Affordable Care Act Part IV: When, if ever, does offering a state money amount to coercion?

After dealing with the commerce clause and the tax power, the Supreme Court in the Affordable Care Act case (available here) turned to the spending clause. (There can't be many cases that have addressed so many of the central federal powers under the Constitution.)

The text of the Constitution tells us that Congress can tax and spend for the “general welfare,” Art. I, § 8, cl. 1. Does that mean Congress can tax and spend on matters that it could not otherwise reach under the rest of its constitutional powers? The answer, the Supreme Court decided in United States v. Butler, 297 U.S. 1, 66 (1936), is yes. So Congress can raise money, and spend it, even on matters that otherwise would be the concern of the states rather than the national government. Moreover, as a general matter Congress can choose what it will spend on; that is, it can put conditions on what it spends, and if it proposes to provide money to states, it can require them to abide by such conditions.

But a year after Butler the Supreme Court suggested a limit on this authority, when it said, in Steward Machine Co. v. Davis, 301 U.S. 548, 590 (1937), that “[n]othing in the case suggests the exertion of a power akin to undue influence, if we assume that such a concept can ever be applied with fitness to the relations between state and nation.” That language is quite a bit short of a firm statement of a constitutional rule, and evidently no case until the health care decision ever found such coercion. Nevertheless, seven justices do find it here. That includes two of the court's liberals, Justices Breyer and Kagan, and their votes may have caused liberal observers a measure of the same disappointment conservatives have vitriolically expressed about Chief Justice Roberts.

What was the coercive aspect of the law? The statute provided for a dramatic expansion of Medicaid, which would now cover everyone under the age of 65 with an income up to 133 % of the federal poverty line. (Currently, Chief Justice Roberts writes, Medicaid covers “only certain discrete categories of needy individuals – pregnant women, children, needy families, the blind, the elderly, and the disabled…. There is no mandatory coverage for most childless adults, and the States typically do not offer any such coverage.” Moreover, states’ definitions of which families are “needy” typically draw the eligibility line well below the federal poverty level. Roberts at 45.) Medicaid is a program largely funded by the federal government, but operated by the states, and states can decline to have a Medicaid program within their borders. Arizona didn’t join the program till 16 years after federal law created it (opinion of Justice Ginsburg, at 59 n.26). States could also decline to take part in the expansion of Medicaid under the ACA, but if they did so then the statute authorized (though it didn't require) the Secretary of Health and Human Services to withhold from the state not only the new federal money that would have paid for the expansion but also the rest of the state's federal Medicaid funds. 42 U.S.C. § 1396c.

That's a big stick. But is it a "coercive" one?

One way to answer that is to consider whether Congress believed any states would choose not to participate in the Medicaid expansion. The answer seems to be no; state participation is an integral part of the ACA's effort to assure near-universal health coverage. But does this mean the statute is coercive or that it is attractive? After all, the ACA funds 100 % of all expansion costs through 2016, and after that “gradually decrease[] to a minimum of 90 percent.” (Roberts at 46.) What state concerned to support its people's health would want to resist such a sweet offer?

But it must be said (as the joint dissenters do, at 45) that Congress didn't just make an offer. It also added a penalty for rejecting the offer -- namely the risk of losing all current Medicaid funds, those already being disbursed by the state in existing health care arrangements. Moreover, existing federal Medicaid funds are major parts of many states' total budgets: between 10 and 15 % of the average state’s entire budget, according to Roberts (at 51); between 16 and 22 % of all total state expenditures, according to the joint dissenters (at 39 & n.14). Loss of this money would be extremely painful.

But suppose a state said "we want to run an industrial development fund with our medicaid money, and we're going to stop using those funds for health purposes." I don't think anyone would contend that the state was entitled to take the federal money and run. It is entirely legitimate, as a general matter, for Congress to say "we will spend only for X, not for Y." And that's true even though it means that the only way to get the money is for a state to use it on the programs Congress specifies. Even the joint dissenters (who are part of the majority in finding a violation of Congress’ spending clause powers) observe that “[w]hen Congress makes grants to the States, it customarily attaches conditions, and this Court has long held that the Constitution generally permits Congress to do this.” (Joint dissent at 31.)

What this points to is the proposition that what makes a financial penalty coercive is not its size per se, but its fairness. With this idea perhaps in mind (though I think not put in these term), the justices debate whether the Medicaid expansion is or is not sufficiently akin to the current Medicaid program that the expansion, and the penalties for declining it, fall within the existing law's specific declaration that Congress may enact changes at any time (42 U.S.C. § 1304). The justices seem to agree that some changes, and penalties, are covered by this provision, but they disagree about whether the very large changes wrought by the ACA were (with a majority saying they weren't).

