February 28, 2011 — President Barack Obama announced today that he supports Congressional legislation that speeds up the timetable for states to opt out of healthcare reform requirements such as the controversial individual mandate if they can find equally effective ways to extend insurance coverage to their citizens.

The mandate for individuals to obtain coverage or else pay a penalty has come under fierce attack not only in Congress but also in federal courts, where officials from more than half the states contend that it is an unconstitutional infringement on personal liberty. The legal battle appears destined to go to the Supreme Court.

President Barack Obama speaks during a meeting of US governors at the White House. Charles Dharapak/AP Photo

The individual mandate works in tandem with other provisions of the Affordable Care Act (ACA) that require states to set up exchanges for individuals to purchase health insurance and large employers to offer their workers coverage or pay a penalty. These provisions are scheduled to take effect in 2014. Under the ACA, states can obtain a waiver from having to comply with them in 2017 if they enact reform measures that extend comprehensive and affordable health coverage to just as many people as the ACA would without increasing the federal deficit in the process. In addition, states would receive all the federal funds they would have been otherwise entitled to under the ACA to finance their individual programs.

This morning, Obama told a meeting of governors that he backs a bill sponsored by Sen. Ron Wyden (D-OR), Sen. Scott Brown (R-MA), and Sen. Mary Landrieu (D-LA) that would move the opt-out year up to 2014.

"I think that's a reasonable proposal," said Obama. "It will give you flexibility more quickly, while still guaranteeing the American people reform.

"I will go to bat for whatever works, no matter who or where it comes from," he said.

According to the White House, state solutions to healthcare reform might include:

linking tax credits for small businesses with tax credits for low-income families,

automatically enrolling people in health plans,

alternative health plan options to increase competition and provide consumers with more choices,

a broader array of benefit packages for individuals and small businesses to choose from, and

allowing large businesses to buy coverage through exchanges.

Reaction: Backpedalling to Smart Move

Obama's support of allowing states to opt out of core ACA requirements as soon as they take effect drew praise from the American College of Physicians (ACP).

"It could provide a basis for much-needed bipartisanship by giving states more options, sooner, as advocated by many governors, Republicans and Democrats alike, while preserving the ACA's promise of providing coverage to all Americans," said ACP President J. Fred Ralston Jr, MD, in a press release.

In the blogosphere, some observers characterized Obama's stance as backpedalling or flip-flopping on the ACA. In contrast, Jamie Court, president of a group called Consumer Watchdog, wrote that the president's "smart" move will let progressive states proceed with plans for a public insurance option or a single-payer system that "would never get the time of day in Washington."

In a press briefing today, senior administrative officials stressed that the opt-out provision has existed in the ACA all along, and that moving it from 2017 to 2014 merely spares states the expense and hassle of immediately complying with federal requirements only to build their own systems 3 years later. They also said that moving up the waiver date does not have any legal effect on the constitutional challenges to the individual mandate in federal courts across the country.

More Medicaid Flexibility Promised

In today's speech at the National Governors Association meeting in Washington, DC, Obama also held out an olive leaf regarding healthcare reform and Medicaid, which is jointly funded by the federal government and states. In an era of bleeding budgets, states have sought more flexibility in designing their individual Medicaid programs to reduce spending. State governors have complained about the increased costs that the ACA will impose on them, and its requirement that they refrain from lowering their current Medicaid eligibility standards until 2014, when expanded federal standards take effect.

Akin to what he said about the ACA opt-out, Obama told the governors that he will support any proposal of theirs that reduces Medicaid costs while providing quality care to beneficiaries. He asked the state executives to appoint a bipartisan group that would work with US Department of Health and Human Services Secretary Kathleen Sebelius to brainstorm about state Medicaid reforms.

The Department of Health and Human Services has a process for states to apply for waivers from federal Medicaid rules. The ACA allows states to combine these applications with those seeking exemption from coverage provisions such as the individual and employer mandates. On its Web site, the White House said that states could use this unified waiver process, for example, to "seek to give people eligible for Medicaid the choice of enrolling in [state] Exchange plans."

However, administration officials at the press briefing today noted that Obama opposes a proposal from Republican governors to turn Medicaid into a block-grant program, which would give more decision-making power to states. The president, they said, once served in the Illinois General Assembly and witnessed firsthand the kind of tradeoffs that legislators make to balance the state budget.

"He wants to make sure trade-offs aren't made on the backs of children," an administration official said.