HealthLawProf Blog

Editor: Katharine Van Tassel
Case Western Reserve University School of Law

Monday, November 30, 2020

Fiscal Waivers and State 'Innovation' in Health Care

Matthew B. Lawrence (Emory University), Fiscal Waivers and State 'Innovation' in Health Care, William & Mary L. Rev. (2021, Forthcoming):

This Article describes how the Department of Health and Human Services (HHS) has used fiscal waiver authorities — delegated power to alter federal payments to states under Medicaid and the Affordable Care Act (ACA) — to influence state health policy choices. It highlights how the agency uses its fiscal waiver authorities to shape which reforms states choose to pursue, in some cases inspiring genuine state innovation and in others encouraging states to adopt reforms favored by HHS or discouraging states from adopting disfavored reforms. Moreover, while HHS has sometimes influenced state policy-making in ways that further the substantive goals of the ACA and Medicaid (such as by facilitating reinsurance programs that make coverage more affordable), at other times it has done so in ways that undermine those goals (such as by incentivizing states to cut benefits and eligibility or by stifling state single payer and public option experiments).  The Article theorizes fiscal waiver authorities as a double-edged tool from the perspectives of health policy, federalism, and administrative law. Fiscal waiver authorities are a distinctively valuable tool from the standpoint of health policy because they use delegated score-keeping to overcome the “tyranny of the budget” and its adverse effects on health reform, and these authorities further the core federalism value of experimentation when used to inspire states. But the lack of transparency currently surrounding the agency’s use of hidden executive conditions on waiver approvals makes fiscal waiver authorities ripe for leveraging and abuse, raising health policy, federalism, and administrative law concerns. The Article concludes by offering concrete prescriptions for the next phase of health reform, which is poised to rely heavily on either existing fiscal waivers or new ones. The Article recommends that HHS bring greater transparency to its use of fiscal waiver authorities in Medicaid and the ACA and cautions that if the agency does not do so then courts may force such transparency on it by way of non-delegation, federalism, or administrative law doctrine. The Article also suggests that fiscal waiver authorities in future federal health reform legislation be structured as “Accountable Innovation Grants,” tailored in ways the Article suggests to unleash health-promoting state innovation while resisting abuse.

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