The Cost of Health Services Questions

Chapter 6Federalism and Health Care
Policy*
Frank J. Thompson and Joel C. Cantor
H
I
G
G
S
,
The balance of power between federal and state government constantly
ebbs and flows. In this chapter, Frank Thompson and Joel Cantor describe
S
the history of federal–state relations in health care policy; show how the
H
regulation of the health sector has been shifting from the state to the federal
A health grants to the states;
level; explore the complicated politics in federal
N Act’s implementation lies, to
and show how the fate of the Affordable Care
I
a large extent, in the intricate dynamics between
federal and state officials.
C
Q
On March 23, 2010, President Barack Obama signedUthe Patient Protection and Affordable Care Act (ACA)—an
A epic
policy breakthrough in a century-old effort to extend health
insurance to all Americans. At virtually the same time, Florida
­Attorney General Bill McCollum (R) filed suit in a federal
1 district
court to have the law declared unconstitutional. ­McCollum,
1
who made an unsuccessful run for governor later that year,
pursued the time-honored tactic of seeking a court0sympathetic to his arguments. Even though his office in Tallahassee
5
was six blocks from a federal district court, he filed the suit
T of
200 miles away in Pensacola. The partisan background
the judges in the two courts drove his decision. President Bill
Clinton had appointed the judge in Tallahassee. In contrast,
President Ronald Reagan had selected the judge in Pensacola,
who also had a reputation for hewing to conservative policy
­positions in his rulings. Eventually, more than 25 other state
attorneys general, nearly all Republicans, joined the Florida
suit. In January 2011, McCollum and the other attorneys
general prevailed when Judge Roger Vinson ruled the entire
ACA unconstitutional. By this time, other federal courts had
reached the opposite conclusion, and observers waited for
the Supreme Court to resolve the matter. In the meantime,
S
*Part of this chapter draws directly from a previous version that Frank Thompson coauthored with James Fossett.1
Thompson also wishes to thank the Robert Wood Johnson Investigator Award Program for research funding that helped
inform this chapter.
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
the newly elected governor of Florida, Rick Scott (R), praised
Judge Vinson’s decision and vowed not to let the state “spend
a lot of time and money” preparing to implement the new law
until “we know exactly what is going to happen.”2
While the founding fathers of the United States would be
surprised at the magnitude of government and the intricacies
of health policy at the dawn of the 21st century, they would
certainly recognize this episode as a natural outgrowth of an
institution they established—federalism. Writing over 200
years ago in support of the new Constitution, James Madison
in the Federalist Papers observed that the founders wereH
calling for “neither a national nor a federal Constitution, but a
I
composition of both.” Madison understood that the system
forged in 1787 would in many ways preserve the “faculty”
G
of national and state governments “to resist and frustrate the
G
measures of each other.”3
S
It would, of course, be a mistake to portray issues of federalism and health policy as a saga of unremitting contention, and
conflict between the federal government and the states. The
two levels of government often collaborate and forge productive
partnerships to address health problems.4 But even in programs
S
marked by substantial cooperation between the federal governH
ment and the states, differences of perspective often surface.
These differences fuel an elaborate intergovernmental politics
A
that involves chief elected executives, legislative bodies, courts,
N
administrative agencies, private stakeholders, and others. This
I
politics yields a balance of power between the federal government and the states that ebbs and flows and shapes whoCgets
what, when, and how from government’s health policies.
Q
Federalism animates the behavior of a wide range of health
policy stakeholders jockeying for advantage. Hence positions
U
on the appropriate balance of power between federal governA
ment and the states tend to be opportunistic. They flow less
from abstract political theories than from concrete interests
and preferences about policy. In recent years, for instance,
1
leading Democrats have generally seen the states as less sympathetic to the interests of low-income citizens than the1federal government; Democrats have resisted many Republican
0
proposals to devolve more responsibility for health programs
to the states. But both parties often shift their stance on5federalism depending on the issue and the circumstances. T
American federalism not only features an ever-changing
S
balance of power between national and state officials, it also
plays a catalytic role.5 When the federal and state governments share the cost of a health program, it may well lead
95
government in general to be more dominant vis-à-vis the private sector than would be the case if one level of the federal
system had to absorb all the costs of the program.
In seeking to describe the complexities of federalism, observers have turned to cakes for metaphors. Some people have
seen federalism as a layer cake with federal and state governments each having distinct, clearly defined responsibilities.
In an earlier period of the nation’s history, the crisp division
suggested by this metaphor at least partly captured political
reality. A kind of “dual federalism” prevailed. However, political scientists today generally hold that federalism has become
more like a marble cake—with rules, regulations, responsibilities, functions, and funding all blurred and intermingled.6
Federalism intersects in myriad ways with efforts to enhance
the nation’s health. Some important intergovernmental initiatives have little to do with the delivery of health care. In this
vein, various policies seek to head off death, disease, disability, and discomfort by reducing hazards in the environment
and by encouraging personal lifestyles conducive to health.
For instance, government initiatives to ensure that citizens
have safe drinking water, minimize their exposure to asbestos, and cut down on their smoking all feature a fascinating
politics of federalism.7 In this chapter, however, we confine
our focus to the intergovernmental dynamics shaping the
delivery of health care services. These dynamics have played
out in programs for constructing hospitals, educating health
professionals, assuring access to care for low-income citizens,
providing long-term care services for the elderly, assisting people with disabilities, and elsewhere. These intergovernmental
relationships have indelibly shaped the balance among access,
cost, and quality in the American health care system.
This chapter zeroes in on four crucial aspects of federalism and the health care system. First, we provide a brief
historical sketch of federalism and health care, pointing
in particular to the 1960s as a watershed. Second, we assay the intergovernmental dimensions of regulatory policy
that shape a ­major pillar of the American health insurance
­regime—private ­c overage provided by employers or purchased by individuals. While states had long led the way
in regulating insurance, the federal government has become
much more involved. Third, we target one very ­important
policy instrument that has loomed especially large in the
health care arena over the last half century—federal grants
to state and local governments. Starting in the 1960s, federal
grants to the states grew rapidly and increasingly ­t argeted
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
96
PART II • National Political Institutions
health relative to other policy spheres. Finally, we examine
the implications of the ACA of 2010 for federalism. This
health reform leans heavily on the states for implementation. It greatly alters the fabric of intergovernmental relationships in the health care arena.
Historical Snapshot:
The Sixties as
Watershed
In broad historical perspective, issues of federalism and
H health
policy sort themselves into four general phases. The minimalI until
ist period ran from the founding of the republic in 1789
the end of the Civil War. During this time, grand issues
G of
federalism revolved around basic questions of whether the
G
federal government could enter certain policy arenas (e.g., esS roads
tablish a national bank, fund public infrastructure like
and canals), whether states could nullify legislation approved
,
by the federal government, and whether states could secede
from the union. To the degree that any level of government
did much about health care, local governments were
S in the
forefront. While the federal government provided some health
Hmental
care to soldiers and veterans and some states operated
institutions, their roles were modest. Nor was the activity
A that
did exist intergovernmental. The layer-cake metaphor—each
N much
level of government in its own distinct layer—pretty
captured the essence of federalism during this period.I
The emergent period extended from the end of theC
civil war
in 1865 to 1965. Both federal and state governments became
Q cenincreasingly involved in the health arena. By the late 19th
tury, the development of a better science rooted in U
the germ
theory of diseases fueled the creation of government instituA
tions committed to fostering public health through sanitation,
immunization, and health education. In 1869, Massachusetts
developed the first viable state health board. States also be1
came increasingly active in licensing medical professionals,
operating laboratories to deal with diseases (especially
1 epidemics), and funding medical schools.8 Later in the period,
0
intergovernmental grant programs for health care began to
surface. Of particular note, Congress approved the Sheppard–
5
Towner Act in 1921—a grant program to the states designed
T
to promote the health and welfare of mothers and children.
S the
Following World War II, national policymakers approved
Hill–Burton Act, which proffered federal grants to stoke the
construction of local hospitals. Through the Kerr-Mills Act of
1960 and other measures, the federal government also provided grants to the states to subsidize nursing home care for
the elderly.9 In these and other ways, the federal and state
governments became more active on the health care stage.
The growth period of health policy and federalism
c­ ommenced in 1965 and continued into 2010. It featured
massive increases in public funding for health care ­services
to a substantial segment of the population while stopping
short of universal insurance. In July 1965, President ­Lyndon
B. Johnson signed two landmark measures into law—­
Medicare and Medicaid. The federal government operated
the former, which covered the elderly and certain younger
people with disabilities. In turn, the federal government
relied on grants to the states to implement ­M edicaid, a
program that funds health services for low-income individuals. The birth of Medicaid had a profound impact not only
on health care but also on federalism. During this growth
­p eriod, the image of federalism as a “marble cake” with
no neat horizontal stratification of functions among different levels of government became increasingly germane.
­M edicaid and the proliferation of other grant programs
­k indled a mingling of national and state officials in the
health policy arena. An intergovernmental politics featuring
conflict and cooperation flourished.
The post-reform period began with the passage of the ACA
in March 2010. As we discuss later, the ACA significantly
altered the balance of power and the nature of relationships
between the federal government and the states. At least over
the short term, it sparked a new fractiousness between the
two levels of government. Whether the ACA stays on course
for implementation—as now seems likely—or whether its opponents somehow manage to derail it, this epic health reform
will leave its mark on federalism.
Insurance Regulation:
State Dominance and
Growing Federal
Involvement
Most Americans obtain health insurance “privately,” primarily through their employers, but some purchase it
themselves. From an early point, state officials became interested in making sure this insurance met certain standards.
