A health reform proposal introduced by three Republican Senators is a positive development both substantively and politically, Dan Mendelson, CEO of Avalere Health, said in a recent interview. He said the greater flexibility in benefit design afforded by the GOP proposal could be a boon for many uninsured people dissatisfied with the choices allowed by the Affordable Care Act.

Senators Richard Burr (NC), Tom Coburn (OK), and Orrin Hatch (UT) offered the proposal, designed to replace the ACA, earlier this year. “This is the discussion that I wish had happened before the passage of the law, said Mendelson, who served as Associate Director for Health at the White House Office of Management and Budget under President Clinton. “We have here three very knowledgeable, relatively moderate Republican Senators coming together on a construct that embraces a lot of what was passed in the ACA. There’s an individual market … prohibited from discrimination on the basis of pre-existing condition; there are patient protections like the age band ratings, albeit less restrictive than the ones that were enacted in the bill.”

Mendelson noted that the Burr-Coburn-Hatch framework retains the ACA’s Medicare provisions. “Everything related to health system change stays: The Medicare Advantage Star ratings, which are very significant and far reaching policy, the Center for Medicare and Medicaid Innovation, and the like,” he said.

The Senate GOP proposal also contains some “very significant changes” from the ACA, many of which provide greater state flexibility in the individual market and Medicaid, Mendelson pointed out. On Medicaid, the proposal “really goes much closer to the block grant proposal that Republicans have felt comfortable with for quite some time. Ironically block granting might actually result in more coverage [than the ACA Medicaid provisions], given where Texas and some of the other Republican states are right now, because they would accept this,” in contrast to their rejection of Medicaid expansion under the ACA.

Mendelson spoke favorably of the fact that the Republican proposal would permit “very bare-bones catastrophic plans and plans that don’t cover the ACA base package of preventive care and the like.” Polling done by Avalere and others has revealed a desire by many uninsured for less expensive and less comprehensive plans. Burr, Coburn, and Hatch are “allowing for a product that is prohibited under the ACA but where there is demand,” he said.

Could such bare-bones plans co-exist with the standard plans permitted under the ACA without creating adverse selection problems? Mendelson suggested the answer was yes. “You are going to have a lot of people who want the standard plans; you could also subsidize the standard products and not the catastrophic plans,” he said. “I really do believe that health system change would be facilitated by giving plans more flexibility with the benefit design — until we allow health plans to innovate, it’s going to hold back real reform.”

Politically, a crucial question going forward will be whether Paul Ryan (R-WI) and other Republican House leaders can unite their caucus around “something reasonable” to replace the ACA, Mendelson said. “It would really benefit the Republican party to pass something more moderate because when they go into this electoral battle, they are going to be called out for the fact that they have not put a credible alternative on the table, and the further they get with that alternative, the better off they are electorally.” However, the Burr-Coburn-Hatch proposal is likely still too close to the ACA to gain the support of House Republicans, he predicted.

Asked about the possibilities for bipartisan compromise, Mendelson noted, “There are a lot of centrist Democratic members of Congress who are unsettled — even with the improving enrollment numbers — because they worry that all of this political back and forth is starting to damage the health care system and starting to put patients at risk. Democratic members who felt that way might end up in a real discussion with Republican members if they felt that compromise was on the table that would put this issue to bed.” However, he cautioned, bipartisan compromise is likely to happen only after the 2014 election, and “only if the Republican party believes that this is not going to be a potent issue in the 2016 elections.”

Editor’s note: You can read another Health Affairs Blog post on the Burr-Coburn-Hatch proposal by Jim Capretta and Joe Antos and hear Mendelson discuss health reform in a recent Health Affairs Conversations podcast.