Supreme Court Considers Healthcare Law - Day Three - The Spending Clause Issue

This is a dispatch prepared by Day Pitney's Bruce Boisture, who attended today's Supreme Court session concerning the constitutionality of key provisions of the Patient Protection and Affordable Care Act.

To read Day Two of the hearing, please click here.

The U.S. Supreme Court today held the third of three days of hearings to consider the constitutionality of two key provisions of the Patient Protection and Affordable Care Act ("ACA"). In its afternoon session, it considered whether the conditions Congress attached to the ACA Medicaid-eligibility extension violate the limitations on Congress' powers under the spending clause of Article I of the Constitution.1

Overview -- the spending clause issue

Beginning in 2014, the ACA extends Medicaid coverage to able-bodied single adults without dependents. Although Medicaid is a state-administered program, the federal government will bear nearly the entire cost of Medicaid benefits for these newly eligible recipients, as well as most of the associated administrative costs. The resulting costs to the states are variously estimated at $20 billion to $40 billion over the next 10 years. States must implement this eligibility expansion (and other related program changes) or lose their eligibility for all federal Medicaid payments. Under the ACA, however, Medicaid remains a cooperative federal-state partnership, with states free to elect not to participate.

Congressional spending power is rooted in the general welfare clause of the Constitution, found in Article I, Section 8, Clause 1:

The Congress shall have the Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States[.]

The constitutional authority of Congress to enact the Medicaid program is generally thought to trace to the general welfare clause.

The states argue the ACA's Medicaid-eligibility expansion is an unconstitutionally coercive use of congressional spending power. They point to several features of the ACA provision in this regard. First, whereas previously Medicaid covered only a portion of those individuals with incomes below the coverage ceiling and left to the states the decision of whether to include others, now all such individuals are Medicaid-eligible. Resulting coverage and administrative expenses will be significant, particularly if one takes into account the effect of the minimum-coverage provision in boosting Medicaid participation by eligible individuals. Second, ACA-mandated "maintenance of effort" requirements will lock in current state eligibility and benefit levels, on pain of loss of all Medicaid funding. Third, and most important,

Unlike in many of its early amendments to Medicaid, Congress did not separate the new coverage requirements and the new funding from the rest of the program and give States the option of continuing to participate in Medicaid while declining...