Michigan battle over 'Obamacare' becomes fight for soul of GOP

States play a leading role in the implementation of two of the most important components of the Affordable Care Act (ACA): the creation of health-insurance marketplaces, known as exchanges, and the expansion of Medicaid. Even after the nasty and partisan fight over health-care reform in Congress in 2009 and the Supreme Court's momentous decision in June 2012 to allow it to go forward, the ultimate shape of the reform is largely being determined by battles in state capitals around the country.

Michigan is a particularly interesting case study of the politics of this ongoing fight, since Democrats had recently been in charge but Republicans now control the state House, state Senate and governorship. The legislature ultimately decided against doing an exchange but in favor of expanding Medicaid. Both votes were close and could easily have turned out differently. The results came down not simply to a battle between Democrats and Republicans, but between moderate Republicans and more conservative tea party Republicans.

Michigan's role in national politics might have suggested a political environment open to, if not supportive of, implementing the ACA. Every Democratic nominee since Bill Clinton in 1992 has won in Michigan, including Barack Obama with 57 percent of the vote in 2008 and 54 percent in 2012, despite Mitt Romney’s ties to the state. In 2012, Senator Debbie Stabenow, also a Democrat, won re-election in Michigan with 59 percent of the vote, despite severe attacks from her opponent about her role in passing health reform. Some of Michigan's congressional representatives were among the leaders supporting the ACA's passage, including Democrats John Dingell and John Conyers, who have introduced health-reform bills in every session of Congress for many years.

Moreover, Michigan needs the help after being hit hard by the Great Recession. Thirteen percent of Michiganders are without health insurance, including 18 percent of adults aged 19 to 64 and 5 percent of children under age 18. The state's unemployment rate is 9 percent (compared to a nationwide rate of 7.3 percent).

At the same time, other Michigan representatives led the opposition in Congress to the law's passage, including Republican Dave Camp, who was the ranking member on the U.S. House Committee on Ways and Means. Michigan Attorney General Mike Cox, the first Republican to hold the office since 1955, was among the original plaintiffs on the lawsuit arguing that the ACA is unconstitutional. In November 2010, Republicans rode their opposition of the ACA to their largest majorities in the legislature since the 1950s.

Elected in the same 2010 GOP wave, Republican Gov. Rick Snyder has been more of a pro-business pragmatist than an ideologue. He supported the lawsuit against the ACA but was the party's only governor not to sign a 2011 letter by the Republican Governors Association calling for the law's repeal. Snyder also supported the creation of a state exchange and expanding Medicaid. Republican leaders in both chambers of the state capitol ultimately supported both approaches as well. Implementing the ACA in Michigan was therefore not a question of Democrats trying to convince Republicans, but Republican leaders trying to convince enough rank and file Republicans to vote with the Democrats.

Michigan was on track to be the first state led entirely by Republicans to create an insurance exchange as part of the ACA. Backed by a broad coalition of insurance companies and other businesses, hospitals, health-care providers and consumer advocates, Snyder called on the legislature in September 2011 to create an exchange run by a non-profit board and focused on maximizing competition and providing good consumer service. The state Senate endorsed this plan, but House leaders delayed action in the hope that the issue would go away if the U.S. Supreme Court struck down the law or if President Barack Obama lost re-election in 2012. When neither happened, the House's Health Policy Committee voted down exchange legislation with nine Republicans voting against the bill, two Republicans joining three Democrats to support it, two Democrats and a Republican abstaining, and two Democrats not even showing up. Each of these Democrats likely would have voted for the exchange except that at the last minute Republicans included a provision barring any plan sold on the exchange from covering abortion. Had the bill made it out of committee, insiders say enough Republicans would have voted with the Democrats to pass it on the house floor.

With plans for a state-based exchange rejected, Snyder focused on creating a partnership exchange with the federal government. The partnership would mean that Michigan would maintain control over customer assistance and a basis could be laid for a later transition to full state control. The Obama administration approved Snyder's proposal in March 2013 and awarded the state $31 million for the project. However, state officials cannot spend federal grants without a specific state appropriation, and the Michigan Senate refused to approve the appropriation. Without funding, plans for a partnership exchange fell apart, leaving national officials to build Michigan's exchange. 

Republicans who support Medicaid expansion tried to learn from the failed exchange effort. Because conservatives do not like Medicaid as it is, supportive leaders framed it as "Medicaid reform" rather than about expanding coverage. They proposed legislation through the House's Michigan Competitiveness Committee, arguing that the generous federal funding would result in a net savings of $1.17 billion through 2019, while refusing the money would put Michigan businesses at a disadvantage. This approach worked in the House, with enough Republicans siding with Democrats to advance expansion by a two-to-one margin. But the Senate adjourned for the summer without taking a vote, because leaders in that chamber refused to put a bill on the floor without support from more than half of the Republican caucus.

After a summer of contentious debates, a reconsideration of the Medicaid expansion passed by a razor-thin margin. A bill endorsed by Snyder initially failed by one vote, but then passed hours later by two votes – when one senator who had voted against changed his position and another who had abstained registered a vote in favor.

Experts estimate that as a result of expanding Medicaid, 620,000 additional Michiganders will be insured by 2020, reducing the overall uninsured population to 5 percent. The federal government is scheduled to pay 100 percent of the increase until 2016, with the state's share ultimately phasing up to 10 percent in 2020.

However, the Republicans placed one last barrier: Rather than record another vote in favor of Medicaid, Republicans allowed the start date for the expansion to be 90 days beyond Jan. 1, 2014. As a result, uninsured Michiganders will have to wait a few more months before receiving new coverage. For each day of this delay, the state will lose an estimated $7 million in federal money.

As in the other 33 states that chose not to create an exchange, the federal government has developed Michigan's online marketplace. As a result, the state lost the opportunity to lead the effort to encourage people to participate, as well as to define how the marketplace is structured — whether it is heavily regulated or an open market, whether interest group leaders are allowed to sit on the board of directors, and what role brokers and agents are to play. It is not yet clear what effect this difference will have on the price of plans sold on the exchange.

As for Medicaid expansion, those states that rejected it will lose out on the federal dollars it will bring, and the added insurance coverage it would bring to thousands of their residents. Michigan, as well as other states that have struggled economically, have found Medicaid expansion too good a deal to pass up.

Despite all the talk of partisanship and polarization, the key division in Michigan is not between Republicans and Democrats, but is within the Republican Party. The split is largely driven by tea party activists and conservative organizations, such as the Mackinac Center for Public Policy and the Michigan chapter of Americans for Prosperity. This group has been vocal and influential, but ultimately has not succeeded in blocking the implementation of ACA in Michigan. Medicaid is being expanded, and although the state is not running its marketplace, Michigan residents will still have access to a federally run exchange.

The 2014 primaries will serve as a referendum within the Republican Party over these key votes. Those Michigan Republicans who supported implementing any component of the ACA will likely be targeted by conservative groups. The results of these sorts of races in Michigan and across the country will shape the future of health reform.