Could the Republican health bill spur dramatic reforms in California?

As the conservative backlash to the Republican health bill gained momentum Tuesday, some critics began to derisively refer to the legislation as “Obamacare Lite.”

The GOP keeps many features of the Affordable Care Act intact, such as the policy on preexisting conditions and the ban on lifetime coverage limits. However, it calls for far more fundamental changes to Medicaid.

Lanhee Chen, a fellow at Stanford’s Hoover Institution and a leading conservative policy adviser, told reporters attending the 2017 USC Center for Health Journalism California Fellowship that the bill would bring about “a significant transformation of the Medicaid program — probably the most significant change since the creation of the program.”

Currently, the federal government pays a share of a state’s Medicaid costs, regardless of state spending levels. The new GOP plan would impose per capita caps. States would get a set amount of money per Medicaid enrollee every year, based on 2016 spending levels and adjusted for medical inflation. Republicans linked this massive funding shift with more flexibility in what states can cover with the far more limited budget provided under the plan.

“The idea behind the per capita allocation is to shift the onus of cost containment to states in some ways, but also to free up the states potentially to do more with their Medicaid programs than they’ve been able to do in the past,” Chen told reporters.

That increased flexibility would allow all states to make major changes to their Medicaid programs, such as imposing work requirements (Arkansas) or requiring that Medicaid enrollees pay co-payments or premiums for their coverage (Indiana), to name a few policy ideas already ascendant in conservative states.

But over time, the reduced federal spending on Medicaid could spell serious trouble in California, where a third of the state’s residents are covered by the program. “The cost implications are significant for California,” Chen acknowledged. “There’s just no way around it, given how many people we have in Medicaid, and how large the expansion was in the state. The state is going to have to do something.”

And, by structuring the bill so that the most draconian changes go into effect in 2020, Republicans would phase out Obamacare’s historic expansion of Medicaid by cutting off the funding to sustain it. “In 2020, enrollment in the Medicaid expansion will ‘freeze’ and states with no longer be able to sign new enrollees up for the program,” Vox’s Sarah Kliff explains. “Legislators expect that enrollment would slowly decline, as enrollees’ incomes change and they shift off the program.”

What the state might do in response is an open question. Will California use that newfound flexibility to rethink Medicaid and its broader health care system, or will the potential funding cuts leave a gaping hole in the state’s safety net?

Peter Long, president and CEO of Blue Shield of California Foundation, wasn’t ready to hit the panic button, in part because the GOP’s latest plan “largely maintains the broad status quo." He told Fellows that the dearth of new ideas in this week’s plan made him wonder if he’d fallen into a time machine set to the early 1990s.

“This is not the dramatic ‘the-world-is-ending-tomorrow’ fundamental change.”

Yet, he hopes that even without that kind of jolt, California’s political leadership will take this moment as a cue to embark on fundamental changes to an imperfect healthcare system, rather than to simply slip into political paralysis.

“If this were the bill, and if you’re on the left, it’s death by a thousand pinpricks,” Long said. “It’s the frog that boils in the water as you turn up the heat.

Long argues that these kind of policy rehashes are destined to fail until we’re clear as a nation on what we want from our health care. “We don’t have a vision for the health care system in the United States,” he said.

As a result, health care continues to see mostly bottom-up innovations — bundled payment programs that deliver better surgical outcomes, programs that keep elderly people out of nursing homes, pharmacists who help manage complex patients — that have yet to be adopted at scale.

“These bright spots are all over the country, but we haven’t set up a system to make them the rule,” Long said. “The ideas that we know work aren’t being supported or integrated into this broader policy framework.”

Surveying California’s health policy landscape, Long identified three broad groups: Those who want to maintain the status quo within the current system; those who want to transition to a single-payer system; and those who advocate for innovating within the framework of the current health care system.

Might a coalition of such factions spearhead a California alternative to conservative-led health reform? That will be one of countless stories to track should the GOP’s latest plan find a path forward through a deeply divided Congress.

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