In the Supreme Court of the United StatesIn the Supreme Court of the United StatesIn the Supreme Court of the United StatesIn the Supreme Court of the United StatesIn the Supreme Court of the United States

MARY C. MAYHEW, in her capacity as Commissioner ofthe Maine Department of Health and Human Services,

Petitioner,v.

SYLVIA M. BURWELL, in her capacity as Secretary of theU.S. Department of Health and Human Services and

JANET T. MILLS, in her capacity as Attorney General of Maine, Respondents.

On Petition for Writ of Certiorari to theUnited States Court of Appeals for the First Circuit

PETITION FOR WRIT OF CERTIORARI

Clifford H. Ruprecht Counsel of RecordAndrea S. ManthorneROACH HEWITT RUPRECHTSANCHEZ & BISCHOFF, P.C.66 Pearl Street, Suite 200Portland, ME 04101(207) 747-4870cruprecht@rhrsb.com

Counsel for Petitioner

Becker Gallagher · Cincinnati, OH · Washington, D.C. · 800.890.5001

NO.

i

QUESTIONS PRESENTED FOR REVIEW

Section 2001(b) of the Patient Protection andAffordable Care Act (“ACA”), Pub. L. No. 111-148, 124Stat. 119 (2010), requires any State paying Medicaid to19- and 20-year-olds as of the ACA’s enactment tocontinue to do so on the same terms until October 2019or lose all its federal Medicaid funding. When the ACAtook effect, Maine was performing a promise to cover19- and 20-year-olds through December 31, 2010 inexchange for increased Medicaid reimbursement, aspart of the federal stimulus program. In 2012, Maineproposed to cease such coverage. The Secretary ruledthat § 2001(b) prohibited the change, and the FirstCircuit affirmed over Maine DHHS’s constitutionalobjections. The questions presented for review are:

(i) Whether § 2001(b) exceeds Congress’s powerunder the Spending Clause and intrudes on thesovereignty reserved to Maine under the TenthAmendment?

(ii) Whether § 2001(b) as applied to Maine is anunconstitutional retroactive change to theconditions on Maine’s participation in thefederal stimulus program?

(iii) Whether Maine’s unequal access to the Medicaidprogram by virtue of § 2001(b)’s requirementthat Maine cover individuals that Maine’s sisterStates are not required to cover needsjustification as an infringement of Maine’s equalsovereignty and, if so, whether promoting thetransition to a regime based on the ACA’sunconstitutional mandatory Medicaid Expansionis adequate justification?

ii

PARTIES IN THE COURT OF APPEALS

Petitioner Mary Mayhew, as Commissioner of theMaine Department of Health and Human Services,(“Maine DHHS” or “Commissioner”), was the Petitionerin the court of appeals.

Respondent Sylvia Burwell, as Secretary of the U.S.Department of Health and Human Services,(“USDHHS” or “Secretary”) was the Respondent below.

Janet Mills, Attorney General of the State of Maine,intervened below as a party-in-interest supporting theposition of the Respondent USDHHS.

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TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW . . . . . . i

PARTIES IN THE COURT OF APPEALS . . . . . . . . ii

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . viii

PETITION FOR A WRIT OF CERTIORARI . . . . . . 1

OPINIONS BELOW . . . . . . . . . . . . . . . . . . . . . . . . . 1

JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

CONSTITUTIONAL AND STATUTORYPROVISIONS INVOLVED . . . . . . . . . . . . . . . . . 2

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . 4

1. Maine Opts to Cover 19- and 20-Year-OldsU n d e r I t s M e d i c a i d P r o g r a m ,“MaineCare,” Even Though Such Coverage IsNot Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2. Congress Enacts Changes to Medicaid Under the2009 Stimulus Program, Increasing Maine’sReimbursement Rates in Exchange for Maine’sPromise to Maintain Medicaid EligibilityThrough the End of 2010 for, Inter Alia, 19- and20-Year-Olds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3. During Maine’s Performance of the StimulusBargain, Congress Enacts the Affordable CareAct, Which Mandates That All States Cover 19-and 20-Year-Olds Beginning in 2014 andMandates That Maine Do So Immediately orLose All Its Medicaid Funding. . . . . . . . . . . . . . . 5

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4. This Court Rules That Withholding of AllMedicaid Funds Cannot Be Used to Force theStates to Furnish Medicaid Coverage to theMedicaid Expansion Population, and theSecretary Uses the Maintenance-of-EffortProvision to Force Coverage of the 19- and 20-Year-Old Cohort of That Population. . . . . . . . . . 8

5. Maine DHHS Appeals the Secretary’sContinuing Mandate of Coverage of 19- and 20-Year-Olds on the Basis of NFIB, Pennhurst, andShelby County, and the First Circuit Affirms. . . 9

REASONS FOR GRANTING THE PETITION . . . 12

1. The Decision of the Court of Appeals DirectlyConflicts with Relevant Decisions of This Court.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

a. The court of appeals’ ruling thatwithholding all Medicaid funds is notunconstitutionally coercive when it enforcesmandatory coverage of 19- and 20-year-oldsdirectly conflicts with this Court’s holding inNFIB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

i. The court of appeals’ holding thatcoercion by itself is insufficient toinvalidate a purported exercise of thespending power directly conflicts withNFIB’s holding that Congress exceedsits spending power when “pressureturns into compulsion.” . . . . . . . . . . . 12

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ii. The court of appeals’ ruling thatmandatory coverage of 19- and 20-year-olds is not a basic changeto Medicaid directly conflicts withNFIB. . . . . . . . . . . . . . . . . . . . . . . . . . 15

iii. The court of appeals’ upholdingmandatory coverage of 19- and 20-yearolds because Maine previously optedto cover those persons, directlyconflicts with NFIB’s holding that theexpansion of Medicaid to cover thoseover 18 can be optional only. . . . . . . . 17

iv. The court of appeals’ ruling that abasic change to Medicaid is a sine quanon for finding coercion conflicts inprinciple with the Court’s decision inNFIB. . . . . . . . . . . . . . . . . . . . . . . . . . 18

b. The court of appeals’ holding that the ACA’smaintenance-of-effort provision was not aretroactive change to the ARRA’s Medicaidmaintenance-of-effort provision becauseCongress reserved the power to amendMedicaid renders the Pennhurst retroactivityprinciple meaningless. . . . . . . . . . . . . . . . . . 22

c. The court of appeals’ holding on equalsovereignty conflicts with Shelby County’sholding that Congress’s disparate treatmentof States needs some justification in all cases,and the court of appeals’ resort in thealternative to the ACA’s unconstitutionalmandate as a sufficient justification cannotbe squared with that case. . . . . . . . . . . . . . . 24

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2. The Questions Presented Are Important andPressing Federal Questions Calling for ThisCourt’s Prompt Intervention. . . . . . . . . . . . . . . 27

a. The questions presented are of nationalimportance in light of the ongoing debateover whether States should opt in to theMedicaid Expansion. . . . . . . . . . . . . . . . . . . 27

b. The questions presented are importantquestions of federalism that have substantialimpact on Maine’s budget and healthcarepriorities for years to come. . . . . . . . . . . . . . 30

c. This Court should intervene now, in light ofthe direct conflict with its own precedent,rather than await development of a circuitsplit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

APPENDIX

Appendix A Opinion and Judgment in the UnitedStates Court of Appeals for the FirstCircuit (November 17, 2014) . . . . . . . . . . App. 1

Appendix B Decision of the Administrator for theCenters for Medicare & MedicaidServices(January 15, 2014) . . . . . . . . . . . App. 38

Appendix C Recommended Decision of thePresiding Officer On the Motion forReconsideration in the Centers forMedicare & Medicaid Services(October 28, 2013) . . . . . . . . . . . App. 53

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Appendix D Initial Decision of the ActingAdministrator in the Centers forMedicare & Medicaid Services(January 7, 2013) . . . . . . . . . . . . App. 69

Appendix E Statutes – Public Laws. . . . . . . . App. 77

Patient Protection and AffordableCare Act, § 2001 . . . . . . . . . . . . . App. 77

American Recovery and ReinvestmentAct of 2009, § 5001 . . . . . . . . . . . App. 92

Act of August 10, 2010, P.L. 111-226,§ 201 . . . . . . . . . . . . . . . . . . . . . App. 104

Statutes – Codified Statutes . . App. 106

42 U.S.C. § 1396a(a)(10) . . . . . App. 106

42 U.S.C. § 1396a(l) . . . . . . . . . App. 115

42 U.S.C. § 1396a(gg) . . . . . . . App. 119

42 U.S.C. § 1396b . . . . . . . . . . . App. 122

42 U.S.C. § 1396c . . . . . . . . . . . App. 122

42 U.S.C. § 1396d(a) . . . . . . . . App. 123

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TABLE OF AUTHORITIES

CASES

California v. United States, 104 F.3d 1086 (9th Cir. 1997) . . . . . . . . . . . . . . 13

National Federation of Independent Business v.Sebelius, 567 U.S. , 132 S. Ct. 2566 (2012) . . . . . passim

Nevada v. Skinner, 884 F.2d 445 (9th Cir. 1989) . . . . . . . . . . . . . . . 13

Oklahoma v. Schweiker, 655 F.2d 401 (10th Cir. 1989) . . . . . . . . . . . . . . 13

Pennhurst State School and Hospital v. Halderman,451 U.S. 1 (1981) . . . . . . . . . . . . . . . . 9, 10, 22, 23

Shelby County v. Holder, 570 U.S. , 133 S. Ct. 2612 (2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

South Dakota v. Dole, 483 U.S. 203 (1987) . . . . . . . . . . . . . . . . 12, 19, 21

Steward Machine Co. v. Davis, 301 U.S. 548 (1937) . . . . . . . . . . . . . . . . . . . 12, 13

CONSTITUTION

Me. Const. art. V, pt. 3d, § 5 . . . . . . . . . . . . . . . . . . 30

Me. Const. art. IX, § 11 . . . . . . . . . . . . . . . . . . . . . . 28

Me. Const. art. IX, § 14 . . . . . . . . . . . . . . . . . . . . . . 30

U.S. Const. amend. X . . . . . . . . . . . . . . . . . . . . . . . . 2

U.S. Const. art. 1, § 8, cl. 1 . . . . . . . . . . . . . . . . . . . . 2

ix

STATUTES AND LAWS

5 U.S.C. § 706 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

28 U.S.C. § 1254(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 1

42 U.S.C. § 1303 . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

42 U.S.C. § 1316(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . 1

42 U.S.C. § 1396a(a)(10) . . . . . . . . . . . . . . . . . . . . . . 2

42 U.S.C. § 1396a(a)(10)(A)(ii) . . . . . . . . . . . . . . . . . 4

42 U.S.C. § 1396a(l) . . . . . . . . . . . . . . . . . . . . . . . . . . 2

42 U.S.C. § 1396a(l)(2)(A)(i) . . . . . . . . . . . . . . . . . . . 6

42 U.S.C. § 1396a(l)(2)(A)(ii)(II) . . . . . . . . . . . . . . . . 6

42 U.S.C. § 1396a(gg) . . . . . . . . . . . . . . . . . . . . . . . . 2

42 U.S.C. § 1396b(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 2

42 U.S.C. § 1396c . . . . . . . . . . . . . . . . . . . . . . . passim

42 U.S.C. § 1396d(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2

42 U.S.C. § 1396d(a)(i) . . . . . . . . . . . . . . . . . . . . . . . 4

42 U.S.C. § 1396d(y)(1)(A) . . . . . . . . . . . . . . . . . . . 28

2011 Me. Laws c. 657, Pt. A . . . . . . . . . . . . . . . . . . 30

Act of August 10, 2010, P.L. 111-226, 114 Stat. 2389(2010), § 201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

American Recovery and Reinvestment Act of2009 (“ARRA”), P.L. 111-5, 123 Stat. 115(2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 7, 22

§ 5000(a)(2), 123 Stat. 496 . . . . . . . . . . . . . . . . . . 5

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§ 5001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

§ 5001(f), 123 Stat. 499-500 . . . . . . . . . . . . . . . . . 5

Fla. Stat. § 409.903(3) (2010) . . . . . . . . . . . . . . . . . 29

N.H. Rev. Stat. Ann. § 126-A:5 (2014) . . . . . . . . . . 28

N.J. Admin. Code § 10:78-1.1(c)(4) (2014) . . . . . . . 28

N.J. Admin. Code § 10:78-1.1(c)(5) (2014) . . . . . . . 28

N.J. Stat. § 30:4D-3(i)(6) (2010) . . . . . . . . . . . . . . . 29

Patient Protection and Affordable Care Act (“ACA”), Pub. L. No. 111-148, 124 Stat. 119(2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

§ 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 3

§ 2001(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

§ 2001(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

§ 2001(a)(1)(C), 124 Stat. 271 . . . . . . . . . . . . . . . 6

§ 2001(a)(3), 124 Stat. 272-73 . . . . . . . . . . . . . . . 7

§ 2001(b)(2), 124 Stat. 275 . . . . . . . . . . . . . . . . . . 6

RULES

Fed. R. App. P. 35(c) . . . . . . . . . . . . . . . . . . . . . . . . . 1

Fed. R. App. P. 40(a)(1)(B) . . . . . . . . . . . . . . . . . . . . 1

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OTHER AUTHORITIES

Governor’s veto of 2012-2013 Bill S2644 (identicalto Bill A4233) (July 29, 2013) available atwww.njleg.state.nj.us/bills/BillView.asp . . . . . . 28

Kaiser Family Foundation, Status of State Actionon the Medicaid Expansion Decision, availableat http : / /k f f .org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/ . . . . . . 28

1

PETITION FOR A WRIT OF CERTIORARI

Petitioner Mary Mayhew, as Commissioner of theMaine Department of Health and Human Services,respectfully submits this petition for a writ of certiorarito the United States Court of Appeals for the FirstCircuit.

OPINIONS BELOW

The opinion of the Court of Appeals for the FirstCircuit is reported at 772 F.3d 80 and is reproduced inthe Appendix hereto (“App.”) at App. 1. The finaldetermination of the Secretary of the United StatesDepartment of Health and Human Services, denyingMaine DHHS’s request for a State Plan Amendment(App. 38), the Recommended Decision of the PresidingOfficer on the Motion for Reconsideration in theCenters for Medicare & Medicaid Services (App. 53),and the Initial Decision of the Acting Administrator inthe Centers for Medicare & Medicaid Services (App. 69)are all unreported.

JURISDICTION

The First Circuit entered judgment on November17, 2014. The time for filing a petition for rehearing enbanc elapsed 45 days later. Fed. R. App. P. 35(c),40(a)(1)(B). This Court has jurisdiction under 28U.S.C. § 1254(1) and 42 U.S.C. § 1316(a)(5).

2

CONSTITUTIONAL AND STATUTORYPROVISIONS INVOLVED

The U.S. Constitution, article 1, section 8, clause 1provides:

The Congress shall have power to lay andcollect taxes, duties, imposts and excises, to paythe debts and provide for the common defenseand general welfare of the United States; but allduties, imposts and excises shall be uniformthroughout the United States.

The U.S. Constitution, amendment X, provides:

The powers not delegated to the UnitedStates by the Constitution, nor prohibited by itto the states, are reserved to the statesrespectively, or to the people.

The appendix reproduces the following relevantstatutory sections:

Section 2001 of the Patient Protection andAffordable Care Act, P.L. 111-148, 124 Stat. 119 (2010);

Section 5001 of the American Recovery andReinvestment Act of 2009, P.L. 111-5, 123 Stat. 115(2009);

Section 201 of the Act of August 10, 2010, P.L. 111-226, 114 Stat. 2389 (2010);

42 U.S.C. § 1396a(a)(10), (l) and (gg);42 U.S.C. § 1396b(a)(1);42 U.S.C. § 1396c;42 U.S.C. § 1396d(a).

3

INTRODUCTION

The conflict between the decision below and thisCourt’s decision in National Federation of IndependentBusiness v. Sebelius, 567 U.S. , 132 S. Ct. 2566(2012) (hereinafter “NFIB”) is simple and direct: inNFIB, this Court held that Congress cannot forceStates to furnish Medicaid to low-income 19- and 20-year-olds under § 2001 of the Patient Protection andAffordable Care Act (“ACA”), Pub. L. No. 111-148, 124Stat. 119 (2010); the court of appeals held that § 2001can be used to force Maine to furnish such coverage.The court of appeals’ decision impairs Maine’shealthcare and budget priorities to the tune of millionsof dollars per year, at least until 2019 and possiblyindefinitely. It also injects substantial uncertainty intothe ongoing national debate over States’ decisionswhether to opt in to ACA § 2001’s Medicaid Expansion,by suggesting that, NFIB notwithstanding, (i) allStates may be compelled to cover the 19- and 20-year-old cohort of the Expansion population, becausemandatory coverage of that age group is not coercive,and (ii) opt-in States may be prohibited from everopting back out of the Expansion, because a State’selection to cover an optional population allows theFederal Government to force the State to continue suchcoverage, even if the Government cannot mandate suchcoverage in the first instance or for all States. ThisCourt should promptly intervene to remove suchuncertainty from an important ongoing national debateand to eliminate the multiple conflicts of the decisionbelow with this Court’s constitutional precedents,discussed in further detail in this Petition.

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STATEMENT OF THE CASE

1. Maine Opts to Cover 19- and 20-Year-OldsUnder Its Medicaid Program, “MaineCare,”Even Though Such Coverage Is Not Required.

Medicaid is a state-federal cooperative program,under which the States administer healthcare coveragefor the Nation’s neediest citizens, and the FederalGovernment pays the States substantial Medicaidreimbursements. See generally, NFIB, 132 S. Ct. at2581. Medicaid constitutes by far the largest singleline item in state budgets, id. at 2664 (Scalia, J.,dissenting); “MaineCare [Maine’s Medicaid program]makes up a major portion of Maine’s annual outlays,accounting for just over one-third of the state’s totalbudget in 2013.” App. 6.

Prior to enactment of the ACA, extending Medicaidcoverage to 19- and 20-year-olds was generally optionalfor the States. 42 U.S.C. §§ 1396a(a)(10)(A)(ii),1396d(a)(i). (In this Petition “19- and 20-year-olds” isused as a shorthand for low-income 19- and 20-year-olds who are not blind, disabled or pregnant; thisPetition concerns provisions that relate to coveragebased on age and income alone. Coverage for 19- and20-year-olds who qualify for Medicaid based on otherfactors such as blindness, disability and pregnancy isnot at issue here). For many years prior to the ACA’senactment, Maine exercised the option to payMaineCare benefits to 19- and 20-year-olds and tofurnish them benefits that exceeded federal minimums.

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2. Congress Enacts Changes to Medicaid Underthe 2009 Stimulus Program, IncreasingMaine’s Reimbursement Rates in Exchangefor Maine’s Promise to Maintain MedicaidEligibility Through the End of 2010 for, InterAlia, 19- and 20-Year-Olds.

In 2009, in response to the Great Recession,Congress passed the American Recovery andReinvestment Act of 2009, P.L. 111-5, 123 Stat. 115(“ARRA”). In order to “protect and maintain StateMedicaid programs during a period of economicdownturn, including by helping to avert cuts toprovider payment rates and benefits or services, and toprevent constrictions of income eligibility requirementsfor such programs,” Congress offered increasedMedicaid reimbursement rates to States that agreednot to restrict their Medicaid eligibility criteria orbenefit levels through December 2010. ARRA§§ 5000(a)(2), 5001(f), 123 Stat. 496, 499-500. Maineaccepted that deal. Accordingly, at the time of theACA’s enactment, Maine was maintaining MaineCareeligibility for 19- and 20-year-olds until December 31,2010 in exchange for increased Medicaidreimbursements under the stimulus program.

3. During Maine’s Performance of the StimulusBargain, Congress Enacts the Affordable CareAct, Which Mandates That All States Cover 19-and 20-Year-Olds Beginning in 2014 andMandates That Maine Do So Immediately orLose All Its Medicaid Funding.

In § 2001 of the ACA, Congress made coverage ofindividuals over 18 mandatory under Medicaid in twodifferent ways. First, the Medicaid Expansion required

6

that every State pay Medicaid to all individuals over181 and under 65 with family incomes at or below 133%of the federal poverty line, beginning in 2014 (the“Medicaid Expansion”). App. 77 (ACA § 2001(a)(1)(C),124 Stat. 271). Second, the “maintenance-of-effort”provision (“MOE”) mandated that every State covering19- and 20-year-olds at the time of ACA enactmentcontinue to do so on the same terms until October 2019.App. 85-86 (ACA § 2001(b)(2), 124 Stat. 275).

The enforcement mechanism for the MOE’s newmandate was different from the mechanism by whichthe Medicaid Expansion would be enforced. Byoperation of 42 U.S.C. § 1396c, a State that did notcomply with the Medicaid Expansion could have someor all of its federal Medicaid reimbursements withheldby the Secretary. See NFIB, 132 S. Ct. at 2604. Bycontrast, under ACA § 2001(b), compliance with theMOE is “a condition for receiving any Federalpayments” under Medicaid. App. 85 (ACA § 2001(b)(2),124 Stat. 275). A State that does not comply with theMOE must lose all of its federal Medicaidreimbursement. The statute vests no discretion in theSecretary to withhold less than all reimbursement, asshe can do under § 1396c.

1 The Medicaid Expansion refers specifically only to individuals“under 65,” but it excludes those under age 19 from its scope. Asof ACA enactment, Medicaid already mandated coverage of allindividuals under 19 years old at or below 133% of the federalpoverty line, see 42 U.S.C. § 1396a(l)(2)(A)(i) & (ii)(II), and theMedicaid Expansion expressly excludes from its scope individualsin any existing mandatory coverage category, see ACA§ 2001(a)(1)(C), 124 Stat. 271.

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In practical effect, the MOE would require a Statethat covered 19- and 20-year-olds prior to the ACA tocontinue to cover such individuals until 2014. Thereafter, the Medicaid Expansion would be theprincipal source of required coverage for 19- and 20-year-olds, and it would apply equally to all States.From 2014 to 2019, the MOE would have a morelimited application, affecting only those States thatprior to ACA enactment had less restrictive eligibilitycriteria or higher benefit levels for 19- and 20-year-oldsthan the ACA, and requiring them to maintain thatmore generous coverage.

