Health Policy, Federalism and the American States

Robert F. Rich, William D. White

• Publisher: Routledge
• Year: 2019
• Print ISBN:
  9781138385818
• eBook ISBN:
  9780429762642
• Topic: Social Sciences
• Subtopic: Social Work
• Index: Social Sciences

First published in 1997, this volume emerged in the ongoing struggle between those favouring centralized and those favouring decentralized government, and has three goals: 1) To illustrate how theories of federalism and intergovernmental relations can provide a useful framework for examining how to 'divide up the job in the health care area'; 2) To assess the capacity of the states to actually implement health care policy changes; 3) To weigh the merits of alternative visions of the future roles of states and the federal government in health care policy.

Part One
Federalism, Health Policy, and the States

Chapter One
Health Care Policy and the American States: Issues of Federalism

Robert F. Rich and William D. White

The role of the states in the development of American public policy has been a source of tension and debate throughout United States history. What is the appropriate balance of power and authority between the federal, state, and local levels of government? The answer to this question has taken different forms over time. Policymakers and Congress are currently engaged in renegotiating the roles of federal and state government in the areas of health and welfare policy (and social policy more generally); they are also reexamining what the overall scope and breadth of government should be.

In the midst of this renegotiation, a major struggle is underway between those, on the one hand, who favor a centralized form of government with national supremacy and those, on the other hand, who favor a decentralized form of government with state supremacy. Should the states simply be the administrators of a national framework and be relegated to a technical role? Or, through devolution, should the states become the implementors of the “national interest” in these critical policy areas and be given the authority to develop independent policies and programs as well as the fiscal and administrative capacity to make them work? More important, should the “national interest” be represented by the collective will of the states? In other words, should the United States have two types of government—federal and state—both shouldering significant and important responsibilities and authority? Or should we follow what Derthick (1994) has called a strong senior/weak junior partner model—a system in which the federal government is the dominant senior partner and the states are weak junior partners—in either a literal or a metaphorical sense? That is, a system in which the federal government can exercise dominance whenever it chooses and set policy at will, either assuming complete responsibility for policy areas or delegating selected administrative and fiscal responsibilities to the states as weak junior partners, while retaining full control over setting policy. These questions represent significant tensions within a model of federalism (the senior/junior partner model) that has been well accepted within the nation for much of the 20th century.

The national debate over health care reform between 1992 and 1994 and more recent discussions of welfare and Medicaid/Medicare reform have raised a similar critical question: What is the appropriate division of tasks and responsibilities in health policy between federal and state government? In part this debate concerns the relative administrative and fiscal capacities of state and federal government to perform various functions: designing and enforcing regulations, providing adequate services for the underserved populations, containing costs, and ensuring quality of services and accountability. But embedded in this debate are also questions about the appropriate role of government, and about the commitment and political will of the states. At issue, thus, is not only the most appropriate level of government to perform particular functions but also the extent to which government should be involved at all.

One perspective on the debates since 1994 over welfare reform, Medicaid reform, block grants, and devolution is that they are part of an ongoing political cycle that alternately emphasizes centralized and then decentralized approaches to public policy development—that is, what Nathan (1993:18) has described as a “cyclical pattern of federal-state relations in American federalism.” Implicit in the notion of political cycles is some sort of stable underlying paradigm for dividing tasks and responsibilities between levels of government. Scholars agree that since the time of the New Deal, the dominant paradigm in the United States for health care and many other areas of social policy has been the just-mentioned strong senior/weak junior partner model.

An alternative perspective on the current debate is that rather than simply experiencing an “equilibrating tendency of the political system [in which states] move into areas of public policy when the national government is moving out of them or at least not taking any initiative” (Nathan 1993: 244), we are undergoing a fundamental paradigmatic shift away from a senior/junior partner model. Indeed, the federal government has less commitment to social programs, especially those that involve entitlements (e.g., welfare, unemployment insurance, Medicaid, food stamps) and redistribution of resources. States, on the other hand, have, since the early 1980s, “increased their influence relative both to the federal government and to local governments and nonprofit organizations” (Nathan and Doolittle 1984: 101). From this perspective, health care provides a “prime example of how states can be testing grounds for policies that may or may not have national application” (Warner 1990: 16).

Proposals forwarded in Congress for devolving administrative authority (through block grants) and sharply reducing federal investment (through significant reductions in federal aid) represent a significant change in federal/state relations. If enacted, the new proposals would substantially alter the social compact that government has traditionally administered. Proposals would, first of all, end entitlements by switching the basis for determining the federal contribution from a need-based, formula-driven mechanism to a fixed contribution indexed to what is feasible in the context of a “balanced budget,” basically moving us from a defined benefit system to a defined contribution system. Second, states would have much more discretion in designing programs that respond to local needs, while assuming more of the financial responsibility for meeting these needs. Third, the federal government’s role in ensuring “equity” across state lines would be substantially diluted. In short, what Nathan (1996) has called the “‘devolution’ revolution” could, if implemented, be truly revolutionary.