Modern private health insurance emerged out of the Great
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
­ epression as providers faced severe declines in demand and
D
the ability of patients to pay for their services. To remedy
this problem, they created broad-based plans where enrollees would prepay for services in exchange for having access
to care when they needed it. Early experiments with this
kind of prepayment grew into a movement, spreading hospital (Blue Cross) and physician (Blue Shield) financing plans
across the states. Initially key stakeholders viewed these
prepayment plans, which came to be called the “Blues,” in
a different light from traditional life, property, and casualty
insurance. Nonetheless, the New York State insurance comH
missioner in 1933 deemed that hospital plans should be
I
regulated as insurance. This would impose premium taxes,
state oversight, and requirements that the plans have signifiG
cant financial reserves. But the New York Blues pushed back,
G
and subsequent legislation exempted them from traditional
insurance regulation.10
S
Eventually, each state had a nonprofit Blue Cross and Blue
,
Shield plan dedicated to operating in the “community” interest with limited regulatory oversight. These plans initially
faced little market competition from other insurers. TheySemployed community rating (i.e., with subscribers paying the
same premium regardless of health status, age, or otherHfactors) as well as guaranteed issue and renewal (i.e., taking
A all
comers regardless of their health). But this communitarian apNbeproach did not last. By the 1940s, commercial companies
gan to offer health insurance. Unlike the Blues, these for-profit
I
companies offered low premiums to large employer groups
C
with the “best” health risks. Their efforts to insure healthier
people through experience rating left the Blues to coverQdisproportionately sicker people, which made their premiums
U
less competitive and prompted them to abandon community
rating. The tension between the worldviews of the BluesAand
commercial carriers, one stressing “social solidarity” and the
other “actuarial fairness,” came to define the debate over the
proper role of state health insurance regulation for more1than
a generation.11
1
With the Blues and commercial insurers front and center,
0
private health insurance grew apace in the postwar period,
increasing from coverage of 10% of the population in1940
5
to more than half by 1950 and peaking at over 80% in the
T
mid-1970s.12 Federal policies did much to stoke this growth.
S to
A national wage freeze during World War II led employers
substitute health benefits for wage increases to attract workers. The 1947 Taft–Hartley Act made health benefits subject
97
to collective bargaining, and unions placed a priority on winning concessions from management in this area. In 1954,
Congress amended the Internal Revenue Code to reinforce the
favorable tax treatment of employee benefits.12 But while federal policy fueled the growth of private insurance, its regulation remained with the states. In fact, Congress in the 1945
McCarran–Ferguson Act expressly delegated the regulation of
the “business of insurance” to them.
In the period of rapid growth up to 1974, the layer-cake
model of federalism characterized health insurance regulation. States developed regulatory regimes focused largely
on ­assuring the financial solvency of insurance carriers, on
their ability to fund contractual obligations to the insured,
and on minimizing fraud. In 1974, however, federal policymakers terminated this era of state hegemony by approving
the Employee Retirement and Income Security Act (ERISA).
In addition to addressing serious problems in private retirement plans, ERISA barred states from regulating self-funded
health plans operated by large employers. Under this arrangement, the employer assumes the financial risk to provide a
health plan for its workforce out of its own revenues rather
than contracting with an insurance company. Larger companies with over 100 employees increasingly opted for this
­approach. Smaller firms, in contrast, continued to use the
Blues and commercial carriers because self-funding exposed
them to risks of financial ruin (e.g., where one employee with
cancer might incur huge medical costs and threaten their solvency). After 1974, state governments continued to regulate
those who did not ­self-fund—primarily the small-group and
individual (non-group) markets but also a smattering of large
employers who continued to purchase insurance. In turn,
ERISA made the federal government the primary regulator of
the health plans of most larger firms. Initially, federal officials
engaged in limited oversight of these plans, but, over time,
some additional regulations were added.
Furthermore, federal policymakers increased their regulation of all insurance plans. Of particular note, Congress
­approved the Consolidated Omnibus Budget Reconciliation
Act ­(COBRA) in1986 and the Health Insurance Portability
and Accountability Act (HIPAA) a decade later. Among other
things, this legislation gave persons with health insurance
through their jobs more rights to continue this coverage at
their own expense after severance from their employers. It
also limited discrimination against workers due to their health
status in certain employer health plans. Other federal statutes
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
98
PART II • National Political Institutions
required carriers to cover specific services, such as breast reconstruction surgery following a mastectomy, minimum maternity stays in hospitals, and mental health benefits.13
In comparison to state regulation, federal oversight of
health insurance remained largely piecemeal following ERISA.
Ironically, ERISA freed states to be more active in regulating
health insurance as large, self-funding employers no longer
had much incentive to lobby against state intervention.14 Increasingly, states approved laws mandating that private health
insurers cover dozens of specific services or types of providers. In the early 1990s, states launched an array of bold
H experiments in health insurance regulation. Many states (especially
in the Northeast) tried to reaffirm notions of socialI solidarity in the insurance market by reintroducing requirements
G for
community rating and guaranteed issue in the small-group
G
and individual insurance markets. Unlike the early period,
S while
when the Blues followed the communitarian approach
commercial insurers “cherry picked” people with fewer health
,
problems, the new state laws applied to all carriers. State policymakers hoped this would guarantee broad access to affordable coverage.
S
This aspiration largely went unfulfilled. A considerable
H
body of research documents that these laws did not increase
Aof the
coverage, although they changed the composition
insured population.15 Specifically, high-risk individuals
N had
an easier time obtaining coverage while many healthier individuals dropped insurance due to rising premiums.I In their
purest form, regulations requiring community rating
C and
guaranteed issue have proven largely unsustainable. The
Qto the
voluntary nature of health insurance purchases goes
crux of the matter. When state regulation compelsU
insurers
to cover high-cost individuals at the same rate as healthier
A
people, premiums rise, causing the latter to drop coverage.
The only state that sustained a reduction in the number of
uninsured under a communitarian regulatory scheme is Mas1 obsachusetts, which mandated that (nearly) all residents
tain coverage.
1
In sum, health insurance regulation began as0a layer
cake where states held sway and varied greatly in their ap5 and
proaches. How insurance markets were structured
regulated depended substantially on where one lived.
T Over
time, however, the federal government became increasingly
S the
involved. ERISA sorted out a division of labor between
two levels of government, but this began to blur in the 1980s
and 1990s as federal policymakers expanded their scope of
regulation. The enactment of the ACA creates a sea change
in health insurance regulation with the federal government
playing an even larger role. We return to this development
later in the chapter.
Grant Programs
and The Fabric Of
Federalism
The workhorse of health care federalism is the intergovernmental grant. These grants feature a mix of incentives and regulation. To entice states to ameliorate some health problems,
national policymakers promise to provide funding. States do
not have to participate in grant programs, but they usually find
the money irresistible. In exchange for the subsidy, ­national
policymakers impose certain requirements concerning goals
and processes (whether in the statute or via ­administrative
regulation) that reflect the preferences of federal principals
and constrain state discretion. As of 2011, the federal government funded nearly 1,000 grant programs to states and localities, dozens of which focused on health.16 Many of the health
grants claim a small share of the federal purse and target specific groups or diseases. For instance, the federal ­Centers for
Disease Control and Prevention provides monies to states
to support early detection programs for breast and cervical cancer. At the other end of the scale stands ­Medicaid, a
­major ­entitlement program that funds a broad range of health
­services for over 60 million low-income people and consumes
a major share of federal and state budgets.
Over the past 45 years, health grants have grown in importance. As Table 6-1 indicates, all grants to state and local governments in 2010 were over 55 times greater (seven times in
constant dollars) than in 1965 while health grants were 465
times greater (66 times in constant dollars). At the inception
of Medicaid, health programs accounted for 6% of all federal
grants to states and localities. By 2010, this share had grown
to 48%. Within the health sector, Medicaid loomed large,
accounting for nearly 95% of all federal health grant dollars
flowing to state and local governments.17
Health care grants vary along an array of dimensions. Some
are project grants where states or localities compete for a
limited pot of federal money to undertake a specific activity.
The ACA, for instance, encouraged states to apply for “early
innovator” awards to help them establish information technology systems for health insurance exchanges. Under the
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
Table 6-1 Federal Outlays for Grants
to State and Local Governments: Health
and Other (in Millions of Dollars)
Health
Percentage
of All Grants
Year
All
Grants
Health
1965
10,910
624
6
1970
24,065
3,849
16
1980
91,385
15,758
17
1990
135,325
43,890
32
2000
284,659
124,843
44
2005
428,018
197,848
46
2010
608,390
290,168
48
H
I
G
G
S
,
S
H
A
N
ACA, these exchanges will provide health insurance options
I
to those without coverage. In February, 2011, the federal bureaucracy announced that seven states would receive these
C
grants.18 Formula grants, such as Medicaid, cut a much larger
Q
profile in the health arena and are the primary focus of this
U or
chapter. These grants allocate federal monies to states
their subdivisions according to a specific formula prescribed
A
Source: U.S. Office of Management and Budget, “Historical Tables, Budget of the United States Government, Fiscal
Year 2012.” Retrieved from http://www.whitehouse.gov/sites/
default/files/omb/budget/fy2012/assets/hist.pdf.
by law or administrative regulation. They support “activities
of a continuing nature not confined to a specific project.”19
Formula grants may be categorical or block depending
1 on
how much discretion policymakers want states to have. In
1
the federal government’s terminology, “the typical categorical
grant permits funds to be used only for specific, narrowly
0 defined purposes and populations and includes administrative
5
and reporting requirements that help to ensure both financial
and programmatic accountability.” In contrast, “block grants
T
award funds to state or local governments, to be used at their
S
discretion to support a range of activities aimed at achieving
a broad national purpose.” Block grants tend to have “limited
administrative and reporting requirements.”20 While useful
99
conceptually, the distinction between categorical and block
grants is much fuzzier that these definitions imply. For instance, many block grants spin a substantial regulatory web
on participating states.
