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Exclusive: Sen. Schatz’s new health care idea could be the Democratic Party’s future

Hawaii Sen. Brian Schatz has a new health care idea (Bill Clark / CQ Roll Call via Getty)
(Bill Clark / CQ Roll Call via Getty)

Democrats are ready to go on the health care offensive. And Sen. Brian Schatz (D-HI) may have a new plan for them to do it.

In an interview with Vox, Schatz revealed that he’s preparing a new bill that could grant more Americans the opportunity to enroll in Medicaid by giving states the option to offer a "buy-in" to the government program on Obamacare's exchanges.

His proposal would expand the public health insurance program from one that covers only low-income Americans to one open to anyone seeking coverage, depending on what each state does. The idea is similar to the government-run “public option” that some Democrats advocated for during the battle over the Affordable Care Act’s passage.

Schatz’s proposal comes in the wake of Republicans’ failed efforts to repeal the Affordable Care Act, where Medicaid proved an especially resilient benefit. Some Republican senators who signed on to bills that would greatly slash subsidies for private insurance drew the line at Medicaid cuts, arguing they would be too harmful to low-income Americans.

“One of the unintended consequences of the Republicans trying to cut Medicaid is they made Medicaid really popular,” Sen. Schatz said in an interview. “This conversation has shifted. There was a time where Medicare was really popular and Medicaid was slightly less popular. What this ACA battle did was make both of them almost equally popular.”

The proposal also comes amid an intraparty debate among Democrats about how to build on the health care law. The party rallied around the Affordable Care Act during Republican attacks, but coming out of that intense fight, different ideas have emerged about how to continue expanding health insurance coverage. Progressives have rallied around single-payer, embracing Bernie Sanders’s plan to virtually eradicate private health insurance and replace it with a single government insurer as a means of extending coverage to the 28 million Americans who currently still don’t have it.

Schatz said he would support Medicare-for-all, even as he puts forward a different proposal. “If there’s ever a vote for single-payer, I’m a ‘yes,’” he told Vox. “But there are lots of things we can do in the meantime to make progress for tens of millions of Americans. And we should do those things.”

The Medicaid-for-all proposal, explained

Senators Return To Capitol Hill After 'Skinny Repeal' Of Obamacare Fails
Sen. Brian Schatz, center, is working on a Medicaid-for-all proposal.
Photo by Chip Somodevilla/Getty Images

For years now, Democrats have kicked around the idea of letting Americans buy into the Medicare program, which covers those older than 65.

Only more recently has the idea of allowing a similar buy-in to the Medicaid program gained traction. The Nevada legislature passed a bill this spring that would have allowed all state residents to enroll in the public program — the first such bill to move through a statehouse — but it was ultimately vetoed by Republican Gov. Brian Sandoval.

Schatz’s bill would give all states the option of opening up their Medicaid programs to uninsured Americans who wish to purchase coverage. It would be similar, functionally, to how states currently have the option under Obamacare to expand their program to all Americans making less than 133 percent of the federal poverty line (about $15,000 for an individual).

It would preserve Medicaid as is for the low-income Americans who already are enrolled on the program. But it would let those who are currently too high-income to qualify pay a premium to join the program. Those who qualify for Affordable Care Act tax credits would be able to use the subsidies to buy into the Medicaid program, just as they do right now to buy private coverage on the marketplace. That would make Medicaid into the Affordable Care Act’s public option, creating another insurance plan in markets with few or no private plans and putting private payers in competition with the much cheaper Medicaid system.

It’s possible that this could hurt the private insurance market, reducing enrollment as more choose Medicaid, an outcome that wouldn’t upset Schatz.

“I’m agnostic what that may do to the private insurance market,” he says. “I don’t have a strong ideological bent there. If the private insurance market can survive, in a context of a public option, good for them. But if they can’t, then that will tell you something about the nature of the market.”

The Schatz bill would also raise Medicaid’s payment rates to doctors and hospitals to match those of the Medicare program. Currently, the Medicaid prices are 72 percent of those that Medicare pays — which in turn pays less than private insurers. Raising Medicaid prices to be equal would likely lure more doctors to participate in the program — but also make Medicaid (and the premiums to buy into Medicaid) significantly more expensive.

Schatz says he’s aware of the trade-off — that higher prices will drive up the cost of the buy-in — but believes it’s a worthwhile one to make, to ensure buy-in enrollees have access to a wide network of doctors.

