Takeaway: Federal capitulation on managing COVID was inevitable; so too may be other changes to the federal-state relationship.

Editor's Note: Below is a brief excerpt from a complimentary Health Policy Unplugged note written by our Health Policy analyst Emily Evans. Click HERE to learn more about Emily's research process and the analysis subscribers receive.

Federalism Returns With The "COVID Hot Potato" - AdobeStock 337758602


It was a quiet but complete capitulation. There is no “federal solution” for the SARS-CoV-2 pandemic/endemic, President Biden acknowledged last week.

And the powdered parlor snakes of punditry wept.

After all, it is much more cost effective for major, but rapidly shrinking, media outlets to man a bureau in Washington, DC than in 50 state capitols. So also is that true for industries focused on affecting regulations that preempt state authority, in theory and in fact.

States, for their part, have been happy to support this de facto deconstruction of the American system of federalism. They accepted generous federal grant money for ossified and frequently counterproductive programs like Medicaid.

Forget that Medicaid is a program that best serves children, the disabled and adults in emergency situations. It does little to improve health, as demonstrated by the heavy toll COVID has taken on the poor and racial and ethnic minorities.

At the onset of the pandemic many governors cast their gaze toward Washington, as has become their habit. Public health had been replaced by public health insurance, but the resources of the Centers for Disease Control and Prevention would be available.

That was the theory anyway. In fact, the CDC hadn’t broken a sweat in years. Stockpiles of strategically important equipment had dissipated, technology and communication systems were outdated and slow, the only test available after the Food and Drug Administration’s meddling, did not work.

It has been in the making for a while, but what governors learned and what President Biden acknowledged last week, is that the 50 years of federal subjugation of state domestic policy priorities is coming to an end.

If in fact, Republicans take the House and the Senate in 2022, previous attempts to shift more responsibility and flexibility to the states, especially for health care, will gain traction.

Of course, the punditry that makes its living off the federal political machinery finds that prospect frightening. Understandably, no one relishes the idea of covering Kentucky’s state legislature. There are no winter tans, dinners at Milano or liberally administered Botox.

There is, however, a new appreciation for the job of governor and that should make this emerging dynamic more interesting in the years to come.


The relaxation of many of Medicare’s rules, which serve as the operating model for many health care providers, during the public health emergency will be the policy preoccupation of 2022.

Under blanket waivers issued in the spring of 2020, many of the regulatory distinctions between provider types were eliminated.

Gone are the structures that have defined Inpatient Rehabilitation, Skilled Nursing, Home Health and Long-term Care Facilities, such as the 15-hour rule, three-day hospitals stay, homebound rule and average 25-day length of stay, respectively.

The dematerialization of payment silos – with no documented negative effects – immediately begs the question, “are these rules even necessary?” While we are at it, we should also ask about other rules, predicated on Medicare’s need to be a vigilant nanny for the practice of medicine.

At the same time, governors are asking similar questions. From Tennessee, Governor Bill Lee as he ended the state public health emergency, “For almost 20 months, this tool has provided deregulation and operational flexibility for hospitals and industries most affected by COVID’s challenges. Should our state face any future surges, we will consider temporarily reinstating this tool, but in the meantime, we are evaluating opportunities for permanent deregulation.”

Never underestimate the power of incumbents to protect their turf but the pandemic afforded policymakers a previously unimaginable opportunity to see the negative effects, if any, of deregulation. The usual strategy of combating deregulatory policy by claiming future harm has been defanged to a great degree.

Also, not to be underestimated are Republicans at all levels of government seizing a generational opportunity.


So much of the federal intrusion into the domestic policy prerogatives of states has rested firmly and rightly on the intractability of southern governors on the issue of segregation in the mid-20th century.

Best understood as another chapter in the long and bloody reconciliation between America’s slave-owning past and its founding principles of “that all men are created equal that they are endowed by their Creator with certain unalienable Rights that among these are Life, Liberty and the pursuit of Happiness;” the violence of the mid-1960s was not abstract. It intruded into virtually every American home via broadcast television.

For President Lyndon Johnson, it was the opening he wanted. What followed was the Voting Rights Act of 1965 and amendments to the Social Security Act that created Medicare and Medicaid.

Johnson’s motives were far from pure. He saw these intrusions into policies long the purview of the states as an opportunity to create loyal constituencies to the Democratic Party.

(Johnson was in the habit of recording all his phone conversations – many of which would be enough to get him “canceled” today – that document his objectives.)

For over 50 years, Johnson was right. The heinous practices of limiting access to the ballot box that resulted in under-representation of minorities in elected office and a commensurate lack of power in governance were curtailed.

Medicare and Medicaid made health care accessible – though not always used – across a broad swath of the population.

In recent years, something has changed. The constituencies the Democratic Party has counted on – many would say exploited – have eroded. Donald Trump, of all people, garnered 25-30% of the Latino vote, more in places like south Florida and the Texas borderland. Trump also did well among Black voters, particularly men.

At the same time, the population in Democratic strongholds has eroded. The Census Bureau reported that as of July, the populations of the Democratic strongholds of New York, California, Illinois and Massachusetts lost over 700k people.

Florida now has more residents than New York. Most telling of all, the population of Washington, DC declined 2.9% between 2020 and 2021.

Those southern states that had earned the ire of President Johnson and spent decades in the political and cultural wilderness are gaining population.

As states that have been the beneficiaries of domestic in migration try to keep doing what works, those that lose it are going to try and figure out where they went wrong, and demand too release from some of the federal government’s more onerous intrusions. For the latter, there is no other way.

Population loses, as Puerto Rico has demonstrated, are difficult to reverse once they get started.

Federalism Returns With The "COVID Hot Potato" - Census