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National Health Care Shouldn’t Be National

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Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of Ownership Society: How the Defined Contribution Paradigm Changed America which looks at how defined contributions (IRAs, 401(k) accounts, 529 programs, FSAs, HRAs, HSAs…) have transformed tax and social policy in fundamental ways. In the article below Zelinksy turns his sight towards health care reform.

The financing of medicine has emerged as the central domestic issue of the 2008 presidential campaign. Hovering over this debate is the memory of the failed health care initiative spearheaded by the then First Lady in 1993. Senator Clinton’s supporters suggest that Senator Clinton has learned from that earlier, unsuccessful experience. Her opponents contend otherwise.

There is, however, an important lesson learned since 1993 which, so far at least, most health care reformers have been unwilling to embrace: “National” health care needn’t be national; indeed, it should not be. The states can and should 9780195339352.jpgbe in the forefront of health care policy. Different states can experiment with different formulas and can adapt to local preferences about health care. The federal government ought to permit state innovation to flourish in the financing of medical care, rather than impose a single set of nationwide rules.

Consider in this context three major features of Senator Clinton’s proposal: an individual mandate requiring all Americans to obtain health care insurance, public subsidies for low-income families to purchase such mandated insurance, a mandate on large employers to provide medical insurance. These features of the Clinton proposal are key elements of the health care program enacted by Massachusetts during Governor Romney’s term of office.

Before legislating federally, we should wait to see how the Massachusetts experiment plays out. Perhaps Massachusetts’ experience will confirm the value and practicality of individual and employer mandates as well as expanded insurance subsidies for low income persons. Perhaps the Massachusetts experiment will reveal that some or all of these approaches should be modified or abandoned. A great strength of federalism is that Massachusetts, and other states, can act as laboratories of public policy and thus generate useful information for the nation as a whole.

In an environment of experimentation and diversity, other states will embrace alternative models for health care. Perhaps some states will try single-payer systems along the lines used by Canadian provinces. Other states may move in the opposite direction, embracing deregulation of the insurance market as the best way to achieve universal coverage. Yet other states may carve their own paths by, for example, imposing an individual insurance mandate but not an employer mandate or vice versa.

After a reasonable time for this state level experimentation with medical coverage, a single model may emerge as best. Alternatively, we may conclude that no single paradigm is optimal. In that case, letting each state maintain its own model will prove the best approach to financing health care.

Today, the major impediment to state-by-state experimentation with health care is the Employee Retirement Income Security Act of 1974 (ERISA) which prohibits the states from enacting laws which “relate to” employer-provided medical care. Since employer-provided health care is central to the status quo, this prohibition legally dooms much productive experimentation, like the new Massachusetts health plan. Accordingly, the first order of business for federal health care reformers should be the modification of ERISA to permit state-by-state innovation in the financing of health care.

However well-intended, proposals like Senator Clinton’s would straightjacket the nation into a single approach to the financing of medical care. Not all national problems require national solutions. For now, and perhaps for good, the states should be the principal arena for health care policy. The wisest course would be to amend ERISA to permit state-based innovation in the financing of health care.

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5 Responses to “National Health Care Shouldn’t Be National”
  1. Don Levit says:

    Edward:
    Thanks for providing your thoughts.
    I agree with you that states need to have the freedom to experiment with different ways to finance health care.
    While ERISA does provide an obstacle, I believe that states have had one area in which experimentation has been encouraged; with multiple employer welfare arrangements (MEWAs).
    In 1983, Congress gave states the ability to do then, what they are asking Congress to do now.
    And, what were the results of the states’ability to regulate these entities since 1983?
    Don Levit

  2. Karl Norris says:

    I agree that more innovative financing arrangements would be a valuable. However, I am hard pressed to see how muti-state employers and their employees or national insurers and their customers can benefit from further variation in state regulation. For example, one of the largest health care companies just finished a project for which the state by state differences in small business group application and enrollment forms added $2 million to the cost of the project. That’s after the forms had been refiled to have as much in common as the states would allow!

    Karl Norris

  3. [...] Rebecca placed an interesting blog post on National Health Care Shouldnât Be National: Amending ERISA to ….Here’s a brief overview:Hovering over this debate is the memory of the failed health care initiative spearheaded by the then First Lady in 1993. Senator Clinton’s supporters suggest that Senator Clinton has learned from that earlier, unsuccessful experience. … [...]

  4. [...] Filed in A-Featured , American History , Law , Media , Politics on September 10, 2008 | SHARETHIS.addEntry({ title: “Congressman Rangel’s Tax Returns and the Ghost of Wilbur Mills”, url: “http://blog.oup.com/2008/09/rangel_tax/” }); Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Zelinsky discusses the failure of House Ways and Means Chairman Charles B. Rangel to report on his federal income tax return Rangel’s rental income from his condominium in the Dominican Republic. Zelinsky contrasts that failure with the ethical standards established by Rangel’s legendary predecessor as Ways and Means Chairman, Wilbur Mills. Check out Zelinsky’s previous articles here. [...]

  5. [...] ERISA Preemption in the City by the Bay permalink Posted on Tuesday, January 15th, 2008 at 8:07 am SHARE: Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of Ownership Society: How the Defined Contribution Paradigm Changed America which looks at how defined contributions (IRAs, 401(k) accounts, 529 programs, FSAs, HRAs, HSAs…) have transformed tax and social policy in fundamental ways. In the article below he reflects on a recent U.S. Court of Appeals for the Ninth Circuit decision and its affects on health care reform. Check out Zelinsky’s previous article here. [...]

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