David G. Oedel

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I am here to discuss a constitutional problem with the Health Care Reform Act" that so far has gotten little attention and that has not yet been discussed by our other panelists. The question is whether the federal government's expansion of Medicaid is a coercive exercise of federal power in violation of the Spending Clause of the United States Constitution." This is one of the two main arguments being pressed by the twenty states87 in the Florida litigation challenging the constitutionality of health care reform." It is an argument that I think you're likely to hear more of in the future. Although I am a deputy special attorney general for Georgia in that case, I speak here in my personal capacity as a constitutional law professor at Mercer University, and my views do not necessarily reflect those of any party.

Let me begin by outlining how Medicaid is being transformed by health care reform. Basically, eligibility for Medicaid under the Act is being expanded by millions of people and now will reach people who are substantially above the federally-specified poverty line." Medicare is exclusively a federal program; Medicaid, on the other hand, is a joint program with the states. It is the occasion for the single largest slug of federal funding going to the states.90 It is a sum that is larger than federal funding to the states for transportation and education combined. Under the Health Care Reform Act, the federal funding for Medicaid appears likely to soon be more than half of all federal funding to the states (it had been about 40% before health care reform). In 2010 Medicaid cost the federal government about $289 billion according to the federal government's own estimates-more than an 11% increase from 2009, and these costs were incurred even before some of the costliest changes to Medicaid go into effect in 2014. So far health care reform seems to have had no dampening effect on Medicaid costs. Meanwhile, Medicaid is also a large and growing part of the typical state's own budget. On average in 2006, even before recent increases in the costs of Medicaid, states were spending about 17% of their own state revenues each year to fund their share of Medicaid. Under health care reform, Medicaid's expansion will initially be funded by the federal government, but even if Medicaid were otherwise staying level (not growing by more than 10% a year because of lack of cost controls in the classic system), states will soon be spending more of their own revenues to fund 10% of the expansion or possibly more in six years, whatever that expansion turns out to be.