to this citizenry. and so, if they want to do it their way, they have to spend money to do it their way. if they don't want to do it the federal way. so, i just don't understand the logic of saying states, you're not entitled to our money, but once you start taking it,>> wela couple of points. one is, i actually think that sort of misdescribes what happened with medicaid. i mean, states were, as you suggest, providing for the poor and the visually impaired and the disabled even before medicaid came along. then all of a sudden, states - the federal government said, look, we'd like to help you with that, and we're going to give you money voluntarily. and then over time, they give more money with more conditions. and now they decide they're going to totally expand the program, and they say that you have to give up even your prior program, where we -first came in and offered you cooperation, we're now going to say you have to give that up if you don't

take our new conditions. secondarily, i do think that our principle is not that when you get past a certain level, it automatically becomes coercive per se. but i do think when you get a program and you're basically telling states that, look, we're going to take away $3.3 trillion over the next 10 years, that at that point, it's okay to insist that congress be a little more careful that it not be so aggressively coercive as it was in this statute. and i would simply say that -- we're not here to tell you that this is going to be an area where it's going to be very easy to draw the line. we're just telling you that it's exceptionally important to draw that line, and this is a case where it ought to be easy to establish a beachhead, say that coercion matters, say there's three factors of this particular statute that make it as obviously coercive as any piece of legislation that you've ever seen, and then you will have effectively instructed congress that there are limits, and you will have laid down some administrable rules. >> mr. clement, the chief has said i can ask this. >> he doesn't always check

first. [laughter] >> as i recall your -- your theory, it is that to determine whether something is coercive, you look to only one side, how much you're threatened with losing or offered to receive. and the other side doesn't matter. i don't think that's realistic. i mean, i think, you know, the -- the old jack benny thing, your money or your life, and, you know, he says "i'm thinking, i'm thinking." it's -- it's funny, because it's no choice. you know? your life? again, it's just money. it's an easy choice. no coercion, right? i mean -- right? now, whereas, if -- if the choice were your life or your wife's, that's a lot harder. now, is it -- is it coercive in both situations? >> well, yes. it is. [laughter] >> really? >> i would say that. >> it's a tough choice. and -- and -

>> i thought you were going to say that it's your money and your life. [laughter] >> and, well -- it is. but i mean -- i might have missed something, but both of those seem to be the hallmarks of coercion. [laughter] >> no, no, no. to say -- to say you're -- when you say you're coerced, it means you've been -- you've been given an offer you can't refuse. okay? you can't refuse your money or your life. but your life or your wife's, i could refuse that one. [laughter] >> mr. clement, he's not going home tonight. [laughter] >> i'm talking about my life. i think -- take mine, you know? [laughter] >> i wouldn't do that either, justice. >> i won't use that as an example. forget about it. >> that's enough frivolity for a while. but i want to make sure i understand where the meaningfulness of the choice is taken away. is it the amount that's being

offered, that it's just so much money, of course you can't turn it down, or is it the amount that's going to be taken away if you don't take what they're offering? >> it's both, your honor. and i think that that's -- i mean, there really is -- there really is, you know, three strings in this bow. i mean, one is the sheer amount of money here makes it very, very difficult to refuse, because it's not money that, you know, that's come from some -- you know, china or, you know, from the -- the -- you know, the export tariffs like in the old day. it's coming from the taxpayers. so, that's part of it. the fact that they're being asked to give up their continuing participation in a program that they've been participating in for 45 years as a condition to accept the new program, we think that's the second thing that's critical - >> well, why isn't that a consequence of how willing they have been since the new deal to take the federal government's money? and it seems to me that they have compromised their status as independent sovereigns because they are so dependent on what the federal government has

done, they should not be surprised that the federal government, having attached the -- they tied the strings, they shouldn't be surprised if the federal government isn't going to start pulling them. >> with all due respect, mr. chief justice, i don't think we can say that, you know, the states have gotten pretty dependent, so let's call this whole federalism thing off. and i just think it's too important, because, again, the consequence -if you think about it -- if -- the consequence of saying that we're not going to police the coercion line here shouldn't be that well, you know, it's just too hard, so we'll give the federal congress unlimited spending power. the consequence ought to be, if you really can't police this line, then you should go back and reconsider your cases that say that congress can spend money on things that it can't do directly. now, we're not asking you to go that far. we're simply saying that, look, your spending power cases absolutely depend on there being a line between coercion - >> but could you tell me - >> -- and voluntary action. >> i don't understand your first answer to justice kagan. you don't see there being a difference between the federal government saying we want to take care of the poor, states, if you do this, we'll pay 100%

of your administrative costs. and you said that could be coercion. all right? doesn't the amount of burden that the state undertakes to meet the federal obligation count in this equation at all? >> it -- it certainly can, justice sotomayor. i didn't mean to suggest, in answering justice kagan's question, that my case was no better than that hypothetical. i mean, but it's in the nature of things that i do think the amount of the money, even considered alone, does make a difference, and it's precisely because it has an effect on their ability to raise revenue from their own citizens. so it's not just free money that they are turning down if they want to, it really is - >> counsel, if we go back to the era of matching what a state pays to what a state gets, florida loses. it's citizens pay out much less than what they get back in federal subsidies of all kinds. so you can't really be making the argument that florida can't ask for more than it gives, because it's really giving less

than it receives. >> well, then i'll make - >> you don't really want to go back to that point, do you? >> well, then i'll make that argument on behalf of texas. [laughter] >> but it's not -- it's not what my argument depends on, and that's the critical thing. it's one aspect of what makes this statute uniquely coercive. and i really think if you ask the question, what explains the idea that if you don't take this new money, you are going to lose all your money under what you have been doing for 45 years to help out the visually impaired and the disabled, nobody in congress wants the states to stop doing that. they are just doing it, and it's purely coercive, to condition the money. it's leverage, pure and simple. >> if the inevitable consequence of your position was that the federal government could just do this on its own, the federal government could have medicaid, medicare, and these insurance regulations, assume that's true, then how are the interests of federalism concerned?

