States’ rights—to block the flow of federal funds to their citizens?

Joseph Fishkin

As a matter of statutory interpretation, the plaintiffs’ argument in King/Halbig—that the ACA as a whole clearly requires no subsidies to go to anybody in a state with a federal exchange—is sufficiently implausible that I think it is fair to characterize it as fundamentally a political argument.

To say that is not necessarily to knock it.  As a descriptive matter, it is hard to dispute the fact that, like the French Conseil Constitutionnel, our Supreme Court sometimes plays a role in our system that is irreducibly political.  From Bush v. Gore through NFIB v. Sebelius, there are plenty of recent high-profile constitutional disputes that illustrate why the founder of this blog and others very plausibly describe much of constitutional law as “high politics.”  Thus, while a challenge to an IRS regulation interpreting the language of the ACA is, on its face, simply a matter of statutory interpretation, it seems pretty clear that the King case is about more than that—not only in the eyes of the plaintiffs but also in the eyes of those who voted today to grant cert.  And so I think it is important to ask what high-politics principle the Justices sympathetic to the plaintiffs aim to vindicate.

(1) The most cynical interpretation is that this is not high politics, but low politics.  In other words, the principle is that Obama’s Affordable Care Act must fall because Obama and his party must lose.  Call this the “partisan Court” theory.  I often have students who are so firmly convinced that law is nothing but politics that they propose interpretations like this.  But I think it is too cynical.

(2) A different, slightly less cynical interpretation would be that the principle is this: the Affordable Care Act must be undone through any means or loophole possible, because it is a deep affront to individual liberty.  Call this the “covert Lochner-revivalist” interpretation.  This interpretation views King through the lens of the joint dissent in NFIB v. Sebelius.  The surface of NFIB may be about the Commerce Clause (just as the surface of King may be about statutory interpretation)—but the broccoli gives the game away.  The real underlying principle, on this view, is: you can’t make me eat the broccoli, you can’t make me buy health care, and indeed you can’t build a society in which everyone’s health insurance is subsidized and intertwined with taxes and the state because deep libertarian principles require, instead, a society in which we all voluntarily purchase whatever health insurance we want, or not.

(3) Or maybe the principle is not Lochner revivalism.  Maybe instead it is about federalism.   This interpretation proceeds as follows: view King through the lens of the Medicaid expansion portion of the Court’s decision in NFIB v. Sebelius.  In some ways that’s the closest fit.  In that portion of the case, many Justices seemed inclined to turn the Affordable Care Act into a very different kind of federal-state program than the one enacted by Congress—one in which the states could decide for themselves whether they wished to expand Medicaid or keep it as it was.  The plaintiffs in King, similarly, would create a system, never contemplated by Congress, that would allow states to opt in—or not, as they choose—to the federal subsidies for purchasing health insurance on the exchanges.  Just as many states now refuse the Medicaid expansion, states would be empowered by King to block all federal subsidy money for their citizens by declining to set up a state exchange.


The ACA itself, of course, gave states a choice about whether to set up an exchange.  But (as I’ve discussed elsewhere) it was a choice that was supposed to hold citizens of the state harmless: either the state could choose to take responsibility—both credit and blame—for the functioning of the exchange, or pass both along to the feds.  Either way, the citizens of the state, who are the intended beneficiaries of the ACA, would get the affordable coverage promised by the Act.

What the Court’s spending clause decision did in NFIB—and what the plaintiffs want to do even more dramatically in King—is give states more flexibility and power to interpose themselves (I use that word deliberately) between the federal government and a class of the state’s own citizens, blocking a particular flow of federal funds so as to ensure that those citizens do not get the subsidized or free insurance they were promised by the ACA.

There are interesting political questions about what will happen if the King plaintiffs prevail.  I have argued elsewhere, and I continue to believe, that all a state must do to establish a “state exchange” is essentially to pass legislation declaring that it is doing so; the federal government can still in fact run much of the back end.  If King is reversed, it will make for an interesting choice for red states.  Unlike with the Medicaid expansion, there is no plausible veneer of cost-savings for states here: the federal government pays 100% of the cost of the subsidies on the exchanges (as compared with 90%-ish of the costs of the Medicaid expansion).  We will see how many states, in the end, actually block the provision of subsidized insurance to their citizens through the exchanges, pulling untold millions of dollars out of their own economies and health care systems, despite the fact that, (a) unlike the Medicaid expansion, the subsidies are free to the states; (b) unlike in NFIB v. Sebelius, the exchanges are now up and running, so it is a question of taking away the endowment of subsidized insurance of people who currently have it; and (c) the recipients in question are not poor or near-poor, but middle-class and perhaps more politically potent.

But fundamentally, what interests me is this question: what so attracts some Justices about giving states the power to interpose themselves in between the federal government and their own citizens in this way?   What is so seductive, in the end, about giving states the power or right to block the flow of federal funds for health insurance?  I don’t have the answer and I think it deserves some serious thought.  I wonder if the right lens through which to view the King challenge is not NFIB at all, but Shelby County.  That is, perhaps there is some sort of notion of the sovereign dignity of the states at stake here—a view that states generally ought to have the power, or perhaps I should say the right, to choose whether or not to accept controversial bundles of federal funds.  Of course, there is a third party here: the citizen.  And so what we’re really talking about is the state's right to stand in the way, interposing itself to block the flow of federal funds to their intended recipients.

Or perhaps, finally, it is a combination of (2) and (3) above: an idea that even if the federal government has not embraced a neo-Lochnerian libertarian constitutional vision, we ought to make darn sure that individual states retain the power to embrace such a vision, rather than being saddled with a fundamentally different social model—one with more social insurance—imposed by the federal government.

Either way these are exceedingly strange principles to see bubbling around just beneath the surface of the questions the Court is ostensibly grappling with in King.
Posted 12:14 AM by Joseph Fishkin [link]