Author: Abigail Moncrieff


Structural Fragmentation

First, I too will add to the chorus of thanks to Frank and Glenn for inviting me to participate.  Healthcare fragmentation is an important — and difficult — topic, and the new book, The Fragmentation of U.S. Health Care: Causes and Solutions, is an important contribution in tackling the issue.  I’m honored to be contributing to the discussion.

My goal here is to highlight a meta-problem in the American healthcare system that overlies many of the fragmentation issues identified in the book and in my colleagues’ blog posts so far:  structural fragmentation in the healthcare regulatory complex.  If we want a coherent system that operates coherently, we must have a simple answer to one simple question: Who’s in charge?  For healthcare, we have no answer.

The general problem is that the U.S. government is self-consciously layered with overlapping jurisdictions and competing regulatory bodies, intended to slow the growth of government and to check the rise of tyranny.  We’ve created a governmental system in which states compete with the national government, states compete with one another, courts compete with executive agencies, executive agencies compete with legislatures, and legislatures… are legislatures.  Some legal fields have smoothed this chaos in our regulatory structure, defining authority clearly among the competing institutions.  Healthcare?  Not so much.  I’ll list and elaborate a few discrete examples of this problem within two categories — federalism and separation of powers — but there are far too many examples to cover all of them in this short blog post.


One cause of structural fragmentation for healthcare regulation is in the federalist division of labor for various healthcare programs.  Here, the first thought is Medicaid.  The “cooperative” federalism structure for Medicaid is not cooperative at all; it’s barely coordinated.  The federal Medicaid Act, which started out with 22 requirements for state plans to qualify for federal funding, now lists literally hundreds of such statutory requirements, not including countless others in the Federal Register.  But very few of them are enforced.  Does this structure lead to a “race to the bottom” among the states in providing public health insurance to the poor?  Maybe, maybe not.  Either way, the program is a many-headed beast that functions poorly, due in part to fragmented regualtory authority.  A retort from within healthcare might be the State Children’s Health Insurance Program (SCHIP), which is also a “cooperative” federalist program that has had greater success.  Why?  In part because it uses block grants instead of entitlement grants — fewer federal strings attached — and in part because it’s still just very small.  Another federalism problem is the problem of Healthcare’s Federalization Snowball: The federal government pays for 40% of healthcare utilization in the United States, leaving any given state with something less than a full financial incentive to curb over-utilization of healthcare.  (Fragmentation in payment systems — even if single payer isn’t a panacea, it would at least solve this problem.)  Unfortunately, PPACA failed to resolve the existing federal fragmentation and added a few more instances of it:  The Exchanges in the final bill are strange beasts for federalism; the states are required to implement their own (50 fragmented exchanges instead of 1 cohesive one), but if any state fails to implement an exchange by 2014, the national government will create one for it.  (Who’s in charge??)  PPACA requires the exchanges to include some insurance plans that are sold nation-wide and imposes new federal requirements for all private plans, taking a first step in nationalizing the private market for health insurance, but it doesn’t get us all the way there.  Instead, it adds some national oversight authority in the Department of Health and Human Services (HHS) without abolishing state authority, creating further fragmentation and jurisdictional overlap.  And let’s not forget the Employment Retirement Income Security Act (ERISA), which still preempts a lot of state authority without creating a national regulatory regime in its place and which contributes significantly to fragmentation among insurance markets (creating a unique regulatory space for employer-sponsored large-group plans).  In short, the fragmented world of healthcare regulation is further fragmented by complicated and often incoherent divisions of labor between the state and national governments.

Separation of Powers

Another important cause of structural fragmentation is in the odd divisions of labor among branches of government and even within single branches of government.  Most obviously, we’re still not sure whether we want courts or agencies to be in charge of healthcare regulation.  Medical malpractice is still primarily a matter for judicial (common law) regualtion, but CMS and private insurers (regulated by executive insurance commissioners and now exchanges) are getting more and more involved in quality control.  And the courts’ authority to review decision-making in Medicare and Medicaid is in flux as the Supreme Court grapples with the scope of Section 1983 and with the general rules for judicial deference to agency interpretations.  In short, authority has been migrating from courts to agencies (not just in healthcare), but for the moment, we’re in an uncomfortable position of “neither here nor there.”  Perhaps because of that uncomfortable position, the jurisdictional structure within the national executive is messy.  To give two examples:  (1) The Department of Labor, the Department of Health and Human Services, and the Treasury Department all have some degree of authority over Employer-Sponsored Insurance, and (2) the Food and Drug Administration and the Attorney General (not to mention the Patent and Trademark Office and CMS) have overlapping authority in regulating drugs and other controlled substances.  This is to say nothing of the multitudinous state agencies that share authority among themselves and with the national agencies in these regimes and others.  In addition to the well-known conflicts between courts and agencies, there are also conflicts between courts and legislatures, which are less frequently considered as separation of powers problems.  The general questions of statutory interpretation and judicial deference to agency delegations, however, is a separation of powers question that has been significant for healthcare regulation.

A Final Note

What are the most successful and most beloved healthcare programs in the United States?  The first answer that pops to mind is probably Medicare.  We could add to the list the Military Health System (MHS) (including VA healthcare and TRICARE for members on active duty) and the Federal Employees Health Benefits Plan (FEHBP).  What do these programs have in common, aside from being publicly funded insurance programs (which also describes the unsuccessul and unpopular Medicaid)?  I don’t want to oversell my thesis, but I find it telling that each of these programs has a single, well-defined head.  Not that they’re monolithic; Medicare contracts with private administrators to manage benefits and even to make variable local coverage determinations.  But authority over Medicare resides comfortably within HHS; authority over the MHS resides comfortably within the Department of Defense; and authority over FEHBP resides comfortably within the Office of Personnel Management. 

We need to defragment our regulatory structure.  In my opinion, that’s step one.