NATIONAL FEDERATION OF INDEPENDENT BUSINESS ET AL. v.
SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.
567 U.S. 519
CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE ELEVENTH CIRCUIT
Argued March 26, 27, 28, 2012—Decided June 28, 2012*
ROBERTS, C. J., announced the judgment of the Court and delivered the
opinion of the Court with respect to Parts I, II, and III–C, in which GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined; an opinion with respect to
Part IV, in which BREYER and KAGAN, JJ., joined; and an opinion with respect to
Parts III–A, III–B, and III–D. GINSBURG, J., filed an opinion concurring in part, concurring in the
judgment in part, and dissenting in part, in which SOTOMAYOR, J., joined, and in which BREYER and KAGAN, JJ., joined as to Parts I, II, III, and IV. SCALIA, KENNEDY, THOMAS, and ALITO, JJ., filed a dissenting opinion. THOMAS, J., filed a dissenting opinion.
CHIEF JUSTICE ROBERTS announced the judgment of the Court and delivered the opinion
of the Court with respect to Parts I, II, and III–C, an opinion with respect to
Part IV, in which JUSTICE BREYER and JUSTICE KAGAN join, and an opinion with respect to Parts III–A, III–B,
and III–D.
Today we resolve constitutional
challenges to two provisions of the Patient Protection and Affordable Care Act
of 2010: the individual mandate, which requires individuals to purchase a
health insurance policy providing a minimum level of coverage; and the
Medicaid expansion, which gives funds to the States on the condition that they
provide specified health care to all citizens whose income falls below a
certain threshold. We do not consider whether the Act embodies sound policies.
That judgment is entrusted to the Nation’s elected leaders. We ask only whether
Congress has the power under the Constitution to enact the challenged
provisions.
* * *
I
. . . The
second provision of the Affordable Care Act directly challenged here is the
Medicaid expansion. Enacted in 1965, Medicaid offers federal funding to States
to assist pregnant women, children, needy families, the blind, the elderly, and
the disabled in obtaining medical care. See 42 U. S. C. §1396a(a)(10). In order to receive that
funding, States must comply with federal criteria governing matters such as
who receives care and what services are provided at what cost. By 1982 every
State had chosen to participate in Medicaid. Federal funds received through the
Medicaid program have become a substantial part of state budgets, now
constituting over 10 percent of most States’ total revenue.
The Affordable Care Act expands
the scope of the Medicaid program and increases the number of individuals the
States must cover. For example, the Act requires state programs to provide
Medicaid coverage to adults with incomes up to 133 percent of the federal poverty
level, whereas many States now cover adults with children only if their income
is considerably lower, and do not cover childless adults at all. See §1396a(a)(10)(A)(i)(VIII). The Act increases
federal funding to cover the States’ costs in expanding Medicaid coverage,
although States will bear a portion of the costs on their own. §1396d(y)(1). If
a State does not comply with the Act’s new coverage requirements, it may lose
not only the federal funding for those requirements, but all
of its federal Medicaid funds. See §1396c.
Along with their challenge to the
individual mandate, the state plaintiffs in the Eleventh Circuit argued that
the Medicaid expansion exceeds Congress’s constitutional powers. The Court of Appeals
unanimously held that the Medicaid expansion is a valid exercise of Congress’s
power under the Spending Clause. U. S. Const., Art. I, §8, cl. 1. And the court
rejected the States’ claim that the threatened loss of all federal Medicaid
funding violates the Tenth Amendment by coercing them into complying with the
Medicaid expansion. 648 F. 3d, at 1264, 1268.
We granted
certiorari to review the judgment of the Court of Appeals for the Eleventh
Circuit with respect to both the individual mandate and the Medicaid expansion.
565 U. S. ___ (2011). Because no party supports the Eleventh Circuit’s holding
that the individual mandate can be completely severed from the remainder of the
Affordable Care Act, we appointed an amicus curiae
to defend that aspect of the judgment below. And because there is a
reasonable argument that the Anti-Injunction Act deprives us of jurisdiction
to hear challenges to the individual mandate, but no party supports that
proposition, we appointed an amicus curiae to
advance it.2
—————— 2We appointed H. Bartow
Farr III to brief and argue in support of the Eleventh Circuit’s judgment with
respect to severability, and Robert A. Long to brief and argue the proposition
that the Anti-Injunction Act bars the current challenges to the individual
mandate. 565 U. S. ___ (2011). Both amici have ably discharged
their assigned responsibilities.
