Medicaid Rule, Not Individual Mandate, May Undo Health Care Law

Does giving money to states also give Washington the power to dictate the size and scope of their programs? The Supreme Court will say next year.


Solicitor General Donald Verrilli is expected to defend the Patient Protection and Affordable Care Act before the Supreme Court in spring 2012. AP.

My long-suffering colleagues can testify that when I read the order granting review in the Affordable Care Act cases, I rushed out of my office yelling "NERDAPALOOZA!" The complexity of the issues, the brilliance of the advocates on both sides, and not least the stunning length of the oral argument granted (five-and-a-half hours when most cases get a total of one hour) makes the upcoming court drama the equivalent of Wagner's Ring Cycle for those of us whose living involves Constitutional law.

Oh, yeah, the issues are important for ordinary people, too.

And in that connection, I want to point out one that there are three cases in which cert. was granted National Federation of Independent Business v. Sebelius, U.S. Department of Human Services v. Florida, and Florida v. U.S. Department of Human Services. The third grant is one of the most interesting parts of the order: the Court will hear a full hour of argument devoted to this question: "Does Congress exceed its enumerated powers and violate basic principles of federalism when it coerces States into accepting onerous conditions that it could not impose directly by threatening to withhold all federal funding under the single largest grant-in-aid program . . . ."

What this means is that Florida claims that Medicaid funding, which it currently accepts, is too central to its state health system to decline. Medicaid funding comes with conditions, however, enacted under Congress's authority to "to pay the debts and provide for the common defence and general welfare of the United States." Under the ACA, the state will be required to expand Medicaid coverage (as part of the aim of universal coverage) in order to keep getting Medicaid funding.

That represents a lot of state money as well as federal. Florida doesn't want to have to choose. It wants to eat its Medicaid cake and have its states' rights autonomy, too.

The Eleventh Circuit, which is the only Court of Appeals so far to strike down the law, had rejected this specific argument. Indeed, it has not to my knowledge been advanced in any other case. (Virginia could have done so in its separate case, but chose instead to concentrate on its bizarre theory that states can outlaw any federal program if they kind don't like it. Virginia's Knight of the Sorrowful Countenance, Attorney General Ken Cuccinelli, will apparently not be going to the Big Dance this April.)

It may be that the Supreme Court is simply trying to cover as many constitutional bases as it can. But the grant of cert. on the Spending Clause issue raises an intriguing or dismaying (depending on your point of view) prospect. The Supreme Court might reject the challenge to Congress' use of the Commerce Power to require taxpayers to purchase health insurance or pay a tax penalty, thus leaving formally intact Congress' power to enact command-and-control economic and social programs, even those that use free-market mechanisms like the individual mandate to achieve their aims. But it might still manage to strike down the ACA--and stab federal power with a different dagger, one that no one quite saw coming.

The Spending Clause is the key to a wide variety of federal programs in areas like education, health care, welfare and other areas. Congress may not compel the states to adopt federal policies; under current doctrine, however, it can bribe them by offering substantial cash grants subject to strict conditions. Federal education funds, for example, subject recipient public schools and colleges to follow federal guidelines about non-discrimination against a wide variety of groups--minorities, women, the handicapped--and also to adopt such educational standards as the standardized test requirements of No Child Left Behind.

The challenge brought by Florida and its sister states does not seek to invalidate federal conditional grants. What it does seek to do is impose a kind of maximum-size requirement. When a federal grant program has become really important to a state, they argue, the federal government can't change the rules and continue the grants only on condition that the states undertake massive changes in their systems. Note that no one questions that Medicaid and the ACA concern the same thing: health care and health insurance. The states argue that the federal government has simply made Medicaid too attractive, and at the same time made the new mandates too large--and that in some way that exceeds the Congress' power.

It's far from a laughable argument, nor is it one that should catch the justices by surprise. The legal right wing has for decades been seeking a way to limit or gut the Spending Power. The question is whether there is an alternative rule they can persuade the Court to accept.

One of the questions posed by the individual mandate issue is whether the Court can discern a "limiting principle" on the Commerce Power. If the federal government can mandate the purchase of health insurance, could it mandate the purchase of (let's mix this up, for heaven's sake, we're going to be talking about it for months) kohlrabi? The federal government has good answers, but the lower courts have still confessed concern on this question.

The Justices will ask the reverse question of the states if they seek to create a new rule against "excessive" federal conditions on spending grants. If the Court is to create limits, where should they stop? (I imagine that only Justice Thomas would have the appetite for stopping all federal conditional-grant programs in their tracks.) It will be intriguing as the briefs are filed to see what the states propose in this regard.

The Commerce Power right now is the magic ring; but the Spending Power is important too. If the Court takes the Spending Power argument seriously, it could doom the ACA and usher in a Gotterdammerung for many conditional spending programs.