As applied to Maine, the ACA extended by nineyears the duration of ARRA’s required maintenance ofeffort as to 19- and 20- year-olds and changed theconsequence of non-compliance from loss of increasedreimbursement to a loss of all Medicaidreimbursement. The ACA did not make any newMedicaid funds available to Maine in exchange forthese changes. Under the ACA, new increasedMedicaid reimbursements are available only forpayments to “newly eligible” individuals; Maine’s 19-and 20-year-olds do not qualify as “newly eligible” bothbecause they were “eligible under [Maine’s] State plan”on the date the ACA was enacted and because they are“under 19 years of age (or such higher age as the Statemay have elected)” as the age cap under its Medicaidplan. App. 81-82 (ACA § 2001(a)(3), 124 Stat. 272-73).

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4. This Court Rules That Withholding of AllMedicaid Funds Cannot Be Used to Force theStates to Furnish Medicaid Coverage to theMedicaid Expansion Population, and theSecretary Uses the Maintenance-of-EffortProvision to Force Coverage of the 19- and 20-Year-Old Cohort of That Population.

This Court ruled in June 2012 that the MedicaidExpansion could not be enforced by withdrawal of allMedicaid reimbursement from non-compliant States. NFIB, 132 S. Ct. at 2607. Although NFIB expresslyaddressed only § 2001(a)’s Medicaid Expansion, itsruling affected the operation of § 2001(b)’smaintenance-of-effort provision. After NFIB, the MOE,not the Medicaid Expansion, became the sole possiblesource for mandatory coverage of 19- and 20-year-olds– coverage for whom could only be optional under theMedicaid Expansion – and that mandate appliedunequally to only some States, one of which is Maine,rather than to all States equally as it did under theMedicaid Expansion.

After the federal stimulus program expired and theMedicaid Expansion was ruled optional, Maine DHHSrequested a State Plan Amendment (“SPA”) from theSecretary to allow Maine to discontinue MaineCare for19- and 20-year-olds. The Secretary denied the requeston the grounds that it violated the MOE. TheSecretary did not rule on the constitutionality of theMOE, determining that she lacked the authority to ruleon that issue. App. 51-52.

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5. Maine DHHS Appeals the Secretary’sContinuing Mandate of Coverage of 19- and20-Year-Olds on the Basis of NFIB, Pennhurst,and Shelby County, and the First CircuitAffirms.

The Commissioner timely appealed to the Court ofAppeals for the First Circuit, on the grounds that(i) the MOE is unconstitutionally coercive under NFIB;(ii) application of the MOE to deny Maine’s SPArequest is unconstitutional under Pennhurst StateSchool and Hospital v. Halderman, 451 U.S. 1 (1981)because it makes a retroactive change to the conditionson Maine’s acceptance of the federal stimulus bargain;and (iii) no sufficient justification exists, as requiredunder Shelby County v. Holder, 570 U.S. , 133 S. Ct.2612 (2013), for the MOE’s unequal treatment ofMaine, requiring Maine to pay MaineCare benefits tocategories of individuals that Maine’s sister States arenot required to include in their Medicaid programs anddo not include.

The First Circuit affirmed.

The court of appeals rejected the coercion argumenton the grounds that under NFIB mere coercion is notenough to invalidate an exercise of the spending power.The court of appeals interpreted NFIB to foreclose anyinvalidation of Spending-Clause legislation “based ona finding of coercion alone” and instead to require forinvalidation a “condition on the receipt of funds” thatis both coercive and that does “not govern the use ofthose funds.” App. 17-18. The latter requirement wasnot met in the court of appeals’ view because requiringcoverage of 19- and 20-year-olds (as opposed tocoverage of those 21 and over) does not effect a “basic

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change” to Medicaid and therefore constitutes acondition that does govern the use of Medicaid funds. Id. That proposition, however, raised a furtherquestion about NFIB and the Medicaid Expansion:after NFIB, why is coverage of 19- and 20-year-oldsoptional under § 2001(a), even though the statute saysit is mandatory, if the Constitution allows all Medicaidfunds to be withheld for failure to cover that age group?The court of appeals answered that this Court simplyoverlooked the issue: “whether to sever application ofthe expansion to 18- [sic] to 20-year-olds fromapplication of the expansion to 21- to 64-year-olds wasnot before the Court in NFIB.” App. 26 n. 10 (emphasisin original).

The court of appeals rejected the Pennhurstretroactivity argument on the grounds that the FederalGovernment’s conditioning Maine’s receipt of increasedMedicaid reimbursement on Maine’s agreeing tomaintain MaineCare eligibility criteria and benefitlevels through December 31, 2010 does not prevent theFederal Government from imposing additional, moreonerous maintenance-of-effort requirements on Maineduring the course of Maine’s performance of thestimulus bargain: “Maine was on notice, both beforeand after accepting stimulus funds, that anincremental alteration of Medicaid might change theconditions on participation in the Medicaid program inthe way that [§ 2001(b)] has.” App. 27.

The court of appeals rejected the equal sovereigntyargument on the grounds that no question could beraised about whether § 2001(b) was sufficiently tailoredto the problem it targets unless Maine first showedthat it had “been ‘singled out’” by Congress for

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“disparate treatment,” App. 29-30, and that suchdisparate treatment intruded “into sensitive areas ofstate and local policymaking,” App. 28 (quoting ShelbyCounty, 133 S. Ct. at 2627 and 2624). Finding no suchshowing had been made, the court of appeals held thequestion of sufficient justification did not even arise.App. 30, 33. Additionally, if the question did arise, thecourt of appeals found that § 2001(a)’s unconstitutionalmandatory design constituted sufficient justification forthe § 2001(b) maintenance-of-effort requirement,stating that § 2001(b) “directly serves the legitimatepurpose of ensuring that children do not lose healthinsurance as the country transitions from the pre-ACAMedicaid regime to the post-ACA Medicaid regime.” App. 35. As applied to 19- and 20-year-olds, thetransition to a post-ACA-regime must refer to theACA’s Medicaid Expansion as originally designed andnot to the statute as limited by this Court in NFIB.Under NFIB, the post-ACA regime is the same as thepre-ACA regime: States are allowed, but not required,to cover 19- and 20-year-olds.

This Petition timely follows.

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REASONS FOR GRANTING THE PETITION

1. The Decision of the Court of Appeals DirectlyConflicts with Relevant Decisions of ThisCourt.

a. The court of appeals’ ruling thatwithholding all Medicaid funds is notunconstitutionally coercive when itenforces mandatory coverage of 19- and 20-year-olds directly conflicts with thisCourt’s holding in NFIB.

No adequate explanation can be given for why themandatory coverage of 19- and 20-year-olds under ACA§ 2001(a) cannot be enforced by withholding allMedicaid funds, but such mandatory coverage under§ 2001(b) can. The court of appeals’ holding directlyconflicts with NFIB in that regard.

i. The court of appeals’ holding thatcoercion by itself is insufficient toinvalidate a purported exercise ofthe spending power directly conflictswith NFIB’s holding that Congressexceeds its spending power when“pressure turns into compulsion.”

Prior to this Court’s decision in NFIB, the Courthad observed that an act under the spending powerwould be unconstitutional if it were “so coercive as topass the point at which ‘pressure turns intocompulsion,’” South Dakota v. Dole, 483 U.S. 203, 211(1987) (quoting Steward Machine Co. v. Davis, 301U.S. 548, 590 (1937)), but the Court had neverinvalidated an exercise of the spending power asunconstitutionally coercive. NFIB, 132 S. Ct. at 2634

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(Ginsburg, J., dissenting in part). Thereafter, somecourts of appeals expressed doubt whether the Courtactually meant what it said: “The difficulty if not theimpropriety of making judicial judgments regarding astate's financial capabilities renders the coercion theoryhighly suspect as a method for resolving disputesbetween federal and state governments.” Nevada v.Skinner, 884 F.2d 445, 448 (9th Cir. 1989); see alsoCalifornia v. United States, 104 F.3d 1086, 1092 (9th

Cir. 1997) (quoting Skinner and expressing doubtwhether “there is any viability left in the coerciontheory”); Oklahoma v. Schweiker, 655 F.2d 401, 414(10th Cir. 1989) (“follow[ing] the lead of other courtsthat have explicitly declined to enter this thicket” of“evaluating whether the states are faced here with anoffer they cannot refuse or merely a hard choice.”).

This Court’s decision in NFIB should have laid torest any such doubts. But in its decision below, theFirst Circuit persisted in those doubts, expressly citingfor support California v. United States and Oklahomav. Schweiker. App. 25 (rejecting any coercion-basedclaim on the grounds that “an attempt to determinewhen ‘inducement’ to comply with a condition on theuse of federal funds crosses the line into ‘compulsion’would ‘plunge the law into endless difficulties’ (quotingSteward Mach. Co., 301 U.S. at 590)); App. 23 (citingCalifornia v. United States). The court of appeals readNFIB as a “fractured” decision on the coercion doctrine,App. 11, and rejected the view that the Expansioncould be invalidated “based on a finding of coercionalone.” App. 18. Rather, the court of appeals read NFIBas standing for a “narrower” holding of a plurality, id.:to invalidate a Spending-Clause enactment a courtmust find “(1) that the [enactment] place[s] a condition

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on the receipt of funds that does not govern the use ofthose funds and (2) that the condition [is] undulycoercive.” App. 17-18.

In NFIB, seven justices agreed that the MedicaidExpansion as written was unconstitutionally coercive. They disagreed, however, on the remedy. Four of thejustices, joining in an opinion authored by JusticeScalia, would have struck down the ACA entirely,finding that the Medicaid Expansion could not besevered from the Act as a whole. 132 S. Ct. at 2676-77(Scalia, J., dissenting). Three justices, joining in anopinion authored by the Chief Justice, held that themandate (and concomitant threat of withdrawal of allMedicaid funds for non-compliance) could be severedfrom the Expansion, which could be saved as a purelyoptional enlargement of Medicaid. Id. at 2607 (Roberts,C.J.).

While it is true, therefore, that the opinion in NFIBis “fractured,” as the First Circuit said, App. 11, theseven Justices who found the Expansionunconstitutional as written fractured on the questionof remedy, not on the question of the viability of thecoercion doctrine or whether coercion alone makes aSpending-Clause enactment unconstitutional.

Granted, the court of appeals’ reference to “coercionalone” might be taken as no more than inartfulphrasing of the court’s view that withholding allMedicaid reimbursement is not per se coercive;something more is necessary for the threat ofwithdrawal to cross the line from pressure intocompulsion. The court of appeals did say that suchwithholding is unconstitutional only when it enforcesa “basic change” in Medicaid, and § 2001(b)’s

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mandatory coverage of 19- and 20-year olds is not sucha basic change. App. 24. But even recast in this way,the decision of the court of appeals directly conflictswith NFIB. Specifically, the court of appeals put itselfin direct conflict with this Court by ruling: (1) thatmandatory coverage of 19- and 20-year-olds is not abasic change to Medicaid within the meaning of NFIB;and (2) that Maine’s election of optional coverage of 19-and 20-year-olds prevents any mandate of suchcoverage from being unconstitutional as applied toMaine. Moreover, should this Court grant certiorari,Maine DHHS intends to argue, as an alternate basisfor reversal, that the court of appeals erred in rulingthat a basic change to Medicaid is a sine qua non underNFIB for finding the withholding of all Medicaidfunding unconstitutionally coercive and that NFIBinstead implies that any withholding of all Medicaidfunds must be proportional to the Medicaidrequirement it enforces, due to the unique risk ofcoercion posed by the threatened loss of all Medicaidreimbursements. The court of appeals’ error in thisregard constitutes a conflict in principle with theCourt’s decision in NFIB.

ii. The court of appeals’ ruling thatmandatory coverage of 19- and 20-year-olds is not a basic change toMedicaid directly conflicts with NFIB.

The surest sign that mandatory coverage of 19- and20-year-olds effects a basic change to Medicaid, as thatconcept appears in NFIB, is that § 2001(a) includedsuch mandatory coverage and was held to effect such abasic change. The court of appeals’ ruling implies thatthe Court would not have found § 2001(a) to effect such

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a basic change had the statute mandated coverage ofonly those under 21 rather than those under 65. Thatproposition is inconsistent with what the NFIB Courtdid: Having determined the Expansion wasunconstitutional as written, the Court in NFIB laboredto sever from the statute the aspect that wasunconstitutional and “then follow Congress’s explicittextual instruction to leave unaffected . . . theapplication of [the challenged] provision to otherpersons or circumstances.” NFIB, 132 S. Ct. at 2607(Roberts, C.J.) (quoting 42 U.S.C. § 1303) (squarebrackets in original). The Court severed § 1396c’swithdrawal penalty as it applied to the entireExpansion population, and did not leave theapplication to 19- and 20-year-olds unaffected. Thecourt of appeals’ proposition is also inconsistent withthe Court’s description of what constitutes a basicchange to Medicaid, and it is stunningly disruptive inits implications.

The Court in NFIB said a basic change to Medicaidinvolves mandating coverage for those not fairlycomprised in the “four particular categories of theneedy” that the “original program was designed tocover”: “the disabled, the blind, the elderly, and needyfamilies with dependent children.” NFIB, 132 S. Ct. at2605-06 (Roberts, C.J.). According to the NFIB Court,low-income childless adults over age 18 – whosecoverage was mandated in the Medicaid Expansion andis also mandated in the maintenance-of-effort provision– are not within those categories, and mandatingcoverage of them effects a basic change to Medicaid.

Moreover, the implications of the court of appeals’ruling are remarkably disruptive. If the court of

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appeals is correct, then the application of the MedicaidExpansion to those under 21 can be enforced bywithholding all Medicaid funds from non-compliantStates. That conflict with the Court’s decision in NFIBdisrupts understandings of the ACA – and of States’options – widely relied on after NFIB.

iii. The court of appeals’ upholdingmandatory coverage of 19- and 20-year olds because Maine previouslyopted to cover those persons, directlyconflicts with NFIB’s holding that theexpansion of Medicaid to cover thoseover 18 can be optional only.

To the extent the court of appeals differentiated the§ 2001(b) mandate from the § 2001(a) mandate notbased on the mandated population’s age but ratherbased on Maine’s prior election to cover thatpopulation, App. 22 (distinguishing § 2001(b) from§ 2001(a) because “Maine is required only to maintainits current benefits for 19- and 20-year olds”), 24(rejecting argument that changing young adultcoverage from optional to mandatory changesMedicaid), the conflict with NFIB becomes more, notless, severe. A holding that Congress can force a Stateto maintain coverage for any population that the Statepreviously chose to cover, or lose all its Medicaidfunding, calls into question any long-term viability ofNFIB’s holding. Following the NFIB decision, manyStates have opted to cover the very low-income non-elderly population that NFIB squarely holds theycannot be forced to cover. The court of appeals’reasoning suggests that Congress could require all ACA“opt-in” States to continue covering all low-income

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adults under age 65 or lose all their Medicaid funding.Indeed, the court of appeals’ reasoning can be read asauthorizing the Secretary to withhold Plan approvalfrom any State that seeks to opt back out of theExpansion once it has opted in. Congress already hasmandated in § 2001(a) that States cover all low-incomeadults under 65; NFIB merely restricts theenforcement under § 1396c of that mandate. The courtof appeals now has held that the Secretary canwithhold Plan approval from a State that seeks todiscontinue coverage of categories mandated under theACA, so long as the State voluntarily chose to coverthose categories in the first place. The court of appeals’decision offers no principle that would prohibit theSecretary from withholding approval of an SPA seekingto opt back out of the Expansion on the same grounds– namely, that the amendment does not comport withan ACA mandate, and such mandate is enforceablebased on the State’s prior election to cover thecategories subject to that mandate. What this Courtarticulated in NFIB as a limit on federal powerbecomes, under the court of appeals’ reasoning, no suchthing. And whether opt-in States have the choice to optback out of the ACA Expansion becomes at best, underthe court of appeals’ reasoning, a matter of legislativeor administrative grace, not constitutional principle.

iv. The court of appeals’ ruling that abasic change to Medicaid is a sinequa non for finding coercion conflictsin principle with the Court’s decisionin NFIB.

The Court in NFIB expressly disavowed anyattempt or need to define the condition without which

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a withdrawal of all Medicaid funds might be merepressure rather than compulsion: “We have no need tofix a line . . .. It is enough for today that wherever thatline may be, this statute is surely beyond it.” NFIB,132 S. Ct. at 2606. Whatever the significance of theplurality’s finding of a basic change to Medicaid, it wasnot to fix the line where the threat of withdrawal of allMedicaid funds first becomes unconstitutionallycoercive.

This case does not require the Court to “fix a line”any more than NFIB did. But if this Court were to fixsuch a line, as it applies to the withholding of allMedicaid reimbursement, it should hold that suchwithholding is unconstitutionally coercive when it isdisproportionate to the Medicaid condition that itenforces. That principle would acknowledge what mustbe true – namely, that a State can lose all its Medicaidfunding for non-compliance that is equivalent towholesale failure to participate in the Medicaidprogram – and would harmonize with this Court’sdecision in NFIB that the Secretary can withhold thefunds dedicated to the Medicaid Expansion from Statesthat do not go along with the Expansion, but cannotwithhold other Medicaid funds. The principle alsowould accord with this Court’s observation in Dole thatany condition Congress imposes must be sufficientlyrelated to the program funded. Dole, 483 U.S. at 207. Finally, it would be consistent with the generalprinciple that the Secretary’s discretion under 42U.S.C. § 1396c to choose among the full-withholdingremedy and the remedy of withholding only fundsrelated to the non-compliance found is limited by thegeneral requirement that agencies not abuse theirdiscretion, or arbitrarily, capriciously, or unreasonably

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impose grossly disproportionate penalties. See, e.g., 5U.S.C. § 706. Finally, such a requirement is suited tothe unique risk of coercion posed by the potential lossof Medicaid funding, a risk significantly different indegree than the risk in other spending programs.

While neither the plurality opinion nor the jointdissent in NFIB deemed the loss of all Medicaidfunding per se unconstitutionally coercive, they bothwere in accord that the size of the Medicaid program is“relevant in determining whether there isimpermissible coercion.” 132 S. Ct. at 2661 (Scalia, J.,dissenting). And the plurality opinion is just as forcefulas the joint dissent in articulating the unique pressurecreated by the threat of withdrawal of all Medicaidfunds. Given the fiscal and administrative obstaclesinvolved, the States are unfree, “in fact” if not intheory, to withdraw from the program:

In this case, the financial ‘inducement’ Congresshas chosen is much more than ‘relatively mildencouragement’ – it is a gun to the head. . . . AState that opts out of the Affordable Care Act’sexpansion in health care coverage thus stands tolose not merely ‘a relatively small percentage’ ofits existing Medicaid funding, but all of it.Medicaid spending accounts for over 20 percentof the average State’s total budget, with federalfunds covering 50 to 83 percent of thosecosts. . . . In addition, the States have developedintricate statutory and administrative regimesover the course of many decades to implementtheir objectives under existing Medicaid. It iseasy to see how the Dole Court could concludethat the threatened loss of less than half of one

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percent of South Dakota’s budget left that Statewith a ‘prerogative’ to reject Congress’s desiredpolicy, ‘not merely in theory but in fact.’ Thethreatened loss of over 10 percent of a State’soverall budget, by contrast, is economicdragooning that leaves the States with no realoption but to acquiesce in the Medicaidexpansion.

NFIB, 132 S. Ct. at 2604-05 (Roberts, C.J.) (quotingSouth Dakota v. Dole, 483 U.S. 203, 211-12 (1987))(emphasis in original) (citations omitted). Against thatbackground, threats to withhold all Medicaid funds arepotentially coercive in more applications than§ 2001(a)’s mandate alone, and NFIB’s coercion rulingapplies equally to the Expansion’s helpmate provision, 2001(b)’s maintenance-of-effort requirement.

A proportionality requirement would suffice tostrike down the MOE as it applies to Maine’s coverageof 19- and 20-year-olds. Just as the Secretary cannotwithhold all Medicaid funds from a State that declinesto cover all low-income adults over 18 (as the MedicaidExpansion was written to require), so the Secretarycannot withhold all Medicaid funds for a failure tocover a much smaller subset of that population, 19- and20-year-olds. Enforcement of § 2001(b) would be farmore disproportionate than the result struck down inNFIB: the same enormous penalty would be imposed,but on account of a far more limited failure to comply.USDHHS can withhold funds from Maine that wouldhave been paid for covering 19- and 20-year-olds, ifMaine declines to do so, but it cannot impose the muchharsher penalty of a withdrawal of all Medicaidfunding, or, what amounts to the same thing,

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disapprove of Maine’s State Plan Amendment,effectively barring Maine from participating inMedicaid unless it covers those young adults.

b. The court of appeals’ holding that theACA’s maintenance-of-effort provision wasnot a retroactive change to the ARRA’sMedicaid maintenance-of-effort provisionbecause Congress reserved the power toamend Medicaid renders the Pennhurstretroactivity principle meaningless.

Under the ARRA, Maine accepted a deal with theFederal Government: Maine would receive increasedMedicaid reimbursement rates in exchange for itsmaintenance of effort in the Medicaid program throughDecember 2010. If Maine ceased maintaining itsMaineCare eligibility and benefit levels before the endof 2010 – say, on March 24, 2010 – Maine would loseany increased reimbursement. Once the ACA wasenacted, if Maine failed on March 24, 2010 to maintainMaineCare eligibility and benefit levels, it would loseall of its Medicaid reimbursements, not just its rateincrease. The court of appeals determined that theACA was not a retroactive change to the stimulusbargain, because the ACA was a condition placed onMaine’s acceptance of Medicaid funds, which Congressalways reserves the power to alter or amend: “Mainewas not ‘unaware of the conditions [on its participationin Medicaid] . . .’ when it chose to receive funds underMedicaid or under the ARRA.” App. 27 (quotingPennhurst, 451 U.S. at 17) (square brackets inoriginal). That reasoning is mere wordplay: the ARRA“stimulus funds” in question were nothing other than

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increased Medicaid reimbursements, conditioned onMedicaid maintenance of effort.

