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How Red States Wrestle with Obamacare: The Forbes Interview with Texas' Rick Perry

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Earlier this week, I interviewed Texas Governor Rick Perry at the 2012 Forbes Healthcare Summit in New York. Perry’s Texas has been an engine of economic growth, far outpacing national indicators, and Perry has a source of creative free-market approaches to state policy problems, especially in the health-care arena. Indeed, some of Perry’s most interesting initiatives are the ones that have remained on the shelf: for example, his exploration of cross-border health insurance as a way to make coverage more affordable for millions of people along the Rio Grande. What follows is a lightly edited transcript of our discussion, in which Perry talked about how states should respond to the implementation of Obamacare, and what the Republican health-care message should be in 2016.

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Tort reform ‘sent a predictable, stable message to innovators’

AVIK ROY: Governor Perry, thanks so much for joining us today. You know, one of the things that a lot of people nationally may not appreciate about your tenure in Texas, is that Texas has really been a center for innovation in health care policy. Why have you been so different from other states in having an active agenda in trying to change things around in Texas?

GOVERNOR RICK PERRY: Well, good partners, and a good team approach. The Texas House, the Texas Senate, the lieutenant governor, we've had two speakers over the last 12 years, they have been very, very focused on how we move Texas forward in the arena of innovation. And you look back through the years, and Texas has had some great periods of innovation. You know, whether it was Texas Instruments back in the ’60s, and the oil and gas industry, George Mitchell and the hydraulic fracturing concept. A lot of naysayers probably on both sides or on both of those issues.

But good, courageous people have stayed hitched, if you will, to the concept. And they paid great dividends. So whether it was passing tort reform, putting tax policy, regulatory policy in place, that sent a predictable, stable message to innovators and job creators, that this was a state where you could come and risk your capital and have a good chance to have a return on your investment.

I think that is the underlying foundation that you must have in your state. Innovators are entrepreneurs. And if you don't first give them clear messages of predictability and stability, then they may not stay in your state. So we first had to create the environment where innovators knew that they would get support from the state, that the state had "skin in the game," so to speak.

That's the reason we created, in 2003, the Enterprise Fund. Later, we created the emerging technology fund. And then, in ’07, we passed a $3 billion effort over a ten year period of time for cancer prevention and to find the cures for cancer. So the message has been consistent over the last decade that, if you were an innovator, this was the place you wanted to be, and that there was not just lip service, that there was truly a partnership. And so public/private partnerships have been real key to our effort, as well.

Obamacare’s exchanges ‘are not going to work’

ROY: Now that Obamacare is here to stay, and it does limit a lot of the latitude that states have, and I know you have been out front since the Supreme Court decision of saying you're not going to expand the Medicaid program, you're not going to create a state-based exchange. But what do you see as the opportunities now? What can Texas do now, given all the things that Obamacare imposes?

GOV. PERRY: Well, I'm not sure Obamacare is going to be successful. And one of the reasons I'm not sure it's going to be successful is because the exchanges are not going to work. And the exchanges are not going to work because states are wise enough not to go into a relationship when you don't know what the rules are. You don't know what the cost is going to be.

So any governor who would sign on the dotted line to go into this exchange at this particular point in time, and they're mandated by Washington. The rules are mandated. The idea that you've got a state instituted exchange, but it has to be federally approved. So the fact is the federal government's going to have to run these. And they don't have the expertise, nor do they have the money.

So on its face, Obamacare may fail because they don't have the expertise nor the money. And they're trying to push this off on the states. And I think wise governors and wise legislatures will say, "No, thank you." Medicaid is a broken system. And the idea that we would expand and put more money and more people into a broken system is not unlike putting another 1,000 people on the Titanic. You know how this is going to turn out. And it's going to be a disaster.

Well, the answer is block granting. I mean it's simple that, again, states are different. They're laboratories of innovation. Giving the states the opportunity to innovate, to put in the programs that best serve their citizens in the way their citizens would rather be addressed on a health care side is substantially a wiser way to go.

So I'm not holding my breath that the federal government is going to block-grant dollars back to the states. So with that given, we're going to try to put as many personal responsibility programs into place where people have options. And we can control the cost of health care in our state. So it's a very disruptive time. But I look at it as a time of great opportunity.

So ideas that will be tried in Louisiana. Bobby Jindal, one of the brightest innovators in the country. Rick Scott over in Florida, who spent his lifetime in health care. And a host of other governors, hopefully Democrat and Republican governors, will put ideas forward, put concepts forward, try them out in their states. And if they look like they would transfer over to your state, pick them up, give them a try.

Will states be able to turn down Obamacare’s federal dollars?

ROY: Can you follow what Utah's done with trying to create a free market oriented health care exchange, do you think that's something that's a viable alternative to Obamacare?

GOV. PERRY: Well, you know, I'm a big believer in the 10th Amendment that states should have the right to innovate. Again, that should be Utah's right to put that into place. And is it right for everyone? I'm not at a juncture where I can say yes or no. But what I do believe is that it is their sovereign right to innovate, to try different approaches that best suit their citizenry.

