The debate in the 104th Congress over the future of Medicaid and welfare programs was more than a budget debate. It embroiled legislators in a discussion of the nature of federalism--the proper division of roles between states and the federal government. The debate was often described in terms of the degree to which power should be devolved to the states, but the legislative proposals reveal complex differences in the objectives of various parties that are not captured in a one-dimensional definition of federalism. A better understanding of the intricacies of federalism could improve the effectiveness of negotiations over shifts in power between the federal government and the states.
The issue of federalism will continue to have high salience. President Clinton's signing of the Republican welfare reform legislation in 1996 appears to solidify a strife in the relationship between the federal government and states that has been underway since the Reagan years. This shift reflects, in part, a changed philosophy of governmental roles and functions. Although the welfare measure ostensibly returned control to the states, it also imposed new requirements and limits on states, not only eliminating individual federal entitlements but also curtailing certain types of state experimentation by linking all welfare funds to new federal limits. Medicaid reform, considered by the 104th Congress but not resolved, is likely to be on the Congressional agenda again. How the issue was considered during the 104th Congress may illuminate how changing views of government in a federal system are likely to affect reforms.
This article suggests that competing Medicaid proposals from the Senate, the House, the conference committee, President Clinton, and the National Governors Association (NGA) may be read as statements that reflect commitments to different underlying theories of federalism. If these differences emanate from fundamentally different definitions of federalism, rather than a particular dimension of the relationship, grounds for negotiation may be difficult to find. The purpose of this article is to bring these underlying differences to the surface and to provide a starting point for a more cogent debate on the relationship between the federal government and the states concerning Medicaid and other social programs.
Dimensions of Federalism
There are a number of different dimensions to the notion of federalism. A review of the literature identifies a major split between structural theories, which emphasize the global nature of the relationship between the states and the federal government, and functional theories, which emphasize the relative advantage of each level of government in various contexts. Using an instrument developed by the authors to identify critical state concerns during the 1995 block grant debate (Kee and Ladenheim, 1995), this study takes a closer look at the notions of federalism that each Medicaid proposal implies. To do this, we developed a checklist and evaluated the extent to which each proposal reflected attention to the structural dimensions (concerned with the overall pattern of the federal-state relationship) and the functional dimension (concerned with the way governmental roles differ across areas of activity, such as income redistribution or economic stabilization). The literate of federalism is both descriptive--this is how government is--and normative--this is how government ought to be. Each dimension has its own characteristics set of issues and values and tends to be aligned with a different academic discipline, as described below.
Structure in Federalism
The structural theorists (e.g., Beer, 1993; Dye, 1990; Elazar, 1987; Grodzins, 1966; Wright, 1998) address how power is divided between the federal government and the state-local sector. They are concerned with issues of control, representation and balance. Their models of federalism emphasize the nature of the overall relationship among levels of government, using terms such as "unitary government," "dual federalism," and a "division of powers. …