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What's right, and what's wrong, with the federal-state division of responsibility for health care.
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.
FINANCING FOR HEALTH AND LONG-TERM CARE for low-income Americans is a joint federal and state responsibility. The states assume major financial and administrative responsibilities while the federal government provides substantial funding and oversight. How to balance these responsibilities has been debated for decades.
Controversy over state and national roles in health policy mirrors broader debates over federalism that trace their roots to the founding of the United States.1 For philosophical reasons, some view states as the appropriate locus of authority to reflect local values and priorities. Others prefer a strong national role to achieve national objectives and, as the U.S. Constitution says, "to promote the general welfare." Theories of public choice and public finance also shape views of federalism. To some, a strong state role encourages competition to develop the best and most efficient policies. Others argue for a stronger federal role because income redistribution is best carried out at higher levels of government and because interstate competition can lead to a race to the bottom as states cut programs for the poor so they can lower taxes to attract businesses and high-income taxpayers. Despite these philosophical positions, most Americans are pragmatists. When they see a problem, they will turn to whichever level of government they believe will do the best job of solving it.
This paper examines federalism in health policy from a pragmatist's perspective. Drawing upon seven years of quantitative and qualitative research conducted as part of the Assessing the New Federalism project at...