States’ Rights Versus Obamacare

States look to sue over health care mandates

The passage of comprehensive health care reform has many implications, but few are likely to fully appreciate the most fundamental impact of all: How the bill undermines the core principle of American federalism.

While growing the size of the federal government is a huge concern in its own right, a far greater threat to the economy and the American system of governance is the elevation of the federal government to a pre-eminent position over the states. In fact, the 10th Amendment to the U.S. Constitution, a core component of the Bill of Rights, explicitly protects the states from federal interferences where power is not explicitly delegated to the federal government.

Fortunately, a few governors and state legislatures have figured this out. The open question is whether their efforts are a last-ditch guerilla warfare tactic or a strategic move to preserve American federalism.

Unlike the extension of federal authority over the national economy, a process that has been ongoing for at least 100 years, Obamacare puts the federal government front and center in the health-care industry while also controlling and subverting state interests and priorities.

Social Security, Medicare, and even the takeovers of global companies, such as GM and major banks, were more about growing the federal government’s influence over the economy than infringing on state governing authority. In theory, they carried few direct implications for state governance, or federalism, since they were national in scope and application. In some cases, such as Medicaid, state authority and sovereignty were respected. States were allowed to set their own Medicaid eligibility requirements and determine benefit levels. Even highway funds were largely allocated by state highway departments of transportation based on state-determined priorities and objectives.

This state discretion has been fundamentally altered with the current health care bill. States will largely become “pass through” entities for implementing federal health care objectives and programs. Under the current reform plan, states will be required to set up health care exchanges [.pdf] for the uninsured, expand Medicaid eligibility, and establish minimum benefit levels for business, individual, and state administered plans.

To some extent, states have been seduced by their own thirst for federal tax dollars to support state programs. The Interstate Highway System may have been the first major program to start states down this proverbial slippery slope. The idea was a bold one: build a national system of highways linking major urban areas. Fund it through a national gas tax-the closest thing Congress could get to a user fee-and let the states spend the money on building and maintaining the system.

This wasn’t an obvious threat to federalism since states could legally opt out of the program. In practice, they didn’t, and their decisions to take the money helped significantly weaken their prospects for long-term independence and inadvertently laid the groundwork for the current expansion of the government’s role in the health care system.

But, the federal government became more aggressive during the 1960s. The federal government began bypassing state governments altogether by creating specific programs to fund individual cities, regional governments, and local housing authorities. In transportation, regional planning organizations became direct beneficiaries of federal spending for road projects, transit programs, bike paths, and environmental mitigation programs, weakening the role of state governments.

Federal policymakers also discovered that federal funding didn’t have to be a large portion of total state spending to have huge impacts on a state’s priorities and goals. Federal revenues represent just 12 percent of state spending on K-12 education today, but no states seem prepared to walk away from that money. And as a result, the mandates in the No Child Left Behind Act enacted under President George W. Bush dramatically and permanently shifted education spending and teaching priorities in every school district in the nation.

ObamaCare blends two broad trends toward a more unified system of national and local governments: expanding size and scope of the federal government and subverting state authority. Unlike Medicare or Social Security, the current health care reform legislation mandates changes to state-level health care programs and coverage. Unlike No Child Left Behind, health care reform doesn’t even pretend to be voluntary.

Whether ObamaCare is the true political capstone event that extinguishes federalism has yet to be determined. Glimmers of hope flash in the Tea Party rallies at the grass roots level, the willingness of 11 states to challenge the constitutional legitimacy of the health-care reform, and the threats of more than two dozen other governors and state legislatures to legally challenge the plan in court. These efforts will determine whether the 10th Amendment to the U.S. Constitution, the last addition to a non-negotiable package of amendments called the Bill of Rights, has any teeth at all.

Unfortunately, these state efforts may be too few and too late in the fight. States have been feeding at the federal trough for 50 years, weakening their moral and constitutional claims to true sovereignty. The health care efforts by Virginia and hopefully a few other states might reinvigorate a serious debate about the viability of the 10th Amendement and federalism more generally. But the states will also have to accept the responsibility for their own actions and policies as well. They can’t have their cake and eat it too.

Only time will tell if these 10th Amendment challenges represent Custer’s Last Stand at the Battle of Little Big Horn, or the heroic last ditch effort of the 101st Airborne at Bostogne that brought the German army to a halt in the waning days of World War II.

Samuel Staley is Director of Urban Growth and Land Use Policy at Reason Foundation.