National Federation of Independent Business v. Sebelius (3)

Brief Fact Summary.

The Affordable Care Act expanded the scope of the Medicaid program by requiring state programs to provide Medicaid coverage to all adults within certain poverty level. The Act added that if any State refuses to comply, it risks losing all of its federal Medicaid funds.

Synopsis of Rule of Law.

The legitimacy of Congress’s exercise of the spending power rests on whether the State “voluntarily and knowingly” accepts the terms of the federal law.

Facts.

The original Medicaid program used to provide federal funding to States to assist needy families, the elderly, children, and many other groups of populations. The Affordable Care Act expanded the scope of the Medicaid program by requiring state programs to provide Medicaid coverage to all adults within an income up to 133 percent of the federal poverty level. The ACA increased its federal funding to cover the States’ cost in expanding Medicaid coverage but if a State refuses to comply, it will risk losing all of the federal Medicaid funds. Twenty-six States challenged the Medicaid program.

Issue.

Does the Medicaid program, which requires States to provide Medicaid coverage to all adults reaching certain poverty level or otherwise they will lose all Medicaid funding as the penalty, exceed Congress’ spending power?

Held.

Yes, by providing that a State loses all Medicaid funding as the penalty for noncompliance with the new conditions from the Act, Congress had exceeded its spending power. Spending Clause does not allow Congress to use its financial inducements to exert a power akin to undue influence on States. In this case, this is what Congress had done.

Dissent.

Justice Scalia, Kennedy, Thomas, Alito

The ACA does not legally compel the States to participate in the expanded Medicaid program but only authorizes a several sanction for those that refuse to comply. Congress customarily attaches conditions when it offers grants to the States and Congress has a broad spending power. Congress had clearly expressed its view that no State could possibly refuse to offer the ACA Medicaid extension. Thus, the Medicaid Expansion exceeds Congress’ spending power.

Concurrence.

Justice Ginsburg

As opposed to the majority’s argument that the new Medicaid program is unduly coercive and was unforeseeable by the States when they first singed on to the original Medicaid, the new Medicaid is not two spending programs. It is a single program with a constant aim, which is to enable the need populations to obtain health care. Moreover, Congress already warned that the Medicaid may change the requirements States have no entitlement to receive any Medicaid funds. They enjoy only the opportunity to accept funds on Congress’ terms.

Discussion.

Instead of simply refusing to grant the new funds to States that refuse to comply with the new conditions of the Act, Congress threatened to withhold those States’ all of existing Medicaid funds. This threat serves no purpose other than forcing unwilling States to obey the federal law in health care coverage. Conditions attached to the new Medicaid program take the form of threats and do not govern the use of the funds. This Court in South Dakota v. Dole stated that Congress’ financial inducement was not coercive because the threatened loss was only less than half of one percent of South Dakota’s budget. In the present case, however, a State is threatened to lose 100% of all of its Medicaid funding, which constitutes over 20% of the average State’s total budget.