The modernization of American public law: health care reform and popular constitutionalism.

• Author: Super, David A.
• Position: III. The Affordable Care Act's Redefinition of Public Law A. Reassigning Roles in Federalism 2. The ACA's Federalism through Conclusion, with footnotes, p. 914-951

2. The ACA's federalism

   The ACA's most dramatic impact is in its rejection of the New Deal's approach to justifying cooperative fiscal federalism. (203) Indeed, it could be viewed as taking a first step toward curtailing such arrangements generally. It displaces the increasingly uneasy balance--struck in the Social Security Act and maintained since--that divides fiscal responsibility for the social safety net between the federal and state governments. The ACA essentially requires states to maintain the fiscal effort they were putting into the prior system--responsibilities that may well dissipate over time--while the federal government covers almost all of the costs of its expansion. (204)

   The ACA openly and unapologetically relies upon the superior capacity model. Just as the New Deal initiated fiscal federalism in the wake of states' inability to respond to mass unemployment, the ACA comes after two decades of state efforts at health care reform that failed, wave after wave, when one or another recession destroyed the states' fiscal capacity to provide the necessary subsidies. (205) This time, however, Congress made little effort to obscure the federal role: premium subsidies come directly from the federal government rather than being funneled through states. (206) To be sure, the ACA imposes considerable detailed policy guidance on those accepting its funds. (207) Nonetheless, the predominance of resources, rather than policy leadership, in its motive is evident from the sweeping waivers it allows states. (208)

   Chief Justice Roberts's de facto majority opinion in NFIB confirms the realignment among the post-New Deal models of fiscal federalism. Most obviously, it sharply weakens the leadership model, preventing the federal government from leveraging states' dependence on existing federal funding to gain their acquiescence to federal policy leadership into new directions. Because this decision came in the face of exceptionally generous federal financing provisions for the Medicaid expansion, this decision may have broad implications. At a minimum, it converts the form of leadership the federal government may exercise in cooperative federalism programs to a more persuasion-driven form. About half the states did not expand Medicaid prior to the ACA's implementation in 2014. (209) Comparisons between the experiences of the implementing and nonimplementing states may provide a natural experiment that gives renewed meaning to the idea of "laboratories of democracy."

   NFIB also, however, strengthens the other two models of fiscal federalism. The compensatory model has assumed that the federal government has a moral obligation to protect states from the fiscal burdens it imposes on them. NFIB for the first time makes that obligation legally binding. Although neither Chief Justice Roberts nor the conservative dissenters provide a detailed roadmap for assessing future fiscal impositions, the mere awareness that some such impositions may be constitutionally proscribed will surely strengthen the moral authority of states demanding compensation in a host of other areas.

   NFIB also acknowledges and accepts Congress's open reliance on the superior capacity model. Historically, the habit has been to treat both federal and state governments' fiscal capacities as similar, presumably because doing anything less would imply that the states are not fully sovereign. Chief Justice Roberts loudly broke this conspiracy of silence. He acknowledged that, whatever their formal powers, states' practical fiscal capacity is far inferior to that of the federal government. (210) This opened the door for frank discussions in mainstream legal and political circles about division of fiscal responsibility. Presumably this could include a more structured, deliberate means of countercyclical revenue sharing with states to avert teacher and public safety officer layoffs during recessions--as well as the deflationary effects of state and local austerity. A Medicaid matching rate that varied with unemployment (rather than merely a state's prosperity relative to other states), permanent provisions for extended federal UI benefits and augmented food assistance when unemployment exceeds some threshold, and automatic supplements to states' TANF block grants--all measures implemented ad hoc in the 2009 stimulus legislation but now expired with unemployment still high--would similarly merit serious debate now that the New Deal's polite but dishonest homage to states' fiscal capacity is behind us.

