Why did the Supreme Court consider the Obamacare Medicaid expansion coercion?

Question

As part of Obamacare's efforts to expand access to healthcare, it included an expansion of Medicaid. Medicaid is a program that receives some federal funding, but it's administered by the individual states. The law said that if a state decided not to participate in the Medicaid expansion, then they would lose their existing Medicaid funding. The Supreme Court, when it ruled on the constitutionality of Obamacare, said that the individual mandate was constitutional, but then said that the provision that would have removed existing Medicaid funding from states that didn't participate in the expansion was unconstitutional, because it was the federal government engaging in coercion against the states.

I don't understand the reasoning here. Suppose I, as a private citizen, have been voluntarily donating money to the state government of New Jersey every year for the past few years, and then I tell the state government that I'll stop donating money unless they enact some policy that I want. Would that constitute illegal coercion? I don't think so.

And I'm pretty sure that if I've been donating money to a private charity every year for the past few years, I can suddenly say that my future donations will be contingent on the charity doing X, Y, and Z.

Just to take one more example, if the federal government itself has been funding some scientist's research for the past few years, it can suddenly decide to place a new requirement that he has to comply with new guidelines if he wants to continue receiving funding.

So why is it that if the federal government has been giving money to a state for the past few years, it can't say that the state has to take some action if it wants to continue receiving funding? Why is that, and that alone, considered unconstitutional coercion?

Answer 1

The answer to the question about coercion is in the decision itself:

NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS

1. CHIEF JUSTICE ROBERTS, joined by JUSTICE BREYER and JUSTICE KAGAN, concluded in Part IV that the Medicaid expansion violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion. Pp. 45–58.

The reasoning is laid out in detail on pages 50-52 of the ruling. The Medicaid expansion was compared against other cases where the federal government threatened to withhold funding unless certain actions were taken:

In South Dakota v. Dole, we considered a challenge to a federal law that threatened to withhold five percent of a State’s federal highway funds if the State did not raise its drinking age to 21. The Court found that the condition was “directly related to one of the main purposes for which highway funds are expended—safe interstate travel.” 483 U. S., at 208. At the same time, the condition was not a restriction on how the highway funds—set aside for specific highway improvement and maintenance efforts—were to be used.

We accordingly asked whether “the financial inducement offered by Congress” was “so coercive as to pass the point at which ‘pressure turns into compulsion.’ ” Id., at 211 (quoting Steward Machine, supra, at 590). By “financial inducement” the Court meant the threat of losing five percent of highway funds; no new money was offered to the States to raise their drinking ages. We found that the inducement was not impermissibly coercive, because Congress was offering only “relatively mild encouragement to the States.” Dole, 483 U. S., at 211. We observed that “all South Dakota would lose if she adheres to her chosen course as to a suitable minimum drinking age is 5%” of her highway funds. Ibid. In fact, the federal funds at stake constituted less than half of one percent of South Dakota’s budget at the time. See Nat. Assn. of State Budget Officers, The State Expenditure Report 59 (1987); South Dakota v. Dole, 791 F. 2d 628, 630 (CA8 1986). In consequence, “we conclude[d] that [the] encouragement to state action [was] a valid use of the spending power.” Dole, 483 U. S., at 212. Whether to accept the drinking age change “remain[ed] the prerogative of the States not merely in theory but in fact.” Id., at 211–212.

In this case, the financial “inducement” Congress has chosen is much more than “relatively mild encouragement”—it is a gun to the head.

(Emphasis mine)

In short, it was the court's opinion that the Medicaid expansion requirements meant that the states had to either give up ALL Medicaid funding or accept the expansion with all strings attached. Other cases cited by the court may have been strongly coercive, but would not have stripped a state entirely of particular government funding.

Answer 2

co·er·cion [koh-ur-shuhn] Show IPA noun

1. the act of coercing; use of force or intimidation to obtain compliance.
2. force or the power to use force in gaining compliance, as by a government or police force.

http://dictionary.reference.com/browse/coercion?s=t

What you've just described is the federal government telling states that they would stop giving them money(that they're already giving them) if they don't comply with the new program.

It would be a mess for a state they stop receiving something like Medicaid funding, and money that they were already receiving and using all of a sudden dries up.

The states really don't want that money to go away, and that essentially means that the Federal government would be putting a force on the states to get them to comply - thus Coercion.

Now it might not be enough of a force to absolutely compel the states to comply, but it is a force of sorts

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All of your examples are coercion, but the reason why cutting off existing medicaid spending is illegal coercion just a mostly of degree.

It "crossed the line" or reasonable coercion.

Prior to NFIB v. Sebelius , the Court upheld Congress’ power to fix the terms on which it disburses federal money to states as long as the condition satisfies four factors: it must be (1) related to the general welfare, (2) stated unambiguously, (3) clearly related to the program’s purpose, and (4) not otherwise unconstitutional. In only two earlier cases, one in the 1930s, and another in the 1980s, the Court noted as an aside that there possibly could be a future case in which a financial inducement offered by Congress could pass the point at which permissible pressure on states to legislate according to Congress’ policy objectives crosses the line and becomes unconstitutional coercion.

In NFIB v. Sebelius , the Court for the first time found that a federal condition on a grant to states was unconstitutionally coercive. This conclusion was reached by Chief Justice Roberts in an opinion joined by Justices Breyer and Kagan. The same conclusion also was reached in the unsigned dissenting opinion joined by Justices Scalia, Kennedy, Thomas, and Alito, yielding a seven justice majority. Justice Ginsburg, joined by Justice Sotomayor, disagreed with the majority view and found that the ACA’s Medicaid expansion was a constitutional exercise of Congress’ spending power.

http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8347.pdf

Answer 3

It's probably a bit tricky. Think of it that the money going to those states is actually state money, or sort of.

Imagine that you're a corporation. Imagine you tell some shareholders, you won't get dividend unless you do this and that.

Basically, the money that is used by the corporation as bargaining chips is your money.

The federal government get money from tax collected from all states. Now it decides that the money is conditional on them following some federal guidelines.

That effectively means the federal government can have power to make the states do what should have been the "states" power instead of federal power.

For example, say your constitution says that the states can have power to tell all citizens to use a red shirt.

If you don't like red shirts, you can go to other states.

Now the federal government says if you do not require your citizens to wear a red shirt I am not going to give you your money. Everyone pays tax to me, but you don't get it.

Effectively, the federal government, instead of the states, decides what color your shirt will be, right? That's coercion.