the condition attached was worked a fundamental transformation in the structure of state government in a situation in which the state didn't have a choice but to accept it. but -- and so, but anything else, so long as -- >> well, but i think -- you're talking about a situation where they have to locate their state house in some other city. >> but surely they can't make the state do anything at all. >> the dole commission is real and -- >> but none of those have addressed the coercion question. so do you think it would be all right for the federal government to say, same program, states, you can take this or you can leave it. but if you don't take it, you lose every last federal dollar for every federal program. >> i think those questions are related.

the how does germainness get to coercion. >> what the connection is between getting you to do a and that money. >> so it fails because it's not germaine, you're saying it would not fail because it was coercive. >> i think they're trying to get at the same thing and i do think it's different here. >> i know it's different here, i'm just trying to understand if you accept the fact or regard it as true that there is a coercion limit or that once the federal government -- once you're taking federal government money, the federal government money can make it back and that doesn't affect the voluntariness of your choice. because it does seem like a serious problem, we're assuming under the spending clause, the federal government cannot do this, under the constitution, it cannot do in. but if it gets the state to

agree to it, then it can. and the concern is, if you can say if you don't agree to this, you lose all your money. whether that's really saying the limitation in the constitution is largely meaningless. do you recognize any limitation on that concern? >> i think the court has said that this is something that needs to be considered in an appropriate case and we acknowledge that. but i do think it's so -- >> you can't imagine a case in which it's germaine and coercive as far as you know? >> i'm not prepared to say right here. >> it's a surprise question.

i think congress has authority to act. >> i can't think of one. i don't blame you for not thinking of one but i really do think it's important to look at an issue like this, it's got to be considered in the factual context. >> let me give you the factual context. congress says this to the states, we have got great news for you, we know your expen do it churs on education are a huge financial burden, we're going to impose a special federal tax. and then we're going to give you a grand that is equal to what you spent on education last year. now this is a great offer and we think you'll take it, but if you take it, it's going to have some -- so take it or leave it,

if you take it, you have to follow our rules on all of these things, if you leave it, well, then you're going to have to tax your citizens, they're going to have to pay the federal education tax, but on top of that, you're going to have to tax them for all of the money that you're not r now spending on education, plus all the federal funds that you were previously given. would that be the point where a financial inducement turns into coercion? >> i don't think so because the states do have a choice there, especially as a going in proposition. the argument the states are making, this is not a going in proposition, they are in a position where they don't have a choice because after everything that's happened. if that's the case, then there's nothing evident. >> as a practical matter, there's a pretty serious political constraint on that situation ever arising because

it's not like the federal government is going to have an easy time to raise the kind of tax questions to raise that kind of -- and priolitical constrain do operate in this area. >> i think there's a constraint on the individual mandate too, but that didn't work. what you call serious political constraints don't always work. >> with respect to a situation like that, justice, scalia, states have their education system and they can decide whether they're going to go in or not. i think it important to trace through the history of medicaid, it's not the case that the norm here is that the federal government has offered to the states the opportunity either to stay where they are or add the new piece. we can debate that proposition

but starting in the 1984 expansion, with respect to pregnant women and infants, the states were given a choice to stay in the program or not. in 1989, it was expanded that children under 6 years of age. 1990, kids 6 to 18, in fact every major expansion, same thing, and so i just think the history of the program and particularly when you read that in context reserves the right of the federal government to amend the program going forward. this has been the evolution of it. we heard the question about whether or not the secretary would use this authority to the extent available. there r is there a place where

you think it would not be permissible? you want some little change made? guess what, i can take away all your money if you don't make it. i win. every time it seems that would be the case. why can't we be sure that the state of authority that the government is exercising. we have to analyze on the basis of something that that power would be exercised, wouldn't we? >> it would not be.

>> it's never kbng used to cut off. >> if we could go to the situation we have here, mr. justice, with respect to the medicaid expansion, the states' argument is as they have said it in their briefs, they articulated it a little bit different this morning. it's not what you stand to gain, but what you stand to lose. but the important thing to evaluate in this on the kex is fully 60% of medicaid expenses in this country are based on optional choices. but states are given choices to expand the beneficiaries beyond the federal minimum and to expangd services beyond the federal minimum.

