First Circuit Upholds ACA’s Medicaid Maintenance-of-Effort Provision Against Constitutional Challenge

By Rachel Sachs

Last week, the First Circuit Court of Appeals upheld the ACA’s maintenance-of-effort provision against a constitutional challenge brought by the Maine Department of Health and Human Services. The court’s opinion has received relatively little media attention, but it should be of interest to all in the health policy space. Its post-NFIB v. Sebelius Spending Clause analysis will be relevant to scholars who are interested in King v. Burwell, challenging the grant of subsidies on health insurance exchanges run by the federal government. Its procedural posture will fascinate those who are interested in plural executive systems. And its fulsome discussion of the Medicaid program and its history will be of broader interest to health policy scholars.

States participating in Medicaid must agree to cover certain groups of people up to certain income thresholds, but states may choose to expand these groups in various ways. Relevant to this case, most states have increased the income thresholds for covering children or pregnant women through the SCHIP program (sometimes quite substantially), and some have extended SCHIP to include low-income 19- and 20-year-olds. Maine had done both, providing coverage to 19- and 20-year-olds since 1991. The ACA subsequently included a maintenance-of-effort provision (42 U.S.C. § 1396a(gg)), requiring states participating in Medicaid to maintain their eligibility standards through 2019. As such, in 2012 HHS denied Maine’s request to stop providing coverage to 19- and 20-year-olds.

Maine’s Department of Health and Human Services sought review in federal court. Maine’s executive branch was not united in this choice: the Attorney General declined to represent the state and even intervened on the side of HHS Secretary Burwell. This mirrors a phenomenon that was often observed in the context of the Medicaid expansion, in which several states whose Attorneys General joined the legal fight against the expansion in NFIB subsequently expanded anyway, as that separate power was exercised by Governors and legislatures. 

Maine principally argued to the First Circuit that the maintenance-of-effort provision is unconstitutionally coercive under the Spending Clause, as it was interpreted by the Supreme Court in NFIB in striking down the Medicaid expansion. The First Circuit disagreed, concluding that the provision was analogous to previous incremental expansions of Medicaid that NFIB had concluded were constitutionally permissible. Because the maintenance-of-effort provision could not plausibly be described as a “new program,” unlike the ACA’s broader Medicaid expansion, it was an “unexceptional” alteration to the program and posed no Spending Clause concern.

Governor Paul LePage has suggested that he is likely to appeal the First Circuit’s ruling, although at present there is no circuit split and (to my knowledge – I welcome corrections on this point) no other such cases are pending. This is unsurprising: children have historically been very inexpensive to cover under Medicaid. Although children make up half of all Medicaid enrollees, they make up just one-fifth of Medicaid spending. So too in Maine, which estimates that removing coverage for 19- and 20-year-olds would save the state $3.7 million. But as this group makes up less than 2% of Maine’s total Medicaid expenditures, other states have rationally chosen not to pick this particular fight.

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