Is block granting Medicaid unconstitutional?

by Nicholas Bagley — Wednesday, May 27, 2015

Sara Rosenbaum and Tim Westmoreland have an interesting new piece out at the New England Journal of Medicine on the Patient CARE Act, a Republican proposal to transform Medicaid into a block grant program (among other things). Not only is the Patient CARE Act bad policy, they argue, but the move to block granting could unconstitutionally coerce the states:

[T]he Patient CARE Act would cast aside the fundamental economic basis on which Medicaid rests and thus represent a dramatic shift in kind, not merely degree — fundamentally altering the program’s structure to achieve a purpose (shielding the federal government from health care costs) that was not part of the deal 50 years ago. The proposal would predicate ongoing federal funding on the states’ agreement to a new budgeting arrangement that forced them to accept and absorb enormous financial risk by altering their obligations to pregnant women, children, and parents, while reducing long-term care commitments to elderly and disabled beneficiaries. By radically restructuring federal Medicaid financing, the Patient CARE Act becomes a legal “gun to the head”: a state that wished to receive continued federal Medicaid funding would be compelled to conform to a new compact without the requisite advance notice of how Medicaid would ultimately be profoundly altered.

This is an intriguing suggestion, but I’m not yet convinced. As my colleague Sam Bagenstos has explained, the Chief Justice’s controlling opinion in NFIB v. Sebelius is best understood to hold that a federal spending condition is unconstitutional only where three separate requirements are met. The condition must be “[1] attached to large amounts of federal money, [2] change the terms of participation in entrenched cooperative programs, [and] [3] tie together separate programs into a package deal.”

The Patient CARE Act is attached to a ton of federal money and transforms the terms of Medicaid participation. On that, I agree with Rosenbaum and Westmoreland. But the Act doesn’t tie separate programs into a package deal. For most of the Medicaid population, it would just scrap traditional Medicaid and replace it with a new block-grant model. A state could take or leave the new block grants without fearing termination ofany separatefunding stream.

The conditions placed on receipt of block grants would thus seem to pass constitutional muster. The analysis might be different if ongoing payments under traditional Medicaid depended on acceptance of the block grants. But I don’t think they do. The Patient CARE proposal says that “no changes would be made to the funding for the acute care of low-income elderly and disabled individuals.” Unless and until Congress threatens the termination of those funds to induce states to accept block grants, any NFIB­-style constitutional objections seem thin.

To be clear, I don’t mean to imply that block granting is good policy. I doubt it is. I’m just not sure it’s unconstitutional, at least under current doctrine.

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About Nicholas Bagley

Nicholas Bagley is a Professor of Law at the University of Michigan Law School.

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