States as Plaintiffs - The Question of State Sovereignty


By Hadley Heath

January is fast approaching, and as newly-elected officials are sworn in, several states will see a change in their stance on the health care lawsuits.

A handful of those states, like Wisconsin, are planning to join an existing suit or file one of their own.

States are a unique type of plaintiff, not just because of the extra authority they have to sue on behalf of their citizens (over the individual mandate), but because of the other constitutional disputes at work over state sovereignty.


Medicaid Expansion

In the Florida case, one of the less-talked-about claims is the “Coercion and Commandeering as to Medicaid” probably because people understand it less than the claim about the individual mandate.

Commonly referred to as the “Medicaid expansion,” there are several provisions in the health reform law that describe how states will work with the federal government to provide more subsidies to more people who will now qualify for Medicaid.  I attended an event yesterday at the American Enterprise Institute on this very topic, and heard the thoughts of Vanderbilt law professor James Blumstein on the topic.  To watch a full video of this event, click here.

Because the states and the federal government must work together to implement it, Medicaid is a cooperative federalism program.  These types of programs normally take on complex regulatory policy objectives and are created by the government and entered into by the states as a contractual relationship.  Entering into the program proves that both the federal and state governments are working towards the end goal.  But the provisions of ObamaCare are tantamount to contract modification.  It will actually destroy the contract set out by the federal government in 1965. Is it fair and reasonable now, nearly 50 years after Medicaid was established, to modify the terms on the states this way?  After the infrastructure of each state’s health system has become reliant on the status quo?

Under the PPACA and beginning 2014, because of the expansion to include millions of new enrollees to the program, the cost of Medicaid will increase greatly. The Medicaid portion of Florida’s budget, for example, is a staggering 26%, even before passage of the Act.  So imagine how it will increase under the new expansion.  States must also pay for coverage of those living below the federal poverty line.

The states are sovereign to make their own decisions about participation or de-participation in federal programs, but Congress does have a “Spending Power” in the Constitution, and this power allows them to “provide financial incentives” to states in exchange for their participation. 

There is, however, a line between what is considered an acceptable “financial incentive” (called “pressure” in South Dakota v. Dole) and what is just flat-out coercion.  From the South Dakota decision:

When financial inducements in federal spending programs cross the line from “pressure” to “coercion,” they violate the autonomy of states guaranteed to them in the structure of the constitution. 

In the end, the decision will fall on the Supreme Court Justices as to whether the federal government has crossed the line.

Health Care Exchanges

Another “cooperative” aspect of the Act is the requirement that states establish a health care exchange.  Lawyer Thomas M. Christina was on yesterday’s panel and shared his insights.  Although no states as plaintiffs have From Section 1311(b)(1) of ObamaCare:

Each state shall, not later than January 1, 2014, establish an American Health Benefit Exchange.

Oops!  “Shall” doesn’t sound like a very “cooperative” word.  It sounds like a mandate.  There are a lot of words available in the English language that communicate a voluntary act.  “States may” or “states choose” or “states have the option” are a few examples.  But the law says that the states “shall.” Then it seems someone (realizing that forcing states to create exchanges is surely not within the constitutional powers of the federal government) caught this mistake in Section 1311 and tried to fix it by adding in Section 1321(c).  If a state chooses not to “elect” to set up an Exchange, then the federal government “shall establish and operate” an Exchange within that state.  Judge Vinson in the Florida case threw out the claim of the plaintiff states about the exchanges.He did not call the exchanges a form of federal government commandeering and dismissed that claim. Vinson’s decision to reject the coercion and commandeering claim stems from New York v. United States and Printz v. United States, cases that successfully proved the commandeering actions of the federal government. Conversely, in Florida v. US DHHS:

[t]he plaintiffs have not identified any provision in the Act that requires the states to enact a particular law or regulation… nor have they identified any provision that requires state officials to enforce federal laws that regulate private individuals. (Florida v US DHHS, Bench’s Order and Opinion)

Simply put, the states chose the wrong terminology in this claim.

But could another state, in another suit, formulate a different argument about how the exchanges usurp state sovereignty instead of relying on the “anti-commandeering rule”?  Well, consider this: No external entity is allowed to influence a state’s political process.  And the federal government is external of the state.  The health reform law provides income tax credits to individuals in exchanges established by states, but not to individuals in exchanges established by the federal government (in non-electing states).  How will voters react to this, if understood correctly?  The choice of their state to establish or not to establish an exchange will impact the tax credits that citizens receive. 

The sovereignty of states is undermined, because the adoption of this law is hardly “voluntary.”  States have been put in a bad position, and I hope that the discussion of these health care exchanges will resurface in another case.

But it seems to me, sadly, that the people who support the health reform law will do so at all costs.  It’s no use talking to them about “state sovereignty” or “cooperative federalism” or even about the constitution.  It seems our only hope is that words like these have not lost their meaning in the minds of our Supreme Court justices, who ultimately will make a decision on this law.



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