Limits on Spending Power Seen as Health Ruling’s Legacy

By Bob Drummond - Jul 2, 2012 5:00 AM GMT+0700

The Supreme Court decision upholding President Barack Obama’s health-care law has drawn attention for limiting Congress’s authority over interstate commerce, yet constitutional scholars say its biggest impact may be a curb on lawmakers’ ability to alter state Medicaid funding.

The justices on June 28 upheld the core of the Patient Protection and Affordable Care Act, which says Americans must have health insurance or pay a penalty. The court ruled that while Congress doesn’t have power under the Constitution’s Commerce Clause to make Americans buy health policies, it can tax people who don’t have coverage.

While the rest of the health-care decision was decided on 5-4 votes among the justices, a 7-2 majority said that while Congress may put conditions on the use of money provided for expanded Medicaid programs, it couldn’t take away existing Medicaid funding from states that don’t participate.

“The holding on the Medicaid expansion could be significant,” said Jenny Martinez, a Stanford University law professor. “It could limit the federal government’s ability to change or expand spending programs once they have been in place for a while and have reached a significant scale.”

Martinez said that the justices’ Commerce Clause finding probably wouldn’t be far-reaching. “There aren’t so many laws, after all, that are similar to the Affordable Care Act in regulating so-called inaction,” she said in an e-mail.

Claim Validated

Congress’s authority to regulate interstate commerce provides the constitutional foundation for many federal laws, creating high stakes whenever the issue hits the Supreme Court.

Opponents of the health-care law said after the ruling that, while they failed to derail the insurance requirement, the section of the high court’s decision on the commerce power represented a victory in a long-running legal argument over limits on Congress’s regulatory authority.

The ruling “validates our claim that a congressional power to compel that all Americans engage in commerce was a constitutional bridge too far,” Georgetown University law professor Randy Barnett said in a statement.

While the court ultimately upheld the law, the decision “is a tremendous victory for re-establishing constitutional limits on the power of the federal government,” Wisconsin’s Republican Attorney General J.B. Van Hollen said in a statement.

‘Modest Limitation’

Still, the specific limits outlined in the health-care decision -- that Congress can’t make Americans buy something they don’t want -- may not do much to tie the government’s hands down the road, University of Michigan law professor Richard Friedman said.

That “modest limitation” on Congress’s power to regulate interstate commerce is followed, in Chief Justice John Roberts’s decision, by a constitutional road map showing lawmakers how they can use the government’s taxing authority get around it, Friedman said in an e-mail.

“All it really does is say that the commerce power doesn’t authorize Congress to require people to buy goods or services -- but this is the first time Congress has felt the need to do so,” he said. “If the need should ever arise again -- it’s highly unlikely that Congress will ever feel the need to require people to buy broccoli -- Congress can achieve much of the same result by imposing a tax, and making sure it looks like a tax.”

Gun to Head

The separate section of the decision -- in which Roberts wrote that Congress can’t use federal funding as a “gun to the head” to force states to expand Medicaid eligibility -- “is the most important part of the decision” in terms of future implications, said Anne Joseph O’Connell, a law professor at the University of California at Berkeley.

Justices Stephen Breyer and Elena Kagan, two Democratic appointees, joined the five justices picked by Republican presidents in putting a new restriction on Congress’s spending power.

“It appears that seven justices have come to the conclusion that some federal grants to the states have become such an integral part of our political system that threatening to withhold them has gone beyond Congress merely putting conditions on money that it offers and crossed the line into coercion,” Friedman said.

While the health-care law, designed to expand health- insurance coverage to millions of uninsured Americans, is the only time the federal government has required people to buy something, Congress often requires state and local governments to comply with policy restrictions as a condition for receiving federal money. Courts have generally given the U.S. government leeway to attach strings dictating the ways that federal dollars can be spent.

Drinking Age

The Supreme Court in 1987 upheld a law that withheld some federal highway funding from states that didn’t raise their legal drinking age to at least 21. The court in that case said conditions on federal funding could, hypothetically, become so pervasive that state governments had no realistic choice but to comply -- a situation that could infringe state sovereignty. The health-care decision marked the first time the justices actually held that a federal program was too coercive.

“This is the first time that they put any teeth” into what previously had been a largely academic debate about limits on Congress’s spending power, Jesse Choper, a law professor at the University of California at Berkeley, said in a telephone interview. “In many ways that is the most significant part of the decision.”

Title IX

Congress has used conditions on federal funding as a policy tool in many areas. The law known as Title IX, for example, says that schools getting federal money must provide equal athletic opportunities for women. Some federal funding for schools and libraries requires them to install Internet filters to block obscene material. The No Child Left Behind law said states had to implement specific education reforms as a condition for getting federal funds.

“The inability to cut down on existing programs in order to force states to take on new responsibilities does indicate that, in federal-state relations, the Congress has fewer powers than most had supposed,” Richard Epstein, a professor at New York University, said in an e-mail.

While restricting Congress’s legal reach under its commerce and spending authority, the high court ultimately upheld the insurance requirement under the constitutional power to levy taxes.

That holding, in fact, “could lead to a greater expansion of federal power than if they had upheld it under the Commerce Clause,” New York University law professor Barry Friedman said in a telephone interview. The court struck down “an expansion of the commerce power that wasn’t going to be used very often” and, in its place, backed a broad interpretation of what Congress can accomplish with taxes.

To contact the reporter on this story: Bob Drummond in Washington at bdrummond@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net