how are the interests of federalism concerned if, in florida or texas or some of the other objecting states, there are huge federal bureaucracies doing what this bill allows the state bureaucracies to do? i know you have thought about that. i would just like your answer. >> i have, and i would like to elaborate that the one-word answer is "accountability." if the federal government decides to spend money through federal instrumentalities, and the citizen is hacked off about it, they can bring a federal complaint to a federal official working in a federal agency. and what makes this so pernicious is that the federal government knows that the citizenry is not going to take lightly the idea that there are huge, new federal bureaucracies popping up across the country. and so they get the benefit of administering this program through state officials, but then it makes it very confusing for the citizen, who doesn't like this. do they complain to the state official because it's being administered by a state official in a state building, or do they - >> but, mr. clement, that is very confusing because the idea behind cooperative

federal/state programs was exactly a federalism idea. it was to give the states the ability to administer those programs. it was to give the states a great deal of flexibility in running those programs. and that's exactly what medicaid is. >> well, that's exactly what medicaid was. the question is, what will it be going forward? and i absolutely take your point, justice kagan. cooperative federalism is a beautiful thing. mandatory federalism has very little to recommend it because it poses exactly the kind of accountability - >> cooperative federalism does not mean that there are no federal mandates and no federal restrictions involved in a program that uses 90% here, 100% federal money. it means there is flexibility built into the program subject to certain rules that the federal government has about how it wishes its money to be used. it's like giving a gift certificate. if i give you a gift certificate for one store, you can't use it for other stores, but, still, you can use it for all kinds of different things.

>> i absolutely agree that if it's cooperative federalism and the states have choices, then that is perfectly okay. but when -- that's why voluntariness in coercion is so important. because if you force a state to participate in a federal program, then -- i mean, as long as it's voluntary, then a state official shouldn't complain if a citizen complains to the state about the way the state's administering a federal program that it volunteered to participate in. but at the point it becomes coercive, then it's not fair to tell the citizen to complain to the state official, they had no choice. but who do they complain to at the federal level? there's nobody there, which would be -- i'm not saying it's the best solution to have federal instrumentalities in every state, but it actually is better than what you get when you have mandatory federalism, and you lose the accountability that is central to the federalism provisions in the constitution. >> thank you, mr. clement. general verrilli. >> mr. chief justice, and may it please the court --

the affordable care act's medicaid expansion provisions will provide millions of americans with the opportunity to have access to essential health care that they cannot now afford. it is an exercise of the spending clause power that complies with all of the limits set forth in this court's decision in dole, and the states do not contend otherwise. the states are asking this court to do something unprecedented, which is to declare this an impermissibly coercive exercise of power - >> what do you think we meant in those dicta in several prior cases, where we've said that the federal government cannot be coercive through the spending clause? what -- what do you think we were -- give us a hypothetical. >> yes. first, if i could just try to be a little more precise about it, justice scalia. i think what the court said in steward machine and in dole is that it's possible that you might envision a situation in which there's coercion. >> okay. >> and the courts didn't say much more, but i can think of

something. one example i could think of that might serve as a limit would be a coyle-type situation, in which 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 - >> anything else, so long as you - >> well, but - >> you are talking about situations where they have to locate their state house in some other city - >> or you may have no legislature or something like that. >> -- and they have no choice. but, short of that, they can make the state do anything at all? >> well, no. dole -- the dole conditions are real. the germaneness condition in dole is real, for example. and so those - >> but none of those have addressed the coercion question. >> right. >> 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 dollar of federal funding for every program? >> i think that would raise a germaneness issue, mr. chief justice, but it's not what we have here. >> but there's no coercion question at all? >> well, but i think -- i think

they are related. i think that the germaneness inquiry in dole really gets at coercion in some circumstances, and that's why i think they are related, but, we don't have that here. and if i could, i would like to address - >> no, i know we don't have that here. how does germaneness get -- get to coercion? >> well, because it gets to be harder to see what - >> that's germaneness, there's no - >> -- what the connection is between getting you to do a and the money you are getting for - >> so it fails because it is not germane, but, you are saying it would not fail because it was coercive? >> well, i think that -- as i said, i think they are really trying to get at the same thing. and i -- but i do think it's quite different here, and i would like to, if i could, take up each of the - >> no, no. i know it's -- 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 are taking federal government money, the federal government money -- can take it back, and that doesn't affect the voluntariness of your choice? because it does seem like a serious problem. we are assuming, under the spending clause the federal government cannot do this, under the constitution it cannot

do this, but, if it gets the state to agree to it, well, 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 -- is largely meaningless. >> well, but i don't think that this is a case that presents that question, mr. chief justice. >> no, no, i know. i'm just -- i know this -- i don't know if i will grant it to you or not, but let's assume it's not this case. do you recognize any limitation on that concern? >> i think the court has said, in steward machine and dole, that this is something that needs to be considered in an appropriate case, and we acknowledge that, but, i do think it's so dependent on the circumstances that it's very hard to say in the abstract with respect to a particular program that there is a - >> you can't imagine a case in which it is both germane and yet coercive, is what you are saying. there is no such case as far as you know. >> well, i am not prepared to -- to say right here that i can -- that ->> i wouldn't think that is a surprise question.

