The Affordable Care Act is transforming American federalism and creating strain between the states and the federal government. By expanding the scale of intergovernmental health programs, creating new state requirements, and setting the stage for increased federal fiscal oversight, the act has disturbed an uneasy truce in American federalism. This article outlines a policy proposal designed to harness cooperative federalism, based on the shared state and federal desire to control health care cost growth. The proposal, which borrows features of the Medicare Shared Savings Program, would provide states with an incentive in the form of an increased share of the savings they generate in programs that have federal financial participation, as long as they meet defined performance standards.
Keywords: Financing Health Care; Health Reform; Medicaid; State/Local Issues.