transition to catastrophic health-insurance plans linked to expanded Health Savings Accounts
  2. Enact per-capita Medicaid spending caps
  3. Create a new conditional-approval framework at the FDA
  4. Encourage outcomes-based payments

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Supporters of the Affordable Care Act have declared victory on health care reform: they proudly note the decline in America’s uninsured rate, as well as the sizable enrollment of lower-income adults on the new individual-insurance exchanges (“ACA exchanges”). Yet after a brief rise, the number of insured Americans is now plateauing well below the ACA’s goal of universal coverage—rather than pay the ACA exchanges’ exorbitant premiums, middle-income adults are overwhelmingly opting to forgo health insurance and pay the individual-mandate tax instead.

Key Findings of this report from the Manhattan Institute:

  • Nearly 30 million American adults remain uninsured.
  • After an initial surge, enrollment on the ACA exchanges has slowed dramatically: since March 2015, only 1 million additional individuals have signed up for coverage.
  • By February 15, 2015—the end of the ACA exchanges’ second enrollment period—fewer than half of eligible middle-income adults had signed up for coverage.