receipt of federal funds. in the most famous case on this is the south dakota versus dole case. that case the federal government required the state of south dakota to change its drinking age in exchange for receiving certain federal highway funds. and the state challenged that and said that was unconstitutional, interfered with the sate's authority as a sovereign to make these decisions for itself. the u.s. supreme court in a decision by justice rehnquist said that this was still constitutional. but there might be cases where congress was going too far. well, of course, just as in the takings clause cases we don't know what goes too far means. since then there's really been no development in the case law on this issue. and keep in mind that in that case in dole we were talking about 5%, i believe it was of the federal highway funds. i believe the total amount of $4.5 million. now we're talking about a

tremendous amount of money as we saw. in fact, medicaid funding to states is usually federal health care funding in general is usually the largest single block of any state's budget. and the states are told that they must comply with the requirements or they lose all of the funding. not just the incremental increase that might be caused by the new requirements but all of their funding. as you saw the bill required -- the new act requires states to expand eligibility and then it requires people to sign up for health insurance which they can do by signing up for medicaid. the states argue that the law forces people on to their medicaid roles. some states will bear an increasing share of the costs for this over time. it forces the states to take over the care of these individuals. now the defense is and the defense in dole was well this is basically just a contract. states take the money. they agree to the strings attached to that money.

they don't like the conditions they don't have to take the money. well that maybe have been an argument in dole, it's hardly an argument here. after all as i said the states lose all of the funding if they reject these conditions and it's worse even than that. they might loads funding for other federal programs if they reject these conditions. and the argument is states can't opt out of medicaid now under the emergency medical treatment act, states -- it is a federal crime to transfer a patient from one hospital to another for an indigent patient for financial reasons. there was an article in a recent magazine a few months ago about this if a state tried to say, we're opting out. we don't want to be part of this anymore, they would have to set up an alternative state-based system to take care of the indigent and that would require

them to transfer the patients which is a federal crime. states are not able to opt out of the medicaid system. the argument that we made in our brief also and hinted at by the states in their briefs is the spending clause really should be limited to the enumerated powers in the constitution. the spending clause should not be treated as an end run around the limitation on federal power in the constitution. right now the federal government has certain powers in the constitution and they can't in theory do anything beyond those limits. but they have been using the federal spending power to get around those limits and impose federal policy by inducement. this inducement is as i said a tremendous amount of the state budget. if a state did try to opt out, it would have to send its tax money to washington, d.c. to be spent on states that still opted in. it's not like if a state said we don't like these conditions we're not going to take the money. it's not like the tax payers are

relieved of their burden to support the states that do opt into the system. they're still required to do that. which would mean states would have to raise their talks tremendously in order to overcompensate for the loss of funding. the federal government's argument is, you know, the health and human services has always said they retain the authority to withhold medicaid funding if you fail to comply and the medicaid act was always made conditional that we could change the conditions required and if you allow states to say we don't like the conditions that go along with this funding that's basically allowing the states to dictate the use of federal dollars. those are reasonable arguments. and the problem her is there really is no case line. where do we draw the line to say these conditions are too burdensome? will the court want to get into that issue. will the supreme court want to get into saying some conditions are too extreme. if they dork you'll see a lot of lawsuits brought by states to invalidate conditions on federal funding. the court will be forced to come

up with some other tests to apply to those conditions in some lawsuits. the arguments the states make in their briefs is we have to draw the line somewhere. if in lieu of compulsory regulation congress could invoke the taxes and spending power to accomplish a forbidden end, then the spending power would be a total sub verks of the government powers reserved for the states. that's clearly true. federal government can't -- we all know from the coercion cases that the federal government couldn't force the states to do certain things. i also shouldn't be allowed to say you have to give us your money. you have to give us federal income taxes and us to spend as we'll give some of that back to you on the condition that you comply with our demands.