The court of appeals’ reasoning guts theretroactivity principle. It is literally true of everyspending program (as it is true of statutes generally)that Congress can later repeal or amend it. ThePennhurst principle limits such exercise ofcongressional power. If the Pennhurst principle meansanything, it is that spending-power enactments are inthe nature of a contract to which Congress cannotunilaterally add after-the-fact conditions, despiteCongress’s general power to repeal or amend existinglegislation.

Any claim that the ACA condition was unrelated tothe stimulus and was only a condition on Maine’scontinued acceptance of new Medicaid funds has nobasis in practical reality. That claim suggests that onand after March 23, 2010, Maine could turn down newMedicaid funding but keep the stimulus deal. Impossible. If Maine ceased participating in theMedicaid program, it would have no way to continue toreceive the increased Medicaid reimbursements itbargained for in the stimulus program. In practicalreality, the ACA condition can only be characterized asa retroactive change to the stimulus deal, and the courtof appeals’ decision can only be characterized as a flatrejection of the Pennhurst retroactivity principle.

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c. The court of appeals’ holding on equalsovereignty conflicts with Shelby County’sholding that Congress’s disparatetreatment of States needs somejustification in all cases, and the court ofappeals’ resort in the alternative to theACA’s unconstitutional mandate as asufficient justification cannot be squaredwith that case.

The court of appeals rejected Maine DHHS’s equalsovereignty arguments on two grounds: (i) that thedoctrine did not apply in this case at all, and (ii) thateven if it did apply, the MOE was sufficiently justifiedas a means of promoting the transition “to the post-ACA Medicaid regime,” in which coverage of all 19- and20-year-olds would be mandatory for all States. App. 35. The court of appeals’ ruling puts it in directconflict with this Court’s decision in Shelby County inthree respects.

First, the court of appeals’ ruling that the need forsufficient justification does not arise unless a State hasbeen “singled out” for disparate treatment, finds nosupport in Shelby County. The Court’s equalsovereignty doctrine does not turn on any kind ofdiscriminatory animus on Congress’s part. Unequaltreatment of a State without adequate justification isforeign to our federalism, regardless of Congress’smotives. The court of appeals went astray by assumingthat, because there was evidence in Shelby County thatthe challenged preclearance formula had been “reverseengineered,” the equal sovereignty doctrine requires acongressional intent to disadvantage particular Statesin order for the equal sovereignty doctrine to apply.

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That is a misreading of the significance of “reverseengineering” in Shelby County.

The significance of reverse engineering in ShelbyCounty was not that it showed any kind ofcongressional animus, but that it was outdated.Relying on an old engineered formula showed aninsufficient effort by Congress to tailor thepreclearance formula to jurisdictions where aparticular problem – namely, “second-generationbarriers” to voting – had been identified. ShelbyCounty, 133 S. Ct. at 2629. This Court struck downthat effort not because Congress cannotconstitutionally focus on particular jurisdictions whereit perceives a problem in need of correction. Quite thecontrary. Congress must tailor statutes that treat theStates differently so that the statutes fit the problemCongress is trying to solve. See id. That is thesufficient justification that Shelby County requires forany infringement of States’ equal sovereignty. Becausethe problem Congress had in view in the Voting RightsAct had no necessary connection to the jurisdictions itengineered the preclearance formula to fit, the statutehad to be struck down in Shelby County. See id. It wasthe lack of any sufficient justification for the formulabased on the second-generation barriers that Congresshad in view that rendered the statute constitutionallyinfirm, not the fact that Congress had set out to designa formula that fit jurisdictions where Congressperceived a problem. Indeed, should Congress correctlyidentify the jurisdictions where the problem of second-generation barriers now needs correction, “Congressmay draft another formula based on currentconditions.” Id. at 2631.

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Second, the court of appeals’ ruling that disparatetreatment of a State needs no justification unless itintrudes on “an area of traditional state concern,”App. 32, also finds no support in Shelby County.Certainly, the regulation of elections, at issue in ShelbyCounty, is a particularly sensitive area of local concern,but that factor was not a necessary precondition to theneed to justify unequal treatment of the States. Suchan intrusion on an area of core sovereignty may bemore difficult to justify and less likely to satisfy theequal-sovereignty doctrine, but that does not meanother unequal treatment of States needs nojustification.

Third, the only justification the court of appealscould find for the MOE is inadequate – namely,promotion of the constitutional wrong that this Courtidentified in NFIB. The court of appeals seized on thejustification offered by the Government for the firsttime at oral argument on appeal: that the MOE servedthe purpose of maintaining the status quo while thecountry transitioned to the post-ACA “regime.”App. 34-35.

As an initial matter, the cited justification that“‘Congress may just not want to shift from an existingprogram to one that is now funded through [new]federal dollars,’” App. 34 (quoting counsel for theUnited States’ oral argument) (square brackets inoriginal), is particularly inapt here: Congress offeredMaine no new federal dollars for covering 19- and 20-year-olds. More broadly, the regime-transitionargument is not a sufficient justification here, becauseit amounts to justifying § 2001(b) on the grounds that

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it promotes the § 2001(a) mandate that this Courtstruck down as unconstitutional.

The court of appeals’ reference to a new “regime”cannot have meant the post-NFIB ACA regime underwhich the Medicaid Expansion is purely optional,because: (i) Congress clearly did not contemplate sucha regime when it designed the ACA, and (ii) withrespect to the 19- and 20-year-olds at issue under theMOE, there is no “transition” after NFIB – coverage ofthat population is optional before and after the ACAExpansion under NFIB’s holding. Hence, the court ofappeals’ justification boils down to the claim that themaintenance-of-effort provision is necessary to preventthe covered States from retreating to ACA minimumcoverage for 19- and 20-year-olds, while those Statestransition to mandatory coverage of the rest of the non-elderly adult low-income population under § 2001(a).But that new regime of mandatory coverage is aconstitutional wrong, remedied by this Court in NFIB.Promotion of that constitutional wrong cannot serve asthe sufficient justification for disparate treatment thatShelby County requires.

2. The Questions Presented Are Important andPressing Federal Questions Calling for ThisCourt’s Prompt Intervention.

a. The questions presented are of nationalimportance in light of the ongoing debateover whether States should opt in to theMedicaid Expansion.

To date, twenty-eight States and the District ofColumbia have opted in to the Medicaid Expansion;seven other States are considering whether to opt in,

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and fifteen States have chosen not to do so. See KaiserFamily Foundation, Status of State Action on theMedicaid Expansion Decision, available athttp://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/ (accessed on Feb. 10, 2015).

Decisions whether to opt in or not have beencontroversial, and the matter remains one of robustdebate at the local level. In Maine, for example, as thecourt of appeals noted, the Legislature recently votedto opt in to the Expansion; the Governor vetoed theLegislation; the Legislature failed to override the veto,App. 12 n. 5, and the Governor has since beenpopularly re-elected. The Maine Attorney General,who is elected by the Maine Legislature, Me. Const.art. IX, § 11, disagrees with the Governor as a matterof policy and has intervened in this lawsuit to opposeMaine DHHS. Similarly, some States’ opt-ins havebeen tentative. For example, New Hampshire’sstatutory opt-in expires on December 31, 2016, see N.H.Rev. Stat. Ann. § 126-A:5 (2014), ¶¶ XXIII-XXV – thedate on which the Federal Government ceases its 100%reimbursement for newly-eligible individuals, see 42U.S.C. § 1396d(y)(1)(A). New Jersey’s Governor vetoedthe State Legislature’s opt-in, see Governor’s veto of2012-2013 Bill S2644 (identical to Bill A4233) (July 29,2013) available at www.njleg.state.nj.us/bills/BillView.asp (accessed Feb. 10, 2015), and opted in byexecutive action instead, see N.J. Admin. Code § 10:78-1.1(c)(4) & (5) (2014), reserving the option to opt backout without legislative action.

Opt-in, as well as opt-out or undecided States areaffected by the MOE and potentially by the decision of

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the court of appeals. Some States, like Maine, arecovering 19- and 20-year-olds under the MOE eventhough they have not opted in to the MedicaidExpansion because they covered that age group in2010. See, e.g., Fla. Stat. § 409.903(3) (2010) (childunder 21 in certain low-income two-parent families).Some opt-in States would become subject to the MOEif they opted back out of the Expansion, because theyoffered pre-ACA coverage to 19- and 20-year-olds. See,e.g., N.J. Stat. § 30:4D-3(i)(6) (2010) (providingcoverage to persons under 21 years of age who would beincome eligible for Title IV-A (TANF) benefits, but forthe dependent child requirement).

The decision of the court of appeals below injectssubstantial uncertainty into this fraught local debate. States covered by the MOE need to know whether theyare bound to cover 19- and 20-year-olds if they have notopted in or if they choose to opt out. Additionally, opt-inStates not covered by the MOE need to know whetherthat choice can be made irrevocable under thereasoning espoused by the court of appeals below,either by a subsequent Act of Congress or by USDHHSwithholding State Plan approval from any State thattries to opt back out. Those States need to knowwhether they are free to opt back out or whether theywill be saddled with continuing Expansion obligationsfollowing any sunset of their opt-in legislation,subsequent repeal, or change of executive policy. Statesthat are considering opting in but have not yet done soneed to know whether the option to cover a non-mandatory population is irreversible. In fairness, theydeserve to know the answer to that question beforethey make a decision to opt in. The ruling belowcreates uncertainty that unnecessarily complicates

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States’ decisions about what path to follow and how tobudget for the choices they are considering or havetaken already – whether those States are in the FirstCircuit, like New Hampshire which faces a statutorysunset in 2016, or in other circuits where the court ofappeals’ decision here might be followed.

b. The questions presented are importantquestions of federalism that havesubstantial impact on Maine’s budget andhealthcare priorities for years to come.

More narrowly, the decision below will have a long-standing impact on Maine’s budget and healthcarepriorities at least until 2019. Medicaid reimbursementis approximately 22% of Maine’s annual budget, see 1st

Cir. Appendix to the Briefs at 9, and Maine hasdeveloped a substantial healthcare administrativeapparatus built around Medicaid. Maine has nopractical choice but to participate in Medicaid.

For 2012-13, Maine DHHS projected an eight-month savings of approximately $3.7 million ($5.5million annualized) from eliminating Medicaidpayments for 19- and 20-year-olds. 2011 Me. Lawsc. 657, Pt. A. Maine is constitutionally required tobalance its budget, Me. Const. art. V, pt. 3d, § 5; art.IX, § 14, and Maine agencies struggle to keep theirbudgets within the bounds that Maine can afford andthat Maine’s Legislature will fund. The Commissionerbelieves there are fundamental services which are coreto the mission of Maine’s Medicaid program that arehigher priorities for the limited dollars in the DHHSbudget than Medicaid for young non-disabled adults –for example, the critical need to address home andcommunity-based services for Maine’s elderly and

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individuals with cognitive and developmentaldisabilities, which have been chronically underfundedand are not generally covered by traditional Medicaid.The millions of dollars per year that Maine isunconstitutionally forced to spend covering 19- and 20-year-olds under MaineCare substantially interfereswith Maine’s setting healthcare and budget priorities.Under the court of appeals’ decision, Maine is beingforced to continue such coverage until at least 2019,and will be forced to continue it indefinitely ifUSDHHS determines in the future that Maine mustconform to the mandate of the Medicaid Expansion asit applies to 19- and 20-year-olds, because such amandate is permissible as applied to a population thatMaine previously elected to cover.

c. This Court should intervene now, in lightof the direct conflict with its ownprecedent, rather than await developmentof a circuit split.

The Court should take up the questions presentedwithout awaiting a circuit split, for three reasons.

First, the need for this Court to intervene to ensureuniformity in the relevant federal law has alreadyarisen, due to the direct conflict with this Court’srelevant precedents. This is not a case where this Courthas not spoken on an issue, and it is wise for the Courtto wait to determine whether any disharmony emergesin lower courts’ interpretations of uniform federal law.Here, the Court has declared the relevantconstitutional principles, and a court of appeals hassimply declined to follow them. The decision below hascreated non-uniformity in federal law, and the Courtshould remedy it now.

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Second, awaiting competing views from anothercourt of appeals does not promise to aid the Court’sanalysis of the questions presented in a way thatjustifies allowing the lower court’s errors here to gouncorrected. While in some cases the Court may find ithelpful to await the full development of a spectrum ofviews among courts of appeals on an issue the Courthas not previously decided, this is not such a case. TheCourt has already weighed competing arguments onthe issues presented for review and has announcedrelevant precedents – most pointedly, on how thecoercion doctrine applies to the ACA’s mandate ofcoverage for persons over 18 never before required to becovered under Medicaid. Moreover, the array of viewsthe Court received, the volume of briefing, and even theamount of oral argument the Court took, beforeannouncing its decision in NFIB were extraordinary. There is no need for the Court to await furtherdevelopment in the courts of appeals on an issue thatthe Court has subjected to such close scrutiny beforedeciding. The Court should intervene to ensureadherence to the law it has announced.

Third, the urgency of the questions and theuncertainty that the court of appeals’ decision belowcasts over the ongoing national debate over States’decisions to opt in to the Medicaid Expansion counseleven more strongly against waiting for furtherdevelopments in the courts of appeals. The States needto know now whether electing to cover individuals thatMedicaid does not require them to cover will empowerthe Secretary to reject any SPA seeking to opt back outof such expanded coverage or will allow a futureCongress to mandate such coverage, despite NFIB’s

33

clear holding that such optional coverages cannotconstitutionally be forced on the States.

CONCLUSION

For all the foregoing reasons, the Court should issuea writ of certiorari to the United States Court ofAppeals for the First Circuit to review the QuestionsPresented by this Petition.

Respectfully submitted,

Clifford H. Ruprecht Counsel of RecordAndrea S. ManthorneROACH HEWITT RUPRECHTSANCHEZ & BISCHOFF, P.C.66 Pearl Street, Suite 200Portland, ME 04101(207) 747-4870cruprecht@rhrsb.com

Counsel for Petitioner

February 12, 2015

APPENDIX

i

APPENDIX

TABLE OF CONTENTS

Appendix A Opinion and Judgment in the UnitedStates Court of Appeals for the FirstCircuit (November 17, 2014) . . . . . . . . . . App. 1

Appendix B Decision of the Administrator for theCenters for Medicare & MedicaidServices(January 15, 2014) . . . . . . . . . . . App. 38

Appendix C Recommended Decision of thePresiding Officer On the Motion forReconsideration in the Centers forMedicare & Medicaid Services(October 28, 2013) . . . . . . . . . . . App. 53

Appendix D Initial Decision of the ActingAdministrator in the Centers forMedicare & Medicaid Services(January 7, 2013) . . . . . . . . . . . . App. 69

Appendix E Statutes – Public Laws. . . . . . . . App. 77

Patient Protection and AffordableCare Act, § 2001 . . . . . . . . . . . . . App. 77

American Recovery and ReinvestmentAct of 2009, § 5001 . . . . . . . . . . . App. 92

Act of August 10, 2010, P.L. 111-226,§ 201 . . . . . . . . . . . . . . . . . . . . . App. 104

Statutes – Codified Statutes . . App. 106

42 U.S.C. § 1396a(a)(10) . . . . . App. 106

ii

42 U.S.C. § 1396a(l) . . . . . . . . . App. 115

42 U.S.C. § 1396a(gg) . . . . . . . App. 119

42 U.S.C. § 1396b . . . . . . . . . . . App. 122

42 U.S.C. § 1396c . . . . . . . . . . . App. 122

42 U.S.C. § 1396d(a) . . . . . . . . App. 123

App. 1

APPENDIX A

United States Court of AppealsFor the First Circuit

No. 14-1300

[Filed November 17, 2014]__________________________________________MARY C. MAYHEW, in her capacity as )Secretary of the Maine Department of )Health and Human Services, )

Petitioner, ))

v. ))

SYLVIA M. BURWELL, in her capacity as ) Secretary of the U.S. Department of )Health and Human Services, )

Respondent, ))

and ))

JANET T. MILLS, in her capacity as )Attorney General of Maine, )

Intervenor. )_________________________________________ )

____________________

PETITION FOR REVIEW FROM A DECISION OF THE DEPARTMENT OF HEALTH

AND HUMAN SERVICES____________________

App. 2

Before

Lynch, Chief Judge, Selya and Barron, Circuit Judges.

____________________

Clifford H. Ruprecht, with whom Christopher T.Roach, Geraldine G. Sanchez, and Roach, Hewitt,Ruprecht, Sanchez & Bischoff, P.C. were on brief, forpetitioner.

Alisa B. Klein, Appellate Staff Attorney, with whomBeth S. Brinkmann, Deputy Assistant AttorneyGeneral, Mark B. Stern, Appellate Staff Attorney,Stuart F. Delery, Assistant Attorney General, WilliamB. Schultz, General Counsel, Janice L. Hoffman,Associate General Counsel, Susan Maxson Lyons,Deputy Associate General Counsel for Litigation, andBridgette Kaiser were on brief, for respondent.

Christopher C. Taub, Assistant Attorney General,with whom Janet T. Mills, Attorney General, was onbrief, for intervenor.

Martha Jane Perkins, Catherine McKee, and JackComart on brief for National Health Law Program,Maine Equal Justice Partners, Maine PsychologicalAssociation, Maine Chapter of the American Academyof Pediatrics, Maine Medical Association, Preble Street,Maine Children’s Alliance, and Young Invincibles,amici curiae.

____________________

November 17, 2014____________________

App. 3

LYNCH, Chief Judge. After providing Medicaidcoverage for over 20 years for 19- and 20-year oldchildren whose families met low-income requirements,in 2012, Maine DHHS1 sought to drop that coverage byproposing an amendment to its Medicaid state plan.The federal Department of Health and Human Services(DHHS) Secretary disapproved the amendment, statingthat it plainly violates a federal statute, 42 U.S.C.§ 1396a(gg), part of the Patient Protection andAffordable Care Act (“ACA”), Pub. L. No. 111-148, 124Stat. 119 (2010). Section 1396a(gg) requires statesaccepting Medicaid funds to maintain their Medicaideligibility standards for children until October 1, 2019.

Maine DHHS now petitions for review, arguing thatthe federal disapproval is unconstitutional. It says thatunder portions of National Federation of IndependentBusinesses v. Sebelius (NFIB), 132 S. Ct. 2566 (2012),§ 1396a(gg) as applied here is unconstitutionallycoercive in violation of the Spending Clause and,independently, that it violates Maine’s right to equalsovereignty as recognized in Shelby County v. Holder,133 S. Ct. 2612 (2013), and like cases.

1 “Maine DHHS,” as used in this opinion, refers to petitioner MaryC. Mayhew, in her capacity as Secretary of the Maine Departmentof Health and Human Services. Maine DHHS has petitioned forjudicial review of the decision of the U.S. Department of Healthand Human Services disapproving Maine’s proposed state planamendment. Maine’s Attorney General has declined to representMaine DHHS in this lawsuit, citing “strong[]” disagreements withthe state agency “as a matter of law and public policy.” The MaineAttorney General authorized outside counsel for Maine DHHS andhas intervened in this suit on the side of respondent SylviaBurwell, in her capacity as Secretary of the U.S. DHHS.

App. 4

The United States says the statute as applied hereis constitutional, fitting easily within congressionalspending power to condition federal Medicaid grants.The Attorney General of Maine, Janet T. Mills, asinterested party-intervenor, argues that the rejectionof Maine DHHS’s proposed amendment isconstitutional. And amici health professionals explainthe history and importance of the Medicaid health careprovisions for this age group.2

For the reasons that follow, we hold that the statuteis constitutional as applied here.

I. Background

The Medicaid Act, 42 U.S.C. § 1396 et seq., firstenacted in 1965, provides federal funds to states toassist them in paying for the medical care of needyindividuals. NFIB, 132 S. Ct. at 2581. The Secretary ofthe U.S. DHHS administers the Medicaid programthrough the Centers for Medicare and MedicaidServices (CMS). Ark. Dep’t of Health & Human Servs.v. Ahlborn, 547 U.S. 268, 275 (2006).

“States are not required to participate in Medicaid,but all of them do.” Id. Maine began participating inMedicaid in 1966, shortly after the program’s inception.See U.S. Advisory Comm’n on IntergovernmentalRelations, Intergovernmental Problems in Medicaid 19(1968), available at http://digital.library.unt.edu/ark:/67531/metadc1397/m1/35/?q=maine. “In order toreceive [Medicaid] funding, States must comply withfederal criteria governing matters such as who receivescare and what services are provided at what cost.”

2 We express our appreciation to the amici for their assistance.

App. 5

NFIB, 132 S. Ct. at 2581. To this end, “States mustsubmit to . . . CMS . . . a state Medicaid plan thatdetails the nature and scope of the State’s Medicaidprogram. [States] must also submit any amendmentsto the plan that [they] may make from time to time.And [they] must receive the agency’s approval of theplan and any amendments.” Douglas v. Indep. LivingCtr. of S. Cal., Inc., 132 S. Ct. 1204, 1208 (2012). CMSreviews the states’ plans and their proposedamendments “to determine whether they comply withthe statutory and regulatory requirements governingthe Medicaid program.” Id. (citing 42 U.S.C.§§ 1316(a)(1), (b), 1396a(a), (b); 42 C.F.R. § 430.10 etseq.).

When Congress passed the Medicaid Act, itexpressly reserved “[t]he right to alter, amend, orrepeal any provision” of the Medicaid statute. NFIB,132 S. Ct. at 2605 (quoting 42 U.S.C. § 1304). It hasexercised that power. Congress has, in fact, providedgreater Medicaid eligibility on numerous occasions.From the start, the Act has mandated coverage forcertain children, and over time it has increased theeligibility by changing age and income requirements.See Social Security Amendments of 1965, Pub. L. No.89-97, sec. 121(a), § 1902(b), 79 Stat. 286, 348 (codifiedat 42 U.S.C. § 1396a(b) (1969)). For example,approximately 25 years ago, “Congress requiredparticipating States to include among theirbeneficiaries pregnant women with family incomes upto 133% of the federal poverty level, children up to age6 at the same income levels, and children ages 6 to 18with family incomes up to 100% of the poverty level.”NFIB, 132 S. Ct. at 2631 (Ginsburg, J., dissenting).

