Medicaid Block Grants = Unconstitutional Coercion?
Professors Sara Rosenbaum and Timothy Westmoreland have an interesting opinion piece in the New England Journal of Medicine with a curious response to the proposal that federal Medicaid funding should be re-structured as block grants (via the Patient CARE Act, proposed by some Congressional Republicans).
It is a pretty well established Republican proposal. It falls short of NCPA’s proposal to convert federal subsidies for health care into refundable tax credits. Nevertheless, it removes the perverse incentive for states to ramp up Medicaid spending beyond what is necessary to pull down more federal funds. In the current system, a state that spends one more dollar on Medicaid will attract between one and nine more federal dollars. This causes states to spend themselves into penury to recover federal dollars.
Ms. Rosenbaum and Mr. Westmoreland suggest that the same Supreme Court that ruled Obamacare’s expansion of Medicaid unconstitutional would do the same for block grants:
Viewed through the lens of the NFIB decision, the Patient CARE Act may suffer from similar constitutional infirmities. For 50 years, the federal–state Medicaid compact has rested on a basic premise: in exchange for reliable, open-ended financing, states will entitle traditional populations to comprehensive benefits. Congress has sometimes altered the eligibility rules for traditional groups such as children, but as Roberts noted, these were simply changes of degree, not kind. The federal compact stood untouched.
Before 2012, Congress’s power to redesign Medicaid seemed a legal given. After NFIB, that’s no longer the case. Legislation that would radically transform the federal–state Medicaid bargain without states’ consent may no longer pass the Tenth Amendment test.
I’m no lawyer, but this seems to be a real stretch. The NFIB vs. Sebelius decision was that the Obamacare Medicaid expansion, which offered states nine dollars for every one dollar they spent on the newly eligible Medicaid population, was so out of balance that it effectively destroyed states’ sovereign power to decide whether to rope more people into Medicaid dependency.
(Recall that every penny the federal government has comes from taxes paid now or in the future by states’ residents. So, Obamacare’s Medicaid funding formula effectively consists of the federal government taxing you nine dollars while the state taxes you one dollar. It then offers that nine dollars back to the state if it obeys federal rules. The conclusion that this violates sovereignty verges on common sense.)
Converting Medicaid funding does the opposite: It frees states to spend as much as they decide on Medicaid, without federal interference. Ms. Rosennbaum and Mr. Westmoreland misconstrue Medicaid as a federal-state “compact”, indicating the current Medicaid system is some kind of right that states can claim from Congress; and that Congress does not have the right to decide how federal money is spent.
