Does the House Build Back Better Bill Violate the Limits on Conditional Spending?

The House’s “Build Back better” spending bill includes provisions that reduce federal funding of health care for states who have not expanded Medicaid in accordance with the Affordable Care Act. You can read the Wall Street JournalChris Jacobs asserts that the argument is against conditional spending holding NFIB v. Sebelius.

Jacobs explains the pertinent provisions in this way:

Seven states, expansion or non-expansion, continue to use uncompensated health care pools to pay for providers of charity treatment. Section 30608 of the Build Back Better bill contains two separate provisions that would apply solely to nonexpansion states. The first would reduce by 12.5% their Medicaid disproportionate-share hospital payments, which offset the costs of hospitals that treat high numbers of uninsured patients.

Some states are able to take advantage of Section 1115 Medicaid waivers that allow them federally funded hospitals to cover uncompensated healthcare. Nonexpansion States would not be permitted to pay hospitals uncompensated care for patients eligible for Medicaid under the Build Back Better bill.

Jacobs says that funding is cut in the BBB bill for those states who refuse to expand Medicaid. Jacobs also notes that while Jacobs’ bill increases health insurance subsidies to those who could be affected, it does not extend these subsidies. The funding reductions are permanent.

One, the fact that the federal government funded something in past doesn’t mean it must fund the same thing in future. Congress should be able to alter its spending priorities as needed. The Court, on the other hand held that NFIBCongress cannot use state prior acceptance of federal funds as leverage to incentivize state cooperation with new programmes. Accordingly, Congress couldn’t condition the continued receipt of Medicaid funds for acceptance of the Medicaid expansion. Chief Justice Roberts stated that Congress can’t penalize States for refusing to accept federal funding.

Jacobs says that since the Medicaid expansion, states have been relying on threatened funding for some years. But Congress has no authority to decide whether it wants to subsidize private health insurance or provide Medicaid funding in a larger amount as a “second best” option for expanding Medicaid. It’s also not obvious to me, considering the context, that states objecting to the reforms would be able describe these reforms to incentivize states to take the Medicaid expansion.

I think the Jacobs editorial flags an intriguing issue which some Red States would litigate, if such provisions were enacted.