One of the major parts of the United States government is its federalist system, which divides power between the federal government and state and local governments. Healthcare is considered a concurrent power, meaning responsibility is shared between the two branches.

 

Currently, the federal government is responsible for the following parts of the system:

• Passing legislation to set a national strategy for healthcare

• Administer and fund Medicare

• Co-fund, regulate, and set requirements for Medicaid

• Co-fund the Children’s Health Insurance Program

• Provide care for federal employees and active/past military members and their families

• Regulate pharmaceuticals and medical devices

• Run the federal individual marketplace for insurance, HealthCare.gov

• Provide premium subsidies for private marketplace coverage

• Only directly own and supply providers for Veterans Health Administration and Indian Health Service

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The state responsibilities include:

• Setting eligibility

• Establishing patient cost-sharing requirements

• Setting benefit packages

• State employee coverage

• Regulating private insurance

• Licensing health professionals

• Managing health insurance for low-income residents (in addition to Medicaid)

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The main purpose of the federalist system is to allow states to address their populations’ needs. For example, in California many people were uninsured at the start of the COVID-19 outbreak. The state has its own health insurance marketplace, instead of using the federal one, and so they were able to offer an additional enrollment period for people who wanted coverage. By contrast, the federal marketplace, which is under control of the Trump Administration, remained closed.

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While the federal government does set regulations, such as the essential benefits under the Affordable Care Act and the rules on covering people with pre-existing conditions, some regulations are up to state discretion. A major example is the Medicaid expansion, which would qualify adults at 138% of the poverty level for Medicaid. This was declared unconstitutional, and so states now have a choice on whether or not to enforce this expansion. Currently, 12 states have chosen not to expand Medicaid. As a result, there are 2.5 million people who qualify for Medicaid based on federal law, but do not under state law.

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Other options available to the states include implementing CHIP, which can be combined with Medicaid or offered as a separate program. States can also set up all-payer claims databases, but cannot require private entities to contribute their data—only federal law can do so. States can also control the types of plans—for instance, in Arizona all Medicaid plans are through Managed Care Organizations.

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There is also overlap between federal and state duties. The most obvious example is in funding. For programs like CHIP and Medicaid, states get grants from the federal government to help pay for programs. This, as mentioned in the course content, helps Congress control the states.

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Another example of this is recent actions regarding cost-sharing reduction payments. The Obama Administration gave money to the states to help insurance companies offset the costs of reduced premiums for low-income patients. The Trump Administration has stopped this payment, and so states have used their power to control the private insurance companies to tell them to raise rates oh higher-income participants instead.