Healthcare’s Medicaid ‘gift’: An offer states can’t refuse?

The Supreme Court’s hearings on the 2010 healthcare reform law wrapped up Wednesday with the issue of whether the law’s vast expansion of the Medicaid program coerced states to do something Congress couldn’t order them directly to do. Former Solicitor General Paul Clement, who’s representing officials from the 26 states challenging the law, had barely uttered one sentence Wednesday afternoon when Justice Elena Kagan asked what strikes me as the most important question: Why is “a big gift” from Washington to the states a matter of coercion?

That’s the essence of this particular aspect of the case. In the Medicaid program, the federal government covers 50% or more of the cost of insuring eligible poor, disabled or elderly Americans. States that want the federal aid have to abide by the rules Congress sets for the program; otherwise, they have to deal with the healthcare needs of that group on their own.

The 2010 law extended Medicaid to millions more people, largely those with incomes just above the federal poverty line. The measure requires Congress to pay the full cost of the newly eligible beneficiaries, then gradually reduces the federal government’s share to 90%. But states can’t decline to cover the extra people and say no to the money without running the risk of losing all their Medicaid dollars.

Kagan’s question is one often heard from proponents of the law. Why is it coercive to provide states a “boatload” of money to help them provide healthcare to poor and working-class residents?

Clement’s response was that the sheer size and expense of Medicaid made it politically impossible for states to drop out and run an alternative program. That’s because state residents wouldn’t be willing to shoulder the burden of paying taxes into Medicaid and a similar program just for the poor and disabled in their state. “We all know that in the real world that to the extent that the federal government continues to increase taxes, that decreases the ability of the states to tax their own citizenry. And it’s a real tradeoff,” Clement argued.

The size-and-expense issue was just one of three reasons Clement cited for calling the expansion coercive -- the other two being that refusing to cover the newly eligible could cost a state the aid it received for existing Medicaid enrollees, and that the expansion was tied to a “decidedly nonvoluntary” mandate to purchase insurance. But it was the most intriguing because it asks the justices to think about the political ramifications of a congressional action, not the legal ones.

But then, the state officials who brought the lawsuit are all Republicans. And at least some of the justices are acutely aware of this fact. Consider this tongue-in-cheek exchange between Justice Antonin Scalia and Clement:

Scalia: Mr. Clement, I didn’t take the time to figure this out, but maybe you did. Is there any chance at all that 26 states opposing it have Republican governors and all of the states supporting it have Democratic governors? Is that possible?

Clement: There’s a correlation, Justice Scalia.

Scalia: Yes.

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