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.