Interstate Compacts Offer New Weapon Against Health Care Plan

A so-called interstate health care compact would invoke a little-known clause in the U.S. Constitution, and could trump other strategies to defeat the national health care plan.

by / May 2, 2011
Making Health Care Personal

Governors who oppose the national health care act have no shortage of strategies they are willing to try -- federal lawsuits aimed at overturning it, state statutes barring its implementation, an attempt at congressional repeal.
But another way around the controversial law may be emerging that, while it sounds far-fetched, theoretically could trump all others: a so-called interstate health care compact that would invoke a little-known clause in the U.S. Constitution.
Here’s how it would work: At least two states would agree to sign a joint agreement taking full responsibility for all health care policy within their borders. If the agreement is approved by Congress, the states that sign up would be given a block grant equal to the total of their federal health care funding for the prior year, including Medicare and Medicaid, with no strings attached. Other states could join later. The states would then work together or separately to develop homegrown health care policies that they believe meet their residents’ needs.

This couldn’t happen right away. The concept has little chance of approval in the Democratic Senate, and, while scholars differ on the president’s role in these matters, it would likely need President Obama’s signature -- which it wouldn’t get. The idea also has met with vehement opposition from patients’ groups and consumer advocates who say leaving health care policy to states would perpetuate extreme differences in quality of care and eliminate any accountability for the way states spend federal health dollars.
Still, interstate compacts do have a grounding in the U.S. Constitution, or at least in interpretations of the constitutional language. Article I, Section 10 provides that "no State shall, without the Consent of Congress, . . enter into any Agreement or Compact with another State."  It doesn’t expressly say that they can do it if Congress consents, but courts have read it to imply such permission hundreds of times.
More than 200 interstate compacts are in existence today, many of them dealing with transportation, geographic boundaries and fishing and water rights. The “compact clause” has in fact been used to supersede federal law in some instances. But no compact has ever been approved by Congress that would essentially nullify a federal law, as the health care compact would.
The founders of the compact movement -- Texas construction magnate Leo Linbeck III and Wisconsin investor Eric O’Keefe -- admit the approach is novel. But they argue that it attacks the real problem with the nation’s health care system -- too much federal bureaucracy. Because of that, members of the Tea Party Patriots, a grassroots organization working to shrink federal government, have become the movement’s foot soldiers. The Patriots have been active on the issue in at least 30 states since January.
So far, only one state, Georgia, has enacted a law agreeing to join a compact -- Republican Governor Nathan Deal signed it April 20. Two days earlier, Arizona Governor Jan Brewer, a Republican, vetoed a compact bill, saying she agreed with the concept of state autonomy in health care, but was already working with the Obama administration to get more control over the federal-state Medicaid program that has swamped the state’s budget.
Shooting for Next Year
Democratic governors Jay Nixon of Missouri and Brian Schweitzer of Montana have compact bills on their desks, and others are under consideration in Florida, Louisiana, Oklahoma, South Carolina, Texas and Tennessee. If even one of those bills becomes law, the constitutional minimum of two states would allow the process of seeking congressional approval to begin. Still, O’Keefe says he wants “a nice long list of states” before taking the proposal to Congress. “We got a late start this year,” he says, “so we’ll be making a big push next year.”
Every state that signs on to a compact must pass it in identical form. Partly for that reason, the model legislation currently being circulated around legislatures contains very few specifics about health care. It is simply a pledge to work with other states to get congressional approval to take over health care policies, backed by a federal block grant. The compact encourages interstate collaboration and information sharing, but does not require it. If a compact were approved, each state would be free to adopt whatever form of health care system it wanted.
“We don't want to shift from a one-size-fits-all federal program to a one-size-fits-all compact,” says O’Keefe. “It's not about taking a market-based approach. A lot of people in the organization believe in that, including me. But this is about who should be dealing with health care.”
While a compact would give the states joining it a great deal of freedom in designing health care programs, it would impose a burden on them in other ways. States in the compact could no longer count on federal help in the event of a pandemic or other public health disaster. Likewise, they could not expect a federal bailout if the country goes into a deep recession again. Compact states would be left on their own with only a modest annual adjustment to their block grant to account for inflation and population growth.
“It’s interesting that the states that are most interested in the concept are the ones where the federal government already spends most of its health care dollars and will spend even more under the Affordable Care Act,” says Linda Blumberg, a health care expert with the Urban Institute. “That means their residents have the most to lose.” In general, those are the poorest states in the country.
Supporters of the compact idea say it isn’t just about skirting the national health care law. They insist they want to take a broader approach to the nation’s health care problems by moving control over health care policy from Washington to state governments. They argue that the proposal is in line with the Obama administration’s recent challenge to states to come up with their own health care plans.
Critics aren’t buying that. They believe the main reason any state would join the compact would be in order to spend less money providing health care to its citizens. “The problem,” says consumer advocate Anne Dunkelberg, who is fighting the compact bill in Texas, “is that when states say they want more flexibility to develop their own plans, we have to assume they want cuts.”

Reprint courtesy of, a nonpartisan, nonprofit news service of the Pew Center on the States that reports and analyzes trends in state policy.