Proposed Federal Law Would Free States to Pursue Innovative Reform

Published April 1, 2007

As President George W. Bush attempts to push a national solution to America’s health care policy problem, some members of the U.S. House and Senate are hoping to make it easier for states to come up with their own answers.

Bridging partisan and ideological divides, Reps. Tammy Baldwin (D-WI) and Tom Price (R-GA) and Sens. Jeff Bingaman (D-NM) and George Voinovich (R-OH) introduced bills H.R. 5864 and S. 2772, respectively, late last year to promote federalism in health care policy. Sen. Russ Feingold (D-WI) introduced similar legislation (S. 3776) on his own and may have Sen. Lindsey Graham (R-SC) as a cosponsor this year.

State-Based Approach

Each bill has some variation of the basic concept outlined in a 2004 Health Affairs article by Henry J. Aaron of the Brookings Institution and Stuart Butler of The Heritage Foundation. Under their plan, a bipartisan commission would review proposals for new state-level programs to reduce the number of uninsured. Congress would vote on the commission’s recommendations, including any exceptions to existing federal laws or regulations that might be required for a state plan to work, but it would not be permitted to make amendments to any state’s plan.

States whose proposals were approved by Congress would receive a money grant from the U.S. Department of Health and Human Services. Each plan would last five years before facing renewal.

The Feingold bill would offer only matching grants and would require no further Congressional action until the pilot programs have run their five-year course, at which point Congress would consider extending them. Applications would have to comply with all federal regulations without exception.

The Voinovich-Bingaman and Price-Baldwin bills would permit states to receive waivers of federal rules.

“Congress has no shortage of well-intentioned measures to solve the problem of the uninsured,” Baldwin said in a January 17 news release, “but it has been clear to me for some time that no single approach currently has enough support for passage.”

Balanced Approach

Because there is such disagreement over what is the best solution to increase the number of people with health insurance, the creative federalism approach makes it possible to pursue many solutions without hamstringing experiments or imposing new regulations on other states, supporters say.

“The critical element of the proposal is that it limits ‘toolbox’ regulatory changes to the state filing the application, instead of making the changes apply to all states,” explained Butler, who added that changing regulations at the national level has been the biggest stumbling block to prior reform initiatives.

Price said differing circumstances in local markets make flexibility in federal rules appropriate.

“What works in the New York City region and Raleigh, North Carolina, and Butte, Montana are three very different things,” Price said. Creative federalism “allows flexibility for what some think is worthwhile.”

For instance, Wisconsin could choose to take Baldwin’s preferred path of a single-payer system, while Georgia could take the more consumer-driven approach Price favors. Both sides of the debate are sure their approach would achieve better results. Butler said the commission’s balanced approach would alleviate concerns of bias in the projects that receive approval.

New Idea

Each of the pending bills focuses on reducing the number of uninsured in a state without significantly affecting the coverage available to those who currently have insurance, while improving quality, lowering costs, and expanding health information technology, Butler said. Grant money would be distributed based on how well each state achieves the goals of its particular project, such as reducing uninsurance or making health plans more affordable.

“What excites me about the idea,” said Arnold Kling, author of Crisis of Abundance: Rethinking How We Pay for Health Care (Cato Institute, April 2006), “is that it will produce information that can be used in formulating policy. What concerns me is that the metrics for evaluating policy results will be unclear, and therefore the experiments will fail to generate useful, comparable results.”

Although all three bills would review the performance of state experiments after five years, Kling thinks the trial period should be longer.

“We will have to be patient enough to allow these experiments to run for 10 years or more, as long as they are not disastrous, because it may take time for changes in incentives to work their way through the system,” Kling said.

‘Meaningful Progress’

Proponents of creative federalism on both left and right point to the success of welfare reform experiments at the state level a decade ago as a sign this approach can work.

“Though we, liberals and conservatives, may disagree on the best means to the end, we couldn’t be more united in our desire to move forward and provide the potential for true policy solutions,” said Baldwin. “This collaboration is rare, gratifying, and a sign of meaningful progress.”

Joseph Coletti ([email protected]) is a fiscal and health policy analyst at the John Locke Foundation, a free-market research group in North Carolina.

For more information …

“How Federalism Could Spur Bipartisan Action On The Uninsured,” by Henry J. Aaron and Stuart M. Butler, published in Health Affairs on March 31, 2004, is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to and search for document #20716.

“The Voinovich-Bingaman Bill: Letting the States Take the Lead in Extending Health Insurance,” by Stuart M. Butler, Heritage Foundation Web Memo #1128, June 15, 2006,

“The Baldwin-Price Health Bill: Bipartisan Encouragement for State Action on the Uninsured,” by Stuart M. Butler and Nina Owcharenko, Heritage Foundation Web Memo #1190, August 7, 2006,

S. 3776,

H.R. 5864,