I have been very negative about the Senate health care reform bill. Frankly, it is a bad bill that is only likely to get worse. It has many problems; I outlined only some of the problems with the Senate in an earlier post.

Still, the bill is not all bad. There are a few parts of the Senate bill that are actually better than the House bill. I will be doing a series explaining each of the Senate provisions I hope eventually make it into the final conference bill, and also offering suggestion on how they could be improved.

Part 1 – SEC. 1332. WAIVER FOR STATE INNOVATION.
(page 212)

Section 1332, allowing a waiver for state innovation, is the provision of the Senate bill likely to generate the most interest from the progressive community. Starting in 2017, states could apply for a waiver to replace the new health care system created by the bill with something else.

To qualify for a waiver, the state’s replacement plan would need to meet a variety of qualifications. In effect, the state would need to create a new health care system that would provide the same or a greater level of insurance coverage for the same or a cheaper price. It must also not increase the federal deficit.

If the state qualified for the waiver, it could take the money that would otherwise have been granted for health care reform to individuals as affordability tax credits, and use that to pay for their new state-based health care system. The waiver would be good for only five years, but the state could apply for a continuum on their wavier.

Unfortunately, the Secretary of HHS cannot waive “any Federal law or requirement that is not within the authority of the Secretary.” I believe this means the waiver could not be used to create a pure, state single-payer system due to ERISA law, but I could be wrong. What is meant by “authority of the Secretary” leaves much open to interruption.

Overall, I’m fairly happy with the design of this state innovation provision. I think it does a good job ensuring it could only be used to create a better health care alternative at the state level. Even though it might not be usable to create a single payer system, there’s plenty of room for dramatic improvement over what this current bill will do.

My biggest problem with the provision (besides the possible issue with ERISA laws) is that it does not start until 2017. This is a very foolish delay. Most of the reforms will not begin until 2014. It seems wasteful to put in place one system in 2014 only to possibly replace it in 2017. If states can come up with a better plan between now and 2014, they should be able to implement it without further delay, and thus avoid going through two different health care transitions.

Another minor change that would be good to see is if there were some short term loan or grant program, or front-loading of funding provisions. The money the state would get instead of the affordibility tax credits would be provided annually. I can easily picture a possible health care system that would require a larger upfront investment in the first year or two, but would save money in the years after that. Being able to get some extra money upfront should help.

Given how bad the Senate bill is and how much room there is for improvement, it is not surprising section 1332 would be a favorite among health care reform activists. Clearly, pushing health care reform at the national level is very difficult. On the other hand, there are some states which are ready to push for more progressive reform, but lack the funding. Getting that money from the federal government will be critical. I don’t think many states will apply for the waiver, but the few states that do successfully implement a better alternative will be good examples for later national pushes for greater reform. It is a good idea with basically no downside.