IV
A
The States
also contend that the Medicaid expansion exceeds Congress’s authority under the
Spending Clause. They claim that Congress is coercing the States to adopt the
changes it wants by threatening to withhold all of a
State’s Medicaid grants, unless the State accepts the new expanded funding and
complies with the conditions that come with it. This, they argue, violates the
basic principle that the “Federal Government may not compel the States to enact
or administer a federal regulatory program.” New York, 505 U. S., at 188.
There is
no doubt that the Act dramatically increases state obligations under Medicaid.
The current Medicaid program requires States to cover only certain discrete
categories of needy individuals—pregnant women, children, needy families, the
blind, the elderly, and the dis-abled. 42 U. S. C. §1396a(a)(10).
There is no mandatory coverage for most childless adults, and the States
typically do not offer any such coverage. The States also enjoy considerable
flexibility with respect to the coverage levels for parents of needy families.
§1396a(a)(10)(A)(ii). On average States cover only
those unemployed parents who make less than 37 percent of the federal poverty
level, and only those employed parents who make less than 63 percent of the
poverty line. Kaiser Comm’n on Medicaid and the Uninsured, Performing Under
Pressure 11, and fig. 11 (2012).
The
Medicaid provisions of the Affordable Care Act, in contrast, require States to
expand their Medicaid programs by 2014 to cover all individuals under the age
of 65 with incomes below 133 percent of the federal poverty line. §1396a(a)(10)(A)(i)(VIII). The Act also
establishes a new “[e]ssential health benefits”
package, which States must provide to all new Medicaid recipients—a level
sufficient to satisfy a recipient’s obligations under the individual man-date.
§§1396a(k)(1), 1396u–7(b)(5), 18022(b). The Af-fordable
Care Act provides that the Federal Government will pay 100 percent of the costs
of covering these newly eligible individuals through 2016. §1396d(y)(1). In the
following years, the federal payment level gradually decreases, to a minimum of
90 percent. Ibid. In light of the expansion in
coverage mandated by the Act, the Federal Government estimates that its
Medicaid spending will in-crease by approximately $100 billion per year, nearly
40 percent above current levels. Statement of Douglas W. Elmendorf, CBO’s
Analysis of the Major Health Care Legislation Enacted in March 2010, p. 14,
Table 2 (Mar. 30, 2011).
The
Spending Clause grants Congress the power “to pay the
Debts and provide for the . . . general Welfare of the United States.” U. S.
Const., Art. I, §8, cl. 1. We have long recognized that Congress may use this
power to grant federal funds to the States, and may condition such a grant upon
the States’ “taking certain actions that Congress could not require them to
take.” College Savings Bank, 527 U. S., at 686. Such measures “encourage a
State to regulate in a particular way, [and] influenc[e]
a State’s policy choices.” New York, supra, at 166. The conditions imposed by
Congress ensure that the funds are used by the States to “provide for the . . .
general Welfare” in the manner Congress intended.
At the
same time, our cases have recognized limits on Congress’s power under the
Spending Clause to secure state compliance with federal objectives. “We have
repeatedly characterized . . . Spending Clause legislation as ‘much in the
nature of a contract.’ ” Barnes v. Gorman, 536 U. S. 181, 186 (2002) (quoting Pennhurst State School and Hospital v. Halderman, 451 U. S. 1, 17 (1981) ).
The legitimacy of Congress’s exercise of the spending power “thus rests on
whether the State voluntarily and knowingly accepts the terms of the ‘contract.’ ” Pennhurst, supra,
at 17. Respecting this limitation is critical to ensuring that Spending Clause
legislation does not undermine the status of the States as independent
sovereigns in our fed-eral system. That system “rests
on what might at first seem a counterintuitive insight, that ‘freedom is
enhanced by the creation of two governments, not one.’ ”
Bond, 564 U. S., at ___ (slip op., at
8) (quoting Alden v. Maine, 527 U. S.
