Facing criticism from the nation's governors, President Obama on Monday said he's willing to give states much more leeway to opt out of key planks of last year's health care law — as long as they still meet his overall benchmarks of covering more people and controlling costs.
Speaking to a gathering of governors at the White House, Mr. Obama endorsed a bipartisan plan in Congress that would grant states "innovation waivers" to bypass parts of the law beginning in 2014 — three years earlier than the law now permits and timed to the introduction of the health care "exchanges" that are a central element of the overhaul plan.
"I think that's a reasonable proposal," Mr. Obama told members of the National Governors Association at a working lunch. "It will give you flexibility more quickly, while still guaranteeing the American people reform. If your state can create a plan that covers as many people as affordably and comprehensively as the [health care law] does — without increasing the deficit — you can implement that plan."
The waivers could apply to even the most controversial parts of the law, including the individual mandate that requires everyone to buy health insurance or pay a penalty to the government. But the administration said it's unclear at this early stage which states — if any — are likely to meet the standards on coverage and cost and thus qualify for the exemptions.
Republican lawmakers on Capitol Hill, who would have to approve the earlier 2014 time frame for waivers, said Monday they fear Mr. Obama's offer will prove hollow — that the administration will draw up restrictions so tight that no state will be able to opt out.
"Despite the administration's claims, state flexibility under Obamacare does not exist — not now, not five years from now, not 10 years from now," said Sen. Orrin G. Hatch of Utah, the senior Republican on the Senate Finance Committee. "Telling states that so long as they meet the law's budget-busting, onerous requirements, they can opt out is not flexibility. Just ask the nation's governors who are seeking real relief from the costs and mandates that are being imposed on them."
House Chief Deputy Whip Peter Roskam said the Obama administration was calling a lot of "line-of-scrimmage audibles" as it struggles to implement the law.
"It is just part of the inherent weakness in the entire health care law," the Illinois Republican told reporters Monday, "that it was put together in a way that wasn't artful and, as we have maintained, bad process makes bad results."
Under the law, states must set up insurance exchanges and implement individual and employer mandates by 2014, with the option of applying for so-called "innovation waivers" in 2017 if they can meet federal coverage guidelines through other means. A proposal co-sponsored by Sen. Ron Wyden, Oregon Democrat, and Sen. Scott Brown, Massachusetts Republican, would move up the date for state waivers to 2014.
Monday's offer marked the third time Mr. Obama has supported a change to the health care law. He has also endorsed a proposal to eliminate a tax provision that both parties have said imposes burdensome paperwork demands on small businesses, and last year he approved rewriting some provisions dealing with health subsidy overpayments.
Facing budget shortfalls and a greater demand for state services, governors across the country are challenging the health care law. Twenty-six states have joined a lawsuit challenging the constitutionality, and many governors say their states are going bankrupt over ballooning costs for Medicaid, the primary federal health care program for the poor.
Some GOP governors have asked Health and Human Services Secretary Kathleen Sebelius for permission to drop Medicaid enrollees from the program. Others have floated the idea of block grants that would give individual states the freedom to adjust their Medicaid coverage standards.
Right now, the health law eliminates federal matching funds to states that tighten their Medicaid standards prior to the launch of state exchanges in 2014.
White House aides said Mr. Obama was asked about block grants during the governors lunch and expressed concern that implementing such a mechanism could leave children, who constitute about half of all Medicaid enrollees, "vulnerable."
Instead, officials said, Mr. Obama has signaled he will work with governors to make Medicaid more affordable for their state budgets, and touted the president's endorsement of the Wyden-Brown bill as proof of his commitment.
The administration is still writing the rules for fully implementing the law, including how states will run their health care exchanges designed to make coverage affordable. But the law has already established new protections for consumers, such as lifting the lifetime cap on benefit payments, allowing young adults to stay on their parents' policies and preventing insurance companies from denying coverage based on pre-existing health problems.
Administration officials said the changes Mr. Obama is supporting are unlikely to have any effect on the lawsuits over the law's constitutionality. Two federal judges have struck down part or all of the law, while three others have upheld it, with a Supreme Court review of the law considered certain.
But pushing for changes to the law is likely to add to the fight on Capitol Hill, where the House Republican majority has passed bills to repeal the entire law and to starve it of funding.
Senate Democrats have blocked the repeal bill and have said they will reject efforts to cut off funding for implementation, too.
Still, the changes Mr. Obama endorsed Monday would require congressional approval, and that could reopen many of those debates in Congress. The House floor this week is scheduled to consider the bill to repeal the tax-reporting requirement.
• Stephen Dinan contributed to this report.
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