The federal government, faced with a prospective annual deficit of $300 billion, is poorly positioned to take any initiative that would require significant new outlays. The legislative hopper contains a range of proposals as diverse as national health insurance and federal tax subsidies for the purchase of private health insurance by the uninsured. State governments have been protesting to the administration and Congress since the late 1980s over continuing congressional mandates to extend eligibility and broaden benefits under their Medicaid programs. In 1989 the National Governors’ Association officially requested that such mandates cease, and when Congress turned a deaf ear to their pleas, the states resorted to various financial schemes to enrich federal matching grants for their Medicaid programs. The principal payers—the federal government, employers, state governments, and households—are poorly positioned to assume the leadership role in health reform.