706, 758 (1999) ). For this reason, “the Constitution
has never been understood to confer upon Congress the ability to require the
States to govern according to Congress’ instructions.” New York, supra, at 162. Otherwise the two-government system
established by the Framers would give way to a system that vests power in one
central government, and individual liberty would suffer.
That
insight has led this Court to strike down federal legislation that commandeers
a State’s legislative or administrative apparatus for federal purposes. See,
e.g., Printz, 521 U. S., at 933 (striking
down federal legislation compelling state law enforcement officers to perform
federally mandated background checks on handgun purchasers); New York, supra, at 174–175
(invalidating provisions of an Act that would compel a State to either take title
to nuclear waste or enact particular state waste
regulations). It has also led us to scrutinize Spending Clause legislation to
ensure that Congress is not using financial inducements to exert a “power akin
to undue influence.” Steward Machine Co.
v. Davis, 301 U. S. 548, 590 (1937) . 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. “[T]he Constitution
simply does not give Congress the authority to require the States to regulate.”
New York, 505 U. S., at 178. That is
true whether Congress directly commands a State to regulate or indirectly
coerces a State to adopt a federal regulatory system as its own.
Permitting
the Federal Government to force the States to implement a federal program would
threaten the political accountability key to our federal system. “[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. 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.
We
addressed such concerns in Steward
Machine. That case involved a federal tax on employers that was abated if
the businesses paid into a state unemployment plan that met certain federally
specified conditions. An employer sued, alleging that the tax was impermissibly
“driv[ing] the state
legislatures under the whip of economic pressure into the enactment of
unemployment compensation laws at the bidding of the central government.” 301 U.
S., at 587. We acknowledged the danger that the Federal Government might employ
its taxing power to exert a “power akin to undue influence” upon the States.
Id., at 590. But we observed that Congress adopted the challenged tax and
abatement program to channel money to the States that would otherwise have gone
into the Federal Treasury for use in providing national unemployment services.
Congress was willing to direct businesses to instead pay the money into state
programs only on the condition that the money be used for the same purposes.
Predicating tax abatement on a State’s adoption of a particular
type of un-employment legislation was therefore a means to “safeguard
[the Federal Government’s] own treasury.” Id., at 591. We held that “[i]n such circumstances, if in no others, inducement or
persuasion does not go beyond the bounds of power.” Ibid.
In
rejecting the argument that the federal law was a “weapon[
] of coercion, destroying or impairing the autonomy of the states,” the Court
noted that there was no reason to suppose that the State in that case acted
other than through “her unfettered will.” Id., at 586, 590. Indeed, the State
itself did “not offer a suggestion that in passing the unemployment law she was
affected by duress.” Id., at 589.
As our
decision in Steward Machine confirms,
Congress may attach appropriate conditions to federal taxing and spending
programs to preserve its control over the use of federal funds. In the typical
case we look to the States to defend their prerogatives by adopting “the simple
expedient of not yielding” to federal blandishments when they do not want to
embrace the federal policies as their own. Massachusetts
v. Mellon, 262 U. S. 447, 482 (1923). The States are separate and
independent sovereigns. Sometimes they have to act
like it.
The
States, however, argue that the Medicaid expansion is far from the typical
case. They object that Congress has “crossed the line distinguishing
encouragement from coercion,” New York,
supra, at 175, in the way it has structured the funding: Instead of simply
refusing to grant the new funds to States that will not accept the new
conditions, Congress has also threatened to withhold those States’ existing
Medicaid funds. The States claim that this threat serves no purpose other than
to force unwilling States to sign up for the dramatic expansion in health care
coverage effected by the Act.
Given the
nature of the threat and the programs at issue here, we must agree. We have
upheld Congress’s authority to condition the receipt of funds on the States’
complying with restrictions on the use of those funds, because that is the means by which Congress ensures that the funds are spent
according to its view of the “general Welfare.” Conditions that do not here
govern the use of the funds, however, cannot be justified on that basis. When,
for example, such conditions take the form of threats to terminate other
significant independent grants, the conditions are properly viewed as a means
of pressuring the States to accept policy changes.