App. 6

Before the expansion of Medicaid effected by theACA in 2010, Medicaid did not require states to covernon-pregnant, non-disabled children ages 18 to 20 as acondition of participation in the program, but itpermitted states to do so at the state’s option. See 42U.S.C. § 1396d(a)(i). States which chose to do so wererequired to provide the same mandatory benefits tochildren aged 18 to 20 as they provided for otherchildren.

From 1991 to the present, Maine’s Medicaidprogram, MaineCare, has provided Medicaid coverageto low-income individuals aged 18 to 20. Althoughconsidered “children” for Medicaid purposes, suchindividuals are otherwise considered “adults” underMaine law. See Me. Rev. Stat. tit. 1, §§ 72(1), 73.MaineCare makes up a major portion of Maine’sannual outlays, accounting for just over one-third of thestate’s total budget in 2013.3

In 2009, as part of the American Recovery andReinvestment Act (ARRA), Pub. L. No. 111-5, 123 Stat.115 (2009), Congress offered stimulus funds to stateswhich agreed to maintain their Medicaid eligibilitycriteria at July 1, 2008 levels until December 31, 2010.Id. § 5001(f)(1)(A), (h)(3), 123 Stat. at 500, 502. Two ofthe purposes of the ARRA were to “preserve and createjobs and promote economic recovery” and to “stabilizeState and local government budgets, in order to

3 Maine’s total state and federal Medicaid expenditures for fiscalyear 2012 were $2.4 billion. According to Attorney General Mills,coverage for 19- and 20-year-olds (the group for which Mainesought to repeal coverage) represented less than two percent ofthat figure.

App. 7

minimize and avoid reductions in essential services andcounterproductive state and local tax increases.” Id.§ 3(a), 123 Stat. at 115–16. Maine accepted those fundsand the concordant conditions, which includedcontinuing to provide coverage to low-income 18- to 20-year-olds until December 31, 2010.

The ACA, enacted on March 23, 2010, contains a“maintenance-of-effort” (MOE) provision, now codifiedat 42 U.S.C. § 1396a(gg), which provides, in relevantpart, that states, in order to continue receivingMedicaid funds,

shall not have in effect eligibility standards,methodologies, or procedures . . . that are morerestrictive than the eligibility standards,methodologies, or procedures, respectively . . .that [as of March 23, 2010] are applicable todetermining the eligibility for medical assistanceof any child who is under 19 years of age (orsuch higher age as the State may have elected).

Maine had elected to cover 18- to 20-year-olds. Therequirement of the MOE provision is in effect untilOctober 1, 2019. 42 U.S.C. § 1396a(gg)(2). In otherwords, beginning March 23, 2010, in order to continuereceiving those Medicaid funds they had received forthis population, states were required to “freeze” theireligibility standards for children for a period ofapproximately nine years. Those “standards” includedMaine’s provision of coverage for 18- to 20-year-olds.

In short, in 2009, Maine agreed to continueproviding coverage, as it had since 1991, for low-incomeindividuals aged 18 to 20 through 2010 as a conditionof receiving federal stimulus funds under the ARRA.

App. 8

The ACA in 2010 then required Maine to continuedoing so for another nine years as a condition ofreceiving Medicaid funds. Maine DHHS complains thatit did not have an opportunity to restrict its eligibilitystandards for children after it accepted funds under theARRA but before the ACA went into effect.

Maine is required by its state constitution to havea balanced budget. See Me. Const. art. 5, pt. 3d, § 5; id.art. 9, § 14. Faced with a budget deficit in 2012,Maine’s governor proposed eliminating MaineCareeligibility for 19- and 20-year-olds not otherwisecovered by Medicaid. The legislature voted in favor ofthat elimination of coverage, among other budget cuts.Maine DHHS projected that removing 19- and 20-year-olds from the program would save Maine $3.7 millionbut cause the state to lose $6.9 million in federal funds.

In August 2012, Maine DHHS submitted a stateplan amendment to the U.S. DHHS that eliminatedcoverage of 19- and 20- year-olds, among other changes.On January 7, 2013, CMS issued an initial decisionallowing most other cuts but declining to approveMaine DHHS’s amendment as to eliminating coveragefor 19- and 20- year-olds because it did not comply with§ 1396a(gg). CMS rejected Maine DHHS’s argumentsthat the MOE provision was an unconstitutionalexercise of Congress’s spending power under theSupreme Court’s decision in NFIB. CMS, onreconsideration, affirmed the disapproval of the stateplan amendment, this time simply stating that theproposed amendment was inconsistent with the MOEprovision and that the agency did not have theauthority to adjudicate the constitutional questions

App. 9

raised by Maine DHHS. This petition for judicialreview followed.

Maine DHHS brings a twofold constitutionalchallenge to the MOE provision before us. First, itrenews its argument that the MOE provision isunconstitutional under the Spending Clause. Second,it contends for the first time that the MOE provisionviolates the doctrine of equal sovereignty as articulatedin Shelby County v. Holder, 133 S. Ct. 2612 (2013).

We review these constitutional challenges de novo.See 5 U.S.C. § 706 (court reviewing agency action must“decide all relevant questions of law” and “interpretconstitutional and statutory provisions,” and shall “setaside agency action . . . found to be . . . contrary toconstitutional right, power, privilege, or immunity”);see also United States v. Rene E., 583 F.3d 8, 11 (1stCir. 2009) (review of constitutional challenge to afederal statute is de novo).4

4 We asked the parties to provide supplemental briefing on theissue of whether we have jurisdiction to address Maine DHHS’sconstitutional claims, even though the agency did not addressthose claims because it disclaimed the “authority to renderdecisions regarding the constitutionality of congressionalenactments.”

After reviewing the parties’ arguments, we conclude that wehave jurisdiction. Under 42 U.S.C. § 1316(a), “[a]ny State which isdissatisfied with a final determination made by the Secretary on. . . reconsideration” regarding approval of the state’s Medicaidplan may “file with the United States court of appeals for thecircuit in which such State is located a petition for review of suchdetermination. . . . The court shall have jurisdiction to affirm theaction of the Secretary or to set it aside, in whole or in part.” TheSupreme Court has approved of the “appellate court[s’] reviewingthe decision of an administrative agency to consider a

App. 10

II. Spending Clause Challenge

“The Spending Clause grants Congress the power ‘topay the Debts and provide for the . . . general Welfareof the United States.’” NFIB, 132 S. Ct. at 2601(quoting U.S. Const. art. I, § 8, cl. 1). Maine DHHSargues that application of § 1396a(gg) in thesecircumstances exceeds Congress’s power under theSpending Clause for two reasons: (1) it isunconstitutionally coercive under NFIB and (2) itviolates the anti-retroactivity principle of PennhurstState School & Hospital v. Halderman, 451 U.S. 1, 17,25 (1981). NFIB itself shows that both of thesecontentions are without merit. The MOE provision isanalogous to past modifications of Medicaid that NFIBdeemed constitutionally permissible.

constitutional challenge to a federal statute that the agencyconcluded it lacked authority to decide.” Elgin v. Dep’t of Treasury,132 S. Ct. 2126, 2137-38 n.8 (2012) (collecting cases). In Preseaultv. ICC, 853 F.2d 145 (2d Cir. 1988), one of the cases cited in theElgin footnote, the court, in the course of reviewing an agency’sdecision, held that it had jurisdiction over a challenge to theconstitutionality of the statute under which the agency acted, eventhough the claim was presented for the first time on appeal.Preseault, 853 F.2d at 148–49. The Preseault court rejected theagency’s argument that the petitioners’ constitutional challengeshould be brought in federal district court in the first instance,concluding that “it would be nonsensical to require a bifurcatedchallenge, relegating the constitutional challenge to the statute toa district court” that did not have jurisdiction over the review ofthe underlying agency proceeding. Id. at 149. We find Preseault’sanalysis persuasive. Under § 1316(a), we have jurisdiction toreview the U.S. DHHS’s disapproval of Maine DHHS’s state planamendment, and that jurisdiction encompasses the power toadjudicate Maine DHHS’s constitutional challenges to § 1396a(gg).

App. 11

A. NFIB v. Sebelius and the Spending Clause

In NFIB, the Supreme Court consideredconstitutional challenges to two provisions of the ACA:to the individual mandate, which required mostAmericans to maintain a minimum level of healthinsurance coverage, and to the significant expansion ofthe Medicaid program, which required states to providespecified health care to all individuals with incomesbelow 133 percent of the poverty level (but at a higherfederal financial participation rate) as a condition ofthe state’s continued participation in Medicaid. 132 S.Ct. at 2577, 2582. In a fractured decision, the Courtupheld the individual mandate as a permissibleexercise of Congress’s taxing power, but foundseverable and struck down as beyond Congress’sSpending Clause authority the provision penalizingstates that did not participate in the new expansion ofthe Medicaid funding with the loss of all Medicaidfunding. Id. at 2608. The Court struck down only thepenalty for noncompliance, not the expansion itself. Id.at 2607. That is, the Court held that the U.S. DHHScould not condition the granting of all federal Medicaidfunds on a state’s participation in the new expandedprogram, but was permitted to condition funds for thenew expanded program on participation in the newprogram. The Court made this explicit:

Nothing in our opinion precludes Congress fromoffering funds under the Affordable Care Act toexpand the availability of health care, andrequiring that States accepting such fundscomply with the conditions on their use. WhatCongress is not free to do is to penalize Statesthat choose not to participate in that new

App. 12

program by taking away their existing Medicaidfunding.

Id.5

Seven Justices concluded that the penalty of takingaway existing Medicaid funding from states whichdeclined to sign up for the new expanded Medicaidprogram was unconstitutional, but they were unable toagree on a single or consistent rationale. Chief JusticeRoberts, in a plurality opinion joined by Justice Breyerand Justice Kagan, offered one rationale for thatholding. A joint dissent authored by Justice Scalia,Justice Kennedy, Justice Thomas, and Justice Alitooffered another.

1. The plurality’s approach

The plurality began its analysis by noting that theMedicaid expansion of the ACA “dramaticallyincrease[d] state obligations under Medicaid.” Id. at2601. Under the pre-ACA system, states were required“to cover only certain discrete categories of needyindividuals -- pregnant women, children, needy

5 Maine has opted not to participate in the Medicaid expansion. InJune 2013, Maine’s legislature passed a bill that would haveexpanded the state’s Medicaid program in order to receive theadditional federal funding offered under the ACA. LD 1066, 126thLeg., 1st Reg. Session (Me. 2013). Maine’s governor vetoed the bill,and the legislature failed to pass it over his veto. Id.; An Act toIncrease Access to Health Coverage and Qualify Maine for FederalFunding: Roll Call Vote #339, 126th Leg., 1st Reg. Session (Me.2013); The Advisory Board Company, Where the States Stand onMedicaid Expansion, Daily Briefing (Sep. 4, 2014),http://www.advisory.com/daily-briefing/resources/primers/medicaidmap.

App. 13

families, the blind, the elderly, and the disabled.” Id.(citing 42 U.S.C. § 1396a(a)(10)). The Medicaidprogram expansion, “in contrast, require[d] States toexpand their Medicaid programs . . . to cover allindividuals under the age of 65 with incomes below 133percent of the federal poverty line.” Id. (citing 42 U.S.C.§ 1396a(a)(10)(A)(i)(VIII)).6

The plurality reiterated the longstanding rule thatCongress may use its power under the Spending Clauseto condition federal grants to states “upon the States’‘taking certain actions that Congress could not requirethem to take.’” Id. (quoting Coll. Sav. Bank v. Fla.Prepaid Postsecondary Educ. Expense Bd., 527 U.S.666, 686 (1999)). But, in order for an exercise of thespending power to be deemed legitimate, the statemust “voluntarily and knowingly” accept the terms ofthe deal. Id. at 2602 (quoting Pennhurst, 451 U.S. at17). Put differently, “Congress may use its spendingpower to create incentives for States to act inaccordance with federal policies,” but it oversteps itsauthority “when ‘pressure turns into compulsion.’” Id.(quoting Charles C. Steward Mach. Co. v. Davis, 301U.S. 548, 590 (1937)). This limit on Congress’sspending power is necessary to “ensur[e] that SpendingClause legislation does not undermine the status of theStates as independent sovereigns in our federalsystem.” Id.

6 The Medicaid program expansion was projected to increasefederal Medicaid spending by $434 billion in its first six years.Reply Br. of State Pet’rs on Medicaid at 19, Florida v. U.S. Dep’tof Health & Human Servs., 132 S. Ct. 2763 (2012) (No. 11-400),2012 WL 864598 at * 19.

App. 14

The plurality opinion reasoned that, while Congressis entitled to “condition the receipt of funds on theStates’ complying with restrictions on the use of thosefunds” in order to “ensure[] that the funds are spentaccording to [Congress’s] view of the ‘general Welfare,’”when Congress places conditions on funds that do notgovern the use of those funds, “the conditions areproperly viewed as a means of pressuring the States toaccept policy changes.” Id. at 2603–04. The pluralitydetermined that the latter situation obtained withrespect to the Medicaid program expansion. Thatexpansion, Chief Justice Roberts explained,

accomplishe[d] a shift in kind, not merelydegree. The original program was designed tocover medical services for four particularcategories of the needy: the disabled, the blind,the elderly, and needy families with dependentchildren. . . . Previous amendments to Medicaideligibility merely altered and expanded theboundaries of these categories. Under the [ACA],Medicaid . . . is no longer a program to care forthe neediest among us, but rather an element ofa comprehensive national plan to provideuniversal health insurance coverage.

Id. at 2605–06. The plurality viewed the Medicaidexpansion as creating an entirely “new health careprogram,” participation in which was a condition ofstates receiving even continued funding for an oldprogram (pre-ACA Medicaid). See id. at 2606. Thismeant that the Medicaid expansion was a conditionupon the receipt of funds that did not govern the use ofthose funds.

App. 15

The plurality next considered “whether ‘thefinancial inducement offered by Congress’ [as to thenew program expansion] was ‘so coercive as to pass thepoint at which pressure turns into compulsion.’” Id. at2604 (quoting South Dakota v. Dole, 483 U.S. 203, 211(1987)) (internal quotation marks omitted). Theprecedent for this portion of the analysis was theCourt’s decision in Dole. Dole had considered whetherCongress’s threat to withhold five percent of a state’sfederal highway funds if the state did not raise itsminimum drinking age to 21 was permissible under theSpending Clause. Dole, 483 U.S. at 211. Dole held thatit was permissible. Id. at 211–12. The NFIB pluralitydistinguished Dole, saying while “the condition was nota restriction on how the highway funds . . . were to beused,” it was “not impermissibly coercive, becauseCongress was offering only ‘relatively mildencouragement to the States.’” NFIB, 132 S. Ct. at2604 (quoting Dole, 483 U.S. at 211).

By contrast, the plurality found that the financialinducement and penalty in the new Medicaid programexpansion was “much more than ‘relatively mildencouragement’ -- it [was] a gun to the head.” Id.Importantly, the plurality expressly acknowledged thatCongress is permitted to modify the Medicaid program,and to condition states’ continuing participation inMedicaid upon compliance with those modifications, asit has done on numerous occasions in the past. Id. at2605.7

7 That was in accord with settled law, see California v. UnitedStates, 104 F.3d 1086, 1092 (9th Cir. 1997); Stowell v. Ives, 976F.2d 65, 69 (1st Cir. 1992); Oklahoma v. Schweiker, 655 F.2d 401,413–14 (D.C. Cir. 1981), and the NFIB Court did nothing to

App. 16

The plurality found that the new Medicaid programexpansion was much more than a simple modification --it was a “dramatic[]” “transform[ation]” of the program.NFIB, 132 S. Ct. at 2605–06. States could not haveanticipated that their entitlement to Medicaid fundswould become conditioned on providing new medicalcare to all individuals with incomes below 133 percentof the poverty line. Id. Thus, the new Medicaid programexpansion violated the “anti-retroactivity” rule ofPennhurst, which provides that Congress may not“surpris[e]” states participating in a federal-statecooperative program “with post-acceptance or‘retroactive’ conditions.” Id. (quoting Pennhurst, 451U.S. at 25).

2. The joint dissent’s approach

The joint dissent’s analysis of the constitutionalityof the Medicaid expansion differed significantly fromthat of the plurality. The primary8 focus of the jointdissent was on the concept of “coercion,” which itdefined simply: “[I]f States really have no choice otherthan to accept the package, the offer is coercive, and

unsettle that law. See also 42 C.F.R. § 430.12(c)(1) (state plan“must provide that it will be amended whenever necessary toreflect . . . [c]hanges in Federal law, regulations, policyinterpretations, or court decisions”).

8 The joint dissent also noted that conditions attached to grantsmust be unambiguous, must be “related to the federal interest inparticular national projects or programs,” and “may not induce theStates to engage in activities that would themselves beunconstitutional.” NFIB, 132 S. Ct. at 2659 (Scalia, Kennedy,Thomas & Alito, JJ., dissenting) (citations omitted) (internalquotation marks omitted). These criteria support theconstitutionality of § 1396a(gg) here.

App. 17

the conditions cannot be sustained under the spendingpower.” Id. at 2661 (Scalia, Kennedy, Thomas & Alito,JJ., dissenting). The Justices cautioned, however, that“courts should not conclude that legislation isunconstitutional on this ground unless the coercivenature of an offer is unmistakably clear.” Id. at 2662.Emphasizing that Medicaid constitutes the largest lineitem in states’ budgets, as well as the apparent view ofCongress that no state would refuse to participate inthe new Medicaid program expansion, the joint dissentconcluded that the expansion exceeded Congress’spower under the Spending Clause. Id. at 2662–66.

B. Application of NFIB to the Disapproval Here Basedon § 1396a(gg)

When a majority of the Supreme Court agrees on aresult but “no single rationale explaining the resultenjoys the assent of five Justices, ‘the holding of theCourt may be viewed as that position taken by thoseMembers who concurred in the judgments on thenarrowest grounds . . . .’” Marks v. United States, 430U.S. 188, 193 (1977) (quoting Gregg v. Georgia, 428U.S. 153, 169 n.15 (1976) (plurality opinion)). In NFIB,the plurality invalidated the Medicaid expansion onnarrower grounds than did the joint dissent. Theplurality found a Spending Clause violation because itdetermined that the Medicaid program expansion wasan entirely new program, participation in which was acondition on continued receipt of pre-ACA Medicaidfunds, and because the loss of pre-ACA Medicaid fundswould have been so consequential to the states thatstates had no real option to refuse. In other words, theplurality found (1) that the expansion placed acondition on the receipt of funds that did not govern the

App. 18

use of those funds and (2) that the condition wasunduly coercive. The joint dissent, in contrast, wouldhave invalidated the expansion based on a finding ofcoercion alone. Hence, the plurality’s rationale wasnarrower. See E. Pasachoff, Conditional Spending AfterNFIB v. Sebelius: The Example of Federal EducationLaw, 62 Am. U. L. Rev. 577, 593-96 (2013); cf. S.Bagenstos, The Anti-Leveraging Principle and theSpending Clause After NFIB, 101 Geo. L.J. 861, 873(2013) (rejecting the proposition that the plurality’sanalysis relied only upon the size of the grant at issue).Thus, we apply the plurality’s approach to § 1396a(gg).

Under that analysis, Maine DHHS’s SpendingClause challenge fails. Indeed, the plurality opinionprecludes us from finding that there is a SpendingClause problem with § 1396a(gg). The MOE provisionapplied to the long-standing provision of care to 19- and20-year-olds, unlike the new Medicaid programexpansion first appearing in the ACA, is not a newprogram. It is simply an unexceptional “alter[ation] . . .[of] the boundaries” of the categories of individualscovered under the old Medicaid program, completelyanalogous to the many past alterations of the programthat NFIB expressly found to be constitutional. SeeNFIB, 132 S. Ct. at 2606.

Section 1396a(gg) differs from the new programexpansion considered in NFIB in several critical ways.As an initial matter, § 1396a(gg) does not “expand”Medicaid eligibility at all. It simply requires a state, asa condition of continued participation in Medicaid, tomaintain its Medicaid eligibility standards for“children” for nine years. See 42 U.S.C. § 1396a(gg)(2)(MOE provision applies to “the eligibility standards,

App. 19

methodologies, and procedures . . . that are applicableto determining the eligibility for medical assistance ofany child who is under 19 years of age (or such higherage as the State may have elected)”). As NFIB noted,the Medicaid expansion “require[d] States to expandtheir Medicaid programs by 2014 to cover allindividuals under the age of 65 with incomes below 133percent of the federal poverty line” and “establishe[d]a new ‘[e]ssential health benefits’ package.” 132 S. Ct.at 2601 (citing 42 U.S.C. §§ 1396a(a)(10)(A)(i)(VIII),1396a(k)(1), 1396u–7(b)(5), 18022(b)).

What is more, § 1396a(gg) requires states tomaintain eligibility standards for a population -- low-income children of certain ages -- that has historicallybeen covered by Medicaid. Maine DHHS admits in itsargument that the classic form of Medicaid providedcoverage for the blind, the disabled, the elderly, andneedy families with dependent children. In fact, theMedicaid program has an extensive history of covering18- to 20-year-olds. At the time of Medicaid’senactment in 1965, the program included some 19- and20- year-olds within the population of children thatstates had to cover. It did so first by requiring states tomatch the coverage of social assistance programs likeAid for Families with Dependent Children (“AFDC”),which defined eligible children to include 19- and 20-year-olds in particular educational programs. See 42U.S.C. § 606(a) (1964) (providing that AFDC wasavailable to any “dependent child,” defined as “a needychild (1) who has been deprived of parental support orcare . . . and who is living with [one of severalenumerated relatives] . . ., and (2) who is (A) under theage of eighteen, or (B) under the age of twenty-one and. . . a student regularly attending [certain educational

App. 20

programs]”); Social Security Amendments of 1965, Pub.L. No. 89-97, sec. 121(a), § 1902(a)(10), 79 Stat. 286,344-45 (codified at 42 U.S.C. § 1396a(a)(10) (1969)) (“Astate plan for medical assistance must . . . provide formaking medical assistance available to all individualsreceiving aid or assistance under State plans approvedunder [AFDC] . . . .”).

