June 28, 2012

What the Supreme Court said about the spending power and Medicaid Expansion under the ACA.

Let's look at what Chief Justice Roberts writes about the spending power. (This is Part IV of his opinion, which is joined only by Breyer and Kagan. The rest of the votes for limiting the spending power come from Scalia, Kennedy, Thomas, and Alito.)

The issue here is raised by states that said that the Medicaid expansion wasn't merely a condition on spending, but "coercion." It's well established that Congress can't "compel the States to enact or administer a federal regulatory program," Roberts said, but Congress can offer money on the condition that they do what Congress could not compel. The states have a choice. But when is a choice not a choice? When it's compulsion.

Roberts highlights the federalism theory:
Permitting the Federal Government to force the States to implement a federal program would threaten the political accountability key to our federal system. “[W]here the Federal Government directs the States to regulate, it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision.” [New York v. United States], at 169. Spending Clause programs do not pose this danger when a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds. In such a situation, state officials can fairly be held politically accountable for choosing to accept or refuse the federal offer. But when the State has no choice, the Federal Government can achieve its objectives without accountability, just as in New York and Printz. Indeed, this danger is heightened when Congress acts under the Spending Clause, because Congress can use that power to implement federal policy it could not impose directly under its enumerated powers....

In rejecting the argument that the federal law was a “weapon[ ] of coercion, destroying or impairing the autonomy of the states,” the Court [in Steward Machine Co. v. Davis] noted that there was no reason to suppose that the State in that case acted other than through “her unfettered will.”  Id. at 586, 590....
But in this case, Congress isn't simply offering new money with a condition attached. It "has also threatened to withhold those States’ existing Medicaid funds."  That additional threat is there for no purpose other than to force the state to accept a dramatic expansion of Medicaid responsibilities:
In this case, the financial “inducement” Congress has chosen is much more than “relatively mild encouragement”—it is a gun to the head.
A State that opts out of the Affordable Care Act’s expansion in health care coverage thus stands to lose not merely “a relatively small percentage” of its existing Medicaid funding, but all of it. 
The internal quote is from South Dakota v. Dole, where the Court accepted Congress's withholding of 5% of federal highway funds if the state failed to raise the drinking age to 21.
Medicaid spending accounts for over 20 percent of the average State’s total budget, with federal funds covering 50 to 83 percent of those costs.... The threatened loss of over 10 percent of a State’s overall budget...  is economic dragooning....
It's compulsion.

Roberts rejects the argument made by Justice Ginsburg that it's acceptable because the threatened funds are all within the Medicaid program and Congress is only setting the conditions of that program:
We cannot agree that existing Medicaid and the expansion dictated by the Affordable Care Act are all one program simply because “Congress styled” them as such. Post, at 49. If the expansion is not properly viewed as a modification of the existing Medicaid program, Congress’s decision to so title it is irrelevant. 
So today is a day for rejecting congressional labels. The individual mandate was upheld under the taxing power even though Congress avoided calling it a tax, and the Medicaid provisions don't get to be considered part of one big pre-existing program even though Congress portrayed them that way. 
The Medicaid expansion... accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for four particular categories of the needy: the disabled, the blind, the elderly, and needy families with dependent children. See 42 U. S. C. §1396a(a)(10). Previous amendments to Medicaid eligibility merely altered and expanded the boundaries of these categories. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. It is no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage. 
So the truly needy category got enlarged to include the relatively needy... and that made it a new program? To accept that argument, you're supposed to think of the overall purpose of the program and see that it's qualitatively different for Congress to go from dealing with the problem of poverty — which states have had to attend to all along — to taking on the ambitious governmental project of universal health care coverage. States might say yes, please help us with our basic welfare program, but still want to think separately about whether they accept the new project — which is highly controversial as a political matter — universal health care. To link the two is to wreck the scheme of accountability, the federalism theory at the heart of the conditional spending power doctrine.

Now, let's look at what Justices Scalia, Kennedy, Thomas, and Alito wrote, which represents 4 more votes on the spending power issue.
This practice of attaching conditions to federal funds greatly increases federal power.... [which] if not checked in any way, would present a grave threat to the system of federalism created by our Constitution....

