Coercion, Compulsion, and the Medicaid Expansion: A Study in the Doctrine of Unconstitutional Conditions

IntroductionThe Supreme Court's feverishly anticipated decision in National Federation of Independent Business v. Sebelius1 ("the Health Care Decision" or "NFIB") regarding the constitutionality of the Patient Protection and Affordable Care Act (colloquially known as "Obamacare") produced three main holdings concerning two critical provisions of the Act.2 The first two holdings concerned the "individual mandate" that requires most Americans to maintain "minimum essential" health insurance. First, a 5.4 majority held that this provision exceeded Congress's power under the Commerce Clause.3 Second, a different 5.4 majority held that this same mandate, which requires those who fail to secure the minimum required health insurance to pay a tax penalty to the IRS, is a constitutional exercise of Congress's taxing authority.4 The third holding concerned "the Medicaid expansion," which expanded the class of persons to whom the states must provide Medicaid coverage as a condition for receiving federal funds under the Medicaid program.5 By the more lopsided margin of 7.2, the Court struck down this provision as an impermissible condition on the provision of federal funds to the states.6Of these three holdings, the third.concerning what is often called Congress's "conditional spending power".is apt to have the most farreaching consequences beyond health care. The Court's Commerce Clause ruling was predicated on the fact that, in a majority's estimation, Congress was here imposing an unprecedented affirmative obligation upon individuals to enter commerce rather than, as is customary, regulating behavior that was already commercial.7 Because Congress could not have been expected to impose many.or any.such affirmative obligations even had the dissenters prevailed on the Commerce Clause issue, this ruling will likely have little future impact. And Congress rarely needs to resort to its taxing power to achieve regulatory ends when it can regulate "directly" on the strength of its commerce power.8 So the Court's relatively expansive interpretation of Congress's taxing power is not of great moment going forward precisely because its relatively restrictive interpretation of Congress's commerce power is not. But Congress makes habitual (a critic might even say "profligate") use of its conditional spending power.9 Accordingly, if, as appears to many, the Court has tightened the restrictions on this power, the implications could be profound.Unfortunately, of the three holdings, the last is not only the most potentially significant, but also the one supported by the least clear rationale. At first blush, to be sure, the majority's reasoning seems straightforward. The key precedent on which the majority drew, South Dakota v. Dole,10 had announced a four-part test governing Congress's use of its spending power to induce state behavior that Congress could not mandate: the spending program must promote "the general welfare," the condition must be unambiguous, the condition must be related to the national interests that the spending would advance, and the condition may not require state recipients to violate the Constitution themselves.11 No Justices in NFIB expressed concern that the Medicaid expansion violated any of these limitations.In addition to these four restrictions, however, the Dole Court read the Spending Clause to impose limits on Congress's ability to "coerce" the states in ways that it could not directly mandate under its other Article I powers.12 "[I]n some circumstances," the Court observed, "the financial inducement offered by Congress might be so coercive as to pass the point at which 'pressure turns into compulsion.'"13 It is this prohibition on coercion or compulsion that, a majority of the Court concluded, doomed the Medicaid expansion.14 While candidly acknowledging that they could provide no guidance regarding how the line between inducement and compulsion would be assessed going forward, seven Justices nonetheless deemed the conditional offer that the Medicaid expansion embodied impermissibly coercive because it gave states "no choice" but to accept. …