American Federalism in Practice: The Formulation and Implementation of Contemporary Health Policy


American Federalism in Practice is an original and important contribution to our understanding of contemporary health policy. It also illustrates how contentious public policy is debated, formulated, and implemented in today's overheated political environment.

Health care reform is perhaps the most divisive public policy issue facing the United States today. Michael Doonan provides a unique perspective on health policy in explaining how intergovernmental relations shape public ...

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American Federalism in Practice: The Formulation and Implementation of Contemporary Health Policy

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American Federalism in Practice is an original and important contribution to our understanding of contemporary health policy. It also illustrates how contentious public policy is debated, formulated, and implemented in today's overheated political environment.

Health care reform is perhaps the most divisive public policy issue facing the United States today. Michael Doonan provides a unique perspective on health policy in explaining how intergovernmental relations shape public policy. He tracks federal-state relations through the creation, formulation, and implementation of three of the most important health policy initiatives since the Great Society: the State Children's Health Insurance Program (CHIP) and the Health Insurance Portability and Accountability Act (HIPAA), both passed by the U.S. Congress, and the Massachusetts health care reform program as it was developed and implemented under federal government waiver authority. He applies lessons learned from these cases to implementation of the Affordable Care Act.

"Health policymaking is entangled in a complex web of shared, overlapping, and/or competing power relationships among different levels of government," the author notes. Understanding federal-state interactions, the ways in which they vary, and the reasons for such variation is essential to grasping the ultimate impact of federalism on programs and policy. Doonan reveals how federalism can shift as the sausage of public policy is made while providing a new framework for comprehending one of the most polarizing debates of our time.

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Editorial Reviews

From the Publisher

"Michael Doonan has filled an important niche with this illuminating analysis of health care, federalism, and policy implementation. In American Federalism in Practice, Doonan's authoritative case studies and policy analysis generate important insights into intergovernmental relations, federal rule making, and policy implementation. Anyone interested in the implementation of health care reform will want to read this book."—Timothy Conlan, George Mason University

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Product Details

  • ISBN-13: 9780815724834
  • Publisher: Brookings Institution Press
  • Publication date: 8/29/2013
  • Edition description: New Edition
  • Pages: 159
  • Sales rank: 879,091
  • Product dimensions: 5.90 (w) x 8.90 (h) x 0.60 (d)

Meet the Author

Michael Doonan is an assistant professor at the Heller Graduate School at Brandeis University. He is also executive director of the Massachusetts Health Policy Forum and director of the Council for Health Care Economics and Policy.

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The Formulation and Implementation of Contemporary Health Policy

By Michael Doonan

Brookings Institution Press

All rights reserved.
ISBN: 978-0-8157-2483-4


Federalism Creates Health Policy

Friends in my small town know that I have been involved in national health care reform efforts as well as those in our home state of Massachusetts. When conversation at the local pub turns to health care, they'll ask me questions. Because I'm a political scientist, not a medical doctor, I don't get pelted with questions everywhere I go, so I welcome the opportunity to respond. I only wish that there were better answers.

Jack, a salesman for a high-tech company, thought that the Massachusetts health care reform would allow him to cover his 24-year-old daughter, Meghan, on his employer's health plan. So why did his company tell him that she wasn't covered? I try to explain that larger companies are exempt from state insurance regulations because they self-insure; those businesses use insurance companies like Blue Cross or Aetna only to administer their claims. It is confusing because the same insurance companies actually provide insurance to small businesses, and in those cases they are subject to state regulations. Eyes glaze over, and we quickly return to the fortunes of the Boston Red Sox. Meanwhile, Meghan remained uninsured.

Matthew runs a small financial consulting business. Because of double-digit health insurance premium increases, coverage for him, his wife, and their three boys takes a big bite out of their budget. He wanted to know whether health care reform would offer more reasonably priced health plans. A while back, I had told him that help was on the way: Massachusetts had just created the Health Care Connector, which was intended to provide a choice of plans at lower prices, at least in theory. The Connector did expand coverage to lower-income individuals and families, but it did not lower the cost of insurance for people like Matt and his family. Perhaps I should have told him to hold tight for federal small business tax credits? Or let him know that health care exchanges created by national reform may offer a better solution soon? But at the risk of losing credibility and a good tennis partner, I turn back to discussing the ball game.