Not surprisingly, state officials usually prefer generously
funded block grants. National policymakers, in contrast, go
through cycles. Typically, they like to pursue their own policy
goals through narrowly defined categorical grants. But the
resulting administrative complexity leads to spasms of support for combining existing categorical programs into block
grants (often accompanied by funding reductions). For instance, Congress moved in this direction in the early 1980s
under President Ronald Reagan. But after consolidation, the
desire to control programs and win credit from constituents
for fighting a specific problem (like AIDS) led Congress to create a new generation of categorical grants.21
Certain fiscal arrangements also distinguish grants from
each other. Federal grants vary in terms of requirements for the
state share of financing (or match). In some instance, the federal government promises to pay the entire cost of the grant.
For example, the ACA will in 2015 fully fund the Children’s
Health Insurance Program (CHIP) for certain low-income
states. In other cases, such as Medicaid, states must commit
money from their own coffers to trigger the release of federal
funds. Finally, and of critical importance, grants vary in terms
of whether they are entitlements or capped. The overwhelming majority of health grants are capped. For instance, the legislation authorizing CHIP in 1997 set aside a fixed allocation
for states depending on a number of factors. States that opt
for a separate CHIP program can suspend enrollments once
they have exhausted their federal grant. In contrast, Medicaid,
as the king of the hill in the intergovernmental arena, is an
entitlement in a twofold sense. First, the federal government
must match whatever states choose to spend on the program.
The minimum federal share is 50%, and some poorer states
receive 75% or more. Second, once a state decides to make
certain individuals eligible for specific Medicaid services (e.g.,
prescription drugs), it cannot abruptly suspend enrollments or
access to these services.22
Grants and Representational
Federalism
The importance of intergovernmental grants as a policy tool
intersects with basic questions of what political scientists call
“representational federalism.” This concept focuses on the
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
100
PART II • National Political Institutions
degree to which and ways in which state officials influence
federal policy processes. With the growing activism of the
federal government in the 1960s, concern mounted in some
quarters that state governments were losing a meaningful role
in American federalism. In the late 1970s, however, Harvard
political scientist Samuel Beer challenged this view.23 While
acknowledging “a large and sudden surge upward in the
growth of the public sector, largely under the impetus of the
central government,” he did not see this development as massively shifting power to the national level. Instead he stressed
“the emergence of new arenas of mutual influence among levH
els of government” that “is adding to our national system of
representation.” Beer identified two primary vehiclesIfor state
representation—the activities of the intergovernmental
G lobby
and implementation processes.
G
States and localities have associations that seek to S
promote
their interests in Congress and the White House.
, In the
The Intergovernmental Lobby
health arena, these groups include the National Association
of State Medicaid Directors, the National Association of Insurance Commissioners, and many others. Within the S
intergovernmental lobby, governors loom especially large. Governors
H
rely on particularistic, bipartisan, or partisan vehicles to shape
A
federal health policy. They frequently work in particularistic
fashion outside formal associations to influence national poliN
cymakers in ways that benefit their own states. In this regard,
35 governors representing over 85% of the nation’sI population have offices in Washington. 24 Governors also
C work
through bipartisan organizations. By far the most important
Q Born
of these is the National Governors Association (NGA).
in 1908, this association adopted its current nameU
in 1977.
The NGA has several standing committees, including one on
A typihealth policy, and a staff of about 100. The governors
cally convene at winter and summer meetings at which twothirds of those present and voting can approve an NGA policy
1 testiposition. The executive director of the NGA frequently
fies before Congress on health policy issues. The NGA
1 also
employs lobbyists who monitor developments on Capitol Hill
0
and seek to protect the interests of states on Medicaid, health
reform, and related matters.
5
Governors also turn to partisan organizations or coalitions
T
to present their views to Congress and the president. EstabS not
lished in 1963, the Republican Governors Association
only seeks to elect more governors from that party, it also
works to leave its ideological stamp on public policy issues
affecting the states. The Democratic Governors Association,
founded in 1983, pursues similar goals from its side of the
partisan divide. The degree to which governors tread particularistic, bipartisan, or partisan paths to influence health policy
varies with the issue and context. In the polarized circumstances of 1995, for instance, Republican governors pursued a
partisan approach in supporting the efforts of House Speaker
Newt Gingrich (R) to convert Medicaid to a block grant.
Two years later, governors worked in more bipartisan fashion
through the NGA to shape legislation establishing the State
Children’s Health Insurance Program.
State Power in Implementation Processes
Although federal grants constrain state discretion, they by
no means eliminate the ability of states to shape processes,
outputs, and outcomes in the health arena. Prior to the civil
war, one of the great federalism debates revolved around the
issue of nullification—whether state legislatures could annul
federal laws within their jurisdictions. While the Civil War
­effectively ruled out such action, states in many respect possess de facto nullification powers, at least over the short term,
as implementing agents. Without officially challenging the
law, states can drag their feet and take other action to thwart
federal intent in the implementation process. The image of
states as puppets with the federal government pulling strings
seldom, if ever, applies even in the case of highly specific categorical programs.
The symmetrical power relationships between the federal
government and the states in grant programs spring from
several sources. Federal administrators often lack enough information about state program activities to fathom whether
they are effectively implementing policy in a manner consistent with the law and administrative regulations. The federal
government’s paltry staff and inadequate information systems
make the monitoring of state behavior difficult. While reformers have called for performance-based accountability in the
case of grant programs, success in establishing them is the
exception rather than the rule.25 Gaining agreement between
the federal government and the states on goals and suitable
output and outcome measures often proves difficult. Efforts
to develop information systems that produce valid, reliable,
and timely data concerning state performance typically prove
daunting. Officials in different states often want to preserve
their own terminology and data management practices, making it impossible to compare the performance of one state to
another. A substantial lag in acquiring data from state officials
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
also exacerbates the problem. By the time some issue shows
up on the federal radar screen, state officials can claim they
have long since dealt with it.
When federal administrators uncover state failings, the
tools they possess to bring state grantees into line also have
limits. Some state problems stem less from willful resistance
than flawed national policy. The grant may be too small for
states to achieve the ambitious goals embedded in a statute.
Or the law may rest on a mistaken theory of how to ameliorate
a health problem. In other cases, a state may lack the administrative capacity (e.g., enough capable staff, adequate H
information systems) to implement the grant effectively. States
I
vary considerably in this regard. So too, the enduring view
Gthe
that states have a special constitutional position and that
federal government and states ought to be “partners” inhibits
G
federal officials from being too assertive in dealing with the
S
states. Moreover, the sanctions at the federal government’s
disposal to compel state action are often difficult to employ.
,
The “nuclear option” in the intergovernmental grant world is
to withhold all federal funds from errant states. But federal administrators find this unappealing because it would oftenShurt
the very people they wish to help (e.g., low-income children
H
in need of health care). Moreover, efforts to impose sanctions
can kindle state lobbying efforts directed at its congressional
A
delegation or the White House to put pressure on federal adN
ministrators to back off.
I
All this is not to suggest that states can blithely ignore
the law and preferences of federal officials. Executives in
Cthe
national bureaucracy typically seek to prod and coax lagQ
ging states to do better in implementing health programs. At
U
times, they can turn to calibrated, smaller penalties to incentivize states (e.g., reducing the flow of federal funds if the
A
state Medicaid program has made payment errors). In this
vein, federal “quality control” systems have encouraged states
to avoid false positive eligibility decisions when reviewing
1 applications for Medicaid (e.g., signing up people who make
1
too much money to qualify). Furthermore, advocacy groups
at times use federal statutes as the basis for suits to require
0
state and local officials to do a better job of implementation.
5
These groups have constituted a kind of unofficial enforcement arm of the federal government. In the late 1990s,
T for
instance, the administration of Mayor Rudolph Giuliani (R)
S to
in New York City adopted enrollment procedures designed
discourage people from applying for public assistance. Among
other things, intake workers routinely accepted an application
101
for Medicaid only after an individual visited their offices a second time. Aware that this practice violated federal regulations,
the Legal Aid Society joined other advocates for the poor in
suing the city. When a federal district judge ruled in their favor, city officials brought their procedures into compliance
with federal law.
On balance, the federal government can seldom compel
state compliance through “command and control.” Power dynamics vary from one intergovernmental grant program to the
next. But in general, the management of the programs tends
to feature negotiation and bargaining when differences between the federal government and the states surface.
Variations in State Capacity
and Commitment
Who gets what from federal grant programs substantially
depends on the capacity and commitment of the 50 state
governments. The governing capacity of states refers to their
ability to formulate coherent, creative, responsive policy in response to a grant and to implement it efficiently, effectively,
and accountably. Fiscal capacity denotes their total taxable
resources and their formal right to tap them for public purposes. Policy commitment in turn focuses on whether the
preferences of the dominant political coalition within a state
support the letter and spirit of the federal grant’s goals.
The Flow and Ebb of State Governing
Capacity
States are widely touted as having appreciably enhanced their
governing capacity over the last half century. Supreme Court
decisions insisting that legislative districts at the state level
reflect the principle of one person, one vote, and the passage
of the civil rights laws in the 1960s helped remove the taint of
racism and undemocratic governance from the states. Many
states also took steps to enhance the capacities of their legislative, judicial, and executive branches. By the 1980s states
were, as one observer put it, no longer perceived as “no-talent
spear carriers worthy only to serve the federal prima donna,
they were moving to center stage and winning an unaccustomed share of the limelight.”26
No handy scorecard exists that allows us to define,
measure, and track trends in state governing capacity with
precision. However, a strong case exists that most states
can under the right circumstances effectively implement
health care grants. Or stated differently, they stand at least
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102
PART II • National Political Institutions
as good a chance of doing so as the federal government.
