Summary

This nation’s system of cooperative federalism – pursuant to which states and local governments work in partnership with the federal government in solving nationwide problems such as health care, environmental degradation and discrimination – is built upon the Constitution’s Spending Clause and rulings by the Supreme Court that allow the federal government to condition generous grants of federal money upon state and local participation in these national efforts.

For this reason, the Supreme Court’s decision to review the claim by 26 states that the Patient Protection and Affordable Care Act (ACA) unconstitutionally coerced states into participating in the expansion of the federal/state Medicaid program was an unsettling surprise. In contrast to the claims against the ACA’s mandatory coverage provision, there was no split in lower court rulings on the constitutionality of the Medicaid expansion: not a single lower court judge ruled for the states on this claim.

Indeed, no court has ever ruled that any Spending Clause statute runs afoul of the Supreme Court dictum that forms the basis of the states’ claim: “‘in some circumstances the financial inducement offered by Congress might be so coercive as to pass the point at which ‘pressure turns into compulsion.’”

So why did the Court decide to review this claim? Could this particular claim of coercion succeed where all others have failed and be the basis of a ruling by the Supreme Court striking down “the entire Affordable Care Act”? The Supreme Court will answer these momentous questions in the next few months. What is clear now is that the states, represented by former Solicitor General Paul Clement, have woven together an argument about coercion that is designed to appeal to the Court’s conservative majority and to capitalize on a sharp ideological split that has emerged on the Court over the past 15 years about the meaning of constitutional federalism and the scope of federal powers under the Spending Clause.

As a result, in addition to being a critical test of the Supreme Court’s jurisprudence under the Commerce Clause, the ACA litigation will likely produce the most important Spending Clause ruling in several decades. Even if the Supreme Court, like every lower court, ultimately rejects the states’ coercion argument in this case, its ruling could make important new law on the ability of the federal government to use the Spending Clause to enlist states in federal-led efforts. With the state challenge to the ACA’s Medicaid expansion pending before the Court, the Spending Clause is very much at a crossroads.