Moreover, at the same time that Congress is debating sweeping changes, powerful challenges are emerging from below to the role of states and localities as “inferior” governments in the U.S. federalist system. States are becoming increasingly aggressive in their questioning of federal dominance, and are also demonstrating enhanced administrative and fiscal capacities to conduct programs of their own. Thus, state governors have been exerting pressure to end unfunded mandates, while states have been actively experimenting with innovative health and welfare policy approaches. Thus, in 1995, the governors also advanced their own proposal for welfare and Medicaid reform (National Governors Association 1996).

Federalism and Health Care Policy

This volume specifically examines federalism and the American states in relation to health care policy. We analyze issues associated with a broad range of health care policy innovations, including incremental changes in health care delivery and finance as well as state and federal cost-containment policies. Whereas almost any policy innovation may be thought of as a “reform,” we use the term health care policy here because health care reform in recent years has become closely allied with comprehensive national health reform efforts.

Since the mid-1980s, the states have launched a series of independent health policy initiatives (Rogal and Helms 1993). Over a dozen states, including California, Colorado, Florida, Hawaii, Iowa, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Tennessee, Vermont, and Washington, have experimented with health reform proposals, and many other states have undertaken more modest and incremental policy initiatives, such as creating task forces and commissions and enacting various insurance reforms. Recently, the pace of change in the states has slowed, and some states have retreated from earlier initiatives; however, state involvement in health policy innovations remains high (Intergovernmental Health Policy Project 1995; see also Holahan and Nichols, chapter 2, this volume).

This surge in state involvement in health care reform has culminated in a fundamental change in the health care policy debate, and in many ways has placed health care on the cutting edge of the broader debate over federalism as described here. This is illustrated by President Bill Clinton’s health reform initiative and subsequent developments. Whereas a subordinate role for the states was taken for granted in past debates over national health reform, in the 1992–94 debate, to a substantial degree because of outcry from the states, questions of federalism and the division of tasks and responsibilities between levels of government emerged as a major issue. The collapse of the Clinton administration’s initiative in 1994, rather than eliminating this issue, served to raise the ante. Thus, the focus of debate has shifted from how much leeway to allow the states in relation to federal reform to questions about whether the states can or should undertake primary responsibility for health care policy. For example, should the states be the administrators of the Medicaid program? Two other closely related issues are whether the federal government should launch new policy initiatives and, if so, how? For example, should this be done via federal legislation such as the Kennedy/Kassebaum bill passed by Congress and signed by President Clinton in August, 1996 as the Health Insurance Portability and Accountability Act of 1996, which stipulates through national regulations that insurance will be portable and that preexisting conditions will be covered? And should the scope of the Employee Retirement Income Security Act (ERISA), which constrains states’ ability to regulate health care insurance plans, be expanded? Or should ERISA be curtailed and the states left to decide on new initiatives?

Whereas serious debate about the role of states in U.S. health care policy is new, questions of governance and of the division of responsibilities have been ubiquitous in our federalized system of government since the days of the Founding Fathers. Examples of ongoing disputes in this regard include such diverse areas as interstate commerce, unemployment insurance, welfare, urban policy, education, the environment, and mental health—giving rise to a large literature on federalism and intergovernmental relations.

Research on federalism and intergovernmental relations offers a framework for considering issues of federalism in health care and also suggests a case for comparative analysis of experiences in health care and other policy areas, on two grounds. First, the many parallels between health care and other social policy spheres make comparisons relevant across these areas. For instance, as discussed by Craig (chapter 9 this volume), issues of distribution and insurance that are prominent in health care are shared by a wide range of other areas. Second, other policy areas offer a depth and variety of experience lacking in health care and may provide important insights into the relative capacities of state and federal government to develop, implement, and finance policies. Experiences in health care may also, of course, inform analysis of other policy areas.

This volume has three specific goals. The first goal is to illustrate how theories of federalism and intergovernmental relations can provide a useful structure for examining issues of what Rivlin (1992) has called “dividing up the job” in health care policy. The second goal is to help provide a basis for assessing the capacity of the states to introduce and implement health policy (i.e., to assess what the states can do) based on past experiences in health care and other policy areas. The third goal is to explore alternative visions of the future role of state and federal government in health care policy (i.e., what state and federal government should do). A more general goal of the volume in each case is to inform discussion of federalism and intergovernmental relations in other areas of social policy.