(In part, this reflects the possibility that the last three
decades have featured an erosion of federal administrative
capacity.)27
While states have bolstered their governing capacity over
the last half century, certain factors caution against exuberance in assessing their ability to implement grants. Above
all, assessments of governing capacity need to acknowledge
more fully its fluidity and potential for backsliding. The 1960s
and 1970s featured a great leap forward in state capacity. The
period after that presents a more mixed picture. For instance,
H
the success of the term limits movement has undercut legI use of
islative expertise and professionalism. The increased
mechanisms of direct democracy (the initiative and
G referendum) in states like California has led to a jumble of laws
G
that foster policy incoherence, fuel gridlock, and undermine
prospects for deliberative democratic institutions. Moreover,
S
an ideology of bureaucratic downsizing, which at times can
,
more aptly be termed dumbsizing, and occasional recessions have in many states eroded government workforces
and the administrative infrastructure needed to implement
S
public programs efficiently and effectively. The worst recession since the Great Depression, starting in late 2007,Hcreated
enormous fiscal stress for many states with public A
employees furloughed, laid off, or not replaced upon resignation or
N a
retirement. In these and other ways, one cannot assume
steady march toward greater state capacity. Moreover,
I states
vary considerably with some of them much more capable of
C
“good government” than others.28
Q in
State fiscal capacity also affects the vigor states evince
implementing federal grants. The taxable resources U
available
to all levels of government increased over the last two decA tide
ades largely because the economy grew. But this rising
has not lifted all boats equally. Substantial variation persists
among states in the monies they can marshal to fund health
1
programs. In 2008, for example, the total taxable resources
ranged from a low of $38,000 per capita in Mississippi
1 to a
high of $84,000 in Wyoming.29 Variations such as these can
0 rebe particularly important when a federal program makes
ceipt of the grant contingent on a state spending 5
a certain
amount of money from its own purse. Under this circumT
stance, less affluent jurisdictions will be at a disadvantage unS so
less the federal government calibrates the funding formula
that it requires no greater fiscal effort from them than it does
from richer states.
The fiscal capacity of a state not only reflects its total taxable resources but also the rules that govern its taxing and
spending decisions. Drawing primarily on ballot propositions
presented to the voters in states that permit the initiative and
referendum, the antitax movement has often succeeded in
handcuffing states fiscally. As the 21st century dawned, over
half of the states had added tax or expenditure limitations
to their constitutions or statutes. These provisions come in
many guises. Some impose strict caps on how much states’
expenditures can increase in a year. Others require any tax
hike to win the approval of a supermajority in the legislature
or the voters in an election. Whatever their precise manifestation, these restrictions have one common characteristic—
they make it harder for states to tap their wealth to pay for
health programs.
The antitax provisions that have taken root reinforce another factor that can make it hard for states to come up with
their share of the tab for health care grants—limited ability
to run budget deficits during recessions. When the economy
sours, federal policymakers often see continued public spending and deficits as a way to counteract the slump. Nearly all
states, in contrast, face requirements to balance their budgets
even if it means slashing public programs. To be sure, states
at times find ways to borrow money to tide them over or
employ an arsenal of fiscal gimmicks to dodge budget cuts.
But these palliatives do not negate the fact that states have
less fiscal capacity during recessions than the federal government. In recognition of this situation, the Obama administration responded to the severe economic recession by pushing
a federal stimulus bill through Congress that temporarily increased the federal match rates to the states for their Medicaid programs.
Substantial Variations in State Commitment
Where there is a way, there may not be a will. The dominant political coalitions within a state may have limited interest in or sympathy for the goals served by a federal health
grant. In the case of competitive grants, this may well lead
them not to apply. On rare occasions, they may even return
grant money. In early 2011, for instance, the newly elected Republican governor of Oklahoma, Mary Fallin, announced that
the state would return a $54 million innovator grant that the
state had won to expedite the creation of an insurance exchange under the ACA. In doing so she affirmed that this step
“accomplishes my goal from the very beginning: stopping the
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
implementation of the president’s federal health care exchange
in Oklahoma.” A key legislator praised her action as “federalism at work.”30
In the case of formula grants, variations in state commitment to the program may lead to stark differences in implementation effort. Medicaid provides a graphic example of
this variation since the federal government has given states
vast discretion to make their programs more or less generous. Consider in this regard two indicators of state Medicaid
effort—program expenditures and enrollees per poor perHfor
son. (We control for poverty because it is a rough proxy
the degree to which a state has more individuals that Ineed
Medicaid.) As of 2008, Medicaid spending per poor person
G
ranged from a high of $17,700 in Vermont to a low of $4,700
in ­Nevada. Among the five most populous states, theGgap
was only slightly less, ranging from $17,400 in New York to
$5,600 in Texas. As for enrollees, Vermont leads the wayS
with
2.6 beneficiaries per poor resident while Montana ranks,50th
with less than 1. Among the five states with the most people,
California sets the pace at 2.3 enrollees per poor person, more
than twice as many as Texas at 1.1.31
S
As the single largest federal grant program, issues of H
state
Medicaid effort intersect with the concept of competitive fedA
eralism. This perspective sees interstate economic competition
as a force constraining state spending on social programsNthat
redistribute benefits from the haves to the have-nots. States
I
purportedly vie with each other to keep their tax burdens low
CAll
in order to retain and attract businesses and the affluent.
else equal, this dynamic makes states reluctant to raise Q
taxes
to enhance Medicaid coverage. A second and related dimension of interstate competition focuses on state fears ofUbecoming welfare magnets.32 This view holds that low-income
A
people gravitate toward states with more generous health
benefits. States with bountiful Medicaid programs presumably
encourage needy people within their boundaries to remain
1
while attracting low-income migrants from other states.33 The
validity of theories of competitive federalism depends not1just
on whether firms, the affluent, and the needy actually0vote
with their feet in the predicted way but on whether policy5
makers perceive that they do.
T
Whatever the exact implications of interstate economic
competition, one fact stands out in the case of Medicaid:SThe
dynamic has not kindled a race to the bottom among states in
their Medicaid effort. To the contrary, all 50 states increased
103
their Medicaid spending (in inflation-adjusted dollars) and enrollees per poor person from 1992 to 2008. This does not, of
course, mean that the forces of interstate competition had no
effect. Perhaps Medicaid growth would have been greater had
these forces been less in play. It also deserves note that Medicaid effort tends to be lower in less affluent states with higher
percentages of poor and uninsured residents. Whatever the
precise causal dynamics, this finding is consistent with a core
thesis of competitive federalism—that states with larger proportions of needy residents will pursue more penurious Medicaid policies.34
Formula Grants and Targeting
Targeting refers to federal efforts to channel funds to states
that need it most. One form of targeting involves the provision of more generous grants to poorer states. Political dynamics make highly calibrated targeting of this kind difficult.
To build a broad supportive coalition for the program, policymakers typically must funnel substantial funds to less needy
states. Again, Medicaid provides a useful example. In creating this program in 1965, national policymakers attempted to
compensate for disparities in wealth among states through a
formula that increases the federal match rate for states with
lower per capita incomes. However, it also constrained targeting by guaranteeing that the federal government would shoulder at least 50% of Medicaid costs for the most affluent states.
The Medicaid formula has drawn criticism. For instance, a
Government Accountability Office (GAO) report asserts that
targeting would improve if Congress eliminated the 50% floor
on the federal match and adopted a more refined measure of
state fiscal need.35 The GAO contends that state per capita
income suffers from many limits as an indicator and should
be replaced by a formula that more fully takes into account a
state’s total taxable resources, population below the poverty
line, and health care prices.
But members of Congress know that any effort to modify
an existing formula opens a political can of worms. Notions
of targeting collide headlong with the desires of senators and
representatives to protect the amount of funding flowing to
their jurisdictions. The constitutional guarantee that each
state has two senators assures that even formula changes
that would benefit the most populous states face roadblocks.
For instance, the modification in the Medicaid formula recommended by GAO would direct more federal monies to the
four most populous states—California, Texas, New York, and
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104
PART II • National Political Institutions
Florida.36 United, the congressional delegations from these
states possess substantial clout in the House of Representatives with nearly one-third of all members coming from them.
In the Senate, however, these four states comprise only 8% of
the votes.
State Manipulation of the Formula
Whether well targeted or not, formulas establish objective
criteria for allocating grant monies to the states. But this
does not always mean that states cannot game the formulas during the implementation process. The potential
H for
states to extract more federal dollars than the formula allows becomes greater to the degree that the federalI government requires states to put up some of their ownGmoney
to obtain grant funding. In this regard, states have been
G
particularly entrepreneurial in shifting Medicaid costs to
the federal government by using “free” money toScomply
with federal matching requirements. This practice picked
,
up steam in the early 1980s. Faced with acute budget
problems, policymakers in West Virginia persuaded hospitals to “donate” (in fact loan) some $22 million
S to the
state Medicaid program. This donation became part of the
H dolstate’s Medicaid match needed to draw down federal
lars. Because West Virginia has a low per capitaA
income
and hence a higher federal match rate, this move generated
N Virover $60 million in federal Medicaid funds. Once West
ginia officials received the federal dollars, they found
I a way
to return the $22 million to the donor hospitals. The state
C Medused the remaining federal money to support various
icaid services. Other states soon followed West Virginia’s
Q
lead. By 1990, all but six states operated a donation or proU rate
vider tax program designed to inflate the federal match
via the use of free dollars for the state’s contribution.