i mean, you know ->> i mean, you know, congress has authority to act and - >> hey, i can't think of one. i'm not blaming you for not thinking of one. [laughter] >> but i do think -- but i do think -- i really do think that it's important to look at this, an issue like this, if you are going to consider it, it has got to be considered in the factual context in which it arises. >> well, let me give you a factual context. let's say congress says this to the states -- we have got great news for you. we know that your expenditures on education are a huge financial burden, so we are going to take that completely off your shoulders. we are going to impose a special federal education tax which will raise exactly the same amount of money as all of the states now spend on education, and then we are going to give you a grant that is equal to what you spent on education last year. now, this is a great offer and we think you will take it, but, of course, if you take it, it's going to have some conditions because we're going to set rules on teacher tenure, on collective bargaining, on curriculum, on textbooks, class size, school calendar, and many other things. 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 fine -- you are 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 now spending on education, plus all of the federal funds that you were previously given. would that be -- would that reach the point -- would that be the point where financial inducement turns into coercion? >> no, i don't think so - >> no? >> -- because they do, the states do have a choice there, especially as a -- as a going-in proposition. the argument the states are making here is not that they're -- that -- this is not a going- in proposition. their argument is that they're -they are in a position where they don't have a choice because of everything that has happened before. but - >> you might be right. but if that's the case, then there's nothing left ->> well, but as a - >> -- of federalism. >> as a practical matter, i disagree with that, justice alito.

first of all, 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 of raising the kinds of tax revenues that need to be -- needed to raised to work that kind of fundamental transformation, and that's real. and political constraints do operate to protect federalism in this area. >> i would have thought there was a serious political strain -- constraint on the individual mandate, too, but that didn't work. what you call serious political constraints sometimes don't work. >> but -- but with respect to a situation like that one, justice scalia, the -- the states have their education system, and they can decide whether they're going to go in or not. but here, of course, i think it's important to trace through the history of medicaid. it is not a case, as my friend from the other side suggested, 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 with respect to 1972 one way or another. the states have one view about that, we have a different one. but starting in the 1984 expansion, with respect to

pregnant women and infants, it was an expansion of the entire program, states were given the choice to stay in the entire program or not. 1989 when the program was expanded to children under 6 years of age, under 133% of poverty, same thing. 1990, kids 6 to 18 and 100% of poverty, same thing. 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 of 42 u.s.c. 1304, which reserves the right of the federal government to amend the program going forward, shows you that this is something that the states have understood all along. this has been the evolution of it, and with respect to -chief >> could you give me some assurance? we heard the question about whether or not the secretary would use this authority to the extent available. is there circumstances where you are willing to say that that would not be permissible? i'm thinking of the arizona letter, for example. i mean, if i had the authority and i was in that position, i

would use it all the time. you might -- you want some little change made? well, guess what, i can take away all your money if you don't make it. i win. every time. it seems that that would be the case. so, why shouldn't we be concerned about the extent of authority that the government is exercising, simply because they could do something less? we have to analyze the case on the assumption that that power will be exercised, don't we? >> well, mr. chief justice, it would not be responsible of me to stand here in advance of any particular situation becoming -- coming before the secretary of health and human services and commit to how that would be resolved one way or another. but that -chief >> no, i appreciate that. i appreciate that, but i guess - >> that discretion is there in the statute, and i think there's every reason to think it's real, but i do think, getting back to the circumstances here - >> well, general, what's the - been the history of its use? has the secretary in fact ever

made use of that authority? >> that's correct, justice kagan. it's never been used - >> what about the arizona letter we just heard about today? >> it has never been used to cut off - >> it's been used to threaten - >> of course not. >> of course no state is going say, okay, go ahead, make my day, take it away. they're -- they're going to give in. >> if we could go to the situation we have here, mr. chief justice, this -- with respect to the medicaid expansion, the states' argument is, as they've said in their briefs -- they articulated a little bit different this morning -- this afternoon. but as they said it in their briefs was it's not what you stand to gain, but what you stand to lose. but i think an important thing in evaluating that argument in this context is fully 60% of medicaid expenditures in this country are based on optional choices. and i don't mean by that the optional choices of the states to stay in the program in '84 or '88 or '89. but -- but states are given choices to expand the beneficiaries beyond the federal minimum and to expand services beyond the federal minimum. >> and just a small point, and please correct me if i am wrong. it -- does this act not require states to keep at the present level their existing medicaid expenditure? so some states may have been more generous than others in medicaid, but this act freezes

that so the states can't go back. or am i incorrect? >> it's much more nuanced than that, justice kennedy. there is something called a maintenance of effort provision which lasts until 2014, until such time as the medicaid expansion takes place and the exchanges are in place. that applies to the population. it says, with respect to the population, you can't take anybody out. it does not apply to the optional benefits where the states still have flexibility. they can still reduce optional benefits that they're now providing if they -- if they want to control costs. they can also work on provider rates. there's also -- with respect to demonstration projects by which some states have expanded their populations beyond the required eligibility levels, they don't have to keep them in. and then there's also, if the state has a budgetary crisis, it can get a waiver of that, as wisconsin did.

