Plunging Into Endless Difficulties: Medicaid and Coercion in National Federation Of Independent Business v. Sebelius

Elizabeth Weeks Leonard, University of Georgia Main Campus
Nicole Huberfield, University of Kentucky
Kevin Outterson, Boston University

Originally Uploaded at SSRN.


After 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.” Otherwise, the Spending Clause “would become the instrument for total subversion of the governmental powers reserved to the individual states.” The case was United States v.Butler, and the law struck down was the Agricultural Adjustment Act of 1933. Until the 2011 Term, no Supreme Court decision since the New Deal had struck down an act of Congress as exceeding the federal spending power. 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 power until the Court decided National Federation of Independent Business v. Sebelius (NFIB) on June 28, 2012. 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. 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. Most of the vast legal and political commentary on the Healthcare Cases, which challenged the Patient Protection and Affordable Care Act (the Affordable Care Act or ACA),centered on the individual health insurance mandate’s prospects under the Commerce Clause. 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. NFIB presented a prime opportunity for the Roberts

The Court has now decisively determined that the Tenth Amendment operates as a limit on Congress’s power to spend for the general welfare when conditions are placed on states’ acceptance of that spending. NFIB invites a host of new coercion challenges to federal conditional spending programs, but the Court has crafted little guidance for lower courts, while complicating matters by misstating the facts upon which the decision relies. Accordingly, the resulting difficulties for lower courts attempting to decide coercion challenges, legislators drafting new conditional spending programs, and federal agencies administering existing Spending Clause programs are profound. For every federal spending program since the Great Society, this case signals the beginning of a new era of litigation challenges. This Article proceeds as follows: Part I discusses the Affordable Care Act’s Medicaid expansion in the context of the history and purpose of the Medicaid Act, paying particular attention to facts about the Medicaid program the Court misunderstood. Part II summarizes the litigation from the lower courts up to the NFIB decision, and examines the Medicaid coercion opinions in NFIB in detail. Part III first considers NFIB in the context of the Federalism Revolution, and then discusses three weaknesses in the new coercion doctrine with an eye toward predicting difficulties of application.

These three weaknesses bear brief mention at the outset. First, although Florida and the other litigating states did not base their Medicaid challenge on any of the four Dole limits, the Court’s coercion analysis was heavily informed by two of the four spending principles set forth in Dole. Specifically, the Court considered whether Congress had given sufficiently clear notice of the condition and whether the condition was sufficiently related, or germane, to the federal program.