In South Dakota v. Dole, we considered a
challenge to a federal law that threatened to withhold five percent of a
State’s federal highway funds if the State did not raise its drinking age to
21. The Court found that the condition was “directly related to one of the main
purposes for which highway funds are expended—safe interstate travel.” 483 U.
S., at 208. At the same time, the condition was not a restriction on how the
highway funds—set aside for specific highway improvement and maintenance
efforts—were to be used.
We
accordingly asked whether “the financial inducement offered by Congress” was
“so coercive as to pass the point at which ‘pressure turns into compulsion.’ ” Id., at 211 (quoting Steward
Machine, supra, at 590). By “financial inducement” the Court meant the
threat of losing five percent of highway funds; no new money was offered to the
States to raise their drinking ages. We found that the inducement was not
impermissibly coercive, because Congress was offering only “relatively mild
encouragement to the States.” Dole,
483 U. S., at 211. We observed that “all South Dakota would lose if she adheres
to her chosen course as to a suitable minimum drinking age is 5%” of her
highway funds. Ibid. In fact, the federal funds at stake constituted less than
half of one percent of South Dakota’s budget at the time. See Nat. Assn. of
State Budget Officers, The State
Expenditure Report 59 (1987); South
Dakota v. Dole, 791 F. 2d 628, 630 (CA8 1986). In consequence, “we
conclude[d] that [the] encouragement to state action [was] a valid use of the
spending power.” Dole, 483 U. S., at
212. Whether to accept the drinking age change “remain[ed]
the prerogative of the States not merely in theory but in fact.” Id., at
211–212.
In this
case, the financial “inducement” Congress has chosen is much more than
“relatively mild encouragement”—it is a gun to the head. Section 1396c of the
Medicaid Act provides that if a State’s Medicaid plan does not comply with the
Act’s requirements, the Secretary of Health and Human Services may declare that
“further payments will not be made to the State.” 42 U. S. C. §1396c. A State
that opts out of the Affordable Care Act’s expansion in health care coverage
thus stands to lose not merely “a relatively small percentage” of its existing
Medicaid funding, but all of it. Dole, supra, at 211. 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. See Nat. Assn. of State Budget
Officers, Fiscal Year 2010 State Expenditure Report, p. 11, Table 5 (2011); 42
U. S. C. §1396d(b). The Federal Government estimates that it will pay out
approximately $3.3 trillion between 2010 and 2019 in order to
cover the costs of pre-expansion Medicaid. Brief for United States 10, n. 6. In
addition, the States have developed intricate statutory and administrative
regimes over the course of many decades to implement their objectives under
existing Medicaid. It is easy to see how the Dole Court could conclude that the threatened loss of less than
half of one percent of South Dakota’s budget left that State with a
“prerogative” to reject Congress’s desired policy, “not merely in theory but in
fact.” 483 U. S., at 211–212. 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.12
Justice
Ginsburg claims that Dole is
distinguishable because here “Congress has not threatened to withhold funds
earmarked for any other program.” Post,
at 47. But that begs the question: The States contend that the expansion is in reality a new program and that Congress is forcing them
to accept it by threatening the funds for the existing Medicaid program. We
cannot agree that existing Medicaid and the expansion dictated by the
Affordable Care Act are all one program simply because “Congress styled” them
as such. Post, at 49. If the expansion is not properly viewed as a modification
of the existing Medicaid program, Congress’s decision to so title it is
irrelevant.13
Here, the
Government claims that the Medicaid expansion is properly viewed merely as a
modification of the existing program because the States agreed that Congress
could change the terms of Medicaid when they signed on in the first place. The
Government observes that the Social Security Act, which includes the original
Medicaid provisions, contains a clause expressly reserving “[t]he right to
alter, amend, or repeal any provision” of that statute. 42 U. S. C. §1304. So it does. But “if Congress intends to impose a condition
on the grant of federal moneys, it must do so unambiguously.” Pennhurst, 451 U. S., at 17. A State
confronted with statutory language reserving the right to “alter” or “amend”
the pertinent provisions of the Social Security Act might reasonably assume
that Congress was entitled to make adjustments to the
Medicaid program as it developed. Congress has in fact done so, sometimes
conditioning only the new funding, other times both old and new. See, e.g.,
Social Security Amendments of 1972, 86Stat. 1381–1382, 1465 (extending Medicaid
eligibility, but partly conditioning only the new funding); Omnibus Budget
Reconciliation Act of 1990, §4601, 104Stat. 1388–166 (extending eligibility,
and conditioning old and new funds).
