Cooperative Federalism and Healthcare Reform: The Medicare Part D 'Clawback' Example

Abstract:     
This symposium article recounts recent litigation by several states over a provision of the Medicare Modernization Act Part D prescription drug benefit: The clawback, which requires states to pay the a potentially substantial portion of new federal program. I then examine the unique federalism implications of the clawback for ongoing state and federal health reform initiatives.

In spring 2006, several states petitioned the United States Supreme Court for original jurisdiction to hear a challenge to one provision of the new Medicare Part D prescription drug law. The federal government, while taking over prescription drug coverage for dually eligible beneficiaries, required states perpetually to pay the cost of certain Medicare beneficiaries' drugs. The Petitioner States raised various constitutional objections to the mandatory payment, based in federalism and intrusion on state sovereignty. I along with several other health law professors and practitioners filed an amicus brief in support of the States' petition. The Supreme Court denied review in August 2006, and the States have not pursued further litigation, perhaps because of other enforcement priorities. In addition, the actual state budgetary impact of the clawback during the first year of Part D implementation was less severe than anticipate. Although the clawback may no longer have saliency for the litigant States, the provision warrants closer examination as a unique example of cooperative federalism. Issues of state-federal cooperation are especially important as both state and federal governments pursue wide-ranging health care reform agendas.

My article (1) describes the Part D benefit and the operation of the clawback, (2) considers the constitutional and prudential arguments to raised in the Supreme Court litigation, (3) suggests additional federalism objections not specifically addressed in the litigation, and (4) urges the need for caution with respect to similar cooperative federalism approaches to health care reform.

Number of Pages in PDF File: 52

Keywords: Federalism, Medicare, Medicaid, Welfare, State and Local Government

JEL Classification: H71, H72, H77, I18, H69, I38, K19, K23, K34, K41

Accepted Paper Series