Can Republicans Govern By Learning From Obama's Mistakes & Bush's Bipartisan Success?

As mid-term elections close in, Republicans are beginning to consider an overarching agenda in the event that they take the Senate. But if Republicans overreach and force confrontation with the President and Democrats at every turn in 2015, the President will be well positioned to claim that he is protecting the electorate from Republicans driven by Tea Party “extremists.”

To govern successfully, Republicans will have to advance a conservative agenda while also appealing to moderate Democrats and independents. Ironically, this will require learning from the Obama Administration's missteps – and building on advances made during the George W. Bush administration.

Obamacare is the first major piece of social legislation passed in the U.S. without bipartisan support. After Scott Walker's victory in November 2009, the Administration could have passed a package of smaller bipartisan reforms – avoiding years of partisan acrimony and litigation. Republicans would do well to remember that passing any lasting Obamacare reforms will require broad-based support, especially from independents.

While the Obama Administration has been quick to claim responsibility for the recent slowdown in health care inflation, it's much more likely that President George W. Bush deserves greater credit. While the slow economic recovery is partly responsible for the broad recent slowdown in U.S. health care spending, Bush-era initiatives have contributed. Part D, Medicare's prescription drug benefit, took effect in 2006 and is responsible for about 70% of lower than expected spending in Medicare. In the employer-based insurance market, Harvard researchers suggest that high-deductible health plans – including Health Savings Accounts (HSAs), signed into law by President Bush in 2003 – have played the leading role in reducing spending

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Governors on both sides of the aisle complained that they were largely sidelined when Congressional Democrats crafted the Affordable Care Act, but the reality is that health care reforms will require significant state buy-in – especially for Medicaid. Drawing governors into a broad agreement on sustainable Medicaid reforms would pay long term dividends, while still allowing individual states to craft local solutions.

On Wednesday, my Manhattan Institute colleague Avik Roy released an ambitious but pragmatic health care plan that builds on Part D and HSAs, reforms Medicare, and better aligns state and federal health care responsibilities in the Medicaid program.

First, Roy would use the Obamacare exchanges as the building blocks for true market-based reforms. While “repeal and replace” is possible with Roy's reforms, the path of least political resistance is to “reform the reform.” Roy's plan would deregulate the exchanges, allowing insurers to offer more affordable plans, encourage adoption of health savings accounts, and target federal premium subsidies and HSA contributions to low-income Americans.

At the state level, Roy envisions a “swap,” with Medicaid's acute care population moving onto the exchanges, with 100% federal funding. States would become responsible for caring for their long-term care population. This swap would align funding and responsibilities, encouraging greater care coordination for the most vulnerable populations, and would give states greater flexibility in managing their long-term care populations.

At the federal level, Roy would adopt bipartisan Medicare reforms like Coburn-Lieberman, while also raising the Medicare eligibility age by four months every year. Over time, this combination of reforms would make the Medicare Trust Fund truly solvent.

Roy's plan is projected to reduce federal spending by $283 billion in its first decade, and federal revenues by $254 billion – for a net deficit reduction of $29 billion, according to a microsimulation model developed by University of Minnesota Professor Stephen Parente.

Over three decades, the plan cuts federal spending by $10.5 trillion and revenues by $2.5 trillion – for $8 trillion in net deficit reduction.

Relative to Obamacare, the plan increases coverage by 12 million in 2025, dramatically improves access to care for low-income Americans, and reduces the average cost of private insurance by 18 percent for individual policies.

American politics could use a dose of principled pragmatism. Roy's plan works within the framework of the status quo to implement real reforms that, over time, would likely pay large fiscal dividends by expanding access to affordable insurance coverage and “right sizing” America's health care entitlements.

There's nothing extreme about that – but it would be revolutionary.