Plunging into Endless Difficulties: Medicaid and Coercion in National Federation of Independent Business v. Sebelius

TLDR: The case was United States v. Sebelius (NFIB) as mentioned in this paper, which was the first case in the history of the United States to mention the notion of coercion.

Abstract: "The bill . . . did not steal upon an unsuspecting legislature, and pass unobserved. Its principle was completely understood, and was opposed with equal zeal and ability."- Chief Justice John Marshall1INTRODUCTIONAfter a contentious partisan process, Democratic majorities in both houses of Congress succeeded in passing dramatic national reform, which became law upon the President's signature. Opponents quickly filed suit, claiming, among other deficiencies, that the law exceeded congressional authority under the Spending Clause. In a divided opinion, the Supreme Court wrote: "The question is not what power the Federal Government ought to have but what powers in fact have been given by the people."2 Otherwise, the Spending Clause "would become the instrument for total subversion of the governmental powers reserved to the individual states."3 The case was United States v. Butler, and the law struck down was the Agricultural Adjustment Act of 1933.4Until the 2011 Term, no Supreme Court decision since the New Deal had struck down an act of Congress as exceeding the federal spending power.5 The question of unconstitutionally coercive conditions was also novel. Indeed, no federal court had ever found any legislation to be an unconstitutionally coercive exercise of the spending power6 until the Court decided National Federation of Independent Business v. Sebelius (NFIB) on June 28, 2012.7 The only two previous Supreme Court cases mentioning the spending power coercion doctrine found it inapplicable, upholding the federal laws in question: the unemployment-compensation provisions of the Social Security Act of 1935 in Steward Machine Co. v. Davis8 and the drinking-age condition on highway funds in South Dakota v. Dole.9 In each case, the Court recognized the theoretical possibility of a federal-spending program unconstitutionally coercing states, but found no coercion on the facts presented. Accordingly, until NFIB, coercion had been relegated to the realm of dicta and theory.10Most of the vast legal and political commentary on the Healthcare Cases,11 which challenged the Patient Protection and Affordable Care Act (the Affordable Care Act or ACA),12 centered on the individual health insurance mandate's prospects under the Commerce Clause.13 But a few of us, familiar with Medicaid, were focused on a much more fundamental challenge to federal power that threatened not only Medicaid but also a host of other federal spending programs.14 NFIB presented a prime opportunity for the Roberts Court to revive the Rehnquist Court's "Federalism Revolution"15 in the context of the Tenth Amendment.Justice Cardozo long ago warned that enforcing the coercion doctrine would "plunge the law in[to] endless difficulties."16 Nevertheless, the Court held that the expansion of Medicaid to include a new category of beneficiaries17 was unconstitutionally coercive because the Secretary of the U.S. Department of Health and Human Services (HHS) could theoretically withdraw all (or part) of federal Medicaid funding in response to a state's failure to comply with federal Medicaid laws.18Seven Justices, including two liberal members of the Court, held the ACA's Medicaid expansion to be an unconstitutionally coercive exercise of the spending power, the first such holding in the history of the Republic.19 While these Justices agreed on this result, however, they fractured into a three-vote plurality authored by Chief Justice Roberts (joined by Justices Breyer and Kagan) and a four-vote joint dissent signed by Justices Scalia, Kennedy, Thomas, and Alito. It was particularly surprising that Justice Kagan, President Obama's appointee and former Solicitor General, thought the Medicaid expansion was unconstitutional.20In the remedy phase, the Roberts plurality did not strike down any part of the Affordable Care Act. Instead, the Court held that an existing statute, on the books for almost eight decades, constitutionally could not be applied to withhold states' Medicaid funding for failing to implement the Medicaid expansion. …