OF INDEPENDENT BUSINESS et al.
SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, et al.
certiorari to the united states court of appeals for the eleventh circuit
Decided June 28, 2012
Chief Justice Roberts:
resolve constitutional challenges to two
provisions of the Patient Protection and
Affordable Care Act of 2010: the individual
mandate, which requires individuals to
purchase a health insurance policy providing a
minimum level of coverage; and the Medicaid
expansion, which gives funds to the States on
the condition that they provide specified
health care to all citizens whose income falls
below a certain threshold. We do not consider
whether the Act embodies sound policies. That
judgment is entrusted to the Nation's elected
leaders. We ask only whether Congress has the
power under the Constitution to enact the
There is no
doubt that the Act dramatically increases
state obligations under Medicaid. The current
Medicaid program requires States to cover only
certain discrete categories of needy
individuals--pregnant women, children, needy
families, the blind, the elderly, and the
disabled. There is no mandatory coverage for
most childless adults, and the States
typically do not offer any such coverage. The
States also enjoy considerable flexibility
with respect to the coverage levels for
parents of needy families....
The Medicaid provisions of the Affordable Care Act, in contrast, require States to expand their Medicaid programs by 2014 to cover all individuals under the age of 65 with incomes below 133 percent of the federal poverty line. The Act also establishes a new "[e]ssential health benefits" package, which States must provide to all new Medicaid recipients--a level sufficient to satisfy a recipient's obligations under the individual mandate. The Affordable Care Act provides that the Federal Government will pay 100 percent of the costs of covering these newly eligible individuals through 2016. In the following years, the federal payment level gradually decreases, to a minimum of 90 percent....
The Spending Clause grants Congress the power "to pay the Debts and provide for the . . . general Welfare of the United States." U. S. Const., Art. I, §8, cl. 1. We have long recognized that Congress may use this power to grant federal funds to the States, and may condition such a grant upon the States' "taking certain actions that Congress could not require them to take." Such measures "encourage a State to regulate in a particular way, [and] influenc[e] a State's policy choices." The conditions imposed by Congress ensure that the funds are used by the States to "provide for the . . . general Welfare" in the manner Congress intended.
At the same time, our cases have recognized limits on Congress's power under the Spending Clause to secure state compliance with federal objectives. "We have repeatedly characterized . . . Spending Clause legislation as 'much in the nature of a contract.' "The legitimacy of Congress's exercise of the spending power "thus rests on whether the State voluntarily and knowingly accepts the terms of the 'contract.' " Respecting this limitation is critical to ensuring that Spending Clause legislation does not undermine the status of the States as independent sovereigns in our federal system. That system "rests on what might at first seem a counterintuitive insight, that 'freedom is enhanced by the creation of two governments, not one.' " For this reason, "the Constitution has never been understood to confer upon Congress the ability to require the States to govern according to Congress' instructions." Otherwise the two-government system established by the Framers would give way to a system that vests power in one central government, and individual liberty would suffer....
That insight... has also led us to scrutinize Spending Clause legislation to ensure that Congress is not using financial inducements to exert a "power akin to undue influence." Congress may use its spending power to create incentives for States to act in accordance with federal policies. But when "pressure turns into compulsion," the legislation runs contrary to our system of federalism. "[T]he Constitution simply does not give Congress the authority to require the States to regulate." That is true whether Congress directly commands a State to regulate or indirectly coerces a State to adopt a federal regulatory system as its own.
Permitting the Federal Government to force the States to implement a federal program would threaten the political accountability key to our federal system. "[W]here the Federal Government directs the States to regulate, it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision." Spending Clause programs do not pose this danger when a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds. In such a situation, state officials can fairly be held politically accountable for choosing to accept or refuse the federal offer. But when the State has no choice, the Federal Government can achieve its objectives without accountability. Indeed, this danger is heightened when Congress acts under the Spending Clause, because Congress can use that power to implement federal policy it could not impose directly under its enumerated powers....