A The
effect on the federal purse was substantial. Medicaid law
generally envisions that the federal government’s share of
all program costs will approximate 57%. By 1992,1its proportion of the Medicaid tab had, by one estimate, climbed
1
to over 65%.37
0
Concerned about state legerdemain, federal policymakers responded with proposals to curtail this gaming
5 of the
Medicaid formula. When the NGA and other elements of
T
the intergovernmental lobby complained that these proposS from
als would hurt the poor, Representative Normal Lent
New York (R) retorted that these complaints were akin to
catching a bank cashier embezzling funds to support his
wife and children. “Should he be allowed to do it for another
year lest we lower the standard of living for his family?”38
Given strong lobbying from the governors and sympathy for
their position in the Democratically controlled Congress, it
was not until 1991 that the administration of George H. W.
Bush successfully negotiated approval of a law that closed
some of the loopholes that had allowed states to inflate their
match rates.
While these and related measures curbed fiscal gaming
by the states, they by no means eradicated it. Throughout
the 1990s and into the 2000s, many states continued to elevate their match rates by exploiting payment provisions for
hospitals that disproportionately served the uninsured and
Medicaid enrollees. Intergovernmental transfers of funds between state and local governments or between state agencies
helped lubricate this manipulation. Typically, use of intergovernmental transfers involved two steps. First, the state would
use its discretion to reimburse public hospitals (or another
kind of institution) at the maximum Medicaid payment rate
permitted under federal law (the upper payment limit). This
would trigger the release of federal matching funds to the
state. Second, hospitals would then retroactively accept
reimbursement for less than the upper payment limit and
transfer funds back to the state. Like provider donations and
taxes, intergovernmental transfers essentially provided states
with “free money” to apply to their share of the Medicaid
match. By one estimate, state manipulation of this mechanism had by the early 2000s raised the federal share of Medicaid costs three percentage points above what the formula
specified.39
Executive Federalism: Waivers
Galore40
Federal grant programs are not set in concrete. They often
change appreciably due to congressional modifications of
the original legislation or court decisions. Programs may also
undergo a more subterranean transformation through the implementation process via “executive federalism.”41 This intergovernmental pattern emphasizes interaction between the
executive branches at the national and state levels to modify
grant programs primarily through the administrative process.
Over the last two decades, a burgeoning reliance on Medicaid
waivers has been the hallmark of executive federalism. To an
unprecedented degree, these waivers have allowed states to
reinvent their Medicaid programs without significant changes
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
105
in federal law. They have afforded presidents, governors, and
other policymakers new opportunities to surmount the veto
points that frequently delay or block action in the American
political system.
moved to renew MassHealth in 2004, however, the Bush administration signaled that it wanted significant changes in the
waiver as a condition for its continuation. In particular, federal officials wanted to redirect MassHealth monies that had
A waiver is a congressional delegation of authority to flowed to certain major providers toward coverage expansions
the executive branch to permit selective deviations from for the uninsured. They warned that if Massachusetts failed
the law. Two kinds of waivers figured prominently in the to do this, it risked losing $385 million in federal Medicaid
transformation of Medicaid during the 1990s and 2000s—­ funds. This prospect kindled intense intergovernmental bardemonstrations and program waivers to promote home- and gaining. Eventually Governor Mitt Romney (R) and Senator
community-based services (HCBS). The demonstration Edward Kennedy (D) negotiated an agreement with the Bush
administration to retain the funds to help subsidize a mawaivers derive from Section 1115 of the Social Security
H
Act. Endorsed by President John F. Kennedy and approved jor coverage expansion. The state’s legislature approved this
by Congress in 1962, this provision gives the federalI bu- plan in April 2006, and the federal bureaucracy signed off on
reaucracy authority to waive statutory requirements soG
that it as an amendment to the original MassHealth demonstrastates can experiment with alternative approaches to social tion. Subsequent implementation helped earn Massachusetts
G
programs. It requires that the demonstrations be formally the distinction of having by far the lowest proportion of uninsured residents of any state in the country.44 The Massaevaluated to foster policy learning. The federal government
S
approved relatively few Medicaid demonstrations in the pro- chusetts model became the template for health reform at the
,
gram’s first quarter century—about 50 in all. This changed national level in 2010.
markedly when President Bill Clinton came to office in 1993.
While the Section 1115 demonstrations afforded opporClinton wasted no time in signaling his openness to S
state tunity for states to try bold and sweeping Medicaid reinvenwaiver proposals. Many states, including Massachusetts, tion, other statutory provisions opened the door to a steady
H
Minnesota, New York, and Tennessee, responded promptly.
stream of incremental changes that yielded a substantial
They won approval for waivers that moved the bulk ofA
their cumulative effect. Section 1915 of the Social Security Act,
Medicaid enrollees into managed care plans while expand- which Congress approved in 1981, allows states to petiN
ing eligibility to new groups of low-income people. Clinton’s
tion for Medicaid waivers to provide HCBS to the elderly
successor, President George W. Bush, continued to encourand people with disabilities who otherwise tend to receive
I
age waivers, renewing many that had commenced during care in nursing homes or other institutions. Spurred on by
C
the Clinton years and encouraging states to submit others
advocates, a major Supreme Court decision, 45 and a wideunder his administration’s Health Insurance FlexibilityQ
and spread preference for HCBS over institutional care, the federal
Accountability initiative.42 The receptivity of the Clinton and government approved large numbers of Section 1915 waivU
G. W. Bush administrations to waivers fueled an outpouring
ers. By 2008, the number of these waivers in operation had
of state initiatives. By the end of the Bush years, about
A 45 grown to 280 with all but two states providing some portion
states and the District of Columbia had won approval of at of HCBS through them.46 Forty percent of all Medicaid enleast one demonstration waiver, many of which were com- rollees receiving HCBS did so via waivers and the program
1
prehensive and transformative.43
allocated two-thirds of its HCBS dollars through them. 47
Among these demonstrations, none loomed larger in1sig- Medicaid spending on HCBS grew from 15% of its long-term
nificance than the waiver Massachusetts received in 2006 care costs in 1992 to 40% near the end of the G. W. Bush
0
administration.48
to forge near universal coverage for its residents. This development hearkened back to the mid-1990s when Massachu5
setts successfully applied for a demonstration waiver called
T
MassHealth to expand eligibility for Medicaid while mandatS
ing that many beneficiaries enroll in managed care. In 2001,
federal administrators approved a three-year extension of
the waiver with little negotiation. When state officials again
The rise of waivers means that major decisions about
Medicaid get made within the executive branches of the
federal and state governments.49 Consider, for instance, the
Massachusetts waiver discussed earlier. This reform derived
from a highly discretionary decision within the federal executive branch to shift its posture on the kind of waivers it
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106
PART II • National Political Institutions
would ­approve. No congressional action required the Bush
administration to alter its position on the contents of the
­M assachusetts waiver in 2005. The Centers for Medicare
and Medicaid Services could have continued it as is. Instead,
however, federal officials stood their ground in promoting a
new perspective on Medicaid waivers—that they should direct monies away from institutions to coverage expansions
for individuals. This shift in the exercise of federal administrative discretion was probably a necessary, if not sufficient,
condition for the birth of Massachusetts health reform. The
Massachusetts case also captures the degree to which waivH
ers involve bargaining and negotiation between the national
I with
and state governments. Power tends to be symmetrical
neither level getting all it wants.
G
It deserves note that HCBS waivers tend to depart from this
G
model of intergovernmental bargaining. Instead, processes
associated with these waivers typically reflect a “licensing”
S
model.50 While some negotiation between national and state
,
officials occurs over HCBS waivers, much interaction is routine. State administrators present the requested information as
a boilerplate application. Federal officials check to make
S sure
the waiver application is complete and conforms to program
H
requirements. They seldom attempt to impose their particular
policy and administrative preferences on the waiver. Once
A approved, federal officials conduct little oversight and tend to
N like
renew them routinely. The waiver process becomes more
obtaining and keeping a driver’s license.
I
C
Federalism and TheQ
Affordable Care Act
U
The passage of major health reform in 2010 dramatically altered the federalism playing field. Developments A
in three
arenas deserve particular note—insurance regulation, the creation of subsidized exchanges so that individuals can comply
1
with the mandate to obtain coverage, and a major Medicaid
expansion. These developments along with the rise
1 of the
Tea Party and partisan polarization have fueled an outburst of
0
fractious federalism.
5
T
The ACA creates something of a federalism roleS
reversal
Implications for Insurance
Regulation
for health insurance regulation. As discussed earlier in this
chapter, states had dominated the regulation of carriers
since the advent of health insurance. Even after the 1974
enactment of ERISA, states remained in the driver’s seat,
especially for the small-group and individual markets. The
ACA creates a comprehensive regulatory regime for all private health insurance, with state decision making relegated
to the margins. To be sure, states will continue to play a role
in the enforcement of consumer protection, insurer solvency
and other matters. But federal law will guide many of their
activities.
