Health policy debates are replete with discussions of federalism, most often when advocates of reform put their hopes in states. But health policy literature is remarkably silent on the question of allocation of authority, rarely asking which levels of government ought to lead. We draw on the larger literatures about federalism, found mostly in political science and law, to develop a set of criteria for allocating health policy authority between states and the federal government. They are social justice, procedural democracy, compatibility with value pluralism, institutional capability, and economic sustainability. Of them, only procedural democracy and compatibility with value pluralism point to state leadership. In examining these criteria, we conclude that American policy debates often get federalism backward, putting the burden of health care coverage policy on states that cannot enact or sustain it, while increasing the federal role in issues where the arguments for state leadership are compelling. We suggest that the federal government should lead present and future financing of health care coverage, since it would require major changes in American intergovernmental relations to make innovative state health care financing sustainable outside a strong federal framework.