	Background

In March 2010, the 111 th Congress passed the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010. Following the enactment of the ACA, state attorneys general and others brought several lawsuits challenging various provisions of the ACA on constitutional grounds. In NFIB , the Court held that the withdrawal of all Medicaid funds from the states for failure to comply with the expansion of the program did violate the Tenth Amendment, but that withholding of just the funds associated with that expansion raised no significant constitutional concerns. For instance, neither the Supreme Court nor any other court had held that a grant condition imposed on a state failed either a relatedness or coercion test. An example of a grant condition that does not violate the Tenth Amendment can be found in South Dakota v. Dole. Finding that the legislation was a clear exercise of Congress's power under the Spending Clause, the Court went on to hold that, under this Clause, the condition must be related to the particular national projects or programs to which the money was being directed (relatedness). The Supreme Court went on to hold, however, that to the extent that enforcement of the ACA Medicaid expansion through withdrawal of existing Medicaid funds was unconstitutional, that the remedy was to sever that enforcement mechanism. Thus the Court limited withholding of funds for failure to serve the expanded Medicaid population to withholding of those new funds, effectively making state participation in the Medicaid expansion voluntary. It should be noted, however, that these categories are not presented by Justice Roberts systematically, but rather are identified explicitly or implicitly at various places in the opinion. Finally, if a grant condition is unrelated to the general policy goals of the underlying grant, then it is most likely unconstitutional under the Spending Clause. Thus, if these factors mark the outer limits of Congress's power, then the case may have minimal impact on existing or future funding grant conditions. In Justice Roberts' opinion, however, the "contract" analogy serves a different purpose. In NFIB , Justice Roberts took a similar approach. It is unclear, however, whether NFIB has significantly changed the Dole analysis, or whether the combination of factors that led to the Court's decision to limit how the ACA Medicaid expansion would be enforced is likely to be repeated. Prior case law holds (and NFIB confirms) that if a grant condition is directly related to the expenditure of federal funds in a state program or activity, then the condition is constitutional under the Spending Clause. Second, if the grant condition is generally related to the policy goals of the underlying grant, then, under Dole and NFIB, withdrawal of all program funds would, in most foreseeable cases, be constitutional under the Spending Clause and the Tenth Amendment. However, if the grant condition is attached to a new and independent program; the government threatens the funding of an existing program; and the withholding of federal funding represents a significant portion of a state's budget, then that condition may be unconstitutionally coercive under the Tenth Amendment. Justice Roberts did not identify a standard to determine what level of funding withholding would be coercive, although he did conclude that withdrawal of federal program funds which represents 10% of an average state's budget constituted a "gun to the head" and was a form of "economic dragooning." How courts are to consider grant withdrawals below 10%, however, is not addressed by the Roberts opinion, and Justice Roberts declined to speculate where such a line would be drawn.
In March 2010, Congress passed the Patient Protection and Affordable Care Act (ACA). The ACA, among other things, requires states to expand Medicaid eligibility or lose Medicaid funding. Following the enactment of the ACA, state attorneys general and others brought several lawsuits challenging various provisions of the act on constitutional grounds. In National Federation of Independent Business (NFIB) v. Sebelius, the Supreme Court, among other things, decided that the enforcement mechanism for the ACA Medicaid expansion, withdrawal of all Medicaid funds, was a violation of the Tenth Amendment. The Court went on to hold, however, that the remedy was to sever that enforcement mechanism, effectively making state participation in the Medicaid expansion voluntary.
In the 1987 case of South Dakota v. Dole, the Supreme Court held that, in order for a federal grant condition imposed on a state to pass constitutional muster under the Spending Clause, the condition must be related to the particular national projects or programs to which the money was being directed. In addition, in order to comply with the limits of the Tenth Amendment, the level of funds withheld for failure to comply with that condition cannot be coercive. In a controlling opinion in NFIB, Justice Roberts suggested that this analysis may vary based on the type of grant condition that was at issue. It is unclear, however, whether NFIB significantly changed the Dole analysis, or whether the combination of factors that led the Court's decision to limit how ACA Medicaid expansion would be enforced is likely to be repeated.
For instance, if a grant condition is directly related to the expenditure of federal funds in a state program or activity, then, according to Justice Robert's opinion in NFIB, the condition is usually constitutional under the Spending Clause. Or even if a grant condition is only generally related to the policy goals of the underlying grant, NFIB suggests that withdrawal of all program funds would still, in most foreseeable cases, be constitutional under the Spending Clause and the Tenth Amendment. If a grant condition is unrelated to the general policy goals of the underlying grant, however, then it is most likely unconstitutional under the Spending Clause. This latter standard, however, has been in place since the Dole case, and no court has ever struck down a federal law on this basis.
Justice Roberts' concern in NFIB arguably dealt with a different question: whether a grant condition attached to a new and independent program (here, the Medicaid expansion) which threatens the funding of an existing program (here Medicaid) is constitutional. In such cases, if the withholding of federal funding represents a significant portion of a state's budget, and there are distinguishing factors among the programs, then that condition may be unconstitutionally coercive under the Tenth Amendment. Justice Roberts did not identify a standard to determine what level of withholding funds would be coercive, or specify what kind of distinguishing factors were necessary. He did conclude, however, that withdrawal of federal program funds which made up 10% of an average state's budget represented a "gun to the head" and was a form of "economic dragooning."
How courts are to consider grant withdrawals below 10%, however, is not addressed by the Roberts' opinion, and Justice Roberts declined to speculate where such a line would be drawn. It should be noted, however, that few federal programs even approach the level of Medicaid funds provided to the states. Thus, if the 10% threshold and the need for distinguishing factors mark the outer limits of Congress's power, then the case may have minimal effect on existing or future federal grant conditions.