The ACA regulatory regime mirrors the communitarian
approaches of early Blue Cross and Blue Shield plans and
the policies some states adopted starting in the 1990s. Specifically, the law prohibits insurers from rejecting or failing
to renew coverage for individuals based on their health, including “preexisting conditions.” It bans lifetime and annual
limits on how much an insurance company will pay to meet
the health care needs of a beneficiary. It also prevents the
carriers from rescinding health insurance coverage except
in cases of fraud. The ACA requires carriers to cover adult
children up to age 26 under family plans. It also strictly limits variations in health plan premiums to three to one (the
highest group may be charged no more than threefold the
lowest). It permits variation within this range based on such
factors as age, geographic area, tobacco use (smokers may
be charged premiums 1.5 times more than nonsmokers),
and family structure (e.g., single, couples, married people
with children). Of particular note, the ACA ends the practice of charging higher premiums to women. The ACA also
calls for greater standardization of plans so that consumers can better understand them. The standard plans will for
the first time include a federally defined “essential benefit
package.” The ACA requires states to subject all health premium increases to rigorous review. Overall, health reform
will promote greater uniformity in state regulatory practices
although it “grandfathers” in some plans that do not meet
the new standards.
This entire regulatory regime depends on a controversial lynchpin, a mandate that all individuals obtain coverage or face a financial penalty. The failed experience of the
Blues and earlier state regulation with guaranteed issue and
community rating demonstrated that the communitarian
approach is not viable in voluntary markets. The ACA significantly raises the bar for most state regulatory regimes.51
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
It also permits more progressive states to go beyond its
standards. For instance, four states require insurers to offer adult children coverage under their parents’ family policies above the ACA age limit of 26, and others may do so
in the future.52 States may also impose coverage mandates
that exceed those of the federal “essential benefit package.”
However, the ACA requires states to pay for these “extra”
benefits for those receiving federal subsidies to purchase insurance through the newly established exchanges. This will
create a strong disincentive for states to exceed the basic
service package.53
H
The apparatus set up to review increases in health insurance premiums points to some of the nuances ofI the
new federalism under the ACA. The McCarran–Ferguson
G
Act of 1945 ceded to states the authority to review and
G
approve health insurance premiums. But prior to the ACA
only about half the states chose to regulate premiums.
S 54
The ACA encourages states to implement rate review and
,
imposes sanctions on insurers that cannot justify increases
above a federally established threshold (initially, a 10% annual increase). The federal government launched a S
$250
million grant program to help states build their capacity to
H
perform this regulatory function. States with review procedures that the federal government deems adequate willA
conduct annual reviews. The federal government will step in to
N
perform these reviews if a state fails to forge an acceptable
process.
I
C
Q
The health insurance exchanges may come to be the U
most
visible manifestation of post-ACA federalism. The exchanges
A
are intended to promote “more efficient and competitive
Implications of the Insurance
Exchanges
(health insurance) markets for individuals and small employers” when the law’s individual mandate goes into effect
1
in January 2014.55 The ACA permits, and federal authorities
1
have strongly encouraged, states to take the lead in designing and operating exchanges. But if states fail to do so,
0the
federal government will establish and run them. Whether
5the
states choose to participate or turn the function over to
federal government will markedly affect the fabric of federalT
ism. In the first 15 months after passage of the ACA, just over
Sfor
one-third of the states had begun to lay the foundation
the exchanges with 13 passing laws to establish them. But
107
l­egislation to create the exchanges had failed to win approval
in 15 states; in several others, no such legislation had even
been introduced.56
The country’s success in expanding health insurance depends heavily on the effective implementation of the ACA’s
exchange provisions. The law provides that uninsured legal
residents with incomes between 133 and 400% of the federal
poverty level (FPL) obtain insurance through the exchanges
or face a tax penalty. The federal government subsidizes the
premiums for those in this income cohort through tax credits.
The lower a person’s income, the more federal assistance he
or she will receive. The ACA also requires exchanges to administer enrollment for those with incomes below 133% of
the FPL who will be on Medicaid. Finally, the exchanges will
provide an enrollment portal for individuals and small businesses ineligible for any federal subsidy but interested in using
the services of the exchange.
At the most basic level, the exchanges are supposed to
function like the benefits offices of large corporations, arraying health plan choices and expediting enrollment. They
are to protect consumers by ensuring that the plans offered
by private carriers through the exchanges meet high standards. They will collect and array information about health
plan quality, provider networks, costs, and other features to
aid consumer decision making. By 2013, the exchanges must
offer consumers the opportunity to obtain pertinent information on the web and through a toll-free telephone service.
Exchanges will also provide “Navigators” who offer culturally tailored outreach and enrollment assistance to individuals. Prior to the ACA, individuals without access to human
resource (HR) offices in large corporations or public agencies
had largely been on their own to deal with the complexities
of purchasing health insurance. Small businesses without
resources to invest in benefits administrators have relied on
agents or brokers compensated by insurance companies. In
concept, the exchanges will significantly reduce the complexities and high information costs faced by individuals and small
firms. Policymakers hope that these efforts to create “smarter
markets” through the exchanges will spark vigorous competition among carriers to offer attractive insurance options at
reasonable prices.
In addition to serving as the “über HR office” for individuals and small businesses seeking to buy insurance, the
exchanges face the formidable task of conducting ­eligibility
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108
PART II • National Political Institutions
determinations for Medicaid and for those between 133 and
400% of FPL. The exchanges must verify whether applicants are legal residents, check their income, and administer
certain exemptions from the ACA coverage mandate. To
accomplish this, the exchanges will need to employ stateof-the-art information technology to tap into federal and
state administrative data concerning the taxes, wages, and
immigration status of applicants. The technology must also
link them to the enrollment systems of insurance carriers
participating in the exchanges. In their operation of incomebased eligibility systems for Medicaid and other social proH
grams, no state has achieved the enrollment efficacy that
I
the exchanges will demand. The implementation challenge
of bringing these systems online calls for an unusually
G high
level of state commitment and ­capacity. The ACA proffers
grants to the states to help them plan and designGthe exchanges. States were supposed to win federal approval
S of
their exchange proposals by January 2013 but have some
,
leeway to take this step at a later date.
State regulatory regimes could affect the viability of the
exchanges even when the states turn their operationSover to
the federal government. This stems largely from the fact that
the exchanges will not have a monopoly on the saleH
of insurance. This raises the possibility that carriers outsideAthe exchanges will go all out to market products to the young and
N richer
healthy. They might, for instance, do this by offering
maternity or wellness benefits (e.g., yoga classes, acupuncI
ture). Moreover, insurance brokers might be tempted to steer
C limits
customers to these carriers if state or federal regulation
or prohibits their fees for referrals within the exchanges.
Q Any
such development will create problems of adverse selection
U them
for the exchanges; those obtaining insurance through
will be older, sicker, and, hence, more expensive. A
This will
drive up premiums for insurance sold through the exchanges
as well as the costs to the federal government of subsidiz1 the
ing these purchases. State regulation of carriers outside
exchanges will help determine whether this risk shifting
1
occurs.
0
5
The ACA also mandated the largest expansion of Medicaid
since its birth in 1965. Nearly all the uninsured up T
to 133%
of the FPL will be entitled to Medicaid. 57 RoughlyS
half the
The Medicaid Mandates
32 million people projected to gain coverage through the
ACA will do so via the program. Colleen Grogan’s chapter
in this book (Chapter 9) dissects the implications of the
ACA for Medicaid. For present purposes we offer a brief observation related to federalism. The ACA reversed a trend in
place for nearly two decades to afford states more Medicaid
discretion. The outpouring of waivers to states under Presidents Clinton and G. W. Bush stoked this devolution. So
too did various statutory provisions that gave states new
options to cover certain populations (e.g., those needing
certain long-term care services) and freed them from other
requirements (e.g., concerning provider payment). In contrast, the ACA imposed a bevy of new mandates. It mandated coverage of poor uninsured adults, a group which
most states had long neglected (especially adults without
children who were previously covered in only six states).
Simultaneously, the ACA required states to preserve their
existing eligibility criteria at least until the new law takes
effect in 2014. This mandate came at a time when most
states faced acute fiscal pressure partly brought on by the
Great Recession and the expiration of an enhanced federal
Medicaid match that had been part of President Obama’s
stimulus program. Meanwhile, the Obama administration in
mid-2011 proposed an administrative rule that would place
a greater burden of proof on states to show that their provider payment levels afforded adequate access to care. This
occurred when many states had sought fiscal relief by cutting provider reimbursement.
These mandates kindled an outburst of fractious federalism. Governors responded to the mandate for a great coverage expansion almost exclusively on partisan lines. Despite
a relatively generous federal match for new enrollees (ultimately 90%), nearly all Republican governors denounced
the ACA. Their Democratic counterparts stayed loyal to
the president and backed it. But the maintenance-of-effort
requirement and provider payment regulations sparked bipartisan opposition. The NGA sent a letter to Congress in
January 2011 urging repeal of the ACA’s maintenance-ofeffort provisions concerning eligibility.58 The administrative
proposal requiring that states better document the rationale
for their provider payment decisions galvanized complaints
from Medicaid directors in states with Democratic and Republican governors. One claimed that the Obama administration had gone “overboard” and another termed the
proposal a “power grab.” 59 Meanwhile over half the state
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
attorneys general signed on to a suit claiming that the ACA
illegally coerced states through its Medicaid provisions. According to the suit, the ACA “converts what has been a
voluntary federal-state partnership into a compulsory topdown program,” which violates the Tenth Amendment to
the Constitution of the United States. 60 In June 2012, the
CONCLUSION
H
In forging a constitution aimed at strengthening the federal government, the founding fathers recognizedIthat
states would play an enduring role in American G
governance. Yet it was not until the 20th century that the
Gon
federal and state governments became major actors
the health stage. Those who prefer a neat division of
S labor between the national and state governments would
,
be sorely disappointed as the century unfolded. After
World War II, and especially after the birth of Medicaid,
federal grants and other forces did much to take layerS
cake federalism off the political menu and replace it with
H
marble cake.
