What Really Matters in Health-Care Reform

Health-care politics continues to grab headlines, but what's important lies elsewhere.
June 2010
Donald F. Kettl
By Donald F. Kettl  |  Columnist
Sid Richardson Professor at the LBJ School of Public Affairs at the University of Texas at Austin

Health-care reform has made for some strange battles, but none is stranger than the one Michigan Attorney General Mike Cox is having with himself.

Conservative opponents to the new health-care law were loaded and ready to fire before President Barack Obama had even signed the bill. They found an argument they think will work: They say the law forces consumers to buy a product--health insurance--which is an unconstitutional use of the Constitution's interstate commerce clause.

Cox headed a group that included 13 other attorneys general who filed suit against the new health-care reform bill. But Michigan Gov. Jennifer Granholm ordered him to file on the other side of the case. To paraphrase Abraham Lincoln, a Cox divided against himself cannot stand.

"On behalf of the interests of the people of Michigan," as the attorney general put it, he's trying to torpedo health-care reform. On Michigan's behalf, as the governor's lawyer, Granholm says Cox is obliged to advance her pro-reform position. Without an act of the legislature, he counters, how can the governor know she's speaking for the state?

And to steal from the movie classic Casablanca, we might be shocked--shocked!--to discover there's politics going on here. In Michigan and three other states, Democratic governors are battling Republican attorneys general. In Georgia and Mississippi, Democratic attorneys general are refusing to contest the law on behalf of Republican governors. Three of the attorneys general are running for governor and a fourth is considering a contest next time around.

We've been down this state-nullification road before: In the '60s--the 1860s, that is--nullification didn't work out well for states below the Mason-Dixon Line that brought disputes, which had been simmering for decades, to a bloody battle over supremacy. In the 1960s, some states were painfully dragged to new federal civil rights and voting rights standards.

The health-care reform battle is a bit different, since it's grounded in an argument about whether individuals can be forced to do something (buy insurance) instead of be forced not to do something (discriminate). But it's unlikely to have a different outcome. Bit by bit, the federal government has chipped away at Thomas Jefferson's argument that the states were the Constitution's supreme arbiters. The upcoming row over Cox's competing loyalties will be great political theater, but it's unlikely to produce legal doctrine.

However, it would be a huge mistake to write this off completely as partisanship. Health insurance reform might be the federal law, but its implementation depends critically on the states. Beneath it all is the always-simmering question of federal pre-emption of state power.

On the implementation side, the cornerstone of the new program is a collection of state-run insurance exchanges. After the health-care fighting was over, the "public option" became a state option, which became a plan in which state governments will create online marketplaces--a kind of Hotels.com for health insurance. These exchanges don't have much of a track record. The plan is based on the Massachusetts Health Connector, created in 2006 under former Gov. Mitt Romney, who's now doing a quick tap dance trying to explain how his plan differs from the "Obamacare" program that followed in its steps. This plan creates strong government control over basic packages of care.

Utah created the nation's second exchange. This one relies far more on telling citizens which private plans are available, and it's already gone back to the drawing board for more tinkering. Utah House Speaker Dave Clark claims it's a better way, because, "not only can we run these programs adequately without federal oversight and interference, but we can operate them more effectively, more efficiently and serve citizens better."

Beyond the exchanges, the new health-care bill significantly expands eligibility for Medicaid, the nation's health program for the poor. Pre-health reform, Medicaid mostly covered health care for children and nursing home care for seniors. The law opens up the program to others under 133 percent of the federal poverty level, which will put states on the front lines of expanding coverage for many more Americans.

Of course, the states don't actually provide health care, either through Medicaid or the exchanges. They are brokers, leveraging and overseeing the behavior of private insurance markets, hospitals and health-care providers without actually hiring the doctors and hospitals that provide the care. This is where the real action in health-care reform will be--and it's why public battles over who is suing whom miss the big point.

We're in the process of rejiggering $1 of every $6 moving through the American economy and rethinking one of the few things--health--in which all of us have a strong and equal interest. The feds are changing the rules of the game. The big questions will be who gets what care from whom and how much it will cost--and they will depend on how the states set up and play the game.

The federal government will decide which state models meet the new program's national standards. So enjoy the on-stage Cox drama. The second act, where states and the feds fight out how to run something that's only barely been tried, will be where the real action is.