Published in POLITICO
By J. LESTER FEDER and DARREN SAMUELSOHN
Think last Thursday’s Supreme Court ruling was just about health care? Think again.
Chief Justice John Roberts’s surprise opinion, which allows states to opt out of the law’s Medicaid expansion, could set up a series of legal showdowns between states and the federal government over the strings attached to billions of dollars in federal grants for everything from transportation to education and the environment.
It’ll take many years — and many lawsuits — before the full effects of Roberts’s health care ruling are sorted out. Still, legal experts on both the right and the left agree that the door is now open for states to challenge everything from the Clean Air Act to No Child Left Behind and anti-discrimination protections.
“When you’ve got 50 different states and possibilities of 50 different objections to something that Congress does, I think it’s very hard to be very specific, but I think this decision is going to embolden states to challenge federal mandates,” Sen. Chuck Grassley (R-Iowa) said in an interview.
At the very least, Grassley predicted, the litigation would come on issues like Medicaid and highway funding. “I think the states are more apt to challenge in the areas where they have the most pressure from the federal government,” he said.
And while they may not want to hear it, the court’s findings may make Congress more cautious in placing requirements on state governments feeding at the federal money trough as they consider enacting new programs.
“Congress has had a desire to do that over time, to tell states you’ve got to do things our way or we’re going to pull money from you, and I think it really is a restriction now,” said Sen. Mike Johanns (R-Neb.), who also served as his state’s governor.
Last week’s ruling was the first time since 1936 that the Supreme Court determined a law had gone overboard when imposing requirements on states as a condition of accepting federal dollars.
By a 7-2 vote, the majority ruled that the health care law went too far by requiring states to add a collective 16 million people to their Medicaid rolls or risk losing every penny of their existing federal Medicaid payments, which pays for more than 60 percent of the program.
Now, it’s up to the states to decide whether to expand their programs — and the only penalty for not doing so is losing the large pot of new Medicaid funds the health care law provides.
Legal experts across the political spectrum said they were surprised by the Supreme Court’s decision, because Congress’s use of its spending power to compel state action has become a standard part of its legal toolbox since the New Deal.
President Franklin Delano Roosevelt created the unemployment insurance program on this basis, and it later underpinned parts of the Civil Rights Act and the Americans with Disabilities Act.
In a portion of Roberts’s opinion joined by Justices Stephen Breyer and Elena Kagan, the chief justice said the health care law signed by President Barack Obama went too far for two reasons.
First, the changes the health care law made to the existing Medicaid program were so broad that they essentially created a different program from the one the states originally signed up for. Second, the requirement that states either go along with the changes or lose their federal Medicaid dollars — which account for 20 percent of state budgets — doesn’t give states a real choice about whether or not to participate.
“In this case the financial ‘inducement’ Congress has chosen … is a gun to the head,” Roberts wrote.
But the opinion didn’t spell out a clear test of when new federal requirements cross that line. When is a change to an existing program so dramatic that it basically transforms it into a different program? And what amount of funding is too big to put at risk — 10 percent of a state budget? 15?
“Where along the spectrum a grant program is going to fall between the permissible and the impermissible is going to require a lot of litigation, wringing of hands and gnashing of teeth,” said Richard Thornburgh, a former Pennsylvania GOP governor and the former attorney general during the Reagan and George H.W. Bush administrations.
It’s possible that the Medicaid expansion is unique, legal experts say — no other programs are as big and the health care law is unusually ambitious legislation. But the ruling didn’t spell out a clear test, which is one reason that it could potentially spark a raft of litigation.
“To people who want to scale back federal power, it gives them a lot to work with,” said Duke University law professor Neil Siegel, who clerked for Justice Ruth Bader Ginsburg. “This door has been opened where [it had] previously been shut.”
One early test on the new limits on Congress’s spending powers could come if there’s a challenge to the Clean Air Act, which requires states and local communities to implement programs that help them meet national pollution limits. If they don’t meet those limits, they can lose federal highway dollars.
Several environmental experts struggled to recall an instance when federal money has been withheld from a state because of its air pollution woes under the 42-year-old law. Nonetheless, the health reform ruling “certainly strengthens the states’ argument that, hey, this isn’t what we signed up for,” said Jonathan Adler of Case Western University Law School.
Adler added that a Clean Air Act provision ripe for challenge allows the Environmental Protection Agency to require power plants to meet new greenhouse gas limits. The Supreme Court in 2007 said the agency has authority under the law to begin issuing rules to deal with climate change, and a federal appeals court last week signed off on EPA’s initial efforts.
But Adler said EPA’s work may go too far under the health care ruling precedent. “I don’t think it’s hard for a state to argue this is a huge departure [from] what we’ve had to do historically,” he said.
The federal government also provides a sizeable amount of education money to states and school districts — and imposes a lot of restrictions in return, many of which could also be tested in court.
Funding associated with President George W. Bush’s No Child Left Behind law comes with plenty of strings. So does the Individuals with Disabilities Education Act, which governs the education of more than 6.5 million children with disabilities, as well as Title IX, which prohibits sex discrimination.
Other laws that could become vulnerable to legal challenges include the Elementary and Secondary Education Act of 1965 and the Family Educational Rights and Privacy Act of 1974. Both have clauses conditioning money on a state’s performance, and both were cited in government briefs defending the health care law, Neal Katyal, the Justice Department lawyer who argued for the Obama administration in the circuit courts, wrote last week in The New York Times.
Katyal’s column, released soon after the court opinion, said the Medicaid finding “contains the seeds for a potential restructuring of federal-state relations.”
“This was the first significant loss for the federal government’s spending power in decades,” wrote Katyal, now a Georgetown University law professor. “The fancy footwork that the court employed to view the act as coercive could come back in later cases to haunt the federal government. Many programs are built on the government’s spending power, and the existence of an extraconstitutional limit on that power is a worrisome development.”
States may start lining up to challenge these rules in the aftermath of the health care ruling, predicted Boston College law professor Brian Galle — and so could school districts.
Whether suits in any of these areas will get anywhere is hard to tell from last week’s opinion, cautioned Georgetown University’s Louis Michael Seidman. But the ruling has started a process that will likely give justices more opportunities to shape Congress’s power in the future.
“It’s an invitation to future litigation, and whether it’s successful or not depends [on] who’s on the Supreme Court — and that depends on who wins the election,” Seidman said.
David Doniger, policy director for the climate and clean air program at the Natural Resources Defense Council, said he didn’t think litigation challenging the Clean Air Act would get very far. There’s too much of a gray area, he said, between the health care ruling and a case Roberts cited as precedent dealing with requirements on states that didn’t raise their drinking age to 21.
In his health care ruling, Roberts cited 1987 opinion in South Dakota v. Dole, which upheld the federal law withholding 5 percent of the state’s federal highway funds if it didn’t set a higher age limit for alcohol consumption. There’s a lot less money at stake with highway funds than with Medicaid. In South Dakota’s case at the time, this was 0.5 percent of its budget.
“We’re pretty confident that the highway funding falls on the lower end of that spectrum,” Doniger said.
Not everyone believes the ruling poses a threat to other programs. Andrew Pincus, a Washington-based private attorney who worked for the solicitor general on South Dakota v. Dole, said discussions about filing litigation against federal spending based on the health care ruling is part of a “major spin offensive.”
During the health care case, he said the plaintiffs expressly argued that their fight was just about health care.
“I certainly understand why people want to expand the scope of the court’s opinion, but the reasoning seems suspect,” he said. “The lemons are of their own making and it’s hard to turn them into lemonade.”
Scott Wong contributed to this report.