   Conversely, if the ACA fails, it will do so in large part because it was perceived as being "too big." Unlike most recent costly federal initiatives, the ACA did not add to the deficit. (211) Although the news media has often left that point unsaid, and polling indicates many voters are confused on that point, (212) the fact that it fully offset its spending suggests that its demise would signify that no consensus exists that securing access to health care is an appropriate project for the federal government. To be sure, the ACA's fiscal provisions give states broader roles in shaping eligibility rules than some preferred, (213) and governors have complained about the costs it does require states to bear. Nonetheless, the ACA's public meaning is as an expansion of federal fiscal responsibility for human services. Some of the ACA's critics claimed to favor its goals but challenged the federal government's legitimacy in pursuing them. (214) Similarly, although the ACA delegated far more regulatory power to the states than many would have preferred, (215) the broad public understanding of the ACA is as a vast expansion of federal regulatory power. And as criticism of its regulatory provisions has gone to their scope rather than to their (generally popular) substance, the ACA's fall would be a constitutional statement about the role and scope of federal economic regulation.

   In other aspects of fiscal federalism, the ACA's entrenchment of the superior capacity model gives federal policymakers a useful tool with which to counteract states' procyclical offsetting of federal fiscal policy. In the near term, however, the ACA exacerbates that problem. The ACA's cost-sharing structure has a similar effect to CHIP'S but with a much more dramatic impact on states. Relatively prosperous low-income people will receive federal health insurance tax credits at no cost to the states. An intermediate group will be covered by the ACA's Medicaid expansion (in states implementing that expansion); their costs will be free to states initially and will eventually stabilize at just ten percent of the total spent on them. (216) The lowest-income people will remain on states' Medicaid programs subject to the existing matching rates, which even in the poorest states require considerably more than a ten percent state share. (217) Thus, when the economy slackens and families' incomes decline, they will shift down from a category with full federal fiscal responsibility to those that impose more and more burdens on states--precisely at times when the states are least able to bear those burdens. Conversely, a booming economy will shrink the legacy Medicaid population and bring further fiscal relief to states whose budgets are already moving into the black. Finally, the ACA turns the prevailing division of administrative responsibilities on its head by fragmenting administration of its low-income subsidies. Because of ideologically based resistance and procrastination prior to the Supreme Court's decision, at least half of the states initially decided not to operate the insurance exchanges administering the health insurance subsidies for their residents. (218) Some of these states will cooperate closely with their federal exchanges; some will refuse to do so, increasing the likelihood of people falling through the cracks. In many of the other states, ideological opposition to the ACA made the major insurance companies indispensable members of the coalition to agree to operate a state exchange; those companies' price typically was putting the exchange in the hands of a private or semiprivate entity that they dominate. (219) Thus, responsibility for determining eligibility for subsidies will be divided between existing state Medicaid offices, isolated federal exchanges, cooperative federal exchanges, public state exchanges, and private exchanges.

   This arrangement likely will be unstable; if the ACA survives, the federal exchanges may become a permanent part of the administrative landscape. If so, it would mean that for the first time federal officials will be dispensing large amounts of state funds (rather than the other way around). Developing accountability mechanisms for this arrangement could call some basic assumptions about the federal-state relationship into question. Alternatively, it could provide the impetus for fully federalizing the financing of Medicaid and for giving these entities responsibility for dispensing other benefits that are entirely federally funded, such as SNAP. For now, however, the ACA is more destabilizing the traditional, state-deferential order than pointing to a clear, technocratic substitute.

   2. Modernizing the Social Insurance Constitution

   In addition to reshaping fiscal federalism, the New Deal also elevated a small, obscure federal activity--social insurance--and set it on course to become the government's largest function. Although the particulars of social insurance are continually in flux, the federal government's performance of this role has clearly achieved constitutional status. President Roosevelt deliberately set out to entrench a system of federal social insurance as something that would be widely accepted as a fundamental right. (220) The Framers may not have envisioned it--just as many believed that a standing army was incompatible with a free country (221)--but today, terminating Social Security, Medicare, and other core social...