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Law & Courts Opinion

Edu-Implications of Yesterday’s Supreme Court 7-2 Medicaid Ruling

By Rick Hess — June 29, 2012 2 min read
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Yesterday, the Supreme Court upheld the bulk of President Obama’s health care reform. Amidst the drama, it was easy to overlook SCOTUS’s 7-2 ruling to strike down the Affordable Care Act’s Medicaid expansion. Yet, that ruling had some important implications for education. The Court limited Uncle Sam’s ability to withhold aid from states which refuse to comply with new federal mandates. This has potentially big impacts on current and future education policymaking, on questions ranging from ESEA/NCLB to the Higher Education Act.

In Ed Week‘s “School Law” blog, Mark Walsh explained the issue succinctly:

On the Medicaid issue, the court effectively ruled 7-2 that the Medicaid expansion violates the U.S. Constitution by threatening the states with the loss of their existing Medicaid funding if they decline to comply with the expansion. Congress put "a gun to the head" of the states to force them to add a much larger pool of the poor to the Medicaid rolls, Chief Justice John G. Roberts Jr. said...Medicaid funding accounts for over 20 percent of the average state's total budget, with federal funds covering anywhere from 50 to 83 percent of those costs, he noted. "Congress may use its spending power to create incentives for states to act in accordance with federal policies," the chief justice said. "But when pressure turns into compulsion, the legislation runs contrary to our system of federalism."

At issue was whether healthcare reform’s expansion of Medicaid was an unconstitutional “commandeering” of state power. In their legal challenge, 26 states argued that the federal government’s decision to make expanding Medicaid the condition for receiving any federal Medicaid funding had the practical consequence of coercing them to comply.

Three thoughts. One, it strikes me that the Court has this generally right. Anybody who has spent much time working with state and local officials knows that, once conditional federal funds have been baked into place, the resulting constituencies and budget realities make it incredibly difficult to pry them out. So, as it stands, the ruling could prove a useful constraint on Congress’s ability to dictate ed policy to states.

Two, though, the Court drew a distinction likely to be problematic in practice. The justices said that the feds can make new funds conditional, but can’t threaten to yank existing federal aid. Hmmmm. What happens when the feds rejigger funding formulas during a reauthorization and a state is now entitled to receive less funding--are states to be held harmless below their old baseline? If programs grow substantially over time, the new, “coercive” federal conditions will eventually apply to much or most of the funds. Is that a problem? What if the feds zero out one edu-grant program, but immediately launch a new, similar program. Since the program is “new,” are policymakers free to attach conditions to their hearts’ content? And, on something like IDEA, what happens if the new conditions deal with required practices (start reporting this way, intervening that way, or reinterpret “least restrictive environment” like so) rather than new obligations, per se? In that case, are the feds free to do as they will?

Three, I suspect few states will ultimately turn down the new Medicaid dollars, especially given that state leaders will feel pressed to support the expansion of health coverage in accord with ACA. This may make the ruling a hollow precedent. More immediately, the ruling does little to temper the pressure on states to ramp up health care spending going forward. This is lousy news for K-12 and higher ed leaders hoping for new state funds after several lean years.

Anyway, none of this is sorted out yet. But these are some things worth keeping an eye on.

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