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    Obamacare Repeal: What May Replace It

    Selling Insurance Across State Lines continued...

    Ed Haislmaier, senior research fellow with The Heritage Foundation, points out that 80% to 90% of insurance premiums are paid to the doctors and hospitals that provide medical care. If you live in Los Angeles and buy a plan in Arkansas, for example, you’ll still end up paying California rates to the doctors there.

    The ultimate cost of insurance won’t be dissimilar to a California-regulated plan, Haislmaier says.

    In addition, Corlette says, insurers would have a strong incentive to set up shop in states with fewer rules and consumer protections and to sell bare-bone policies to people who are primarily healthy.

    “You would very quickly have a race to the bottom,” she says.

    That may reduce premiums for people who are healthy, at least for a while. But it would increase costs for people with medical conditions or those who prefer to have insurance with more generous benefits, Blumberg says.

    Plans sold across state lines also become difficult to regulate. Consumers with complaints about an out-of-state health plan can’t turn to their state officials for help, she says. That’s not just a problem for consumers. State regulators don’t like the idea either. Although states can create marketplaces to sell insurance across state lines now, none have done so.

    “Republican or Democrat, they all hate it because it undermines the state’s regulatory authority,” Blumberg says.

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    Medicaid Block Grants

    Today, Medicaid is paid for by states and by the federal government. As more people become eligible for the program and enroll, the greater the government’s cost.

    There are a number of different ways Medicaid block grants could change how the program is funded. But generally, they are designed to reduce the federal government’s spending. These federal grants would provide states with a fixed “block” of money. The funds wouldn’t adjust to changes in the economy or increases in health care or drug costs. Instead, they would grow according to a preset formula no matter how many people enter the program, making spending far more predictable.

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