Stumbling into Obamacare Federalism

Joseph Fishkin

Federalism has various functions in our constitutional system.  But the picture of which functions matter most changes during periods of intense political polarization, intense federal government dysfunction, or both (and our current political era, both pre- and post-Trump, is a cocktail with a whole lot of both).

For example: Heather Gerken has argued that one central function of federalism, and indeed sub-federalism potentially “all the way down,” is to allow people who are in the minority in national policy disagreements to have some jurisdictions where they actually decide—govern—rather than merely voicing their dissent.  This particular function of federalism takes on greater significance at times of intense polarization, even as that same polarization tends to tax the willingness of those in power at the national level to countenance dissent from the states below.

I’ve blogged here before about another, less laudable item in the list of functions of federalism (and especially of “cooperative federalism”): to obscure the role of the federal government in major national policy measures, disguising federal policy as state policy and federal dollars as state dollars.  This is one of the reasons why you so often see polling results that show, for example, that state insurance exchanges created by the Affordable Care Act (such as KYNECT, the Kentucky-branded exchange), as well as the state-administered Medicaid programs the ACA dramatically expanded, are far more popular than the ACA itself.  To be sure, even the ACA itself—the unambiguously national brand—is more popular than Beltway Republicans think.   But its state-branded components are often considerably more popular.  As is often the case, states get undue credit for the good stuff.  The individual mandate—collected by the IRS via your 1040—looks like the federal policy it is, while KYNECT looks like the state of Kentucky.  Here as elsewhere, citizens have every reason not to understand that the bulk of the money for many popular state programs comes from the federal government.  We have deliberately fuzzed it up.

The current debacle unfolding in Congress and the Executive Branch, as Republicans flounder to formulate a plan to “replace” the ACA, amid radical disagreement within their own ranks over exactly what the goals and scope of any such replacement ought to be, has me thinking about a third and much simpler function of federalism.  Federalism can be a way to punt.  Sometimes, the federal government simply has reason to decide not to decide an issue.  Maybe the tradeoffs are too hard.  Maybe there is no solution that can garner a majority in Congress.  So, the federal government punts, leaving it to the states.

There is plenty of overlap among the functions of federalism I’ve just mentioned (and others I have not).  For instance, sometimes people advocate what sounds like a punt to the states of a hard issue, but really what they have in mind is more Gerkenian: One side is nationally in the minority, and they argue that something should be “left to the states” precisely because that way they’ll win somewhere rather than losing everywhere; and perhaps by winning somewhere, they’ll advance their overall argument in the national public sphere in the long run.  This is why “leave [same-sex] marriage to the states” was at one time, briefly, the liberal position (when liberals were nationally in the minority on the issue) and then later became the conservative position (when conservatives found themselves in the minority).

So that brings us to our current political moment.  Republicans have a problem.  Their general problem is that now they have to govern.  Their specific problem is that they have pledged to “repeal and replace” the ACA and they have no idea how to translate this into national policy that can (a) garner 60 votes in the Senate and a majority in the House, (b) not mangle the national health insurance system so badly that it creates political blowback on an epic scale (I am deliberately setting the bar very low), and (c) satisfy their core supporters that they have followed through on their promise to slay their white whale, Obamacare.  Indeed it would be a challenge to satisfy any two of these!  And they do need all three.

Many but not all Republicans would set the bar higher, with a stronger version of (b) that we could call the “nonretrogression” principle in health insurance: The millions of people who now have coverage through either expanded-Medicaid or the exchanges should not be made substantially, visibly worse off (such as by losing health insurance outright, or seeing their current insurance replaced with something that is obviously flimsy in comparison).  President Trump, for his part, has repeatedly and forcefully endorsed this stronger version of (b).

The result is a moment of serious peril for the new Republican governing majority, and I’m not sure they yet appreciate the scope of the peril.  Any major, high-profile changes to Obamacare will begin to trigger the Pottery Barn rule: the chaos and broken mess of the health insurance system will begin to be blamed on Republicans.  Even without such major, high-profile changes, after a while people will tend to blame the President for national policies that are going badly.

So, what to do?  The answer is Obamacare federalism.

