As we approach the oral arguments before the Supreme Court the week of March 26, most attention has focused on the constitutionality of the minimum coverage requirement. The question of whether or not Congress had the authority to impose this requirement under its delegated powers to regulate interstate commerce, levy taxes, and enact necessary and proper laws has been the focus of Affordable Care Act ligation since the day the law was enacted.
Yet the Court will also hear arguments on an even more important issue — whether the ACA’s expansion of the Medicaid program is constitutional. The Medicaid program is jointly funded by the federal and state government and administered by the states subject to federal guidelines. It was begun in 1965 as a program to cover poor aged, blind, and disabled persons and families with dependent children. Medicaid has expanded over the years to cover more lower-income Americans. The ACA expands it once again, this time to cover adults with incomes at or below 133 percent of poverty beginning on January 1, 2014.
Although the federal government will cover 100 percent of the cost of this expansion initially (phasing down to 90 percent by 2020), compared to the 50 to 83 percent that it pays for other Medicaid populations, the 26 state plaintiffs in the ACA litigation claim that the expansion is unconstitutional. They claim that the requirement that states expand their programs or lose all Medicaid funding is “coercive,” because no state can afford to lose its Medicaid funding, the largest source of federal funding in states’ budgets.
It is clear that the federal government cannot force a state to participate in a federal program. The states argue, however, that the threat to withdraw federal Medicaid funding if states do not expand their Medicaid programs is the functional equivalent. This is a dangerous theory, which would allow states to challenge any condition imposed on federal grants with which they disagree. No federal court at any level has ever held a federal law unconstitutional on this theory, which was rejected by both the district and appellate court below. The theory is based on dicta in two earlier Supreme Court cases, both of which questioned whether the theory could actually be applied.
If the Court holds the minimum coverage requirement unconstitutional, implementation of the ACA will be more difficult. ACA implementation will face greater political resistance and it will be difficult to reform insurance markets without the participation of healthy individuals.
If the Medicaid expansion is struck down, however, a host of federal programs that depend on conditional federal funding to the states are at risk, including not only health and welfare programs, but also education, transportation, community development, even homeland security programs.
The states argue that the Medicaid expansion is unique — that no other federal program is at risk if the ACA expansion is held unconstitutional. The states offer no limiting principle, however; no credible explanation that Medicaid is different. It is unfortunate that the Supreme Court took certiorari on this novel and unsupported theory. It is only to be hoped that they realize the enormous consequences of holding the Medicaid expansion unconstitutional and walk back from the brink on this case.