Recognizing this potential for abuse, our cases have long held that the power to attach conditions to grants to the States has limits....

Where all Congress has done is to “encourag[e] state regulation rather than compe[l] it, state governments remain responsive to the local electorate’s preferences; state officials remain accountable to the people. [But] where the Federal Government compels States to regulate, the accountability of both state and federal officials is diminished.” New York, supra, at 168.
Here's the federalism accountability theory again.
When Congress compels the States to do its bidding, it blurs the lines of political accountability. If the Federal Government makes a controversial decision while acting on its own, “it is the Federal Government that makes the decision in full view of the public, and it will be federal officials that suffer the consequences if the decision turns out to be detrimental or unpopular.” New York, 505 U. S., at 168. But when the Federal Government compels the States to take unpopular actions, “it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision.” Id., at 169; see Printz, supra, at 930. For this reason, federal officeholders may view this “departur[e] from the federal structure to be in their personal interests . . . as a means of shifting responsibility for the eventual decision.” New York, 505 U. S., at 182–183. And even state officials may favor such a “departure from the constitutional plan,” since uncertainty concerning responsibility may also permit them to escape accountability. Id., at 182. If a program is popular, state officials may claim credit; if it is unpopular, they may protest that they were merely responding to a federal directive.
So is this coercion? Scalia-Kennedy-Thomas-Alito pose a hypothetical:
Suppose, for example, that Congress enacted legislation offering each State a grant equal to the State’s entire annual expenditures for primary and secondary education. Suppose also that this funding came with conditions governing such things as school curriculum, the hiring and tenure of teachers, the drawing of school districts, the length and hours of the school day, the school calendar, a dress code for students, and rules for student discipline. As a matter of law, a State could turn down that offer, but if it did so, its residents would not only be required to pay the federal taxes needed to support this expensive new program, but they would also be forced to pay an equivalent amount in state taxes. 
If if a state declines the funds, the people in that state get to maintain local autonomy about something that has traditionally been the province of the states, but they have to pay their own full cost and their share of the federal money that goes to all the other states. That always happens with conditional federal spending: Instead of each state paying its own way and making its own decisions, the states as a whole make the decisions and the money comes from the states as a whole. This means the states that like the decisions (and might have been happy spending their own money to do something) now get to cover their expenses with money taken from all the states, including the ones who hate the decisions enough to reject the money altogether.

But conditional spending is already part of the doctrine, so Scalia-Kennedy-Thomas-Alito are only talking about putting a limit on it. The limit is, as Roberts also wrote, when the offer becomes compulsion, because there is no real choice — when "federal spending legislation crosses the line from enticement to coercion." Scalia-Kennedy-Thomas-Alito say courts should be careful, but it's "unmistakably clear" in this case that Congress had crossed the line. He covers the same numbers that formed the core of Roberts' discussion — the immense size of the Medicaid program in the states' budget.
What the statistics suggest is confirmed by the goal and structure of the ACA. In crafting the ACA, Congress clearly expressed its informed view that no State could possibly refuse the offer that the ACA extends....
If Congress had thought that States might actually refuse to go along with the expansion of Medicaid, Congress would surely have devised a backup scheme so that the most vulnerable groups in our society, those previously eligible for Medicaid, would not be left out in the cold... If Congress had contemplated that some of these citizens would be left without Medicaid coverage as a result of a State’s withdrawal or expulsion from the program, Congress surely would have made them eligible for the tax subsidies provided for low-income aliens. 
These features of the ACA convey an unmistakable message: Congress never dreamed that any State would refuse to go along with the expansion of Medicaid. Congress well understood that refusal was not a practical option.
Thus far, the Scalia-Kennedy-Thomas-Alito opinion is really no different from Roberts'. The divergence comes at the point of deciding what to do about the Congress's transgression. Scalia-Kennedy-Thomas-Alito would invalidate the Medicaid Expansion (and the entire Act). The more moderate Roberts solution is only to invalidate the withholding funds that are part of the pre-existing Medicaid program. As Scalia-Kennedy-Thomas-Alito see it, the Medicaid Expansion was completely interwoven with a scheme of universal health-care coverage, which included exerting this compulsion upon the states with respect to the new Medicaid coverage.

