American Federalism in Practice: The Formulation and Implementation of Contemporary Health Policy

3. CHIP: Federalism and Rulemaking

30 chapter three CHIP: Federalism and Rulemaking Laws passed by Congress do not emerge as finished products . Before they can be fully implemented, they have to go through the underappreciated but crucially important process of administrative rulemaking . This phase defines how a law will work in the real world, thereby creating policy. Rulemaking is nearly as important as the legislative process, but it is often ignored. It’s not as sexy as the podium-pounding, headline-grabbing battles that can take place in Congress. It is not easy to understand, and it is often relegated to the domain of wonks, insiders, and lawyers. From personal experience I can attest that there is no better cure for insomnia than spending some quality time with the Federal Register, in which the rules are published for comment. But to truly understand how policy is made, you have to open up the black box of the rulemaking process to see how it ticks. The importance of rulemaking was on full display after the passage of CHIP; Clinton administration officials, interest groups, the states, and Congress all influenced the evolution of the program. The input of the executive branch speaks volumes about current and future policy. A very different CHIP rule would have been created under the conservative George W. Bush administration. Similarly, if President Obama had not been reelected, Mitt Romney would have used executive orders and the rulemaking process to begin “on day one” to weaken and, in effect, overturn many elements of the ACA.1 Opponents of reform would doubtless have written very different rules governing how health exchanges might work, the design of the essential health insurance benefits package, the Medicaid expansion, and a range of critical decisions needed to make reform work. The pen that writes administrative rules is powerful. 03-2483-4 chap3.indd 30 6/25/13 5:33 PM chip: federalism and rulemaking / 31 After CHIP passed into law, the Centers for Medicare and Medicaid Services was charged with writing the rules and regulations necessary to expand coverage for uninsured children. The process was anything but straightforward . Congress wanted all that was “good”: targeting low-income children with no other source of insurance, preventing fraud and abuse, limiting administrative costs, and preventing parents from dropping other coverage, all while providing certain benefits and prohibiting others. This wish list required strong national standards. Congress and President Clinton were also committed to maximum state flexibility, and CMS had to find a way to reconcile those polar-opposite forces. In the early days of CHIP, CMS worked in close partnership with the states. But over time, that partnership essentially fell apart under the weight of the federal government. The shift to federal dominance was driven by the requirements of the formal rulemaking process, CMS’s sense of mission , and the administration’s priorities. In the end, CMS regulations provided national protections at the cost of state autonomy. Lessons for national health care reform include the need to work in partnership with the states to kick-start the program as quickly as possible. The CHIP rulemaking process also demonstrated that state flexibility can be harnessed to reach national health insurance coverage goals but that the process is not likely to be pretty. Informal Rulemaking Proposed CHIP regulations were not written until well after the states began putting the program into action.2 States could begin receiving CHIP money just two months after the program was signed into law on August 5, 1997. That may seem unusually fast, but it is actually par for the course. Congress generally takes a long time to pass legislation, but when it finally acts, it wants the law implemented immediately. Needless to say, CMS could not possibly complete all of the necessary rules and regulations in such a short time frame. Formal rulemaking requires analysis of implementation options, including cost implications, publication in the Federal Register, opportunity for public comment, and a strict process for maintaining public records. That takes time and resources.3 In order to meet ambitious deadlines, CMS proposed expedited regulations that would go into effect immediately and allow states to draw down CHIP money. Simultaneously, CMS developed a model template for states to use to submit plans for their new CHIP programs, issued a series of twentythree letters for state health officials (“Dear State Health Official” letters), 03-2483-4 chap3.indd 31 6/25/13 5:33 PM 32...