WASHINGTON — Congress will help pay for your roads, but your state can’t lower its drinking age below 21. There’s federal money for colleges, but they can’t discriminate against women in the classroom or on the athletic field.
Federal cash comes with strings. Now 26 states are telling the Supreme Court that President Barack Obama’s health care law has stretched an old rule too far. The new law’s requirements for expanding Medicaid amount, in their view, to coercion that violates the U.S. Constitution’s division of power between the national government and the states.
No lower court has sided with the state plaintiffs. But the justices have reserved time next Wednesday to hear the Medicaid issue as part of their broad review of challenges to the health care overhaul. And their decision could have implications far beyond health — for federal aid for housing, law enforcement, education and transportation.
“It was such a surprise that the court decided to hear this,” said Ron Pollack, executive director of Families USA, a liberal advocacy group backing the law. If the plaintiffs prevail “it would not only invalidate the Medicaid expansion but place in jeopardy almost any federal program that creates conditions for the receipt of funds.”
Medicaid, the federal-state insurance program for low-income people, is a case study on the growing federal role in health care. Created in 1965 mainly to serve families in the old cash welfare program, it now covers more people than Medicare as a result of expansions usually initiated from Washington.
The more than 60 million Medicaid beneficiaries include one in four children, severely disabled people, many nursing home residents and low-income pregnant women. Trauma hospitals rely on Medicaid for critical funding, as do children’s hospitals. GOP presidential candidate Mitt Romney’s expansion of health insurance when he was governor of Massachusetts depended heavily on getting the federal government’s blessing to tap Medicaid funds.
Overall, the federal government pays about 60 percent of Medicaid costs, and states cover the rest. But the program’s scope and reach have turned it into one of the top state budget items, and the fact that Medicaid rolls swell when the economy tanks makes it especially tricky to handle for states required by their own constitutions to balance the books.
As if Medicaid weren’t complicated already, along came Obama’s health care overhaul. About half of the more than 30 million people expected to gain health coverage as a result of the overhaul will do so through Medicaid, most of them childless adults. Starting in 2014, the law effectively opens the program to anyone making up to 138 percent of the federal poverty level, or about $15,400 for an individual.
About half the states are saying: Enough is enough.
“Medicaid is no longer a partnership,” said Wisconsin health secretary Dennis G. Smith, who ran the program nationwide for former President George W. Bush. “When Washington says ‘You shall do this’ or your entire Medicaid program is at risk … that is flat-out coercion.”
The new health care law uses “blunt force,” said Smith, who was appointed by GOP Gov. Scott Walker. States are forced to carry out the expansion if they want to continue to participate in Medicaid. Refusal would jeopardize billions in federal funds.
The federal government did enact provisions to make the expansion less costly. Under the overhaul law, Washington will pick up the entire tab for newly eligible enrollees the first three years. Eventually the federal share will drop to 90 percent, still far more than Washington contributes for the rest of Medicaid.
That’s no comfort, said Smith, because the law has many hidden costs, including a so-called “woodwork effect” that Washington was aware of but did not address.
It works like this: Many people already eligible for Medicaid under previous laws don’t apply, partly because of the stigma associated with a low-income program. But Obama’s law requires most Americans to carry health insurance, so states are expecting many of those already eligible to sign up for the first time. And there will be no enhanced federal matching funds to help with those.
“There is a line somewhere — undefined by the courts — but there is a line somewhere,” said Smith. “If this isn’t coercion, what in the world is?”
Yet Smith’s counterpart in Massachusetts, health secretary JudyAnn Bigby, doesn’t call it coercion but “a relief in many ways.”
“I don’t see it as a burden at all,” said Bigby, a primary care doctor before going into government service. “I see it as a tremendous opportunity. We know we have poor people who are currently unable to afford private health insurance.”
Bigby, appointed by Democratic Gov. Deval Patrick, says part of the expansion costs will be offset with savings from accounts used to reimburse hospitals caring for the uninsured. Even with Romney’s health insurance overhaul, some Massachusetts residents lack coverage.
As for the feds telling the states what to do, Bigby says it’s nothing new. “States have always been obligated to follow federal rules and regulations in order to participate in Medicaid,” she said. “I don’t see this as any different, quite frankly.”
Reflecting divisions nationally, most of the state officials suing to overturn the law are Republicans. The defenders are Democrats.
The lower court judge who went the furthest on the broad overhaul, ruling that the whole law should be struck down, nonetheless said he found the challenge to the Medicaid expansion legally unpersuasive.
“There is simply no support for the state plaintiffs’ coercion argument in existing case law,” wrote U.S. District Judge Roger Vinson of Pensacola, Fla., in the first decision on the main case now before the Supreme Court.
Nonetheless, Vinson said he appreciated the predicament of the plaintiffs. “At the time the Constitution was drafted and ratified, the founders did not expect that the federal government would be able to provide sizable funding to the states and … exert power over the states to the extent that it currently does,” Vinson wrote.
He suggested the Supreme Court may want to revisit the issue.
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