The Medicaid program also mandated that statesprovide medical assistance to all under-21 individualswho would have qualified as “children” for AFDC butfor their age, thus removing the educational conditionthat limited the class of 19- and 20-year-olds coveredunder AFDC. See id. §§ 1902(b), 79 Stat. at 348(codified at 42 U.S.C. § 1396a(b) (1969)); see also id.§ 1904, 79 Stat. at 351 (codified at 42 U.S.C.§ 1396d(a)(i) (1969)). Thus, from its early days,Medicaid contemplated mandatory coverage of some19- and 20-year-olds, due to their status in federal lawas “children” in need. Such a mandatory coveragerequirement was in place when Maine joined Medicaidin 1966. The mandate to cover children under 21 whowould qualify for AFDC but for their age did notbecome optional until more than a decade later. SeeOmnibus Budget Reconciliation Act of 1981, Pub. L.No. 97-35, § 2172(b)(1), 95 Stat. 357, 808 (1981)(codified at 42 U.S.C. § 1396d(a)(i)); id. § 2172(a), 95Stat. at 808 (codified at 42 U.S.C. § 1396a(b) (1983)).

There is an additional relevant point. The categoryof children for which a state must provide coverage hasremained subject to expansion throughout the historyof Medicaid. Alterations to the category of needychildren occurred repeatedly in the 1980s, with statesbeing required to cover an expanding group of children

App. 21

based on changing age and income requirements.Importantly, in 1990, Congress required states to coverall 18-year-olds who met certain income eligibilityrequirements, irrespective of their “dependent” status.Omnibus Budget Reconciliation Act of 1990, Pub. L.No. 101–508, § 4601(a)(2), 104 Stat. 1388, 1388-166(1990) (codified at 42 U.S.C. § 1396d(n)(2)); id.§ 4601(a)(1)(A), 104 Stat. at 1388-166 (codified at 42U.S.C. § 1396a(a)(10)(A)(i)(VII)). In this way, childrenaged 18 -- historically treated by AFDC and Medicaidin the same manner as children under 21 -- thusbecame included in the mandatorily covered categorywithout any condition other than their income level.That is so even though 18-year-olds are for many otherpurposes, including voting, treated as adults ratherthan children.

The history of Medicaid’s treatment of 18-, 19-, and20-year-olds further demonstrates that application of§ 1396a(gg) here as to the treatment of 19- and 20-year-olds “accomplishes a shift in . . . degree,” rather than inkind. NFIB, 132 S. Ct. at 2605; see also id. at 2606(noting that a Medicaid “amendment requiring Statesto cover pregnant women and increasing the number ofeligible children . . . . can hardly be described as amajor change in a program that -- from its inception --provided healthcare for ‘families with dependentchildren’” (emphasis added)).9

Two further differences between the MOE provisionand the new Medicaid program expansion considered

9 The pregnancy program was not directly at issue in NFIB, butthis language strongly suggests that the plurality viewed it as apermissible alteration of the old program.

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in NFIB support the conclusion that the MOE provisiondid not accomplish a shift “in kind.” First, the MOEprovision uses the same pre-existing fundingmechanism as pre-ACA Medicaid, whereas theexpansion uses a new, more generous federal fundingmechanism. Second, under § 1396a(gg), Maine isrequired only to maintain its current benefits for 19-and 20-year olds, whereas the Medicaid expansionrequired states to provide a “new ‘[e]ssential healthbenefits’ package . . . to all new Medicaid recipients.”NFIB, 132 S. Ct. at 2601 (first alteration in original).The NFIB Court explicitly mentioned both of thesefeatures of the expansion in its analysis. It noted that“the manner in which the expansion [was] structuredindicate[d] that . . . Congress . . . recognized it wasenlisting the States in a new health care program”because “Congress created a separate funding provisionto cover the costs of providing services to any personmade newly eligible by the expansion” and because“Congress mandated that newly eligible persons receivea level of coverage that is less comprehensive than thetraditional Medicaid benefit package.” Id. at 2606.

In short, the MOE provision as applied here doesnot create a new program and falls comfortably withinCongress’s express reservation of power to “alter” or“amend” the terms of the Medicaid statute in itscoverage of previously covered groups. See Cong.Research Serv., Selected Issues Related to the Effect ofNFIB v. Sebelius on the Medicaid ExpansionRequirements in Section 2001 of the Affordable CareAct 5-6 (July 16, 2012), available athttp://www.ncsl.org/documents/health/aca_medicaid_expansion_memo_1.pdf (concluding that the MOEprovision of the ACA remains valid after NFIB because

App. 23

it is not “part of the ‘new Medicaid expansion program’for which the states must have a ‘genuine choice’”).Further, the states had notice at the inception of theMedicaid program that continued participation by astate in Medicaid might be conditioned on arequirement such as the MOE provision here.

As a result, there is no Spending Clause violationunder NFIB. See also California v. United States, 104F.3d 1086, 1092 (9th Cir. 1997) (rejecting California’sargument that Congress cannot introduce newconditions on participation in Medicaid becauseCalifornia “now has no choice but to remain in theprogram in order to prevent a collapse of its medicalsystem”); Stowell v. Ives, 976 F.2d 65, 69 (1st Cir. 1992)(finding that statute providing that U.S. DHHS wouldnot approve a state plan for medical assistance if thestate reduced payment levels for the AFDC programprovided “incentives -- not commands -- to the States,”since states could choose to maintain AFDC benefits orto reduce them and risk losing federal funding).Rather, this is one of the “typical case[s]” in which “welook to the States to defend their prerogatives byadopting ‘the simple expedient of not yielding’ tofederal blandishments when they do not want toembrace the federal policies as their own.” NFIB, 132S. Ct. at 2603 (quoting Massachusetts v. Mellon, 262U.S. 447, 482 (1923)).

Maine DHHS’s arguments to the contrary areunconvincing. First, Maine DHHS argues that theMOE provisions are an “integral part” of the Medicaidexpansion that was considered in NFIB, and so theymust be struck down “as a direct implementation of theruling in NFIB.” Not so. The plurality focused

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exclusively on the amendments to Medicaid thatrequired states “to meet the health care needs of theentire nonelderly population with income below 133percent of the poverty level.” NFIB, 132 S. Ct. at 2606.The Court did not hold, or even intimate, that otherchanges to Medicaid wrought by the ACA, such as theMOE provision at issue here, were constitutionallyinfirm. To the contrary, the plurality expressly statedthat it was holding unconstitutional only the sanctionof withholding all Medicaid funding from states thatrefused to accept this “basic change in the nature ofMedicaid.” Id. at 2608. “That remedy d[id] not requirestriking down other portions of the Affordable CareAct.” Id.

Second, Maine DHHS contends that, regardless ofits earlier choice to provide coverage for low-income 19-and 20-year-olds, Congress had not previouslymandated this coverage, so the now-mandated MOEcoverage is “new.” It argues that “Congress cannotthreaten to withdraw all Medicaid funds from a Statefor failing or refusing to cover categories of adults forwhom Medicaid has never previously mandatedcoverage,” regardless of the fact the state had chosen toprovide such coverage. In fact, Congress can do so andit has done so, on numerous occasions. Moreover, theNFIB plurality expressly said Congress is allowed to doso, so long as the change effected by the expansion is ashift in degree rather than a shift in kind. See id. at2605. NFIB approved of a past amendment that newlyrequired states to cover pregnant women; that was ashift in degree and not in kind, as is this. Id. at2605–06. Further, application here of § 1396a(gg)concerns children, a classic Medicaid programobjective, not adults.

App. 25

Third, Maine DHHS argues that § 1396a(gg) is“coercive” because “when a federal program is as largeas Medicaid is . . ., the State has no option but toparticipate.” That is not the test NFIB has adopted.Even were the question of tests open, Maine DHHS’sSpending Clause claim based upon “coercion” alonedoes not work. As the Supreme Court noted long ago,an attempt to determine when “inducement” to complywith a condition on the use of federal funds crosses theline into “compulsion” would “plunge the law intoendless difficulties.” Davis, 301 U.S. at 590 (Cardozo,J.); see also Oklahoma v. Schweiker, 655 F.2d 401, 413-14 (D.C. Cir. 1981) (“The courts are not suited toevaluating whether the states are faced . . . with anoffer they cannot refuse or merely a hard choice.”).

Maine DHHS’s argument that the MOE provision isindistinguishable from the Medicaid expansionconsidered in NFIB is, as explained, unpersuasive. Asit affects Maine, the MOE provision requires Maine todo no more than continue to cover low-incomeindividuals aged 18 to 20 for a period of nine years, andin exchange Maine will receive the classic funding. Bycontrast, the new Medicaid program expansion wouldhave required Maine to cover all low-incomeindividuals indefinitely. NFIB, 132 S. Ct. at 2606.Those changes are not the same nor even analogous.10

10 In briefing and at oral argument, counsel for Maine DHHSargued that, because “the NFIB Court did not sever the applicationof the Medicaid expansion only to those 21 and above,” the decisionmeans that Congress may not make coverage of 19- and 20-year-olds mandatory. We see no basis to so conclude. The question of

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C. Claimed Pennhurst Anti-Retroactivity Violation

Maine DHHS also argues that the application to itof the MOE provision violates the Pennhurst anti-retroactivity principle because Congress “changed thedeal” it offered to Maine in 2009. Maine DHHS pointsout that, in 2009, Maine was required to maintaineligibility standards only through 2010 in order to getthe stimulus funds it had chosen to seek. Then, in2010, with the passage of the ACA, Maine was requiredto maintain those standards through 2019 in order toavoid losing all Medicaid funds.

This retroactivity argument fails. In Pennhurst, theSupreme Court explained that “legislation enactedpursuant to the spending power is much in the natureof a contract: in return for federal funds, the Statesagree to comply with federally imposed conditions.” 451U.S. at 17. But a state cannot “voluntarily andknowingly accept[] the terms of the ‘contract’” if it “isunaware of the conditions or is unable to ascertainwhat is expected of it.” Id. Thus, “if Congress intends toimpose a condition on the grant of federal moneys, itmust do so unambiguously”; it may not “surpris[e]participating States with post acceptance or‘retroactive’ conditions.” Id. at 17, 25.

The ACA did not “surprise” Maine with aretroactive condition. Because Congress has reservedin the Medicaid Act the power to “alter” or “amend” theMedicaid program, states have had fair notice that

whether to sever application of the expansion to 18- to 20-year-oldsfrom application of the expansion to 21- to 64-year-olds was notbefore the Court in NFIB.

App. 27

Congress may make incremental changes such as“increasing the number of eligible children.” NFIB, 132S. Ct. at 2606.11 Here, Congress did not even go thatfar; instead, it merely required that states continueproviding coverage to children on the same terms aswere in effect on the date of the ACA’s passage. MaineDHHS appears to argue that it could not have foreseenthat in exchange for stimulus funds it would be lockedinto those coverage levels at a later time. But thismodest change falls within the Medicaid Act’s broadreservation clause. Maine was on notice, both beforeand after accepting stimulus funds, that anincremental alteration of Medicaid might change theconditions on participation in the Medicaid program inthe way that § 1396a(gg) has. Put differently, Mainewas not “unaware of the conditions [on its participationin Medicaid] or . . . unable to ascertain what [was]expected of it,” Pennhurst, 451 U.S. at 17, when itchose to receive funds under Medicaid or under theARRA. There is no constitutional infirmity here.

III. Equal Sovereignty Claim

Maine DHHS also argues that the MOE provisiondeprives Maine of its right to equal sovereignty underShelby County v. Holder, 133 S. Ct. 2612 (2013),because it “prohibit[s] Maine from exercising theprerogative to design its Medicaid laws in ways thatmany of its sister States remain free to do.” This

11 As explained in greater detail above, at the inception of theMedicaid program, states were required to cover individuals aged18 to 20 if they would have qualified for the AFDC program but fortheir age, and Congress at one point expanded Medicaid to cover18-year-olds regardless of their status as “dependents.”

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argument fails at every step of the analysis. First,Maine DHHS’s premise that § 1396a(gg) singles outcertain states for disparate treatment is wrong. ShelbyCounty is also not relevant here because § 1396a(gg)does not similarly effect a federal intrusion into asensitive area of state or local policymaking. Finally,there is no constitutional problem because anydisparate treatment caused by § 1396a(gg) issufficiently related to the problem that the statute wasdesigned to address.

A. Shelby County

Shelby County considered the continuingconstitutionality of §§ 4 and 5 of the Voting Rights Act(VRA) of 1965. Section 4 set forth a “coverage formula”that identified jurisdictions with a history of voterdiscrimination, and § 5 required those jurisdictions toobtain “preclearance” for any change in votingprocedures by “proving that the change had neither ‘thepurpose [nor] the effect of denying or abridging theright to vote on account of race or color.’” Id. at 2618–20(alteration in original). In the years after the VRA’spassage, Congress repeatedly re-authorized the Act(most recently in 2006), but it made no changes to § 4’scoverage formula after 1975. Id. at 2620–21.

The Shelby County Court held that § 4’s coverageformula unconstitutionally infringed the equalsovereignty of the states. Id. at 2623–31. The majorityexplained that, when a statute “authorizes federalintrusion into sensitive areas of state and localpolicymaking, . . . and represents an extraordinarydeparture from the traditional course of relationsbetween the States and the Federal Government,” id.at 2624 (citations omitted) (internal quotation marks

App. 29

omitted), “any ‘disparate geographic coverage’ must be‘sufficiently related to the problem that it targets.’” Id.at 2627 (quoting Nw. Austin Mun. Util. Dist. No. Onev. Holder, 557 U.S. 193, 203 (2009)).12 The Court foundthat § 4’s coverage formula as used in Shelby Countydid not satisfy this test because it was “based ondecades-old data and eradicated practices.” Id. at 2627.

B. Disparate Treatment

Maine DHHS’s premise that § 1396a(gg) results in“disparate treatment” of states, as that phrase wasused in Shelby County, is mistaken. On its face, theMOE provision applies the same rule to each state:freeze eligibility standards in existence as of March 23,2010 until October 1, 2019, or risk losing Medicaid

12 Shelby County relied primarily on two cases for its discussion ofthe equal sovereignty doctrine: Coyle v. Smith, 221 U.S. 559(1911), and Northwest Austin. Coyle held that

when a new state is admitted into the Union, it is soadmitted with all of the powers of sovereignty andjurisdiction which pertain to the original states, and thatsuch powers may not be constitutionally diminished,impaired, or shorn away by any conditions, compacts, orstipulations embraced in the act under which the newstate came into the Union, which would not be valid andeffectual if the subject of congressional legislation afteradmission.

221 U.S. at 573. In other words, Congress can enact laws affectinga state differently from other states at the time of its admissiononly if Congress could constitutionally do so after the state’sadmission. Northwest Austin expressed concerns in dicta that theVRA might conflict with “our historic tradition that all the Statesenjoy ‘equal sovereignty.’” 557 U.S. at 203 (quoting United Statesv. Louisiana, 363 U.S. 1, 16 (1960)).

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funding. In Shelby County, the government admittedthat the coverage formula was “‘reverse-engineered’:Congress identified the jurisdictions to be covered andthen came up with criteria to describe them.” Id. at2628. In contrast, Maine has not been “singled out” atall. The rule is uniform and performs an importantfunction of not providing incentives to states to act inways Congress wishes to avoid. See, e.g., Bennett v. Ky.Dep’t of Educ., 470 U.S. 656, 671–72 (1985). Everystate has simply been required to continue for a limitedperiod of time13 to fund Medicaid services for thosechildren it was funding before the ACA.

Maine DHHS resists this distinction, pointing outthat even the preclearance requirement in ShelbyCounty, in a sense, applied to all states. Thiscontention is unpersuasive. In Shelby County, thegovernment expressly admitted that it had singled outcertain states for disfavored treatment and thenreverse-engineered a coverage formula that wouldtarget only those states. 133 S. Ct. at 2628. Here, incontrast, there is no suggestion that the MOE provisionwas “reverse-engineered”; from all indications,Congress came up with the criteria without regard towhich states would be covered by their application.

C. Intrusion Into a Sensitive Area of State or LocalPolicymaking

We reject Maine DHHS’s equal sovereignty claimfor another reason as well. Shelby County involved asituation of federal “intrusion[s] into sensitive areas of

13 Section 1396a(gg) will remain in effect only until 2019. See 42U.S.C. § 1396a(gg)(2).

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state and local policymaking,” id. at 2624, and requiredin that context that disparate treatment must be“sufficiently related to the problem that it targets,” id.at 2627. The Court repeatedly emphasized that theVRA marked an “extraordinary” departure from basicprinciples of federalism because it intruded into arealm (regulation of state and local elections) that hastraditionally been the exclusive province of the states.14

Id. at 2618 (characterizing § 5 as a “drastic departurefrom basic principles of federalism”); id. at 2623 (notingthat the Framers “intended the States to keep forthemselves . . . the power to regulate elections”); id. at2624 (stating that the VRA “‘authorizes federalintrusion into sensitive areas of state and localpolicymaking,’ . . . and represents an ‘extraordinarydeparture from the traditional course of relationsbetween the States and the Federal Government’”); id.at 2630 (explaining, “[a]t the risk of repetition,” thatthe VRA is “far from ordinary”); id. at 2631 (statingthat any preclearance formula must reflect conditionsthat “justify[] such an ‘extraordinary departure fromthe traditional course of relations between the Statesand the Federal Government’”). The equal sovereigntydoctrine has been applied only in such extraordinarysituations. See NCAA v. Governor of N.J., 730 F.3d

14 Similarly, in Coyle v. Smith, the challenged federal statutemandated that Oklahoma, as a condition of admittance to theUnion, establish its state capital in a particular city. See 221 U.S.559, 564 (1911). The Court found that this statute violated theequal sovereignty doctrine, noting that “[t]he power to locate itsown seat of government, and to determine when and how it shallbe changed from one place to another, and to appropriate its ownpublic funds for that purpose, are essentially and peculiarly statepowers.” Id. at 565.

App. 32

208, 239 (3d Cir. 2013) (“[T]here is nothing in ShelbyCounty to indicate that the equal sovereignty principleis meant to apply with the same force outside thecontext of ‘sensitive areas of state and localpolicymaking.’” (quoting Shelby County, 133 S. Ct. at2624)).15 This is not such an extraordinary situation.Federal laws that have differing impacts on differentstates are an unremarkable feature of, rather than anaffront to, our federal system. Indeed, MOE provisionslike the one at issue here have long been a commonfeature of federal spending programs, includingMedicaid. See, e.g., Social Security Amendments of1965, Pub. L. No. 89-97, sec. 121(a), § 1902(c), 79 Stat.286, 348 (codified at 42 U.S.C. § 1396a(c) (1969)) (MOEprovision in the original Medicaid statute); Bennett,470 U.S. at 671 (describing MOE provision in theElementary and Secondary Education Act of 1965).

The MOE provision at issue here does not intrudeon an area of traditional state concern; to the contrary,it simply requires an extension of states’ prior choicesto participate in a limited federal-state cooperativeprogram. Maine DHHS’s assertion that the MOEprovision affects its “ability to pass and implement

15 In NCAA, the Third Circuit rejected an equal sovereigntychallenge to a statute that, in effect, prohibits casino-operatedsports books outside of Nevada. The Third Circuit held that theCommerce Clause, under which the challenged statute had beenenacted, “‘does not require geographic uniformity.’” Id. at 238(quoting Morgan v. Virginia, 328 U.S. 373, 388 (1946)(Frankfurter, J., concurring)).

We need not and do not hold that the equal sovereigntydoctrine is categorically inapplicable to congressional action underthe Spending Clause. We simply find the doctrine inapplicable onthe facts of this case.

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laws, in the exercise of the fundamental police powerover health and welfare” is stated at much too high alevel of generality to be true. A state’s ability to set theconditions of eligibility for participation in a federalhealth insurance program that is funded primarily bythe federal government is not a core sovereign statefunction in the same way as is a state’s ability toregulate the conduct of its elections. Cf. NCAA, 730F.3d at 237–39 (reasoning that the equal sovereigntydoctrine did not apply to a statute affecting a state’sability to pass laws legalizing sports gambling).

Put simply, the MOE provision is not at all an“intrusion,” much less an intrusion into statesovereignty as was true of § 4 of the VRA. The equalsovereignty doctrine of Shelby County is not applicableto this case.

D. Sufficient Justification

Maine DHHS makes, and we reject, an argumentthat under Shelby County the MOE provision is notsufficiently related to the problem it targets. ShelbyCounty permits legislation that “single[s] out” states ifthe singling out “makes sense in light of currentconditions.” 133 S. Ct. at 2629. The coverage formula of§ 4 of the VRA failed that test because it was “based ondecades-old data and eradicated practices.” Id. at 2627.Section 1396a(gg), in contrast, does “make[] sense inlight of current conditions,” and so, to the extent thatit results in disparate treatment of states at all, thedisparity is permissible.

Congress has long used temporary MOE provisionsin Medicaid and other benefits programs for a specific,legitimate purpose: to protect low-income individuals

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from losing public assistance in times of transitionbetween different statutory schemes for delivering thatassistance.16 The MOE provision at issue here is nodifferent. As counsel for the United States explained atoral argument, when Congress passed the ACA, it didnot want to create incentives for states to drop childrenpreviously covered “on the often mistaken premise thatthey will be easily transitioned to new coverage,” when“in fact, there are gaps in enrollment, people lose betterbenefits packages, or Congress may just not want toshift from an existing program to one that is nowfunded through [new] federal dollars.” And as amicipoint out, Congress was entitled to consider thatwidespread withdrawal of coverage for children couldhave a serious impact on the public fisc, since childrenwho have health insurance are more likely to avoidserious (and expensive) long-term health problems thatoften beset children who lack insurance. The MOEprovision avoided these potential negativeconsequences of the shift from the pre-ACA regime.The coverage conditions here are based on “currentconditions” and address real problems.

Thus, we reject Maine DHHS’s argument that “theMOE provisions . . . [are] not sufficiently tailored to

16 For example, when Congress passed the Medicaid statute in1965, it included a provision prohibiting the U.S. DHHS fromapproving a state plan that would result in a reduction in aid orassistance provided under any of the five assistance programsrelated to Medicaid eligibility, such as AFDC. See Social SecurityAmendments of 1965, Pub. L. No. 89-97, sec. 121(a), § 1902(c), 79Stat. 286, 348 (codified at 42 U.S.C. § 1396a(c) (1969)).

