Dr. SCOTUS: Overturning Medicaid expansion could turn laws on their head

June 6, 2012

Health Care at the Supreme Court(Editor’s note: The Supreme Court will rule on the legal challenges to 2010’s Affordable Care Act by the end of June.  Leading up until the end of the month, we’ll be looking at how the law could change with a Supreme Court ruling upholding or overturning the law).

The first issue to examine is one that I had previously believed to be noncontroversial: the Medicaid expansion.

In light of March’s oral arguments which found several Justices strongly questioning the constitutionality of the expansion, it seems that the case law supporting it isn’t quite as well settled as I had thought.

By the way, this Medicaid expansion is a broadening of eligibility standards to include individuals under 65 who earn up to, or less than 133% of the federal poverty line beginning in 2014.

The Federal Government pays somewhere in the neighborhood of 90% of the cost of these expansions, leaving the remaining balance to the states.

26 states are arguing that this expansion is unconstitutionally coercive under the limits to the Spending Clause set forth in 1937’s Steward Machine Company v. Davis and applied most recently in 1987’s South Dakota v. Dole.

Dole is the current standard for evaluating the constitutionality of Congress’s Spending Clause power, so it makes sense to start there.

Dole dealt with South Dakota’s challenge to the National Minimum Drinking Age Act which imposed a 10% decrease in the annual federal highway apportionment for any state that did not make 21 the minimum legal age to purchase alcohol.

The Supreme Court sided with the federal government and upheld the Act.

However, it did establish limits to federal Spending Clause power.

The first of these requires that the exercise of the spending power must be in pursuit of “the general welfare” (the determination of which should be deferred “substantially to the judgment of Congress”).

The next limitation requires any conditions attached to federal funds to be unambiguous, “enabl[ing] the States to exercise their choice knowingly, cognizant of the consequences of their participation.”

The third requires the condition to be related “to the federal interest in particular national projects or programs.”

Lastly, there may be an “independent constitutional bar” – that is, a constitutional limitation other than coercion – to the conditional grant of federal funds.

Unlike in Dole, there are no “independent constitutional bars” at issue in the Supreme Court’s consideration of the Medicaid expansion.

Instead, we have a straight coercion test analysis.

This “coercion test” is best understood in the context of Steward, where it originated.

That decision took a very limited view of “coercion,” holding that “coercion” only occurs in circumstances in which the state literally has no choice.

A very powerful incentive from the Federal Government to make a particular choice is not “equivalent to coercion.”

As the Steward opinion held, “to hold that [incentive] is equivalent to coercion is to plunge the law in endless difficulties.  The outcome of such a doctrine is the acceptance of a philosophical determinism by which choice becomes impossible.”

Considering the lofty requirements needed to be considered coercive, it is no surprise that no court has ever invalidated a federal funding condition on the coercion theory.

Looking at some of the Justices’ comments during oral argument, it’s entirely possible that Florida v. Dept of HHS may be the first case to do so.

If such a ruling were handed down, how would Spending Clause jurisprudence be affected?

If oral arguments were any indication, and such a decision would find coercion based on the huge amount of federal funds involved and the states’ reliance on the Medicaid program, congressional Spending Clause power would be severely limited.

Congress would be effectively forbidden from making changes to any large, long-standing state-federal programs.

What Congress could do is discontinue a program entirely, and then enact a brand new program identical to the earlier one except for the desired changes.

In addition to the raw expense, making changes in this manner would be an administrative nightmare.

In light of this consequence, would the Supreme Court still make this ruling?

It becomes more unlikely to be sure, but not impossible.

The more likely ruling would be one placing new limitations on Congress’s spending power – though not to the level required to overturn the Medicaid expansion (since such limitations would turn Spending Clause jurisprudence on its head).

However, considering that the Roberts Supreme Court is widely regarded as the most conservative in decades, anything’s possible.