It is easy to be pessimistic about the future of health care policy, given the increasing polarization in Congress and in the country. We seem to be condemned to a future mix of gridlock, with occasional winner-takes-all lurches in one direction or another.
Federalism, however, is a powerful tool for helping to resolve such standoffs in the United States. The states’ role as “laboratories of democracies” has long been appreciated as an important technical feature of federalism. It is important also to recognize federalism’s powerful political role in resolving impasses, and its potential for doing so in health care.
A Change Agent
In addition to creating consensus among warring political factions, federalism has often been decisive in helping to achieve reform. For instance, the then-controversial women’s suffrage campaign gained power in a tidal wave from Western states, as state after state granted the vote, eventually shifting the balance toward congressional passage of a constitutional amendment. And it is important to recall that the Supreme Court’s 2015 same-sex marriage decision encountered almost no resistance, because in the decade leading up to the decision, dozens of states legalized same-sex unions and marriages.
It is remarkable how federalism can help trigger such dramatic changes of opinion. It may accomplish that in health care. Yet short of facilitating such rapid reform, federalism can move us forward in more gradual but decisive ways.
For one thing, federalism can help resolve disputes blocking agreement by first “pretesting” controversial ideas in individual states, making more likely future national passage of programs containing those ideas. Sweeping welfare reform was made possible in 1996, for example, in part because concerns about 2 controversial ideas—ending permanent welfare and introducing work requirements—had been reduced after versions were tested by individual states.
Similarly, tests by states of health care ideas such as reinsurance pools, a greater emphasis on social determinants of health, and even work requirements could ease the way for the future passage of national versions. Granting states variations or exemptions from some features of the Affordable Care Act (ACA) (through so-called Section 1332 waivers) and Medicaid (Section 1115 waivers) help facilitate such experimentation.
Federalism can enable progress in health policy to happen in another way, by defusing otherwise determined opposition to a reform already in place—and sometimes, that in turn can provide the time for a consensus to gradually develop. To reduce opposition and win passage of Medicaid in 1965, for instance, advocates were forced to allow states to decline to join the federal-state program. Initially just 26 states signed up. But the remaining states gradually decided to join the program as the financial and other benefits to states became clear to voters. By 1970, all but 2 had Medicaid programs, and in 1982 the last holdout, Arizona, signed up. Thus, while millions of low-income people initially failed to receive Medicaid in some parts of the country—seen as an injustice by many—the opt-out did allow Medicaid to pass and did lead gradually to the opt-out states having second thoughts.
Moving forward to the passage of the ACA, the idea of an “exit ramp” for conservative states, enabling them to take a different path, soon gained some traction. That strategy became reality for a crucial part of the ACA by the Supreme Court’s decision that states did not have to expand Medicaid. The Trump administration is also advancing the exit-ramp strategy by granting more leeway to states by making broad use of 1332 waivers to depart further from the mainstream features of the ACA.
Meanwhile, toward the other end of the spectrum, a handful of states have been taking steps to reintroduce a mandate requiring households to purchase insurance after Congress removed that ACA requirement in the 2017 tax legislation. California has doubled down by not only passing its own insurance mandate but also adding Medicaid coverage for undocumented young adults. Indeed, notes George Mason University law professor Ilya Somin, JD, many liberals are warming to federalism, seeing it as a way to limit a range of the Trump administration’s national policies.
There is a twist to this aspect of federalism politics that may come back to haunt opponents of the ACA, however. Let’s say the exit-ramp federalism strategy fails in its goal of states creating health systems that are qualitatively different from the ACA—and that failure now seems probable. If so, allowing states to opt out of some parts of the law may end up simply mollifying some opponents of the ACA, giving the law the political breathing room it needs to be sustained over time. Thus, ironically, the Trump administration’s ACA waiver strategy may ensure the permanence of the law it pledged to end.
About the author: Stuart M. Butler, PhD, is a senior fellow, Economic Studies, at the Brookings Institution in Washington, DC, where he focuses on health care and budget issues. Dr. Butler also serves on the board of trustees for the Convergence Center for Policy Resolution, and the board of Mary’s Center, a Federally Qualified Health Center. (Image: Paul Morigi/The Brookings Institution)
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