States Warn Congress of Possible Lawsuit Over Nebraska’s ‘Cornhusker Kickback’

January 4, 2010 - 7:38 PM
Thirteen state attorneys general have sent a letter to Congress threatening legal action against health care reform unless a provision in the Senate bill given to Nebraska is removed.

South Carolina Attorney General Henry McMaster

(CNSNews.com) – Thirteen state attorneys general have sent a letter to Congress threatening legal action against health care reform unless a provision in the Senate bill given to Nebraska is removed.
 
The provision is known as the “Cornhusker Kickback,” because it gives Nebraska a permanent exemption from paying for Medicaid expenses that would be required of all the other states. This means that taxpayers in other states would be paying for an increase in Nebraska’s Medicaid population. Medicaid is a federal-state health care program for the poor.
 
“This provision is constitutionally flawed,” the attorneys general wrote. “As chief legal officers of our states we are contemplating a legal challenge to this provision and we ask you to take action to render this challenge unnecessary by striking the provision.” 
 
The Dec. 30 letter was sent to House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.).
 
“It has been reported that Nebraska Senator Ben Nelson’s vote, for H.R. 3590 [Senate health care bill], was secured only after striking a deal that the federal government would bear the cost of newly eligible Medicaid enrollees,” the attorneys general wrote.
 
“In marked contrast, all other states would not be similarly treated, and instead would be required to allocate substantial sums, potentially totaling billions of dollars, to accommodate H.R. 3590’s new Medicaid mandates,” they added.
 
In addition to the possible litigation, there are proposals in 26 state legislatures for an amendment to their state constitutions that would allow individuals to pay directly for medical care if they choose, and block any state attempt to penalize individuals for not purchasing government-approved insurance.   
 
Health care reform has passed in both the House and Senate, but the bills must go to conference committee and then a final vote to pass before reaching the desk of President Barack Obama, who is eager to sign a bill into law.
 
The House version includes a government-run health insurance plan (“public option”) that would compete with private insurers. It also specifically bans federal funding for any health plan that covers abortion.
 
The Senate bill does not have a government plan and does allow for federal funding of health plans that cover abortion. Both plans mandate that employers provide and individuals carry health insurance, and that the government establishes a “health care exchange” to allow individuals to choose from different insurance-coverage policies.
 
“The bill is constitutionally flawed because Congress would be spending money in an arbitrary and capricious way,” Carrie Cantrell, spokeswoman for the Republican Attorneys General Association, told CNSNews.com. “Because the Nebraska cornhusker kickback is for one state, it could violate the Equal Protection clause. There are a couple of ways to look at the constitutionality of it.”
 
The Dec. 30 letter was drafted by South Carolina Attorney General Henry McMaster and gained the signatures of 12 other Republicans. Oklahoma Attorney General Drew Edmondson is the only Democrat, so far, to express support for the possible litigation.
 
“As a practical matter, the deal struck by the United States Senate on the ‘Nebraska Compromise’ is a disadvantage to the citizens of 49 states,” reads the letter. “Every state’s tax dollars except Nebraska’s, will be devoted to cost-sharing required by the bill, and will be therefore unavailable for other essential state programs.”
 
The letter also includes the signatures of attorneys general from Alabama, Colorado, Florida, Idaho, Michigan, North Dakota, Pennsylvania, South Dakota, Texas, Utah, Virginia and Washington state.
 
The letter cites U.S. Supreme Court precedent from 1937 and 1987 that says Congress cannot use its spending power to demonstrate a “display of arbitrary power.”
 
But courts tend to give Congress a great deal of leeway in its constitutional authority to spend money, said David Rivkin, a former Justice Department attorney.
 
“The legal argument is not a slam dunk and certainly has merits,” Rivkin told CNSNews.com. “But the Supreme Court has ruled what spending is or isn’t in the general welfare, is up to Congress.”
 
However, Rivkin also said the attorneys general would have a case because the Nebraska allocation is not a usual earmark.
 
“One reason to be optimistic is because this is so outrageous,” Rivkin said. “It’s worse than any pork barrel projects Congress has ever done. This is so blatant and outrageous it may change the basis of the court’s view. Certain cases have been known to do that.”
 
Meanwhile, the legislatures in 26 states will consider action to challenge key parts of the bill. Each state has a proposed constitutional amendment, and several have stand-alone bills as well.
 
The proposals would preserve the rights of individuals to buy direct medical coverage, and prohibit any individual from being penalized for not purchasing a government-approved insurance plan.
 
Further, the proposals say that “any state attempt to require an individual to purchase health insurance—or forbid an individual from purchasing services outside of the required health care system—would be rendered unconstitutional.”
 
Thus far, only Arizona has approved a measure to be on the 2010 ballot in November.
 
The most recent proposals were announced in Iowa and Virginia.
 
South Carolina state Rep. Tim Scott, a Republican, proposed similar legislation in his state in November.
 
“We can’t afford it, and it doesn’t make a lot of sense to me to reduce the quality of health care for 86 percent of our country while trying to bring health care to the other 14 percent,” Scott told CNSNews.com.
 
Understanding the federal Supremacy Clause of the Constitution, courts have historically allowed states to opt out of various policies, said Christie Herrera, health policy director for the American Legislative Exchange Council.
 
“This simply says that people have the choice to obtain the health care plan of their choosing,” Herrera told CNSNews.com.
 
However, Rivkin doubts the state constitutional amendments will carry in court if the federal health care bill is deemed constitutional.
 
“This one is very simple: That dog won’t hunt,” Rivkin said. “The Supremacy Clause says you can’t use a state constitution to nullify or block it [a federal law].”
 
In the 233-year history of the United States, the federal government has never mandated that individual Americans purchase any good or service.
 
In 1994, when Congress was considering President Clinton’s proposal for a national health care plan, the non-partisan Congressional Budget Office said that for federal government to order Americans to buy health insurance would be “unprecedented,” adding that the government had “never required” Americans to purchase anything.
 
“A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action,” CBO found.

“The government has never required people to buy any good or service as a condition of lawful residence in the United States," said the CBO report.

"An individual mandate would have two features that, in combination, would make it unique. First, it would impose a duty on individuals as members of society. Second, it would require people to purchase a specific service that would be heavily regulated by the federal government."