ADDED: I've corrected the text to reflect that Justices Scalia, Kennedy, Thomas, and Alito are writing the dissenting opinion jointly.

52 comments:

Mr. Forward said...

My Medication
by The Who Cares

Pelosi tried to put us down (Talkin' bout the legislation)
Just because we're still around (There won't be negotiation)
Under the bus looks awful c-c-cold (Talkin' bout our destination)
They hope we die before we get old (Talkin' bout our expiration)

This is my medication
This is my medication, baby

Why don't you all just d-die today (Talkin' bout your obligation)
And don't believe what we all s-s-say (Shovel ready administration)
I'm not trying to cause a b-big c-c-cremation (Talkin' bout Obama Nation)
I'm just talking about my m-m-medication (Talkin' bout my medication)

This is my medication
This is my medication, baby

Jose_K said...

so Bush saved Obamacare, who would say?

wyo sis said...

Mr Forward
Brilliant!

Sloanasaurus said...

As I noted in a different thread, the medicaid expansion piece really is the liberal part of Obamacare. It is the expansion of the single payor system to the middle class, and it is this expansion that makes up most of the additional uninsured that will be covered by Obamacare. The cost of the program is hidden by the sharing with the states. But that the cost to the states in the years to come will be enormous.

However, with this ruling, it seems a lot more unlikely that states will be able to tax its citzens to support this expansion. 1). It's health insurance for middle class people, not the poor 2) Under the ruling, there now is no penalty for not doing it.

What happens to the uninsured who were supposed to be covered under the medicaid expansion program. It seems that they will now have to pay that unpopular penalty (now tax), or be accosted by the IRS.

James Pawlak said...

In the early 1770s we had some other disputes as to unreasonable taxes imposed by a tyrannical government.

The responses came from the muzzles of guns.

Matthew Sablan said...

Don't be silly Pawlak. The only response we need is the ballot box in November.

Rocketeer said...

The more I read about the decision, the more I really do think this is a Cadmean victory for Obama, and for liberal hopes for future legislative and policy success.

Bonus: in the short term, the hysterics on the right, and the dopey victory dancing on the left are a source of amusement.

Once the dust settles I think each side is going to feel...quite differently than they feel now.

Sloanasaurus said...

Also, are there limitations in the states for entering into this future obligation without submitting it to the voters. When medicaid was passed very few conemplated how expensive it would be. But today, everyone knows that the medicaid expansion program will require massive tax increases by the states. Can states enter into these bargains without obtaining the tax increases first?

roesch/voltaire said...

I think this part is reasonable and the more I think about the decision, the more I think that Roberts does not want his legacy to only reflect Scalia's activism--and that he why he made this a 5-4 vote.

Matthew Sablan said...

RV: The Roberts court is the least "activist," most moderate court in recent memory. Don't be so misinformed.

Rocketeer said...

That's the point, R/V - Roberts even has you thinking this. And yet, he has done more with this single opinion to advance Scalia's "activism" than Scalia has in all his time on the bench.

Freakin' brilliant. He is absolutely, freakin' brilliant.

dreams said...

"Now that the Supreme Court has ruled that Obamacare’s health insurance mandate is in fact a tax levied on those who do not purchase insurance, Senate Republicans will look to repeal the full law through the budget reconciliation process."
blog.heritage.org

Everything is going to be ok. Not to worry, be happy. All is well that ends well and I think its going to end well.

Revenant said...

Interesting argument, Rocketeer. You may be right.

Chuck66 said...

So many of us think that this is a victory for Obama as much as turning in 1,000,000 (sic) recall signatures was a victory or gov't unions in Wisconsin.

Sloanasaurus said...