ROY: One thing that you did, and you looked into with the Texas legislature a few years back, was withdrawing from Medicaid all together. And you decided not to, because the amount of federal money that was being plowed into the state, getting rid of that and then trying to make up with that by raising taxes at the state level was just too great.

GOV. PERRY: Right.

ROY: Do you worry that something similar will happen with Obamacare that now, today, you can say, "Well, we're not going to implement Obamacare's Medicaid expansion, the exchanges, and what not," but eventually, whether it's you or some future governor, they'll have no choice because all that Texas federal tax money is going to other states instead of coming back to Texas?

GOV. PERRY: Yeah. Well certainly, we took a look at it. And I think, you know, leadership is about asking a lot of difficult questions. You may find the answer isn't something that's acceptable or wasn't what you thought it was going to be, or is not in the best interest of your citizens. But, you know, asking the question [is important].

And, you know, we took a serious look at it. And we send a lot of money to Washington, D.C. But here's the bigger issue for me as a citizen of the United States is that the program is there, putting it forward. I mean this isn't free money. It's our money. And we're either going to print money and devalue the dollars that are in your pocket, or we're going to borrow that money from China, on a program that we know is not sustainable.

And I hope governors and legislators and citizens across this country will stand firm and say, "What are we doing? Why are we continuing to dig this hole, to further put our country in debt and future generations in debt?" And hopefully that in the future there will be a deconstruction of this piece of legislation and put things into place that actually work: Block granting, you know, moving policies across borders and allowing insurance to be purchased in other states.

Or, as we laid out some years ago, the concept of maybe there's a bi-national type of insurance approach with, you know, the huge amount of interaction between the United States and Mexico, or the United States and Canada. I'm not saying that's a correct answer. But I think it's that type of innovative conversation that governors, leaders, should be having with their citizens, and with citizens of other states.

Obamacare is ‘the law of the land’ but it can be tweaked

ROY: Yeah, I think people should definitely look at that bi-national health care plan that you looked at in Texas. Because it's a very interesting model that probably more states along the border should consider.

Other than block grants, and other than repealing Obamacare, which is obviously a little more difficult today than it was, say, a year ago, what do you think are the two or three things that Congress could do to make it easier for Texas to make its health care system better?

GOV. PERRY: Well obviously, being able to free these states from one-size-fits-all. And again, I know that's a rather sweeping statement. And Obamacare is, in fact, now the law of the land. But that's not to say that we can't tweak that piece of legislation as we go forward. And we're going to find out that there are parts of it that don't work. There are going to be parts of it that do work.

And so the most important thing, I would suggest, that Congress can do is to be open-minded about, "Listen, when you identify, or when the states identify something that's just not going to work, something that's going to cost, don't have such pride of authorship that you're afraid to back out of something. Go ahead, work with the governors."

I would suggest that the most important thing that the current administration and Congress can do is to really bring the governors in and ask their opinions, work with them. That was not done. When Obamacare was being drafted, I was the head of the Republican Governors Association. I don't recall any serious efforts to bring governors in to say, "How is this going to impact the states? How can we partner and come up with solutions to these challenges that we have?"

And the most important thing, not that, you know, all the brilliance in the world does not reside with governors. But they truly have a lot of experience. When you look at the numbers of years of experience that Democrat and Republican governors have in being chief executive officers of their state, there's a lot of experience there. There's a lot of real world experience that I think Congress could be well served, this administration could be well served, in finding the solutions to these challenges that we have in health care.

GOP message on health care should emphasize access and cost

ROY: I'm going to ask you one politics question. So the Republicans just had this drubbing in 2012. Mitt Romney, of course, lost. In 2016, what do you think the Republicans health care message should be? We'll have the end of Obama's second term. Republicans will obviously be looking to have a national health care agenda, along with what to do at the state level. What do you think that agenda should be?

GOV. PERRY: Let me share with you just one. The Republican governors actually added to their numbers. They were the only Republican group out there that had a successful night. And I happened to think that, from a citizens standpoint, their governors, and the people who are the chief executives of their state, are where there's a higher level of trust between them in Washington D.C. or the federal elected officials.

So governors are going to be where Americans look. There's 30 of the 50 governors now that are Republican. So the Republican message on health care is going to be one of access. It's going to be one of efficiency from the standpoint of cost.

And you've got some great examples of that across the country. Again, I go back to what Rick Scott's doing in Florida, what Bobby Jindal's doing in Louisiana, what we're doing in Texas. I mean governors who truly have not only experience, but are implementing programs that are making health care more affordable, more accessible. And that's what people care about.

So I think that the message in 2016 is going to be, "Look at what people who truly have the responsibility for delivering services, whether it's education or transportation infrastructure, or power, or health care. Who are the people that are really doing it? And who are the people that are being successful?" And the message in 2016 is going to be, "It's Republican governors that are truly making America work better, health care being in one of those areas."

ROY: Governor Perry, thanks so much for joining us.

GOV. PERRY: You're welcome.

ROY: And thanks for coming to New York. Nice to see you.

GOV. PERRY: It's my honor. Thank you.