Medicaid ruling could be the sleeper of challenge

Published in POLITICO

Few people expected the Supreme Court to be arguing Wednesday about whether expanding Medicaid health care coverage to more poor people is constitutional.

But it is.

And few expect the court to strike down the Medicaid expansion in ways that could threaten some of the core civil rights, environmental and social welfare legislation dating back to the New Deal.

But it could.

The court is spending most of its health care law oral arguments on questions pertaining to the individual mandate. Later Wednesday, the court will devote the sixth and final hour to Medicaid expansion. And even though court watchers are not expecting a precedent-shattering ruling on the question, the fact that the court is addressing this element of the health care law signals that the justices are taking it seriously.

A broad ruling by a conservative majority in June against Medicaid could shake the shared legal foundation of landmark legislation, including unemployment benefits, the Civil Rights Act and the Clean Air Act. And that, said George Washington University’s Sara Rosenbaum, would “completely change the balance of power of federalism.”

The balance of power — and balancing the books — is precisely what the 26 states challenging the health law are worried about. The legal question the states pose is how much power Congress has under the Constitution’s Spending Clause to attach strings to federal dollars flowing to the states.

The states argue that the health law oversteps constitutional boundaries by requiring them to start absorbing an estimated 16 million more low-income people into Medicaid in 2014, the joint state-federal health program for the poor.

Medicaid is already straining state budgets. And the states argue that they shouldn’t be forced to add more people to the rolls as condition of receiving the federal dollars that pay for at least half the program in every state.

The states make this claim even though the federal government under the expanded version of Medicaid will pick up 100 percent of the new beneficiaries’ costs in the first years and most of the cost after that. States contend that the federal contribution could easily shrink, given the pressures on the federal budget, leaving them on the hook for a program they didn’t agree to.

Most legal experts — including conservative legal analysts critical of the law — are skeptical of the states’ argument. After all, Congress has used its spending power to add many new groups to Medicaid since it began in 1965, primarily to cover poor kids. It has never been successfully challenged in court and none of the lower courts that ruled on the health law found merit in the states’ Medicaid claims.

And though the Constitution forbids Congress from directly telling states what to do, courts have upheld Congress’s ability to use the power of its purse. Federal lawmakers can make states take specific actions as a condition of receiving specific funds. The best known example is when states had to raise the drinking age to 21 to receive federal highway dollars — a policy that was upheld overwhelmingly in the 1987 case South Dakota v. Dole.

Yet all that could now be called into question.

“If the court threw out the basis for the federal government to put condition on the use of federal dollars, that could be a very far reaching and radical departure from the way our federal system has worked,” said Rep. Henry Waxman (D-Calif.), who helped lead the health reform law to passage when he chaired the House Energy and Commerce Committee.

The 26 state plaintiffs argue that the Medicaid expansion is unconstitutionally “coercive.” Though states could theoretically avoid the requirement by withdrawing from Medicaid, dropping out of a program that has been in place for nearly 50 years and losing a huge pot of federal dollars is not really an option. It’s essentially an offer they can’t refuse, the states argue, and that’s unconstitutional.

“If the ACA does not cross the line, no act of Congress ever will,” wrote the states’ lawyer, Paul Clement, in a Supreme Court brief.

Boston College law professor Brian Galle thinks this argument is a stretch, in part because Congress’s spending power helped create the rules and programs that built the modern state. In addition to Medicaid, these include unemployment insurance, the Americans with Disabilities Act, No Child Left Behind, and the Title IX prohibition on sex discrimination in higher education, to name a few.

“If the power to use the spending clause were significantly curtailed,” Galle said, “that means you’re on a path to confrontation” with all of these laws.

Vanderbilt Law School’s James Blumstein disagrees. Blumstein, who filed an amicus brief arguing the Medicaid expansion should be struck down, argues that the conditional spending in the health law differs from established precedents.

Congress has all the power it wants under the spending clause to create a Medicaid program with all the features it included in the health law — if those terms had been spelled out from the start, when states were deciding whether to participate, Blumstein argues. But Congress doesn’t have the authority to change the rules decades after states signed up and shaped their programs.

“What they cannot do is have a bait and switch process,” Blumstein said.

Harvard law professor Charles Fried, who as President Ronald Reagan’s solicitor general represented the federal government in the South Dakota v. Dole highway case, counters that the court would “have to be making up an awful lot of law” to strike down the Medicaid expansion now.

Some legal experts thought Chief Justice John Roberts might have dropped a hint that he views Congress’s spending powers well established in a dissent he wrote in an unrelated Medicare case decided in February, Douglas v. Independent Living Center of Southern California.

But he only touched on the issue in passing, and his remarks leave an opening for striking down the Medicaid law in this case because Congress is changing the rules for the states.

Some legal scholars see a path for the court conservatives to narrowly rule against Medicaid expansion — crafting a position that says the health law’s Medicaid expansion crosses a constitutional line, without casting doubt on a host of other social and domestic policies.

Case Western Reserve University’s Jonathan Adler suggested that the court could say to Congress: “You use conditional spending to do an awful lot, but this is just a step too far.” But a broader game-changing ruling on the Spending Clause, in Adler’s view, is “exceedingly unlikely.”

But Boston College’s Galle thinks the court is facing an all-or-nothing decision on Congress’s spending powers. He said, “I don’t see how you can craft a narrow ruling without threatening these other programs.”


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