Maybe I don't understand Obamacare completely... .but it is my understanding that if you are not covered by Medicaid then you are eligible for the subsidies and required to pay the mandate. Why then would any state join the medicare expansion program? Since the Federal Gov. will cover everyone under the mandate and subsidies, there is no incentive for a state to expand medicare now that there is no penalty for doing so.

Why would a state governemnt punish itself and its citizens by entering into the expansion program if everyone will be covered anyway?

The net result of this is a massive increase in costs to the federal government....and a massive tax increase for those paying the penalty (err tax) that is if the money is appropriated to cover the subsidies.

dreams said...

I think by ruling it a tax the court has ultimately made it a win for the Republicans, plus the other ruling on medicaid was a win for federalism and the Republicans.

By ruling it a tax it will be easier to repeal the full law through the budget reconciliation process.

Defenseman Emeritus said...

Sorry to go off topic, but the other threads are way too long at this point. I don't have a legal background and still don't understand something.

Is Congress' power to tax so extensive that it literally is permitted to tax inactivity? This seems unprecedented to me. I've only ever seen taxes levied on economic activity (sales, income, etc.) or on assets/property. But actually, is it the case that Congress is free to simply tax your existence if it chooses?

Defenseman Emeritus said...
This comment has been removed by the author.
Chip Ahoy said...

I totally heard that song.

Sloanasaurus said...

"By ruling it a tax it will be easier to repeal the full law through the budget reconciliation process."

I think you can repeal by reconciliation (cut taxes), but only for 5 years.

bagoh20 said...

It's good to be a state. The federal government isn't allowed to coerce you with a penalty tax.

The court has protected the politicians in D.C. by letting them get away with lying to the voters, and also protected the state politicians from the ones in D.C.. They're looking out for almost everyone, but somebody is left out here.

Revenant said...

But actually, is it the case that Congress is free to simply tax your existence if it chooses?

Yes, Congress can assign taxes just for existing, provided it does so in a manner evenly distributed among the states.

That's actually one of the few forms of taxation Congress was originally *allowed* to impose, before income taxes were legalized by constitutional amendment.

Revenant said...

I think you can repeal by reconciliation (cut taxes), but only for 5 years.

From the Republican Party's perspective that makes it even better -- they can use it as an election issue year after year, like they do with the "Bush" tax cuts.

dreams said...

"Is Congress' power to tax so extensive that it literally is permitted to tax inactivity? This seems unprecedented to me. I've only ever seen taxes levied on economic activity (sales, income, etc.) or on assets/property. But actually, is it the case that Congress is free to simply tax your existence if it chooses?"

I've read somewhere either from Althouse or another blog that Roberts was concerned about that but ultimately decided it is ok if it isn't too much.

Tibore said...

I don't go so far as Dreams said in thinking it's a victory for Republicans. On appearances alone, it's a defeat. That said, I mostly agree with Rocketeer: This may indeed not be the sort of victory statist politicians would want. Once those who're wailing and teeth gnashing on the right calm down, they'll have the opportunity to see that the Court handed them a hidden gift by leveraging it out from under the Commerce Clause.

Again, it's back in the hands of the people via their elected officials. Time to fix the problem via elections.

bagoh20 said...

"Yes, Congress can assign taxes just for existing, provided it does so in a manner evenly distributed among the states."

Then the logical thing to do is tax everyone who doesn't or can't vote, and tax them big. What are the gonna do about it, and who cares?

dreams said...

"Is Congress' power to tax so extensive that it literally is permitted to tax inactivity?"

I think Roberts reasoned that the tax on inactivity is ok because it is less than the cost of the insurance.

bagoh20 said...

"Time to fix the problem via elections."

But it still makes those elections a contest between Santa Clause, and The Grinch. Real reform is gonna be all up hill, if possible at all.

dreams said...

"I don't go so far as Dreams said in thinking it's a victory for Republicans."

Yes, a victory would have been overturning at least the mandate.

David said...

Mostly this pushes me to the conclusion that the vast expansion of federal power, in nearly all cases deriving from the ability of the federal government to borrow huge amounts of money, is not going to be checked by judicial action. That possibility ended when the Court got into the business of discerning the difference between encouragement and coercion.