Some see the rise of these intergovernmental develA
opments as a sign of growing federal power at the exN
pense of the states. Without question, national grant
programs and other initiatives have shaped the health
I
policy agenda of the states. The centralizing thrust of
C
the ACA stands out in this regard. But it would miss
Q of
the mark to portray states as the timorous servants
the federal government in the health arena. The interU
governmental lobby, with the governors paramount,
shapes the health legislation and administrative A
rules
that the federal government promulgates. Moreover,
states continue to derive considerable clout from their
1
role as implementing agents. The central government
cannot easily coerce states into vigorously implement1
ing federal initiatives and mandates with which they
disagree. States can in critical respects practice de 0
facto
nullification of federal mandates through the implemen5
tation process at least for awhile. Even when the federal
T
piper pays the lion’s share of a program’s costs, states
109
Supreme Court evinced sympathy for this argument. The
court ruled that the federal government could not withhold
funds from a state’s existing Medicaid program if it failed to
implement the ACA’s mandated expansion. This had the effect of making the expansion an option for the states rather
than a requirement.
typically negotiate and bargain in ways that ­allow them
to at least partially call the tune. Furthermore, focusing on the balance of power between the federal government and states makes it easy to overlook the way
in which federalism enhances the role of both levels.
For instance, federal funding formulas for grants have
at times created incentives for both the federal government and the states to do more in the health care arena.
The ACA substantially expands the role of both tiers
vis-à-vis the private sector.
Of course, the balance of power between the federal
government and the states fluctuates over time. The
centripetal thrust of the ACA dissipated significantly
with the Supreme Court ruling on the mandated Medicaid expansion. Moreover, Republicans may, through
the electoral process, gain sufficient control of Congress
and the presidency to repeal the ACA. Aside from this
possibility, other forces could fuel devolution. The burgeoning federal debt may well encourage the federal government to explore ways to reduce the flow of funds to
states while giving them more opportunity to shape programs. Or the federal government could use its waiver
authority under the ACA to give states latitude to find
cost-effective ways to provide near universal coverage.
Some states might try market-driven approaches and
others single-payer models akin to the Canadian heath
care system. Whatever the precise developments, issues of federalism are destined to remain at the heart of
American governance and the quest to achieve a better
balance among costs, quality, and access in the health
care arena.
S
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
110
PART II • National Political Institutions
Study Questions
1. What are the four phases of federalism and health policy?
2. In what ways have both federal and state governments been involved in health insurance regulation?
3. What kinds of intergovernmental grants does the federal government make available to states?
4. What are the two varieties of state representation in influencing the federal policy process?
5. What three state factors significantly influence who gets what from federal grant programs?
6. How does “competitive federalism” affect funding
H for programs such as Medicaid?
7. In what ways can using formulas to allocate IMedicaid funds be problematic?
8. Are states ever granted waivers from Medicaid requirements?
G
G
S
,
9. How might implementation of the Affordable Care Act involve federalism?
Endnotes
1. See Thompson and Fossett, 2008.
2. See Sack, Herszenhor, and Pear, 2011.
S
3. Hamilton, Madison, Jay, and Rossiter, 1964, (No. 39), p. 246, and (No. 46), p. 295. For a contemporary overview of
H
federalism, see Derthick, 2001.
4. The Maternal and Child Health Program, for A
instance, embodies a much more cooperative partnership between the
federal government and the states (Frederickson
N and Frederickson, 2006).
5. Brown and Sparer, 2001.
6. Grodzins, 1960.
7. See, for example, Scheberle, 2004.
8. Starr, 1984, p. 184.
9. See Grogan, 2008, pp. 335–337.
10. Morrisey, 2008, p. 7.
I
C
Q
U
A
11. See Chapter 1.
12. Morrisey, 2008, p. 10.
1
13. This favorable treatment means that individuals
1 do not pay income tax on the amount they and their employers
spend to provide them with health insurance.
0
5
15. Morrisey, 2008, p.13.
Tand Monheit, Cantor, Koller, and Fox, 2004.
16. See, for instance, Simon, 2004, Chollet, 2004,
S and depend on various definitions and assumptions. This number
17. Estimates of the number of grant programs differ
14. Kaiser Family Foundation, 2008.
comes from Dilger, 2011, pp. 6–7.
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 6 • Federalism and Health Care Policy
111
18. US Office of Management and Budget, 2011.
19. Dixit, 2011.
20. US Executive Office of the President, Office of Management and Budget, and General Services Administration, 2010,
p. I.
21. US General Accounting Office, 1998, p.3.
22. Posner, 2003.
23. In the case of long-term care, some states have obtained federal waivers that enable them to cap enrollments and
establish waiting lists for the elderly and people H
with disabilities who wish to obtain home- and community-based
services from Medicaid (Thompson and Burke, 2009).
I
G
25. Nugent, 2009, p. 116.
26. For an overview of various efforts to implementG
performance-based accountability in the context of federal grant
programs, see Frederickson and Frederickson, 2006.
S Among the cases they examine, the maternal and child grant
program to the states comes closest to achieving this model.
,
27. Teaford, 2002, p. 225.
24. Beer, 1978, p. 9.
28. See, for instance, Light, 2003.
S
H US Department of the Treasury. Total taxable resources g­ enerally
30. The data come from the Office of Economic Policy,
denote how much wealth state officials could tax.
AMore technically, it is the unduplicated sum of the income flows
produced within a state and the flows received by its residents that could potentially be taxed.
N
31. Kliff, 2011.
I on Medicaid and the Uninsured for furnishing pertinent data to
32. We thank David Rousseau of the Kaiser Commission
us. Enrollees represent all individuals on the Medicaid
C roles for at least part of the year.
33. See, for instance, Peterson and Rom, 1990.
Q
34. For a review of some of the evidence, see Kenyon, 1996.
U
35. See the data on state variation in Thompson, 2010.
A
29. See for instance, Mead, 2004.
36. US General Accounting Office, 2003.
37. Ibid.
1
1
39. Quoted in Thompson, 1998, p. 39.
0 and King, 2004.
40. Gusmano and Thompson, 2012, and Coughlin, Bruen,
41. This section draws heavily on Thompson and Burke,
5 2007, 2009.
42. Gais and Fossett, 2005.
T
43. Among other things, this initiative encouraged market-based approaches—greater cost sharing for enrollees, the use
S
of Medicaid to provide premium assistance to purchase private insurance, and greater flexibility to trim or otherwise
38. Gilman, 1998, p. 159.
reshape Medicaid’s benefit package.
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
112
PART II • National Political Institutions
44. Thompson and Burke, 2007, p.988.
45. This account draws on McDonough, Rossman, Phelps, and Shannon, 2006.
46. The Supreme Court’s (1999) Olmstead decision interpreted the Americans with Disabilities Act as requiring placement of people with disabilities in a home or community setting rather than an institution when certain conditions
were met.
47. See http://www.cms.hhs.gov/MedicidStWaivprogDemoPGI/MWDL/list.asp?listage=53 (accessed January 22,
2010).
48. Kaiser Commission on Medicaid and the Uninsured
H et al., 2009, pp. 5–7.
49. Thompson and Burke, 2009, p. 39.
I
50. This does not mean that presidents, governors, and civil servants are all powerful in shaping the substance of
G
­waivers. A bevy of Medicaid providers and advocates
often find ways to influence waivers, as do members of Congress and some state legislatures (especiallyG
more professionalized ones). Interviews Frank Thompson conducted
in Florida and Minnesota in 2010 uncovered considerable legislative involvement in shaping major demonstration
S
waivers. For examples of congressional influence, see Thompson and Burke, 2007, p. 996–99.
51. Weissert and Weissert, 2008.
,
52. Kofman and Pollitz, 2006.
S
53. Cantor, Belloff, Monheit, DeLia, and Koller, 2012.
54. Conceivably, the federal government could rule
H that adult dependent coverage for those over age 26 is an “excess”
benefit, putting these expansions in jeopardy.
A
55. US Department of Health and Human Services at http://www.healthcare.gov/law/resources/regulations/guidance-toN
states-on-exchanges.html (accessed July, 2011).
I
56. Department of Health and Human Services, “Initial
Guidance,” http://www.hhs.gov/ociio/regulations/guidance_to_
states_on_exchanges.html (accessed July, 2011).
C
57. Kaiser Family Foundation, 2011, p. 1–2.
Q
58. For all practical purposes, the ability of states to disregard certain earnings pushes eligibility up to 138% of the
U
­federal poverty level.
59. Everstine, 2011.
A
60. Pear, 2011.
61. Page 5 of Case 3:10-cv-00091-RV-EMT obtained
from the Web site of the Florida attorney general, http://
1
myfloridalegal.com (accessed on January 16, 2011).
1
0
References
5
Beer, S. H. 1978. “Federalism, Nationalism, and Democracy in America.” American Political Science Review 72(1): 9–21.
T
Brown, L. D., and M. Sparer. 2001. “Window Shopping: State Health Reform Politics in the 1990s.” Health Affairs
S
20(1): 50–67.
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CHAPTER 6 • Federalism and Health Care Policy
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Cantor, J. C., D. Belloff, A. C. Monheit, D. DeLia, and M. Koller. 2012. “Expanding Dependent Coverage for
Young Adults: Lessons from State Initiatives.” Journal of Health Politics, Policy and Law 37(1): 99–128. doi:
10.1215/03616878-1496056.
Chollet, D. 2004. “What have we Learned from Research on Individual Market Reform?” In Monheit A. and J. Cantor,
eds., State Health Insurance Market Reform (pp. 46–64). New York: Routledge.
