Doug Holtz-Eakin served as director of the Congressional Budget Office from 2003-2005 and as John McCain’s chief economic adviser in the 2008 presidential campaign, and is now president of the American Action Forum. On Thursday, he wrote a piece for National Review, urging states to move forward on health insurance exchanges.

We spoke Friday about why he disagrees with the 18 states who aren't moving forward on the task, why Obamacare is here to stay and how Republicans can best bargain with the White House. A transcript of our conversation follows, lightly edited for clarity.

Sarah Kliff: Let's start with what's at stake here. At the end of the day, all the states will have an exchange, either one they run or one the federal government sets up. Why does it matter whether the state is in charge?

Doug Holtz-Eakin:  I believe that if you look around the world, and look at countries like Switzerland, where there's a very successful insurance system with lots of coverage and choice, if you look at what would have been the underpinnings of premium support, you've got exchange-like entities. It's hard for me as a matter of instinct to say exchange-like entities aren't of value. It doesn’t mean you should like either the federally sponsored exchange or what the law does to the state exchanges. They’re both too regulatory, too laden with inflexiblity.

What I'm saying is that governors are in a good bargaining position. The White House wants them to do the Medicaid expansion, so they have the ability to negotiate. They can say we want to have an exchange, but we're not going to do everything you say in the law. This is a moment, I'm arguing, an opportunity to really deliver on a substantial health reform. 

SK: How much do you think governors could get the White House to give on the exchanges?

DHE: Do I think its automatic? No. But imagine Utah goes ahead with the exchange it has anyway. Then you’ve got a demonstration of success, and other places want to look like that. Then you could use Medicaid waivers to make that part of the law more workable. There are a lot of ways to envision how this plays out. None of those are possible if you cut off access to a competitive marketplace.

SK: What kind of changes do you think states should demand?

DHE: They would make sure people could just get an offer. Under the federal exchange, you regulate who gets to sell, do they get to sell more than one policy, what the actuarial value is of the product they sell. It should be open. We should allow very vigorous competition.

SK: The things you're describing are pretty much at the core of the law. They're what makes sure all the health plans are standardized. Why do you think the Obama administration would budge on them?

DHE: If you look at the way they handled essential health benefits, they tossed to the states. They didn’t want to take the heat, so they said you states pick the essential health benefits. Let's get more flexibility in. 

Another way to say why I would say that is this. It's the same reason the very conservative state of Utah has said, let's build an exchange. It's a conservative idea that can be done well. I would not want to go to my grave having totally stood in the way of a useful conservative idea.

The alternative is CMS [Centers for Medicare and Medicaid Services] actually implements this to the letter of the law and they revert to their very regulatory instincts and produce something unworkable.  

SK: What do you make of the governors who say, you know, I really oppose this law, I don't think it's going to work at all, I'm not doing anything to assist the federal government?

DHE: I’m sympathetic. I hope no one is confusing this as my endorsement of the law. I'm on record as having some reservations. This is not an endorsement of Obamacare. This is an endorsement of the idea that an exchange-like entity will exist. I'm arguing that you should be the one who is the mother of invention here. 

SK: One last question: I know I've heard some conservative folks in the states pinning their hopes to an Oklahoma lawsuit that challenges whether the federal exchange can operate in a legal way. What do you think of that strategy?

DHE: I know the lawsuit exists. I’ve read the law, and there is a plain-face reading that suggests it's not a crazy idea. But I've already pinned my hopes to a lawsuit once. We know how that ended.

I'm done throwing Hail Marys. It's time to start blocking, tackling and get over the finish line. 

Related reading

-- Ezra on what we can learn from Switzerland's health-care system.

-- Utah seems to be doing what Holtz-Eakin suggests: setting up an exchange that is not compliant with Obamacare and seeing what the White House does. 

-- The state of the exchanges, in one map