After the Health Care Ruling: Medicaid, But Not Medicaid

JURIST Guest Columnist Nicole Huberfeld of the University of Kentucky College of Law says that the Supreme Court's decision on the constitutionality of the Medicaid expansion provision of the ACA relied on a strange reading of the law, where the Medicaid expansion was deemed to be both a part of the Medicaid Act and not part of the Medicaid Act...

In April, I wrote that the oral arguments in National Federation of Independent Business v. Sebelius (NFIB) did not bode well for the Medicaid expansion provision in the Patient Protection and Affordable Care Act (ACA); and so it was. Here we are, decision in hand, trying to understand how the Court for the first time enforced a coercion doctrine (holding not that Congress could not offer the money, but that it could not threaten to take all Medicaid money away), and still upheld the Medicaid expansion while effectively permitting states to opt-out of it (states may choose not to extend Medicaid eligibility to everyone up to 133 percent of the federal poverty level without jeopardizing their existing programs).

The highly divided opinion regarding the Medicaid expansion's constitutionality defies simple synopsis. A plurality of three — Chief Justice John Roberts, Justice Stephen Breyer, and Justice Elena Kagan — would have held that the Medicaid expansion is unconstitutionally coercive. Justices Ruth Bader Ginsburg and Sonia Sotomayor dissented in part because they would have held the Medicaid expansion to be wholly constitutional. These five justices agreed, however, that the remedy was not to strike down the expansion but to alter the penalty for non-compliance, so states would only lose the funding offered for the expansion rather than all Medicaid funding. The joint dissent from Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito not only would have held the Medicaid expansion to be unconstitutionally coercive, but also would have struck down the law in its entirety based on the conclusion that both the individual mandate and the Medicaid expansion were unconstitutional. While seven justices voted that the Medicaid expansion was unconstitutionally coercive, they fractured into the plurality and the joint dissent. Two justices would have upheld the Medicaid expansion in its entirety, five justices voted to sever the penalty for state failure to comply with the expansion and four justices would have struck down the ACA in its entirety.

This decision will undoubtedly result in a tidal wave of coercion litigation, but here I will discuss the plurality's dissonant interpretation of the Medicaid Act because, strangely, it helped to save the Medicaid expansion. The plurality held that the Medicaid expansion was not part of the Medicaid program in its coercion analysis. But, the plurality interpreted the remedy for non-compliance with the Medicaid expansion to be severable because of the Act's severability provision (thus gaining two votes to create a majority). The Medicaid expansion was both Medicaid and not Medicaid, depending on the purpose for which it was being interpreted.

The Medicaid expansion was an amendment to the Medicaid Act, consistent with prior amendments to the federally-mandated eligibility for Medicaid, and a much-needed modernization of Medicaid eligibility. The expansion was an important part of the scheme to create universal health insurance because it fills the gaps in eligibility for needy citizens — only about 40 percent of whom have been covered by Medicaid historically. Congress eliminated this disequilibrium in expanding Medicaid eligibility to anyone under age 65 with income below 133 percent of the federal poverty level.

Despite the fact that Congress has set the basic terms of Medicaid since 1965, including eligibility baselines, the Court denied Congress deference regarding the statutory construction that made the Medicaid expansion part of the Medicaid program. The plurality concluded that the Medicaid expansion was "an element of a national plan to provide universal health insurance coverage," and deemed it to be part of the ACA and a new program, not a modification of existing Medicaid. Indeed, the Court rejected the idea that Congress could "style" the expansion as part of Medicaid. Because the Court held the expansion to be a new program, threatening noncompliance with loss of all Medicaid funding was adjudged to be unconstitutionally coercive.

The lack of deference to Congress's findings conflicted with dicta earlier in NFIB which stated that "'every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.'" With regard to upholding the minimum coverage provision, Roberts was willing to "[g]rant[] the Act the full measure of deference owed to federal statutes" but that deference was not granted to the congressional creation of the Medicaid expansion. Notably, the joint dissent also refused to defer to Congress's legislative expertise.

The legerdemain occurred when the majority then deemed the Medicaid expansion to be part of the Medicaid Act for purposes of crafting a remedy. A majority of five held that the remedy for unconstitutional coercion was to sever the existing statutory penalty, which gives the secretary of the Department of Health and Human Services discretion to withhold or remove all Medicaid funding for noncompliance with the Medicaid Act. Because the Social Security Act, of which Medicaid is a part, contains a severability provision, the Court severed the secretary's authority to withhold all Medicaid funding if a state does not expand eligibility. The secretary now may only withhold funds tied to the Medicaid expansion.

This interpretation of the Medicaid Act's penalty and severability provisions facilitated the Court's Medicaid-preserving remedy. However, it also created a tortured reading of the Medicaid Act. On one hand, the plurality held that the Medicaid expansion was not part of the Medicaid program for purposes of determining whether the expansion was coercive. On the other hand, because the plurality believed that the Medicaid expansion was a new program, it interpreted the remedy for non-compliance to be severable based upon the terms of the Medicaid Act itself. Because the Medicaid Act's penalty of withholding funding was severed as to the Medicaid expansion, the expansion was preserved.

Ultimately, no aspect of the ACA or the Medicaid Act was struck down. Instead, the secretary's remedy for state noncompliance was limited, leaving much in the hands of the agency responsible for implementation of the Medicaid program. This administrative remedy drives home the peculiarity of the Court's reading of the Medicaid expansion as a different program from existing Medicaid. The agency responsible for the Medicaid program cannot withhold existing Medicaid funding but is responsible for interpreting the Court's limitation of the Medicaid expansion and NFIB's consequences. We will undoubtedly be digesting this dissonant decision for quite some time.


Nicole Huberfeld is the Gallion & Baker Professor of Law at the University of Kentucky College of Law and a bioethics associate with the College of Medicine. Her scholarship focuses on the cross-section of constitutional law and federal health care programs with a particular interest in federalism and Spending Clause jurisprudence.

Suggested citation: Nicole Huberfeld, After NFIB: Medicaid, But Not Medicaid, JURIST - Forum, July 27, 2012, http://jurist.org/forum/2012/07/nicole-huberfeld-nfib-medicaid.php.



This article was prepared for publication by Caleb Pittman, head of JURIST's academic commentary service. Please direct any questions or comments to him at academiccommentary@jurist.org

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