Day 3 at the Supreme Court: Does the ACA Coerce States to Expand Medicaid?

March 28, 2012

March 28, 2012 — At the very end of the last Supreme Court hearing on the Affordable Care Act (ACA), the attorneys for both sides in the case departed from the assigned topic of whether Medicaid expansion tramples states’ rights and focused on a more basic Constitutional issue — liberty.

US Solicitor General Donald Verrilli Jr, representing the Obama administration, said today that expanding Medicaid eligibility will extend health coverage to millions of individuals who have diabetes, heart disease, and other chronic conditions with profound results.

US Solicitor General Donald Verrilli

“As a result of the healthcare that they will get," said Verrilli, “they will be unshackled from the disabilities that those diseases put on them and have the opportunity to enjoy the blessings of liberty.”

He credited the individual mandate with having the same liberating power.

Paul Clement, the attorney for the 26 state officials who have challenged the ACA, replied that policies spreading the blessings of liberty sound good in theory.

“But I would respectfully suggest that it's a very funny conception of liberty that forces somebody to purchase an insurance policy,” said Clement.

“Direct Threat to Our Federalism”

The official question before the court today was whether the ACA forces states to do something — in particular, to enroll an additional 16 million people in their Medicaid programs through 2019. As with most public-policy disputes these days, the controversy involves money.

Although administered by the states, Medicaid is funded with both state and federal dollars, with Uncle Sam kicking in about two thirds of the total. Clement said today that the federal government is using the states’ dependence on those federal dollars to coerce them into Medicaid expansion, which the states will find burdensome.

The dollar figures at issue are enormous. Through 2016, the federal government will underwrite 100% of caring for Medicaid recipients who enter the program through the new eligibility requirements. The federal contribution will gradually decrease until it reaches 90% in 2020. In all, the states will receive an additional $434 billion in federal Medicaid dollars during that time.

The state officials complain that Medicaid expansion will nevertheless require them to spend at least an additional $20 billion of their own money on Medicaid, which is already a budget buster for them. Plus, they will have less control over what benefits they offer.

Paul Clement

Clement told the justices that the states find themselves unable to opt out of Medicaid expansion because the federal government could withdraw every last dollar of its Medicaid funding, leaving the states entirely on the hook to provide healthcare to the poor. That is a form of coercion, he said, that violates the 10th Amendment of the Constitution, which balances state powers against federal powers in a federalist form of government.

“It's a very strange conception of federalism that says that we can simply give the states an offer that they can't refuse, and through the spending power [of Congress]...force the states to do whatever we tell them to,” said Clement. “That is a direct threat to our federalism.”

Other States Welcome Medicaid Expansion, Notes Ginsburg

Justice Stephen Breyer

Justice Stephen Breyer challenged Clement on the threat of states losing all of their federal Medicaid funding if they refuse to accept a change in the program. Breyer quoted regulations stating that the secretary of Health and Human Services (HHS) “at his discretion” can withhold whatever amount he or she deems appropriate. In other words, said Breyer, an HHS secretary may decline to cut off all Medicaid funding for an uncooperative state. And, unreasonable defunding is always open to challenge.

Clement replied that the mere possibility of a state losing all of its federal Medicaid dollars is coercive enough.

Donald Verrilli, the attorney for the Obama administration, said that Medicaid always has expanded through the decades under the same terms — state participation in the program is voluntary, but if states accept federal dollars, they must follow federal rules on how it is spent. He denied that coercion enters the relationship.

Justice Ruth Bader Ginsburg noted that while officials from 26 states object to Medicaid expansion, officials from other states welcome it.

Justice Ruth Bader Ginsburg

“You are saying that because you represent a sizeable number of states, you can destroy this whole program, even though there may be as many states that want it, that don't feel coerced,” Ginsburg told Clement.

Verrilli said Medicaid’s expansion is a testimony to a successful federal-state collaboration. Sixty percent of Medicaid spending “is based on voluntary decisions by the states to expand beyond what federal law requires, because this is a good program and it works,” said Verrilli. “And the states generally like what it accomplishes.”

Three days of hearings on the constitutionality of the ACA this week have given the high-court justices more fodder for their deliberations. Their ruling in the case is expected by July, just in time to heat up the coming presidential election.


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