| April 8, 2011

Accepting Federal Exchange Funding for Obamacare: A Dangerous Proposition for the States

Right now, states across the country are trying to figure out what to do in response to Obamacare and its health insurance exchange architecture. In Oklahoma, the question has gone even further as the state government debates whether or not to accept federal funding, appropriated in the Obamacare statute, to create a state information technology system for a health care exchange.

In Ed Haislmaier’s recent paper, he describes this dilemma: “Trying to shoehorn patient-centered, market-based reforms into the bureaucratic architecture of Obamacare’s health insurance exchanges is not a viable strategy, either practically or politically. But refusing to create an Obamacare state exchange, while politically appealing, would leave state health insurance markets vulnerable to even more federal interference and disruption over the next two years.”

In addition, and at issue in Oklahoma, is whether states should accept federal funding to pursue state-based reforms. It would be prudent for states to think twice before accepting any federal funding from Obamacare. As history documents, once states accept funding from the federal government, they are forever at the mercy of the federal bureaucracy. States need to look no further than Medicaid to understand the dangers of this proposition. Moreover, at the federal level, conservatives in Congress are actively trying to repeal and defund Obamacare.

State officials must take a leadership role in fighting back against Obamacare and must advance conservative, patient-centered, market-based health care reforms. As Ed Haislmaier said, “The best strategy for the state lawmakers is to adopt their own reforms—separate from, and independent of, Obamacare’s exchange design.” Acceptance by states of federal funds appropriated by Obamacare, to be used by the state for the purpose of implementing Obamacare, would be inconsistent with current congressional efforts to repeal and defund Obamacare.

Nina Owcharenko is a health-care policy analyst at The Heritage Foundation. Robert Moffit is The Heritage Foundation’s senior fellow in domestic and economic policy studies.

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