and our demand exceed our constitutionally authorized powers. how do i think the court's going to rule? it's hard to tell this is as i said basically a blank slate. we have butler from 1936 and we have the dole case. that's about it. no court has ever enforced the spending clause as a shield against federal power. the justices will be skeptical of wading into this area. dole makes it very clear that some things have to go too far. we're talking about this system that basically co-ops the states into branching of the federal government with regard to medical care then you are talking about something that goes too far. thank you. >> thank you, tim for your

succinct argument. we're going to hear from the other side. he served as associate director of jimmy carter's white house domestic policy staff as a partner in a law firm and as a senior counsel in austin. he has written prolifically. he writes frequently for the american constitution society. his atlantic article the most dangerous branch was republished many the best american political writing of 2003. he graduated from yale law school where he was a note and

comment editor of the yale law journal. please welcome, simon. [ applause ] >> thank you very much. i don't want to disturb your computer. j just shut it down. >> there you go. thanks. thanks very much roger. thanks to you and your colleagues for hosting this very fine conference. nnd in particular i want to thank you for recognizing the importance of this medicaid expansion issue that all of you have spoken to. i have seen this as a sleeper issue and one that raises significant questions. i hardly disagree with i think each of you on most of the ways

in which you look at those questions and many of the things that you said about the facts surrounding them. but i share a view that congress's spending clause authority is a very significant part of the way in which our kuhn are tri is governed. and so the courts addressing that issue is very important it's an issue which just hasn't gotten a lot of respect. there's almost nothing about it in the press. even though here it is sitting on the court's docket. there are innumerable debates staged in this town. as far as i know none have been about the medicaid issue. they have all been rehashing the same interesting, but same

arguments that most of us are very familiar with about the individual mandate issue. so what i -- i want to just summarize up front. is a few things. first of all, i think that this issue has the potential to affect not only the fundamental constitutional law governing the exercise of domestic power by the federal government and the states. it has more potential to affect that than the individual mandate issue does. and it certainly has more potential i think to affect the actual social and governmental practice in terms of the distribution of power between the states and the federal

government. i'd also say that the legal attack on the affordable care act medicaid expansion provisions much more than the individual mandate side of their case is an overt, overt not speaky, but an overt drive to effect a revolutionary change in constitutional law and in governmental practice. the legal briefs on filed by the republican officials in the 26 states challenging the law are very much closer to the libertytarian philosophical and somewhat radical briefs filed by a number of you all.

then perhaps is the case with respect to the commerce clause, the relatively more mundane commerce clause arguments being made against the mandate on that side of the case. i'd like to make one other point. just to begin and that is this is not a state versus federal issue. this is a partisan democrat versus republican libertarian or conservative versus moderate or progressive issue purely. the 26 states that is to say the 26 republican officials senior officials representing states are on one side, but there are -- there's a really excellent brief filed by 13 democratic states including some very large ones. so that the

populations represented by the twoe sides are probably more equal than 26 to 13. but that's not really real vent. that brief details why it's emor nously beneficial to states. i think we should just bear that in mind. this is very serious and genuine philosophical policy political debate but it is really not a debate between the states or state interests and the feds. i do agree about the way in which roger and i think tim

stated the basic simple issue. medicaid expansion in the aca has a number of aspects, but the main thing is very simple. it expands eligibility to all adults up to 138% of the federal poverty line from where it was before and roger and tim both appropriately described the existing pre aca eligibility standard. and the aca provides that states don't have to accept this expansion, but if they reject the expansion they only do so by withdrawing from medicaid altogether and there be losing all their existing medicaid funds. now, just up front, let me just say why this is important. this theory, this coercion theory, this is a theory that choice that is posed by the aca

to the states constitutes unconstitutional quote unquote coercion. if it's accepted or to the extent that it's accepted that could topple long standing programs on a truly massive scale on a scale as i said before much broader than with the collateral impact of accepting the claim against the individual mandate. and for that basic proposition i want you to know that this is not just some deranged liberal chimera. you would be interested to know that the radical impact of the claim that is being made against the medicaid expansion provisions provoked i think the only significant defection from within senior republican ranks

