Spending on Medicaid, a theoretically cooperative federal-state program, is approximately 40 percent of all federal funds given to states and 7 percent of all federal spending. Enacted in 1965 as a program for the poor, it has exploded. The increase in its costs by the end of this decade is expected to be $434 billion. Its cost is projected to rise 7.9 percent a year — faster even than Medicare’s (6.9 percent).
Under Obamacare, however, the cooperative nature of Medicaid has been radically revised in a way no state could have anticipated before becoming inextricably entangled with it. Obamacare requires states to cover all persons with incomes up to, effectively, 138 percent of the poverty level. The federal government will pay all increased costs (other than administrative costs) until 2016; by 2020 states will pay 10 percent of the expansion. But even with the federal government paying most of the costs, in many states their portion of Medicaid costs is the largest item in their budgets, even exceeding education. And Obamacare, which forbids states to restrict the eligibility criteria it adopted before this new burden, would deny all Medicaid funds to noncompliant states.
This would cost most states billions of dollars. For example, 26 percent of Florida’s budget goes for Medicaid; if it lost federal funds, it would require 60 percent of all tax revenue to maintain today’s pre-Obamacare benefits.
In theory, state participation in Medicaid is voluntary; practically, no state can leave Medicaid because its residents’ federal taxes would continue to help fund the program in all other states. Moreover, opting out of Obamacare’s expanded Medicaid would leave millions of poor people without affordable care. So Obamacare leaves states this agonizing choice: Allow expanded Medicaid to devastate your budgets, or abandon the poor.
The Constitution created a federal government of limited and enumerated powers and promptly strengthened this with the 10th Amendment. The Supreme Court has held that the states therefore retain “a residuary and inviolable sovereignty” incompatible with federal “commandeering” of states’ legislatures and executives. Under Obamacare’s Medicaid expansion, states are dragooned for the furtherance of federal objectives.
In 1987, the court upheld a federal law denying a portion of federal highway funds to states that refused to implement a drinking age of 21. The court held that the threatened loss of funds — only 5 percent — was a “relatively small” inducement and hence “not so coercive as to pass the point at which pressure turns into compulsion.” The court thereby said the federal government cannot behave like Don Corleone, making offers states cannot refuse. At some point, government crosses the threshold of unconstitutional compulsion.
The crucial consideration is the degree of threatened impoverishment. Because of Obamacare, the nation needs clarity from the court. If it now thinks Congress has unfettered power to place conditions on states receiving money from it, the court should explicitly disavow its coercion doctrine. But if the coercion doctrine is to survive, Obamacare should not.
The Obamacare issues of Medicaid coercion and the individual mandate are twins. They confront the court with the same challenge, that of enunciating judicially enforceable limiting principles. If there is no outer limit on Congress’s power to regulate behavior in the name of regulating interstate commerce, then the Framers’ design of a limited federal government is nullified. And if there is no outer limit on the capacity of this government to coerce the states, then federalism, which is integral to the Framers’ design, becomes evanescent.
So, the time the court has allotted for oral argument about Obamacare is proportional to the stakes. This case is the most important in the more than half a century since the Brown v. Board of Education cases because, like those, it concerns the nature of the American regime.