Thursday, July 12, 2012

The Individual Mandate Explained, Part 4


The big political story out of the court case was the individual mandate, but something else was ruled upon as well. You might not have noticed, but the Supreme Court did something incredibly meaningful in its health care decision: they put the final nail in the coffin of the federalist foundation that we have had since the New Deal. Though the movement to New Federalism has meant the gradual pushing of power from the center to the states, it has not really worked that way when the federal government really wanted something done. Instead, the federal government orders the states' to do something, then holds federal dollars that the states are owed until they do it. Call it Federalism through hostage-taking. 


The famous case is how the drinking age was raised from 18 to 21. President Reagan and a Democratic Congress passed the National Minimum Drinking Age Act in order to curb binge drinking as well as drinking and driving (with the unintended consequence of pushing college student drinking into the shadows of fraternity parties instead of out in the open in regulated college bars - which increased Greek life membership and worsened binge drinking in result). The federal government did not have the power to do this on their own because drinking age laws are state laws instead of a federal ones. To achieve compliance, the federal government withheld highway funding to states unless they passed laws in accordance with this new Act. Hostage-taking federalism.


Not surprisingly, the federal government was sued, as they are sued a lot. My brother-in-law can attest to that fact because it is his job to sue them. The resulting Supreme Court case was South Dakota v. Dole, where the state of South Dakota said that it was an abuse of congressional authority to withhold marginally unrelated dollars in order to pressure the states into passing legislation. The federal government should not be able to legislate on the state level. The Rehnquist Court voted 7-2 that it was within the scope of the federal government to do so. The dissent was the two most liberal judges on the court at the time - Brennan and O'Connor. Conservatives for federalism, liberals split for and against it. 


Fast forward to the present day, NFIB v. Sebelius. The court rules 5-4 that the federal government does not have the power to withhold current Medicaid funds if states choose not to expand their programs to be in accordance with ObamaCare. The liberals were in the minority protecting federalism and the conservatives were in the majority breaking it down. When the politics change, so does the underlying ideology of the justices.Rather the Supreme Court decided that states can choose whether to expand their medicaid programs or not. 

Several governors have already made it known that they will not be participating citing future cost increases. This sets a new precedent for Federalism: the government can now only bribe states into achieving their goals instead of blackmailing. The ACA does this by saying the government will pay 100 percent of the Medicaid expansion for the first three years and then it slowly phase the program down to only 90 percent after that. It's still a great deal for the states and people like Nancy Pelosi are correct in pointing out that the economics of it will win out over the politics over time. Blackmail federalism.

Many lawsuits are about to be filed over other laws that the states feel they were forced to pass to obtain the federal dollars that they were rightfully owed - perhaps even the drinking age will be re-visited. For now though, the limited Medicaid provision could leave millions without health care. It created a new donut hole in Medicaid - like the much maligned Medicare one. Would have the people (or at least the poor) been better off with Medicaid and not the individual mandate?


Stay tuned for next time.

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