But whether the changes were sufficiently predictable is not the whole of a fairness analysis. Congress can always change its laws, whether or not it reminds us of that in advance. Here, as Justice Ginsburg says (at pages 38 & 51 of her opinion), in theory it could have repealed "old Medicaid" and passed a brand new statute, "old and new Medicaid," and conditioned receipt of all Medicaid funds on compliance with the whole of the newly enacted law. Chief Justice Roberts responds that that would have been politically difficult (Roberts at 54 n.14); maybe so, but why does that matter -- either way -- to the measure of Congress' powers?

The justices finding a spending clause violation emphasize the idea that spending clause legislation is “in the nature of a contract” between the federal government and the states. (Roberts quotes this phrase from earlier precedents at 46; the joint dissenters use almost the same language at 33.) To my mind, however, this metaphor is quite imprecise. Congress may be setting the terms for contractual relations with the states, and it may (as cases have held) be essential that those terms be spelled out clearly. But Congress is also exercising its constitutional authority to tax and spend, and that authority should not be improperly undercut. Even with the aid of this metaphor, in any case, it remains a matter for debate just how much advance notice the states are fairly entitled to. In fact, Justice Ginsburg cites a Social Security case that invoked the same “right to repeal or amend” statutory provision that applied to Medicaid to say that “Congress put States on notice that the ‘Act created no contractual rights.’” (Ginsburg at 55, quoting Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 51-52 (1986).)

I think it is not possible to say what is unfair pressure without some baseline judgment about the respective roles of the federal and state governments. (This is an application of the insight of scholars considering the general concept of "coercion.") As Ginsburg says, the conservative joint dissenters (who are 4 of the 7 justices making up the majority on this point) at times seem to imply that a federal spending program is more likely to be coercive the larger it is: “On this logic, any federal spending program, sufficiently large and well-funded, would be unconstitutional.” (Ginsburg at 57 n.24.) This idea isn't absurd -- since state taxpayers fund the federal program, for a state to decline its share of the federal funds is a painful loss, more painful with each dollar. But it is also, from the national government's perspective, perverse – the more vigorously the government uses its spending power to achieve important purposes, the more it may run into constitutional trouble.

Meanwhile, it seems quite possible that for Justice Ginsburg essentially any spending amounts and conditions would be permissible so long as they aim at a legitimate governmental purpose and do not violate individuals' constitutional rights. She declares (at 59) that “[t]he coercion inquiry, therefore, appears to involve political judgments that defy judicial calculation.” If that is right, then the coercion test is a matter for politicians in Congress and the White House, and not the business of the Courts. At one point the Supreme Court, some decades ago, did take the view that the federal system could be relied upon to protect the states – from which all federal officials come – but that is no longer the law.

Between these two possible extremes, Chief Justice Roberts, joined by Justices Breyer and Kagan, seem to be looking for a common sense understanding of coercion – though their “gun to the head” rhetoric (at 51) obscures this point. The amount of money matters; the degree of advance warning matters; the degree of states' dependence on the status quo (here, the existing Medicaid programs and their funding) matters. Perhaps the essence of their position is that states are entitled to a meaningful choice -- a standard that is a long ways from the idea that states might be entitled to an "unfettered" choice, but also quite a ways from the idea that Congress is entitled to unfettered discretion in the conditions it attaches to its money. As Roberts puts it, at 49:

In the typical case we look to the States to defend their prerogatives by adopting “the simple expedient of not yielding” to federal blandishments when they do not want to embrace the federal policies as their own…. The States are separate and independent sovereigns. Sometimes they have to act like it.

In fact, even the joint dissenters speak in these terms, saying that the test of coercion is whether “States really have no choice” (joint dissent at 35), and affirming that “courts should not conclude that legislation is unconstitutional on this ground unless the coercive nature of an offer is unmistakably clear” (at 38) – though there is room in such language for quite a spectrum of concrete results in future cases.

In all of this, we are a long ways from the nation of our past. Chief Justice Roberts calls the states “separate and independent sovereigns,” but the “sovereignty” of the 13 original states, in 1776 when we declared independence or in 1787 when the draft constitution was put before the states for ratification, has little connection to our world. But in our world there is room for debate about just how preeminent the national government should be, just how independent the states should be. The ACA decision seems to somewhat strengthen the hand of the states. I'm not sure that's the best thing to do, but I'm not unhappy with this aspect of the case -- which strikes me as a reasonable approach to a hard constitutional issue.