Samuel R.

Bagenstos
701 S. State St.
Ann Arbor, MI 48109
sbagen@gmail.com

November 4, 2019

Dear Senator Warren:

You have asked whether a state maintenance-of-effort provision can be
designed, consistent with the Supreme Court’s decision in National Federation of
Independent Business v. Sebelius, 567 U.S. 519 (2012) (NFIB), to help finance
Medicare for All. Chief Justice Roberts’s controlling opinion in NFIB is a complex
one, and much depends on precisely how the maintenance-of-effort provision is
structured. But I believe there is ample room to craft a provision that satisfies the
criteria articulated in that opinion, as well as general constitutional principles.
The maintenance-of-effort requirement in your Medicare for All plan contains
two components. First, state and local governments will redirect to the federal
government $2.7 trillion of the private health insurance premiums they currently pay
for their employees. Second, state governments will redirect to the federal
government $3.3 trillion that they currently spend on Medicaid and CHIP services
for their residents.
The first of these components raises no particular issue under NFIB, nor does
it present an especially difficult constitutional question. Since the Supreme Court’s
decision in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528
(1985), it has been clear that Congress has the same power to adopt labor standards
for state and local employees that it does for private-sector employees. Your Medicare
for All plan requires private-sector employers to make an Employer Medicare
Contribution for their employees, and the Constitution does not demand that it
exempt public-sector employers from making equivalent contributions for their
employees. The plan thus requires state employers, like other employers, to comply
with general standards for providing health insurance for their workers. The
Supreme Court has held that subjecting states to such requirements does not amount
to impermissible commandeering. See Reno v. Condon, 528 U.S. 141 (2000). Since
the Consolidated Omnibus Budget Reconciliation Act of 1985, states have been
required to pay Medicare taxes for their employees; the first maintenance-of-effort
component in your plan rests on precisely the same constitutional basis.
The second component of the maintenance-of-effort requirement raises
different constitutional issues. Under that component, the federal government will
not simply be regulating how a state treats its employees but will instead be asking
the state to assist in financing health care for its residents. That brings us closer to
NFIB and the commandeering cases. Congress may not “commandeer[] a State’s
legislative or administrative apparatus for federal purposes.” NFIB, 567 U.S. at 577

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(opinion of Roberts, C.J.). Commandeering, for these purposes, means “requir[ing]
the States in their sovereign capacity to regulate their own citizens”; requiring the
state legislature “to enact . . . laws or regulations”; or “requir[ing] state officials to
assist in the enforcement of federal statutes regulating private individuals.” Condon,
528 U.S. at 151. And the Chief Justice’s controlling opinion in NFIB concluded that
Congress may not use its spending power to commandeer indirectly, by “coerc[ing] a
State to adopt a federal regulatory system as its own.” NFIB, 567 U.S. at 578 (opinion
of Roberts, C.J.).
But the Chief Justice’s opinion in NFIB reaffirmed the long-established power
of Congress to grant federal funds to the states on the condition that the states carry
out federal policies. See id. at 580 (“We have upheld Congress's authority to condition
the receipt of funds on the States’ complying with restrictions on the use of those
funds, because that is the means by which Congress ensures that the funds are spent
according to its view of the ‘general Welfare.’”). In identifying the point at which
permissible financial inducement of the states crosses the line to impermissible
coercion or compulsion, Chief Justice Roberts applied what I have called an “anti-
leveraging principle”: “when Congress takes an entrenched federal program that
provides large sums to the states and tells states they can continue to participate in
that program only if they also agree to participate in a separate and independent
program, the condition is unconstitutionally coercive.” Samuel R. Bagenstos, The
Anti-Leveraging Principle and the Spending Clause After NFIB, 101 Geo. L.J. 861,
865 (2013).
In holding that the Affordable Care Act’s Medicaid expansion was
unconstitutional, Chief Justice Roberts reasoned that the expansion did not simply
alter the existing Medicaid program but instead demanded that the states join a
completely new Medicaid program—one that was different as a matter of “kind, not
merely degree.” NFIB, 567 U.S. at 583 (opinion of Roberts, C.J.). To ensure
compliance, the statute threatened to take away all Medicaid funding from states
that refused—a threat that put at risk a long-entrenched stream of federal funds that
accounted for a tenth of the average state’s budget. The threat was thus “a gun to
the head”—“economic dragooning that leaves the States with no real option but to
acquiesce in the Medicaid expansion.” Id. at 581-582. Chief Justice Roberts
distinguished the ACA from earlier changes to the Medicaid statute, which
sometimes put all federal Medicaid funds at stake but did not require participation
in a completely new program. See id. at 583. And he also distinguished the statute
from earlier federal laws that used federal funding under one program to induce
states to change policies elsewhere, but which did not threaten such a great financial
hardship to states. See id. at 581-582.
Although much depends on the details of how the policy is designed, I believe
that there is ample room to craft a maintenance-of-effort provision that satisfies these
principles. The clearest path would involve layering Medicare for All on top of the
existing Medicaid system. If a state paid the federal government its share of health
care spending under Medicaid and CHIP, the federal government would cover its

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population under Medicare for All. The state would then have no further obligations
under those legacy federal programs. If the state chose not to make the payment to
the federal government, it could continue in the existing Medicaid/CHIP program (in
which all states currently participate, and which would be the only way, without
joining Medicare for All, to ensure that its residents received federally financed
health care).
Because making the payment to participate in Medicare for All will be less
expensive for the state than continuing in Medicaid and CHIP, most states are likely
to choose to join the new system. And for those that do not, the federal government
can directly provide additional services wrapping around Medicaid/CHIP to ensure
that individuals who continue to be enrolled in those legacy programs receive the
same coverage and access to providers as do individuals newly enrolled in Medicare
for All.
To facilitate coordination between the legacy programs and Medicare for All,
the federal government could tweak Medicaid’s requirements to align with those of
the new program. Such changes would constitute differences in mere degree, not in
kind. Cf. NFIB, 567 U.S. at 583 (opinion of Roberts, C.J.). And to ensure that states
did not simply slough off their financial responsibilities onto the new federally
provided wraparound services, the federal government could require states who
continued to participate in Medicaid to maintain their existing services and eligibility
rules. See Mayhew v. Burwell, 772 F.3d 80 (1st Cir. 2014) (applying NFIB to uphold
similar maintenance-of-effort requirement in the Affordable Care Act), cert. denied,
135 S. Ct. 2805 (2015). To help offset the cost of the new wraparound services, the
federal government could also reduce its Medicaid reimbursement rate to states that
did not participate in Medicare for All, at least so long as the reduction was small
enough not to constitute coercion under NFIB. See NFIB, 567 U.S. at 581-582
(opinion of Roberts, C.J.) (explaining that threatened loss of 10 percent of a state’s
budget was coercive, while threatened loss of half of one percent of a state’s budget
was not). Alternatively, the federal government could offset this cost by reducing
Medicare for All reimbursement rates for non-Medicaid patients in states that retain
Medicaid.
Rules like these would continue the state’s contribution to its residents’ health
care, while preserving the coverage, cost, and provider guarantees of Medicare for
All. And though a full constitutional analysis would depend on the precise details of
the plan’s design, I am confident that it is possible to craft mechanisms that comply
with NFIB and other relevant Supreme Court decisions while ensuring that every
person in the United States obtains health care identical to that contemplated by
Medicare for All.
Sincerely,
Samuel R. Bagenstos
Frank G. Millard Professor of Law, University of Michigan Law School
(Institutional affiliation listed for identification purposes only)