Why the Medicaid Mandates on States Violate the General Welfare Clause

My new op-ed in Monday’s Wall Street Journal with Mercer law professor David Oedel, ObamaCare and the General Welfare Clause, explains why the new Medicaid mandates imposed on the states suffer from the same General Welfare Clause problem as did the Cornhusker Kickback:

Remember the Cornhusker Kickback? In a frantic effort to move ObamaCare through the Senate last December, Majority Leader Harry Reid procured Sen. Ben Nelson’s vote by offering Nebraska a unique opportunity: His state alone would not have to pay for the dramatic expansion of Medicaid under the bill. The deal was dropped at the last minute, but not only because of the public outrage it generated. Many realized it was unconstitutional for a reason that now applies equally to the health-reform law: Both violate the general-welfare clause. . . .

Normal federal spending occurs irregularly throughout the U.S. If Nebraska gets a military base, for example, making the case that it serves the “common defense and general welfare of the United States” is easy, since citizens of other states benefit from the base. The same general-welfare story can be told about virtually all federal spending programs, which is why Chief Justice William Rehnquist said in Dole, “[i]n considering whether a particular expenditure is intended to serve general public purposes, courts should defer substantially to the judgment of Congress.”

ObamaCare is different. Texas might be allowed to withdraw from Medicaid, but Congress will simply send the Medicaid portion of its citizens’ federal tax payments to the 49 other states. Texas citizens would receive nothing in return.

Given the enormous sums involved, sending their tax payments to other states would make it nearly impossible for Texans to fund their own system of medical assistance to the poor: Texas’s poor citizens would suffer while the state’s tax payments would go to support the poor in other states. Taking from one state to benefit 49 others is as much a violation of the general-welfare clause as the Cornhusker Kickback, which proposed taking from 49 states to benefit one.

In short, the real key to the Medicaid challenge by the 20 states is not simply that withholding Medicaid funding is coercive. It is that the taxes paid by citizens of a state that opts out of Medicaid would no longer be spent in support of the general welfare of each and every one of the states—including itself.

The problem is not insurmountable: Congress could simply provide any state that chooses to withdraw from Medicaid a federal block grant equal to the amount that state’s taxpayers would otherwise receive for Medicaid. That would make its choice to remain in or opt out of Medicaid truly voluntary and ensure that the Medicaid program serves the general welfare.

A cynic might respond, Congress would never offer such a block grant because then lots of states might withdraw. Exactly right. And this shows how the “coercion” principle of Dole is linked to the general-welfare clause. If the only way to withdraw from Medicaid is for a state to deprive its citizens of the benefit of their tax payments, they are in this sense unconstitutionally coerced into remaining.

You can read the whole thing here (subscription may be required if this link does not work). In oral argument in Florida, Judge Vinson seemed troubled about characterizing the Medicaid mandates as “coercive” when states remain formally free to opt out. Our analysis highlights a factor that was not stressed in oral argument: If a state like Texas chooses to opt out, the tax payments of its citizens are transfered to other states on a massive scale. This transfer of funds prevents Texas from implementing a substitute program to assist its poor, and coerces it into remaining in the program. The requirement in Article I, section 8, that all taxes be expended for the “general welfare” helps explain why this is unconstitutional coercion.

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