Supreme Court Possibly Divided on Medicaid Expansion

The Supreme Court’s sharp political divide took center stage again during Wednesday’s arguments on the expansion of the Medicaid program under the Affordable Care Act (ACA).
by | March 28, 2012

The Supreme Court’s sharp political divide took center stage again during Wednesday’s arguments on the expansion of the Medicaid program under the Affordable Care Act (ACA).

Justices appointed by Democrats grilled Paul Clement, former Solicitor General and attorney for the 26 states challenging the law, on how the ACA’s Medicaid expansion differs from other conditions that Congress sets for federal-to-state spending. Justices appointed by Republicans pressed Solicitor General Donald Verrilli to explain how the provision didn’t represent an overreach of the federal government’s constitutional authority.

As with the individual mandate, the issue seems likely to be decided by a narrow vote. Notably, Chief John Roberts, considered by some to be a potential swing vote on the expansion, argued from both sides during the last session of a three-day debate on the federal health care law.

Under the ACA, states must open Medicaid eligibility to all individuals and families with income up to 133 percent of the federal poverty level. If they do not, the Secretary of Health and Human Services has the option of withholding some or all of their federal Medicaid match (a minimum of 50 percent for the jointly administered program).

While Clement defended the states’ case, which argues the expansion is unconstitutionally coercive because the risk of losing all federal Medicaid funding is untenable, Roberts posited that the expansion might be a consequence of “how willing (states) have been to take federal money since the New Deal.” Such precedents are central to the Obama administration’s case.

“They shouldn’t be surprised,” Roberts said. “They tied the strings and now the federal government is pulling them.”

But when Verrilli took the podium, the Chief Justice pushed him to explain whether there is “any limit” on Congress’s power to impose conditions on the states for the federal funding they receive if the government’s position (the expansion is supportive by precedents that confirm that power) were maintained.

“The Secretary has total authority to say you lose this funding,” Roberts said. “That’s significant authority.”

Justices from both sides questioned whether the Secretary’s discretion ensures enough flexibility to quell any concerns of coercion.

Justice Stephen Breyer, a Democratic appointee, noted during Clement’s argument that the Secretary must make a legally reasonable decision when revoking states’ Medicaid funding. That means, he argued, that the Secretary would likely be limited to pulling only funding related to the newly eligible enrollees. And if the federal government acted otherwise, states would have the right to “march into court” and challenge that decision, Breyer said.

“Does that relieve you of your fear?” Breyer asked, garnering laughs from the courtroom. Clement then pointed to a letter Health and Human Services Secretary Kathleen Sebelius sent to Arizona after the state proposed reducing its eligiblity pool in 2010, an action prohibited by the ACA. In it, Sebelius warned that the state risked losing all of its Medicaid funding, Clement said.

Regardless, Breyer said, giving the Secretary discretion “doesn’t mean the Secretary can do anything.” Justice Elena Kagan, another expected supporter, observed during Verrilli’s argument that the discretion of the federal government to revoke all of a state’s funding for failing to comply with federal conditions of a jointly administered program “has never been used.”

Justice Antonin Scalia, part of the court’s conservative block, countered that the threat could still represent coercion, citing the Arizona letter. He also appeared to back another part of the opposing states’ argument: that Congress expected all 50 states to adopt the Medicaid expansion (fulfilling the goal of universal coverage) when lawmakers passed the ACA.

“That sounds like coercion to me,” Scalia said. Justice Samuel Alito, another Republican appointee, echoed that sentiment moments later.

The court’s previous decisions on similar cases were also called into question. South Dakota v. Dole (1987) was central to Verrilli’s argument. In that case, South Dakota challenged Congress’s decision to withhold 5 percent of a state’s federal highway funding if it did not adopt 21 as the legal drinking age. The court upheld the federal government’s position, but noted that there could be a hypothetical situation in which states are being coerced.

Justice Anthony Kennedy, pegged as a swing vote by court watchers, observed that the 100 percent of Medicaid funding is substantially more than the 5 percent at risk in the Dole case. “It’s apples and oranges,” he said.

As legal experts told Governing prior to the trial, overturning the Medicaid expansion would likely require the court to set a test for when coercion begins. Justice Sonia Sotomayor, an anticipated supporter of the law, pressed Clement to define such a standard.

"At what percentage does it become coercion?" she asked. Clement declined to provide a specific figure, instead reiterating the sizable impact of Medicaid on state budgets.

Below is the transcript from Wednesday afternoon's arguments.


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