Coughlin, T., B. Bruen, and J. King. 2004. “States’ Use of Medicaid UPL and DSH Financial Mechanisms.” Health Affairs
23(2): 245–257.
Derthick, M. 2001. Keeping the Compound Republic: Essays on American Federalism. Washington, DC: Brookings
H
Institution.
Dilger, R. J. 2011. Federal Grants-in-Aid: An HistoricalIPerspective. Washington, DC: Congressional Research Service.
Dixit, R. 2011. “Oklahoma to Return ‘Early Innovator’ G
Grant.” [Blog post]. Retrieved from http://www.ihealthbeat.org/
articles/2011/4/15/oklahoma-to-return-early-innovator-grant-for-insurance-exchange.aspx.
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Everstine, B. 2011, May 12. “House Panel Approves Medicaid MOE Repeal, Block Dem Efforts to Exempt Children,
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Elderly.” Retrieved from https://healthpolicynewsstand.com/Inside-Health-Policy-General/Daily-News/feed/rss/
menu-id-431/Page-98.html.
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Frederickson D., and H. G. Frederickson. 2006. Measuring the Performance of the Hollow State. Washington, DC:
Georgetown University Press.Gais, T., and J. Fossett. 2005. “Federalism and the Executive Branch.” In Aberbach, J.
S486–524). New York: Oxford University Press.
and Peterson, M., eds., The Executive Branch (pp.
Gilman, J. D. 1998. Medicaid and the Costs of Federalism,
H 1984–1992: Health Care Policy in the United States. New
York: Routledge.
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Grodzins, M. 1960. “The Federal System.” In Goals for Americans: The Report of the President’s Commission on
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National Goals. Englewood Cliffs, NJ: Prentice Hall.
Grogan, C. 2008. “Medicaid: Health Care for You and IMe?” In Morone, J., Litman, T., and Robins, L., eds., Health Politics
and Policy (4th Ed., pp. 329–354). Clifton Park, C
NY: Delmar, Cengage Learning.
Gusmano, M., and F. Thompson. 2012. “The Safety Net at the Crossroads: Whither Medicaid DSH?” In Hall, M., and
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Rosenbaum, S., eds., The Health Care “Safety-Net” in a Post-reform World. New Brunswick, NJ: Rutgers University Press.
Hamilton, A., J. Madison, J. Jay, and C. Rossiter. 1964.UThe Federalist Papers. New York: Mentor Books.
ANg, C. Harrington, and M. O’Malley Watts. 2009, November.
Kaiser Commission on Medicaid and the Uninsured, T.
“Medicaid Home and Community-Based Service Programs: Data Update.” Retrieved from http://www.kff.org/
medicaid/upload/7720-03.pdf.
1
Kaiser Family Foundation. 2008, April 21. “How Private Health Coverage Works: A Primer—2008 Update.” Retrieved
from http://www.kff.org/insurance/7766.cfm. 1
Kaiser Family Foundation. 2011, August 3. “Establishing
0 Health Insurance Exchanges: An Overview on State Efforts.”
Retrieved from http://www.kff.org/healthreform/8213.cfm.
5
Kenyon, D. 1996. “Health Care Reform and Competition among the States.” In Rich, R., and White, W., eds., Health
Policy, Federalism, and the American States (pp. T
253–277). Washington, DC: University Press of America.
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Kliff, S. 2011, April 14. “Oklahoma Governor Returns $54M Health Care Grant.” Retrieved from http://www.politico.
com/news/stories/0411/53216.html.
Kofman, M., and K. Pollitz. 2006. Health Insurance Regulation by States and the Federal Government: A Review of
Current Approaches and Proposals for Change. Washington, DC: Health Policy Institute, Georgetown University.
Light, P. 2003. “Measuring the Health of the Federal Public Service.” In Davidson, R. (ed.), Workways of Governance
(pp. 90–120). Washington, DC: Brookings Institution.
McDonough, J., B. Rossman, F. Phelps, and M. Shannon, 2006 (September 27. “The Third Wave of Massachusetts
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Health Coverage Program.” Health Affairs 23(4): 167–175.
Morrisey, M., 2008. Health Insurance. Chicago, IL:GHealth Administration Press.
Nugent, J. 2009. Safeguarding Federalism. Norman:
S University of Oklahoma Press.
Pear, R. 2011, May 3. “Rule Would Discourage States’
, Cutting Medicaid Payments to Providers.” The New York Times.
Mead, L. 2004. Government Matters. Princeton, NJ: Princeton University Press.
Retrieved from http://www.nytimes.com/2011/05/03/us/politics/03medicaid.html.
Peterson, P., and M. Rom. 1990. Welfare Magnets. Washington, DC: Brookings Institution.
S System Continues to be Highly Fragmented. Retrieved from
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Sack, K., D. Herszenhor, and R. Pear 2011 (February
A16). “Along Party Lines, States Diverge on How to Deal with Health
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Scheberle, D. 2004. Federalism and Environmental Policy: Trust and the Politics of Implementation (2nd Ed.).
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Washington, DC: Georgetown University Press.
Simon, K. I. 2004. “What Have we Learned from C
Research on Small-Group Insurance Reforms?” In Monheit A. and
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Starr, P. 1984. The Social Transformation of American Medicine: The Rise of a Sovereign Profession and the Making of
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MD: Johns Hopkins University Press.
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A View from the States (pp. 14–55). Washington, DC: The Brookings Institution.
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Thompson, F. 2010. “Social Program Durability in Good Times and Bad: The Case of Medicaid.” Paper presented at the
1 Association, Washington, DC.
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Thompson, F., and C. Burke. 2007. “Executive Federalism
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Thompson, F., and C. Burke. 2009. “Federalism byTWaiver: Medicaid and the Transformation of Long-Term Care.”
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CHAPTER 6 • Federalism and Health Care Policy
115
Thompson, F., and J. Fossett. 2008. “Federalism.” In Morone, J., Litman, T., and Robins, L., eds., Health Politics and
Policy (4th Ed., pp. 153–172). Clifton Park, NY: Cengage Learning.
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Often Widened.” Retrieved from http://www.gao.gov/products/GAO-03-620.
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US Supreme Court. 1999. Tommy Olmstead, Commissioner, Georgia Department of Human. Resources et al. v. L.C.,
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By Jonathan Zimring. Retrieved from http://www.justice.gov/osg/briefs/1998/3mer/1ami/98-0536.mer.ami.pdf.
S License to Shape the Future of Fiscal Federalism.” In
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Conlan, T., and Posner, P., eds., Intergovernmental
, Management for the 21st Century (pp. 157–175). Washington,
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S
H
A
N
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C
Q
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1
1
0
5
T
S
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
Chapter 7
Why Health Reform Happened
Jacob S. Hacker
H
I
G
G
S
,
This chapter tells the tale of health reform from the perspective of a
participant in the process, highlighting the many bumps along the road
S
that America traveled on the way to formulation and passage of the
H
Affordable Care Act.
A
N
I
As the health care debate reached fever pitch in August 2009,
C
an e-mail arrived in my inbox. The subject line was innocuous
enough: “comment.” The text was less so: “You are
Q working for the enemies of this nation. I was making 6 figures
­before you were even born you little punk. You haveU
no right
to take the liberties that this country has fought andA
died for
and try to destroy it! You should be ashamed of yourself! . . .
You should be shipped to Gitmo!” A few days later, a similar
1 left on
­message—with some choice words thrown in—was
my office voicemail, surprisingly to me, in a female voice. I
1
saved the message, just in case.
Over the coming months, my hate mail—and 0
yes, fan
mail—became a running marker of the polarized debate.
I
5
tried to stop reading the full text of the messages, immediT
ately deleting them or saving them to a folder I had created
S 2010,
for the particularly threatening ones. When, in early
Republican Scott Brown captured the Massachusetts Senate
seat opened by Ted Kennedy’s death, I received the following
reasoned response to an op-ed that another political scientist
and I had written arguing that Democrats could and should
still push ahead:
communist fucking rat. you rat vermin mother­
fuckers will be exposed. well will tea party freedom
and liberty and the constiuttional republic and
you fuckers will pay for your treason.
i will not go down easy and live in 1984 you
fucking animals!
Compared with that missive, the note I received the next
day was a model of wit: “No wonder Americans are overwhelmingly against this monstrosity, when PhDs from Yale
can’t even muster an [sic] cogent defense of it.”
Of course, the hate mail I received was a trickle compared
with the flood that poured into Congress and the White
House. Yet Congress and the White House were writing the
9781305172005, Health Politics and Policy, Fifth Edition, Morone/Ehlke – © Cengage Learning. All rights reserved. No distribution allowed without express authorization.
CHAPTER 7 • Why Health Reform Happened
law. I was merely, as one critical article more or less accurately put it, “an academic who has no medical background
and doesn’t serve in the Obama administration, and whose
original proposal was published in a largely unread book.” 1
My “largely unread book” was The Road to Nowhere, an
account of the rise and fall of the Clinton health plan published in 1997.2 And while it did not contain my “proposal”—
I published the proposal that would provoke so much ire a
few years later in 2001—it did, unbeknownst to me at the
time, launch me on the path that would end with me in the
crosshairs of conservative agitation and the nation with a new
H
health care law.3
All of which raises two obvious questions: How did II end
up in the crosshairs? And how did the nation end up with
Ga
new health care law? The former question is beyond trivial
G
compared with the latter. The only reason for interest in it,
at least outside my immediate family, is that it has implicaS
tions for the latter. Fortunately, it can be answered quickly:
,
I became directly involved in promoting what I saw as good
policy and, in particular, what came to be called the “public option”—a public insurance plan modeled after…

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