Congress may attach appropriate conditions to federal taxing and spending programs to preserve its control over the use of federal funds. In the typical case we look to the States to defend their prerogatives by adopting "the simple expedient of not yielding" to federal blandishments when they do not want to embrace the federal policies as their own. The States are separate and independent sovereigns. Sometimes they have to act like it.
The States, however, argue that the Medicaid expansion is far from the typical case. They object that Congress has "crossed the line distinguishing encouragement from coercion" in the way it has structured the funding: Instead of simply refusing to grant the new funds to States that will not accept the new conditions, Congress has also threatened to withhold those States' existing Medicaid funds. The States claim that this threat serves no purpose other than to force unwilling States to sign up for the dramatic expansion in health care coverage effected by the Act.
Given the nature of the threat and the programs at issue here, we must agree. We have upheld Congress's authority to condition the receipt of funds on the States' complying with restrictions on the use of those funds, because that is the means by which Congress ensures that the funds are spent according to its view of the "general Welfare." Conditions that do not here govern the use of the funds, however, cannot be justified on that basis. When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressuring the States to accept policy changes.
In South Dakota v. Dole, we considered a challenge to a federal law that threatened to withhold five percent of a State's federal highway funds if the State did not raise its drinking age to 21. The Court found that the condition was "directly related to one of the main purposes for which highway funds are expended--safe interstate travel." At the same time, the condition was not a restriction on how the highway funds--set aside for specific highway improvement and maintenance efforts--were to be used.
We accordingly asked whether "the financial inducement offered by Congress" was "so coercive as to pass the point at which 'pressure turns into compulsion.' " By "financial inducement" the Court meant the threat of losing five percent of highway funds; no new money was offered to the States to raise their drinking ages. We found that the inducement was not impermissibly coercive, because Congress was offering only "relatively mild encouragement." We observed that "all South Dakota would lose if she adheres to her chosen course as to a suitable minimum drinking age is 5%" of her highway funds. In fact, the federal funds at stake constituted less than half of one percent of South Dakota's budget at the time. Whether to accept the drinking age change "remain[ed] the prerogative of the States not merely in theory but in fact."
In this case, the financial "inducement" Congress has chosen is much more than "relatively mild encouragement"--it is a gun to the head. Section 1396c of the Medicaid Act provides that if a State's Medicaid plan does not comply with the Act's requirements, the Secretary of Health and Human Services may declare that "further payments will not be made to the State." A State that opts out of the Affordable Care Act's expansion in health care coverage thus stands to lose not merely "a relatively small percentage" of its existing Medicaid funding, but all of it. Medicaid spending accounts for over 20 percent of the average State's total budget, with federal funds covering 50 to 83 percent of those costs. In addition, the States have developed intricate statutory and administrative regimes over the course of many decades to implement their objectives under existing Medicaid. It is easy to see how the Dole Court could conclude that the threatened loss of less than half of one percent of South Dakota's budget left that State with a "prerogative" to reject Congress's desired policy, "not merely in theory but in fact." The threatened loss of over 10 percent of a State's overall budget, in contrast, is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion....As we have explained, "[t]hough Congress' power to legislate under the spending power is broad, it does not include surprising participating States with postacceptance or 'retroactive' conditions." A State could hardly anticipate that Congress's reservation of the right to "alter" or "amend" the Medicaid program included the power to transform it so dramatically.
Justice Ginsburg claims that in fact this expansion is no different from the previous changes to Medicaid, such that "a State would be hard put to complain that it lacked fair notice." But the prior change she discusses--presumably the most dramatic alteration she could find--does not come close to working the transformation the expansion accomplishes. She highlights an amendment requiring States to cover pregnant women and increasing the number of eligible children. But this modification can hardly be described as a major change in a program that--from its inception--provided health care for "families with dependent children." Previous Medicaid amendments simply do not fall into the same category as the one at stake here.
