Court Equally Skeptical (or More) on Medicaid Expansion

The Supreme Court yesterday seemed just as skeptical--and maybe even more so--of the Medicaid expansion as it was of the universal coverage, or individual mandate, on Tuesday.  The line-up was similar, with Justices Ginsburg, Breyer, Sotomayor, and Kagan appearing to favor the government, and Justices Scalia and Alito leaning against.  (Justice Thomas was again silent, but his opposition to Medicaid expansion is all but certain.)  The difference in yesterday's argument: Chief Justice Roberts and Justice Kennedy seemed even more strongly against Medicaid expansion than against the individual mandate.

The core issue in the case, of course, was coercion: Did the federal government coerce the states by conditions a states' entire pot of Medicaid funding on its acceptance of the expansion?

Chief Justice Roberts made some very strong statements against the government's position that expansion isn't coercion, especially worrying about federalism and "intrusion on the sovereign interests of the State."  Transcript p. 59; see also Transcript p. 34.  This latter question, the one on page 34, also suggests that the federal government "having attached the . . . strings, [states] shouldn't be surprised if the Federal Government isn't going to start pulling them."  On balance, though, the Chief Justice seemed to lean against expansion.

Justice Kennedy seemed worried most about accountability--how citizens could sort out who to blame if they didn't like the policy.  He recognized that there's no "workable" test based on accountability (p. 64), but he also seemed to want to find a place for accountability in the analysis.  He was also concerned about "practical coercion" (my phrase), discussed immediately below.

In the end, there seemed one predominant theme among those who appeared to lean against the expansion: If the government can't conceive of a state declining to participate in the expansion--because the money's too sweet, because the program's too good, or because the individual mandate would have a hard time working without it--it seems like coercion.  This kind of plain-spoken, practical coercion might just drive the case. 

Others apparently favorable to the expansion argued that this practical coercion must mean that a program can be unconstitutionally coercive only because it's too good--a plainly absurd conclusion, and therefore not a reason to overturn the expansion.

Several other themes emerged:

Complete Funding.  The federal government pays the lion's share of the expansion in the first few years--a point made early by Justice Kagan.  To those favoring the government, this makes it look like a pure federal gift to the states for the purpose of expanding Medicaid.  But Paul Clement, representing the states, argued that it was both the size of the Medicaid program and the expansion that makes this coercion: because of Medicaid's size, state's can't afford to lose it; because of the generosity of the expansion, states can't say no to it. 

Related: There was concern among those apparently leaning against the expansion about why states could stand to lose all their Medicaid funding just because they don't agree to take funding for this incremental expansion.  This issue relates to executive discretion, discussed below.

Related:  Chief Justice Roberts seemed especially concerned that the federal government could later decrease the amount of its participation, after leading the states on with this nearly-completely-funded expansion, and leave states in an even more precarious situation--even more coercive.

Complete Overhaul.  Justice Sotomayor asked if the federal government could simply scrap the whole program and start all over, why it couldn't add this incremental expansion.  Clement said that nobody has a problem with certain existing Medicaid programs, and so it makes no sense to condition the whole program, including existing programs, on a state's willingness to sign on to the incremental expansion.

Politics.  The politics played a minor role, but were there.  Justice Ginsburg asked about the other half of states that may favor the expansion, and Justice Scalia helped point out that the states in this case--those opposing expansion--are headed by Republicans.  In Clement's words: "There is a correlation." P. 21.

Spending Power.  Clement tried to distinguish between congressional use of the spending power for objectives included in other portions of Article I, Section 8, and use of the spending power for ends outside of its Section 8 powers.  It's not clear whether this position has enough traction to work its way into the Court's analysis, but it does revive a very old (but now well settled) debate over the scope of congressional spending power: Congressional spending power is most certainly not cabined by what it can do under other Article I, Section 8 powers.  Clement's position seems to question that, even if only on the margins.

Taxes and Citizenship.  Clement argued that the federal government is encroaching on state authority by taxing state citizens for a benefit that they don't want.  The argument confuses state and federal citizenship, and didn't seem to get any traction with the Court.  But Clement's related argument--that federal taxes to support Medicaid expansion crowd out states' ability to tax their citizens for other purposes--did get some attention among opponents of the expansion.

Executive Discretion.  Justice Breyer raised the point that the Secretary is bound by the APA in revoking all Medicaid funds for a state that declines to participate in the expansion, and that such a decision would be subject to rationality, or the arbitrary and capricious test.  This point gained traction as the argument moved forward, but the Justices seemed to divide over the implications: Justice Breyer argued that this means that the Secretary isn't unbound in revoking all funds, and others pointed to the history of the Secretary's modest exercise of this authority; opponents of the expansion argued that the authority to revoke all funds is still there in the statute.  SG Verrilli, of course, couldn't give assurances about how the Secretary would use the discretion, but suggested that the Secretary wouldn't revoke all Medicaid funding.

Accountability.  Justice Kennedy raised the point about accountability: How can citizens understand the lines of accountability for a program that's so strongly encouraged by the federal government?  Accountability is surely a consideration, but it's not clear how much, if at all, it'll turn this case.  Justice Kennedy also said that any test based on accountability is "unworkable," but he seemed to search for a way to consider accountability within the coercion framework.

Practical Coercion.  Again, Chief Justice Roberts, Justice Scalia, Justice Alito, and even Justice Kennedy at one point all pointed out, in only slightly different ways, that if the government can't conceive of a state saying no--because of the size of the program, or because how expansion fits with the individual mandate, or because Congress knew that states liked Medicaid so much and just assumed that all states would come on board--then that's coercion.

SG Verrilli wrapped up his argument with an appeal to liberty--the liberty of those who would be covered by Medicaid expansion to receive funded medical care.  This was refreshing, but probably not anything that would persuade those who oppose the expansion based on the sovereignty of the states and federalism.

This case, like the universal coverage case, will likely turn on Chief Justice Roberts or Justice Kennedy or both.  But here both seemed even more opposed to expansion than they were to universal coverage.

SDS