App. 35

any constitutional purpose.”17 To the contrary,§ 1396a(gg) directly serves the legitimate purpose ofensuring that children do not lose health insurance asthe country transitions from the pre-ACA Medicaidregime to the post-ACA Medicaid regime. This is a farcry from the situation the Court confronted in ShelbyCounty, where Congress “reenacted a formula based on40-year-old facts having no logical relation to thepresent day.” 133 S. Ct. at 2629. Any disparity intreatment caused by the MOE provision is justified.

IV. Conclusion

We deny the petition for review and find noconstitutional violation. Costs are awarded againstMaine DHHS.

17 Maine DHHS contends that, because “the MOE provisions . . .form an integral part . . . of the Medicaid Expansion,” “[i]t is clearthat the purpose of the MOE provisions is promotion of aconstitutional wrong: the mandatory Medicaid Expansion underACA § 2001.” But Maine DHHS’s premise that the MOE provisionswere an “integral” part of the new Medicaid program expansionconsidered in NFIB is pure speculation; as Maine DHHS admits,Congress did not, and was not required to, make explicit findingsas to the rationale behind the MOE provision. Moreover, even ifMaine DHHS’s speculation were correct, it remains true that theindependent justification for the MOE provision offered by theUnited States -- preserving public assistance benefits for childrenin a time of transition between different public assistanceprograms -- is entirely valid.

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United States Court of AppealsFor the First Circuit

No. 14-1300

[Filed November 17, 2014]__________________________________________MARY C. MAYHEW, in her capacity as )Secretary of the Maine Department of )Health and Human Services, )

Petitioner, ))

v. ))

SYLVIA M. BURWELL, in her capacity as ) Secretary of the U.S. Department of )Health and Human Services, )

Respondent, ))

and ))

JANET T. MILLS, in her capacity as )Attorney General of Maine, )

Intervenor. )_________________________________________ )

____________________

JUDGMENTEntered: November 17, 2014

This cause came on to be heard on a petition forreview of an order of the [Enter Agency] and wasargued by counsel.

Upon consideration whereof, it is now here ordered,adjudged and decreed as follows: The petition forreview is denied, and we find no constitutional

App. 37

violation. Costs are awarded against MaineDepartment of Health and Human Services.

By the Court: /s/ Margaret Carter, Clerk

cc: Mr. Comart, Ms. Klein, Ms. Mills, Ms. Perkins, Mr.Roach, Mr. Ruprecht, Ms. Sanchez, Mr. Stern & Mr.Taub.

App. 38

APPENDIX B

CENTERS FOR MEDICARE & MEDICAID SERVICES

Decision of the Administrator

Docket No. 13-02

[Filed January 15, 2014]____________________________________In the matter of: )

)The Disapproval of Maine State Plan )Amendment 12-010 )___________________________________ )

This case is before the Administrator, Centers forMedicare & Medicaid Services (CMS) for final agencyaction pursuant to 42 CFR 430.102. The Staterequested that the Administrator reconsider thedisapproval of the State Plan Amendment (SPA) 12-010. The CMS Presiding Officer’s recommendeddecision was issued on November 22, 2013, affirmingthe Administrator’s disapproval of SPA 12-010. TheState filed exceptions.

Issue

The issue involves the reconsideration of CMS’disapproval of the SPA 12-010, which proposed changesto eligibility for parents, caretaker relatives, andchildren whose income is at, or below, 133 percent ofthe Federal poverty level (FPL). The proposal wouldmake eligibility standards, methods, and proceduresmore restrictive than those in effect on March 23, 2010.

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Background

The State of Maine submitted SPA 12-010,1 whichspecifically proposed changes to eligibility for parents,caretaker relatives, and children who have income at orbelow 133 percent of the FPL.2 The State of Maineproposed reducing the income eligibility limit from 150percent of the FPL to 100 percent for parents andcaretaker relatives, who may qualify under sections1902(a)(10)(A)(i)(I) and 1931 of the Social Security Act.The proposed SPA would therefore impose morerestrictive eligibility standards on adults whose incomewas above 100 percent and at or below 133 percent ofthe FPL. The SPA 12-010 also proposed to reduce the

1 See e.g., CMS Exhibits at 160-171 (August 7, 2012 proposed SPArevisions); 175-197 (August 1, 2012 SPA request).

2 Maine SPA 12-010 initially also proposed, inter alia, to reduceincome eligibility for the Medicare Savings Plans (MSPs) throughthe elimination of certain income disregards. The SPA waseventually split into two parts: SPA 12-010 and the proposalrelating to MSPs as 12-010A. Pursuant to the subsequentcorrespondence between CMS and the State, the State of Mainealso requested the non-application of the MOE requirement forcertain populations for the period July 1, 2012 through June 30,2103, based on a projected deficient for the State’s fiscal year 2013.

CMS approved SPA 12-010(A) by a separate notice dated January7, 2013, effective March 1. 2013. CMS Exhibits at 15-17.Transmittal #12-010(A) approved the State’s request to:1) eliminate an optional group of parents and caretaker relatives;2) reduce the income eligibility standard for the section 1931 groupfrom 150 percent of the FPL to 133 percent of the FPL; and3) reduce certain eligibility for certain individuals also eligible forMedicaid based on their eligibility for Medicare. The approval wastied to the budget deficit certified for the State through June 30,2013.

App. 40

age limit for eligibility under its State plan forindividuals who meet the income and resourcerequirements of the Aid to Families with DependentChildren (AFDC) state plan but would not havereceived AFDC benefits because of age. The proposedchange would lower the age limit of eligibility from 20to 18 for children who met the eligibility requirementsfor the AFDC state plan, but who would not havereceived AFDC based on age and thus eliminateeligibility for such individuals who are ages 19 and 20.

By notice dated January 7, 2013, CMS disapproved theproposed SPA after consulting with the Secretary, asthe SPA was not consistent with the requirements ofsections 1902(a)(74) and 1902(gg) of the Act. Theproposal would have eliminated Medicaid eligibility forparents, caretaker relatives, and children eligibleunder sections 1902(a)(10)(A)(i)(I) and 1931 whoseincomes are between 100 percent and 133 percent ofthe FPL, and Medicaid eligibility of certain individualsconsidered “children” under Maine’s State Medicaidplan. CMS found that the proposed SPA constitutedmore restrictive eligibility standards than those ineffect in the State of Maine as of March 23, 2010 thatcould not be excepted from the “maintenance-of-effort”(MOE) mandate that Maine is subject to under sections1902(a)(74) and (gg) of the Social Security Act. Mainehas covered parents and caregivers relatives withincomes up to 150 percent of the FPL since 2005 andthe proposal would impose more restrictive eligibilitystandards on adults between 100 and 133 percent ofthe FPL which is inconsistent with the MOErequirements. Maine has also covered 19 and 20 yearolds who meet the income and resource requirements

App. 41

of the AFDC state plan since 1991.3 Because theindividuals were previously covered by the State basedon their status as children, the reduction of eligibilityfor these individuals is not permitted under the budgetdeficit certification (MOE) exception as it is onlyavailable for non-pregnant and nondisabled adults, andeven if considered adults, their income would fall below133 percent of the FPL.

In the disapproval, CMS also responded to the State’sclaim that the National Federation of IndependentBusiness v Sebelius, 567 U.S.----, 132 S. Ct. 2566 (2012)(NFIB) directed approval of the SPA. CMS explainedthat the Supreme Court did not strike down anyprovision of the Patient Protection and Affordable CareAct including the MOE requirement. The SupremeCourt limited Federal enforcement remedies withrespect to States that elect not to proceed with theMedicaid adult eligibility expansion and thus haveState plans provisions that are out of compliance withthe provisions of section 1902(a) of the Act. The MOEprovisions require the State plans to continue coverageof needy families with dependent children that theState has covered for many years, rather thanimplement a new program. Thus, the analysis in NFIBmakes it clear that the MOE provision is well withinCongresses’ authority. CMS also rejected the State’sclaim that the MOE requirement retroactivelypenalized the State for having maintained eligibilitylevels during the period financial incentives for doingso were available under the American Recovery and

3 The State would make an exception to this reduction of eligibilityfor 19 and 20 year olds who are independent foster care adolescent.See CMS Disapproval, dated January 7, 2013, at n. 1.

App. 42

Reinvestment Act of 2009 (ARRA), without continuingthe incentives that were present under ARRA.However, CMS found that the Maine coverage of thegroups at issue began long before the ARRA and theState continues to have flexibility to achieve budgetaryobjective consistent with the MOE requirement. TheCMS Administrator notified the State that CMSdetermined that the proposed SPA was contrary to theMOE statutory provision as it relates to parents andcaretaker relatives as well as children, ages 19 and 20.

The State requested reconsideration of the CMS’disapproval of SPA 12-010. By letter dated April 4,2013, CMS scheduled a reconsideration hearing bynotice dated April 4, 20134 and designating a PresidingOfficer. The date for a hearing was named. The partiessubsequently agreed that the administrativeproceedings would be conducted based on a writtenrecord.

CMS Presiding Officer’s Recommended Decision

After a review of the administrative record and therespective parties’ briefs in support of their positions,the CMS Presiding Officer held that the State of Mainehad properly exhausted its administrative remedies bytimely presenting its administrative appeal. Theparties agreed that there were no material questions offact and that it was undisputed that the SPA 12-010, ifapproved, would violate the statutory MOErequirement at sections 1902(a)(74) and 1902(gg) of the

4 The “Notice of Hearing: Reconsideration of Disapproval of MaineState Plan Amendments (SPA) 12-010” was published at 78 FedReg. 21608 (April 11, 2013).

App. 43

Act. The CMS Presiding Officer concluded that theadministrative tribunal does not have the authority torender a decision regarding the constitutionality of theACA. Accordingly, the CMS Presiding Officer affirmedthe CMS disapproval of SPA 12-010. The CMSPresiding Officer’s recommended decision was issuedNovember 22. 2013.

Exceptions

Exceptions were received timely from the State ofMaine with respect to the CMS Presiding Officer’srecommended decision. The State filed exceptionsstating that the CMS Presiding Officer was incorrect inhis assertion that this administrative tribunal does nothave the authority to decide the sole substantivedispute in this matter concerning the constitutionalityof the ACA MOE provision as applied to Maine’s SPAby CMS in its disapproval of SPA 12-010. The Statecited to Thunder Basin Coal Co. v. Reich, 510 U.S. 210,215 (1994), for the proposition that it is not amandatory rule that an administrative agency cannotadjudicate the constitutionality of an congressionalenactment and given the circumstances of this matter,it would be appropriate for the agency to exercise thisdiscretion. However, to avoid further delay, the Statewaived its objection to the failure of the agency torender a decision regarding the constitutionality of theACA MOE provision as applied in this matter.Accordingly, the State requested that CMSimmediately approve, in full, the SPA at issue. In thealternative, without waiving its constitutionalargument, the State requested CMS immediately issuea final decision accepting the CMS Presiding Officer’s

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proposed decision and, thereby, allow the State topetition for judicial review.

Discussion

The Medicaid program, enacted in 1965 as Title XIX ofthe Act, is a cooperative Federal State program createdto provide medical assistance to eligible low incomefamilies and individuals. The program is jointlyfinanced by the Federal and State governments and isadministered by the States. Under Section 1901 of theSocial Security Act (Title XIX of the Social Security Actalso referred to as the Medicaid Statute), the FederalGovernment shares the costs of Medicaid with Statesthat elect to participate in the Medicaid program.5

While participation in the program is voluntary,participating States must comply with certainrequirements imposed by the Act and regulationspromulgated by the Secretary of Health and HumanServices (Secretary).6 Under Section 1902(a) of theSocial Security Act, States that elect to participate

5 Section 1901 of the Act provides that: “For the purpose ofenabling each State, as far as practicable under the conditions insuch State, to furnish (1) medical assistance on behalf of familieswith dependent children and of aged, blind, or disabled individuals,whose income and resources are insufficient to meet the costs ofnecessary medical services, and (2) rehabilitation and otherservices to help such families and individuals attain or retaincapability for independence or self-care, there is hereby authorizedto be appropriated for each fiscal year a sum sufficient to carry outthe purposes of this title. The sums made available under thissection shall be used for making payments to States which havesubmitted, and had approved by the Secretary, State plans formedical assistance.” See also 42 C.F.R. 430.0.

6 See section 1902 of the Act.

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must submit to the Secretary, and have approved, aState plan to provide medical assistance. Section 1903of the Act requires the Secretary of Health and HumanServices to make grants to States to share in the costof State programs pursuant to approved State plans formedical assistance to the needy individuals. States thatelect to participate in the Medicaid program mustsubmit a comprehensive plan for the provision ofservices that must be approved by the Secretary.7 Theregulation at 42 CFR 430.10 explains that:

The State plan is a comprehensive writtenstatement submitted by the agency describingthe nature and scope of its Medicaid programand giving assurance that it will beadministered in conformity with the specificrequirements of title XIX, the regulations in thisChapter IV, and other applicable officialissuances of the Department. The State plancontains all information necessary for CMS todetermine whether the plan can be approved toserve as a basis for Federal financialparticipation (FFP) in the State program

The Secretary delegates power to review and approveState plans to CMS. CMS reviews the State plan todetermine whether its provisions are consistent withFederal policy and law. The regulations at 42 CFR430.12(c) provides that a:

7 See section 1116 of the Act. .(“Whenever a state plan is submittedto the Secretary by a state for approval under title ... XIX, he shall,not later than 90 days after the date the plan is submitted to him,make a determination as to whether it conforms to the requirementsfor approval under such title.”) (Emphasis added.)

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Plan amendments. (1) The plan must providethat it will be amended whenever necessary toreflect– (i) Changes in Federal law, regulations, policyinterpretations, or court decisions; or (ii) Material changes in State law, organization,or policy, or in the State’s operation of theMedicaid program. For changes related toadvance directive requirements, amendmentsmust be submitted as soon as possible, but nolater than 60 days from the effective date of thechange to State law concerning advancedirectives. (2) Prompt submittal of amendments isnecessary– (i) So that CMS can determine whether the plancontinues to meet the requirements for approval;and (ii) To ensure the availability of FFP inaccordance with § 430.20.

CMS then exercises its delegated authority either toapprove or disapprove the State plan after consultingwith the Secretary.8 The regulation at 42 CFR 430.15explains that:

(a) Basis for action. (1) Determinations as to whether State plans(including plan amendments and administrativepractice under the plans) originally meet orcontinue to meet the requirements for approvalare based on relevant Federal statutes andregulations.

8 See 42 CFR 430.15(b)-(c).

App. 47

(2) Guidelines are furnished to assist in theinterpretation of the regulations. *** (c) Disapproval authority. (1) The Administratorretains authority for determining that proposedplan material is not approvable or thatpreviously approved material no longer meetsthe requirements for approval. (2) TheAdministrator does not make a finaldetermination of disapproval without firstconsulting the Secretary.

Relevant to this proposed SPA, sections 1902(a)(74)and 1902(gg) of the Social Security Act, were added bysection 2001(b) of the Patient Protection and AffordableCare Act (ACA).9 Section 1902(a) provides the criterianecessary for approval of a State plan for medicalassistance. One criteria for approval of a State plan isat paragraph (a)(74) which sets forth that a State planfor medical assistance must “provide for maintenanceof effort under the State plan or under any waiver ofthe plan in accordance with subsection (gg)” Relevantto this proposed SPA, section 1902(gg) states that:

MAINTENANCE OF EFFORT.—(1) GENERAL REQUIREMENT TO MAINTAINELIGIBILITY STANDARDS UNTIL STATE EXCHANGE

9 Pub. Law 111-148 as amended by the Health Care and EducationReconciliation Act of 2010 (Pub. Law 111-152) (together known asthe Affordable Care Act or ACA). A similar provision waspreviously enacted in section 5001(f)(1) of the American Recoveryand Reinvestment Act (Recovery Act, Pub. Law 111-5). See alsoCMS State Medicaid Director Letter, dated February 25, 2011,SMDL #11-001, ACA #14 (Re: Maintenance of Effort).

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IS FULLY OPERATIONAL.—Subject to thesucceeding paragraphs of this subsection, duringthe period that begins on the date of enactmentof the Patient Protection and Affordable CareAct and ends on the date on which the Secretarydetermines that an Exchange established by theState under section 1311 of the PatientProtection and Affordable Care Act[53] is fullyoperational, as a condition for receiving anyFederal payments under section 1903(a) forcalendar quarters occurring during such period,a State shall not have in effect eligibilitystandards, methodologies, or procedures underthe State plan under this title or under anywaiver of such plan that is in effect during thatperiod, that are more restrictive than theeligibility standards, methodologies, orprocedures, respectively, under the plan orwaiver that are in effect on the date ofenactment of the Patient Protection andAffordable Care Act. (2) CONTINUATION OF ELIGIBILITY STANDARDSFOR CHILDREN UNTIL OCTOBER 1, 2019.—Therequirement under paragraph (1) shall continueto apply to a State through September 30, 2019,with respect to the eligibility standards,methodologies, and procedures under the Stateplan under this title or under any waiver of suchplan that are applicable to determining theeligibility for medical assistance of any child whois under 19 years of age (or such higher age asthe State may have elected).

As referenced at section 1902(a)(74) of the Act, theprovisions at section 1902(gg) are referred to as the

App. 49

“maintenance of effort” or MOE requirement. Thus,except for certain exceptions, as a condition of receivingFederal Medicaid funding, States must maintain“eligibility standards, methodologies, and procedures”that are no more restrictive than those in effect as ofMarch 23, 2010 (the date of enactment of PatientProtection and Affordable Care Act or ACA), for alimited period of time. Pursuant to section 1902(gg)(1)of the Act, the MOE requirement applies to adults untilthe “Secretary determines that an Exchangeestablished by the State under section 1311 of the[ACA] is fully operational” and, under paragraph (2),shall continue to apply to children through September30, 2019.

In addition, Section 1902(gg)(3) of the Act provides anexception for non-application of the MOE requirementfor a limited period, for certain populations, statingthat:

(3) NONAPPLICATION.—During the period that begins on January 1,2011, and ends on December 31, 2013, therequirement under paragraph (1) shall not applyto a State with respect to nonpregnant,nondisabled adults who are eligible for medicalassistance under the State plan or under awaiver of the plan at the option of the State andwhose income exceeds 133 percent of the povertyline (as defined in section 2110(c)(5)) applicableto a family of the size involved if, on or afterDecember 31, 2010, the State certifies to theSecretary that, with respect to the State fiscalyear during which the certification is made, theState has a budget deficit, or with respect to the

App. 50

succeeding State fiscal year, the State isprojected to have a budget deficit. Uponsubmission of such a certification to theSecretary, the requirement under paragraph(1) shall not apply to the State with respect toany remaining portion of the period described inthe preceding sentence.”

Thus, section 1902(gg)(3) of the Act offers a partial non-application of the MOE requirement during the periodbetween January 1, 2011 and December 31, 2013, whena State certifies to the Secretary that it has a budgetdeficient during the fiscal year for which it is seekingthe non-application or projects a deficient in thesucceeding fiscal year. This non-application is limitedto “non-pregnant, nondisabled, adults who are eligiblefor medical assistance under the state plan or under awaiver of the plan at the option of the state and whoseincome exceeds 133 percent of the poverty line.”10

On review, the Administrator hereby affirms andadopts the CMS Presiding Officer’s recommendeddecision. As explained in the CMS Presiding Officer’srecommended decision, the Secretary is required toapprove a SPA that comports with the requirements ofthe law. Conversely, the Secretary has no authority toapprove a SPA that fails to meet the requirements ofthe law. In this reconsideration, the record establishesthat approval of the SPA would be contrary to sections1902(a)(74) and 1902(gg) of the Act and, therefore, theSPA cannot be approved. The record establishes that

10 CMS also provided general guidance and explained in moredetail examples of changes which would not be considered an MOEviolation in Medicaid in the SMDL # 11-001.

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Maine has covered parents and caregiver relatives withincomes up to 150 percent of the FPL since 2005 andthat the proposal would impose more restrictiveeligibility standards on adults whose income is above100 percent and at or below 133 percent of the FPL,which is inconsistent with the MOE requirements. TheState of Maine has also covered, since 1991, 19 and 20year old individuals who meet the income and resourcerequirements of the AFDC State plan. Because theindividuals were previously covered by the State planbased on their status as children, the reduction ofeligibility for these individuals is not permitted underthe budget deficit certification provided for a MOEexception as it is only available for non-pregnant andnondisabled adults. Moreover, even if these individualswere considered adults, their income would be at orbelow 133 percent of the FPL and thus fall below theMOE exception income threshold.

In this case, the law and material facts are not indispute.11 Instead, the State is challenging theconstitutionality of the MOE provisions. Generally,case law establishes that administrative tribunals donot have the authority to render decisions regardingthe constitutionality of congressional enactments.12

Consistent with that general rule, there is no authority

11 See e.g. Maine Brief at 4.

12 See e.g. Louisiana Public Service Commission v FCC, 472 U.S.355, 374 (1986); Eligin v. Department of the Treasury, 132 S. Ct.2126, 2136 (2012)(citing to Thunder Basin Coal Co. v. Reich, 510U.S. 210, 215 (1994); Shalala v, Illinois Council on Long TermCare, 529 U.S. 1, 23 (1999); Weinberger v Salfi, 422 U.S. 749,765(1975).

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granted by Congress for such agency review of the lawin the Medicaid statute, nor, consequently, in theimplementing regulations. The CMS Presiding Officerproperly determined that the administrative tribunaldoes not have the authority to decide theconstitutionality of the MOE provisions at issue as setforth in the Affordable Care Act. In thisreconsideration, the record establishes that approval ofthe SPA would be contrary to sections 1902(a)(74) and1902(gg) of the Act and, therefore, the SPA cannot beapproved. Thus, the Administrator affirms and adoptsthe CMS Presiding Officer’s recommended decision.The proposed Maine SPA 12-010 is disapproved.

Decision

The Administrator affirms and adopts the CMSPresiding Officer’s recommended decision. Theproposed Maine SPA 12-010 is disapproved.