That should be where this debate ends up.  And—each of the major sides in that debate in Washington should endorse some version of it, for different reasons that track the functions of federalism outlined at the start of this post.  This afternoon I saw an early indication that a few key Republican Senators are thinking along these very lines.*


The political problem here is, to a remarkable extent, one of Republicans’ own making.  If Obamacare were half as horrible as Republicans have claimed for the better part of a decade to enormous political effect, then it would be no problem to achieve both repeal and nonretrogression—and probably some Democratic Senators would go along as well, getting you (a), (b), and (c).  And indeed, one can easily imagine a world in which serious, right-leaning policy wonks designed a strategy that had the optics of “repeal and replace” but actually just made various medium-sized changes—e.g. allow insurance companies to charge older people a bit more, say 5x more than younger people instead of 3x, repeal the hated individual “mandate” and replace it with a similar-sized and functionally equivalent “tax credit if you have insurance,” make modest tweaks to other provisions, call the result Trumpcare, and declare victory.  This could actually be popular with the American people and could be a bipartisan policy success.  A lot of Democrats might go along.  But that is not our world.  The current Republican party would not accept it.  So instead it’s time for something completely different.

Here is how I think the perfect Obamacare federalism bill would look.  (We will not get this one—don’t get your hopes up.)  Pass a statute that explicitly allows each state to repeal any component of Obamacare, on a state basis, by state statute—as long as they replace it with something else whose result is that just as many people will have insurance coverage that is just as good.  In other words, allow each state to do repeal, piecemeal, as long as they also satisfy a strong form of nonretrogression.  Leave the problem of squaring this circle entirely to the states!

Consider the political optics.  Republicans in Congress and the Trump Administration can immediately claim total credit for nixing Obamacare’s onerous regulations and requirements, which will now remain in place only to the extent that states can’t come up anything better—and really, a Republican could say, based on well-established alternative facts, how hard could that possibly be?  Citizens, if you don’t like what your state has or hasn’t done, call your governor and state legislature and tell them to get moving and do their jobs!  Congress will have done its job.

Of course there are problems with this plan.  A lot would need to be worked out about the allocation of the money from the various revenue components of the ACA—including the individual mandate, which would need to become a state option somehow.  Still, it seems to me that the core political problem would be solved.  This proposal is basically a waiver program on steroids – with the important safeguard that no state may make changes that cause retrogression in access to adequate health insurance for the people of the state.  (I’d like to see that safeguard given some teeth through a private right of action.)

Of course, that’s not the Obamacare federalism we’re likely to see.  What we’re likely to see, instead, is a version of Obamacare federalism without the nonretrogression safeguards.  The Trump administration may be able to do a fair amount of this on its own, through the aggressive use of its power to issue waivers to states, which has always been fairly extensive under the ACA.  The political problem is that this purely administrative approach does little to satisfy (c), the partisan thirst for repeal.

So what is needed is a new statute that plants a political flag of repeal in big letters—yet lets states that wish to continue to operate the current system continue to do so. A carefully crafted Obamacare federalism statute could satisfy (a), (b), and (c)—and it could attract Republican and some Democratic support.  This is because the different sides could view it in terms of the different functions of federalism described above:

- For those working within the Republican coalition who fear no consensus replacement plan can be found, this could be a classic punt: go with federalism when the national-level choices are too hard or no position can garner enough support.

- Meanwhile, for Republicans who want repeal, but don’t want political blowback from any resulting retrogression in coverage, the “leave it to the states” solution shifts the locus of political responsibility, in a high-profile way, to state governments.  If residents of a given state are mad about retrogression, the fact that coverage did not retrogress in a neighboring state powerfully suggests that it’s state leaders, not Republicans in Congress or the White House, who are to blame.  This is federalism as submergence.  (Confusingly, Obamacare is already a program of cooperative federalism that obscures the federal role; the new solution has to submerge that role even further, making it appear that the states are really the only ones in charge.)

- And finally, of course, some Democrats could accept some sort of Obamacare federalism compromise and even vote for it, on Gerkenian grounds—they hope to preserve their power to decide at the state level to preserve something like the current Medicaid expansion and insurance marketplace, even if within the federal government this is now a dissenting position.  And Democrats can, perhaps, hope that this form of dissenting by deciding will, in the long run, help advance their side of a national argument that is unlikely to end any time soon.



* I haven’t read the Cassidy-Collins bill and this blog post is not an endorsement of it—or of whatever emerges from the messy process that is now well underway in the Senate.  But seeing the news of that bill, as described this afternoon in the Times, is what prompted to me to write this blog post.  (note: here's a one-pager with more about the bill on Senator Cassidy’s website.)
Posted 8:53 PM by Joseph Fishkin [link]