FEDERALISM AND THE FUTURE OF HEALTH
An important theme in the ongoing health care reform debate is federalism. During the battle over the Clinton Health Plan in 1993–94, the question of which level of government—federal or state—should take the leading role in health policy was almost as contentious as the particular proposals for extending access to quality health care and controlling health care costs. With the failure in 1994 to achieve comprehensive legislation at the national level, many policymakers and commentators gave fresh attention to the states as potential agents for health care reform.
Theories of federalism provide support for a significant state role in health reform. As we will argue in this chapter, however, the current arrangements for the financing and delivery of health care are likely to impede effective action at the state level. This is because most private health insurance in the United States is provided through the workplace. Our constitutional structure and federal law together restrict the ability of states to regulate employment-based health insurance. Indeed, they provide employers with an opportunity for a [double exit] from state regulation. First, as with most forms of policy-making, state decision making is constrained by the possibility of [external exit,] that is, the ability of an employer to relocate to another the state to avoid cost-imposing regulation. Second, with respect to health care, many employers enjoy immunity from state regulation without having to physically exit the state. This is due to the federal Employee