NFIB v. Sebelius (on the Spending Clause)

Brief Fact Summary.

The ACA required the states to expand their Medicaid coverage or risk losing all of their federal Medicaid funding.

Synopsis of Rule of Law.

The Medicaid expansion provision of the ACA was not a valid exercise of Congress’ authority under the Spending Clause because they were impermissibly coercive. Relevant factors to this analysis were (1) the extent of the cost to the states, (2) whether the policy change is a shift in kind or degree, and (3) whether states could have anticipated the policy change.

Facts.

The Affordable Care Act expanded Medicaid and increased the number of individuals states would have to cover. It increased fedral funding to cover states’ costs in expanding Medicad coverage, and provided that states that did not comply with the new coverage requirements might lose all of their federal Medicaid funding.

Issue.

Was the Medicaid expansion provision of the ACA a valid exercise of Congress’ authority under the Spending Clause?

Held.

No, the Medicaid expansion provision of the ACA was not a valid exercise of Congress’ authority under the Spending Clause.

Dissent.

Justice Ginsburg

Justice Ginsburg argued that the federal government was not threatening states with the loss of existing funds from one spending program in order to induce them to accept another program, but that it was requiring states to comply with prescribed conditiones to receive Medicaid funding, which is the same thing it has always done. She also argued that the Supreme Court’s coercion analysis was lacking, and appeared to involve political judgements.

Concurrence.

Justice Scalia

Justice Scalia argued that federal government’s interpretation of the anticoercion principle was incorrect, and that that interpretation would allow Congress to regulate areas traditionally regulated at the state or local level. According to Justice Scalia, the government’s interpretation was that the anticoercion principle is not violated if states are free as a matter of law to reject the federal funds.

Discussion.

According to the Supreme Court, Spending Clause programs threaten the federal government’s accountability when a state does not have a legitimate choice whether to accept federal conditions in exchange for federal funds. The Medicaid expansion provision of the ACA was, according to the Supreme Court, impermissibly coercive upon states, because the federal government did not just condition the receipt of the new funds upon accepting the new conditions, but it threatened to withold all Medicaid funds as well. Such inducement was not merely “relatively mild encouragement to the [s]tates” like the inducement that the Supreme Court upheld in South Dakota v. Dole was. Facing the threat of losing all of their federal Medicaid funding, states did not have a real choice to opt out of the new policy, according to the Supreme Court.

In coming to this conclusion, the Supreme Court argued (1) that the funds the states would lose were significant; (2) that the policy change they they would have to accept was a shift in kind, not degree; and (3) that states could not have anticipated such a dramatic policy change.