The Court in Steward Machine did not attempt to "fix the outermost line" where persuasion gives way to coercion. The Court found it "[e]nough for present purposes that wherever the line may be, this statute is within it." We have no need to fix a line either. It is enough for today that wherever that line may be, this statute is surely beyond it. Congress may not simply "conscript state [agencies] into the national bureaucratic army," and that is what it is attempting to do with the Medicaid expansion.
Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.....
Justice Ginsburg, with whom Justice Sotomayor joins, dissenting in part.
....Unlike The Chief
Justice, however,...I would also hold
that the Spending Clause permits the Medicaid
expansion exactly as Congress enacted it....
Medicaid, as amended by the ACA, however, is not two spending programs; it is a single program with a constant aim--to enable poor persons to receive basic health care when they need it. Given past expansions, plus express statutory warning that Congress may change the requirements participating States must meet, there can be no tenable claim that the ACA fails for lack of notice. Moreover, States have no entitlement to receive any Medicaid funds; they enjoy only the opportunity to accept funds on Congress' terms. Future Congresses are not bound by their predecessors' dispositions; they have authority to spend federal revenue as they see fit. The Federal Government, therefore, is not, as The Chief Justice charges, threatening States with the loss of "existing" funds from one spending program in order to induce them to opt into another program. Congress is simply requiring States to do what States have long been required to do to receive Medicaid funding: comply with the conditions Congress prescribes for participation....When future Spending Clause challenges arrive, as they likely will in the wake of today's decision, how will litigants and judges assess whether "a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds"? Are courts to measure the number of dollars the Federal Government might withhold for noncompliance? The portion of the State's budget at stake? And which State's--or States'--budget is determinative: the lead plaintiff, all challenging States (26 in this case, many with quite different fiscal situations), or some national median? Does it matter that Florida, unlike most States, imposes no state income tax, and therefore might be able to replace foregone federal funds with new state revenue? Or that the coercion state officials in fact fear is punishment at the ballot box for turning down a politically popular federal grant?
The coercion inquiry, therefore, appears to involve political judgments that defy judicial calculation. Even commentators sympathetic to robust enforcement of Dole's limitations have concluded that conceptions of "impermissible coercion" premised on States' perceived inability to decline federal funds "are just too amorphous to be judicially administrable."
At bottom, my colleagues' position is that the States' reliance on federal funds limits Congress' authority to alter its spending programs. This gets things backwards: Congress, not the States, is tasked with spending federal money in service of the general welfare. And each successive Congress is empowered to appropriate funds as it sees fit. When the 110th Congress reached a conclusion about Medicaid funds that differed from its predecessors' view, it abridged no State's right to "existing," or "pre-existing," funds. For, in fact, there are no such funds. There is only money States anticipate receiving from future Congresses....Justice Scalia, Justice Kennedy, Justice Thomas, and Justice Alito, concurring in part.
The power to make any expenditure that furthers "the general welfare" is obviously very broad, and shortly after Butler was decided the Court gave Congress wide leeway to decide whether an expenditure qualifies. "The discretion belongs to Congress," the Court wrote, "unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment." Since that time, the Court has never held that a federal expenditure was not for "the general welfare."....This practice of attaching conditions to federal funds greatly increases federal power. "[O]bjectives not thought to be within Article I's enumerated legislative fields, may nevertheless be attained through the use of the spending power and the conditional grant of federal funds." This formidable power, if not checked in any way, would present a grave threat to the system of federalism created by our Constitution. If Congress' "Spending Clause power to pursue objectives outside of Article I's enumerated legislative fields, is "limited only by Congress' notion of the general welfare, the reality, given the vast financial resources of the Federal Government, is that the Spending Clause gives 'power to the Congress to tear down the barriers, to invade the states' jurisdiction, and to become a parliament of the whole people, subject to no restrictions save such as are self-imposed.' " Butler. "[T]he Spending Clause power, if wielded without concern for the federal balance, has the potential to obliterate distinctions between national and local spheres of interest and power by permitting the Federal Government to set policy in the most sensitive areas of traditional state concern, areas which otherwise would lie outside its reach."
