Federalism and Health Care Cost Containment in Comparative Perspective

Despite widespread agreement over the connection between federalism and social expenditures during times of welfare state expansion, disagreement exists concerning federalism's role in the retrenchment era. Existing approaches fail to recognize institutional variation among federal states. Analysis of Britain, Germany, and Canada suggests that federalism may promote or hinder health care retrenchment depending upon how it structures the relationship between regional and national governments. Power-sharing federalism hinders health care reform by increasing the institutional obstacles to unpopular cutbacks. Power-separating federalism facilitates reform by creating opportunities for blame avoidance without substantially increasing the number of veto players. These findings challenge traditional linear or dichotomous models of federalism, suggesting the need for an approach that captures how particular types of federalism affect retrenchment politics.