Backstop Federalism

Joseph Fishkin

Or, the improbable story of why same-sex couples may have a chance on the Texas health insurance exchange

Suppose two guys, let’s call them Austin and Travis, marry in Massachusetts.  Then they move to Texas.  Texas law says they’re not married.  The federal government’s view (after Windsor) is more complex.  They are married for some purposes and not for others.  A great deal of legal energy is now being poured into the question of when yes and when no.  One set of issues has to with tax law: for instance, the tax credits federal law provides for purchasing health insurance on the new state exchanges.  I have no special insight into how that question will be resolved, but for purposes of the argument of this post let’s suppose the federal government makes an administrative decision to treat Austin and Travis as married (this is the so-called “state of celebration” rule: if you were legally married where you had your ceremony, then you stay married wherever else you go).  In that case, it seems to me, Austin and Travis will have no trouble obtaining family health insurance coverage and family subsidies—rather than being treated as single individuals—on the Texas health insurance exchange, with coverage to begin January 1, 2014.

But wait, you might say.  Not so fast.  What about Texas law?  Doesn’t Texas law, indeed, the Texas Constitution, which clearly prohibits treating Austin and Travis as married, have something to say about this?  I don’t think so.  Before we even begin to get to possible questions of preemption, there is a threshold matter: For political reasons, Texas has wiped its hands of having anything to do with its health insurance exchange, leaving the federal government to build one by default, and run it.  In other words, the health insurance exchange in Texas is not going to be an example of “cooperative federalism.”  Quite the opposite.  It’s going to look more like Head Start or the EITC: a straight-up federal program that bypasses the state government more or less entirely, and goes directly to the people.  For that reason, it’s very hard to see how the Texas Constitution would apply in any way to this program.  (Which, under the circumstances, is a very good thing.)

My interests in this post are two.  First, where does this leave cooperative federalism—a paradigm that may not be especially well adapted to the current political world, in which the politics of one party (the Republicans) increasingly requires vociferous resistance to new federal programs rather than cooperative implementation?  And second, how should federal legislation accommodate this new political reality?  The Affordable Care Act’s solution—creating a federal backstop in case of state resistance—is an excellent model that deserves more attention.  It offers state legislators in conservative states a chance strike their preferred political pose of resistance to federal authority in a way that does little damage to, and in fact advances, the substantive goals of federal policy.


Let me lay my cards on the table here.  I find much of cooperative federalism as presently practiced to be both patently ridiculous and somewhat pernicious.  By cooperative-federalism-as-presently-practiced I mean the following sort of arrangement: The federal government puts up most of the money and sets the basic parameters of a program; the states administer it in a largely ministerial way, tweak the details, and claim a wildly disproportionate share of the credit.

The policy justifications for these arrangements are extremely thin.  Their main purpose is political.  It seems that they were especially well adapted to the politics of the 1990s.  For instance, if Bill Clinton cared mainly about the end goal of expanding public health insurance for children, and Republicans in Congress cared mainly about not expanding “federal” programs, a good compromise was just to have the federal government pay for most of what was then called S-CHIP, but then let each state pass it off as its own unique and wonderful state program.

My main objection to these arrangements is likewise political.  These programs are part of the story of the submergence of the federal government as the engine of American public policy.  It would be completely understandable for residents of many states to believe erroneously that children’s health insurance and many other programs are “state” programs funded by their state taxes, whereas in fact they are, in simple dollar terms, federal programs funded by their federal taxes. The design of the programs encourages such erroneous beliefs and helps ensure that people have no idea where their federal taxes go.  (Hint: Medicare and your local military base.  But apparently people think a quarter of it must be foreign aid and are receptive to charges that most of it must go to “overhead” or “bureaucrats,” since they sure can’t see “federal” money flowing anywhere near where they live!)

The provisions of Obamacare that will go into effect on January 1, 2014 represent an important new chapter in cooperative federalism.  So far it’s not an especially happy chapter for those who like the “cooperative” bit, as the states are in fact being distinctly “uncooperative” (see Jessica Bulman-Pozen & Heather Gerken’s important article).  The ground has shifted underneath the old politics of the 1990s.  Today, tea party types reward, and demand, Republicans who will “just say no” to bipartisan compromise and to money from Washington.  This means that instead of taking the federal cash and taking the credit for a massive expansion of health insurance, as they did with S-CHIP, many states are flatly refusing to have anything to do with Obamacare.

