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Medicaid could be in Supreme Court's sights

The justices will hear an argument that President Obama's healthcare law violates states' rights by requiring a Medicaid expansion. If the court agrees, previous expansions and an array of federal social programs could be affected.

March 25, 2012|By David G. Savage and Noam N. Levey, Washington Bureau
  • People wait in line outside the Supreme Court building in Washington. The court will hear arguments starting Monday challenging President Obama's healthcare law.
People wait in line outside the Supreme Court building in Washington. The… (Brendan Smialowski / AFP-Getty…)

Reporting from Washington — Ever since the Democratic Congress passed President Obama's healthcare law, critics have focused their ire on the requirement that all Americans have health insurance beginning in 2014.

But some legal experts believe — and progressives worry — the Supreme Court's conservatives will instead target another mandate in the new law: the requirement that states expand the Medicaid rolls and provide subsidized healthcare for as many as 17 million more low-income people.

On Wednesday, the third day of oral arguments on the law, 26 Republican-led states will argue that the federal pressure to expand Medicaid to all low-income Americans violates states' rights.

Medicaid "is the real sleeper issue," said Simon Lazarus, counsel for the National Senior Citizens Law Center. "If the court buys the 'coercion' argument, it will effectively mean that every expansion of Medicaid since 1965 will be vulnerable to challenge." Such a ruling could also undercut an array of federal social programs.

Justice Anthony M. Kennedy, whose stand could be decisive, has repeatedly spoken of the need to protect the "sovereignty" of the states from a too-powerful federal government. Last week, he spoke for a 5-4 majority in voiding part of the federal Family Medical Leave Act. His opinion rejected a lawsuit from a fired state worker on the grounds it would threaten "our constitutional design" that "states, as sovereigns, are immune" from damage claims.

At first, the challenge to the Medicaid provision was treated as far-fetched.

Throughout the 20th century, Congress passed laws that offered states money for certain purposes — for highways, schools, colleges, hospitals and many others — in exchange for following federal rules. The Supreme Court has never struck down such a spending law — including previous Medicaid expansions — even though the states have often griped about "unfunded mandates" from Washington.

The new Medicaid provisions also look to be quite generous to states. In the past, Congress has paid about half to three-fourths of a state's cost for providing healthcare for the poor, about half of whom are children. Under the new law, Washington will initially pay 100% of the cost for expanding Medicaid. The federal share will drop to 90% by 2020.

However, Paul D. Clement, the lawyer for the states, says this deal is not as good as it looks. Even with the big federal subsidies, the states' share of the coverage expansion may top $21 billion over the next seven years. The states are given no real choice whether to participate in the Medicaid expansion, Clement said. Congress should not be "free to use its spending power to coerce states into enforcing the federal government's dictates," he said.

That argument lost repeatedly in the lower courts, even in the U.S. 11th Circuit Court of Appeals, which struck down the individual mandate. But to the surprise and dismay of liberal advocates, the Supreme Court voted to hear the claim and devoted a separate hourlong argument to it.

"It would be a constitutional earthquake" if the high court were to strike down the expansion of Medicaid, said Doug Kendall, president of the Constitutional Accountability Center.

It would also dramatically undermine the law's plan for achieving universal healthcare. More than half of the approximately 30 million Americans who are expected to gain coverage over the next decade will rely on Medicaid. These are primarily childless adults and other low-income Americans who are not currently eligible for the program in most states.

"If the Medicaid expansion is invalidated, it would mean the poorest of the poor will be simply shut out of America's healthcare system," said Families USA Executive Director Ron Pollack, a leading Washington-based consumer advocate. "It would be a huge setback."

Scrapping the Medicaid expansion would save the federal government nearly $800 billion over the next decade, the largest expense in the new law, according to estimates from the nonpartisan Congressional Budget Office.

But it may have broader consequences as well, said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, who compared such a move to opening a Pandora's box.

States would be free to cut people from their Medicaid rolls, which could set off a round of cutbacks around the country that would further boost the number of people without health insurance.

Also in jeopardy are three years of federal funding for the Children's Health Insurance Program, a state-administered insurance plan for children from families who make too much to qualify for Medicaid but may not be able to buy insurance on their own.

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