Draft

Snapple_girl1

source3.pdf

Home >Education homework help >Draft

Intergovernmental Politics

Federalism and the Patient Protection

and Affordable Care Act of 2010: The

Founding Fathers Would Not Be Surprised

Michael S. Sparer Columbia University

There are many political tales to tell following the enactment of the Patient Protection and Affordable Care Act of 2010 (ACA). One story, about effective presidential leadership, focuses on President Barack Obama, especially his decision to delegate to Congress the task of developing the actual plan, while simultaneously pushing congressional Democrats and key interest groups to enact legislation that expands health insurance cov- erage for millions without disturbing the basic architecture of the nation’s health care system. A second story focuses on institutional politics within the federal branch: had Scott Brown won his Massachusetts Senate seat in November 2009 instead of January 2010, the Republicans might well have successfully filibustered and defeated the entire reform legislation. Then of course there is the role of America’s political culture (from anti- government Tea Parties to the president’s seeming reluctance to embrace the moral argument for universal coverage).1

Deeply embedded in each of these stories, however, was the long- standing debate over which level of America’s government should do what, especially in a polity in which nearly all politics takes place within the context of a complicated and constantly evolving intergovernmental partnership.

This is not a new political dynamic. Indeed, federalism was at the core of the initial debate over the very nature of the American republic: nation-

1. In this issue, see Quadagno’s essay on interest groups, Morone’s on political culture and American exceptionalism, and Peterson’s on the role of political institutions.

462 Journal of Health Politics, Policy and Law

alists like Alexander Hamilton argued for a powerful federal government (fueled by a strong executive branch), while small-government aficiona- dos like Thomas Jefferson feared that Hamilton would move the country toward monarchy. Somewhere between these two poles was James Madi- son, who preferred a large but relatively weak federal government, with its powers limited by institutional checks and balances. How did the framers resolve the debate? They didn’t. Instead, the constitution provides support for each view, leaving to each political generation the task of reframing the intergovernmental balance.

Prior to the 1930s, the Jeffersonian view dominated, and aid to the poor and needy was considered a local responsibility, with such aid tar- geted primarily to the so- called deserving poor (those outside the labor force through no fault of their own). In 1935, however, in the midst of an economic depression, President Franklin Roosevelt persuaded Con- gress to create a national income security system, in which the federal government (generally in partnership with the states) took responsibility for both economic and social welfare legislation.2 This inter governmental health and welfare system has continued to grow, financed by a mix of federal and state dollars and run by a combination of federal, state, and local administrators. Medicaid and the Child Health Insurance Program (CHIP) provide obvious examples: not only do two levels of government share the cost of the programs, but there also is an ongoing intergov- ernmental dance over eligibility criteria, benefit packages, and provider reimbursement rates. Similarly, states have historically regulated much of the nation’s private insurance industry, but here too federal law (such as the Employee Retirement Income and Security Act, or ERISA) has long limited state discretion and authority. This inter governmental context was an important component of the politics of the recent health reform battle and is also critical to the implementation of the legislation that Congress eventually enacted.

Federalism and the Politics of Reform

President Obama was hardly the first national leader to propose universal (or even near universal) health insurance coverage; there is instead a long list of failed initiatives from predecessors such as Harry Truman, Richard

2. Recent studies suggest significant state building at the federal level (where intergovern- mental dynamics were a crucial component in growth) prior to the New Deal; however, it is still acknowledged that a much larger role for the federal government occurred after passage of the New Deal. See, for example, Skowronek 1982, Skocpol 1992, and Carpenter 2001.

Sparer ■ The Founders Would Not Be Surprised 463

Nixon, and most recently Bill Clinton. In order to succeed where others had failed, President Obama had to navigate difficult interest-group poli- tics, respond to broad cultural concerns about the role of government, and overcome the checks and balances of America’s political institutions that are designed to make it hard to enact major federal legislation. Federalism considerations loomed large in each of these political arenas.

Interest-Group Politics

Consider, first, the interest-group politics of reform.3 It is by now almost a cliché to point out that every one of the more than $2.6 trillion spent on American health care is income to some person or some organization, and that nearly all of the players in the health care industry are all for reform, so long as their particular niche (and income) is protected and even enhanced. Both the president and other policy makers thus worked hard to negotiate with organizations representing doctors, hospitals, phar- maceutical companies, private insurers, employers, and a broad array of other groups clamoring for input.

Less- often discussed, however, is that state governments were among the most important and most successful interest groups in the entire health reform process, often acting as a relatively unified and influential bloc, ably assisted by the National Governors Association and similar lobby- ing organizations. For example, Congress enacted a state-based system of insurance exchanges (as opposed to a national or even regional approach) largely because of state-based lobbying. The legislation also contains funding for a host of state-based pilot initiatives, in areas ranging from care management to public health and wellness to medical malpractice. And while state officials generally objected to the new Medicaid eligi- bility mandates, they persuaded Congress to provide enhanced federal funding for the expansion, thereby minimizing the fiscal pain of the new federal rules.

