Obama's Mandate Waiver Trick

Obama's new proposal would grant waivers to states to create their own health plans. But the economics of healthcare may set the states up for failure.

On Monday, President Obama announced to the National Governors Association that he would endorse a waiver for states to create their own health plans.  States would be eligible for the waiver to cover their residents as long as they can create “the quality healthcare their citizens deserve.” But the waiver plan won’t make things easier for the states.  In fact, Obama’s move is a political masterstroke and once again he’s shown his ability to outmaneuver his critics.

Obamacare is an insurance coverage plan, not a reform of American healthcare. As Paul Starr, the Stuart Professor of Communications and Public Affairs at Princeton and winner of the Pulitzer Prize for his classic work, The Social Transformation of American Medicine, states:  “Ultimately, the expansion of coverage will not survive unless the growth in costs is reduced.” The failure to have a plan that controls costs dooms any insurance plan to fail and the waiver the president offered to the states cannot succeed unless the ability to control costs and limit the rich benefits and open enrollment requirements is also granted.

President Obama’s offer to allow states to craft their own insurance plan will lead nowhere if the waivers require the states to maintain all of the benefits Obamacare currently requires. The reason for requiring an individual mandate is that Obamacare entails a very expensive form of insurance and requires insurers to accept patients whenever they apply for healthcare insurance even if the patients wait until they first need the coverage to make their applications.  The economics of Obamacare cannot possibly work without a mandate that includes virtually every American. But this mandate is abhorrent to many voters. States cannot possibly implement their own versions of Obamacare unless the waivers relieve them not only of the individual mandate but also of many of the required care provisions of the plan.

If the states accept Obama’s proposal to grant waivers of the individual mandate while maintaining the onerous requirements of Obamacare, the president will have outmaneuvered his opponents. He can then watch their efforts at implementing insurance reform crash and burn.  Obama will have forced the states into a Hobson’s choice: accept Obamacare and fail to control costs or go on your own and fail even sooner without federal support. Either way, the burden of healthcare costs will continue to overwhelm state and federal budgets.

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