ObamaCare Makes Medicaid An Offer States Can’t Refuse

Originally Posted At Forbes.com
By Lawrence A. Hunter and Peter J. Ferrara
January 22, 2012

The Social Security Institute has joined with the American Civil Rights Union in filing an amicus curiae brief to the Supreme Court arguing that ObamaCare’s expansion and transformation of the Medicaid program violates the Tenth Amendment under the Court’s Coercion Doctrine.  In overstepping the bounds between acceptable pressure and unacceptable compulsion, ObamaCare transgresses state sovereignty and violates the constitutional framework of federalism.  Peter J. Ferrara wrote the brief on our behalf.  The essence of that brief follows:

Medicaid was enacted in 1965 as a federal-matching, grant-in-aid program to the states with each state free to decide whether and when to participate. Historically, the federal government has paid for 50 percent to 83 percent of total program costs in each state, the exact federal matching share determined by a statutory formula calculating the federal contribution in each state.

Until the 2010 enactment of the Patient Protection and Affordable Care Act (ObamaCare), Medicaid preserved state sovereignty and was consistent with the constitutional framework of federalism, despite numerous stringent federal mandates, because the states retained substantial discretion to decide Medicaid eligibility, determine the scope and duration of coverage, and they were free to discontinue participation in Medicaid if not satisfied with the terms and conditions imposed by the program.

At the core of ObamaCare is the individual mandate requiring every citizen to obtain health-insurance coverage with the benefits and provisions specified by the federal government. The way ObamaCare provides for lower-income individuals and families to obtain that required coverage is by forcing the states to offer expanded coverage under Medicaid as a condition of continuing to participate in the rest of the program.

Under ObamaCare, the federal government now imposes Medicaid on the states as a federal mandate to meet the federal requirements of the individual mandate for the entire below-age-65 population with incomes under 138 percent of the poverty line. That includes mandatory coverage for the first time of all non-elderly, childless adults within the income limits. The states, consequently, no longer retain substantial discretion to determine eligibility or scope and duration of coverage for the program within their respective jurisdictions, which makes the program unacceptably coercive.

The result of this coercion will be to increase Medicaid enrollment by 24 million additional beneficiaries by 2015, covering nearly 100 million Americans by 2021 according to the Congressional Budget Office (CBO).  The chief actuary of the Centers for Medicare and Medicaid Services estimated that ObamaCare will impose at least another $20 billion to $42 billion in additional costs on the states by the end of the decade, even counting all the federal financing for Medicaid, not to mention other open-ended mandatory costs that are inestimable.

ObamaCare threatens the states with the loss of all federal Medicaid funds unless they buckle to all of the new, mandatory expansions of state obligations under the program. Federal Medicaid funds currently account for more than 40 percent of all federal funds granted to the states, amounting to more than $276 billion in 2011 alone. Even before enactment of ObamaCare, federal and state spending on Medicaid amounted on average to 20 percent of total annual state budgets.

In Florida, for example, had the state not had federal funds available in 2010, Medicaid benefits would have consumed almost two-thirds of Florida’s tax revenue. As for the federal claim that Florida could just raise its own taxes to pay those benefits if it doesn’t want to comply with the ObamaCare’s mandates, the federal government already collects more than $100 billion per year in federal taxes from Florida residents, leaving little or no capacity for further state tax increases to make up the difference.

Medicaid is an all-or-nothing, take-it-or-leave-it proposition for the states; they must comply with all federal terms and conditions as a requirement of participating in any part of the program.  Consequently, Medicaid has become a contract of adhesion, which gives the appearance of mutual consent between both parties but, in fact, allows one party to impose terms on the other party who has no real ability to negotiate terms due to its extremely unequal bargaining position.

To change the terms so drastically to the detriment of the states of what might originally have been a truly “voluntary” program—now, after the states have become financially dependent on (literally addicted to) the federal aid it offers—saps all semblance of “voluntariness” from Medicaid. 

Under the constitutional framework of federalism, the states are sovereign entities with their own constitutionally protected powers, which the federal government cannot transgress. Consequently, the federal government does not hold the constitutional power simply to order the states to implement federal policies.

The Court has long recognized under the Coercion Doctrine that just as Congress has no enumerated power to order states to implement federal policies, it may not use its Spending Power to achieve the same result indirectly. That is why the Court held in South Dakota v. Dole (quoting Steward Machine Co. v. Davis) that an exercise of the spending power would violate the Constitution if it were “so coercive as to pass the point at which ‘pressure turns into compulsion.’”

Consequently, the constitutional test under the Coercion Doctrine is whether, as a practical matter, the programs the Congress adopts leave the states with a true choice regarding their own policies, or whether the states are effectively coerced into following federal commands the federal government otherwise has no constitutional authority to impose on the states. Given the enormous taxes and spending of the modern welfare state, strict application of this Coercion Doctrine is now essential to preserving state sovereignty and maintaining the constitutional framework of federalism.

The Coercion Doctrine is particularly relevant to strings attached to federal aid such as those imposed by ObamaCare on Medicaid. Do the conditions as a practical matter leave the states with a true choice regarding whether to accept the aid, or not? In other words, has Congress made an offer the states can’t refuse? That is the question the Court must decide in considering whether ObamaCare neuters state sovereignty.

The overwhelming importance of Medicaid to state budgets is proof positive that there is no conceivable way the states any longer retain a true choice of whether to comply with the mandatory requirements that ObamaCare imposes on Medicaid. Medicaid is a roach motel; states check in but they never check out.

ObamaCare’s expansion of Medicaid unconstitutionally violates the Coercion Doctrine under the Tenth Amendment thereby transgressing state sovereignty and violating the Constitutional framework of federalism.  It simply cannot stand without bringing the entire edifice of federalism down around it.

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