No state participation, it seems to me, will almost inevitably mean no state constitutional or statutory constraints.  This may mean (subject to the various qualifications at the start of this post) that Austin and Travis have a better shot at obtaining family coverage and subsidies in Texas than in a state like Kentucky, which also bans same-sex marriage but, unlike Texas, is creating its own state-based insurance exchange.  In other words, the “uncooperative” behavior of Texas and other states has a sort of ricochet effect.  Instead of actually asserting a domain of state autonomy and control, these states’ “dissent” instead presses us incrementally closer to a uniform, national rule of full equality in health insurance for same-sex couples.  These are the perils of “uncooperative” federalism when it takes the form of a state taking its marbles and going home, in cases where a statute (quite sensibly, in my view) contains a federal backstop in the event of state default.

Interestingly, when you look at the list of states that are implementing the health exchanges, it looks quite similar to the list of states that allow same sex couples to marry (only longer).  The Kaiser Family Foundation says 23 states are currently trying to implement some sort of exchange, and that includes all but one of the 13 states that currently allow same sex marriage.  On the other side, 27 states are refusing to set up an exchange, thereby defaulting to the feds, and of those, only one (Maine) allows same-sex marriage.  None of this is a big coincidence: probably in general, states controlled by Democrats are more likely both to allow same sex marriage and to set up a health exchange, while states controlled by Republicans are more likely to do neither.  The result, oddly enough, is that there are only a few states, less than a dozen by my count, that (a) are implementing a health exchange, AND (b) do not recognize same-sex marriage.  So, if things go as the first paragraphs of this post suggest, same-sex couples would be able to get health insurance on the exchanges in around 39 states—much closer to a de facto nationwide policy than would have been the case if the states had all done their bit and implemented the health insurance exchanges.

The key here, obviously, is that the federal legislation anticipated the state resistance, in the form of refusal to implement the exchanges.  Contrast, unfortunately, the Medicaid expansion: Congress did not anticipate the Court’s Spending Clause holding in NFIB v. Sebelius, and therefore provided no similar backstop of an all-federal Medicaid expansion alternative, should states refuse that part of the ACA.  Because of this, a large number of low-income people in states like Texas are going to be stuck with no coverage at all—no Medicaid and no insurance exchange subsidy—so that their care will have to be paid for the way it is now, the most expensive possible way, through uncompensated-care cross-subsidies from the rest of us, often for care in the ER, which was definitely not what the ACA intended.

But in the case of the exchanges themselves, Congress did anticipate the state resistance, and it provided right-wing legislators with a fool’s bargain that they are, amazingly, rushing to accept.  The bargain is simple: give up all state control over your health insurance exchange, all ability to implement state policy through the exchange, and in return, you will get nothing of policy substance whatsoever, but something of political significance: the right to say you (the legislature) have nothing at all to do with the program.  In other words, you get to strike a cleaner and more noble pose of resistance, and in return, you give up all policy substance.  Who would take such a deal?  If your answer is “nobody,” you are not cynical enough.  At this time, 27 states seem to be taking this deal.  (Although, to be fair, inertia is on their side: for this deal, silence is assent.)

Call it backstop federalism.  In some ways it’s just the inverse of the cooperative federalism of the 1990s.  That federalism dangled in front of federal Republican legislators the opportunity to pretend they were not creating large new federal programs, and gave state leaders the opportunity to pretend they were creating wonderful new state programs, as though children’s health insurance were just the latest idea to bubble up from the beakers of those white-coated wizards in our laboratories of democracy.  In contrast, the new backstop federalism (if we can elevate this one excellent example to the status of a new paradigm) goes the other way:  It offers state Republican officials the opportunity to strike a pose of resistance, and in doing so, actually cede all substantive policy control to the federal government.  (It offers nothing in particular to federal Republicans, or so the ACA vote count would seem to suggest.)  In another way, though, I suppose it should be noted that the backstop federalism paradigm and the old cooperative federalism paradigm are both attempts to find a compromise between two sides, one of which seems more focused on policy, the other of which seems more focused on politics.

Backstop federalism has the salutary effect of somewhat unmuddying the waters of cooperative federalism.  In Texas, at least, I don’t think anyone will be confused about whether the new health insurance exchange is a federal program or a state one.  It’s federal all the way.  And so much the better for the long-suffering gay and lesbian citizens of Texas, a few of whom might just end up with family rates on health insurance.  They can thank the Texas legislators who took a heroic stand against Obamacare’s encroachments on Texas’ sovereignty or dignity or whatever.  Well done!
Posted 1:27 PM by Joseph Fishkin [link]