Why Federalism Fails

[Joanne98]

Why Federalism Fails

Mitt Romney and many others want to preempt meaningful health care reform with federalist, 50-state solutions. Don't let them.

Ezra Klein | August 30, 2007 | web only
http://www.prospect.org/cs/articles?article=why_federalism_fails


It's testament to the extremism of the Republican base that Mitt Romney -- a genuinely accomplished governor -- is having to twist away from his signature achievement as governor of Massachusetts. Romney, after all, crafted and passed a universal health reform bill. You'd think that would be a big part of his presidential campaign, but instead, he's trying to squirm away from the legislation's more pragmatic and sensible features -- like the mandate ensuring universal coverage -- and embrace something closer to what the Wall Street Journal would concoct. That’s how you get press releases like this one, which enthuses that "Governor Mitt Romney Unveiled A Bold Plan To Improve The American Health Care System By Putting Conservative, Market-Based Principles To Work!"

Well, I guess it's better than letting those conservative, market-based principles sit around and collect welfare checks.

Honoring those conservative principles turns out to mean forcing the states to take charge. "Rather than relying on a one-size-fits-all, government-run system,” we’re told, “Governor Romney's plan recognizes the importance of the role of the states," thereby fulfilling the ancient conservative belief that everything works better if it's fragmented into 50 little pieces. This is why America's fighting elite reside in the state-run National Guard, rather than the U.S. Special Forces.

This federalism stuff isn't just a Romney idea, though. The late, great, Paul Wellstone championed this strategy from the minority, and Russ Feingold has carried it through the recent Democratic resurgence, attracting Republican co-sponsors like Lindsey Graham along the way. Liberal organizations like the Progressive States Network back this approach, and they've attracted some strange bedfellows, including Stuart Butler of the Heritage Foundation. "Let's just try many different approaches in many different states and see what happens," he tells me. "The more complex an issue is, the less possible it is to actually know the best system in advance -- therefore a system of trial and error in which all these pieces work together is the best way to push forward."

Under this vision and its many variants, the federal government would set certain minimum coverage and insurance standards that each state would have to meet, guarantee set levels of financing, and allow 50 beautiful flowers to bloom. In liberal versions, the standards would be stringent, forcing comprehensive care and universal coverage. In conservative visions, like Romney's, the states have considerably more autonomy to do nothing.

Either way, do we really want 50 different health care systems, each with their own requirements, regulations, structures, and failings? Yale political science professor Jacob Hacker is, to say the least, skeptical. "Whenever people ask me if this should be a state run issue, I say no. And I say no. And I say no and no and no."

Ron Pollack, president of Families USA, is only slightly more positive. "As an interim -- and I underscore interim-- step, a federalist system makes sense, but ultimately, we need a system with greater uniformity so when travel from one state to another they're not going to confront wildly different health systems. If one or two or four states do something, it can cause very peculiar habits with who goes into or leaves that state. It can become either a haven or a pariah for various types of providers and patients." Their skepticism is understandable. Federalist solutions preserve many of the weaknesses and disadvantages of our current health care system, while eschewing the unique regulatory powers and efficiencies the federal government could bring to bear.

America's health spending is unprecedented among developed nations. At over $6,000 per capita, we spend two-and-a-half times the OECD median, with no discernible advantage in health outcomes and 47 million uninsured (meaning the per capita spending is, in fact, understated). A 2003 study in the journal Health Affairs concluded that, "In 2000 the United States spent considerably more on health care than any other country, whether measured per capita or as a percentage of GDP. At the same time, most measures of aggregate utilization such as physician visits per capita and hospital days per capita were below the OECD median." Translated back from Wonk, we pay more, and get less. A January, 2007 report released by the McKinsey Group came to the same conclusion, finding that Americans overpay to the tune of $1,645 per person, per year.

There's an easy explanation for this: Size matters. Just as Wal-Mart lowers prices by using their size to demand savings, in other countries, governments wield their massive size and market share to bargain down the costs of health care. America doesn't. It's very simple, and very well understood. Indeed, to protect the pharmaceutical industry's profits, when Republicans crafted the 2003 Medicare Prescription Drug Benefit, they inserted a line specifically barring Medicare from bargaining down drug prices. That's why, if you compare brand name drugs in the U.S. and Canada, the same drug will cost you a full 60 percent more here. If you restrict that to the top selling drugs, you find we pay 230 percent more than anyone else. For generics, the difference evaporates.

So on average, we overpay by 60 to 70 percent for pharmaceuticals, largely because we, unlike every other country, don't bargain down the costs. We're in fact subsidizing their discounts, as the pharmaceutical companies can raise our prices to lower theirs. In a nationalized system, that would change. In a system with 50 states all on their own, it wouldn't. How would you like to be the governor who runs for reelection after refusing to pay Pfizer's preferred price for Lipitor, thus depriving seniors of a favored drug? And without that capacity at the bargaining table, large cost-savings are but a dream.

Federalist solutions are best understood as a stop-gap approach. The hope is that they're possibly a bit easier to pass, but from a policy perspective they're substantially worse. They have some potential for achieving universal coverage, but they'll preserve many of the system's worst inefficiencies and be completely unable to take advantage of the federal powers that make an integrated, substantially-public system so attractive. Romney could do better. In fact, in Massachusetts, he did. But just because the braying of the Right has left him cowering, doesn't mean progressives should follow suit.
http://www.prospect.org/cs/articles?article=why_federalism_fails

[bemildred]

1. This guy doesn't seem to know what "federalism" means.

http://en.wikipedia.org/wiki/Federalism