As the country geared up for national health care reform, I traveled from state to state talking about reform efforts in Massachusetts. Everywhere I went, I shared my excitement over the obvious progress in coverage. More than 98 percent of people in Massachusetts have health insurance, by far the highest coverage rate in the nation. Enacted in 2006, state reform added a patchwork of new programs and regulations that built on previous expansion efforts. Over 300,000 previously uninsured individuals now have health insurance coverage and can sleep better at night. But the program is complex and difficult to comprehend—even for policy wonks—and it was not designed to address persistently rising health care costs.

National health care reform was signed into law by President Obama on March 23, 2010. The Patient Protection and Affordable Care Act (ACA) has much in common with the Massachusetts effort. It holds similar promise—and suffers from similar limitations—when it comes to expanding health care coverage to the uninsured. More of the uninsured will be covered, but coverage will be complex to negotiate and cost containment will be just as difficult. Despite its shortcomings, ACA represents a significant political triumph after a series of failed efforts that date back to the Truman administration. 1 Under national guidelines, reform will be administered in large part by the states through existing health plans, insurers, hospitals, doctors, and other health care providers. States will be critical players in implementing reform and in establishing state-based health care exchanges. Applying national exchange rules to health systems that vary widely from state to state will be a tremendous challenge.

The ACA barely passed Congress, along partisan lines. The Democrats struggled to hold on to more conservative members of their party and used parliamentary maneuvers to avert defeat by filibuster in the Senate. The Democrats in the Senate did not even have the votes to include a relatively modest "public option" insurance plan to help balance private sector offerings and force down administrative costs. However, it is unlikely that anything more progressive could have passed. In fact, after the 2010 election, when the Republicans gained control of the House of Representatives and the conservative Tea Party adherents attacked the ACA as the centerpiece of their "revolution," the Democrats were fighting repeal.

Universal or near universal coverage has been referred to as the unfinished business of the New Deal. The New Deal represented a major realignment of the political parties in favor of social welfare policy, and efforts to improve, modify, and build on it have been a subject of political debate for decades. In this case, the advantage went to the Democrats. The election of Ronald Reagan in the 1980s represented a realignment against social welfare policy expansion and the national agenda of the Great Society and War on Poverty programs of the 1960s and 1970s. In the 1990s, Speaker of the House Newt Gingrich took the Reagan revolution one step further, taking aim at the New Deal with efforts to privatize portions of Social Security and Medicare. In this case, the Republicans had the advantage. Today the proper role of government and its role in health care reform is still hotly debated. The success or failure of the implementation of the ACA may well determine which political party holds sway over the next several decades.

Conservative opposition to the ACA represented not only an attack on a particular piece of legislation but an ongoing fight about the legitimacy of the government's efforts to ensure health care security for citizens. While repeal passed the House several times in 2012, the Democrats, who controlled the Senate, protected the law. Even if the Senate were controlled by the Republicans, it would still take sixty votes even to end the debate and have a vote on repeal. The American political system is structured to make passing legislation hard, which makes passing repeal equally challenging.

The ACA also dodged two near-death experiences. The first was the Supreme Court decision in National Federation of Independent Business (NFIB) v. Sebelius, which found the individual mandate requiring people to purchase health insurance to be constitutional. Without the mandate, much of the ACA falls apart. The law prevents insurance companies from denying coverage for people with preexisting conditions and requires them to make products widely available and renewable in their service area. Without a coverage mandate, people could simply wait until they got sick or needed care to sign up for insurance and then drop coverage when they were well. Doing that flies in the face of the concept of insurance. Furthermore, implementing the ACA without the mandate would lead to lower numbers of younger, healthier people enrolling in the health exchanges, leaving disproportionately older and sicker people in what insurers call the risk pool. That would increase costs and make insurance even less attractive to healthier people, creating still higher costs and an insurance death spiral. Finally, the mandate is essential to covering the 30 million uninsured people that the law is designed to cover.