The balance of this chapter is organized as follows. We begin by considering federalism as a framework. We then provide a brief historical analysis of the development of federalism from the New Deal to the present. We use the federalism framework to examine the historical context of recent state and federal health policy initiatives and offer an appraisal of the current situation. We conclude with an overview of the remainder of the volume.

Federalism as a Framework

The United States government is characterized by a system in which there is a separation of powers not only between branches of government (legislative, judiciary, and executive) but also between levels of government (federal, state, and local). The study of federalism deals with questions of the division of responsibilities and functions between these levels of government. Paul Peterson has stated:

Federalism is a system of government in which powers are divided between higher and lower levels of government in such a way that both levels have a significant amount of separate and autonomous responsibility for the social and economic well-being of those living in their respective jurisdictions. (1981: 47)

To again borrow Rivlin’s words (1992), federalism is about “dividing up the job” of government.

Many metaphors have been used to describe different relationships and interactions between levels of government under federalism in the United States. Underlying these metaphors are two related dimensions of federalism that are essential to define and understand within our analytical framework. One dimension is constitutional and political and regards who has authority for dividing up responsibilities. The other is functional and regards the nature of responsibilities to be allocated.

Constitutional and Political Dimensions of Federalism

The constitutional or legal foundations for federalism deal primarily with interpretations of the Tenth Amendment, and of Article 1, Section 8 of the Constitution, which deals with questions of interstate commerce and enumerated and implied powers. A number of landmark court decisions in these areas serve to delimit the scope of debate. For example, in economic policy, a series of decisions since the New Deal concerning the Commerce Clause have provided the basis for significantly expanded federal authority. However, court decisions offer limited guidance on how to “divide up the job” in health care and other major areas of social policy.

The literature on the constitutional or legal dimensions of federalism presents a mixed picture. A historical review of Supreme Court decisions suggests that “the Court, in effect, concluded that if the states, as states, want protection within the constitutional system, they must look to the Congress and not the Court” (Mackey 1993: 17). Recent Supreme Court decisions suggest, however, an independent basis for state action.

Authorities on constitutional law, such as Charles Black, have argued in essence that there is no constitutional basis for the debate over federalism—only a political foundation.

The issue here is not whether our federal system, with state quasisovereignty, has any basis. It has a basis in the political structure of the national government…. The issue, rather, is whether the federal system has any legal substance, any core of constitutional right that the Court will enforce. (Black, quoted in Powell 1993: 633, emphasis added)

This suggests that although constitutional questions may be important in defining the scope of debate, there are no explicit, operational guidelines for dividing up functions and responsibilities in health care.

However, several recent Supreme Court decisions suggest that the Constitution does provide for independent authority for state governments. In New York v. United States (1992, 112 S. Ct. 2408), which deals with low-level radioactive waste, Justice Sandra Day O’Connor, the author of the majority opinion, wrote that Congress may not simply “commandeer the legislative process of the States by directly compelling them to enact and enforce a regulatory program.” She has developed a series of operating rules for dividing up the job between the federal and state levels of government: (1) Congress may not tell the states to comply with regulations without giving them the resources to do so; (2) Congress may provide inducements or incentives designed to encourage states to comply; (3) Congress may preempt the states so long as the federal government is willing to assume full financial responsibility; and (4) states may decide to go beyond the standards set by Congress (cited in Pfander 1993). More recently, there are indications the Supreme Court is reexamining the Commerce Clause as a basis for federal authority—see, for example its 1996 Seminole Tribe v. Florida (1996.64 U.S.L.W. 4167) decision regarding an Indian casino (Greenhouse 1996). In summary, there is a legal core to the analysis of federalism. Moreover, this core provides a framework for both establishing and altering the terms of the political debate.

The political dimensions of federalism focus on the work of Congress, state legislatures, and the executive branch of government nationally and in state capitols. Within the broad framework defined by the Constitution, it is in the political arena that most of the actual “sorting-out” of responsibilities has occurred in social policy areas through legislative debate and administrative decisions. In this arena, interest groups, guilds, professional associations, and other constituencies have negotiated and bargained over allocation of authority in a variety of policy areas over time.

Functional Dimensions of Federalism

From a functional perspective, federal...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Acknowledgments
• CONTENTS
• Foreword
• Preface
• PART ONE Federalism, Health Policy, and the States
• PART TWO Health Policy in the States: Overview
• PART THREE Assessing the Capacity of the States
• PART FOUR The Future of States in Health Care Policy
• About the Editors
• About the Contributors