ObamaCare: An Experiment in Federalism?


When ObamaCare first passed, most everyone assumed that every state would voluntarily create its own health insurance exchange. The law also required states to expand Medicaid, or face the possibility of severe federal penalties. Neither is true anymore: A majority of states have signaled that they will not create their own exchanges but will let the federal government do it for them. And following last year's Supreme Court decision, which made the Medicaid expansion voluntary, at least 15 states have said or strongly hinted that they won't expand Medicaid, while 11 more remain undecided.

Not surprisingly, many of the law's supporters are unhappy with the lack of commitment: They're aggressively pushing wavering states to expand Medicaid and build their own insurance exchanges, and shaming the mostly conservative governors who aren't enthusiastically signing to implement the health law.

I'm not sure they need to be quite so upset. On Medicaid, for example, Aaron Carroll—who, to be sure, thinks states should agree to the expansion sooner rather than later—points out that when the program first came online, it took more than a decade to reach full adoption. Only 26 states participated in the program when it was passed in 1966, and the last state didn't sign up until 1982. I'm not convinced that ObamaCare's Medicaid expansion is a good deal for states, as supporters claim; but if it is a good deal, then it will still be a good deal down the road, and holdout states will eventually join in the program.

Similarly, ObamaCare supporters have tried to stoke conservative anxieties about federal power by pointing out that if states refuse to run the exchanges, the federal government will do it for them, thus increasing federal power at the expense of the state. States have responded—correctly—that they don't actually get that much flexibility or authority under the law, except to follow federal rules, but forget that for a moment: From the perspective of an ObamaCare supporter, would increasing federal power over the law really be so bad? I'd imagine that few of the law's backers have serious problems with increasing the scope of federal authority over the law, especially when the alternative is to see parts of it set up and run by conservative state officials. Meanwhile, states that opt out now have the option to take over the exchanges down the road: If it's obviously better to be running—and paying—for these insurance hubs, then states that don't go for the expansion up front can step in later. (Interestingly, Jonathan Gruber, one of the architects of both RomneyCare and ObamaCare, and a leading proponent of both laws, recently suggested that Florida should let the federal government run its exchange, at least for the time being.)

I'm no fan of ObamaCare, but we're actually primed for a potentially interesting experiment in health care federalism: Some states will go ahead with full implementation. Others will decline to participate in either the exchanges, the Medicaid expansion, or both. And as a result, we'll be able to see if it works, and how well. If it's worth doing, states that don't play along now will have clear incentives to do so down the road.