The Volokh Conspiracy

Mostly law professors | Sometimes contrarian | Often libertarian | Always independent

The CMS Vaccine Mandate As Applied To State Employers

The new executive action will also implicate the spending power, and federalism.


Earlier today, I wrote about possible challenges to the OSHA vaccine mandate. But there is another element to the package. According to reports, CMS has threatened to withhold federal funding from hospitals and other health care facilities that do not impose vaccine mandates. These institutions could lose Medicaid and Medicare funding.

Many states operate nursing homes and other facilities. Therefore, this threat to withholds funds implicates the limits of the federal spending power. And once, again, NFIB v. Sebelius becomes relevant. Governor Noem of South Dakota issued a cryptic tweet, threatening to sue President Biden. Perhaps fittingly, this case could be a redux of another South Dakota case, South Dakota v. Dole.

South Dakota v. Dole identified four, and really five limits on the federal spending power.

First, "the exercise of the spending power must be in pursuit of 'the general welfare.'" This factor is almost always satisfied.

Second, Congress must place conditions on the funds "unambiguously." States need to know what they are getting into when they accept federal money. CMS has not released any specific guidance, so I do not know which statutory authority they are working with. But under Pennhurst, and related doctrines, there must be a clear statement of the relevant conditions. President Trump's attempts to defund sanctuary jurisdictions failed under this prong of the Dole test. The relevant statutes did not clearly impose conditions barring sanctuary policies. Here, it is not clear if the states had fair notice that CMS funding could be withdrawn if they do not impose a vaccine mandate.

Third, the conditions must "relate" to "the federal interest" for which the spending program was established. Dole did not define how closely "related" the condition must be to Congress's "purpose." Justice O'Connor's dissent provided a more narrow test for "relatedness," or "germaneness." Here, I suppose the federal vaccine mandate is designed to prevent the spread of COVID across state lines.

Fourth, "[o]ther constitutional provisions may provide an independent bar to conditional grant of federal funds." For example, the Dole majority held held that the Twenty-First Amendment, which allows states to regulate alcohol, was not such a bar. In dissent, Justice Brennan found that the Twenty-First Amendment did impose a bar.

The Court also found that the federal highway spending program did not violate the Tenth Amendment. Dole explained that the Tenth Amendment operates differently in the context of conditional spending, than it does in the context of "congressional regulation of state affairs." For example, Oklahoma v. Civil Service Comm'n (1947) upheld the Hatch Act's restrictions on state employees, because Oklahoma accepted federal funds. Chief Justice Rehnquist wrote:

The State contended that an order under this provision to withhold certain federal funds unless a state official was removed invaded its sovereignty in violation of the Tenth Amendment. Though finding that "the United States is not concerned with, and has no power to regulate, local political activities as such of state officials," the Court nevertheless held that the Federal Government "does have power to fix the terms upon which its money allotments to states shall be disbursed." The Court found no violation of the State's sovereignty because the State could, and did, adopt "the 'simple expedient' of not yielding to what she urges is federal coercion. The offer of benefits to a state by the United States dependent upon cooperation by the state with federal plans, assumedly for the general welfare, is not unusual."

Rehnquist observed that the "independent constitutional bar" restriction is very, very narrow: Congress cannot force states to take unconstitutional actions.

These cases establish that the "independent constitutional bar" limitation on the spending power is not, as petitioner suggests, a prohibition on the indirect achievement of objectives which Congress is not empowered to achieve directly. Instead, we think that the language in our earlier opinions stands for the unexceptionable proposition that the power may not be used to induce the States to engage in activities that would themselves be unconstitutional. Thus, for example, a grant of federal funds conditioned on invidiously discriminatory state action or the infliction of cruel and unusual punishment would be an illegitimate exercise of the Congress' broad spending power. But no such claim can be or is made here. Were South Dakota to succumb to the blandishments offered by Congress and raise its drinking age to 21, the State's action in so doing would not violate the constitutional rights of anyone.

Would the CMS policy run afoul of the "independent constitutional bar" doctrine? Long before COVID, state employers have required their employees to be vaccinated. However, states may have created certain exemptions based on the Free Exercise of religion. Those exemptions may be compelled by the Free Exercise Clause or by state constitutions and RFRAs. It is possible that the federal mandate is less protective of religious freedom than the state mandate. In that case, states could argue that the federal CMS policy is forcing them to violate state law, or perhaps federal constitutional law. The delta between federal and state policies would prove important. I need to give this position some more thought.

In addition to these four limitations, Dole identified a fifth factor: A condition becomes unconstitutional when "the financial inducement offered by Congress might be so coercive as to pass the point at which 'pressure turns into compulsion.'" Such coercion would, in effect, commandeer the state legislature to comply with the condition. In Dole, South Dakota would have only lost 5 percent of "certain federal highway funds." This incentive was "relatively mild encouragement." Therefore, the condition was constitutional.

In NFIB v. Sebelius, however, the Court found that the condition would run afoul of this fifth limitation. With the Medicaid Expansion, "pressure turn[ed] into compulsion." Chief Justice Roberts explained:

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, just as in New York and Printz. 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.

How much money would the states have lost if they declined to expand Medicaid? The Chief observed that states could lose as much as 10% of their overall budgets:

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 . . . 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. FN12

FN12 . . . More importantly, the size of the new financial burden imposed on a State is irrelevant in analyzing whether the State has been coerced into accepting that burden. "Your money or your life" is a coercive proposition, whether you have a single dollar in your pocket or $500.

Does the CMS mandate amount to "economic dragooning"? At this point, details are scant. But presumably, states would lose pre-existing funding, like in NFIB. There is no new pot of money that is at risk. Old money is at risk. In NFIB, Arizona stood to lose about $8 billion for failing to expand Medicaid. A decade ago, that amount represented a quarter of the state's budget. If states could lose all of their CMS funding for not mandating vaccines, we may be in NFIB territory.

Again, these thoughts are tentative. I welcome any comments or corrections.