so, that is a -- that's a provision i think that does a significant degree less than my friends on the other side have suggested in terms of -in terms of its effect, and its effect beyond that is just temporary. but i do think with respect to the -- the first of their three arguments for coercion, the sheer size argument, that 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 that it doesn't matter whether the medicaid expansion is substantial or whether it's modest, or whether there's any expansion at all. the states, for example -- the federal government, for example, could decide that under -- under the current system too much money has ended up flowing to nursing home care and that money would be better serving the general welfare if it were directed at infants and children. but if the federal government said we're going to redirect the spending priorities of the federal money that we're offering to you, the states could say, well, geez, we don't like that, we'd like to keep

spending the money the way we were, and we have no choice, because this has gotten too big for us to exit. and so -- and in fact, it seems to me, standing here today before these expansions take place, under their theory, the provision is coercive. >> the smaller it, is the bigger the coercion. >> well - >> the smaller what you're demanding of them, the bigger the coercion to go along. >> the more they stand to lose. and -- and so -- and then it -- i'm sorry, justice breyer. >> i -- just before you leave that, i'd -- i'd appreciate it if you would expand a little bit on the answer to justice kagan's question for the reason, when i read the cutoff statute, which as i said has been there since 1965 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 condition. and as i read that, that gives the secretary the authority to cut off all the money, but the states' refusal to accept the condition means they shouldn't have. but nothing there says they can go beyond that and cut off unrelated money.

now, there is a sentence says maybe they could do that. i thought they had to exercise that within reason. >> right. well - >> i don't know when it be reasonable. so, you've looked into it, and that's what i want to know. >> right. >> is there -- i could find no instance where they went beyond the funds that were related to the thing that the state refused to do or things affected by that. i would like you to tell me, when you looked into it, 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? >> i think the situation is generally as you've described it, but i do want to be careful in saying i don't think it would be responsible of me to commit now that the secretary would exercise the discretion uniformly in one way or another.

>> well, but that's just saying that when, you know, the analogy that has been used, the gun to your head, "your money or your life," you say, well, there's no evidence that anyone has ever been shot. >> but - >> well, it's because you have to give up your wallet. you don't have a choice. >> but that - >> and you cannot -you cannot represent that the secretary has never said -- and if you don't do it, we are going to take away all the funds. they cite the arizona example, i suspect there are others, because that is the leverage. >> but it - >> i'm not saying there's anything wrong with it. >> it's not coercion, mr. chief justice. >> wait a second. it's not -- it's not coercion -- well, i guess that's what the case is. it's not coercion - >> it's not coercion. >> -- to say i'm going to take away all your funds, no matter how minor the infringement? >> but, of course - >> i don't know if that's so. and all i asked in my question was i didn't ask you to commit the secretary to anything. i wanted to know what the facts are. >> i - >> i wanted to know what you found in researching this case. i wanted you, 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? >> it's -- my understanding is that these situations are usually worked out back and forth between the states and the federal government. and i think that most - >> and you are not privy to what those are. >> and i'm not. but - >> and who wins? >> well, i think -- that's what i think is the problem here, justice scalia, is it seems to me we are operating under a conception that isn't right. the reason we have had all these medicaid expansions, and the reason, it seems to me, why we are were where we are now, and why 60% of what's being spent on medicaid is based on voluntary decisions by the states to expand beyond what federal law requires, iis because this is a good program and it works. and the states generally like what it accomplishes - >> and, general verrilli - >> general verrilli, is this discussion realistic?

the objective of the affordable care act is to provide near universal health care. now, 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 population that would not have healthcare. and it's a realistic possibility the secretary is going to say, well, okay, fine, you know. we are going to cut off your new funds, but we are not going to cut off your old funds, and just let that condition sit there? >> well, just as i can't make a commitment that the authority wouldn't be exercised, i'm not going to make a commitment that it would be exercised. but i do think that that -- to try and move away from the first of their arguments, the sheer size argument, to the second one, which is that it's coercive by virtue of its relationship to the affordable care act, i really think that that's a misconception, and i would like to be able to take a minute and walk through and explain why that is. >> general verrilli, before you do that, i'm sorry, but in response to the chief justice's question, i mean, the money or your life, has consequence because we are worried that that person is actually going

to shoot. so i think that this question about are we -- what do we think the secretary is going to do is an important one. and as i understand it, i mean, when the secretary withdraws funds, what the secretary is doing is withdrawing funds from poor people's health care, and that the secretary is reluctant and loathed to take money away from poor people's health care. and that that's why these things are always worked out. it's that the secretary really doesn't want to use this power, and so the secretary sits down with the state and figures out a way for the secretary not to use the power. >> that's correct, justice kagan. that is no - >> no, what the - >> i'm sorry - >> go ahead. >> that's another way of trying to say what i was trying to say to justice scalia earlier, is that the states and the federal government share a common objective here, which is to get health care to the needy. and, in the vast majority of instances, they work together to make that happen. >> but the question is not -- obviously, the states are

interested in the same objective, and they have a disagreement, or they have budget realities that they have to deal with. and states say, well, we are going to cut by 10% what we reimburse this for or that for, and the federal government says, well, you can't. and no one is 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 to 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 sovereign interests of the state. now, i'm not -- it may be something they gave up many decades ago when they decided to live off of federal funds, but i don't think you can deny that it's a significant authority that we are giving the federal government to say, you can take away everything if the states don't buy into the next program.

