Journal article examines the implications of the Supreme Court’s Medicaid decision

Lost in much of the discussion surrounding the Supreme Court’s surprise decision to uphold the individual mandate of the Affordable Care Act, the most publicized provision of the Obama health care bill, was the Supreme Court’s decision to allow states to opt out of Act’s planned expansion of Medicaid, the government’s predominate program for covering health care for people with disabilities.

The decision was the first time the Supreme Court has ever ruled that the federal government unconstitutionally “coerced” states into accepting the conditions of a federal-state program. The Medicaid expansion requires states to expand coverage to people below 133 percent of the poverty line, with the vast majority of the additional costs being covered at first by the federal government. Seven of the nine justices agreed on this part of the ruling.

In one of the first law journal articles analyzing the decision, University of Michigan Law School professor Samuel Bagenstos argues that this new “coercion theory” may not call into question the constitutionally of as many federal spending programs as initially feared. Specifically, he wrote how Chief Justice Robert’s decision highlighted three distinct factors that made the ACA’s Medicaid expansion particularly unique.

First, the Supreme Court highlighted the large amount of money at stake. The court contrasted the case to a 1987 case where the Supreme Court upheld the federal government’s decision to withhold 5 percent of state’s highway transportation funds from states that didn’t raise their drinking age to 21. While in that case, the states were perceived as still having an opportunity to negotiate with the federal government, the Supreme Court analogized the ACA’s Medicaid expansion as the federal government putting a “gun to the head” of the states.

Second, the Supreme Court noted that Medicaid is an “entrenched program,” and that the ACA threatened to withhold all of the state’s Medicaid funds if it refused to participate in the expansion. Therefore, the federal government was forcing states to provide services it had not originally agreed to when it agreed to participate in the Medicaid program, threatening the voluntary nature of Medicaid’s federal-state partnership.

Third, the Supreme Court determined that the Medicaid expansion, since it was part of the ACA, radically changed the nature of the Medicaid program, from a “program to care for the neediest among us” to “an element of a comprehensive national plan to provide universal health insurance.”

Bagenstos summarized this new theory, which he deemed the the anti-leveraging principle,” as “When Congress takes an entrenched federal program that provides very large sums to the states and tells states that they can continue to participate in that program only if they also agree to participate in a separate and independent program, the condition is unconstitutionally coercive.”

Bagenstos largely disputes the third part of the test, the concept that ACA is a fundamentally different from Medicaid, and raises questions regarding whether there should even be a “coercion theory” because states have always had the opportunity to opt out of the entire Medicaid program. However, in offering an “uneasy defense” of Chief Justice Robert’s decision, he argues that it is likely inapplicable to most other federal programs.

Several governors have already announced that they will opt out of the Medicaid expansion, which is set to go into effect in 2014. The ACA originally projected that the Medicaid expansion would provide health insurance to 15 million previously uninsured individuals.