THIS CONSTITUTES THE FINALADMINISTRATIVE DECISION OF THE

SECRETARY OF HEALTH AND HUMANSERVICES

Date: 1/15/14 /s/ Marilyn TavennerAdministrator Centers for Medicare & MedicaidServices

App. 53

APPENDIX C

DEPARTMENT OF HEALTH AND HUMAN SERVICESCENTERS FOR MEDICARE AND MEDICAID SERVICES

PROPOSED DECISION OF THE PRESIDING OFFICER

[Filed October 28, 2013]_________________________________________________

In the Matter of: Reconsideration of Disapproval of Maine State

Plan Amendment No. 12-010 (Hearing Docket Number 13-02) Administrative Record Hearing

__________________________________________________

INDEX

Page No.

I. Legal Authority ....................................... 1 A. Jurisdiction B. State Plan Amendment Review Process C. Recent Legislation and Related Case Law

II. Factual and Procedural Background....... 5

III. Contentions Regarding Presiding Officer’sAuthority .................................................. 7

IV. Proposed Decision and Order................... 8

App. 54

I. LEGAL AUTHORITY

A. Jurisdiction

The Centers for Medicare and Medicaid Services (CMS)is an operating division of the United StatesDepartment of Health and Human Services (HHS).This proposed decision concerns CMS’ disapproval of aState Plan Amendment (SPA) proposal submitted bythe State of Maine (Maine, or the State), and isprovided pursuant to 42 C.F.R. § 430.102. The CMSPresiding Officer designated by the CMS Administratorto conduct the subject administrative proceeding is theundersigned, Benjamin R. Cohen.

B. State Plan Amendment Review Process

Medicaid was enacted in 1965 as Title XIX of the SocialSecurity Act (the Act). Title XIX Grants to States forMedical Assistance Programs authorizes CMS, underdelegations from the Secretary of HHS (the Secretary),to make federal funds available to assist the states inproviding medical assistance to persons whose incomeand resources are insufficient to meet the costs ofnecessary medical services.1 Program regulations statethat, “Within broad federal rules, each State decideseligible groups, types and range of services, paymentlevels for services, and administrative and operatingprocedures.”2 Under Medicaid, the Federal Governmentshares the cost of providing medical assistance underthe program. This cost allocation is calculated byapplying the “federal medical assistance percentage”

1 42 U.S.C. § 1396.

2 42 C.F.R. § 430.0.

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(FMAP) to the state’s total Medicaid expenditures.3 TheFMAP represents the federal government’s share ofMedicaid costs and, by statute, must fall between 50percent and 83 percent for each state.4

States that choose to participate in the Medicaidprogram must submit to the Secretary, and haveapproved, a state plan to provide medical assistance.5

The Medicaid statute explicitly provides that theSecretary shall approve any plan which meetsrequirements as outlined in 42 U.S.C. § 1396(a). Theregulations at 42 C.F.R. Part 430 implement thestatute setting forth the state plan requirements,standards, procedures, and conditions for obtainingfederal financial participation (FFP). The Secretary hasauthority to issue regulations under the program6 andhas delegated responsibility for approving state plansand state plan amendments to CMS.7

The regulation at 42 C.F.R. § 430.10 describes therequired contents of a state plan as follows:

The State plan is a comprehensive writtenstatement submitted by the agency describingthe nature and scope of its Medicaid program

3 42 U.S.C. § 1396b(a)(1).

4 42 U.S.C. § 1396d(b). See also Federal Matching Shares forMedicaid, 77 Fed. Reg. 71,420, 71,422 (Nov. 30, 2012).

5 42 U.S.C. § 1396.

6 42 C.F.R. § 430.1.

7 42 C.F.R. §§ 430.14, 430.15.

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and giving assurance that it will beadministered in conformity with the specificrequirements of title XIX, the regulations in thisChapter IV, and other applicable officialissuances of the Department. The State plancontains all information necessary for CMS todetermine whether the plan can be approved toserve as a basis for federal financialparticipation [FFP] in the State program.8

The regulation at 42 C.F.R. § 430.15 outlines, inrelevant part, the basis and authority for the CMSAdministrator’s initial review of proposed state planmaterial as follows:

(a) Basis for action. (1) Determinations as to whether State

plans (including plan amendmentsand administrative practice under theplans) originally meet or continue tomeet the requirements for approvalare based on relevant Federal statutesand regulations.

(2) Guidelines are furnished to assist inthe interpretation of the regulations.

(b) Approval authority. The RegionalAdministrator exercise delegated authority toapprove the State plan and plan amendments onthe basis of policy statements and precedentspreviously approved by the Administrator. (c) Disapproval authority.

(1) The Administrator retains authorityfor determining that proposed plan

8 (Emphasis added).

App. 57

material is not approvable or thatpreviously approved material nolonger meets the requirements forapproval.

(2) The Administrator does not make afinal determination of disapprovalwithout first consulting theSecretary.9

Ultimately, pursuant to 42 C.F.R. § 413.16(b)(2), theAdministrator may give notice of disapproval of an SPAif the plan does not meet federal requirements.

The statute at 42 U.S.C. §1316(a)(2) provides thatstates dissatisfied with the disapproval action mayrequest a reconsideration hearing.10 The section states,in relevant part:

Any State dissatisfied with a determination ofthe Secretary . . . with respect to any plan may,within 60 days after it has been notified of suchdetermination, file a petition with the Secretaryfor reconsideration of the issue of whether suchplan conforms to the requirements for approval . . . .11

The regulations at 42 C.F.R. §§ 430.66 and 430.102provide that the Administrator may designate apresiding officer to conduct a hearing and issuerecommended findings and a proposed decision. After

9 (Emphasis added).

10 42 U.S.C. § 1316(a)(2).

11 Id. See also 42 C.F.R. § 430.18.

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the Administrator reviews the presiding officer’sproposed decision and issues his or her own decision,the decision constitutes a “final determination” and“final agency action” and a state has a right to judicialreview with the United States Court of Appeals for thecircuit in which the state is located.12

C. Recent Legislation and Related Case Law

In February 2009, the American Recovery andReinvestment Act of 2009 (ARRA) was enacted.13 Thislaw was passed in response to the nation’s economiccrisis and aimed “to preserve and create jobs andpromote economic recovery.”14 Relevant to the currentproceeding, the ARRA also sought “to stabilize Stateand local government budgets, in order to minimizeand avoid reductions in essential services andcounterproductive state and local tax increases.”15 Tothis end, the ARRA offered increased Medicaid FMAPfunding to those states that agreed to maintain theMedicaid eligibility standards that were in effect from

12 42 U.S.C. § 1316(a)(2) and (3), 42 C.F.R. §§ 430.38(a) and (b),430.102 (b) and (c).

13 Pub. L. No. 111-5, 123 Stat. 115. See also What is Recovery.gov?,RECOVERY.GOV, http://www.recovery.gov/Pages/default.aspx (lastvisited Sept. 18, 2013 (a website established by the United StatesGovernment under the Recovery Act, “in order to show theAmerican public how Recovery funds are being spent by recipientsof contracts, grants, and loans, and the distribution of Recoveryentitlements and tax benefits)).

14 Pub. L. No. 111-5, sec. 3, 123 Stat. 115 (2009).

15 Id.

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July 1, 2008 to December 31, 2008.16 The ARRA’sincrease in FMAP funding was made available to statesfor a prescribed period of time that spanned fromOctober 1, 2008 through December 27, 2010.17 Thistime period was later extended to June 30, 2011through additional legislation.18

The Patient Protection and Affordable Care Act(PPACA or ACA), enacted on March 23, 2010, featuredadditional changes to the Medicaid program.19 Forexample, as a condition of Medicaid participation, theACA required states to expand their coveredpopulations by 2014 and offered increased federalfunds to assist the states in this process.20 ACA

16 See ARRA, H.R. 1, 111th Cong. § 5001(h)(3) (2009), available athttp://www.gpo.gov/fdsys/pkg/BILLS-111hr1enr/pdf/BILLS-111hr1enr.pdf. ARRA § 5001(f) provides: “STATE INELIGIBILITY;LIMITATION; SPECIAL RULES – [A] State is not eligible for anincrease. . . if eligibility standards, methodologies, or proceduresunder its State plan. . . are more restrictive than the eligibilitystandards, methodologies, or procedures, respectively, under suchplan (or waiver) as in effect on July 1, 2008.”

17 Id. at § 5001(h)(3).

18 See 2010 Education, Jobs, and Medicaid Assistance Act, Pub. L.No. 111-226, 124 Stat. 2389.

19 Pub. L. No 111-148, 124 Stat. 119 (2010).

20 See 42 U.S.C. § 1396a(a)(10)(A)(i)(VIII) (explaining that statesare required to cover all persons under the age of 65 with incomesbelow 133 percent of the federal poverty line); 42 U.S.C.§ 1396d(y)(1) (stating that the Federal Government is to pay 100percent of costs associated with Medicaid expansion under theACA).

App. 60

required states to maintain the Medicaid eligibilitystandards that were in place as of the ACA’senactment. Specifically, 42 U.S.C § 1396a(a)(74)contains a mandate requiring State Medicaid plans toprovide for “maintenance of effort under the State planor under any waiver of the plan in accordance withsubsection (gg).”21 The referenced provision, 42 U.S.C.§ 1396a(gg) provides:

(1) General requirement to maintain eligibilitystandards until State exchange is fullyoperational

Subject to the succeeding paragraphs of thissubsection, during the period that begins onMarch 23, 2010 and ends on the date on whichthe Secretary determines that an Exchangeestablished by the State under section 18031 ofthis title is fully operational, as a condition forreceiving any Federal payments under section1396(b)(a) of this title for calendar quartersoccurring during such period, a State shall nothave in effect eligibility standards,methodologies, or procedures under the Stateplan under this subchapter or under any waiverof such plan that is in effect during that period,that are more restrictive than the eligibilitystandards, methodologies, or procedures,respectively, under the plan or waiver that arein effect on March 23, 2010.

21 Collectively, 42 U.S.C. § 1396a(a)(74) and § 1396(a)(gg) arereferred to as the ACA maintenance of effort (MOE) provisions.

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(2) Continuation of eligibility standards forchildren until October 1, 2019

The requirement under paragraph (1) shallcontinue to apply to a State through September30, 2019, with respect to the eligibilitystandards, methodologies, and procedures underthe State plan under this subchapter or underany waiver of such plan that are applicable todetermining the eligibility for medical assistanceof any child who is under 19 years of age (orsuch higher age as the State may have elected).

The statute also explains the circumstances when themaintenance of effort (MOE) requirements are notapplicable. The MOE provisions do not apply duringthe period January 1, 2011 through December 31, 2013to non-pregnant, non-disabled adults with incomesexceeding 133 percent of FPL, if the State certifies thatit has or projects a budget deficit during the succeedingyear.22

The United States Supreme Court reviewed theconstitutionality of the ACA in its 2012 NationalFederation of Independent Businesses v. Sebelius(NFIB) decision.23 While the Court upheld the ACA’sindividual mandate, it indicated that Congress hadexceeded its authority with regard to the requirementthat states expand their respective Medicaid programsor risk losing existing federal matching funds. Thedecision concluded:

22 42 U.S.C. § 1396a(gg)(3).

23 National Federation of Independent Business v. Sebelius (NFIB),367 U.S. __, 132 S.Ct. 2566 (2012).

App. 62

As for the Medicaid expansion, that portion ofthe Affordable Care Act violates the Constitutionby threatening existing Medicaid funding.Congress may offer the States grants andrequire the States to comply with accompanyingconditions, but the States must have a genuinechoice whether to accept this offer. The Statesare given no such choice in this case: They musteither accept a basic change in the nature ofMedicaid, or risk losing all Medicaid funding.The remedy for that constitutional violation is topreclude the Federal Government from imposingsuch a sanction. That remedy does not requirestriking down other portions of the AffordableCare Act.24

II. FACTUAL AND PROCEDURAL BACKGROUND

In order to receive additional FMAP funding pursuantto the ARRA for fiscal year 2011, Maine explains thatit voluntarily held its Medicaid eligibility requirementsat the July 1, 2008 levels, which exceeded the federalminimum standards.25 However, Maine offers thatpursuant to the passage of the ACA MOE provisions,its 2008 eligibility levels were automatically extendedthrough 2014 for adults and through 2019 for children,absent additional ARRA Medicaid funding.

24 Id. at 2608.

25 ARRA, H.R. 1, 111th Cong. § 5001(f)(1)(A) (2009), available athttp://www.gpo.gov/fdsys/pkg/BILLS-111hr1enr/pdf/BILLS-111hr1enr.pdf.; 2010 Education, Jobs, and Medicaid AssistanceAct, Pub. L. No. 111-226, 124 Stat. 2389. See also Appeal Recordat 178, 180, 184, Letter from State to CMS (Aug. 1, 2012).

App. 63

Maine, whose state constitution requires a balancedbudget, projected a budget deficit for fiscal year 2013.Accordingly, the State requested relief from the MOErequirements for the period spanning from July 1, 2012to June 30, 2013.26 On August 1, 2012, Maine requestedthat CMS approve certain changes to its Medicaideligibility criteria. Under its proposed SPA request, No.12-010 (to be effective October 1, 2012), the State wouldreduce/restrict its Medicaid eligibility standards butsuch changes still “would result in Maine’s Medicaideligibility remaining well above the mandated federalstandards.”27

Additionally, the State contested the constitutionalityof the ACA MOE provisions claiming that suchprovisions are “not applicable or void” in the wake ofthe Supreme Court’s NFIB decision.28 Maine arguedthat the MOE provisions are “part and parcel” of theMedicaid expansion that the Court reviewed and aretherefore equally, if not more, coercive as the provisionreviewed by the Supreme Court.29 Therefore, Maineargued, requiring the State to maintain Medicaid

26 Maine certified this projected budget deficit on December 20,2011. See Appeal Record at 199, Letter from State to CMS (Dec.20, 2011). See also Appeal Record at 172-174, Letter from MaineGovernor to HHS Secretary (Aug. 1, 2012) (indicating that “Mainemust comply with its constitutionally-mandated balanced budgetprovision”).

27 Appeal Record at 175-199, 175, Letter from State to CMS (Aug.1, 2012).

28 Id.

29 Id. at 182.

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eligibility standards above Federal minimum levelsexceeds Congressional spending power and violatesprinciples of federalism reflected in the TenthAmendment to the United States Constitution.30

Ultimately, by letter dated January 7, 2013, CMSdisapproved SPA No. 12-010.31 The agency determinedthat Maine’s SPA proposal violated the MOE statutoryprovision as it relates to parents and caretakerrelatives32 as well as children ages 19 and 20 as “theproposal would make eligibility standards, methods,and procedures more restrictive than those in effect onMarch 23, 2010.”33 Moreover, CMS rejected Maine’sassertion that on a constitutional basis, the NFIBholding requires that SPA 12-010 be approved despitethese violations of the MOE statutory requirements34

30 See also infra note 36.

31 Appeal Record at 10–14, Letter from CMS Administrator toMaine Department of Health and Human Services (Jan. 7, 2013)( “SPA Denial Letter”). Also, the record contains writtencommunications between federal and state officials during thetimeframe between the August 1, 2012 SPA submission and theJanuary 7, 2013 disapproval of SPA 12-010. See, e.g., AppealRecord at 18, 21, 22, 148, 152, 154, 155, 160.

32 Appeal Record at 11, SPA Denial Letter. CMS determined thatthe SPA would reduce income eligibility levels for parents andcaretaker relatives, from 150 to 100 percent of the FPL. Id.

33 Appeal Record at 10, SPA Denial Letter.

34 Id. at 12. CMS contended that the NFIB decision did not“authorize approval of state plan provisions that do not complywith other provisions of the law, including the MOErequirements.” CMS explained that the MOE provisions continue

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The agency’s denial letter also indicated that the Statemay petition for reconsideration pursuant to 42 C.F.R.§ 430.18.

Maine requested reconsideration of the SPAdisapproval. By letter dated April 4, 2013, CMSscheduled a reconsideration hearing to be held on May23, 2013.35 In lieu of a live hearing, the partiesstipulated that this administrative proceeding would beconducted based on the written record after Maine fileda narrative brief and CMS filed a response. The partiesfurther agreed that CMS would provide a copy of theadministrative record to the Presiding Officer.

III. CONTENTIONS REGARDING PRESIDINGOFFICER’S AUTHORITY

In their respective briefs, both parties represented thatno material factual disputes exist and that theremaining substantive dispute centers upon theconstitutionality of the ACA MOE provisions as appliedto Maine’s SPA. It is undisputed that these changes inSPA 12-010 would have made Maine’s eligibilitystandards, methods, and procedures more restrictivethan those in effect on March 23, 2010 and that theSPA proposal violated the ACA MOE requirement.

medical assistance for existing covered populations and are notpart of a new program; accordingly, “the analysis in NFIB makesit clear that the MOE provisions are well within Congress’sauthority.”

35 The letter was published in the Federal Register on April 11,2013 Notice of Hearing, Reconsideration of Disapproval of MaineState Plan Amendments (SPA) 12-010, 78 Fed. Reg. 21608–10(Apr. 11, 2013).

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In its brief, the State did not present a detailedanalysis addressing the Presiding Officer’s and theagency’s authority in further considering thissubstantive dispute; but rather, Maine focused upondeveloping legal support regarding its assertion thatthe MOE, as applied, is unconstitutional.36 Conversely,CMS’ responsive brief did not further develop itsconstitutional position outlined in the January 7, 2013denial but instead focused upon proceduralconsiderations. CMS articulated:

In seeking reconsideration, Maine has properlypresented the agency with its constitutionalchallenge to the MOE provision; but the HearingOfficer is without authority to decide thatchallenge. When an agency does not decideconstitutional claims, these “can bemeaningfully addressed in the Court ofAppeals.” Thunder Basin Coal Co., 510 U.S. at215. After SPA #12-010 is upheld, as it must be,Maine may present its constitutional arguments

36 See generally Maine Br. Maine further articulates the relief thatit seeks comports “with common sense and fair play” in that Mainewould fully comport with and exceed the minimums that thefederal government views as appropriate and would be punishedfor past generosity which may no longer be affordable. Mainealleges that its current choice whether to abide by the forcedextension of its previous discretionary choice or potentially losesubstantial federal funding is more coercive than the Medicaidexpansion provisions deemed unconstitutional in the NFIBdecision. The State also cites Arlington Central School DistrictBoard of Education v. Murphy, 548 U.S. 291, 296 (2006) for theproposition, “States cannot knowingly accept conditions of whichthey are unaware or which they are unable to ascertain.”

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to the United States Court of Appeals for theFirst Circuit. 42 U.S.C. §§1316(a)(3), (b).37

IV. PROPOSED DECISION AND ORDER

Maine has properly exhausted its administrativeremedies by timely presenting its administrativeappeal. This appeal was raised in accordance with therequirements outlined in 42 C.F.R. Part 430 and theCMS Notice of Hearing dated April 4, 2013. The partiesagree that there are no material questions of factrelated to Maine’s relevant standards, which exceededthe federal minimum mandates prior to the enactmentof ARRA. Moreover, the submissions provide that theACA MOE provision as applied to Maine extended thefreeze of Maine’s higher than required eligibilitystandards until 2014 for adult recipients and until2019 with respect to 19 and 20 year old recipients38

while the enhanced [ARRA] federal reimbursement wasno longer available. Furthermore, it is undisputed thatSPA 12-010, if approved, would violate the statutoryMOE requirements at 42 U.S.C. §§1396(a)(74),

37 CMS Br. at 7-8. As support for its explanation regarding thistribunal’s absence of authority to adjudicate this matter, CMScites to various cases. See, e.g., Louisiana Pub. Serv. Comm’n v.FCC, 472 U.S. 355, 374 (1986) (“An agency literally has no powerto act . . . unless and until Congress confers power upon it.”); Elginv. Dep’t of the Treasury, 132 S. Ct. 2126, 2136 (2012) (quotingThunder Basin Coal Co. v. Reich, 510 U.S. 200, 215 (1994)(“[A]djudication of the constitutionality of congressionalenactments has generally been thought beyond the jurisdiction ofadministrative agencies”).

38 CMS Br. at 3, Maine Br. at 8.

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1396(gg) and fall outside the budget certificationexception.

This administrative tribunal does not have theauthority to render a decision regarding theconstitutionality of the Affordable Care Act’s MOEprovisions as applied to Maine’s proposed State PlanAmendment. Accordingly, CMS’ January 7, 2013 andApril 4, 2013 determinations to disapprove SPA No. 12-010 are therefore affirmed.

/s/ Benjamin R. Cohen Presiding Officer October 28, 2013

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APPENDIX D

DEPARTMENT OF HEALTH & HUMAN SERVICES

Centers for Medicare & Medicaid Services__________________________________________________

Administrator Washington, DC 20201

[Dated January 7, 2013]

Ms. Mary Mayhew CommissionerDepartment of Health and Human Services 11 State House Station 221 State Street Augusta, ME 04333-0011

Dear Ms. Mayhew:

I am responding to your request for approval of theState of Maine’s Medicaid state plan amendment (SPA)#12-010, received by the Centers for Medicare &Medicaid Services (CMS) on August 1, 2012. The statesubsequently split the SPA into two separate SPAs,#12-010 and #12-010A.

Today, under separate cover, we are approving #12-010A, which makes changes to eligibility for parents,caretaker relatives, and individuals who are eligible forMedicaid based on their eligibility for Medicare, whoseincome is above 133 percent of the federal poverty line(FPL).

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In SPA #12-010, Maine proposes changes to eligibilityfor parents, caretaker relatives and children whoseincome is at or below 133 percent of the FPL. Theproposal would make eligibility standards, methods,and procedures more restrictive than those in effect onMarch 23, 2010. For the reasons set forth below, I amunable to approve SPA #12-010 because it does notcomply with the requirements of sections 1902(a)(74)and 1902(gg) of the Social Security Act (Act).

Medicaid Maintenance of Effort Requirements

Under sections 1902(a)(74) and 1902(gg) of the Act,added to the Social Security Act by the Affordable CareAct, state plans must maintain Medicaid eligibilitystandards, methodologies, and procedures that are nomore restrictive than those in effect on March 23, 2010,(the date of enactment of the Affordable Care Act) fora limited period of time. We refer to those provisions asmaintenance of effort (MOE) requirements. For adults,under 1902(gg)(1), MOE provisions apply until a healthinsurance Exchange is operational on January 1, 2014.To the extent that the state certifies that it has anactual or projected budget deficit, under 1902(gg)(3),there is a limited exception under which MOEprovisions do not apply to non-pregnant, non-disabledadults in optional populations who have income above133 percent of the FPL for the applicable family size.

