Thursday, July 22, 2010

“Commandeering” and the ACA’s Medicaid amendments (part 3)

You can find my prior posts on this subject here (part 1) and here (part 2).

So we come to the ultimate question concerning the states’ commandeering claim: whether the predicate facts asserted by the 20 states in the Florida lawsuit—that they entered into Medicaid with an understanding that Congress would not change its basic terms, and that they cannot withdraw from the program now because their residents rely on the existing scope of Medicaid and the states are financially incapable of funding the program on their own—are sufficient to demonstrate “coercion” as that term has been used by the Supreme Court in its spending power decisions (most critically, South Dakota v. Dole, 483 U.S. 203 (1987)).
For the moment, let’s bracket the question whether the concept of coercion has any intelligible purchase in this context. Many who have thought about the issue—including at least one United States Courts of Appeals, see Nevada v. Skinner, 884 F.2d 445 (CA9 1989)—have concluded that it does not. Again, states have no constitutional entitlement to federal funding. They are sophisticated, complex entities, not natural persons (who might be subject to coercive psychological pressures). And they possess an independent taxing power, which permits them (given the necessary political will) to raise additional revenue when necessary. All of these points undercut the notion that any strings that Congress might attach to federal funds offered to state governments—particularly when those strings concern the affected program itself, rather than some tangentially related aspect of state law—can ever be accurately characterized as compulsion. One can make a decent argument that, as a matter of law, states always have a choice to decline the funds.

But let’s set this question aside, as Dole indeed suggests there can be coercion in this context. Instead, let’s ask this question: What would be the consequences for constitutional law were the Supreme Court to uphold the states’ claim that the ACA’s Medicaid amendments are coercive? As I will endeavor to demonstrate, I believe the consequences would be significant—so significant that, even if the states might be correct in claiming that they have no practical choice but to accept the ACA’s new Medicaid requirements, the Supreme Court is exceedingly unlikely to rule in their favor.

What are these implications? First, it is unclear how the Court could devise a judicially manageable standard for determining when a spending condition practically (as opposed to formally) crosses the line from constitutional temptation into unconstitutional coercion. Would it turn simply on the amount of money at stake for the states? It would seem strange if the Constitution forbid Congress from offering the states some threshold amount of funds. How would the Court determine that threshold? And would this dollar amount vary by the size of the state’s population, or its income, or its taxing power? Alternatively, might the standard turn on the percentage of the state’s spending on that subject represented by the federal funds in question? If so, what is the “subject”? In this case, is it health insurance for the indigent and the disabled? Health care more generally? All social services? Or should the standard depend on the proportion of the state’s total budget at stake? If so, does this mean that the standard will vary by state, as states choose to tax and spend at differing rates?

Perhaps a more troubling question is why a court should look at any of these factors. That is, why, as a matter of constitutional principle, should a state’s decision to become heavily dependent on federal subsidies affect the constitutionality of a federal spending statute?

The more one thinks about how the Court might actually operationalize the idea of “practically coercive” spending conditions, the more problems seem to emerge. Of course, every doctrinal rule in constitutional law has some arbitrariness around the edges. Moreover, the Court could always say something like, “The ACA simply goes too far, regardless of where the precise line should be drawn,” and leave the details for another day. But working out those “details” would appear to be much more than just a minor hassle for the justices. In many respects, the whole project looks unworkable. Many scholars have thought about the problem for several years, and no standard has surfaced that seems both principled and susceptible of consistent application. And this is an extremely important point of constitutional law, one that affects literally hundreds (and probably thousands) of federal spending programs. The lack of a workable standard here could not simply be swept under the rug.

A second point is that, even if the Court could somehow devise a judicially manageable standard for discerning “practically coercive” spending conditions, vindicating the states’ claim that the ACA’s Medicaid amendments are coercive would have perverse doctrinal implications. To the extent the Court found coercion due to the states’ reliance on the basic terms of the Medicaid program remaining static, it would create a rule effectively requiring Congress, once it has created such a spending program, to keep it in place, largely unchanged, indefinitely. Congress conceivably could change the program, but only by repealing it in its entirety—recall that Congress has no constitutional obligation to create Medicaid in the first place—and then reenacting the entire program as amended by the ACA. This seems rather bizarre.

