As explained in a prior post, the jurisdictional infirmities exposed by the Fourth Circuit’s rulings in Virginia v. Sebelius and Liberty University v. Geithner should bring renewed attention to the alternative state standing theories in Florida v. HHS not yet addressed by any court. There are two such theories. This post discusses the first, and a later post will examine the second.
The states’ lead theory is one of indirect injury from the incremental Medicaid expenditures each state will have to make when presently uninsured individuals comply with the mandate by enrolling in Medicaid. See States’ 11th Cir. Br. at 67-69.
The federal government has argued that this allegation of indirect injury is insufficient as a matter of law, that the claimed injury rests on speculation, and that any potential injury from individuals’ compliance with the mandate is neither actual nor imminent. Additionally, relying on Pennsylvania v. New Jersey, 426 U.S. 660 (1976), the federal government has argued that “it is difficult to see how a State can claim injury on the ground that its citizens choose to accept benefits the State offers them under State law. Reply to Mot. to Dismiss at 13.
The distinction between direct and indirect injuries in the state standing context is traceable to Florida v. Mellon, in which Florida sought to challenge a federal tax on the ground that it would “have the result of inducing potential taxpayers to withdraw property from the state, thereby diminishing the subjects upon which the state power of taxation may operate.” 273 U.S. 12, 17-18 (1927). The Court held that Florida could not go forward with the suit because the State was not in immediate danger of sustaining “any direct injury as the result of the enforcement of the act in question.” Id. at 18. In short, the Court drew a line between direct and indirect injury, and held that it lacked jurisdiction because the claimed fiscal injury arising by virtue of the actions of private citizens in response to the federal law was indirect.
While the line between indirect and direct may be hard to identify in certain cases, the distinction seems administrable enough to foreclose the claimed injury to states resulting from individuals’ compliance with the individual mandate. Recall, also, that states are not permitted to sue the federal government as parens patriae. Allowing states to rely on indirect fiscal injury could provide for easy circumvention of that limitation.
In attacking the states’ indirect injury argument as speculative, the federal government has argued that (i) the pre-mandate status quo already imposes costs on the states in the form of uncompensated care; and (ii), moving more people into insurance may result in a net reduction of costs borne by the states even though some of that insurance is state-provided insurance through Medicaid. The federal government has also pointed to circuit court cases denying standing to states on the ground that the complained-of fiscal effects were too attenuated. See Pennsylvania v. Kleppe, 533 F.2d 668, 672 (D.C. Cir. 1976); Iowa v. Block, 771 F.2d 347, 352-54 (8th Cir. 1985).
If the Supreme Court were to consider this speculation argument, it is unclear (from the filings I have reviewed, anyway) whether the factual record would be sufficiently developed to ground a prediction about the effects of the mandate on state fiscs (which are likely to vary from state to state). If the record were to be found insufficiently developed, that would cut against the states because it is their burden to establish standing.