The vast majority of the press coverage over the past several days has focused, quite understandably, on the fate of the individual mandate and the fact that Chief Justice Roberts appeared to break with his conservative brethren to uphold the law as a proper exercise of Congressional power under the General Welfare (Taxing) Clause of Article I, Section 8 of the Constitution. However, there is one part of the ruling that has received little attention so far, and which has the potential to have far reaching implications for Federal spending and the relationship between the Federal Government and the states. In 7-2 ruled in which Justices Kagan and Breyer joined Chief Justice Roberts and the four conservative Justices, the Court significantly limited the ability of Congress to force the states to expand spending under the mandate of a Federal program:
While the Supreme Court narrowly ruled the Affordable Care Act constitutional, it did place some important restrictions on a Medicaid expansion that is a backbone of the law’s efforts to insure more Americans.
In addition to requiring citizens to buy health insurance, the law also expanded Medicaid and tied federal funding to that expansion of state programs. In order to provide insurance to more poor people, the law said that states who did not accept the Medicaid expansion would risk losing existing Medicaid funds.
Today the Court said that as long as states who chose not to participate in the law’s expansion of Medicaid do not lose existing funds the Medicaid the expansion is constitutional The vote was 5-4 with Chief Justice John Roberts joining the liberal bloc.
The end result could be that more states opt out of the Medicaid expansion, which won’t be enacted until 2014, and the law could end up insuring fewer currently uninsured Americans.
The bottom line from Roberts: “The Court today limits the financial pressure the Secretary may apply to induce States to accept the terms of the Medicaid expansion.As a practical matter, states may now choose to reject expansion; that is the whole point.”
But what is interesting is that liberal justices like Elena Kagan and Stephen Breyer joined the five conservatives to insist that the states couldn’t be threatened with a loss of funding.
“Although many will be surprised that Chief Justice Roberts joined the Court’s progressive bloc to uphold the mandate, the far bigger surprise is that two members of that bloc-Justices Breyer and Kagan-joined the conservatives in holding that the Medicaid expansion exceeded Congress’s power,” says Stephen Vladeck, of American University Washington College of Law.” As a matter of precedent rather than politics, the Breyer and Kagan votes on Medicaid are likely to be far more significant going forward than the Roberts vote on the mandate,” he said.
Paul Clement, an attorney for the states called this part of the ruling a “significant victory” he said. “The states will have a chance to make the choice. They will no longer have the gun to their head.”
Over at National Review, Mario Loyola points out the problems that the PPACA’s Medicaid rules presented to states, and the importance of the Supreme Court’s ruling:
Obamacare turns Medicaid from a safety net into a massive wealth-redistribution scheme, and threatens states with the loss of all federal Medicaid matching funds if they don’t comply. While the Supreme Court has made it clear many times that the federal government cannot command state governments to do anything, it has also upheld federal grants conditioned on compliance with federal dictates, so long as the penalty didn’t cross the line from “encouragement” into “compulsion.” The seminal case was South Dakota v. Dole (1987), in which the Court upheld a provision in the federal highway bill that allowed the Secretary of Transportation to dock 5 percent of a state’s federal highway funds if they refused to raise their drinking age to 21.
(…)
The silver lining in yesterday’s ruling was that Chief Justice John Roberts marshaled seven votes for a significant revision of the Dole coercion doctrine. The essence of the ruling was that states must retain freedom of choice, not just in theory but also in fact. Though the Court provided little guidance in how to distinguish between mere encouragement and compulsion, it seems clear from the ruling that if the penalty is much more than nominal, it risks being struck down for eliminating the state’s freedom of choice in fact. Another crucial aspect of the ruling was that the threat of losing all Medicaid matching funds if states did not comply with Obamacare’s transformation of Medicaid was per se unconstitutional. Elevating Justice Sandra Day O’Connor’s Dole dissent into the majority, the Court ruled that it is unconstitutional to condition the funds for one program on compliance with the dictates of a different program. The Medicaid expansion is no mere modification of Medicaid, reasoned the Court: It creates an entirely new program. Now think about that for a second. Many and perhaps most conditional federal grant programs have provisions similar to the one struck down by the Roberts Court. All of those will now be open to constitutional challenge.
The implications of this may not be easy to see, but they are potentially far reaching. With this ruling, which has behind it the support of a strong majority of the Court, the Federal Government is going to have a much harder time shifting responsibility for social welfare spending, or indeed any other type of spending, to the states in the form of an unfunded mandate, and the states are going to have a significantly powerful weapon in their hands to challenge future attempts by Congress to impose new mandates upon them without providing the funding for them. Moreover, as more than one legal analyst has pointed out in the days since the decision came down, this ruling constitutes the first major restriction of any kind on the Congressional Spending Power in 75 years and, for that reason alone, it is significant ruling that has the potential to open up many new areas in which Federal power can be challenged by the states, and by the people.
The important question, of course, if what the contours of this new limit actually end up being. Here’s what Chief Justice Roberts said in his opinion:
[In South Dakota v. Dole], [w]e found that the inducement was not impermissibly coercive, because Congress was offering only “relatively mild encouragementto the States…” We observed that “all South Dakota would lose if she adheres to her chosen course as to a suitable minimum drinking age is 5%” ofher highway funds. In fact, the federal funds at stake constituted less than half of one percent of South Dakota’s budget at the time. In consequence, “we conclude[d] that [the] encouragement to state action [was] a valid use of the spending power.” . Whether to accept the drinking age change “remain[ed] the prerogative of the States not merely in theory but in fact.”
In this case, the financial “inducement” Congress haschosen is much more than “relatively mild encouragement”—it is a gun to the head. Section 1396c of the Medicaid Act provides that if a State’s Medicaid plan doesnot comply with the Act’s requirements, the Secretary of Health and Human Services may declare that “further payments will not be made to the State.” A State that opts out of the Affordable Care Act’s expansion in health care coverage thus stands to lose not merely “a relatively small percentage” of its existing Medicaid funding, but all of it… Medicaid spending accounts for over 20 percent of the average State’s total budget, with federal funds covering 50 to 83 percent of those costs.
In some sense, then, it appears that the size of the new burden that would be imposed on the states is an important factor in determining if the new mandate is a valid exercise of Congressional power. It will take many cases, and many years, to determine exactly what those limits are in the Court’s view, but Jonathan Adler fleshes out some of the implications of the Court’s ruling here:
The Court’s decision on the Medicaid expansion dramatically reduces the pressure for states to accept this part of the PPACA. It will also limit the federal government’s ability to direct state implementation in other areas by threatening the withdrawal of federal funds. Given the frequency with which Congress uses the power of the purse to induce state cooperation, new rounds of litigation on the spending clause are sure to follow. Dole upheld a threat to withhold five percent of federal highway funds if states refused to adopt a 21-years-old drinking age. But will courts uphold a threat from the Environmental Protection Agency to shut off the lion’s share of highway funds should states not adopt sufficiently stringent pollution controls on local businesses? Perhaps not. (For more on this point, see J. Adler, Judicial Federalism and the Future of Federal Environmental Regulation, 90 Iowa Law Review 377, 433-52 (2005)).
Just as with the Court’s holding limiting the Commerce Power, which I wrote about last week, this holding as the potential to place significant limits on Congressional power going forward. Just exactly how that works itself out will be interesting to watch.
