The Corner

The Sleeper Issue in Friday’s Obamacare Ruling


The Eleventh Circuit Court of Appeals decision to strike down Obamacare’s individual mandate has received a lot of well-deserved attention. But another issue in the case deserves much more attention than it has received, both because it so important, and because it so interesting. The Eleventh Circuit affirmed Judge Roger Vinson’s ruling that the Medicaid-expansion provisions of the law are constitutional. But, as I explain over at the Daily Caller, the judges totally ignored his provocative reasoning, and did their ruling, and the nation, a disservice.

The Medicaid provisions of Obamacare require that states dramatically expand their Medicaid rolls as a condition of continuing to receive federal Medicaid matching grants. In Texas, these federal Medicaid funds already account for 15 percent of all the funds available for the state budget — a figure that will quickly double under Obamacare.

The Supreme Court has long fretted over the danger that federal conditional grants pose for the federal structure of our Constitution. In South Dakota v. Dole (1987), the Supreme Court made it clear that state participation in conditional federal grant programs must be voluntary “not merely in theory but in fact” and that the conditions cannot be so coercive that they pass the point at which “pressure turns into compulsion.” In a landmark ruling just last June (in an opinion written by Justice Kennedy, no less, and joined by Roberts, Scalia, Thomas, and Alito), the Supreme Court noted that “the individual liberty secured by federalism is not simply derivative of the rights of the States. [. . .] By denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power.”

That is a profound and potentially far-reaching articulation of the imperative of federalism, and one which the Supreme Court seems increasingly willing to deploy against unbridled national majority rule, the force that has been eroding constitutional restraints on federal power since the New Deal.

It’s important to understand that the Eleventh Circuit did not merely affirm the constitutionality of the Medicaid provisions — that is no surprise. What is interesting is that the court affirmed summary judgment for the federal government as a matter of law. Summary judgment is a peculiar thing. It is the very last step in civil procedure before a full trial on the facts. If a trial court looks at the parties’ allegations and decides that, as to a specific issue, the allegations don’t reveal any issue of material fact, it can grant summary judgment for one of the parties as a matter of law. By granting summary judgment for the federal government, both the district (trial) court and the court of appeals decided that there was no need to find out if the Medicaid-expansion provisions indeed “passed the point at which pressure turns into compulsion.” This was despite the fact that there is a genuine dispute between the federal government and the 26 states suing to stop Obamacare as to how onerous those conditions really are.

What’s implied in the high court ruling is that the federal government can impose whatever conditions it wants on its grants to the states, because there is no level at which the penalty would in fact cross the point at which pressure turns into compulsion. Here the Eleventh Circuit contradicts itself:#more#“To say that the coercion doctrine is not viable or does not exist is to ignore Supreme Court precedent, an exercise this Court will not do. […] If the government is correct that Congress should be able to place any and all conditions it wants on the money it gives to the states, then the Supreme Court must be the one to say it.” But in fact, that was the essence of the summary judgment, and the Eleventh Circuit affirmed it.

The states should vehemently appeal this aspect of the court’s ruling. The current federalist majority on the Supreme Court could well look upon this ruling as an affront, and return the case to the district court for a full trial on the factual question of whether the Medicaid expansion requirements leave states free to choose, “not merely in theory but in fact.”

But here’s what’s really interesting: A full trial of the facts would only further reveal that Dole’s coercion rule is totally unworkable, because it is based on a logical fallacy. When the federal government uses its taxing power to take money from the states and then returns it to them only on condition that they agree to whatever policy the current congressional majority may prefer — in an area of traditional state concern — there is coercion, pure and simple, whether it’s one dollar or a billion dollars. In exchange for federal funds, the states have come to let the elected representatives of other states displace their own state legislatures in determining state policy. Texas has absolutely no desire to let the congressional delegation of California determine its state policies. But it has no real choice when California and like-minded states deploy the hammer and anvil of federal taxing and spending through a congressional majority.

The real problem raised by Obamacare is not the unprecedented individual mandate, but rather the expansive scope that the Supreme Court has already given to the federal government’s spending power — which is both the root of the Medicaid issue and perhaps the gravest threat to the federal structure of the Constitution. In U.S. v. Butler (1936), the Supreme Court warned that conditional federal grants could become an “instrument for the total subversion of the governmental powers reserved to the individual states.” So it has proved. But in U.S. v. Printz (1997), the Supreme Court ruled that what offends the “dual sovereignty” of the states is an offense to the federal structure of the Constitution, and must be struck down.

By elision, the Eleventh Circuit deftly avoided Judge Vinson’s invitation to extend the logic of Printz to the domain of conditional federal grants. Perhaps it had little choice, given that Dole is both unworkable and (for the moment) a controlling precedent. Unfortunately, we do not have the same “circuit split” on the Medicaid issue that now guarantees the individual mandate’s rapid ascent to the Supreme Court. But, with any luck, the Supremes will grant certiorari on the Medicaid issue, and at long last squarely face how poisonous federal conditional grants are to the whole philosophy of government that shaped our Constitution.

— Mario Loyola is director of the Center for Tenth Amendment Studies at the Texas Public Policy Foundation. He filed an amicus brief on behalf of the states before the Eleventh Circuit in this case. 

Mario Loyola, a former White House environment-policy adviser and speechwriter, is a senior fellow at the Competitive Enterprise Institute.

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