PPACA Medicaid Expansion Survives 7-2 Vote Against It

The Supreme Court’s rulings on the constitutionality of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) reflect both the ideological divisions on the Court and differing understandings of separation of powers and judicial restraint. They also show that the key to any decision is how the issue is framed.

PPACA amended Social Security Act sections 1902(a) and 1905 to add a mandatory eligibility group and specify the services available to them. Specifically, effective January 1, 2014, states must provide benchmark benefits to adults with incomes under 133 percent of the federal poverty level (FPL) who are not elderly (age 65), disabled, parents or pregnant. The benchmark benefit is coverage for essential services, not extension of existing Medicaid benefits to the new group. In fact, PPACA forbids federal funding for a Medicaid expansion that simply adds the newly eligible to the existing program.

The constitutional challenge to the Medicaid expansion is that the states are coerced into it—they risk losing federal funding for their existing Medicaid programs if they do not adopt the expansion. The federal government is entitled to place conditions on states’ receipt of grant funds, but the consequences of refusing to cover the new group are so dire that states have no choice but to accept the new conditions. Chief Justice Roberts described it as “holding a gun to the head” of state officials. The challengers argued that three factors made the expansion coercive:

  • Medicaid funds are the largest grants that states receive, comprising as much as 20 percent of state budgets;
  • There were no limits on the Secretary’s enforcement power, unlike some previous expansions;
  • There was no “fall-back” plan if states chose not to participate, unlike the provision for health insurance exchanges;
  • The addition of childless, nonpregnant, nondisabled adults, who had always been excluded from Medicaid eligibility, was really a new, completely different program, “a difference in kind, not in degree.” As we have discussed before, Medicaid and the cash assistance programs originally were directed at the “deserving” poor, that is, children deprived of parental support, the disabled and the elderly.

Justices Ginsburg and Sotomayor found the expansion not coercive:

  • The federal government would pay 100 percent of the states’ costs, gradually decreasing to a minimum of 90 percent in 2019. The unprecedented increase in the federal medical assistance percentage (FMAP) over the ordinary match rate is actually a generous gift.
  • From the very beginning, Congress has always reserved the right to change, amend or repeal the programs authorized under the Social Security Act. It has enacted major expansions before, at greater cost to the states. such as the addition of pregnant women and children up to age 6 with incomes up to 133 percent of FPL as mandatory beneficiaries.
  • The purpose of Medicaid, to provide the needy with access to health care, is unchanged.
  • States have the option to withdraw from the federal program and use their money to run their programs as they see fit. That the decision may be politically unpopular does not mean the conditions are coercive.

Nowhere does PPACA threaten states with the loss of all Medicaid funding if they fail to add the new eligibility group or the new benefit. The potential sanctions are found in Soc. Sec. Act Sec. 1904. That statute provides that if the HHS Secretary finds that a state plan, either as written or as administered, does not comply with title XIX of the Social Security Act, the Secretary must give notice and the opportunity for a hearing. If, after the hearing, the state is found to have violated the Act, the Secretary may decide to make no further payments to the state for Medicaid or, in his or her discretion, to limit the payments to the categories or parts of the state’s Medicaid plan that comply with the law until the noncompliance is corrected.

It doesn’t address the problem of a state’s noncompliance by failing to expand. But the statute has been unchanged since the enactment of Medicaid in 1965. No state has ever lost all its Medicaid funding or been expelled from the Medicaid program. Rather, the agency has pulled funding when a state agency refused to comply with the law that applied when the funds were granted, as it did with Texas. And CMS recently adopted regulations easing the requirements for states to repay disallowed expenditures. So the threat of pulling entire Medicaid programs is more remote than the “gun to the head.”

Seven justices—not only the conservative four, but also Chief Justice Roberts and Justices Breyer and Kagan— believed the threat rendered the Medicaid expansion unconstitutional. The four dissenters would have held the entire expansion invalid. Then, having removed two essential provisions of the law, they would have stricken all of PPACA, even the provisions that have little or nothing to do with either the individual mandate or Medicaid expansion, because there were so many items inserted in exchange for votes that Congress would not have enacted any of them without enacting them all. They did not address the principle that courts should strike down statutes as written only as a last resort, but accused the majority of rewriting the statute.

So why did it survive? In one word: severability, or, as Congress put it in 1935, “separability.” Soc. Sec. Act Sec. 1103 states, “If any provision of this chapter, or the application thereof to any person or circumstance, is held invalid, the remainder of the chapter, and the application of such provision to other persons or circumstances shall not be affected thereby.”  In other words, don’t apply the Act in ways that would be unconstitutional, but keep it for all of the situations where it’s valid. That’s exactly what Chief Justice Roberts did.

He and Justices Breyer and Kagan applied section 1103 Act to limit the coercion on states; they ruled that states may not lose federal funding for their existing Medicaid programs if they don’t meet the new conditions. Justices Ginsburg and Sotomayor agreed that if the law was unconstitutional, the solution was to limit its application not to strike it down.