Wednesday, July 21, 2010

“Commandeering” and the ACA’s Medicaid amendments (part 2)

As I discussed in an earlier post, the states’ most serious sovereignty-related (or Tenth Amendment) claim concerns the ACA’s amendments to Medicaid. Specifically, the states in the Florida lawsuit allege that, although a state’s participation is formally voluntary, they have no practical capacity to withdraw from the program. Thus, the ACA provisions that impose additional requirements on the states as a condition of receiving federal Medicaid dollars are coercive, and thus amount to an unconstitutional “commandeering” of the states.

On what basis do the states claim that they lack the practical capacity to avoid these requirements? The argument is laid out in paragraphs 65 through 68 of the complaint—preceded by the heading “The Act’s Requirements and Effects on the Plaintiff States Cannot Be Avoided”—which I reproduce here in full, given their significance:

65. Plaintiff States cannot avoid the Act’s requirements. Neither the Act nor current federal Medicaid provisions prescribe a mechanism for a State to opt out of the Act’s new Medicaid requirements, to opt out of Medicaid generally, or to transition to another program that provides only traditional Medicaid services.

66. Moreover, if they were to end their longstanding participation in Medicaid, Plaintiff States would desert millions of their residents, leaving them without access to the healthcare services they have depended on for decades under Medicaid. Thus, Plaintiff States are forced to accept the harmful effects of the Act on their fiscs and their sovereignty.

67. Prior to passage of the Act, Medicaid and its corresponding law, regulations, guidance, policies, and framework had been well-established, subject to occasional limited modifications, for more than four decades. During that time, participating States developed their respective Medicaid programs in reliance on Medicaid continuing to be a partnership with the federal government.

68. Presently, the Centers for Medicare and Medicaid (CMS), the federal agency with chief responsibility for administering Medicaid for the federal government, will terminate a State’s federal funding for Medicaid unless the State complies with the Act’s requirements. In addition, Medicaid requirements are linked to other federal programs, and the benefits of those programs to a State and its citizens and residents would be in jeopardy if the federal government were to terminate the State’s participation in Medicaid.

Let’s examine these points in turn.

This first paragraph (65) is a bit curious. True enough, the new Medicaid requirements imposed by the ACA are not optional; if they were, there could be no claim of coercion. But it is unclear why the federal government would be obligated to “prescribe a mechanism for a State . . . to opt out of Medicaid generally, or to transition to another program that provides only traditional Medicaid services.” Federal law prescribes a number of conditions on states to qualify for federal Medicaid reimbursements, and it directs the Secretary of HHS to withhold such reimbursements when states fail to meet these conditions (as the states explain in ¶68). Nothing prevents states from operating their existing health insurance programs for the indigent without any federal financial assistance. So it is unclear what sort of “mechanism” the states envision, let alone why the Constitution would require the federal government to provide one. All in all, this paragraph seems irrelevant.

In contrast, paragraphs 66 and 67 set out the crux of the states’ coercion argument. In essence, the states are saying (1) our residents have grown to expect and depend on a certain level of health care coverage for the indigent and the disabled; (2) we have only been able to provide that level of coverage because of the federal financial assistance under Medicaid; (3) we committed to participating in Medicaid with a certain understanding of how much discretion we would be afforded under the program; (4) so even though we would not have originally agreed to participate in the Medicaid program as it is being amended by the ACA, we cannot go back now given our residents’ reliance on the present scope of the program; and (5) we could not possibly replace the lost federal dollars with state dollars, so as to maintain the present program scope. This fifth point is largely implicit, but it critical. For if the states could easily maintain their existing indigent health insurance programs without any federal assistance, there would not seem to be any real basis for claiming coercion. The states could walk away largely unharmed.

In short, the argument blends an element of reliance on the existing, pre-ACA terms of Medicaid with the critical fact that simply too many federal dollars are at stake for the states to withdraw.

Does this make a compelling case for coercion? It depends, of course, on how we understand that idea in this context. It is important to keep in mind that the federal government has absolutely no constitutional obligation to provide state governments with any money to fund health insurance for the indigent or the disabled. As a constitutional matter, Congress could repeal Medicaid tomorrow, and the states would have no viable claim of entitlement. Moreover, states are large entities, not natural persons. Thus, forces we might term “coercive” from the perspective of social psychology seem inapposite.
Nonetheless, given existing political and fiscal realities, do the states really have any practical choice (at least in a colloquial, if not a technical sense) but to swallow the new Medicaid requirements so as to remain eligible for their FMAP dollars? Could any state, as a practical matter, turn down federal assistance that amounts to roughly one fifth of its annual budget? The answer has to be no, at least in the sense that we could almost never imagine a state rationally incurring the political and fiscal repercussions of such a decision.

This means—at least in a certain linguistic sense—that the ACA’s amendments to Medicaid are coercive. They effectively command the states to take certain actions—most notably, to extend coverage to all persons under age 65 with incomes up to 133 of the federal poverty level.

But is there a difference between a choice that is (a) wholly irrational or extremely unlikely, given current political realities, and (b) one that is actually coerced? More to the point, does the type of pressure that the states assert here amount to coercion in a constitutional, South Dakota v. Dole sense? (Indeed, what exactly did the court mean in Dole mean when it used the term “coercive”?) Perhaps most importantly, what would be the implications for constitutional law were the Supreme Court to hold that the ACA’s Medicaid provisions are coercive?

I hope to address these questions in my next post.