National Federation of Independent Business v. Sebelius (On the Spending Power)

Citation. 567 U.S. 519 (2012)

Brief Fact Summary.

The ACA required states to expand Medicaid coverage to more of their residents.

Synopsis of Rule of Law.

The ACA’s Medicaid expansion provision was not authorized under the Spending Power, because it coerced states into accepting a federal policy by threatening to withhold all of their Medicaid funds.

Facts.

Medicaid is a federal program that offers federal funding to states to help various classes of people obtain health care. To receive Medicaid funding, states must meet certain federal criteria, such as what services are provided at what costs. The ACA expanded Medicaid, increasing the number of people the states must cover. States that did not comply with the expansion would lose all federal Medicaid funding.

Issue.

Was the Medicaid expansion provision of the ACA a proper exercise of the spending power?

Held.

No, the Medicaid expansion provision of the ACA was not a proper exercise of the spending power.

Dissent.

Justice Scalia

Justice Scalia argued that the Court erred in accepting the government’s definition of the anticoercion principle. According to Justice Scalia, the government argued that the anticoercion principle is not violated if states are free as a matter of law to reject the federal funds.

Justice Ginsburg (dissenting in part)

Justice Ginsburg argued that the ACA’s Medicaid expansion was simply an amendment to existing Medicaid, not an entirely new program. She also argued that it was problematic that the Court declined to explicitly establish a distinguishing line between persuasion and coercion.

Discussion.

Supreme Court precedent establishes that states must voluntarily and knowingly accept the terms of the contract for a Congressional exercise of the spending power to be legitimate. To that end, exercises of the spending power cannot coerce states to adopt federal regulatory systems for themselves. In Steward Machine Co. v. Davis, the federal government did not coerce the states by adopting a tax and abatement program to channel money to states with certain unemployment legislation that would have otherwise gone to the Federal Treasury to use for unemployment services.

Additionally, when the federal government imposes conditions that are not related to the purposes for which the funds are expended, the conditions should be viewed as a means of pressuring the states. South Dakota v. Dole.

Here, the Court ruled that Congress surpassed pressure and engaged in coercion by threatening to withhold not just a percentage of states’ Medicaid funds, but all of the funds. The Court held that this threat was so significant that it left the states with no option but to accept the Medicaid expansion.

Additionally, the government argued that the ACA’s Medicaid expansion is simply a modification of existing Medicaid. The Social Security Act, which originally established Medicaid, expressly established the government’s ability to amend the statute. The Court rejected this argument, holding that the Medicaid expansion was a complete shift in kind, not just in degree, from existing Medicaid, because it expanded the population covered by Medicaid.

The Court declined to explicitly define a distinguishing point between coercion and persuasion.