Medicaid Expansion, Regulations & Spending Clause
As a part of the Medicaid Expansion of PPACA, States are compelled to follow new regulations or risk losing their current Medicaid funding. This part of the bill was also under the constitutional microscope. The result was a 5-4 overturning of this part of the bill. Here is the crux of the issue:
Congress may use its spending power to create incentives for States to act in accordance with federal policies. But when “pressure turns into compulsion,” ibid., the legislation runs contrary to our system of federalism.
More specifically, the decision came down to the accountability of our democratic system:
…when the State has no choice, the Federal Government can achieve its objectives without accountability…
“[W]here the Federal Government directs the States to regulate, it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision.” Id., at 169.
Had non-compliance only risked loss of the medicaid expansion funding, it may have survived constitutionality in this regard:
…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.
For practical purposes, the threat of losing current medicaid funding will not be permitted to induce compliance to the new regulations. The decision, also, sets a strict precedent limiting the power of the federal to govern the states.