Alan Weil: I’m very interested in the federalism aspect. Federalism is sort of a meta-issue, in the sense that the question of the allocation of responsibilities between the states and federal governments is central to what this set of policies we adopt are actually going to look like out there in the real world. Since the nature of American Federalism is defined by the United States Constitution, I consider federalism to be a legal issue. In that sense, the legal issues with respect to states are pretty profound.
Take the debate over the creation of insurance exchanges. If the exchange is going to be a force for driving the health insurance marketplace to be more competitive, more responsive, and more consumer-friendly, then the design and behavior of those exchanges has a great deal of potential effect on whether we achieve those goals.
If states run exchanges, there will be states that basically treat the exchange as a Craigslist for health insurance where you post and people pick. But there will be other states that view the exchange as something to integrate with the purchasing they’re already doing for Medicaid and state employees. They’re going to demand data, and outcomes, and performance measures. They may negotiate on rates, and we could see standardized benefit packages so consumers can compare them, and do all kinds of things that are designed in an activist way to push markets.
If we have a single national exchange, it will probably land somewhere in between. I doubt we would see a national exchange that was nothing other than a website where you could find out the thousands of insurance options available to you. But also think we’d be naive to think that the federal government would be as aggressive and as ambitious and as capable of carrying out the kind of market-changing behaviors as the most aggressive state governments: The federal government doesn’t have a lot of experience negotiating health insurance, market conditions vary around the country, and you get a lot of push back in Washington whereas in some states you may have more political capital to expend on it.
There’s a common misconception that the federal government will do it better. I think the fact is that the federal government will bring up the floor, but it will also lower the ceiling.
Lester Feder: Can you make the counterargument that does back a strong federal role?
Alan Weil: There are two counterarguments: In an administration that is strongly committed to health reform, and has stated publicly that one of the primary goals of health reform is to bring down costs, you could see a very aggressive agenda coming out of HHS. They could say, “We have the authority, we won the votes, we’ve got a plan, we’ve got to get costs down. We’re going to do it.” With the scale that the federal government has, if they get a head of steam, they can make a lot happen.
The other counterargument is more ideological. We worry about whether or not the health care people get depends on where people live. We currently accept a very high level of variability in Medicaid benefits, insurance regulation, and the delivery system. Part of what health reform is about is reducing the variation. Maybe it’s worth giving up a little bit of the front-end innovation to make sure that we bring everyone up to where they ought to be. It’s a reasonable argument, and I’ve been known to subscribe to it in some areas—these things are not black and white.
Lester Feder: What about the argument that the states don’t have the market power to change things one-by-one and slow cost growth?
Alan Weil: You really could make a strong argument that if there is going to be a public option, it will only be able to achieve the goals set out for it if it is national in scope because the whole point is to put up a national benchmark and say, “This is achievable, and the private sector has to achieve it.” If you try to do that state by state, you undercut the whole purpose of that.
Lester Feder: Is there any question of the legal capacity of the federal government to insure that this was done effectively on either the state or federal level? Does the federal government have the legal powers to do what it would need to do if it chose to exercise them?
Alan Weil: I don’t see why not. The exchange, at least as envisioned, is a pretty straightforward making a market. It’s not a heavy regulatory hand moving into domains that would normally not be permissible for federal action. I have a pretty hard time believing that there’s a reasonable basis for challenging the authority of the federal government to do something like that.
Let’s take sort of the obvious example, which is the regulation of insurance. Traditionally a state role, states vary quite dramatically in what kind of rating bands, and what other provisions they have. It’s an area where the federal government stepping in would make a big difference. But do they have the authority? Sure they do—they already did it in HIPAA. The states only have the authority because the federal government gave it to them, so we know they can take it away. I don’t get too worked up about the question of whether this is something the federal government has the authority to do.
There’s not a lot of question about what the federal government can do vis a vis states. If you ask the question, broadly speaking can the federal government come in and expand Medicaid eligibility, change how we rate health insurance, provide subsidies to businesses and individuals on an income basis and use the power of the tax code to strongly encourage people to purchase coverage, it would be hard to find anything on that list they were not permitted to do, whether the states wanted them to do it or not.
The federal government’s authority to preempt state action is well established. If they want to do it, they can. What I think is interesting is whether or not they should. That’s where it gets fun.