“You pay providers more; that doesn’t come from thin air,” Schatz says. “My judgment is you’re going to get better uptake if you have a broader provider network, and the more participants, the better the risk pool and the better the score.”

The Schatz bill envisions that Medicaid buy-in enrollees might have a slightly different benefit package than those who already qualify for the program. Medicaid programs often have specific benefits tailored to a low-income population, such as providing transportation to certain doctor appointments.

The buy-in population would get a plan that covers the Affordable Care Act’s 10 essential health benefits, which includes things like doctor visits, hospital visits, and prescription drugs.

The buy-in program would not be national, but rather would rely on states opting into the program. This could lead to a similar outcome as the Affordable Care Act’s Medicaid expansion — made optional by a 2011 Supreme Court decision — where some states, typically run by Democrats, have a significant expansion of coverage, and others, helmed by Republican governors, stick with the status quo.

“I have reservations about that,” Schatz says. “It’s Medicaid — that is the way it’s configured, the reason it’s got broad bipartisan support — but you’re right if a governor or legislature chooses not to provide more coverage, they would be able to do that under this scenario.”

Why shouldn’t Democrats go for broke?

The crucial context for Schatz’s bill is the ongoing debate over what kind of health care bill Democrats would want to implement if they took back congressional majorities in 2018 or 2020.

With the Republican bill dead and buried (at least for now), Democrats are entertaining health care solutions that would expand the government’s footprint well beyond Obamacare. About 60 percent of House Democrats have now co-sponsored Michigan Rep. John Conyers’s single-payer plan, which virtually overnight would cause the end of private health insurance and entail billions more in government spending and massive disruption to the insurance markets. Bernie Sanders is expected to release his single-payer proposal in early September.

Schatz’s new bill would face hurdles in achieving true universal coverage: States could decline to offer it, undocumented immigrants could still be left uninsured in many places, and some Americans might simply choose to go without insurance because the new Medicaid enrollees would likely have to pay premiums and deductibles.

Though they would entail massive tax increases, some single-payer proposals — like Conyers’s — are explicitly designed to cover every American under one program and eradicate patient cost sharing.

Similarly, the single-payer plans would outlaw the employer-sponsored plans that about 150 million Americans currently rely on for their insurance; Schatz’s plan wouldn’t directly attack private insurers, and would thus be seen as more politically feasible, even if its coverage gains are less certain. Conyers and Sanders also would likely advance multibillion-dollar tax increases on the wealthy; Schatz’s proposal wouldn’t entail a huge new tax hike on the rich to subsidize insurance for the poor.

Democrats are co-sponsoring competing health care proposals

But though Schatz and Sanders’s plans diverge sharply, they both emerge in a similar context — one in which Democrats are increasingly comfortable saying the government should guarantee insurance for everyone.

“The bigger-picture conversation is no longer about, ‘Should the federal government have a larger role in health care?’ but, ‘What is the correct configuration of statutes and taxes and subsidies that will get the most coverage at the lowest price for the most Americans?” Schatz said.

He downplays the degree of disagreement within his own caucus. Not only is he likely to support Sanders’s bill, but he says that his team is currently working with “about a dozen” different senators on co-sponsoring his Medicaid proposal, including Sanders. He added that three prominent Democratic senators — Kirsten Gillibrand (NY), Cory Booker (NJ), and Tammy Baldwin (WI) — are also working with his office on the plan, even though they haven’t agreed to co-sponsor the (still-unfinished) legislation.

Even if Democrats don’t agree on their plan just yet, they’re using their time in the minority to begin field-testing different ideas about how to improve on Obamacare should the chance arise.

“I’m glad a lot of people with competing ideas are likely to be co-sponsors of each others’ plans,” Schatz said.

He said he’s open to alternative approaches advanced by Democrats. “There was a famous boxer who said, ‘Everyone has a plan until they get punched in the mouth.’ And I think, in this instance, everyone has the best idea until they have a hearing,” he said. “Of course, I like my idea the best. But in order for the process to work, we have to subject all our ideas to the public hearing process.”

The immediate prospects for also finding consensus across the aisle are considerably grimmer, although Schatz said he did hope to talk to Sen. Lamar Alexander (R-TN), the chair of the Senate Health, Education, Labor, and Pensions Committee, about his plan. But as long as Trumpcare remains dead, Democrats are eager to begin putting their own ideas forward.

“As important as the ACA fight was, we weren’t making progress. We were protecting progress,” Schatz said. “Now it’s time to talk about how to make the system better for everybody.”

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