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As we await the U.S. Supreme Court’s decision on health care reform, it makes sense to recall an under-reported part of the case. Five of six hours of the Supreme Court’s oral arguments in March about the constitutionality of health care reform focused on the individual mandate and got most of the media’s attention. The last hour was left for considering whether the tradition of federal/state cooperation in delivering Medicaid has, in the Affordable Care Act, morphed into unconstitutional coercion of the states. After that debate flared hotter than expected, Chief Justice John Roberts Jr. on the spot allowed extra time for argument. “Lucky me,” groaned U.S. Solicitor General Donald Verrilli Jr., who was in the process of being grilled more heatedly than at any other time during that already intense week. Until that oral argument, the 26 plaintiff states faced widespread expert skepticism about the states’ constitutional challenge to Medicaid’s expansion. No court has ever before held that the federal government unconstitutionally coerced any state through conditional federal spending. The ACA, though, puts an unusually heavy federal clamp on state “partners” in Medicaid. If any rogue state were to fail to extend free health care to large portions of the lower-middle class, as ordered under the ACA, it could lose all its federal funding for Medicaid for the poor. That funding is by far the largest federal outlay to any state, and is critical to states being able to care for the poor. Justice Stephen Breyer unexpectedly suggested at oral argument that a decision by the secretary of Health and Human Services to strip any noncompliant state of all Medicaid funding would be unreasonable, and just cause for litigation. Because a legally “improper” threat amounts to duress according to contract law and the Court’s contractual view of cooperative federalism, Breyer’s own reasoning ironically seemed to imply that the ACA’s expansion of Medicaid may be coercive. That view was reinforced when Verrilli, with HHS Secretary Kathleen Sebelius sitting nearby, declined to take Breyer’s invitation to renounce any federal threat to end all Medicaid funding for noncompliant states. The extended exchange between Verrilli and Breyer suggested by its end that a serious and improper federal threat may be present. Justice Elena Kagan mused that the prospect of “tak[ing] money away from poor people’s health care” would be so serious as invariably to result in deals between the federal government and the states about Medicaid expansion. Roberts, though, while accepting the gravity of such a potential deprivation, did not draw the conclusion that any resulting deals would be freely made. He interjected, “[S]o long as the Federal government has that power [to strip all funding], it seems to be a significant intrusion on the sovereign interests of the State,” even if the states may have experienced and accepted such intrusions before. Riffing off the classic duress case of “your money or your life,” Roberts summarized the federal government’s position (embellished by Breyer and Kagan) as being that “there is no evidence that anyone has ever been shot,” rather than that a free choice exists. “You don’t have a choice,” declared the chief flatly. Justice Anthony Kennedy echoed Roberts’ view later, agreeing, “There’s no real choice. And Congress does not in effect allow for an…opt-out.” In short, the Court’s center seemed to lean toward the possibility that Medicaid’s expansion is being financially coerced, a result that had been foreshadowed by former Reagan-era solicitor general and present-day Harvard law professor Charles Fried. Fried has been widely noted for testifying before the Senate Judiciary Committee in February 2011 that he was “quite sure that the health care [individual] mandate is constitutional.” Few people noted, though, the very next words out of Fried’s mouth: “I have my doubts about [the constitutionality of] Medicaid compulsion on the states. That’s something I worry about.” The potential “strain of a persuasion equivalent to undue influence” on a state by dominant federal spenders worried Justice Benjamin Cardozo, too, when he put the Court’s stamp of approval on federally funded unemployment insurance back in 1937. Although Cardozo wasn’t concerned for the states in that case, because they unanimously welcomed the new unemployment insurance plan, Cardozo was concerned that states might one day be forced to jump to some federal financial tune beyond “the point at which pressure turns into compulsion.” Cardozo left what to do about such a situation “to abide the wisdom of the future.” That future may be arriving. One lingering issue that concerned Kennedy at the recent oral argument was how to distinguish between compulsion and ordinary financial persuasion. The states’ lead counsel, Paul Clement, pointed to the distinctive nature of Medicaid’s huge scale; Medicaid’s expansion in expected lockstep with the admittedly coercive individual mandate; and the federal government using the leverage of a threatened loss of funding to the states for the traditional forms of Medicaid for the poor. Whatever the list of distinctions between the ACA and garden-variety spending programs, however, Clement urged the Court to use this case as a “beachhead” marking for the first time some limit to the congressional spending power. Kennedy also asked whether the integrity of our unique form of federalism is properly a matter for the spending clause’s coercion prohibition, or instead for another constitutional provision, perhaps like the Tenth Amendment. Kennedy got no direct answer on that matter from Verrilli, but Clement pointed to the general principle of “accountability,” something that could be found both in limits to the spending clause as well as the Tenth Amendment. If the individual mandate is struck and that provision is deemed nonseverable from the rest of the act, the Court may not reach these questions about the Medicaid mandate, as the whole act will be deemed unconstitutional. Under any other scenario, the arguments on the constitutionality of the ACA may still be historic, but for unexpected reasons. The case may then turn not so much on the commerce clause, as almost everyone seems to expect, but on whether the spending clause is violated by the Medicaid mandate. The media so far have largely ignored this important aspect of the states’ two constitutional challenges. David Oedel is professor of constitutional law at Mercer University Walter F. George School of Law, and, as a special assistant attorney general for the state of Georgia, is also a counsel to Georgia in its challenge with 25 other states to the constitutionality of health care reform. In March, Oedel attended all the oral arguments in the case in Washington. The views he expresses here do not necessarily reflect those of any litigants in the case.

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