>> well, but 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 circumstances in which they are very difficult decisions. but that's different from saying that they are coercive, and that's different from saying that it's an unconstitutional - >> why is it different? why is it different? i mean, i thought it might be very unlikely that a state would ever say -- the government -- 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 away $42 billion of funding, okay? i thought such a thing would not happen. and i thought if it tried to happen, that it's governed by the apa, and the person with the eyeglasses would say it's arbitrary, capricious abuse of discretion. and that's so, even though the statute says it's in the discretion of the secretary. but mr. -- 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, that they would do it, and they do do it, and -- and, etc. so i would like a little clarification. >> in the situation described in your hypothetical, justice breyer, i think it's -- the secretary of health and human services would never do it. but what i'm saying is, with respect to the medicaid expansion in this case - >> could never do it or would >> would never do it. >> it's your prediction, okay. >> well, and i think that it would have to satisfy the administrative procedure. think that's a real constraint. what i'm not -- 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 it -- if that would be unreasonable? are you willing to accept that? wouldn't if i were you. >> so - [laughter] >> what i'm trying to do here is to -- is to suggest that the secretary does have discretion under the statute, and that that -- and that >> indeed, part of the discretion is to cut off all of

the funds. that's what the statute says. >> and it is possible, and i'm not willing to give that away. but that doesn't make this - >> but, general verrilli, you're not willing to give away whether the apa would bar that, but the apa surely has to apply to a discretionary act of the secretary. >> i agree with that, justice kagan, but - >> what's making you reluctant? >> i'm not trying to be -i'm not trying to be reluctant. i understand how this works. 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 wouldn't worry a lot if i were you. i don't know of any case that, where the secretary's discretion explicitly includes a certain act, we have held that, nevertheless, that act cannot be performed unless we think it reasonable. i don't know any case like that. yes, when there's just a general grant of discretion, it has to be exercised reasonably. but maybe justice breyer knows such a case. >> yes, i do. >> all right. give it to me. [laughter]

>> if i could go back to the sheer size idea, there's, i think, another couple of points that are important in thinking about whether that's a principle courts could ever apply. once you get into that business -- in addition to the problem i identified earlier, that 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 -- will the loss of the federal funding be so significant that you would count it as being coercive. >> 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 citizens that the state or the federal government is administering the program, even though it's a state administrator. >> well, but i think this going to come from a - >> and i think that's unworkable. >> this is going to come from a withdrawal situation. their argument's about it's what

you stand to lose and with respect to withdrawal. i mean -- so, does it depend on -- is it an absolute or a relative number with respect to how much of the state budget? is it a situation where you have to make a calculation about how hard would it be for that state to make up in state tax revenues the federal revenue they would lose? does that depend on whether it's a high tax state or a low tax state? it just seems to me -- and then, what is the political climate in that state? it seems to me like - >> in your view -- in your view, does federalism require that there be a relatively clear line of accountability for political acts? >> yes, of course, it does, justice kennedy. but, here - >> is that subsumed in the coercion test, or is that an independent one? >> you know, here, the coercion test, as it's been discussed, i think, for example, in justice o'connor's dissent in dole and in some of the other literature, does address federalism concerns in the sense of the federal government using federal funding in one area to try to get states to act in an area where the federal government may not have article i authority.

>> yes. >> 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 suggested, expand medicare and do it itself. >> but do you agree that there still is inherent and implicit in the idea of federalism, necessary for the idea of federalism, that there be a clear line of accountability so the citizen knows that it's the federal or the state government who should be held responsible for their program? >> certainly, but i think the problem here is - >> and does coercion relate to that, or is that a separate - >> yes, but i think - >> -- is that a separate doctrine? >> well, i think it relates to it in the opposite way that my friends on the other side would like it to, in that i think their argument is that it would subject us to such a high degree of political accountability at the state level to withdraw ourselves from the program, that it's an unpalatable choice for us, and that's where the coercive effect comes from. and that's why i think - >> well, but i think the answer would be that the state wants to preserve its integrity, its

identity, its responsibility in the federal system. >> and it may -- and, of course, it may do so, and it can make ->> may it do so? doesn't the question come down to this -maybe you can answer this yes. but -- but isn't the question simply -- is it conceivable to you, as it was evidently not to congress, that any state would turn down this offer, that they can't refuse? is it conceivable to you that any state would have said no to this program? that,ss didn't think because some of its other provisions are based on the assumption that every single state will be in this thing. >> i think - >> now, do you -- can you conceive of a state saying no? that- and if you can't, sounds like coercion to me. >> i think -- i think congress predicted that states would stay in this program, but the -- prediction is not coercion. and the reason congress predicted it, i think, justice scalia, is because the federal

government is paying 90-plus% of the costs. it increases state costs - >> so what do you predict? if you predict the same, that 100% of the states will accept it, that sounds like coercion. >> prediction is not coercion. i disagree, justice scalia. that's just an assumption, and if it proves to be wrong, then congress has time to recalibrate. and beyond that, i do think if -- i just want to go back to the -- the other part of your honor's point -- that with respect to the relationship between medicaid and the -- the act, and particularly the minimum coverage provision, my -- my friend mr. clement has suggested that you can infer coercion because, with respect to the population to which the provision applies, if there's no medicaid, there's no other way for them to satisfy the requirement. i want to work through that for a minute if i may, because it's just incorrect. first of all, with respect to anybody at 100% of the poverty line or above, there is an alternative in the statute. it's the exchanges with tax credits and with subsidies to insurance companies. so with respect to that, the part of the population at 100% of poverty to 133% of poverty, the -the statute actually has an alternative for them.

