The Virginia state legislature recently passed a law making it illegal “to require individuals to purchase health insurance.” This action reminded me how commonly the extent of governmental powers are misperceived.

The Virginia legislature’s action follows those in other states, and are in line with the “tea party” groups’ opposition to the general direction of national health reform. But what exactly it means for a government’s actions to be “illegal” is also unclear. And as Tuesday’s Washington Post article on the Virginia bill states, “it would have little practical impact because it would be preempted by federal law.” Thus, the actions in Virginia and other states are more political than substantive, and seem to be more about the states’ laying down markers should they later want to take the Federal government to court over any individual mandates for buying or having insurance.

Powers of the Government
Hidden underneath this political discussion of the “illegality” of health insurance mandates is exactly what the government can and cannot do to force or entice people to do things.  And while academic and legal scholars may take some issues with my simplified description of governmental powers, there are basically four broad options for what governments can do to try and change people’s actions:

1. Attack
Making war, (or other type of overt or covert intervention), is probably the most dramatic of the Federal government’s powers, but presumably doesn’t have a role for health reform and mandates for buying insurance, etc.

2. Incarcerate
The government does a great job of putting people in jail, but I haven’t heard anyone talking about jail time as a penalty for failing to have health insurance.  However, healtcare for prisoners has been a potent political and policy issue at different times.  For example, it was a key message in Harris Wofford’s victorious 1991 special Senate election in Pennsylvania when he noted that if prisoners had a right to healthcare then so should all Americans. And at a much more granular level, there have been cases where prisoners have tried to stay incarcerated so they could get care for health problems because if they were freed they would have been uninsured.

3. Money, Money, Money
Money is the lever governments uses most frequently for non-criminal activities, such as health insurance, housing, food, etc…  At the most basic level governments can either give money, (e.g., tax credits, food stamps), or take it away, (e.g., higher tax rates, fines, penalties, or denial of tax deductions or credits, etc.). And the mechanisms for giving or taking money can be divided between taxes and cash – or cash equivalents like housing vouchers.

For example, in Massachusetts, the individual and employer health insurance “mandates” are enforced by financial penalties, i.e. not jail time.  Similarly, fiscal incentives for individuals and states to have or provide health insurance are very common, e.g. the increase in Federal Medicaid matching rates included in the 2009 stimulus law.

Of course, there are often strings attached to the receipt of money or benefits because neither governments nor private citizens are in the habit of leaving cash in a bag for someone to pick up and do with what they please. That is why government programs have participation requirements just as private contracts have provisions for what must be done before money is exchanged.

4. Talk the Talk
The last tool governments can use to influence actions is the power of the speech, persuasion, and illustrative illumination.  Elected and senior appointed officials have the advantage of having their words amplified through the press. Such officials can also identify individuals and companies who have done good things, as well as not-so-good things.  This type of individual identification can be very powerful, but may also be politically dangerous if praise is directed towards those who has skeletons in their closet, (either literal of figurative), which then become public.

The last type of tool that governments can use to change the world is to use government program operations and purchasing decisions to lead by example. This type of Walk the Walk action is a combination of money and talk, and an example is the State of Massachusetts using their state employees’ health benefits program to advance quality of care by using information about individual physicians to create incentives for employees to go to physicians who are rated the highest in quality. This initiative was controversial but it survived a court challenge in the State, unlike a similar initiative in New York State.

Leading by example is often not as simple as creating targeted economic incentives, because such actions can run into government procurement rules, international treaties, union contracts and other legal limitations on government actions – which may be why this tactic is not commonly used for driving public policy changes.

Conclusions
While the Federal Government has considerable power and resources, the history and legal system of the United States limits governments’ powers so that giving and taking money is the primary tool used to enforce “mandates” and “requirements.” The result is that people, companies and even state and local governments have a choice – comply with the Federal rules and get the money, or don’t and don’t get the money, or maybe even lose some money.  For example, as I noted in my last posting, the State of Arizona didn’t get any Federal matching funds for Medicaid for over 15 years because they chose to not have a Medicaid program.  Similarly, the mandates in Massachusetts for having health insurance are “enforced” by tax penalties for individuals and businesses – although the number of people and companies effected has been relatively small because of the exemptions for smaller companies and affordability for individuals.

Leading by example – either in how they run their internal operations or their procurement/contracting – is an option which governments have used less often to advance specific policies. In a time of fiscal constraints, leading by example might be a good way to leverage limited Federal money and resources – particularly around the contentious issue of health reform where it could help demonstrate the positive value of better healthcare benefits and care delivery for employees, organizations and society.