To be sure, states did not always speak with one voice, mainly because they exercise their discretion within the nation’s intergovernmental part- nership in extraordinarily different ways. For example, no two Medicaid programs have the same eligibility rules, benefit packages, or reimburse- ment policies. States also have different fiscal resources, political cultures, socioeconomic demographics, interest-group dynamics, institutional capacities, constitutional requirements, bureaucratic politics, and local

3. Please see Quadagno’s essay in this issue for more on interest groups.

464 Journal of Health Politics, Policy and Law

health care markets. In this context, new federal rules (around Medicaid expansions, insurance exchanges, subsidies to low- wage workers) impact different states differently. Each state thus calculated how it would do under different reform scenarios and battled hard for its optimum out- come. Indeed, this battling became so fierce that it eventually led to a backlash, especially after Senator Ben Nelson negotiated what seemed like a special deal for Nebraska (the so- called Cornhusker Kickback). Moreover, while many of the battles revolved around the cost of reform and the federal contribution to such cost, such battles impacted the sub- stance of the reform initiative as well (such as the eligibility criteria of the proposed Medicaid expansions).

Political Culture

That slippery concept known as political culture is often cited as an obsta- cle to efforts at comprehensive health reform.4 The idea is that Americans are particularly susceptible to claims that the federal government is inept, or worse. More than two hundred years ago, Thomas Jefferson warned of an emerging monarchy, and innumerable politicians and political com- mentators have echoed the complaint. Related to this general perception is the widely held view that the source of America’s greatness is its ground- ing in the principles of individual rights, capitalism, and personal respon- sibility. Americans are thus presumably less inclined to have strong feel- ings of social solidarity, especially with groups or communities viewed as different from their own. In this more individualistic, capitalistic, and antigovernment polity, it is no wonder that opponents have long been suc- cessful tarring universal coverage proposals as both socialist and likely to result in lower-quality care (along the lines of the rationing and poor quality that presumably takes place in those statist social democracies like France, England, and Germany).

Not surprisingly, the 2009 – 2010 health reform debate featured plenty of sharp anti government rhetoric, fueled even more than usual by the rise of the so- called Tea Party movement, which viewed President Obama’s health care proposals as part of a more general effort to take over the entire American economy, somehow connecting bank bailouts and efforts to rescue the automobile industry with a purported government takeover of the nation’s health care industry.

President Obama relied on several strategies to counter this cultural

4. For more on the impact of classic American liberalism in shaping the ACA, see essays in this issue by Grogan, Morone, and Campbell and Morgan.

Sparer ■ The Founders Would Not Be Surprised 465

attack on health reform, most notably his decision to keep in place the basic architecture of the current insurance system (and his promise that Americans could keep their current insurance carrier if they so desired). Moreover, he was never more than an ambivalent supporter of the notion of a new “public option,” worried that its unfortunate title, not to mention its potential challenge to the private insurance industry, would only sup- port the image of an expanded government role.

In addition, however, President Obama and the congressional Demo- crats used federalism as a political counterweight to charges of a federal takeover. The new insurance exchanges will be state based, rather than regional or national. Public insurance expansions are being established through the state- administered Medicaid, rather than the federal Medi- care, program. The new federal insurance regulations generally will be administered and enforced by state insurance department staffs.

To be sure, the ACA is hardly an example of state- led reform. It is instead a federal law that relies on intergovernmental partnerships in both its administrative architecture as well as its implementing bureaucracy. Similarly, these intergovernmental partnerships are at best a partial shield against claims of a federal takeover and a socialist plot. Both moderate and Tea Party Republicans are still challenging the legitimacy of the new law, aided in large part by dozens of state politicians who not only oppose the legislation but have also initiated litigation claiming that the law vio- lates the Tenth amendment and other constitutional protections against an overarching federal government. Nonetheless, there is little doubt that the ACA uses a federalist shield to provide at least some protection from claims of a federal government gone amok.

Institutional Dynamics

The health reform debate renewed the long-standing debate over the insti- tutional checks and balances in the federal system: the multiple commit- tees with jurisdiction over reform, the Senate rule generally requiring sixty votes to break a filibuster, the controversy over what can be included in Senate budget bills that are the only exception to the supermajority requirement, and the more general legislative, executive, and judicial relationships that are entangled in all federal laws. Rarely have so many people spent so much time trying to figure out how these institutional dynamics would play out.5

5. See Peterson’s and Brown’s essays in this issue for more on institutional dynamics.

466 Journal of Health Politics, Policy and Law

Policy analysts and political pundits paid far less attention to the insti- tutional obstacles posed by American federalism, though the issue was always high on the agenda of the various federal actors. The bias in Amer- ican government toward state and local government is more than a cultural artifact or a Tea Party pledge: the federalist history of the nation’s health insurance and health care systems both shaped and constrained the scope and substance of the reform effort.

