Health Ruling Sets Up Potential Fallout for Federalism

For the first time, the U.S. Supreme Court declared an act of Congress to be unconstitutionally coercive toward states.
by | June 29, 2012
 

Did the U.S. Supreme Court fundamentally change the relationship between the states and the federal government by limiting the Medicaid expansion in the Affordable Care Act (ACA)? Perhaps, according to some initial reactions from legal experts and policymakers.

The health-care reform law, which the justices voted to largely uphold, included an expansion of Medicaid eligibility to 133 percent of the federal poverty level. The change was expected to add up to 17 million people to state Medicaid rolls starting in 2014.  If the state didn’t adopt the new eligibility standards, the U.S. Department of Health and Human Services (HHS) could have withheld some or all of a state’s existing federal Medicaid match, under the law.

Twenty-six states argued that the change was unconstitutional coercion because a loss of federal Medicaid funding would be a devastating blow to any state’s program. On Thursday, five of the justices agreed. While the Court upheld the federal government’s right to offer states more money to raise their Medicaid eligibility threshold, it struck down HHS’s ability to revoke existing Medicaid funding if they did not.

“In this case, the financial inducement Congress has chosen is much more than relatively mild encouragement -- it is a gun to the head,” Chief Justice John Roberts wrote in his majority opinion. “The threatened loss of (funding) … is economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion.”

As Governing explained prior to the Supreme Court’s hearings in March, the argument over the ACA’s Medicaid expansion could have profound implications for the overall concept of federalism. And for the first time Thursday, the Supreme Court declared that Congress had overstepped its constitutional power by essentially forcing states to participate in a joint federal-state program.

What does this mean for other federal-state programs? Federal education funding, for example, is based on states meeting certain student achievement goals. Likewise, states must meet federal safety requirements to receive some infrastructure and transportation funding. Does the Court's decision change the federal-state relationship and lay the grounds to challenge future attempts by Congress to set conditions for federal funding to states?

“I think that’s the million-dollar question, and it might,” said Lisa Soronen, executive director of the State and Local Legal Center, during a discussion on the ruling’s implications Friday. “But only time will tell.”

Legal analysts previously explained to Governing that a test would be necessary for the Court to declare the Medicaid expansion unconstitutionally coercive. In previous decisions, the Court had asserted that coercion was possible, but never detailed what it would look like. Roberts seemed to address this issue by explaining that the Medicaid expansion was, in effect, a new federal-state program (as opposed to an extension of the existing Medicaid program). By tying federal funding from an existing program to a new one, Congress had overstepped its authority, Roberts decided.

“It is no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage,” Roberts wrote. “As we have explained, though Congress’ power to legislate under the spending power is broad, it does not include surprising participating states with postacceptance or retroactive conditions.”

He did not, however, go so far as to set a definite test for coercion, instead using the above grounds as evidence that the Medicaid expansion does represent it. “We have no need to fix a line,” Roberts concluded. “It is enough for today that wherever that line may be, this statute is surely beyond it.”

Mark Seidenfeld, professor of administrative law at Florida State University, said the Roberts reading could have "significant pragmatic ramifications" for Congress's ability to set conditions in the future for federal funding.

"There's a lot of things where Congress says to states: 'We'll give you money, but you have to do X, Y and Z,'" Seidenfeld said. "I think this, in some sense, could cause problems down the road. I just don't know how it works. We're still not sure where the line is."

Roberts’ effort to address the limits of the federal government’s coercion power drew praise from some state policymakers. "I am relieved that the Act's Medicaid expansion has been declared unconstitutional and has been significantly limited by the Court," South Dakota Attorney General Marty Jackley, who opposed the ACA as a whole, said in a statement.

For now, though, the long-term implications of the ruling remain a guessing game.

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