Despite Paul Clement’s brilliant representation of his clients throughout the oral arguments, the coercion doctrine itself that remains murky. Furthermore, whatever the doctrine might mean, its application to the Affordable Care Act’s Medicaid expansion appears to have raised grave doubts in the minds of many of the Justices.

In rejecting the states’ claim that they are being unconstitutionally coerced into participating in the ACA’s Medicaid expansion by the prospect of losing all Medicaid funding, the United States Court of Appeals for the Eleventh Circuit went so far as to observe of the coercion doctrine that there might in fact be no there there.  648 F. 3d 1235, 1265 (11th Cir., 2011)).  Furthermore, that appellate court concluded that even if the doctrine had some legal oomph and actually could be more than just theory, it had no application to the Medicaid expansions.

The reality of Medicaid is anything but a case of unconstitutional coercion. Medicaid certainly is not a case of Congress forcing states to do what it cannot do.  No one suggests that Congress lacks the constitutional power to create a federally financed, federally administered health insurance program for the poor, just as, in 1972, Congress replaced its previous state grant in aid cash welfare program for the aged and disabled poor with the federal Supplemental Security Income program.   Thus, this is not a question of unconstitutionally “commandeering” states, directing them to do what Congress itself lacks the power to do, something that is forbidden by the Tenth Amendment as illustrated in New York v United States, 505 U.S. 144 (1992).

By contrast, Medicaid is the product of a voluntary agreement between Congress and the states to jointly carry out a program of medical assistance for the poor that evolved from previous federal/state health care partnerships predating Medicaid’s 1965 enactment.  For its part, Congress historically has reserved the right to alter and amend the program as needed.  42 U.S.C. §1304.  For their part, states historically have reserved the right either not to participate at all, and to exit the program whenever they so desire.

Nothing about the Affordable Care Act changes the basic parameters of this deal.  So where is the unconstitutional coercion? Although no federal law ever has been invalidated on a coercion theory, South Dakota v Dole 483 U.S. 203 (1987) leaves open the possibility that a federalism arrangement can, in fact, become unlawfully coercive.   This would happen if the restrictions placed on states were so significant and the threatened loss of funding so great that what at first blush looked like an economic incentive ultimately morphs into compulsion. At this point, so the coercion theory goes, states’ Tenth Amendment sovereignty is threatened, and Congress therefore has crossed the line beyond the furthest limits of its Spending Clause powers.   This, in a nutshell, is the coercion doctrine.

The oral arguments on Medicaid coercion showed the extent to which the Justices struggled to apply the doctrine – such as it is — to this case.  In his arguments, Paul Clement identified three bases for a finding of coercion: (1) the “sheer size” of the federal funding at stake for states under Medicaid as well as the size of the adult coverage expansion under the Affordable Care Act; (2) the link between the Medicaid expansion for poor adults and poor adults’ forced reliance on Medicaid as the means of achieving compliance with the minimum essential coverage requirement, which applies to them, given the fact that they are excluded from the advance premium tax credits available through state Exchanges; and (3) the fact that the federal government has “leveraged” states’ prior participation in the program, conditioning all of their federal Medicaid funding on their agreement to carry out the Medicaid expansion.

The Justices struggled to grasp the argument.

  • Justice Kagan: how could a “big gift” from the federal government (Tr. p. 3) possibly could be coercive.  Was Clement really arguing that the more generous the federal government in its assistance, the more coercive the conduct? How could the return of federal funds to many states far in excess of what they themselves spent possibly be coercive? (Tr. p. 6)
  • Justice Breyer: Was the modest rise in total Medicaid spending as a percent of GDP as a result of the expansion sufficient to make the expansion coercive?  (Tr. p. 25)
  • Justice’s Sotomayor:  Could Mr. Clement attach a dollar figure to coercion? At what point would the federal investment in state Medicaid programs be too big?  At a 50 percent contribution rate?  An 80 percent contribution rate? (Tr. p. 7) When is the moment reached that the federal government gives states too much, essentially making them an offer they cannot refuse, thereby crossing the Tenth Amendment Maginot Line?   Is it unconstitutional coercion simply because a state never could explain to its voters, politically speaking, why it decided to pull out of Medicaid and give up all federal funding?  (Tr. p. 7)
  • Justice Ginsburg: How is this Medicaid expansion different from every one that has preceded it, and are the states therefore suggesting that Medicaid is unconstitutional? Hasn’t it always been the case that Congress set minimum ground rules for Medicaid as its part of the bargain?  (Tr. pp. 9-10)
  • Justice Breyer:  Isn’t it a fallacy – indeed facially wrong given the text of the Medicaid statute – to argue that the federal government has leveraged states’ entire programs in the bargain? In fact the federal Medicaid statute (42 U.S.C. §1396c) explicitly  gives the Secretary the discretion to fashion far more modest remedies for state violations. Furthermore, wouldn’t fundamental principles of administrative law (a point echoed by Justices Roberts, and Kagan later in the argument) act as a check on the power of the Secretary to act unreasonably by dropping a financial nuclear bomb on a state for a relatively modest infraction? (Tr. pp. 10-14). Does the mere fact that the Secretary possesses the power to withhold all funding make it reasonable that she do so, and were she to do so, wouldn’t she face judicial accountability herself?
  • Justice Ginsburg:  What are we to make of the fact that a sizable number of states like the expansion, want the expansion, and don’t think the law is coercive and that the opposing states’ arguments essentially would “destroy the whole program”? (Tr. p. 20)
  • Justice Sotomayor (in the ultimate and most eloquent question of the day): Is the fact that Congress sees a large problem and commits major resources to its solution to be understood as inherently coercive?  Are federal partnerships and generosity on the part of the federal government a violation of the Tenth Amendment? (Tr. pp. 28-29)
  • And finally, Chief Justice Roberts’ observation that seemed to forever raise questions about the basics of the doctrine itself: Ever since the New Deal, states have been willing to take the federal government’s money? In so doing, haven’t states “compromised their status as independent sovereigns, because they are so dependent on what the federal government has done, they should not be surprised that the federal government having attached . . . strings. . . isn’t going to start pulling them.” (Tr. p. 33)

In the end, no Justice appeared to be able to offer a workable application of the coercion doctrine in a Medicaid context, a point that the Chief Justice seemed to unhappily acknowledge in an exchange with the Solicitor General (Tr. pp. 41-43).  Whether they will ultimately be able to frame the doctrine in a workable fashion, and where the Medicaid expansion will fit becomes a central question in the case, one that now hangs over countless federal grant-in-aid programs that together form the lifeblood of the U.S. social welfare system.

Editor’s note: For more on the Medicaid coercion oral arguments, see additional Health Affairs Blog posts by Timothy Jost and William Sage.