Forces of Federalism, Safety Nets, and Waivers

Inequality is the defining feature of our times. Many argue it calls for a policy response, yet the most obvious policy responses require legislative action. And if inequality is the defining feature of our times, partisan acrimony and gridlock are the defining features of the legislature. So being, it is worth considering what role administrative agencies, and administrative law, might play in ameliorating or exacerbating economic inequality. Here, I focus on American safety net programs, many of which are joint operations between federal administrative agencies and state governments. In this context, a central mode of bureaucratic policy innovation comes in the form of administrative waivers, whereby a federal administrative agency waives some statutory requirement that otherwise binds on state administrators. For example, the CMS recently granted waivers to allow several states to impose various “personal responsibility” requirements on Medicaid beneficiaries. Faced with a choice between legislative inactivity and policy innovation through waivers, many scholars and policymakers of both parties have tended to favor waivers. The appeal of waivers as a path around legislative gridlock is compelling. However, I argue that this view has neglected the federal structure of American safety net programs, and does not account for the state politics of implementation. Moreover, scholars have not focused on the severe information problems that federal agencies face when issuing waivers; a permissive waiver regime exacerbates these problems. Focusing on Medicaid implementation, I highlight the risks of waivers for American safety net programs. Before concluding, I discuss possible reforms to administrative procedures, and offer a case study of litigation surrounding one recent waiver application. The case study illustrates many of the theoretical arguments, and further demonstrates the failure of judicial review; it indicates how review might be adjusted to promote more effective use of waivers and diminish their perils.