on these issues. on december 15th none other than senator charles grassly took to the senate floor and delivered it. he didn't just put it in the record. he delivered a speech which devastates every single legal argument that his republican colleagues from the 26 states are making about the medicaid expansion. for all the reasons that i'm going to identify. and for all the reasons that those who support the medicaid expansion in court adduce. senator grassly said among many other things i'm going to quote a supreme court ruling in favor of the states will necessarily bring into question every agreement between the federal government and the states where the federal government conditions 100% of the federal fund on states meeting requirements that are determined in washington. now laws within the cross hairs

of that forecast would include not just the expansion of medicaid, but all of medicaid. it would include all federal aid to education programs and all requirements that are tied to those programs. that would mean for example, title six of the civil rights act which requires recipients of federal fund to abide by a whole set of familiar anti-discrimination guarantees. it would include title nine which of course is the reason why we have women's collegiate sports intramural and intercollegiate. it would include a whole raft of requirements for assuring equal access to people with disabilities, which are of immense significance. it would affect foster care

programs. it would affect the solomon amendment which some of you may know requires that all universities receiving federal funds grant equal access to military recruiters. which was itself the subject of a supreme court case not too long ago. it would affect anti-abortion strings on the receipt of federal funds. so the impact of siding with the states or even changing the law or stating what the law is in ways that reflect a great deal of the state's argument or the arguments that roger and tim have ably put just now would have an enormous domino consequences for all these

programs. you know roger i enjoy going one against three. but please do something if i start to run over my time. tim was very brief. there's an awful lot that i'd like to respond to. i'm going to have to go out of my way and respond. one thing about the wonderful power point presentation is that i think i'm not an economist and i wasn't quite sure what i was looking at entirely. i think that a lot of that scary looking nearly vertical line that was going up to represent states' costs -- >> you weren't sure? >> it was like this. it went up very sharply. i think however accurate or not accurate it is, i'm sure it's substantially accurate, a large amount of those costs you should

understand are not relevant to the constitutional issue of coercion at all. the fact that the affordable care act may or may not encourage people who are now eligible for medicaid to enroll in medicaid has nothing whatsoever to do with whether or not the medicaid expansion choice that the states now face about increasing eligibility, it has nothing to do with whether or not that choice is constitutional or coercivcoerci should understand that. and any other -- any costs that are not caused by what will be involved with the states accepting the newly eligible people under the act have nothing to do with the constitutional issue that all of us lawyers, anyway, have been discussing.

so what i'm going to do is very briefly run through as briefly as i can, run through the hodgepodge of legal theories that the republican states have come up with, and they are -- and it is come up with, because the law is very clear. there haven't been a lot of cases -- there have actually been some cases recently, tim, in which the court has reaffirmed the very broad limits that now exist on the spending power. but there haven't been many. there's really no law out there for the challengers to hang on to and so they really are making it up as they go along. here's what they made up. there are at least five theories that i can count in their brief. the first -- the first point really is that that this expansion is different from -- medicaid expansions because it's

uniquely onerous. in fact the opposite is the case. this expansion of medicaid is uniquely not onerous compared to past expansions of medicaid. the average share of state medicaid spending now is 59%, which i didn't know before but i'll take it for granted. for this expansion of medicaid, the federal government is undertaking to pay $100% of what it will cost to pay for newly eligible people through 2016 and after that the percentage drops to 90% until 2020 and it is made permanent at 90%. so the federal government is covering much more of the shared costs of funding medicaid for this expansion than it has for any of the past expansions.