The true check on federal power will have to be political, through the people and their representatives. Right now the chances of that happening seem remote. However, remember that this power exists largely because the federal government, unlike the states, can borrow nearly unlimited amounts of money to fund its coercive (it's always coercive, you Supremes) largesse.

That ability to fund through borrowing will come to an end. It may come to an end via voluntary restraint, though we have seen few signs of that. More likely it will come via a crisis of confidence in American creditworthiness. That could happen sooner than most think.

This means it will be a internal political crisis as well as a international financial crisis.

Of course, because it will be a real not fake crisis, many different outcomes are possible. It's never good to lose control of your own destiny. We may have already done so.

dreams said...

To paraphrase Roberts, the court is not here to protect the voters from their own elected politicians.

Anthony said...

I might be too cynical, but I suspect that the Feds can probably quite easily think of some other way to punish non-participating states by withholding some other money.

PackerBronco said...

So the states cannot be compelled by the federal government to accept an unpopular health care program.

The people?

Not so lucky ...

David said...

dreams said...
To paraphrase Roberts, the court is not here to protect the voters from their own elected politicians.


First they might try to protect us from themselves. What fun it will be watching the judicial system try to administer these standards. You know we are in crazy land when Scalia and Thomas start talking about the "spirit" of the Constitution.

PackerBronco said...

Sloanasaurus said...
Why would a state governemnt punish itself and its citizens by entering into the expansion program if everyone will be covered anyway?

6/28/12 3:15 PM


They wouldn't which is why ObamaCare was trying to force them to take on the program. And Obama wanted to do that so the costs of the program would be shifted unot the states.

David said...

Roberts: "The court is not here to protect the voters from their own elected politicians."

Perhaps Roberts could have a little talk with the Chairman of the Federal Reserve, and suggest that this notion might have a broader application.

dreams said...

"If Chief Justice Roberts thought he was preserving public trust in the Supreme Court today, he will quickly learn he has done the opposite--not least because Democrats define bipartisanship as complete capitulation. Liberals--still smarting over Bush v. Gore--and conservatives now both have reason to distrust the court and its motives. If that "bipartisanship" is the legacy of the Chief Justice's apparent switch, it is a bitter bequest."

www.breitbart.com

I think he is right about that.

Jeff in Oklahoma said...

Rocketeer said...
6/28/12 3:05 PM

I think you are spot-on.

Commerce Clause - restricted.
State's rights - enhanced (by a 7-2 vote no less).

All done while making the left think they have won.

Sean Trende agrees too. http://www.realclearpolitics.com/articles/2012/06/28/the_chief_justices_gambit_114646.html

Andy Freeman said...

The federal tax power is in sections 2, 8, 9 (article 1), tariffs, exise taxes (due to the commerce clause), and income (16th amendment). (The poll-tax amendments are the only other mention of taxes in the constitution.)

The mandate isn’t a tariff and it isn’t levied on the basis of income. The opinion stated that the mandate wasn’t an exercise of the commerce power.

So, how does the mandate fit under sections 2, 8, or 9?

If it doesn’t, how is it a constitutional tax?

dreams said...

"If it is correct that Roberts was acting as a finger-to-the-wind politician, he may find that what he thought was the wind was really just the hot breath of Linda Greenhouse. And if he is now basking in "strange new respect," he may want to reflect on the question of just how respectful it is to think of the chief justice of the Supreme Court as an easily bullied politician."

James Taranto WSJ

yashu said...

I know we're all busy dissecting and debating Roberts's decision, but let me take a moment to give some props to Anthony Kennedy.

Sloanasaurus said...

If I am understanding this correctly, I think the States Attorney Generals who filed the original suit could come out and claim victory over this ruling. Their biggest concern was being forced into the Medicaid Expansion program. Now that they can easily opt out of that program without penalty, then they have essentailly won their case. The mandate was always a means for them to get rid of the medicaid expansion, not the mandate itself.

