Health Care USA

Obamacare and Federalism

The comprehensive health care law, President Obama signed in 2010. 

For those who could not afford to buy insurance, the law expanded the federal–state Medicaid program. States had to take part in this expansion, or lose all their federal funding for Medicaid, the federal government’s largest grant program. A number of states sued, arguing that this requirement unconstitutionally violated the principles of federalism. The brief that they submitted to the U.S. Supreme Court contended that the law was an act of coercion, not persuasion: Congress answered the coercion question itself by tying Medicaid to the individual mandate and premising its comprehensive health insurance reform scheme on the understanding that States had no realistic option but to expand Medicaid. The individual mandate gives low-income individuals no choice but to obtain insurance. And the Act provides no means for those individuals to obtain such insurance save Medicaid. A program necessary to satisfy a mandate cannot be understood as anything other than mandatory.

 During oral argument, Justice Elena Kagan expressed skepticism: 

So that really reduces to the question of why is a big gift from the Federal Government a matter of coercion? In other words, the Federal Government is here saying, we are giving you a boatload of money. There are no–there’s no matching funds requirement, there are no extraneous conditions attached to it, it’s just a boatload of federal money for you to take and spend on poor people’s healthcare. It doesn’t sound coercive to me, I have to tell you.

 Although the Court upheld the individual mandate to buy insurance, it struck down the Medicaid provision. The Court said that Congress can attach strings to aid, provided that the financial inducements are not so coercive as to turn pressure into compulsion. In his opinion for the majority, however, Chief Justice Roberts wrote that the health care law crossed this line: 

In this case, the financial “inducement” Congress has chosen is much more than “relatively mild encouragement”—it is a gun to the head. Section 1396c of the Medicaid Act provides that if a State’s Medicaid plan does not comply with the Act’s requirements, the Secretary of Health and Human Services may declare that “further payments will not be made to the State. 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.

 But although Congress cannot withhold all Medicaid funding from states that do not meet the new eligibility requirements, it can still withhold additional Medicaid funding that comes with the law. So while the Court limited the federal government’s leverage over the states, it did eliminate it completely.