for people below 100% of poverty, it -- 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, right now, the -- the level of 100% of poverty is $10,800. the -- the requirement for filing a federal income tax return is $9,500. so anybody below $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. >> well, i'm not -- in selling this argument -- take the poorest of the poor.

if there is no medicaid program, then they're not going to get health care. isn't that right? >> yes, that's true. but this - >> so congress obviously assumed -- it thought it was inconceivable that any state would reject this offer, because the objective of the affordable care act is to provide near-universal care. and medicaid is the way to provide care for at least the poorest of the poor. so it -- it just didn't occur to them that this was a possibility. >> well - >> and when -- when that's the case, how can that not be coercion? >> well - >> unless it's just a gift. unless it's just purely a gift. then it comes back to the question of whether you think it makes a difference that the money -- a lot of the money to pay for this -- is going to come out of the same taxpayers that the states have to tax to get their money. >> this is -- this is a -this is -- these are federal dollars that congress has offered to the states 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 i authority under the general welfare clause and the appropriations clause. this is not some remote contingency, or an effort to leverage in that regard. this is how congress is going to have the federal government's money be used if states choose to accept it. yes, it was reasonable for congress to predict in this circumstance that the states were going to -- to take this money, because -- because it is an extremely generous offer of funds -- 90-plus% of the funding. states can -- can expand their medicaid coverage to more than 20% of their population for an increase of only 1%- >> if it's such a good deal - >> -- of their funding. >> -- why do you care? if it's such a good deal, why do you need the club? >> well, the -- the - >> if it's a good deal, take it. we're not going to -- if you don't take it, you're just hurting yourself. we're not going to - >> that's -- that's a judgment for congress to make about how the federal -how federal funds are going to be used if states choose to accept them, and congress has made that judgment. that's congress's judgment to make, and it's -- it doesn't mean that it's coercive. >> you have another 15 minutes.

>> lucky me. lucky me. [laughter] >> but the -- but the point is -- but the -- the point is, there's -- there's no real - >> can we go back - >> there's no real -- there's no realistic choice. there's no real choice. and congress does not in effect allow for an out -- opt out. we just know that. and it's - >> well, i guess i - >> -- it's substantial. >> i would go back, justice kennedy, to the - >> i recognize the problem with that test. >> i would go back to the fact that 60% of the medicaid spending is now optional. it's -- it's a result of choices that states have made that -- it's expanded the - >> even though they're now frozen in, per our earlier discussions, to a large extent. >> well, but -- well, no -to a more -- much more modest extent was my point, justice kennedy. for example, optional services where a huge amount of money is spent -- more than $100 billion annually -- the largest component of that is nursing home services. that remains optional. it's -- right now, once the

minimum -- once the maintenance provision remains in place, states have the flexibility to that -reduce those numbers. states have considerable flexibility now and going forward with respect to the way that money is spent. and i do think in terms of evaluating whether this expansion should be considered coercive, it has got to be evaluated against the backdrop of the fact that the states are generally taking -- are generally taking advantage of the opportunities of this statute to greatly expand the amount of money that the federal government spends and the amount of money that they spend to try to make the -- the lives of their citizens better. i think - >> of course, they have to do so by hiring a very substantial number of more employees. there will be state employees. there'll be substantial state administrative expenses that are not reimbursed. >> well, but -- i would take issue with that, justice kennedy. part of the affordable care act is that it -- it provides for new streamlined eligibility

processes to get people into the system at a -- at a much faster and cheaper rate. there are going to be costs to set that up. but under the statute, the federal government is going to pay 90% of those costs, the short-term set-up costs. and then all of the projections that we have seen suggest that the medium- to long-term costs once these changes are in place are going to be dramatically lower for the states - >> well, what - >> -- on the administrative side. >> obviously, the federal government isn't bound to that. and what if, after the 90%, they say well, now -- from now on, we're going to pay 70%? what happens then? where does that extra money come from? >> well, i think -- then -then the states would have a choice at that -- at that point whether they were going to stay in the program or not. but that isn't what we have here, and - >> there's no -- they can just bail out -- whenever the government reduces the amount of the percentage that it's going to pay, the states can say, that's -- that's - >> well, i'm not saying it would be an easy choice, mr. chief justice - >> they'd have to bail out of medicaid, you're talking about, not just there. >> right.

that that would be - >> oh. >> right. that that would be the option. they can leave medicaid if they decide that that isn't working for them. i'm not saying this is an easy choice. i'm also not saying it would happen, because the secretary does have this discretion - >> well, the secretary has the discretion. we're talking about something else. we're talking about fiscal realities, and whether or not the federal government is going to say we need to lower our contribution to medicaid and leave it up to the states because we want the people to be mad at the states when they have to have all these budget cuts to keep it up, and not at the federal government. >> but that would be true, mr. chief justice, whether this medicaid expansion occurred or not and - >> i know, but you've been emphasizing that the federal government is going to pay 90 percent of this, 90% of this, and it's -it's not something they can take to the bank, because the next day or the next fiscal year, they can decide, we're going to pay a lot less. and you, states, are still on the hook, because you -- you don't -- you say it's not an easy choice. we can say -- ask whether it's coercion. you're not going to be able to bail out of medicaid. you just have to pay more because we're going to pay less. >> well, like i said, i -- i agree that it would be a difficult choice in some

