Access to health care just isn't enough.

Health Care Everyone Can Agree On

Lanhee Chen is a research fellow at the Hoover Institution who also teaches public policy at Stanford University. He was the policy director of Mitt Romney's 2012 presidential campaign.
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Republicans and Democrats have little occasion to agree on anything in these toxic times. Nowhere are their differences more acute than on health-care policy.

The two of us disagree on whether the Affordable Care Act is improving the U.S. health system, whether it is good policy, and whether it should continue to exist. It's such a lightning rod that broad consensus on alterations to the law may never be reached.

Yet it is still possible to make progress on changes that will improve the health-care system. Disagreements about the future of Obamacare need not stop us from agreement in other areas. And it starts with emphasizing the role that states can and should play in slowing the increase in health-care costs.

Conservatives and progressives agree that cost growth will continue to be a problem in the coming years. We agree that this makes it harder for American families to make ends meet. Conservatives worry that such increases worsen yearly deficits and the national debt. Progressives believe that increasing costs contribute to rising inequality by consuming larger shares of workers' incomes, while crowding out public investment in education, infrastructure and research.

We propose a model in which states could opt to be responsible for health-care costs and quality, earning financial rewards for success. They would become the driving force for action to constrain costs.

States are well-suited to take the lead here for several reasons.

First, they have already offered workable and innovative solutions.

Second, states have many levers at their disposal that the federal government doesn't have or has resisted using. For example, some states have broadened "scope of practice" laws, expanding competition between and access to medical providers. Still others have introduced payment reforms in their state employee plans, such as reference-based pricing (where the state caps reimbursements for clinical services).

Third, states are in a better position to negotiate with stakeholders. In Arkansas, for example, the Medicaid agency, private insurers and Wal-Mart Stores Inc. all agreed to payment changes that they are now carrying out. These reforms reward medical providers that meet benchmarks for cost and quality.

Fourth, states face different problems and their systems for the delivery of care vary. What works in a state with large urban areas might not work as well in a rural state. Similarly, some states have larger elderly populations, while others don't.

Under the model we propose, a state would choose a target for total health-care spending, based on long-term economic growth in the state. If it meets the target, it would be eligible to keep a greater share of savings from the federal government.

Protections are needed to ensure that states don't cut costs by reducing access to care. The federal government should base eligibility for shared savings on states meeting benchmarks for this access and for the quality of the care. States should be encouraged to reduce costs across the system, rather than merely shift them from the public sector to the private sector. And states would be prohibited from merely imposing costs on consumers to meet their targets.

In return, states would get more flexibility. For example, if Arkansas wants to extend its payment innovations to Medicare, it should be allowed to do so. The process for states to get waivers for federal programs would be streamlined and standardized, with a single point of review. And making payment policies consistent across insurers and programs would provide strong and consistent incentives to medical providers to provide better care at lower cost.

The potential savings to states, the federal government and households would be significant. For example, a proposal advanced by the Center for American Progress would save an estimated $1.7 trillion in total health-care spending over the first 10 years, with federal savings of more than $350 billion. Other proposals based on the principles we articulate could also achieve significant savings.

Why might this model work? It puts enough money at stake to combat inertia and special interests invested in driving up costs. Furthermore, it only pays for success, which both motivates states and prevents wasteful spending. Most important, it breaks the logjam blocking common-sense reforms at the federal level.

Republicans and Democrats will continue to hold strongly contrasting beliefs on the future of Obamacare. These disagreements won't go away if the changes we suggested are adapted. But for the good of the country, we should work together where we can to make health care more affordable for more Americans.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
Katy Roberts at kroberts29@bloomberg.net