Why is healthcare a federal issue and not a state issue

Question

Why is healthcare in the US viewed by many as a federal issue, instead of a state issue? It seems to me, it would make more sense to implement healthcare reform on a state level, like they did in Massachusetts.

Answer 1

There are a couple of reasons.

Lots of things are seen as federal issues by some people and healthcare just happens to be one of them

The sort of federalism where there is a small federal government focused on a small set of responsibilities, with state governments that can focus on nearly anything else that they want, is not popular with everyone in the United States at the moment. There are many reasons for that, but they all tend to stem from a belief that government should be doing something it isn’t presently, and that the federal government is uniquely powerful, so it should use its unique power to do whatever it is that should be done.

Healthcare is really expensive, so it’s hard for states to pay for it

You cite Massachusetts as a state that implemented healthcare reform, and it is a good example. However, the current appetite for reform that some people have involves something vastly more complicated than a mandate to purchase health insurance; the current idea in vogue is a single payer healthcare system.

Single payer healthcare provided at the sort of standard Americans are used to receiving is really, really expensive. So much so that Vermont and California have both abandoned proposals to implement a statewide form of it over fiscal concerns. This doesn’t stop people from wanting it, so the natural entity to try it is the Federal government, which has several unique advantages that states don’t have:

• The Federal government has a very large tax base compared to any one state
• The Federal government can borrow money at really low rates compared to state governments
• The Federal government can (indirectly) control the supply of money to make paying for all of this easier (this would be a bad thing but there’s a new intellectual fad centered around this idea).

None of these things mean that single payer healthcare is more likely to succeed at being implemented, or be a success when implemented, but the federal government can hypothetically get any such scheme over all of the hurdles that states have already run into. Whether that would be desirable or not is an exercise I leave for the reader.

Answer 2

Because the federal government spends a substantial portion of the healthcare dollars. It's noteworthy that the United States government (federal and state combined) spends more money on healthcare than the United Kingdom's government. There are basically four federal programs:

• Veterans' Affairs. For military veterans. Funded entirely by the federal government.
• Medicare. For people 65 and older. Funded entirely by the federal government. Possibly with copays.
• Employer. For federal employees. The insurance is funded entirely by the federal government but can include copays and deductibles. The federal government employs one sixth of all US workers.
• Medicaid. For those with low incomes. At least 50% funded by the federal government, with the remainder financed by state governments. Can include copays and deductibles.

When Massachusetts passed its healthcare reform, it had to get waivers from the federal government. Medicaid had requirements for who was eligible and for what that weren't met by Romneycare. It was able to get these waivers because the legislators were Democrats and the governor (Mitt Romney) was a Republican. So there was a bipartisan request to the federal government.

To make a serious reform at the state level, the state would have to get federal approval for waivers. Since the current set of proposed reforms is only supported by Democrats, they are unlikely to get federal approval for the necessary waivers to take over VA hospitals, Medicare, the insurance of the federal employer, and Medicaid. There are actually some proposals by Republicans that might help, but Democrats are ideologically opposed to things like block granting Medicaid or privatizing the VA and Medicare.

Another problem is taxes. If Vermont, California, or New York passed single payer healthcare, then they'd have to fund it with state taxes (because states can't deficit spend). Because rich people can move more easily than poorer people, those taxes would mostly have to be raised on the middle class or employers of the middle class. And of course if they raise taxes on employers, it is possible that the employers might leave.

Another way of saying this is that state governments have found it impossible to fund single payer. So supporters hope that the federal government will be able to do so. This seems unlikely. While the federal government can borrow money, it's already at its limits for a non-recession economy. The only time that the US had a higher debt to GDP ratio was after World War II and the Great Depression. Wikipedia

I also remain unconvinced that increasing tax rates on the rich will increase tax revenues in the long term. The rich have far more options for collecting their income than the middle class do. So they are likely to do so even in the face of high taxes. Either by hiding their income in lower taxed income types (e.g. capital gains) or by hiding their income in lower tax jurisdictions (e.g. Caribbean island countries).

It's also noteworthy that even with static scoring (assuming no income hiding), the two main proposals, a wealth tax and a 70% income tax rate on incomes over $1 million, only produce $345 billion in revenue a year combined. That's well under half the current budget deficit much less the costs of single-payer. And as I said, I suspect that in reality the loss in taxes from increased evasion would entirely offset any gains. While other countries do have higher revenues per person, they do this not from higher taxes on the rich (the US has the highest percentage of its tax revenue paid by the rich among OECD countries), but through higher taxes on the middle class.

Politicians in the US have been talking about single payer health care for decades. I witnessed it first hand in 1992. Polls will even show it as popular until the costs are included. But people who have employer-based health insurance don't want to give it up. Most employers don't want to replace buying insurance with a tax. Most employees don't want to replace insurance that their employer buys with a tax that they pay. And most doctors and nurses don't want to take the pay cuts from single payer.

All those problems apply to states as much as the federal government. Or more than. It's much easier to migrate from a state than a country. And the long term fixes (e.g. free education for doctors and nurses) are, well, long term and not much help in the near term.

Answer 3

One additional argument I have heard from single-payer supporters is that doing it on a state level will only encourage people to move to the state and potentially not work and drag down the healthcare system. And so, to avoid this, it must be done federally.