OEDEL: Supersizing Medicaid, 2.0

November 17, 2013 

It’s as if President Obama didn’t read the Supreme Court’s 2012 decision outlawing forceful federal expansion of Medicaid against the will of most states. The Court ruled 7-2 in favor of a 26-state constitutional challenge to the feds’ use of financial coercion to supersize Medicaid. Despite that decision, Obama’s administration has repeatedly signaled that it still intends firmly to steer every state into full-blown Medicaid expansion.

On Nov. 8, President Obama jawboned Louisiana and all other non-expanding states to open the gates to about half again more people to “get (coverage) through an expanded Medicaid; let’s make sure we do that.” After Obama confirmed that universal Medicaid expansion remains his ultimate objective, courts be damned, Louisiana Gov. Bobby Jindal retorted, “We will not allow President Obama to bully Louisiana into accepting an expansion of Obamacare.” So far, 25 states continue to resist expansion despite seeing their residents’ taxes going elsewhere.

The non-expanding states should now ask the courts’ help to enforce the implications of the Supreme Court’s 2012 decision, even if some wags still accuse the non-expanding states of being callous to their residents, and politically spiteful. Political animus clouds Washington, but the air is clearer in the states, where pragmatic governors are elected statewide. They see that Medicaid doesn’t even improve overall health outcomes.

A natural science project confirming that suspicion occurred when Oregon, in 2008, introduced a lottery allowing some low–income citizens into a limited Medicaid expansion, leaving others uninsured. It later turned out that it made no difference to those citizens’ health outcomes whether they got Medicaid or remained uninsured, even if Medicaid slightly improved their finances.

Supersizing Medicaid wouldn’t just be health-neutral, but hugely expensive. Medicaid already crowds out funding for education, welfare, safety, environment, jobs, etc. States can’t print money, and usually can’t run deficits. While rich, medical-Mecca Massachusetts might manage to stretch Medicaid to cover Massachusetts’ relatively small uninsured cohort without breaking its bank, other states aren’t so fortunate.

Medicaid also poses indirect harms, introducing perverse incentives for citizens to keep income low, duck out of the official labor force, and stay out permanently. Jindal wasn’t kidding about bullying. Obama has made only meager concessions to states like Arkansas, Iowa and Oklahoma, and only if they substitute plans that mimic the federal mandates.

What many states want is funding for real flexibility, for instance to convert Medicaid into more effective means-based insurance, and to support key providers like low-cost primary-care clinics, rural hospitals and big public-service hospitals. Yet the administration entertains little of that, while continuing to press a punishing spending calculus by which non-expanding states are paid back for disobedience by exporting “their” money to other states.

That logic was reflected in Ohio Gov. John Kasich’s explanation for capitulating to the federal pressure. Ohioans, he said, must “reclaim our share of federal taxes to support jobs here in Ohio -- jobs that will be created in other states with our money if Ohio does not extend coverage.”

When refereeing another federal/state Medicaid dispute, the Supreme Court in 1981 described the federal/state Medicaid relationship of “cooperative federalism” as “much in the nature of a contract” between co-venturers in business. Basic contract and business laws tracing from classic decisions of Justice Benjamin Cardozo hold that contracting partners and co-venturers owe duties of good faith and utmost loyalty to one another. When conditions change or new opportunities arise, they’re legally expected to act not as adversaries, but collaborators.

Since the court’s 2012 decision, Obama’s administration has instead acted high-handedly, even dictatorially, risking a constitutionally untenable situation where half the states would practically subsidize radical Medicaid expansion for the other half, and get nothing in return -- altogether apparently violating the Constitution’s General Welfare Clause.

To avoid that constitutional conundrum, and to open space for experimentation that respects all states as partners, the non-expanding states should now sue to end the Obama administration’s imperialistic dismissal of meaningful choices, and its ongoing pattern of bad faith, cash-knuckled coercion and attempted commandeering.

David Oedel teaches constitutional law and contracts at Mercer University. He was counsel to Georgia in the states’ constitutional challenge to Obamacare.

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