does this act not require states to keep at the present legal their existing medicaid example? so some states may have been more generous than others in medicaid. so they can't go back. >> there is something called the maintenance of effort provision which lasts until 2014, until such time as the medicaid expansion takes place. that applies to the population, says with respect to the ybody out, it does not apply be the states still have flexibility. they can still reduce optional benefits that they're now providing if they want to control costs. they can also work on provider rates with respect to demonstration projects where states had expangded -- they don't have to keep them in, so

that's a provision that dews significantly left and it's effect beyond that is just temporary, but i do think the effect of the first of the three arguments, the sheer size argument. it's very difficult to see how that is going to work, because if the question is about what you stand to lose, rather than what you stand to gain, then it seems to me, it doesn't matter whether the medicate expansion is sub substantial or whether it's modest, or whether there's any expansion at all. the federal government could decide that under the current system too much money has ended up flowing to nursing home care, and that money would be better served used as the general welfare. the states could say, we don't

like that, we would like to keep spending the money the way we were. and in fact, it seems to me, standing here today, before these expansions take place under their theory -- >> the smaller it is, the bigger the coercion. the smaller of what you're demanding of them, the bigger of the coercion to go along. >> the more they stand to lose. >> just before you leave that, i would appreciate if you would expand a little bit on the answer to justice kagan's question, when i read the cut off statute, which i stated has been there since 1967, unchanged, it does refer to the secretary's discretion to keep the funding insofar as the funding has no relationship to the failure to comply with the conditi

condition. there is a sentence they could do that. so you have looked into it and that's what i want to know. is there -- i could find no instance where they went beyond the funds that were related to the things the state refused to do or things affected by that. i would like you to tell me that what i thought of in this isolation chamber here is actually true, or whether they have gone around threatening people that we will cut off totally unrelated funds, what is the situation? >> sir, i think the situation is generally as you describe it, but i do want to be careful because i don't think it would be responsible of me to commit n

now there's no evidence that anyone's ever been shot, that's because you have to give up your wallet. and that doesn't mean that the secretary has said if you don't do it, we're going to take away all the funds. they cite the arizona example and i suspect others. because that is the leverage, i think that's what's wrong with it. >> it's not coercion. >> it's not coercion to say i'm going to take away all your funds. >> i didn't ask you to commit the secretary to anything. i wanted to know what the facts are. i wanted to know what you found in researching this case. i wanted you to -- in other words to answer the question the chief justice has, is it a

common thing that that happens, that this unrelated threat is made or isn't it? >> my understanding is that these situations are usually worked out back and forth between the states and the federal government and i think you're not privy to the -- and i'm not. >> but who wings? that's what i think is the problem is, the reason we have had all these medicaid expansions and the reason it seems to me why we are where we are now and why 60% of what's being spent on medicaid is based on voluntary decisions by the state to expangd beyond what federal law requires because this is a good program and it works and the states generally like what it accomplishes. >> is this discussion realistic? the objective of the affordable care act is to provide near universal health care. suppose that all of the 26 states that are parties to this case were to say, well, we're

not going to -- we're not going to abide by the new conditions. then there would be a huge portion, a big portion of the populati population that would not have health care, it's a realistic possibility that the federal government will say we're going to cut off your new funds but we're not going to cut off your new funds. >> i'm not going to make a commitment that that would be exercised. i'm trying to move away from the sheer size argument to the second one that its coercive by relation to the affordable care act. i think that's a misconception and i would like to take a minute and walk through and explain why that is. >> in response to the chief justice's question, the money or your life has a consequence because we're worried that that midwestern

person is actually going to shoot. so in response to this question, what we think the secretary is going to do is important one. as i understand it, when the secretary withdraws funds, what they're doing is withdrawing funds from poor people's health care and the secretary is reluctant and loathe to take away from poor people's health care. the secretary doesn't want to use this power so the secretary sits down with the -- to figure out how not to use this power. >> the states and the federal government share a common objective here which is to get health care to the needy. and the vast majority of instances they work together to make that happen. >> but the question is not obviously the states are not interested in the same agreement or they have budget realities that they have to deal with and

states say, well, we're going to cut by 10% what we reimburse this for or that for. no one's suggesting that people want to cut health care, but they have different views about how to implement policy in this area. and the concern is, that the secretary has the total and complete say because the secretary has the authority under this provision, say you lose everything, no one's suggested in the normal course that will happen, but so long as the federal government has that power, it seems to be a significant intrusion on the sovereignty of the state. it may be something they gave up many decades ago when they decided to live off federal funds, but i don't think you can deny that's a significant that we're giving the federal government to say, you can take away everything if the states don't buy into the next program. >> well, what i would say about that, mr. chief justice is that

we recognize that these decisions aren't going to be easy decisions in some circumstances, as a practical matter, there may be some circumstances in which there are difficult decisions, it's different from saying it's an unconstitutional -- >> why is it different? i thought it might be very unlikely a state would ever say the federal government would say, here's a condition that you have to have a certain kind of eyeglasses for people who don't see. and by the way, if you don't do that, we'll take a way $40 billion of funding. i thought such a thing would not happen. and i thought if it tried to happened that it's governed by the ipa and the person would stay it's -- discretion of the secretary. but your colleague and brother says, no, i'm wrong about the law there, and moreover they would do it. that's what i'm hearing now,

