Federal Health Care Reform, Paid For By the States, and the 17th Amendment
By Randall Holcombe • Tuesday September 29, 2009 10:45 AM PDT • 4 Comments
One of the interesting things about the Baucus health care reform bill now under consideration by Congress is that it will place a large financial burden on state governments, while state governments already consider themselves fiscally overburdened. You would think that governors and state legislators would be up in arms about this, but I’ve heard little from them in terms of objections.
The burden has been noticed by many, including Senate majority leader Harry Reid of Nevada, who is pushing to have 100 percent of Nevada’s extra costs covered by the federal government. While Senator Reid may have the power to effect this change in the bill, you’d think that this shifting of costs to the states would be enough to eventually kill it. Isn’t there enough political clout at the state level to stop this from happening?
The shift of costs to the states is a result of increasing the scope of Medicaid, whose costs are shared between the federal and state governments. The Baucus bill already proposes to pay between 77 and 95 percent of the additional state costs for the first five years, after which the states are on the hook for all of it. So the costs that Senator Reid is worried about are a small part of the burden states would face in five years.
I don’t really view this as a partisan issue. Regardless of what you think about health care reform generally, does anybody think that it would be a good idea for this federal initiative to place additional financial burdens on state governments? They would either have to raise their taxes to pay for a federal program, let Medicaid crowd out other state expenditures, or some combination of both. In support of my claim that the issue is not partisan, Democrat Harry Reid is on my side.
The root of this particular problem goes back nearly a century, to the passage of the 17th amendment in 1913. Prior to the 17th amendment Senators were chosen by their state legislatures, and represented the interests of their state governments. Under that system, this cost-shifting could not have been remotely feasible, because the representatives of the state governments, in the Senate, would not possibly sign off on it. Now, with the popular election of senators, Congress is more able to pass the costs of its initiatives on to the states.
I’ll go a step further and argue that the cost-sharing arrangement in the original Medicaid program approved in 1965 could not have passed had Senators been chosen by their state governments rather than by popular vote.
Lots of people have criticized Senator Baucus’s health bill, and I’m one of them. Looking at the bigger picture, the issue I’ve raised also provides a nice illustration for why we should repeal the 17th amendment.
Tags: Budget and Tax Policy, Constitution, Economics, Healthcare, Taxation, The State 
Completely agree that a major cause of runaway Federal government is the 17th Amendment – a disaster.
Also, Gov. Bredesen (D) of Tennessee came out against the healthcare plan for the same reasons you outline here. Tennessee, just this year, had to use a large portion of it’s part of the Federal stimulus money just to get its always-on-the-brink-of-insolvency TennCare program through the rest of the year. From what I understand the new burdens placed on our state alone, should the bill pass as it’s written, would add something like another billion to an already exploding budget. And our state has been a lot more conservative in our budgets than a California or New York. Those two states, as well as many others, are already billions in the red and have started cutting programs. This will be a taxpayer nightmare.
RickC | Sep 29, 2009 | Reply
VERY interesting observation about the relationship of legislation such as this and the 17th Amendment, but with all due respect, does anyone actually read what G.W. Bush called a “God D@mned piece of paper” aka; the US Constitution anymore? Seriously, let’s flip back a page or two and stop at the 10th Amendment... this legislation is clearly prohibited by the Constitution, yet here it is, and no one is arguing that it is illegal for the Congress to even be debating it, let alone passing it... so arguing that it is caused by the 17th Amendment is an exercise in futility – brilliant though it is. If you would like to work toward restoring our Republic to it’s Constitutional limitations, I believe that the first step is to work to pass the “Enumerated Powers Act” As well as NEVER voting for someone that promises to violate the Constitution while campaigning – this of course is nearly EVERY Democrat and Republican candidate (Ron Paul being a notable exception).
joe4liberty | Oct 6, 2009 | Reply