circumstances. but that is not to say it's coercion as a legal matter or even as a practical matter. and i think it would depend on what the circumstances were on how -- and i -- i think, trying to think about how a court would ever answer the question of whether it was coercive, it was too difficult as a practical matter for states - >> general, i'm trying to - >> -- to withdraw. >> -- go back to that because justice kennedy asked you whether there is -- i think he said it's -- it's coercion if no one can be politically accountable. i'm not sure how that could be practically politically accountable because almost every gift -- if the terms are attractive, it would be an un -- unattractive political alternative to turn it down. dole itself was one of those cases. i think every state raised the drinking age to 21, correct? >> yes, justice sotomayor, and this argument was raised in

dole, and the court rejected it as a - >> i guess my point is that political accountability has two components -- what can i do if i like something, and what can i do if i don't like something? and if people really like something like medicaid, they're not going to let you drop it, correct. >> well, the citizens of the state, but that's the citizen of the state acting - >> exactly. that's the whole point, that's their choice, right? >> -- in the capacity of the citizens of the state. and i think that's why i get - try to get back to the point, that's why i think this is wrong to think about this as coercion, because this is a program that works effectively for the citizens of the state, and states' governments -- and state governments think that, and that's why it has expanded the way it has expanded, because it's providing an essential service for millions of needy citizens in these states. it's providing access to health care that they would not otherwise have. >> you mentioned the -the dole case. now, what was the threat in that case, raise your drinking age to 21 or what? >> or lose a percentage of your highway funds.

>> do you remember the percentage? >> 7%, yes. >> yes. it's a pretty small amount. that's really apples and oranges when you're talking about lose all of your medicaid funds or lose -- i thought it was 5, but 7 - 7% of your highway funds. >> it's -- i think i agree with your honor, that it -- that it's different, but i don't think that that makes coercion as a legal matter. as i said, i think that this is a situation in which the -- if the states -- is it -- i'm not saying it would be an easy choice, but the states made the choice, they've made the choice. and - >> well, they made a choice with the stimulus bill, didn't they? some governors rejected the stimulus bill - correct, -- that's justice sotomayor. and - >> -- and some of -- some of their congressional or legislative processes overturned that. >> that's right. >> in others, they supported it. the percentages were smaller, but it's always the preference of the voters as to what they want, isn't it? >> that is correct. >> what was the threat in the stimulus bill? what would the state lose? >> that answer i don't know, mr.

chief justice. >> would anything be taken away, or would it just lose the opportunity to get the money? >> i don't know the answer to that. i don't know the answer to that. but if i may just say in conclusion that -i'd like to take half a step back here, that this provision, the medicaid expansion that we're talking about this afternoon and the provisions we talked about yesterday, we've been talking about them in terms of their effect as measures that solve problems, problems in the economic marketplace, that have resulted in millions of people not having health care because they can't afford insurance. there is an important connection, a profound connection, between that problem and liberty. and i do think it's important that we not lose sight of that. that in this population of medicaid eligible people who will receive health care that they cannot now afford under this medicaid expansion, there

will be millions of people with chronic conditions like diabetes and heart disease, and as a result of the health care that they will get, they will be unshackled from the disabilities that those diseases put on them and have the opportunity to enjoy the blessings of liberty. and the same thing will be true for -- for a husband whose wife is diagnosed with breast cancer and who won't face the prospect of being forced into bankruptcy to try to get care for his wife and face the risk of having to raise his children alone. and i could multiply example after example after example. in a very fundamental way, this medicaid expansion, as well as the provisions we discussed yesterday, secure of the

blessings of liberty. and i think that that is important as the court is considering these issues that that be kept in mind. the -- the congress struggled with the issue of how to deal with this profound problem of 40 million people without health care for many years, and it made a judgment, and its judgment is one that is, i think, in conformity with lots of experts thought, was the best complex of options to handle this problem. maybe they were right, maybe they weren't. but this is something about which the people of the united states can deliberate and they can vote, and if they think it needs to be changed, they can change it. and i would suggest to the court, with profound respect for the court's obligation to ensure that the federal government remains a government of enumerated powers, that this is not a case in any of its aspects that calls that into question. that this was a judgment of policy, that democratically accountable branches of this government made by their best

lights. and i would urge this court to respect that judgment and ask that the affordable care act, in its entirety, be upheld. thank you. >> thank you, general. mr. clement, you have 5 minutes. >> thank you, mr. chief justice and may it please the court -- just a few points in rebuttal. first of all we talked a lot about the sort of hallmark of coercion, your money or your life, with somebody with a gun. i would respectfully suggest that it is equally coercive or certainly not uncoercive if i say your money or your life -- and by the way, i have discretion as to whether or not i will shoot the gun. i don't think that eliminates the coercion. i also don't think this is a discretion that the secretary would ever be able to exercise. and the reason is, we disagree on the details, but the solicitor general and i agree that, over the years, congress has had different approaches to expanding medicare. sometimes, as in 1972, it makes the expansion voluntary, that's also by the way what happened with the stimulus funds, which

