Health Care Reform and the Challenge of Cooperative Federalism

Professor Abigail Moncrieff explores the balance of power between federal and state governments following two key Supreme Court rulings.

“I campaigned for Al Gore in the 2000 primary,” says Associate Professor Abigail R. Moncrieff, “and one of the major issues between Bill Bradley [former Senator from New Jersey] and him was this debate over health care reform. The more I read about it at the time, the more I realized how much I had to learn. It’s an absolutely fascinating field of study. Constitutional law and administrative law have always been interesting to me as well, and they’re so relevant to health law. The power of our agencies to shape health care is a very important part of the ongoing health care reform debate, and will be for a very long time.”

Moncrieff is particularly interested in the long-term effect that two 2012 Supreme Court decisions will have on federalism, the balance of power between the federal government and state governments that allows for the local implementation of national programs. She believes that the two Supreme Court holdings, which at first blush appear to give states broad power to shape national policy, may actually usher in a new era of federal control over large-scale national programs.

Moncrieff’s paper, “Will Uncooperative Federalism Survive NFIB?” (forthcoming from Montana Law Review), explores this theory. She presented her research this fall at the Montana Law Review 2014 Symposium on Federalism, and at the Yale Law School Symposium on The Law of Medicare and Medicaid at 50.

State and Federal Cooperation

The federal government cannot require states to implement federal programs; but, in a compromise known as “cooperative federalism,” it is able to condition federal money on the state’s administering federal programs. States fight back against federal influence through negotiation: in her Montana symposium paper, co-authored by second-year student Jonathan Dinerstein (’16), Moncrieff writes that when a state and the federal government disagree on how to administer a federal program, the state can easily assert itself by refusing to comply with national directives.

“The national government could theoretically argue that the state isn’t in compliance, and pull its money,” Moncrieff says, “but the federal government would never do that because it’s counterproductive. What everyone wants is a program that works as well as possible. Taking the money away won’t accomplish that goal; so already, we have a situation where the federal government’s bargaining power is limited.”

Rulings in Contradiction

According to Moncrieff, the Supreme Court may have upended that delicate balance through a pair of contradictory 2012 opinions. First, in Douglas v. Independent Living Center of Southern California, Justice Breyer, writing for the majority, invited individuals to use the Administrative Procedure Act (APA)—and its standard of arbitrary and capricious review—to sue federal administration agencies when states resist cooperative federalism programs. This put the burden of enforcement on the federal government. Second, in National Federation of Independent Business (NFIB) v. Sebelius, the Court backed states’ resistance to President Obama’s attempts to expand Medicaid. The Court held that the federal government could not require states to participate in the Medicaid expansion by threatening to withhold federal money from previously existing Medicaid programs.

“NFIB is a ruling based on a hypothetical,” Moncrieff explains. “It says the federal government can’t take away money if a state refuses to expand its Medicaid program—which the federal government would never actually do. But, the Supreme Court made it clear that it’s unconstitutional for the federal government to even threaten to pull its funding. So now, the negotiations between states and the federal government have changed significantly.”

Mechanisms for Enforcement

Moncrieff takes issue with the NFIB decision on two points: first, she argues that Congress’s attempt to expand Medicaid is hard to distinguish from ordinary amendments to cooperative federalism programs; and second, she points out thatNFIB appears to take enforcement power away from the federal government shortly after the burden of enforcement was placed on the federal government through Justice Breyer’s reliance on the Administrative Procedure Act in Douglas.

“The Supreme Court invited litigation under the APA against the national Centers for Medicare and Medicaid Services (CMS), the federal agency that administers state Medicaid plans, for failure to enforce the statute. But in the same term, it told the CMS that its only bargaining chip for enforcing the statute was unconstitutional,” Moncrieff says. “This leaves CMS in a bind: it has to enforce a statute, but it’s not allowed to enforce the statute.”

Ultimately, Moncrieff believes this initial crackdown in favor of the states will actually lead to more nationalization of policy decisions and policy administration. Rather than engaging in the negotiations that come with the conditioning of federal money on states’ administering federal programs, Moncrieff predicts that Congress will instead use conditional preemption: when a state refuses to implement a national program, the federal government crowds out the state administration and administers the program itself.

“This is like the health care exchanges,” Moncrieff says. “The federal government will either give a state money to set up a program, or if the state refuses, will come in and set it up themselves. Agencies don’t use that tool very often, largely because they don’t have the staff, but it’s a good option, especially for large-scale legislation like Medicaid.”

Rebecca A. Binder (’06)