Federalism and Health Policy
Health Affairs
Web Exclusive
July 16, 2003
Which Way For Federalism And Health Policy?
What’s right, and what’s wrong, with the federal-state division of
responsibility for health care.
By John Holahan, Alan Weil, and Joshua M. Wiener
Abstract:
The current balance of responsibility between states and the federal government for low-income people’s health coverage has achieved a great deal. It covers many of the neediest people, supports the safety net, responds to emerging needs, and supports some experimentation. However, it leaves more than forty million people uninsured, allows excessive variation across states, places unsustainable pressure on state budgets, creates tension between the two levels of government, and yields too few benefits from experimentation. This mixed record argues for a significant simplification of and increase in eligibility for public programs, with the federal government either providing extra funds to states to meet these needs or assuming full responsibility for insuring the poor.
From the Conclusion:
The current balance of federal and state responsibilities for health insurance coverage has achieved a great deal. But it has failed to insure forty million Americans, it expands coverage in small steps only, and under it no state, much less the nation as a whole, has developed and implemented a comprehensive approach to covering the uninsured. The states are now largely playing defense against an eroding employer base of coverage and a fiscal future in which Medicaid expenditures are likely to grow faster than revenues. There is no reason to believe that the current federal structure will ever yield universal coverage or even come close. Indeed, the late 1990s may turn out to have been the high-water mark for health insurance coverage within the parameters of the current system.
Decades of experience show that major progress in covering the uninsured will require a substantial new investment by the federal government. Heavy reliance upon state financing, on top of large differences in employer coverage, is the primary reason for dramatic interstate variations in coverage and, ultimately, for the large gaps in coverage that remain. While states have substantial financial capacity, that capacity is more limited than that of the federal government; it falls with economic downturns, at precisely the same time that health care needs increase; and its funding sources are less progressive than the federal government’s are, making it harder to redistribute funds to services for low-income families.
The challenge for federalism is to devise a financing role for states that continues to prompt administrative innovation while minimizing the inequities that arise when they must bear an overwhelming fiscal burden. Our two approaches take different paths toward striking this balance. The first retains a large role for states; the second diminishes that role. Both would maximize the base of coverage and provide opportunities for moving beyond it while encouraging innovation and experimentation. Neither approach eliminates interstate variation or the inequities it implies. However, since both start from a higher coverage base, the inequities are more defensible than are those in the current system.
Proposals that require substantial new federal funding could be unrealistic in the current fiscal climate. However, without additional federal funds, the states are unlikely to sustain their current coverage levels, let alone increase them. Changing the balance of federalism involves risk. However, there is no other way to return stability and sustainability to our system so that we can build upon it to greatly reduce the number of uninsured Americans.
http://www.healthaffairs.org/WebExclusives/Holahan_Web_Excl_071603.htm
Comment: Although this article discusses federalism and health policy for low-income individuals, the general concept can apply to our entire health care system. Moderate-income individuals are now faced with inadequate benefits, excessive cost sharing, unaffordable premiums, uninsurability because of preexisting disorders, the burden of cost shifting, and all of the other inequities that characterize our system.
John Holahan and his colleagues explain why major federal funding is essential for state health care programs for low-income populations. The single payer model of reform calls for federal funding with state administration, but for everyone. The concept of federalism in health policy should be expanded to accommodate the single payer model which would address the inequities that we all currently face.
On July 20, “Federalism and Health Policy,” a book by these authors will be available from the Urban Institute Press:
http://www.uipress.org/Template.cfm?Section=Browse_by_Author&Template=/Ecommerce/ProductDisplay.cfm&ProductID=4263