were voluntary funds. you didn't lose all your medicaid funds, which is why 17 states could say no. sometimes, they take the voluntary approach. sometimes, as in 1984, they take the mandatory approach. if the secretary exercised the discretion to say, you know what, it really isn't reasonable for you to have to give up your funding for the visually impaired and the disabled, just to cover these newly eligible people, so we will make it voluntary, we'll make that discretionary -- that would essentially be creating - converting a 1984 amendment approach to a 1972 amendment approach, and i just don't think that is the kind of discretion that the secretary has, with all due respect. now, moving on to the next point, justice alito, your hypothetical, i think, aptly captures the effect on this, based on the fact that these tax dollars are being taken from the state's tax base, and it's not like steward machine, where the federal government would say, and oh, by the way, if you don't take the option we are giving you, we are going to have a federal substitute that will go in, and we will take care of the unemployed in your states. here, if you don't take this offer we are giving you, your tax dollars will fund the other 49 states, and you will get nothing. but of course, this situation is much more coercive, even in your hypothetical, because it is

tied directly to the mandate. it's also tied to the -- to participation in the preexisting program. so it is as if there was yet another program for post- secondary education, they gave them exactly your option -option -- and then they also said, oh, and by the way, you not only -- not get these funds, but you lose the post-secondary fund as well. it's really hard to understand tying the preexisting participation in the program as anything other than coercive. the solicitor general makes a lot of the fact that there are optional benefits under this program. well, guess what? after the medicaid expansion there will be a lot less opportunity for the states to exercise those options, because one of the things that the expansion does -- precisely because the expansion is designed to convert medicaid into a program that satisfies the requirement of the minimum essential coverage of the individual mandate, things that used to be voluntary will no longer be voluntary. the perfect example is prescription coverage. it's a big part of the benefits that some states but not all provide voluntarily now. it will no longer be voluntary after the expansion because the federal government has deemed that prescription drugs to be

part of the minimal essential health coverage that everybody in this country must have under the mandate. so that option that the state has is being removed by the expansion itself. the chief justice made the point - >> mr. clement, may i ask one question about the bottom line in this case? it sounds to me like everything you said would be to the effect of, if congress continued to do things on a voluntary basis, so we are getting these new eligibles, and say, states, you can have it or not, you can preserve the program as it existed before, you can opt into this. but you are not asking the court as relief to say, well, that's how we -- we -- that's how we cure the constitutional infirmity, we say this has to be on a voluntary basis. instead, you are arguing that this whole medicaid addition, that the whole expansion has to

be nullified, and moreover, the entire health care act. instead of having the easy repair, you say that if we accept your position, everything falls. >> well, justice ginsburg, if we can start with the common ground that there is a need for repair because there is a coercion doctrine and this statute is coercion, then we are into the question of remedy. and we do think, we do take the position that you describe in the remedy, but we would be certainly happy if we got something here, and we got a recognition that the coercion doctrine exists, this is coercive, and we get the remedy that you suggest in the alternative. let me just finish by saying i certainly appreciate what the solicitor general says, that when you support a policy, you think that the policy spreads the blessings of liberty. but i would respectfully suggest that it's a very funny conception of liberty that forces somebody to purchase an insurance policy whether they want it or not.

and it's a very strange conception of federalism that says that we can simply give the states an offer that they can't refuse, and through the spending power which is premised on the notion that congress can do more because it's voluntary, we can force the states to do whatever we tell them to. that is a direct threat to our federalism. thank you. >> thank you, mr. clement. and thank you, general verrilli, mr. kneedler, mr. carvin, mr. katsas, and in particular, of course, mr. long and mr. farr. the case is submitted. >> the supreme court wrapped up three days of oral arguments yesterday. this week, they focused on four primary questions -- first, if the law includes a tax, does the court had jurisdiction to decide the case before the law takes

effect? secondly, is the individual mandate part of the statute constitutional? and, if not, can the rest of the law survive? finally, is above law's expansion of medicaid coverage and intrusion on state, which is the case we just heard. listen to all four arguments on line and find out more about the health law. go to c-span.org/healthcare. >> live sunday on in depth, or founding fathers, civility, and conservative politics with your questions for author and national review senior editor. his 11 books include "right time, right place," "america's first dynasty," and his latest and james madison. he will take your phone calls, e-mails, and sweets -- on c- span2's book tv. starting sunday, see the winners

in this year's c-span studentcam the video documentary competition on the theme -- the constitution and you. middle and high school students across the country showed which part of the constitution was important to them and why. we will air the top 27 videos each morning at 6:50 a.m. eastern and you will need the students on "washington journal." for a preview, check studentcam.org. >> ronald reagan was leaving this hotel after delivering a speech to a afl-cio -- he is this close, 15 feet from the president. he shoots. the first hit jim brady, the press secretary. the second one is the d.c. police officer who had turned around to check on the president's progress. he was hit in the back and falls down -- i can hit. now the path of the president is clear. at healy has an effective range of 20-30 feet. he had done target practice, he can hit stationer retardants. >> march 30, 1981. would-be assassin john hinckley

fire six shots. this weekend on american artifacts, and author of the race to save a president. sunday at 7:00 p.m. and 10:00 p.m. eastern on american history tv this weekend on c-span 3. >> the house is back in this morning for more work on the 2013 budget, which they expect to finish today. then we move on to the surface transportation bill. live coverage at 9:00 a.m. eastern here on c-span. on c-span2, we will hear from budget committee chairman paul ryan and the top democrat on the committee, chris van hollen. they will be at a national journal event at 8:30 eastern. c-span 3, the senate energy committee will hold a hearing on gas prices. live coverage begins at 9:30 a.m. eastern. coming up on obama washington journal,", we will talk to new journal,", we will talk to new mexico senator jeff