Recognizing this potential for abuse, our cases have long held that the power to attach conditions to grants to the States has limits. For one thing, any such conditions must be unambiguous so that a State at least knows what it is getting into. Conditions must also be related "to the federal interest in particular national projects or programs," and the conditional grant of federal funds may not "induce the States to engage in activities that would themselves be unconstitutional." Finally, while Congress may seek to induce States to accept conditional grants, Congress may not cross the "point at which pressure turns into compulsion, and ceases to be inducement."
legislation gives the States a real choice
whether to accept or decline a federal aid
package, the federal-state relationship is in
the nature of a contractual relationship. See
Barnes v. Gorman, 536
U. S. 181, 186 (2002); Pennhurst,
451 U. S., at 17. And just as a contract
is voidable if coerced, "[t]he legitimacy of
Congress' power to legislate under the
spending power . . . rests on whether the
State voluntarily and knowingly
accepts the terms
of the 'contract.' " Ibid. (emphasis added). If a federal spending program coerces participation the States have not "exercise[d] their choice"--let alone made an "informed choice." Id., at 17, 25.
....As we have explained, the legitimacy of attaching conditions to federal grants to the States depends on the voluntariness of the States' choice to accept or decline the offered package. Therefore, if States really have no choice other than to accept the package, the offer is coercive, and the conditions cannot be sustained under the spending power. And as our decision in South Dakota v. Dole makes clear, theoretical voluntariness is not enough.
The question whether a law enacted under the spending power is coercive in fact will sometimes be difficult, but where Congress has plainly "crossed the line distinguishing encouragement from coercion,"a federal program that coopts the States' political processes must be declared unconstitutional. "[T]he federal balance is too essential a part of our constitutional structure and plays too vital a role in securing freedom for us to admit inability to intervene."
The Federal Government's argument in this case at best pays lip service to the anticoercion principle. The Federal Government suggests that it is sufficient if States are "free, as a matter of law, to turn down" federal funds. According to the Federal Government, neither the amount of the offered federal funds nor the amount of the federal taxes extracted from the taxpayers of a State to pay for the program in question is relevant in determining whether there is impermissible coercion.
This argument ignores reality. When a heavy federal tax is levied to support a federal program that offers large grants to the States, States may, as a practical matter, be unable to refuse to participate in the federal program and to substitute a state alternative. Even if a State believes that the federal program is ineffective and inefficient, withdrawal would likely force the State to impose a huge tax increase on its residents, and this new state tax would come on top of the federal taxes already paid by residents to support subsidies to participating States.
the Federal Government's interpretation of the
anticoercion rule would permit Congress to
dictate policy in areas traditionally governed
primarily at the state or local level.
Suppose, for example, that Congress enacted
legislation offering each State a grant equal
to the State's entire annual expenditures for
primary and secondary education. Suppose also
that this funding came with conditions
governing such things as school curriculum,
the hiring and tenure of teachers, the drawing
of school districts, the length and hours of
the school day, the school calendar, a dress
code for students, and rules for student
discipline. As a matter of law, a
State could turn down that offer, but if it
did so, its residents would not only be
required to pay the federal taxes needed to
support this expensive new program, but they
would also be forced to pay an equivalent
amount in state taxes. And if the State gave
in to the federal law, the State and its
subdivisions would surrender their traditional
authority in the field of education. Asked at
oral argument whether such a law would be
allowed under the spending power, the
Solicitor General responded that it would.
Whether federal spending legislation crosses the line from enticement to coercion is often difficult to determine, and courts should not conclude that legislation is unconstitutional on this ground unless the coercive nature of an offer is unmistakably clear. In this case, however, there can be no doubt. In structuring the ACA, Congress unambiguously signaled its belief that every State would have no real choice but to go along with the Medicaid Expansion. If the anticoercion rule does not apply in this case, then there is no such rule....