How much power over commerce should rest with the states versus the federal government? During the long Philadelphia summer of 1787, the authors of America's Constitution handed the lion's share to Congress. This summer, Washington will tackle the same burning question all over again, albeit from a perspective that Madison or Hamilton could hardly have imagined. The issue this time is health care reform: Who will set the ground rules for America's $1 trillion health economy? Although poorly understood by members of Congress, this critical debate pits states that want a fair amount of control over the health system against many of the nation's businesses. These firms want a uniform national system for health reform -- yet fear that they could be reduced to mice in a maze of varying state laws and stripped of their ability to manage health costs.
The conflict stems from the dual nature of many reform plans now being debated on Capitol Hill. A number of these proposals would give states leeway to put reforms into place within a federal framework for health financing. President Clinton's plan, for example, would set up large health-insurance purchasing "alliances" through which most of the population would obtain health coverage but states could run the alliances as government agencies or nonprofit corporations. Such two-track approaches to reform may be inevitable; fears of augmenting the federal bureaucracy, observes University of Wisconsin political scientist Donald Kettl, have produced federal-state partnerships in everything from education to crime control. Yet this federalist thrust conflicts with a fundamental reality. With drug companies, stethoscope makers and the like doing business in 50 states, health care today is largely a matter of interstate commerce -- under the Constitution, the clear jurisdiction of the federal government. And thousands of firms that pay their own health bills and manage workers' benefits across state lines don't want 50 different entities telling them what to do.
Confusion. As a result, a number of business groups have formed a new National Uniformity Coalition to fight health-financing reforms that would hand off lots of power to states. Among its members: large physician group practices, such as the Mayo Clinic, which draw patients from all over the country and fear measures that could make it harder for people from a given state to seek care elsewhere. The coalition faces an uphill fight. "Most members of Congress don't understand the issues," says Curtis Rooney, counsel for the Association of Private Pension and Welfare Plans, a group of benefits managers for large companies.
One key battle may be over ERISA -- the federal Employee Retirement Income Security Act -- which many states want to amend so they can carry out their own health reforms. This 1974 law pre-empted state statutes and gave exclusive jurisdiction over employee benefits to the federal government. That clearly included health benefits provided by firms that "self-insure" -- in other words, that pay workers' health expenses directly, rather than buying health insurance for them. Roughly half of all firms with more than 50 employees do self-insure but a handful of states, including Washington and Oregon, want an ERISA exemption so that they can tax self-insured companies' health benefits to fund their own state reform plans. Yet companies fear that cracking open ERISA could lead to more state regulation. This explosive issue will have to be resolved "very carefully," says Treasury Secretary Lloyd Bentsen. One possible compromise is that no state would get an ERISA exemption -- but self-insured firms would kick in money to help states cover people who lack health insurance.
Another fight could come over Clinton's proposal to let individual states abandon employer-based health financing and set up their own "single payer" systems, in which state governments would collect taxes and pay all medical bills. Yet many companies fear that state single-payer plans would sock them with taxes while also robbing them of the ability to manage workers' health costs. They complain that the president wants an employer-based financing system -- but would still set up state minefields for the very firms that are already providing health coverage to workers. Clinton's rationale? Mainly to attract votes: More than 90 House Democrats actually support a national single payer system, while Clinton's lone Republican supporter in the Senate, James Jeffords of Vermont, comes from a state that has also toyed with a single-payer approach.
Some experts think fears of federalism are overblown. Most state governors also want a national framework for health reform and "aren't interested in setting up 50 different state systems," contends Carl Volpe, health lobbyist for the National Governors' Association. Moreover, no state seems close to enacting a single- payer plan. But Democrats still need the votes of single payer supporters in Congress to pass health reform and thus may be locked into Clinton's pledge to let states go their own way. That means business groups could well lose their fight for a uniform national plan. After all, it's politics that has shaped the outcome of federal-state face-offs for more than 200 years.
