Does the House Build Back Better Bill Violate the Limits on Conditional Spending?

The bill cuts health care funding in states that refused to accept the ACA's Medicaid expansion in ways that might violate NFIB v. Sebelius.

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Among the provisions of the House-passed "Build Back Better" spending bill are provisions that cut federal health care funding in states that have refused to expand Medicaid under the Affordable Care Act. In the Wall Street Journal, Chris Jacobs argues that this violates conditional spending holding of NFIB v. Sebelius.

Here's how Jacobs describes the relevant provisions:

Seven states, including expansion and nonexpansion states, still use uncompensated-care pools to reimburse providers for charity treatment. Section 30608 of the Build Back Better bill contains two separate provisions that would apply solely to nonexpansion states. The first would reduce by 12.5% their Medicaid disproportionate-share hospital payments, which offset the costs of hospitals that treat high numbers of uninsured patients.

Some states have availed themselves of Section 1115 Medicaid waivers, which allow them to pay hospitals for uncompensated care using federal dollars. The Build Back Better bill would ban nonexpansion states from reimbursing hospitals for uncompensated care provided to patients who would be eligible for Medicaid if the state expanded.

So, as Jacobs explains, the BBB bill cuts funding in states that refused to expand Medicaid. While the bill also expands health insurance subsidies for those potentially affected by these limits, Jacobs notes, these subsidies sunset, while the cuts in funding are permanent.

On the one hand, just because the federal government has funded something in the past does not mean it has to fund something in the future. Congress must have the ability to change its spending priorities over time. On the other hand, the Court held in NFIB that Congress may not use prior state acceptance of federal funding as leverage to induce state cooperation with new programs, and on this basis held that Congress could not condition continued receipt of pre-existing Medicaid funds on acceptance of the Medicaid expansion. Wrote Chief Justice Roberts: "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."

The question here is on which side of the line do these BBB provisions fall, Jacobs notes that states have relied on the threatened funding for some time, per-dating the Medicaid expansion. Yet there is nothing that says Congress can't decide it would rather subsidize private insurance than provide broader Medicaid funding as the "second-best" alternative to Medicaid expansion. Further, given the context of the reforms, it's not clear to me that objecting states would be able to characterize these reforms as a "coercive" effort to induce states to accept the Medicaid expansion now when they refused to before.

In any event, the Jacobs op-ed flags an interesting issue that I am sure some Red States will litigate if these provisions are enacted into law.

NEXT: Another Case About "Bringing About the Difficulty"

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  1. If Congress is merely closing a waiver, as opposed to rescinding a previous allocation, this argument would seem much harder to make.

    Waivers of ordinary rules don’t carry the same expectation of a contract that rules themselves do.

  2. States have allowed themselves to become mere political subdivisions of the federal government. Unless and until they are prepared to stop sucking off the federal teat, they will remain subject to the whims of Congress.

    I would go so far as to amend the Constitution on this in order to reduce federal spending and restore state sovereignty, thusly: The Congress shall have no authority to provide any money to any state or engage with any state to perform any policy, program or other service.

    1. As unwise as that amendment would be, I imagine it would be music to the ears of those wealthy northern blue states who are perennial "donors" to red-voting southern states.

      1. I would love to know why it would be “unwise”.

        Also, as you know, most of the money flows to individuals by direct payments through various programs that would be unaffected by this amendment.

        But even if it cuts off funding for state governments, so much the better.

      2. And I forgot to mention that indeed, states with more high earners will have higher income tax revenue than states with average earners and indeed, the wealthy tend to live in the coastal states which provide the greater income tax revenue to the government.

        1. They also ignore that many people retire to the "red" states.

  3. It seems to me that a red state lawsuit would be asking for continued Federal money. This seems to go against the ideas that some of these state's politician so vigorously push. They are not really asking the court for more or less money but to get the money the way they want it. It does smack a bit of hypocrisy but is that all that new for politicians.

  4. I think this is an overreading of Sibelius.

    The conditional spending problem in Sibelius was stark. The state had two choices: kick everyone off Medicaid, or participate in the program. It was as close to holding a gun to people's heads as you could get, because kicking everyone off Medicaid would have literally killed some poor people. (Indeed, advocates of the Obamacare Medicaid expansion routinely cite statistics about how putting more people on Medicaid has saved lives. But that's exactly what made the conditional spending so stark.)

    "Do this or lose 1/8th of your funding" is not anything like that. This is normal conditional spending, similar to South Dakota v. Dole.

    1. Furthermore there is simply no justification for rejecting the Medicaid expansion in 2021–if West Virginia can afford it then TX and Florida can obviously afford it. The fact red states continue to reject fully implementing the ACA just shows how Trump isn’t the problem with the GOP. And the Rittenhouse reaction from Democrats shows they have negative tribal instincts just like the Republican tribe.

    2. South Dakota v. Dole involved 5% of highway funds, so there’s a bit more money imvolved here. They have a non-frivolous case. Let’s see where the courts draw the line.

      1. I never said it was frivolous. But it's nothing like Sibelius, and really nothing close to it.

    3. "Do this or lose 1/8th of your funding" is not anything like that. This is normal conditional spending, similar to South Dakota v. Dole.

      In Dole, "do this" was simply setting a minimum drinking age. Here, it's committing to perpetually fund a social program. "Spend more of your own money or you'll get even less from us" doesn't seem like the same sort of dynamic at all.

      1. That doesn't matter, unless you can find something in the Constitution that specifically treats state social welfare programs differently from state drinking regulations.

        If anything, it's the opposite- the states have extensive power reserved to them on alcohol regulation due to the 21st Amendment.

        1. That doesn't matter, unless you can find something in the Constitution that specifically treats state social welfare programs differently from state drinking regulations.

          Oh, come on. The Constitution doesn't spell out degrees of coercion any more than it spells out a trimester schedule for abortions -- Dole and its progeny cut that out of whole cloth. Forcing a state to permanently expand its spending of its own citizens' money on program A to temporarily continue to get money from (more accurately, continue to get back some of the money they paid into) the Federal government for program B is in a different league of coercion than merely requiring the state to set a regulation such as drinking age.

        2. I'm at a loss to find anything in the Constitution that specifically authorizes this sort of bill. But enumerated powers doctrine is kind of passé.

  5. It would be really nice if we could stop using Team Color language in articles such as this.

    Better: "In any event, the Jacobs op-ed flags an interesting issue that I am sure some conservative State governments will litigate if these provisions are enacted into law."

  6. "Section 30608 of the Build Back Better bill"

    No further comment.

    1. Well, the first section is 10001, and the second one is 11001. So there aren't 30608 actual sections in the bill. But it's still huge.

      Congress.gov has a warning on the bill that if you open the HTML version, your browser might become unresponsive. But fear not: for your convenience, they've also included a plain-text version which is "only" 3 MB.

      1. Also, I don't see a section 30608. I think he meant 30603.

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