In the wake of the White House’s health care summit, reconciliation is still seen as the likely route that congressional leaders and their liberal allies will take to jam Obamacare through Congress. Congressional Democrats and President Barack Obama already are using the summit as a public relations vehicle to help fast-track the Senate health care bill through a parliamentary process used primarily for budgetary issues.

But beware Plan B — the more “modest” plan. There’s a surer, well-worn path that the Clinton Administration took after the collapse of Hillarycare in 1994: A careful, well-coordinated, step-by-step march to the Left on federal health care policy.

The Republican congressional victory in 1994, even though it reflected public revulsion at the Clinton Administration’s proposed takeover of the private health care system, did not change the fundamental direction of federal health policy. It only changed the degree and velocity of liberal policy success. The Clinton team started taking baby steps to expand federal control over health care financing and delivery, lulling often clueless congressional Republicans into cooperation with long-term consequences for doctors and patients. In some cases, the GOP majority enacted provisions of the Clinton health bill word for word.

In fact, much of today’s health care landscape reflects the enormous policy success the Clinton Administration achieved during the 1990s in the wake of the legislative failure of Hillarycare:

– Unprecedented statutory interference with the doctor-patient relationship — restricting private contracting — in Medicare in 1997

– The frustrating regulatory burden imposed on doctors through the Health Insurance Portability and Accountability Act in 1996

– The creation of the State Children’s Health Insurance Program (SCHIP), which has now become a roaring entitlement, costing billions more in taxes and crowding out private health coverage as Congress pushes eligibility up the income scale

Through all of this, Republicans in Congress dismissed or ignored the warnings of conservative health policy analysts and economists, and instead cooperated with President Clinton or played an ineffective defense.

Congressional conservatives should ponder liberals’ past incremental health care successes. It may help them prepare for what may lay ahead. Rest assured that Team Obama is keeping options open.

According to the Wall Street Journal, while no final decisions have been made, “the smaller plan’s outlines are in place in case the larger plan fails.” Those smaller bills could include:

– Mandating that insurance companies allow “children” up to 26 years old to be on their parents’ health plans.

– Expanding Medicaid and SCHIP beyond the massive expansions that were enacted in 2009. Medicaid expansion has been a favored coverage form by liberal Democrats.

As Heritage’s Stuart Butler recently noted in the New England Journal of Medicine, small changes to the nation’s $2.5 trillion health-care system can have dramatic results:

“History shows that changing even seemingly minor features of legislation or administrative decision making with regard to health care can have major — and sometimes unintended — consequences for the system’s evolution.”

Conservatives in Congress have ample policy proposals to expand patient choice and improve market competition. There is no reason why they should carefully develop and implement a grand legislative strategy of incremental conservative reform.

Co-authored by Marguerite Higgins.

First, the winning states. Nebraska and Hawaii are easily identifiable because the Reid amendment specifies their sweetheart deals by name. While all the other states will lose the extra federal financing for new Medicaid eligibles after 2017, full federal financing will continue for Nebraska. Hawaii gets funding for Disproportionate Share Hospital (DSH) payments that it gave up years ago to expand Medicaid eligibility. Ironically, $18.5 billion in cuts to the DSH program in all the other states help finance the rest of the health care legislation.

Massachusetts and Vermont have already expanded Medicaid eligibility so they would not have benefited from new federal financing under the original legislation. The Reid amendment provides a fix for these states. The increased federal spending will not increase insurance coverage, it will only substitute federal funds for state funds.

Who are the losers? All the other states. According to the Congressional Budget Office (CBO) analysis of the Reid Amendment, total state funding for Medicaid and SCHIP will increase by $1 billion compared to the original legislation. Clearly if total state spending goes up and spending for a few favorite states goes down, then all the other states are picking up the tab.

New federal rules will punish states that would use the flexibility of current law to increase the share paid by with local governments for Medicaid. California and New York historically have shared the cost and administration of Medicaid with counties and municipalities. States that have not done so in the past will lose federal funds if they attempt to do so now.

