NEW FEDERALISM AND INTERGOVERNNENTAL FISCAL RELATIONSHIPS - THE IMPLICATIONS FOR HEALTH-POLICY

This paper explores a number of popular but largely inaccurate myths a bout American federalism in order to clarify the fundamental structure s and processes that characterize American federal governance. Examina tion of financial and political trends over the past several decades r eveals the development of a form of functional specialization among na tional, state, and local governments based on pragmatic responses to p olicy problems rather than decisions based on clearly articulated ''pr inciples.'' These responses have increasingly come from states in a wi de variety of policy areas, including health care, where the energetic reform activity of the past decade provides a sharp contrast to the i nability of the national government to enact reform. Recent pressure t o devolve more authority to the states is thus much more than an ideol ogical fad; it reflects widespread agreement among political elites th at state and local governments have become capable governing partners. Nonetheless, there are limits to devolution which guarantee that clos e fiscal and political ties between the nation and the states will rem ain in place. Devolution does not, because it cannot, mean separation.