they would do it and they do do it. so i would like a little clarification. >> in the situation described in your hypothetical, justice prior, i think the secretary of the department of health would never do it. >> would never do it or could never do it? >> would never do it and it would have to satisfy the safe procedure act. what i don't feel able to do here is to say with respect to this medicaid expansion. >> are you willing to acknowledge that the administrative procedure act is a limitation on the secretary's ability to cut off all the funds? she can't do it. if that would be unreasonable? are you willing to accept that? i wouldn't if i were you. >> what i'm trying to do here is to suggest that the secretary does have discretion under the statute. >> indeed, part of the discretion is to cut off all of

the funds. that's what the statute says. >> that's possible, and i'm not willing to give all that away. >> you're not willing to give away whether the epa would bar that. but the epa surelied that to apply to a discretionary act of the secretary. i'm not trying to be reluck tachbt, i'm trying to be careful about the authority of the secretary of health and human services and how it will apply in the future. >> i don't know of any case where the secretary's discretion explicitly includes a certain act, we have held that that act cannot be performed unless we think it reasonable when there's a general act of discretion, it may be reasonable. >> if i could go back to the

sheer size idea, i think it's important about theeing whether that's a prince pal course that would ever apply. once you get into that business, in addition to the problem i identified earlier, it basically means that congress is frozen in place now based on the size of the program, you've got this additional issue of having to make a judgment about in what circumstances will the loss of the federal funding be so significant that you would counter -- >> i suppose one test could be, i just don't see that it would be very workable is whether or not it's so big that accountability is lost, that it is not clear to the citizen that the state or the federal government is administering the program even though it's a state administrator. this is going to be about a

withdrawal situation. and with respect to withdrawal, does it depend on -- is it an absolute or relative number with respect to how much -- where you have to make a calculation as to how hard -- does that depend on whether it's a high tax state or a low tax state. in your view, does federalism require that there be a relatively clear line of accountability for political acts? >> yes, of course it does. the coercion test as it's been discussed in some of the literature, does address federal concern. but as your honor suggested earlier, this is a situation in which while it is certainly true

that the federal government couldn't require the states, as the chief justice indicated to carry out this program, the federal government could as your honor suggest ed suggested the federalism, necessary for the idea of federalism, that there be a clear line so that the stenos that the federal or state government should be held responsible for their program. does coercion relate to that or is that a separate thought? i think it relates in that there's such a high degree at the state level to withdraw ourselves from the program program that -- and that's why i

the these. >> doesn't the question come down to this? maybe you can't answer this yes, but isn't the question simply is it conceivable to you as it was evidently not to congress that any state would down this offer that they can't refuse? is it conceivable to you that any state would have said no to this program? congress didn't think that because some of its other presumptions are under the assumption, can you conceive of a state saying no? and if you can't, that sounds like soers. >> prediction is not coercion and that's because the federal

government is paying 90% of the cost. >> if you predict the same, that 100% of the state also accept it, that sounds like coercion. >> na's just an asump someone and if we have time congress has time to recalibrate. i just want to go back to the other part of your honor's point that with respect to the relationship between the medicaid and the act and particular particularly you can infer coercion because with respect to the population to which the provision applies, if there's no medica medicaid, there's no way for them to satisfy the requirement. with respect to anybody at the poverty line or above, there is the exchange with tax credits

and with subsidies to insurance companies the statute actually has an alternative for them. for people below 100% of poverty,st it is true that there is no insurance alternative, but by the same token, there is no penalty that is going to be imposed on anybody in that group to begin with. the requirement for filing federal income tax return is # 9,500, no penalty because they don't have to file an income tax return. the sliver of people between 9,500 and 10,800, the question there is are they going to be able to find health insurance that will cost them less than 8% of their income. >> take the poorest of the poor, if there is no medicaid program

then they're not going get health care, isn't that right? >> yes, that's true. >> so congress obviously assumed, it thought it was inconceivable that any state would reject this offer. because the objective is to provide near universal care and medicare is the way to provide care for at least the poorest of the poor. so it just didn't occur to them that informs a possibility. when that's the case, how can that not be coercion? unless it's just a gift. unless it's just buerly a gift. and amount of the money to pay for this is going to come out of what the states have. >> these are federal dollars that congress has oftened to the state and said, we're going to make this offer to you, but here's how these dollars need to be spent. this is the essence of congress's article 1 authority under the general welfare clause

and the appropriations clause. this is not some remote contingency in an effort to leverage in that regard. yes it was reasonable for congress to predict in this circumstance that the states were going to take this money because it is an extremely generous offer of funds, 90 plus% of the funding states can expand their medicaid coverage to more than 20% of their population, with an increase of object one 1%. >> if it's such a good deal, why do you need the club? >> well, the it's a good deal, take it if you don't take it, you're just hurting yourself. >> that's a choice the -- that's congress's judgment to make and it doesn't mean that it's coercive.

there there's no realistic choice, there's no real choice and congress does not in effect allow for an opt out. we just know that. and it's substantial. >> for example,ing optional services were a huge amount of money is spends, more than 100 billion annually that remains optional. right now, once the