Health Care Compact Shifts Choices from D.C. to Michigan

State Rep. Tom McMillin (R-Rochester Hills) has sent a memo to House colleagues inviting them to co-sponsor a multistate Health Care Compact he plans to introduce shortly. The measure has been introduced in 14 states, adopted by legislative bodies in several, signed into law in Georgia and Oklahoma, and submitted for governors' signatures in Missouri and Montana. If approved by Congress, it would make the federal “Patient Protection and Affordable Care Act” optional in the states that join the compact — and theoretically, the president’s signature is not required on that congressional approval.

Importantly, the Health Care Compact is much more than just an “Obamacare doesn’t apply here” measure. It would profoundly shift the balance of power between states and the federal government in health care regulations and programs by turning all of a state’s federal Medicaid and Medicare spending into a no-strings-attached block grant (indexed for future inflation and population growth). Member states would have primary responsibility for regulation of all nonmilitary health care goods and services in their state, plus health-related social welfare programs.

So, for example, if Michigan so chose, it could replace Medicare’s restrictions and price controls with a means-tested voucher-like insurance subsidy similar to that proposed nationally by Republican Congressman Rep. Paul Ryan. If our Legislature wanted to fix Medicaid’s broken promises by converting it into a “cash and counseling” program for the truly indigent, it could do so.

As McMillin puts it, “Michigan leaders understand Michigan’s needs better than Washington — this is all about who decides.”

On the budget side, in most states the Medicaid health care program for the poor has been growing at unsustainable rates. Replacing its open-ended grant of ever-increasing federal matching funds with an inflation-adjusted block grant would eliminate state politicians’ incentive to constantly increase spending in pursuit of that additional federal money.

Similarly, these changed incentives might cause the Legislature to revisit a watered-down law that burdens taxpayers with the cost of providing welfare to middle-class nursing home residents — one of the biggest drivers of Medicaid cost increases. The Health Care Compact would repeal those skewed incentives, while transferring these and hundreds of other health care program decisions from distant Washington to a state government that in comparison is much closer and more accountable.

There are some interesting constitutional features to interstate compacts. If Congress approves one, it supersedes existing federal law in the member states. That would include Obamacare. Also, the Constitution says nothing about the president having to sign on. A good information resource on compacts in general is the study Shield of Federalism: Interstate Compacts in Our Constitution.

An interesting political dynamic also is created when a state adopts the Health Care Compact. Imagine a U.S. senator who voted for Obamacare, facing the decision of whether to vote against his own state government’s request to take control its own health care choices. The roll call vote results might include some surprises.

Michigan already belongs to scores of multistate compacts that have been approved by Congress. The Great Lakes Compact is probably the best known; it leaves critical decisions about the lakes in the hands of the states (and provinces) that border them. Compacts have a long history in our nation, stretching all the way back to the Mayflower Compact.

President Obama recently told a group of governors that he favors giving states "the power to determine their own health-care solutions." The bill he was endorsing actually does no such thing, but the Health Care Compact really would. The president also said, "I don't believe that any single party has a monopoly on good ideas." That is precisely the philosophy behind a compact that would devolve health care choices from Washington to 50 state laboratories of democracy.

Update: The legislation was introduced on May 26, and is House Bill 4693.