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Supreme Court's Medicaid Decision Could Reach Far Beyond Health Care

The final argument the Supreme Court will hear about the new health care law is whether its Medicaid expansion unfairly forces states to participate.
Adam Cole
The final argument the Supreme Court will hear about the new health care law is whether its Medicaid expansion unfairly forces states to participate.

After Tuesday's judicial fireworks, the Supreme Court wraps up arguments on the new health care law Wednesday by focusing on two questions. The first involves what would happen if the "individual mandate" — the core of the law that requires most people to have health insurance — is struck down. Would the rest of the law fall, too, or could some provisions stay?

But it's the second argument the court will hear about the Affordable Care Act that could potentially have the most far-reaching consequences. At issue is whether the health law's expansion of the Medicaid program for the poor unfairly forces the states to participate.

If the justices find the federal government is coercing the states, that decision could reach far beyond health care.

Medicaid is already one of the nation's largest providers of health care services, says Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

"It provides health insurance coverage to 1 in 3 American children, so it's a fundamental part of the way in which we deliver health care services today," she says.

But as large as the program is, Medicaid today in most states is still not available to people simply because they are poor. They have to be poor and something else — such as a child, a pregnant woman or older than 65. Under the health law, however, that would no longer be the case.

"Medicaid changes from a program that covers certain categories of low-income individuals to a program available for health coverage for all individuals," Rowland says.

All individuals, that is, with incomes under 133 percent of the federal poverty line. This year that's $14,856. According to the Congressional Budget Office, that will add about 17 million new people — mostly adults without children — to Medicaid's 60 million or so enrollees by the year 2016.

Currently, states share the cost of Medicaid with the federal government. Wealthier states pay half; poorer states pay a smaller share. But the federal government recognized that states are strapped for cash these days. So most of the new cost — all of it at first; 90 percent eventually — is being paid by the federal government.

But that's not stopping states from claiming that this expansion amounts to unconstitutional arm-twisting. That's because if they don't follow through with the new changes, they have to pull out of Medicaid altogether — or so they claim.

Former Bush administration Solicitor General Paul Clement is representing the 26 states that are suing over the Medicaid provisions of the health law.

He says what the law means is that if states don't agree to the expansions, "we're going to take away all of your money, including all of the money that you've kind of gotten used to, all of the money that you've used for different groups of people. And that does seem a little more coercive."

Medicaid is, in fact, a voluntary program. States don't have to participate. But they all do. And Clement says so much money is at stake — more than $400 billion in 2010 — that dropping out is simply unrealistic.

"How any state at this point could say, 'We're just going to turn down Medicaid funding from the federal government' — I don't think any set of citizens would allow that to happen," Clement says. "Because it's all this money that's being taken from the state taxpayers that would then be going to every state in the union but that state; it just wouldn't work."

But is this latest expansion of Medicaid really coercive? Sara Rosenbaum, a law professor and Medicaid expert at George Washington University, says it's hardly different from many of the expansions that have come before.

"States already cover a lot of adults," Rosenbaum says. "They cover parents; they cover adults with disabilities; they cover adults who are pregnant. And so all this expansion does is really to fill in the remaining gaps. And it's something that many states have wanted to do over the years."

While states are worried about how much they might ultimately have to pay for all those new adults, even if it's only 10 percent of the cost, Rosenbaum says, over the long term, they might actually save money.

"There are studies that suggest by just 2019 alone, states will have saved about $100 billion in state funding for uncompensated care, especially for adults," she says.

But the real reason people are watching the Medicaid arguments so closely has nothing to do with Medicaid. It's the potential impact on the relationship between the federal government and the states. This is one of the few times the court has taken up what's known as the "spending clause" of the Constitution.

"It's long been established by the Supreme Court that Congress can attach conditions to federal funds that it gives the states," says Elizabeth Wydra of the Constitutional Accountability Center, a liberal think tank. "States can follow the requirements ... or they can opt out of receiving the funds altogether."

But while earlier cases have suggested that there could be limits to those conditions, the court has never said what those limits are. And it's not just Medicaid at stake.

"That places in jeopardy, in addition to the entire Medicaid program, a host of other very beneficial federal grant programs in the education context, child welfare and other programs," Wydra says. In fact, it could affect virtually any program in which the federal government gives money to the states with conditions attached.

So far, no lower court has agreed that the Medicaid expansion coerces the states. But no one expected the Supreme Court to hear this part of the challenge against the health law, either.

Listen Live At 8 p.m. Wednesday: Wednesday marks the final day of Supreme Court arguments on the fate of the health care law. Tune in for news and analysis from NPR's Nina Totenberg, Julie Rovner, Ari Shapiro and more.

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