The
Medicaid expansion, however, accomplishes a shift in kind, not merely degree.
The original program was de-signed to cover medical services for four particular categories of the needy: the disabled, the blind,
the elderly, and needy families with dependent children. See 42 U. S. C.
§1396a(a)(10). Previous amendments to Medicaid eligibility
merely altered and expanded the boundaries of these categories. Under the
Affordable Care Act, Medicaid is transformed into a program to meet the health
care needs of the entire nonelderly population with income below 133 percent of
the poverty level. It is no longer a program to care for the neediest among us,
but rather an element of a comprehensive national plan to provide universal
health insurance coverage.14
Indeed,
the manner in which the expansion is structured
indicates that while Congress may have styled the expansion a mere alteration
of existing Medicaid, it recognized it was enlisting the States in a new health
care program. Congress created a separate funding provision to cover the costs
of providing services to any person made newly eligible by the expansion. While
Congress pays 50 to 83 percent of the costs of covering individuals currently
enrolled in Medicaid, §1396d(b), once the expansion is fully implemented
Congress will pay 90 percent of the costs for newly eligible persons, §1396d(y)(1).
The conditions on use of the different funds are also distinct. Congress
mandated that newly eligible persons receive a level of coverage that is less
comprehensive than the traditional Medicaid benefit package. §1396a(k)(1); see
Brief for United States 9.
As we have
explained, “[t]hough Congress’ power to legislate
under the spending power is broad, it does not include surprising participating
States with post acceptance or ‘retroactive’ conditions.” Pennhurst, supra, at 25. A State could hardly anticipate that
Congress’s reservation of the right to “alter” or “amend” the Medicaid program
included the power to transform it so dramatically.
Justice
Ginsburg claims that in fact this expansion is no different from the previous
changes to Medicaid, such that “a State would be hard put to complain that it
lacked fair notice.” Post, at 56. But
the prior change she discusses—presumably the most dramatic alteration she
could find—does not come close to working the transformation the expansion
accomplishes. She highlights an amendment requiring States to cover pregnant
women and increasing the number of eligible children. Ibid. But this
modification can hardly be described as a major change in a program that—from
its inception—provided health care for “families with dependent children.”
Previous Medicaid amendments simply do not fall into the same category as the
one at stake here.
The Court
in Steward Machine did not attempt to
“fix the outermost line” where persuasion gives way to coercion. 301 U. S., at
591. The Court found it “[e]nough for present
purposes that wherever the line may be, this statute is within it.” Ibid. We
have no need to fix a line either. It is enough for today that wherever that
line may be, this statute is surely beyond it. Congress may not simply
“conscript state [agencies] into the national bureaucratic army,” FERC v. Mississippi, 456 U. S. 742, 775
(1982) (O’Connor, J., concurring in judgment in part and dissenting in part),
and that is what it is attempting to do with the Medicaid expansion.
* * *
The
Affordable Care Act is constitutional in part and unconstitutional in part. . . .
As for the
Medicaid expansion, that portion of the Affordable Care Act violates the
Constitution by threatening existing Medicaid funding. Congress has no
authority to order the States to regulate according to its instructions.
Congress may offer the States grants and require the States to comply with
accompanying conditions, but the States must have a genuine choice whether to
accept the offer. The States are given no such choice in this case: They must
either accept a basic change in the nature of Medicaid,
or risk losing all Medicaid funding. The remedy for that constitutional
violation is to preclude the Federal Government from imposing such a sanction.
That remedy does not require striking down other portions of the Affordable
Care Act.
The
Framers created a Federal Government of limited powers, and assigned to this
Court the duty of enforcing those limits. The Court does so today. But the
Court does not express any opinion on the wisdom of the Affordable Care Act.
Under the Constitution, that judgment is reserved to the people.
The
judgment of the Court of Appeals for the Eleventh Circuit is affirmed in part
and reversed in part.
It is so ordered.