so the argument that this is uniquely onerous as a constitutional matter is completely nonsense. three minutes left. the rest of the arguments. next argument -- they have actually said this over and over again. never before has the federal government done this when it's expanded medicaid. never before has it said if you don't accept the new requirements, then you can only do that by withdrawing from medicaid altogether and losing all your existing funding. that's simply completely not true. almost every past expansion of medicaid has been done in exactly the same way. this is not just a debater's point, it means were the court to accept this argument, it would call into question the entire medicaid program because all of these past expansions would then become vulnerable to challenge. the third argument is what i would call sort of the i want my cake and i want to be able to

eat it too argument which you've already heard and that is states are coming up and saying, well, we want you, supreme court, to say we can keep -- we have a constitutional right to keep the very large amount of federal funds now going into medicaid, the hundreds of billions of dollars going into medicaid, as a matter of fact, and not accept any new strings that a majority of the national congress wants to impose. in other words, they're basically saying we want to have a constitutionally -- we want to turn medicaid into a constitutionally imposed block grant program, which is -- i can see why it would be an aspiration but it hardly is the law. i have one minute left. finally, there's an argument that the mandate is an act of comma

commandeering to get the states -- to recruit the tats to help fund implementation of the individual mandate and i think tim outlined this argument. the problem is that anyone poor enough to qualify for medicaid, even the new standards for medicaid, will be exempt from the penalties to comply -- for noncompliance with the mandate, so it's very hard to argue as a constitutional matter that this -- that the medicaid expansion amounts to a commandeering in support of the mandate. i guess -- no, i'm not going to bother you with that. i only probably have a few seconds left? >> mm-hmm. >> okay. so there's really much more to say and there are many points here that i would really like to respond to, but i think i'm just going to point out one, and that is that tim -- that this case is really completely different from the dole case. the dole case did not hold --

was really not about the 5% number. it was true that under the statute involved in dole the penalty for not going along with the requirement of lowering the drinking age was to lose 5% of your highway funds. but the dole case was not really about coercion, as i think you probably know. there are four criteria the court has established to determine whether or not an exercise of the spending power is constitutional. none of which happened to have -- to be about coercion. one of which is whether or not the condition that is at stake is sufficiently germane to the purpose of the grant. and so the issue in that case was whether or not requiring states to enact another law lowering the drinking age was sufficiently germane to

receiving highway funds to meet that germaneness requirement, and a couple of justices thought it wasn't but the majority thought it was. there was just a little reference to coercion as a possible thing that might come up in some case off to the side. it really is not appropriate to compare that to this case because that the conditions being complained about here are absolutely central to the purpose of the medicaid program and the grants involved. and i'll leave it at all. >> okay. [ applause ] thank you very much, simon. >> let me address your point that it was 3-1. we try to be very even-handed here at cato. jagadeesh is here simply as a numbers cruncher today to put forth the numbers that any reasonable economist could predict could be projected from this very large bill.

i am here as a moderate, which means i have to be as neutral as is possible for me to be. and so that means it's you and tim that are going at each other in the legal capacity. so before we open it up to questions from the floor, let me ask the three of you, if you'd like to respond to anything that's been said so far. do you have anything -- yes, jagadeesh. >> just one point -- there are several points. one point, your emphasis that the federal medicaid expansion is not onerous seems to be based on just a partial understanding of what i presented. i admit that the newly eligible individuals that would enroll into medicaid would be 90% plus mandate is the interaction of medicaid expansion with the individual mandate. and the mandate will induce

additional enrollments by -- those were eligible and that cost, that match rate is still 59%, which means a bigger share of the cost must be paid for by the states and that's the source of the vertical line. >> i understand that. i just meant to say that that -- that those -- the now eligibles who will sign up in addition are not relevant to the constitutional issue, >> that's not my concern. >> that's not your department. >> they may not be relevant to the constitutional issue, but they are relevant to the structure of the bill, is that not your point, namely it is the mandate that drives these people -- >> absolutely. >> -- to medicaid who are otherwise not on medicaid. you are perhaps the only person that's brought that point out in the actual structure. >> i would add that economic laws have nothing to do with constitutionality or