And to the extent the Court found the ACA’s Medicaid amendments coercive due to the amount of federal dollars at stake (either in absolute or percentage terms), it would effectively mean this: The more the federal government defrays the costs of the states in a joint federal-state spending program, the less control it possesses over how those dollars are spent (as each dollar added by Congress would increase the chances that the conditions would be considered coercive). This seems backwards, as a matter of logic and constitutional principle. One would think that the more funding the federal government provides the states, the more it should be entitled to dictate the terms on which that money is spent.

A final implication—and one that might go largely unnoticed—is that finding coercion under circumstances like this would potentially undermine some other important principles of constitutional federalism. In particular, it would jeopardize Congress’s capacity to meaningfully regulate the states’ taxation of interstate commerce.

It has long been assumed (and even held) that the Commerce Clause grants Congress the authority to regulate the states’ taxation of activities substantially affecting interstate commerce. The Supreme Court has so stated in several opinions (such a Moorman Mnfg. v. Bair, 437 U.S. 267 (1978), and Quill Corp. v. North Dakota, 504 U.S. 298 (1992), to name two), and Congress has exercised this authority in enacting several statutes (e.g., Public Law 86–272, the Railroad Revitalization Act, and the Internet Tax Freedom Act). These laws, even when prescribing how states are to implement their tax schemes, can be reconciled with the anti-commandeering principle of New York and Printz because, at least in form, they afford states a choice: States can adhere to the terms prescribed by Congress, or they can decide not to impose the affected tax.  Understood this way, Congress has not commanded the states to govern their citizens in any particular way. 

But if the constitutional talisman were whether the states have a practical choice in the matter, this distinction would dissolve. Congress would lack the authority to regulate any state taxes that, as a practical matter, are simply too difficult for the states to abandon. For example, if it were financially infeasible for the states to discard their corporate income taxes (as it assuredly is for most states that impose them), any attempt by Congress to dictate the parameters of such taxes (such as by establishing uniform rules for determining how much of a business’s income is attributable to each state) would necessarily constitute an impermissible commandeering. Such a statute would practically coerce states to tax their citizens according to the federal government’s terms.

This implication may seem rather insignificant, but the long-term ramifications of disempowering Congress from regulating state taxation could be quite important. In 2006, state and local governments collected roughly $1.2 trillion in tax revenue, accounting for more than one third of the overall tax burden in the United States. Moreover, the growing complexity and heterogeneity of state-level tax regimes has caused an increasing number of economic inefficiencies. Congress has recently considered several bills aimed at bringing greater uniformity and rationality to state tax systems—especially corporate income taxes and sales and use taxes—and the pressure to enact such legislation is likely to grow. The inefficiencies inherent in 50 different, overlapping tax systems will only increase over time.
In short, the doctrinal implications of a holding that the ACA’s Medicaid amendments are coercive, and thus a commandeering, would be substantial—and, in many ways, substantially destabilizing for constitutional law. No doubt, there are some who would welcome the destabilization of constitutional doctrine as it pertains to Congress’s authority to regulate the states. But the Supreme Court is a conservative institution—and by this I do not mean its political ideology. Rather, the justices (other than Justice Thomas) tend to be risk averse and incrementalist in approach. Thus, no matter the instinctive appeal of the states’ contention that they are being “coerced” into implementing the ACA’s Medicaid amendments, the doctrinal complications that such a holding would precipitate—complications the Court would be forced to manage through its ongoing superintendence of constitutional law—make its chances remote.

In the end, I think it quite unlikely that any of the states’ sovereignty-related claims against the ACA can succeed at the Supreme Court. If the ACA is to fall, the more likely doctrinal route would be for the Court to conclude that the individual mandate exceeds Congress’s enumerated powers. And I hope to turn to this question next week.