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Analysis: Supreme Court may question Medicaid expansion, a pillar of new health law

This article first appeared in the St. Louis Beacon, March 5, 2012 - On the last of three days of arguments on the Affordable Care Act later this month, the U.S. Supreme Court will turn to the sleeper issue that could have the biggest impact on federal power -- Congress' authority under its spending power to require a big expansion of state Medicaid programs.

Most attention has focused on the individual mandate and whether Congress can impose upon everyone the requirement to obtain health insurance. One reason that issue is so important is that Congress' authority to regulate interstate commerce is one of its strongest powers.

But the spending power, which involves Congress' power to place conditions on federal money, is an even more powerful source of national power, legal experts say. A Supreme Court restriction on the spending power could be even more debilitating than a limitation on the commerce power, they say.

If the Supreme Court were to restrict Congress' commerce and spending powers, it would cut back on national power in a way not seen since the beginning of the New Deal, 80 years ago.

Bruce La Pierre, a constitutional law expert at Washington University Law School, says he "long thought that a court bent on limiting national power would go after the spending power." He noted in an email that the late Justice William J. Brennan Jr. had "proudly pointed out that Congress can often, if not always, use the spending power and conditional grants to get around limits on the commerce power.”

La Pierre continued, "The spending power is the most important national power. Congress achieves all sorts of regulatory ends by offering dollars -- to states and individuals -- on conditions of compliance with rules.”

La Pierre says he suspects that four justices on the court would like to cut back on Congress' spending power. If they get a fifth and succeed, then there would be a "fundamental reduction of national power -- a reduction of national power that in my judgment would leave us like dysfunctional Europe, less able to compete in the 21st century."

In the end, however, La Pierre predicts the court will step back from the brink because Republicans as well as Democrats depend on muscular exertions of national power.

"The court understands the risk of killing the goose that lays the golden egg of national power," he wrote. "Although Republicans now deplore national power, they will sing a different tune, as they have in the past, when they have a president to direct a Republican House and Senate chorus.

"So, for example, although education is a traditional state prerogative, it was George Bush, not the Democrats, who advanced the national No Child Left Behind statute. Federalism, protecting the states from national power, is the song sung by the party out of power at the national level."

Michael Wolff, a Saint Louis University law professor and former chief justice of the Missouri Supreme Court, agrees.

"The Medicaid issue is a sleeper issue,” he wrote, but “I think it will stay asleep. The conservative majority on the U.S. Supreme Court is not allergic to muscular assertions of federal power. And they are long-term thinkers; a long-term thinker may not like (President Barack) Obama and his policies but would not want to crimp the style of a future president who is his soul mate."

David Roland, litigation director of the libertarian Freedom Center of Missouri, wrote that he "found the states' Medicaid argument to be weak and reading their briefing on this topic has not changed my view. I feel like this part of their claim is equivalent to the states asking (the Supreme Court) to bail them out of the consequences of their own poor decisions -- not altogether unlike major corporations looking to Congress for financial bailouts and just as bad of an idea."

But Paul Clement, one of the nation's leading Supreme Court advocates, told the Supreme Court in a brief for 26 states that the court must strike down Congress' use of the spending and commerce powers if it is to stop an unprecedented expansion of federal power.

"The ACA effects a dramatic expansion of federal authority that destroys the healthy balance of power between the states and the federal government," he wrote. "This court should grant... review to restore that essential balance. This case, and this case alone, provides a vehicle to address all the major objections to the act’s reworking of our federalism, and to do so in the context of an extraordinary challenge to federal overreaching."

Congress’ spending power

The Constitution states that Congress has the power to "lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States." So Congress has the power to spend for the general welfare.

The Medicaid provisions of the new health law require a big expansion of state Medicaid coverage to encompass people not now covered. Those earning less than 138 percent of the poverty level would be covered, increasing the number of people covered by about 16 million by 2020. The federal government also imposes a minimum level of care upon the states' programs, limiting their current discretion. The Medicaid expansion is one of the ways in which the new law attempts to achieve nearly universal health-care coverage.

The federal government pays for the entire cost of the expansion at first. After 2017, states take on 5 percent of the cost of the expansion and after 2020, 10 percent. States always have the power to withdraw, but Medicaid is the largest federal grant-in-aid program in existence, providing 40 percent of the money that the federal government passes along to the states. A typical state receives federal funds of more than a billion, so withdrawal may not be feasible.

Clement, in his brief, says that the expansion and the enormous amount of money mean that the federal government is effectively coercing the states to go along. That, he says, violates the principle of federalism underlying the Constitution and the 10th amendment reserving to the states those powers not granted the federal government.

The Supreme Court has said that the federal government cannot "commandeer" the states, as the Brady gun law did by requiring local law enforcement to become part of the law's enforcement mechanism. Nor can the federal government compel states to administer a federal regulatory program, such as one for disposing of hazardous waste.

But Congress has broad power to require states to follow federal regulations as a condition of receiving federal money. In South Dakota vs. Dole in 1987, the Supreme Court upheld a federal law that withdrew 5 percent of federal highway funds from states that lowered the drinking age below 21.

Chief Justice William H. Rehnquist wrote that Congress's spending power had four limitations:

  1. It has to be directed at the "general welfare," as the text of the Constitution states;
  2. Congress must make the conditions unambiguously clear;
  3. the conditions must relate to a national program;
  4. and, finally, it must not violate some other part of the Constitution.

It is that last limitation that comes into play in the Medicaid case. Does the Medicaid expansion conflict with the 10th amendment and the constitutional principle of federalism?
In his brief, Clement points out that Rehnquist had said in the highway funds case that whether to go along with the drinking age of 21 "remains the prerogative of the states not merely in theory but in fact" because only 5 percent of highway funds were involved.

The Medicaid expansion raises the possibility that states refusing to go along could lose all of the money. That amounts to coercion, Clement says.

"As more than half of the states are here attesting," he wrote, "there is no plausible argument that a state could afford to turn down a federal inducement as massive as all Medicaid funding, particularly when doing so would mean taking on 100 percent of the burden of covering its neediest residents’ medical costs."

Roland, the libertarian, says, "The states should have known the danger of becoming dependent on money from the federal government. ... Even today the states have the option of backing out of Medicaid, and they are perhaps in a uniquely powerful position to do so given that 27 states (representing, collectively, well more than half the nation's population) are complaining about their involvement. If all of those states simply pulled out of the system and/or pressured their congressional representatives to restructure the law, I have a pretty strong hunch that they could affect some significant change.”

William H. Freivogel is a professor in the Southern Illinois University's School of Journalism, a contributor to St. Louis Public Radio and publisher of the Gateway Journalism Review.