The New Health Care Federalism: An Empirical and Theoretical Assessment of Federalism Dynamics in Health Care and Beyond

Ongoing litigation challenges and political opposition to the Patient Protection and Affordable Care Act (ACA) have obscured the fact that the statute has already generated a roiling and ongoing experiment in the realities of American federalism. While the ACA substantially increases national authority over the nation’s health insurance and delivery structures, the statute devolves to the states the front-line role in implementing many of the ACA’s core goals, and with that devolution comes broad space for state policy discretion and strategic negotiation with the federal executive. The past two years in which states have actively prepared to implement, subvert, or reframe the ACA’s core elements illustrate the dynamic complexity of American federalism within a major federal policy area. This article assesses and explains the workings of shared state-federal policymaking in the health care field from multiple methodological perspectives. Building on the growing body of emerging literature on American federalism in the twenty-first century, we offer a multifaceted theory of “new health care federalism” that explains why states and the national government are incentivized to negotiate differently in the health policy space than in other areas of state-federal interaction. The substantial monetary flows from the national government to the states in major shared public health insurance programs like Medicaid are unmatched in other areas and produce unique bargaining and negotiation outcomes that we explore in detail in this article. We test this new theoretical frame with two different kinds of empirical analysis. First, drawing on our shared expertise and awareness of ongoing developments in the states in both Medicaid expansion and exchange regulation, we provide a nuanced analysis of the highly dynamic and individualized process whereby each state seeks to advance its interests. Second, we generate cross-state findings from carefully coded datasets that track each state’s individual choices about exchange operation and Medicaid expansion, thus accessing hundreds of state-level variables that illustrate key generalizable trends. Our research reveals several important features of the new health care federalism that illuminate federalism discourse more generally. Health care federalism in the twenty-first century operates dynamically over time, defined not by fixed judicial decisions but by ongoing, adaptive, and reactive strategies employed by both state and federal actors. The new health care federalism plays out on multiple horizontal axes as well as on the more traditionally considered vertical dimension; intrastate debates over Medicaid expansion and exchange formation expose the understudied point that states are republican governments too, with all of the inter-branch tensions that characterize national policymaking. Moreover, the new health care federalism illustrates how states act individualistically and strategically in dealing with the national government. Rather than an undifferentiated collective resistance, in the health care space we see each state operating selfishly to cut its best deal with federal regulators. Finally, the dynamics of the new health care federalism expose the incentives of the national executive in seeking to advance a transformative policy initiative, leading to a welcoming and permissive federal agency attitude toward particularistic state demands in order to advance longer term entrenchment goals.