James F. Blumstein files amicus brief in Florida v. USDHHS

May 31, 2011

James F. Blumstein, who is the University Professor of Constitutional Law and Health Law & Policy at Vanderbilt Law School and Vanderbilt University Medical Center, and who directs Vanderbilt's Health Policy Center, has filed an amicus brief in Florida v. U.S. Department of Health and Human Services [USDHHS], an appeals case to be heard in the U.S. Court of Appeals for the Eleventh Circuit on June 8.

Florida v. USDHHS challenges the Affordable Care Act (ACA), the health insurance reform legislation President Obama signed into law March 23, 2010. Blumstein believes the case should hinge on what he terms "an important sleeper issue" which arises in the cross-appeal brought by Florida and 25 other states: the validity of the expanded Medicaid mandate imposed on states to cover those with incomes up to 133 percent of the poverty threshold. "The Medicaid mandate accounts for about half the increased coverage of the uninsured under ACA," Blumstein said. "In 2014, states must either expand Medicaid to cover adults with incomes above the poverty threshold or exit Medicaid entirely."

Blumstein asserts that this requirement renders the ACA unenforceable because it makes a substantial change in the terms of what is essentially a contract between the federal government, which helps fund Medicaid, and individual states, which administer their separate Medicaid programs, by requiring states to cover more people under the program than they could reasonably have foreseen when they agreed to participate in the program. He argues that notice of this change — and of the alternative the ACA provides for states that choose not to implement this ACA-mandated change of opting out the Medicaid program entirely — was neither timely nor sufficient.

"Federal spending legislation like Medicaid is treated as a contract between federal and state governments," he explained. "States receive federal funding for Medicaid, but they must comply with certain conditions to receive the federal funds. Contract law treats the formation and the modification of a contract very differently. Parties have much more freedom when they form a contract than when they modify it. To protect the interest of states when they decide to sign up for a federally funded program such as Medicaid, the Supreme Court requires that the federal government provide clear and unambiguous notice of what conditions attach to the federal funding in advance of a state's decision to participate in the program."

In Florida v. USDHHS, an issue raised in the cross-appeal is whether the 'clear notice' rule applies when states agreed to participate in Medicaid or when the ACA substantially changed Medicaid’s rules by requiring states to cover more people. In his brief, Blumstein contends that the federal government was obligated to provide clear notice to the states of the nature, scope and magnitude of their obligations at the time they initially signed up for Medicaid, and that the ACA changed Medicaid's rules in an unforeseeable manner. "The ACA substantially modifies an ongoing relational contract and authorizes states to opt out of their Medicaid contracts," Blumstein said. "Notice of these changes and of states' ability to opt out is neither timely nor sufficient. When changes in Medicaid are substantial and unforeseeable, and when they impose significant increases in program cost and significant increases in a state’s overall budget, which the ACA does by requiring states to extend Medicaid benefits to people with incomes above the poverty threshold, the notice is insufficient if it comes at contract modification and not contract formation."


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