Rather than work to undo the exchanges, some conservative policy analysts, such as Chris Pope of the Manhattan Institute, suggest embracing them as a safety net for “low-income individuals and those with major pre-existing conditions.” This is, of course, a far more modest role for the exchanges than what President Barack Obama and his allies had in mind. But that is fitting: If conservative health reform is to gain ground, it will do so by being less hubristic than the left’s version, not equally so. In a similar vein, Pope has suggested that states be allowed to “semi-expand” Medicaid. That is, in deference to states that have been reluctant to accept the Medicaid expansion out of concerns over “crowd-out,” work disincentives, and the potential fiscal burden, semi-expansion would allow them to impose regulations designed to ensure that working-age, able-bodied Medicaid beneficiaries eventually transition to other coverage, whether employer sponsored or subsidized via the exchanges. Such an approach would surely cost the federal government a good deal of money, but it would also expand coverage in some of the country’s poorest states.
One could go further in this direction. The Graham-Cassidy bill went down to defeat in part because numerous Republicans feared, not unreasonably, that by curbing future federal Medicaid spending, it would impose a ruinous burden on state governments going forward. One way to allay these fears would be to ease this burden by, for example, entirely federalizing the cost of caring for the older Americans who are eligible for both Medicare and Medicaid. Though this population represents only 15 percent of Medicaid enrollees, it represents one-third of all Medicaid expenditures and, more to the point, a rapidly rising share of state budgets. Federalizing the dual eligibles would, again, be quite expensive. Yet, as the health-policy scholar Donald Taylor Jr. argues in Balancing the Budget Is a Progressive Priority, it could also yield significant fiscal benefits by improving the coordination of care. And it would make imposing spending discipline on the rest of the Medicaid program an easier sell.
So much for the carrots. What about the sticks? Regardless of ideological proclivities, all health reformers in America must confront the hospital sector. The United States has a vastly larger number of fully kitted-out community general hospitals relative to its population than Europe’s market democracies, and hospital-bed occupancy is far lower. Many of our expensively equipped hospitals are tiny rural outfits, where most beds lie idle. In theory, the reason to maintain these underutilized hospitals is to ensure that decent medical care is within reach of all Americans, including those residing in small rural communities. This is a noble aspiration. Yet it neglects the all-important distinction between emergency care, where having decent facilities within easy reach really is essential, and elective care, when you might prefer better, cheaper medical providers, which means medical providers that have high patient volumes and thus the requisite experience to do their jobs well. Emergency departments really do need to be liberally sprinkled in every corner of the country, and they really do need tighter government oversight to ensure that money isn’t wasted. Elective care is a different matter—it’s the kind of care where the emergence of specialized providers would be a boon, and where getting people to travel to the best, most cost-effective facilities would go a long way toward curbing the monopoly power of locally dominant hospitals.