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Kentucky’s new Republican governor is entrenching Obamacare while pretending to dismantle it

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Kentucky's new Republican governor, Matt Bevin, plans to dismantle his state's Obamacare marketplace, Kynect. On the surface, this looks like a Tea Party conservative governor taking a stand against the law he campaigned against in 2015.

Except Bevin's actions don't really show that at all. The best data we have suggests that the decision of whether to run an Obamacare marketplace isn't especially consequential. Bevin's move to kill off the marketplace seems to be a mixture of politics and practicality. It might not make a ton of sense for a state to run a marketplace when the federal government can do so equally well — especially when that marketplace is part of a law your party would very much like to repeal.

In any case, changes to Kentucky's Obamacare marketplace are really just a sideshow. The really big decision governors have to make about the law — the one that does have consequences — is about whether to expand Medicaid. And there, Bevin recently decided in Obamacare's favor.

Kynect doesn't matter much anymore

Kentucky's state marketplace is called Kynect, and it does seem like a great way to buy health insurance. It was an especially great way to buy health insurance back in 2013, when Healthcare.gov had a disastrous launch. Because Kentucky had built its own marketplace — one that actually worked — people in the state could actually sign up.

Kentucky got a lot of great press for how well Kynect worked during that first, tumultuous enrollment period, and rightfully so. But now things are different. Healthcare.gov works reliably well — and states that use it have done a good job signing people up for health insurance.

All three states have expanded Medicaid, but Kentucky decided to run its own marketplace, while Ohio and West Virginia decided to use Healthcare.gov. Kentucky's uninsured rate has declined 55.9 percent. In Ohio it's dropped 56 percent and in West Virginia 52.8 percent.

This suggests that the decision whether to run a marketplace does not have that big of an impact on how well Obamacare works at getting people covered. Ohio and West Virginia have done just fine using Healthcare.gov. And Kentucky probably will too.

Bevin's most important Obamacare decision: keeping the Medicaid expansion

During his campaign, Bevin promised to kill off the state's Obamacare Medicaid expansion immediately.

"Absolutely. No question about it. I would reverse that immediately," Bevin said in February.

But since getting sworn in this past December, his tune has changed — a lot.

Instead, he quietly announced (right between Christmas and New Year's) that he would look at ways to "transform the way Medicaid is delivered." Changing delivery of the program is a whole lot different from eliminating it.

The decision to expand Medicaid is hugely important. If you look at the states that have had the fastest declines in their uninsured rates — the dark purple states in the map above — you'll notice that nearly all of them are participating in the expansion of the public health insurance program.

The fact that Bevin backed off Medicaid expansion is hugely important for the half-million low-income Kentuckians who now use the program.

"It's pretty clear ... that it would be damaging to low-income adults in Kentucky to go from expansion to no expansion," says Harvard's Benjamin Sommers, who recently published a study on the effects of Medicaid expansion. "It would introduce huge affordability issues."

Politically, dismantling Kynect looks like dismantling Obamacare. But the real work of taking down the law would be in dismantling the Medicaid expansion — a step Bevin doesn't seem to want to take.

Bevin will make Obamacare look more like what liberal House Democrats wanted

There is something a tad ironic about Bevin, a Tea Party candidate, turning the keys for his exchange over to the Obama administration. He's giving the federal government more control over how Kentuckians shop for coverage.

Liberal Democrats originally envisioned a law where the federal government ran one big, national marketplace. This would give the Obama administration more control over health insurance sales, allowing them to set the rules of the game.

States balked. For centuries, they've had the authority to manage their own insurance markets. The more centrist Senate bill that ultimately passed turned control of the marketplaces over to the states.

Bevin is giving up flexibility in how the state runs the marketplace. Right now, for example, Healthcare.gov lets any insurers who meet a checklist of requirements sell coverage. But Kentucky works differently: It selects a handful of insurers that it thinks will offer the best deal to shoppers. This is meant to stimulate competition, as all the carriers in Kentucky have to try to convince Kynect officials they should get one of the coveted spots.

With the transition back to Healthcare.gov, Kentucky won't be able to do that anymore.

Bevin has said that he's eliminating Kynect to reduce "redundancy." And there is a fair amount of sense to that: If he doesn't plan to run a more active marketplace — the type that hand-picks insurers — then the Kentucky marketplace would end up looking a lot like the federal one. If that's the case, it seems completely fair to direct state resources elsewhere.

But that decision does come with trade-offs. Bevin is losing the flexibility to decide what his marketplace looks like — and deciding it is better for the federal government to make those decisions instead.