For example, the nation’s health insurance industry began in the early 1930s when a hospital industry threatened with bankruptcy by the Great Depression created Blue Cross. Ever since that time, state insurance departments have regulated the insurance industry, imposing capitaliza- tion and reserve requirements, marketing rules, and general oversight. To be sure, state regulators have ceded some authority to their federal coun- terparts (following the congressional enactment of ERISA, Health Insur- ance Portability and Accountability Act, and the Mental Health Parity Act), and the intergovernmental partnership is more complex than ever before. Nonetheless, federal legislators in 2010 were not about to dissolve this federalist legacy: instead, the new federal oversight of the insurance industry builds upon and is shaped by the state- based system that it sup- plements. So too, the federal reform legislation reflects prior federalist arrangements in every imaginable arena, from Medicaid to managed care to medical malpractice. And perhaps most of all, the legislation imposes enormous implementation burdens on the states. It is hardly an understate- ment to suggest that the success of the entire initiative depends largely on the capacity (organizational, political, and more) of the states.

Policy Laboratories, Catalytic Federalism, and the Expansion of the Public Sector

There are many lenses through which to view the interaction of federal- ism and health reform: so far we have discussed states as interest groups, federal efforts to use federalist structures to deflect charges of big govern- ment, and ways that the intergovernmental health care partnership shaped the boundaries of the reform initiative. Each of these perspectives illus- trates how federalism narrowed rather than broadened the possibilities of reform.

Viewed from two other perspectives, however, federalism served to propel the reform forward, helping to produce a more expansive and comprehensive initiative than would otherwise seem plausible. Consider first the argument long supported by federalism scholars that states act as

Sparer ■ The Founders Would Not Be Surprised 467

policy laboratories, both for their subnational counterparts as well as for national leaders. While such claims are often overstated, there also is little doubt that there are occasional examples of such watching, learning, and adopting, as illustrated by federal enactment of diagnosis-related groups (following laboratory testing in New Jersey). In many respects, the ACA provides yet another example, as the federal initiative closely tracks the 2006 reforms implemented in Massachusetts: the individual mandate, the Medicaid expansion, the insurance reforms, and the insurance exchanges (combined with subsidies to low- wage workers) were all first tested in that New England laboratory prior to the current national rollout.

Finally, consider recent events in light of the long-standing debate over whether the states or the federal government should “take the lead” on health care reform. Would increased state authority lead to a more accountable, responsive, and innovative health care system? Or do states already have too much control over the health care system, leading to inequitable interstate variation and inefficient program management? Do states have the fiscal, political, and economic capacity for reform, or are federal leadership and federal financing required for any comprehensive reform initiative?

Viewed narrowly, the enactment of the ACA presumably resolves the debate: it took federal leadership and federal legislation to move the nation far closer to universal coverage. Viewed more broadly, however, the answer is more nuanced and more complex. No state could enact universal cover- age on its own; even the Massachusetts initiative simply would not have happened without a major infusion of federal Medicaid dollars. Similarly, the ACA would not be law today if it did not rely on an extensive inter- governmental partnership. The United States is not about to enact Medicare for all. Instead, the different levels of government prompt and prod each other to expand coverage and benefits, each relying on the other for political, economic, and administrative cover. In other words, health care federalism does not languish in a system of Madisonian checks and balances; on the contrary, federalism catalyzes and expands governmental activity, whether through insurance expansions or increased regulatory oversight.

The focus on federalism does not, of course, minimize the importance of presidential leadership, interest-group dynamics, political culture, or institutional obstacles. Instead, the focus of federalism enriches our understanding of each of these variables, and of health politics (and poli- tics) more generally. Put simply, the focus on federalism is fundamental to the politics of health reform. Would the framers have wanted it any differently?

468 Journal of Health Politics, Policy and Law

References

Carpenter, D. P. 2001. The Forging of Bureaucratic Autonomy: Reputations, Net- works, and Policy Innovation in Executive Agencies, 1862 – 1928. Princeton, NJ: Princeton University Press.

Skocpol, T. 1992. Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States. Cambridge, MA: Belknap Press.

Skowronek, S. 1982. Building a New American State: The Expansion of National Administrative Capacities, 1877 – 1920. Cambridge: Cambridge University Press.

may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express

written permission. However, users may print, download, or email articles for individual use.