The second bullet was dodged with the reelection of President Obama. His challenger, Mitt Romney, vowed to begin the repeal process through executive orders on his first day in office. A Romney win would have empowered and emboldened opponents of reform in Congress and in state houses throughout the country. Furthermore, a large number of states were sitting on the fence, awaiting the election results before moving forward in earnest with implementation. In addition, a Romney administration could have significantly weakened the ACA through the administrative rulemaking process. Nevertheless, the Court ruling and the election merely kept reform alive; the political battle continues through the rulemaking process and state implementation.

Making the ACA a reality will be a complex process fraught with peril. How enthusiastic will the twenty-seven states that were part of the lawsuit against reform be about implementing the major provisions of the law? Further significant opposition continues in Congress, and public opinion on reform is split. In particular, 60 percent of the population is opposed to the individual mandate. The political right still characterizes the ACA as "socialized medicine" and a "massive government takeover of the health care system." Certainly it represents an expansion of government intervention, but health plans, insurers, hospitals, and physicians and other providers all remain private or not-for-profit entities. Missteps in implementation will reinforce notions of government incompetence and increase calls for greater privatization. The political and individual stakes are high.

Success would be hard to reverse. Once the policy is in place, a powerful political coalition is likely to develop to protect gains. The program has the potential to enjoy the kind of broad political support enjoyed by Medicare, Social Security, and unemployment insurance. If the plan succeeds in covering 30 million additional Americans, who will be clamoring for the "good old days" when millions could not pay their hospital bills and people were denied coverage for preexisting conditions? Ultimately, the fate of reform rests on implementation and on intergovernmental relations within the framework of American federalism. The states are at the epicenter of implementation, and their actions will be guided by federal rules and regulations. The interplay between the states and the federal government will determine, for example, how the new health care exchanges will vary between states. It will also dictate the following:

—how federal tax-based subsidies will be administered through state-based health exchanges

—how new insurance regulations will dovetail with existing state laws and systems

—how states can use the new flexibility to alter the benefits for Medicaid beneficiaries

—whether states agree to expand Medicaid to all low-income individuals and families with an income below 133 percent of the federal poverty level

—how the individual mandate for insurance coverage will be enforced

—who will determine what is considered "affordable" for the purpose of enforcing the mandate

—who will set and enforce minimal benefit standards

—how sanctions on individuals and business will be administered.

In short, intergovernmental relations will shape the program and determine whether reform will reach its coverage and cost-containment goals.

If I tried to explain the importance of federalism and intergovernmental relations to Jack and Matt, not only would their eyes glaze over, but the guys would probably get up and leave me at the bar. Yet federal-state interactions determine the success or failure of policy and programs that impact us all. Knowledge about intergovernmental relations is essential to understand the policy process, to evaluate options for effective and politically feasible implementation, and to understand how programs operate. Such insight, which can be obtained only by systematically examining intergovernmental relations for different types of policy across the policy process, is essential for scholars and students of public policy as well as practitioners at the national, state, and local level who struggle to make programs work.

A more comprehensive understanding of American federalism in practice and its impact on programs and policy comes from three case studies—the State Children's Health Insurance Program (CHIP), the Health Insurance Portability and Accountability Act (HIPAA), and the health care reform enacted by Massachusetts. Each mirrors key elements of the ACA and offers unique insights into policy formulation and implementation. CHIP is an example of coverage expansion, with state flexibility and federal oversight. HIPAA is an example of insurance regulation, with federal standards but limited national resources and weak oversight of state activity. The Massachusetts reform has many similarities to national reform, but within a policy environment that is significantly different from that of the majority of states. Each case demonstrates that states can be a source of innovation for social welfare policy, particularly during times of national policy gridlock. Each case provides lessons in how the ACA might be successfully—or unsuccessfully-implemented.

