Those skeptical that Congress would make federal health insurance subsidies contingent on states creating their own insurance exchange need to understand something: That’s just business as usual. Congress regularly provides states with federal funding ONLY if the states do what Congress wants.
Under our federalist system—or what’s left of it—the federal government is limited in what it can tell the states they can and can’t do. And so for decades Congress has taken the “carrot approach” to imposing mandates on them by making certain federal funds contingent on states agreeing to Congress’s demands.
George Mason University economist James T. Bennett has provided a history of how the feds impose their will on states in a recently published book, Mandate Madness: How Congress Forces States and Localities to Do Its Bidding and Pay for the Privilege.
Bennett outlines six different types of mandates, based on an earlier book by Paul L. Posner, a former Government Accountability Office (then called the General Accounting Office) director of federal budget issues. Bennett focuses on the one Posner calls “crossover sanctions,” defined as when “states threaten to eliminate or reduce grants if states do not adopt certain policies.”
That would be a good description of what Democrats did with health insurance exchanges in the Affordable Care Act. That provision recently came before the Washington, DC, Circuit Court of Appeals in Halbig v. Burwell.
This state-mandate process started with President Lyndon B. Johnson, according to Bennett. His wife, Lady Bird, wanted to keep billboards off the interstate highway system, which she thought distracted from their beauty. So she convinced her husband to push the issue, and in 1965 Congress passed a highway bill authorizing the secretary of commerce to withhold 10 percent of a state’s highway funds if it didn’t adopt the billboard-control provision. Game on!
In the 1970s Washington decided it did not want anyone in the country driving faster than 55 miles per hour—anywhere. If states refused to adopt the lower speed limit, they would lose a percentage of their highway grant money.
The only good thing to come out of that mandate was Sammy Hagar’s 1984 song “I Can’t Drive 55.” He wasn’t the only one; the public ignored that law’s provisions about as often as Obama has ignored those in his health care law.
Congress raised the speed limit to 65 mph in 1988 and repealed the provision in 1995, returning that prerogative to the states.
During the Reagan years Congress decided it wanted to set a national standard for the drinking age at 21 and, again, conditioned highway funds on adopting that provision. And President George W. Bush pushed his No Child Left Behind Act on the states by imposing sanctions if the states didn’t comply.
The list goes on, but as Bennett points out—and as Obamacare crafters, likeeconomist Jonathan Gruber, assumed—virtually every state would accept the money and the strings attached.
But big changes were in the wind, beginning in 2009. Several states pushed back against federal funds being offered in Obama’s stimulus bill, which passed in February 2009. Constituents rose up and criticized Louisiana Senator Mary Landrieu for what was called the “Louisiana Purchase,” money in Obamacare which critics’ claim bought her vote. Something similar happened in Nebraska, as voters blasted Senator Ben Nelson for his “Cornhusker Kickback,” which brought more Medicaid money to the state.
In short, many states, worried both about their and the federal government’s fiscal condition, were rejecting the federal handouts—as well as (or maybe because of) the strings attached.
Democrats who rammed through Obamacare never expected that. They thought, as Gruber has helpfully pointed out, that virtually every state would set up its own exchange to get the federal subsidies. Just as they thought virtually every state would expand its Medicaid program to get the extra federal money. But to make sure, Democrats crafting Obamacare said if a state didn’t expand Medicaid, it would lose ALL Medicaid money—just as it would lose all subsidies for not creating an exchange. The Supreme Court thought the Medicaid mandate was too onerous and struck it down.
So don’t believe Democrats’ feigned perplexity over the Obamacare provision requiring states to establish their own exchange in order to receive federal health insurance subsidies; that’s the way Congress has imposed its will on states for decades. What’s different is that so many of the states finally stood up and said, NO!