The Republican loss of the House last November brought an official end (at least through 2020) to the party’s long campaign to repeal and replace the Affordable Care Act. The Democrats, despite their new majority, won’t be able to pass their health care agenda either, because the Republican president and Senate will block it.

That political stalemate could mean nothing gets done on health care for several years. But it doesn’t have to be that way. There are pressing problems that need attention—problems both parties agree on, such as inadequate coverage for many people below the poverty line, high premiums and an unstable market for individual insurance, and rising costs across the board.

Divided government might present an opportunity to tackle some of these problems. That won’t come naturally in today’s polarized environment, since both parties dream of (and campaign on) imposing their preferred, sweeping health care solutions. Many Democrats want full public control — “Medicare for All,” or some variant thereof. Republicans, even those who aren’t trying to throw out the whole ACA, believe the system needs to go the other way, with much stronger free-market incentives for the system to improve affordability and accessibility, rather than more regulation and public spending.

Neither side is likely to fully prevail, even after the 2020 election: The current system is too vast and too entrenched. Employers provide 181 million people with health insurance. Medicare for All implies ending this coverage, which would precipitate a backlash from workers who like what they have today. At the same time, Republicans must concede that the public supports the ACA’s legal protections for persons with preexisting conditions, and its insurance rules that try to make coverage affordable for older and sicker patients in particular.

The country would be better served if both parties accepted that the U.S. health care system will, for the foreseeable future, retain a large role for both the public and private sectors, for the federal and state governments, and for regulatory controls and consumer incentives. Instead of dreaming about an entirely different system — at least for the next two years — policymakers should work with what we have to correct obvious flaws and improve the functioning of today’s arrangements.

We’ve worked on health care policy issues for many years in various capacities, including as campaign advisers, congressional staffers and appointed officials in the executive branch. Both of us come at these questions from a market-based perspective, but also with an eye toward what is realistic and practical. We also believe our constitutional structure was designed to encourage compromise and step-by-step progress.

When Congress gets past the current shutdown threat and turns its attention to the next two years, here are some ideas for starting the conversation:

A Compromise on Medicaid. The ACA greatly expanded Medicaid, allowing states to cover citizens with incomes less than 138 percent of the federal poverty line. But many Republicans believe the law went too far and is too prescriptive on the states. As of today, 36 states plus the District of Columbia have adopted the Medicaid expansion, and 14 states have not. The ACA requires the federal government to pay for 90 percent of the costs of the expansion population while it pays an average of only about 60 percent for everyone else on the program, most of whom have even fewer financial resources than those who became eligible under the ACA expansion.

The current state-by-state approach to the ACA’s coverage expansion is leaving some poor Americans with inadequate options. In the states that chose not to expand Medicaid, some adults with incomes below the poverty line are caught in a “coverage gap” – ineligible for Medicaid (which before the ACA expansion was aimed primarily at children and the disabled) but not yet covered by the ACA’s premium credits (which become available at the poverty line). Policymakers need to find a compromise to provide better options for this population.

Republicans should accept that Medicaid is the nation’s safety net insurance program. There should be an income level below which all Americans will become eligible for Medicaid; that level does not have to be the one set by the ACA, 138 percent of the federal poverty line. Democrats should accept that Medicaid was always supposed to leave room for state decision-making.

A possible compromise would be to allow states to expand Medicaid to levels below 138 percent of poverty but no lower than 100 percent. States that met the minimum expansion threshold would get the additional federal matching support provided in the ACA for which states pay just 10 percent of the added cost. This approach would align federal policy with the goal of ensuring no American with an income below the poverty line goes without access to publicly funded insurance. States that have already expanded Medicaid to include those at 138 percent of poverty would be allowed to stay at that level, with no change in federal support.

States that meet the minimum eligibility standard also should be rewarded with more freedom to test reforms without needing to first secure federal approval, including receiving fixed, per-person payments from the federal government instead of the traditional percentage payments under current law.

Market Stabilization and State Flexibility. The individual insurance market remains unstable in part because the ACA allows consumers to buy coverage without regard to their health status, but no longer provides a penalty for going without coverage. This combination of policies gives healthy consumers an incentive to forgo paying premiums until they know they will need to use the insurance, which leaves those who don’t drop coverage with higher costs. This problem could be addressed by boosting insurance enrollment through an automatic process. Congress should allow states to voluntarily use automatic enrollment programs to place beneficiaries who are eligible for premium credits, but haven’t signed up with a plan, into coverage. States could use federal and state tax and other data sources to identify eligible individuals and then enroll them in plans with premiums that are low enough to require no additional premium from the enrollees. The enrollees could decline the coverage if they didn’t want it.

Automatic enrollment directly addresses a large remaining obstacle to reducing the number of uninsured Americans. The Kaiser Family Foundation estimates there were about 15 million uninsured people in 2016 who were eligible for publicly subsidized coverage, including 7.8 million people who were eligible for premium credits provided in the ACA for individual insurance (another 3.7 million uninsured were eligible but unenrolled in tax-subsidized employer plans). We can reduce the ranks of the uninsured, and thus also help stabilize markets, just by increasing participation in the programs that are already on the books.

The structured individual insurance markets created in the ACA – called “exchanges” -- were unstable from the beginning because of their relatively small size (unexpected costs are absorbed more easily when the covered population is large). But recent policy developments have created additional instability. In late 2017, the Trump administration terminated payments to insurers covering the cost-sharing subsidies for lower income consumers, which it argued were not properly appropriated by Congress. Then, in 2018, the administration issued new rules allowing consumers to buy less regulated short-term plans or insurance offered through associations of employers. While this regulatory intervention provided more choice to consumers, it also resulted in enrollees leaving the exchanges, creating further instability on them. Meanwhile, the new Democratic majority in the House is seeking to pass legislation that would roll back the administration’s actions.

Congress and the administration should strike a compromise that would stabilize the exchanges while allowing the Trump administration’s efforts to proceed.

Several states have already demonstrated that well-designed reinsurance programs, which compensate insurers hit with unusually large claims, will lower premiums for all consumers in the exchanges. Congress should pass legislation establishing a federal reinsurance program, which all states can have access to. That same legislation should reinstate cost-sharing reduction payments to insurers (with a proper appropriation), which would promote more certainty and competition in the ACA exchanges too.

To make such legislation palatable to ACA opponents, including the president, Congress should also expand the existing authority under the ACA to allow states to experiment with innovative reforms that lower premiums and boost coverage and should provide statutory support for the short term and association plans authorized in the recent regulations.

Controlling Costs and Improving Value. Both parties agree that costs are too high, and that it is important to insist on better value for what is spent on medical care. There are a series of reforms which would build on existing efforts and accelerate the “value agenda.” In Medicare, beneficiaries should be allowed to enroll in Accountable Care Organizations in the same way that they can select Medicare Advantage plans for their coverage. This means expanded choices and lower costs for seniors. Further, the effort to “bundle payments” for certain high-volume procedures should be used to begin soliciting prices from the health systems supplying the services, to foster greater competition and price transparency. More educated consumers will create a more functional marketplace to bring down costs and improve the quality and value of care provided.

Divided control of Congress means that health care legislation cannot pass without bipartisan support. That could mean nothing gets done. Or it could mean the parties set aside unlikely ambitions to improve today’s public-private system, which is both a worthy goal and one that will help more Americans get access to the health coverage they need.

Lanhee J. Chen is a research fellow at the Hoover Institution and director of domestic policy studies in the public policy program at Stanford University. James C. Capretta is a resident fellow at the American Enterprise Institute.

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