The book is divided into three sections, each of which addresses one of the three case studies. Within the sections are chapters on federal-state relations as they apply to legislative development, rulemaking, and implementation. The final chapter draws conclusions from all the cases regarding how federalism affects both program development and the policy process and applies what has been learned to the implementation of national health care reform.

CHIP, HIPAA, and Massachusetts Reform

CHIP, passed in 1997, provides grants to the states to expand health insurance coverage to uninsured children whose family income is too high to qualify for Medicaid but who lack access to private insurance. The program has been an enormously successful federal-state partnership resulting in health insurance for millions of uninsured children. In 2010, the program covered more than 7 million children. National reform in 2010 extended CHIP until 2019 and provided supplemental federal funding, along with a requirement that states continue to maintain coverage levels.

As with many policies, a good deal of work occurred before most of the federal rules relating to CHIP were put in place and details ironed out. States were encouraged to innovate by designing alternative programs, and they received incentives to participate through increased federal reimbursements. State implementation was kept in line through significant federal oversight and mandatory reporting requirements. From the outset, CHIP provided states with the flexibility to design their own program or expand Medicaid or to come up with some combination of those two options. Within federal guidelines, states could set eligibility rules, benefit levels, provider payments, and other program requirements. The result was not only a major expansion of coverage but also great equalization in coverage levels across states.

HIPAA, which passed in 1996, had a host of goals, including privacy protection, regulation of insurance, prevention of fraud and abuse, simplification of administrative tasks, and creation of medical savings accounts. The focus here is on the portion of the HIPAA that addresses insurance regulation, including limiting exclusions for preexisting conditions and guaranteeing policy renewal. These aims are similar to those of national insurance reform in the ACA. HIPAA standards were meant to extend federal control in an area traditionally regulated by the states, but unlike with CHIP, federal resources, administrative expertise, and oversight were so limited that states largely controlled the process nevertheless. Ultimately, there remained wide variation between states and the regulations had limited impact, hence the need for significant insurance regulation in the ACA.

The third case, Massachusetts health care reform, served as a model for national reform, even if presidential candidate and former Massachusetts governor Mitt Romney later denied it. Both plans include an individual mandate to purchase insurance, health care purchasing exchanges, expansion of the Medicaid program, and subsidies for low- and moderate-income individuals and families. The reform was based on the notion of shared responsibility, and Massachusetts asked individuals, businesses, and government to pitch in. Individuals must purchase health insurance if it is deemed affordable, or they face a fine. Businesses with eleven or more full-time employees must provide health insurance or pay a small fee. In order to increase affordability, the state government, with federal support, expanded subsidies to low- and moderate-income residents.

From the beginning, Massachusetts reform depended on support from the federal government. Through a federal government Medicaid waiver, the state was receiving millions of dollars paid directly to hospitals for uncompensated care. The George W. Bush administration threatened to stop providing this money, $385 million a year, if the state did not shift funding away from hospitals and toward direct coverage of the uninsured. Interestingly, the conservative Bush administration pushed for reform and approved the plan that would ultimately serve as a model for "Obamacare," which is detested by the political right.

Excerpted from AMERICAN FEDERALISM IN PRACTICE by Michael Doonan. Copyright © 2013 THE BROOKINGS INSTITUTION. Excerpted by permission of Brookings Institution Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents


Acknowledgments....................     vii     

1 Federalism Creates Health Policy....................     1     

2 CHIP: Federalism in Congress....................     16     

3 CHIP: Federalism and Rulemaking....................     30     

4 CHIP: Federalism and Implementation....................     43     

5 HIPAA: Federalism in Congress....................     57     

6 HIPAA: Federalism and Rulemaking....................     71     

7 HIPAA: Federalism and Implementation....................     84     

8 Massachusetts Leads the Way....................     99     

9 Federalism and the Affordable Care Act....................     115     

Notes....................     131     

Index....................     153     

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