Republican-controlled states might be Trump’s best hope to reform health care

Early on in this year’s health care debate, we wrote about how the interests of Republican governors and their federal co-partisans in Congress would not necessarily line up. Indeed, as Congress deliberated options to “repeal and replace” the Affordable Care Act, several GOP governors came out against the various proposals. Nevada Governor Brian Sandoval, for example, held a late June press conference with his state’s Republican senator, Dean Heller, where he criticized the congressional Republicans’ plans to end the Medicaid expansion. On the eve of what proved to be the final vote in the Senate, five GOP governors—Sandoval, plus Larry Hogan of Maryland, Charlie Baker of Massachusetts, John Kasich of Ohio, and Phil Scott of Vermont—announced their opposition to the so-called “skinny repeal” measure ultimately defeated the next day. At the same time, some Republican governors who might have had reason to oppose congressional efforts at key junctures did not do so. Arizona’s Doug Ducey, for example, sided with nearly all Senate Republicans in supporting the “skinny repeal” proposal in order to move debate along, despite the fact that more than 418,000 people in his state benefitted from the ACA’s Medicaid expansion.

These same dynamics may also affect what’s likely to be the next front in the ongoing health care debate: waivers, which can be valuable policy tools in implementing federal health policy for governors and presidents alike. Waivers under Section 1115 of the Social Security Act have a long history of providing governors with an opportunity to experiment with different methods of Medicaid program delivery. Doing so may allow governors to pursue their own policy agendas and/or address needs specific to their state.

Presidents, meanwhile, also have something to gain by granting state waiver requests. At first blush, this may seem counterintuitive: Section 1115 waivers allow states more flexibility, while scholarship on the presidency emphasizes that, in general, presidents seek to centralize their control over federal policy. Granting waivers from federal law would appear to undermine this goal.

But this view does not account for the benefits waivers offer presidents. Faced with congressional intransigence, for example, presidents can approve waivers and claim credit for enacting policy reforms when Congress cannot – as we wrote previously, President Clinton used this approach. In addition, presidents may grant states flexibility via waivers to facilitate adoption of policies that governors may not otherwise implement. The Obama administration’s use of Section 1115 waivers to facilitate state Medicaid expansions is one example of how presidents have used the tool to incentivize behavior within the political constraints facing governors.

The potential use of waivers to induce state-level policy changes helps explain why presidents do not only grant waivers to governors from their own party. Indeed, of the 84 approved Section 1115 Medicaid waivers from 1993 through present, about 55 percent went to governors of the same party as the president – meaning, of course, that about 45 percent of approved waivers were granted by presidents for governors in the opposing party. Republican presidents in this time period (George W. Bush and Trump) are slightly more likely to approve waivers for co-partisans: about 59 percent of waivers approved by Republican presidents went to Republican governors, while 52 percent of waivers approved by Democratic presidents (Clinton and Obama) went to Democratic governors.

Given what we know about the politics of waivers, what should we expect moving forward? Recent analyses of pending 1115 Medicaid expansion waivers—including one from the Kaiser Family Foundation on various provisions and one in the New England Journal of Medicine on partial expansions specifically—suggest that the immediate focus will be shared conservative policy priorities in the face of congressional inaction rather than on inducing policy changes by Democratic governors. The Trump administration, for example, has signaled a willingness to approve work requirements via 1115 waivers. The Obama administration denied waiver proposals that would have imposed similar rules as a condition of expanding Medicaid “on the basis that such a provision would not further the program’s purposes of promoting health coverage and access.” However, in March 2017, CMS sent a letter to governors indicating it was interested in Section 1115 waiver applications that proposed work requirements, among other priorities.

As states submit waiver applications, it will also be important to remember that states’ internal political dynamics can also affect the process. The Trump administration, after all, can make clear what kind of policy changes it would like to see but cannot require states to submit waiver applications. As we wrote in June with respect to various proposals to end the Medicaid expansion, governors’ electoral timelines are different than those of members of Congress and the president, which may influence their choices; of the nation’s 34 Republican governors, for example, 14 are term-limited in either 2017 or 2018. State legislatures can and do insert themselves into the decision-making process as well. Arizona, for example, passed a law in 2015 requiring the governor to apply for an 1115 waiver implementing work requirements and a time limit for beneficiaries, but only after a similar law had been vetoed by the previous governor in 2013.

While history suggests that presidents do not always simply rubber stamp waiver applications from governors of their own party and desk reject those from their opponents, the Trump administration has signaled an interest in policy changes, like work requirements, that Democratic governors are unlikely to be enthusiastic about. Particularly given the Republican party’s recent legislative failures on healthcare, Republican politicians at the state and national level – governors and members of the Trump administration – face particularly strong incentives to deliver, at least in part, on their party’s promises to enact healthcare reforms. These conditions in turn may create fertile ground for policymaking via waivers in Republican-controlled states.