States seeking demonstration projects (“waivers”) may find their paths blocked by new requirements to allow outside parties review applications. Senators are apparently unsure as to how new provisions will be viewed in the light of the Medicaid entitlement so a new provision to ask the Government Accountability Office (GAO) to conduct a study on “causes of action” has been added.

The Reid Amendment also raises new requirements on health plans participating in the Exchange. Using this authority, the Secretary can block any health plan from covering children that does not meet certain benefits and cost sharing provisions. Medicaid, of course, through the Early Periodic Screening Diagnosis and Treatment (EPSDT) provisions provides the most generous benefit package available. It also includes new reporting requirements on health plans on pediatric quality measures. Herein lies the seeds of a future government plan—continued expansion of Medicaid and using Medicaid and SCHIP rules to drive private plans out of business.

Over the past few weeks, the debate on the Senate floor has reduced the health care reform debate from what the American people really want to a desperate defense along the lines, “it’s better than nothing and we will fix it later.” By pitting state against state, the Reid Amendment raises the backroom deal to an art form.

Moreover, the bill would send millions of young, healthy adults into Medicaid which will increase the cost of insurance for every one with private coverage because of the cost shift and “crowd out effect” associated with Medicaid.

The Pelosi bill not only diverges from the President’s policies but is inconsistent with itself. The individual mandate has been repackaged as “individual responsibility” that is enforced through a tax on those individuals without “acceptable health care coverage.” But H.R. 3962 actually makes it easier for a family to simply pay the tax and remain uninsured because under Section 305, any child born without “acceptable coverage” is automatically enrolled in Medicaid and will continue to be eligible for Medicaid at least for a year, regardless of family income.

How does an entitlement to Medicaid regardless of family income promote individual responsibility? Or, is this policy really one of the secret deals with the insurance companies that allows them to avoid covering high risk pregnancies and the first year of life which are generally more expensive than coverage of older children?

For more than 10 years, states have made the choice whether to run their SCHIP programs as a separate non-Medicaid program or as a Medicaid expansion. A majority of states including California which serves the most children under SCHIP have chosen to run separate SCHIP programs. A separate SCHIP program provides states with greater flexibility in managing benefits, service delivery, and eligibility. Under the current SCHIP program, there is no individual entitlement and eligibility is reserved only to those who were previously uninsured. States had the flexibility to impose a waiting period to protect against families dropping their private coverage. All of this will be overridden under the new legislation. State SCHIP programs will be dismantled.

Families will not have a choice between Medicaid and ability to use the new credits for private coverage. Families may be split as children will be forced into Medicaid.

For example, the Baucus Plan either puts states into fiscal jeopardy or provides another budget gimmick to avoid paying the full cost of the legislation through the treatment of the State Children’s Health Insurance Program (SCHIP). The SCHIP provisions have significant budgetary implications for either the federal government or the states. Section 1611 of the Baucus Plan provides a new 23 percentage point increase in the federal funding for SCHIP. That would seem like good news for states. However, under current law, there are no additional appropriations for SCHIP after 2012 and the Baucus Plan does not provide any increased funding. There is a budget cliff in 2013 that will cut federal funds for SCHIP in half.
In scoring the Baucus Plan, the Congressional Budget Office (CBO) must assume its current law baseline remains level.

With the increased federal percentage under Section 1611, states will substitute the federal dollars for state dollars so long as federal funds are available. In other words, the federal funds in the SCHIP pipeline will be spent faster, depleting the funding earlier than what would occur under current law. When that happens, states will be hit with a choice—reduce SCHIP benefits to lower the overall cost of the program or switch to Medicaid. Switching to Medicaid means returning to the regular Medicaid match rate. Instead of an 88 percent federal match rate as promised by Section 1611, for example, New York will get only a 50 percent match rate. The states, who have been promised that the federal government would bear the majority of the cost of the new Medicaid expansion for adults, will end up paying more than they do under current law for their children.

To pay for SCHIP reauthorization at enhanced match rates would like cost the federal government $40-$50 billion. Leaving the funding out either means the legislation is not really paid for, which breaks the President’s promise to the budget hawks, or it shifts those costs to the states. Someone deserves an explanation.