Obama would have been much better off from a substance point of view to lose on the mandate and win on the medicaid piece than to win on the mandate and lose on medicaid.

dreams said...

Here is the Roberts quote "It is not our job to protect the people from the consequences of their political choices."

yashu said...
This comment has been removed by the author.
Methadras said...

I've been saying this all along. Either take the insurance or pay the tax. It's not a choice, both are compulsions.

yashu said...

"It is not our job to protect the people from the consequences of their political choices."

As I've said, I'm unhappy about Roberts's decision, but I do love that even while upholding ACA as constitutional he basically disses it as bad and harmful legislation-- something from which the voters would want to seek protection.

Sorry America, it's not my job to protect you from this monstrosity. Blame the people you elected. The SC can't save you from ACA-- you'll just have to find another way to get rid of it. And for god's sake, vote more wisely next time.

(Amended for the correct quote, thanks dreams.)

dreams said...

"I’m not consoled. The vote on the Commerce Clause was 5-4. If the next Court to hear a big Commerce Clause case has one additional liberal Justice (in net terms), then today’s case holding on that provision will be distinguished
away in one fashion or another."

Paul Mirengoff www.powerline.com

We need to elect Romney and hopefully repeal ObamaCare and get more conservative justices.

cubanbob said...

dreams said...
"Is Congress' power to tax so extensive that it literally is permitted to tax inactivity?"

I think Roberts reasoned that the tax on inactivity is ok because it is less than the cost of the insurance.

6/28/12 3:55 PM

For now. Since that won't work for obvious reasons, then when the tax is made onerous enough that purchasing insurance is cheaper than paying the tax, then what?


As for the states, considering the average Medicaid state portion of the state budget is 20% as is, what happens if a state that is under too much financial stress decides to opt out of Medicaid? Does the payroll taxes collected in that state for the Medicaid portion of FICA stop being collected by the feds? If so, then its not a uniform tax across the country. Are the feds then obligated to rebate the taxes to the tax payer? Or to the state the taxes collected so the state can administer its Medicaid program with those federally collected funds only? Or does the federal government directly take over that state's Medicaid program administration? If that were the case can the feds tax the residents of that state the 20% difference?

bagoh20 said...

""It is not our job to protect the people from the consequences of their political choices."

Like electing the guy who nominated you?

"Cut the living child in two, and give half to one and half to the other"

That was just a threat, but this king actually went through with it.

cubanbob said...

Andy Freeman said...
The federal tax power is in sections 2, 8, 9 (article 1), tariffs, excise taxes (due to the commerce clause), and income (16th amendment). (The poll-tax amendments are the only other mention of taxes in the constitution.)

The mandate isn't a tariff and it isn’t levied on the basis of income. The opinion stated that the mandate wasn’t an exercise of the commerce power.

So, how does the mandate fit under sections 2, 8, or 9?

If it doesn't how is it a constitutional tax?

6/28/12 4:29 PM

Excellent observation. The optimist in me wants to believe that when the tax goes in to effect and is paid that will be the issue that will wind up in front of the court and that your observation will be held as correct.

The realistic cynic that I am is reasonably certain the tax will be deemed to be a form of income just as the penalty was deemed a tax by another name.

Romney and the republicans have one chance to turn this into a wave election and that is not only by vowing to repeal the ACA, that no longer is enough, but by starting an amendment to seriously narrow the scope of what the federal, state and local governments can tax and to limit the amount of a persons income and wealth they can tax along with what they can regulate and within that to limit the degree of regulation. Otherwise we are cooked. I doubt we will become Greece but most definitely like France. Very high taxes (albeit hidden in the VAT)a lot more state control over the economy and our lives and all else being the same a lower standard of living compared to what we have now.

george said...

The only fortunate thing is that once this whole house of cards comes tumbling down we won't have to write a new constitution.

We have a perfectly good one that is not being used.

ampersand said...

"It is not our job to protect the people from the consequences of their political choices."

More like " Flounder, you can't spend your whole life worrying about your mistakes! You fucked up... you trusted us!"

WTF! Isn't the court supposed to protect the minority?