NEJM: Healthcare reform--a lawsuit dissected

The Supreme Court has promised to review not only the issue of the constitutionality of the Patient Protection and Affordable Care Act (PPACA) on the individual mandate but also of whether the PPACA’s Medicaid expansion violates the U.S. Constitution, wrote I. Glenn Cohen, JD, and James F. Blumstein, LLB, in a perspective paper Dec. 7 in the New England Journal of Medicine.

Cohen, from Harvard Law School in Cambridge, Mass., and Blumstein, from Vanderbilt Law School in Nashville, Tenn., wrote that only a lawsuit brought by Florida, joined by 25 other states, has challenged the PPACA’s mandatory Medicaid-expansion requirements. The 11th Circuit Court of Appeals rejected the challenge, but the Supreme Court has granted review on this issue, allocating a four-hour argument.

“The challenge centers on the Constitution's Spending Clause,” Cohen and Blumstein wrote. “As the Supreme Court has explained, ‘legislation enacted pursuant to the spending power is much in the nature of a contract: in return for federal funds, the states agree to comply with federally imposed conditions that fix the terms on which states disburse federal money.’”

Congress has broad authority to set conditions on its spending, but Florida's challenge raises two limits: federal conditions must be unambiguous, ensuring that states are given clear notice of their obligations when they accept federal funds so that they can knowingly exercise their choice (which is protected under the Constitution) about whether to participate; and the federal government may not employ the spending power in such a way as to “coerce” the states into compliance with federal objectives, according to the authors.

The 11th Circuit Court found that the Medicaid expansion mandate constituted pressure rather than compulsion:

• States were warned from the beginning that Congress reserved the right to make changes to Medicaid, and at each subsequent amendment stage, states could choose between complying with the changes and losing all or part of their funding.
• The federal government will bear 90 percent of the costs associated with the expansion once it is fully phased in.
• States have four years from the date the PPACA was enacted to decide whether to stay in Medicaid by adopting the expansions and thus have had significant notice and time to deal with the expansion.
• States can tax and raise revenue and therefore can create and fund their own programs if they don’t like Congress’s new terms.

“Florida will probably contend that linking these changes to continued participation in the pre-existing Medicaid program is a form of excessive leveraging, offering states an untenable choice: give up a large existing program (an ongoing contract) entirely or accept additional financial burdens that states have a right not to incur,” the authors wrote. “Florida will most likely argue that the lack of federal subsidies for persons with incomes below the federal poverty level strongly suggests that Congress was betting that no state could realistically exit Medicaid entirely, thereby leaving the poorest and most vulnerable persons without federal support, whereas those with incomes of 100 to 400 percent of the poverty level were receiving new federal subsidies for purchasing health insurance.”

By granting review of it and explicitly allocating it an hour of argument, the Court has signaled that it takes the matter seriously, concluded the authors. “Should the expansion be struck down, as a constitutional matter there is nothing to prevent Congress from declaring that Medicaid as we know it has ended and enacting ‘Medicaid 2.0,’ including the expansion provisions, and leaving states free to decide whether to sign up. However, in practice, such a move could prove to be politically unpopular and would be unlikely to gain traction in Congress.”