Supreme Court surprise: Court will also hear Medicaid challenge

Lawyers on both sides of the lawsuits over President Obama’s healthcare law were caught off guard Monday when the Supreme Court said it would debate whether the law’s Medicaid expansion is constitutional.

The high court was widely expected to take up the law’s individual mandate, and to take the case filed by 26 states and the National Federation of Independent Business. But the court’s decision to also hear the states’ Medicaid challenge came as a surprise to the healthcare law’s critics as well as its supporters.

“I don’t really know what that signals, but that signals something,” said Randy Barnett, a Georgetown University law professor who represents NFIB.

The court rarely takes up issues that have not split lower courts, but the states haven’t gotten anywhere with their Medicaid arguments. The district court and the appeals court in the 26-state suit both said the Medicaid expansion is constitutional. Both also struck down the mandate.

“I guess they’re just willing to consider everything,” Barnett said.

Tim Jost, a Washington and Lee University law professor who supports the healthcare law, was “surprised and disappointed” that the court took up the Medicaid challenge. A ruling against the expansion would have more dramatic implications than a ruling against the mandate, he said.

Simon Lazarus, policy counsel at the National Senior Citizens Law Center, echoed that view.

“That would be enormously dramatic, which is a good reason to think they won’t do it,” he said. “It would invite copycat attacks on myriad federal requirements.”

Lazarus and other experts cautioned that taking up the Medicaid challenge doesn’t necessarily mean the Supreme Court is poised to accept the states’ arguments — it could simply mean that enough justices thought the question was worth considering.

“I think the grant strongly suggests that they have interest in the issue,” said Greg Katsas, who represents NFIB. “I don’t think you can go so far as to say it signals that the states are likely to win, but it does signal they’re viewing that as a serious question.”

Ilya Shapiro, an attorney with the libertarian Cato Institute, said upholding the Medicaid expansion could help make a rejection of the individual mandate seem more tailored and less like a broad attack on the healthcare law.

“It might make them look balanced at the end,” he said.

The healthcare law expands Medicaid so that everyone with an income below 133 percent of the federal poverty level is eligible for aid. States must adopt the new eligibility threshold if they want to remain in Medicaid, and the federal government will initially pay the entire cost of covering the newly eligible patients.

The 26 states say the requirements amount to “coercion.” But the 11th Circuit Court of Appeals said the federal government has broad power to change the terms of Medicaid and states must adhere to new terms or quit the program altogether.

Lazarus said there is a “noticeable fear and loathing” in conservative legal circles of the federal government’s authority to attach strings to its funding.

“Paul Clement’s brief cleverly pushed all of those buttons,” Lazarus said. Clement, a former solicitor general, is the lead attorney for the states.

Clement argued that the federal government can attach new requirements to new streams of federal funding, but shouldn’t be able to tack on more Medicaid mandates simply because states initially agreed to participate in the program. The reform law “essentially holds the states hostage,” he wrote in the states’ request for a Supreme Court hearing.