The Affordable Care Act MOE provisions relating toadults are aimed at maintaining stability during theperiod between enactment of the Affordable Care Actand 2014, when the Exchanges will becomeoperational.

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Discussion

As discussed above, it is not consistent with the MOErequirements in sections 1902(a)(74) and 1902(gg) ofthe Act for Maine to have eligibility standards,methods, or procedures under its State plan that aremore restrictive for children until September 30, 2019,and for adults until a health insurance Exchange isoperational in the state (on January 1, 2014), except,based on the state’s budget deficit certification, for non-pregnant, non-disabled adults whose income exceeds133 percent of the FPL. Based on Maine’s certificationof a projected budget deficit, on February 10, 2012,CMS notified the state that Maine qualified for theexception to the MOE provisions pursuant to section1902(gg)(3) of the Act for the period from July 1, 2012,through June 30, 2013. This exception applies to non-pregnant, non-disabled adults whose income exceeds133 percent of the FPL. This provision of law allows usto approve SPA #12-010A.

The provisions of SPA 12-010 would violate thepermissible limitations by reducing eligibility forchildren and for parents and caretaker relatives whohave income below 133 percent of the FPL. As a result,we cannot approve proposed SPA 12-010 as consistentwith the requirements of sections 1902(a)(74) and1902(gg) of the Act.

Specifically, the areas of MOE violation are as follows:

1. Parents and Caretaker Relatives: Maineproposed to reduce income eligibility levels forparents and caretaker relatives, eligible undersections 1902(a)(10)(A)(i)(I) and 1931 of the Act,from 150 to 100 percent of the FPL. Since 2005,

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the Maine plan has covered parents andcaregiver relatives with income up to 150percent of the FPL. The proposed amendmentthus would impose more restrictive eligibilitystandards on adults between 100 and 133percent of the FPL, which is not consistent withthe MOE requirements.

2. Children Ages 19 and 20: Maine proposed toreduce the age limit for eligibility under its stateplan for individuals who meet the income andresource requirements of the AFDC state planbut would not have received AFDC benefitsbecause of age. This proposed change wouldeliminate eligibility for such individuals who areages 19 and 20. Since 1991, the Maine plan hascovered 19 and 20 year olds who meet theincome and resource requirements of the AFDCstate plan.1 Because the individuals werepreviously covered by the state based on theirstatus as children, reduction of eligibility forthese individuals is not permitted under thebudget deficit certification exception, which isavailable only for non-pregnant, non-disabledadults. Even if these individuals were treated asadults, the budget deficit certification exceptionwould not apply because the income level of

1 The state would make an exception to this reduction of eligibilityfor 19 and 20 year olds who are independent foster careadolescents.

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these individuals (based on the AFDC state planstandards) is below 133 percent of the FPL.2

We do not agree with your claim that NationalFederation of Independent Businesses v. Sebelius, 567U.S. __, 132 S. Ct. 2556 (2012) (NFIB), requires thatSPA 12-010 be approved despite these violations of theMOE requirements. In NFIB, the Supreme Court didnot strike down any part of the Affordable Care Act.The Court limited federal enforcement remedies withrespect to states that elect not to proceed with theMedicaid adult eligibility expansion and thus havestate plans that are out of compliance with theprovisions of section 1902(a) of the Act. The Court didnot strike down any provision of the law, nor did itauthorize approval of state plan provisions that do notcomply with other provisions of the law, including theMOE requirements. Accordingly, we do not agree withyour assertion that the Court’s reasoning in NFIBimplies that the MOE provision in section 1902(gg) ofthe Act is unconstitutional or that it would beunconstitutional for the Secretary to disapprove theproposed state plan amendments due to theirinconsistency with section 1902(a)(74) of the Act.

In NFIB, the Court likened the Medicaid adulteligibility expansion to an entirely new programbecause it will expand Medicaid coverage to all low-income adults, where Medicaid has previously coveredonly “the disabled, the blind, the elderly and needyfamilies with dependent children.” NFIB, 132 S. Ct. at2605-06. The Court concluded that this shift is “a shift

2 For example, the amount for a family of three with an adult inthe home is approximately 28% percent of the FPL.

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in kind, not merely in degree,” and distinguished itfrom earlier eligibility expansions under the Medicaidprogram, which had “merely altered and not expandedthe boundaries of these categories.” Id. In concludingthat the Secretary could not, constitutionally, withholdall funding for a state’s existing Medicaid program ifthe state refused to implement the Medicaid adulteligibility expansion, the Court reasoned that, “whileCongress may have styled the expansion a merealteration of existing Medicaid, it recognized it wasenlisting the States in a new health care program.” Id.at 2606 (emphasis added). The Court concluded thatCongress could not make existing Medicaid fundingcontingent upon a state’s agreement to implement thisnew health care program. Id. at 2605-07.

The MOE provisions are not part of the Medicaid adulteligibility expansion. To the contrary, the MOEprovisions require the state to continue providingmedical assistance to populations that were previouslycovered by the state’s Medicaid program. Thepopulations that Maine has proposed to eliminate fromthe state Medicaid program are “needy families withdependent children,” populations that have long beencovered by the state’s Medicaid program. Medicaidcoverage for parents and caretaker relatives was firstauthorized under the original enactment of theMedicaid statute in 1965, and Maine has covered themat the current income level since 2005. Similarly,Medicaid coverage for 19 and 20 year old children wasfirst authorized in the original enactment of theMedicaid statute in 1965, and Maine has covered themat the current income level since 1991. Thus, asrelevant here, because the MOE provisions require thestate plan to continue coverage of needy families with

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dependent children that the state has covered for manyyears rather than implement a new program, theanalysis in NFIB makes it clear that the MOEprovisions are well within Congress’s authority.

You also assert that the MOE requirementsretroactively penalize the state for having maintainedits eligibility levels during the period financialincentives for doing so were available under theAmerican Recovery and Reinvestment Act of 2009(ARRA), without continuing the incentives that werepresent under ARRA. However, as discussed above,Maine’s coverage of the groups of individuals it nowproposes to drop from Medicaid began long beforeARRA.

To the extent that Maine now faces economicpressures, Maine still has substantial flexibility toachieve budgetary objectives consistent with the MOErequirements. The state retains flexibility to adjustbenefit levels or provider payment rates and to increasethe effectiveness and efficiency of service deliveryconsistent with many of the new opportunities affordedstates under the Affordable Care Act as well as existingflexibilities in the Medicaid program.

For these reasons, and after consulting with theSecretary as required by federal regulations at 42 CFR430.15(c), I am unable to approve this SPA. If you aredissatisfied with this determination, you may petitionfor reconsideration within 60 days of receipt of thisletter in accordance with the procedures set forth at 42CFR 430.18. Your request for reconsideration may besent to Ms. Cynthia Hentz, Centers for Medicare &Medicaid Services, Center for Medicaid, CHIP and

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Survey & Certification, 7500 Security Boulevard, MailStop S2-26-12, Baltimore, MD 21244-1850.

If you have any questions or otherwise wish to discussthis determination, please contact Mr. RichardMcGreal, Associate Regional Administrator, JFKFederal Building, Government Center, Room 2275,Boston, MA 02203.

Sincerely,

/s/

Marilyn TavennerActing Administrator

cc:

Regional Administrator, Boston RO Associate Regional Administrator, Boston RO

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APPENDIX E

STATUTES – PUBLIC LAWS

PATIENT PROTECTION AND AFFORDABLE CARE ACT, § 2001

TITLE II—ROLE OF PUBLIC PROGRAMS

Subtitle A—Improved Access to Medicaid

SEC. 2001. MEDICAID COVERAGE FOR THE LOWESTINCOME POPULATIONS.

(a) COVERAGE FOR INDIVIDUALS WITH INCOME AT ORBELOW 133 PERCENT OF THE POVERTY LINE.—

(1) BEGINNING 2014.—Section 1902(a)(10)(A)(i) ofthe Social Security Act (42 U.S.C. 1396a) isamended—

(A) by striking “or” at the end of subclause (VI); (B) by adding “or” at the end of subclause (VII);and (C) by inserting after subclause (VII) thefollowing:

“(VIII) beginning January 1, 2014, who are under65 years of age, not pregnant, not entitled to, orenrolled for, benefits under part A of title XVIII, orenrolled for benefits under part B of title XVIII, andare not described in a previous subclause of thisclause, and whose income (as determined undersubsection (e)(14)) does not exceed 133 percent ofthe poverty line (as defined in section 2110(c)(5))applicable to a family of the size involved, subject tosubsection (k);”.

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(2) PROVISION OF AT LEAST MINIMUM ESSENTIALCOVERAGE.—

(A) IN GENERAL.—Section 1902 of such Act (42U.S.C. 1396a) is amended by inserting aftersubsection (j) the following: “(k)(1) The medical assistance provided to anindividual described in subclause (VIII) ofsubsection (a)(10)(A)(i) shall consist ofbenchmark coverage described in section1937(b)(1) or benchmark equivalent coveragedescribed in section 1937(b)(2). Such medicalassistance shall be provided subject to therequirements of section 1937, without regard towhether a State otherwise has elected the optionto provide medical assistance through coverageunder that section, unless an individualdescribed in subclause (VIII) of subsection(a)(10)(A)(i) is also an individual for whom,under subparagraph (B) of section 1937(a)(2),the State may not require enrollment inbenchmark coverage described in subsection(b)(1) of section 1937 or benchmark equivalentcoverage described in subsection (b)(2) of thatsection.”. (B) CONFORMING AMENDMENT.—Section 1903(i)of the Social Security Act, as amended by section6402(c), is amended—

(i) in paragraph (24), by striking “or” at theend; (ii) in paragraph (25), by striking the periodand inserting “; or”; and (iii) by adding at the end the following:

“(26) with respect to any amounts expended formedical assistance for individuals described insubclause (VIII) of subsection (a)(10)(A)(i) other

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than medical assistance provided throughbenchmark coverage described in section 1937(b)(1)or benchmark equivalent coverage described insection 1937(b)(2).”. (3) FEDERAL FUNDING FOR COST OF COVERINGNEWLY ELIGIBLE INDIVIDUALS.—Section 1905 of theSocial Security Act (42 U.S.C. 1396d), is amended—

(A) in subsection (b), in the first sentence, byinserting “subsection (y) and” before “section1933(d)”; and (B) by adding at the end the following newsubsection:

“(y) INCREASED FMAP FOR MEDICAL ASSISTANCE FORNEWLY ELIGIBLE MANDATORY INDIVIDUALS.—

“(1) AMOUNT OF INCREASE.— “(A) 100 PERCENT FMAP.—During the periodthat begins on January 1, 2014, and ends onDecember 31, 2016, notwithstanding subsection(b), the Federal medical assistance percentagedetermined for a State that is one of the 50States or the District of Columbia for each fiscalyear occurring during that period with respect toamounts expended for medical assistance fornewly eligible individuals described in subclause(VIII) of section 1902(a)(10)(A)(i) shall be equalto 100 percent. “(B) 2017 AND 2018.—

“(i) IN GENERAL.—During the period thatbegins on January 1, 2017, and ends onDecember 31, 2018, notwithstandingsubsection (b) and subject to subparagraph(D), the Federal medical assistancepercentage determined for a State that is oneof the 50 States or the District of Columbiafor each fiscal year occurring during that

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period with respect to amounts expended formedical assistance for newly eligibleindividuals described in subclause (VIII) ofsection 1902(a)(10)(A)(i), shall be increasedby the applicable percentage point increasespecified in clause (ii) for the quarter and theState. “(ii) APPLICABLE PERCENTAGE POINTINCREASE.—

“(I) IN GENERAL.—For purposes of clause(i), the applicable percentage pointincrease for a quarter is the following:

“For anyfiscal yearquarteroccurring inthe calendaryear:

If the State isan expansionState, theapplicablepercentagepointincrease is:

If the State isnot anexpansionState, theapplicablepercentagepointincrease is:

2017 30.3 34.3

2018 31.3 33.3

“(II) EXPANSION STATE DEFINED.—Forpurposes of the table in subclause (I), aState is an expansion State if, on the dateof the enactment of the Patient Protectionand Affordable Care Act, the State offershealth benefits coverage statewide toparents and nonpregnant, childless adultswhose income is at least 100 percent ofthe poverty line, that is not dependent on

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access to employer coverage, employercontribution, or employment and is notlimited to premium assistance, hospital-only benefits, a high deductible healthplan, or alternative benefits under ademonstration program authorized undersection 1938. A State that offers healthbenefits coverage to only parents or onlynonpregnant childless adults described inthe preceding sentence shall not beconsidered to be an expansion State.

“(C) 2019 AND SUCCEEDING YEARS.—BeginningJanuary 1, 2019, notwithstanding subsection (b)but subject to subparagraph (D), the Federalmedical assistance percentage determined for aState that is one of the 50 States or the Districtof Columbia for each fiscal year quarteroccurring during that period with respect toamounts expended for medical assistance fornewly eligible individuals described in subclause(VIII) of section 1902(a)(10)(A)(i), shall beincreased by 32.3 percentage points. “(D) LIMITATION.—The Federal medicalassistance percentage determined for a Stateunder subparagraph (B) or (C) shall in no casebe more than 95 percent.

“(2) DEFINITIONS.—In this subsection: “(A) NEWLY ELIGIBLE.—The term ‘newly eligible’means, with respect to an individual describedin subclause (VIII) of section 1902(a)(10)(A)(i),an individual who is not under 19 years of age(or such higher age as the State may haveelected) and who, on the date of enactment of thePatient Protection and Affordable Care Act, isnot eligible under the State plan or under a

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waiver of the plan for full benefits or forbenchmark coverage described in subparagraph(A), (B), or (C) of section 1937(b)(1) orbenchmark equivalent coverage described insection 1937(b)(2) that has an aggregateactuarial value that is at least actuariallyequivalent to benchmark coverage described insubparagraph (A), (B), or (C) of section1937(b)(1), or is eligible but not enrolled (or is ona waiting list) for such benefits or coveragethrough a waiver under the plan that has acapped or limited enrollment that is full. “(B) FULL BENEFITS.—The term ‘full benefits’means, with respect to an individual, medicalassistance for all services covered under theState plan under this title that is not less inamount, duration, or scope, or is determined bythe Secretary to be substantially equivalent, tothe medical assistance available for ani n d i v i d u a l d e s c r i b e d i n s e c t i o n1902(a)(10)(A)(i).”.

(4) STATE OPTIONS TO OFFER COVERAGE EARLIERAND PRESUMPTIVE ELIGIBILITY; CHILDREN REQUIREDTO HAVE COVERAGE FOR PARENTS TO BE ELIGIBLE.—

(A) IN GENERAL.—Subsection (k) of section 1902of the Social Security Act (as added byparagraph (2)), is amended by inserting afterparagraph (1) the following:

“(2) Beginning with the first day of any fiscal yearquarter that begins on or after January 1, 2011, andbefore January 1, 2014, a State may elect througha State plan amendment to provide medicalassistance to individuals who would be described insubclause (VIII) of subsection (a)(10)(A)(i) if thatsubclause were effective before January 1, 2014. A

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State may elect to phase-in the extension ofeligibility for medical assistance to such individualsbased on income, so long as the State does notextend such eligibility to individuals described insuch subclause with higher income before makingindividuals described in such subclause with lowerincome eligible for medical assistance. “(3) If an individual described in subclause (VIII) ofsubsection (a)(10)(A)(i) is the parent of a child whois under 19 years of age (or such higher age as theState may have elected) who is eligible for medicalassistance under the State plan or under a waiverof such plan (under that subclause or under a Stateplan amendment under paragraph (2), theindividual may not be enrolled under the State planunless the individual’s child is enrolled under theState plan or under a waiver of the plan or isenrolled in other health insurance coverage. Forpurposes of the preceding sentence, the term‘parent’ includes an individual treated as acaretaker relative for purposes of carrying outsection 1931.”.

(B) PRESUMPTIVE ELIGIBILITY.—Section 1920 ofthe Social Security Act (42 U.S.C. 1396r–1) isamended by adding at the end the following:

“(e) If the State has elected the option to provide apresumptive eligibility period under this section orsection 1920A, the State may elect to provide apresumptive eligibility period (as defined in subsection(b)(1)) for individuals who are eligible for medicalassistance under clause (i)(VIII) of subsection (a)(10)(A)or section 1931 in the same manner as the Stateprovides for such a period under this section or section1920A, subject to such guidance as the Secretary shallestablish.”.

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(5) CONFORMING AMENDMENTS.— (A) Section 1902(a)(10) of such Act (42 U.S.C.1396a(a)(10)) is amended in the matter followingsubparagraph (G), by striking “and (XIV)” andinserting “(XIV)” and by inserting “and (XV) themedical assistance made available to anindividual described in subparagraph (A)(i)(VIII)shall be limited to medical assistance describedin subsection (k)(1)” before the semicolon. (B) Section 1902(l)(2)(C) of such Act (42 U.S.C.1396a(l)(2)(C)) is amended by striking “100” andinserting “133”. (C) Section 1905(a) of such Act (42 U.S.C.1396d(a)) is amended in the matter precedingparagraph (1)—

(i) by striking “or” at the end of clause (xii); (ii) by inserting “or” at the end of clause (xiii);and (iii) by inserting after clause (xiii) thefollowing: “(xiv) individuals described insection 1902(a)(10)(A)(i)(VIII),”.

(D) Section 1903(f)(4) of such Act (42 U.S.C.1396b(f)(4)) is amended by inserting“ 1 9 0 2 ( a ) ( 1 0 ) ( A ) ( i ) ( V I I I ) , ” a f t e r“1902(a)(10)(A)(i)(VII),”. (E) Section 1937(a)(1)(B) of such Act (42 U.S.C.1396u–7(a)(1)(B)) is amended by inserting“subclause (VIII) of section 1902(a)(10)(A)(i) orunder” after “eligible under”.

(b ) MA I N T E N A N C E O F ME D I C A I D IN C O M EELIGIBILITY.—Section 1902 of the Social Security Act(42 U.S.C. 1396a) is amended—

(1) in subsection (a)— (A) by striking “and” at the end of paragraph(72);

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(B) by striking the period at the end ofparagraph (73) and inserting “; and”; and (C) by inserting after paragraph (73) thefollowing new paragraph:

“(74) provide for maintenance of effort under theState plan or under any waiver of the plan inaccordance with subsection (gg).”; and (2) by adding at the end the following newsubsection:

“(gg) MAINTENANCE OF EFFORT.— “(1) GENERAL REQUIREMENT TO MAINTAINELIGIBILITY STANDARDS UNTIL STATE EXCHANGE ISFULLY OPERATIONAL.— Subject to the succeedingparagraphs of this subsection, during the periodthat begins on the date of enactment of the PatientProtection and Affordable Care Act and ends on thedate on which the Secretary determines that anExchange established by the State under section1311 of the Patient Protection and Affordable CareAct is fully operational, as a condition for receivingany Federal payments under section 1903(a) forcalendar quarters occurring during such period, aState shall not have in effect eligibility standards,methodologies, or procedures under the State planunder this title or under any waiver of such planthat is in effect during that period, that are morerestrictive than the eligibility standards,methodologies, or procedures, respectively, underthe plan or waiver that are in effect on the date ofenactment of the Patient Protection and AffordableCare Act. “(2) CONTINUATION OF ELIGIBILITY STANDARDS FORCHILDREN UNTIL OCTOBER 1, 2019.—Therequirement under paragraph (1) shall continue toapply to a State through September 30, 2019, with

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respect to the eligibility standards, methodologies,and procedures under the State plan under this titleor under any waiver of such plan that are applicableto determining the eligibility for medical assistanceof any child who is under 19 years of age (or suchhigher age as the State may have elected). “(3) NONAPPLICATION.—During the period thatbegins on January 1, 2011, and ends on December31, 2013, the requirement under paragraph (1) shallnot apply to a State with respect to nonpregnant,nondisabled adults who are eligible for medicalassistance under the State plan or under a waiverof the plan at the option of the State and whoseincome exceeds 133 percent of the poverty line (asdefined in section 2110(c)(5)) applicable to a familyof the size involved if, on or after December 31,2010, the State certifies to the Secretary that, withrespect to the State fiscal year during which thecertification is made, the State has a budget deficit,or with respect to the succeeding State fiscal year,the State is projected to have a budget deficit. Uponsubmission of such a certification to the Secretary,the requirement under paragraph (1) shall notapply to the State with respect to any remainingportion of the period described in the precedingsentence. “(4) DETERMINATION OF COMPLIANCE.—

“(A) STATES SHALL APPLY MODIFIED GROSSINCOME.— A State’s determination of income inaccordance with subsection (e)(14) shall not beconsidered to be eligibility standards,methodologies, or procedures that are morerestrictive than the standards, methodologies, orprocedures in effect under the State plan orunder a waiver of the plan on the date of

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enactment of the Patient Protection andAffordable Care Act for purposes of determiningcompliance with the requirements of paragraph(1), (2), or (3). “(B) STATES MAY EXPAND ELIGIBILITY OR MOVEWAIVERED POPULATIONS INTO COVERAGE UNDERTHE STATE PLAN.—With respect to any periodapplicable under paragraph (1), (2), or (3), aState that applies eligibility standards,methodologies, or procedures under the Stateplan under this title or under any waiver of theplan that are less restrictive than the eligibilitystandards, methodologies, or procedures, appliedunder the State plan or under a waiver of theplan on the date of enactment of the PatientProtection and Affordable Care Act, or thatmakes individuals who, on such date ofenactment, are eligible for medical assistanceunder a waiver of the State plan, after such dateof enactment eligible for medical assistancethrough a State plan amendment with anincome eligibility level that is not less than theincome eligibility level that applied under thewaiver, or as a result of the application ofsubclause (VIII) of section 1902(a)(10)(A)(i),shall not be considered to have in effecteligibility standards, methodologies, orprocedures that are more restrictive than thestandards, methodologies, or procedures in effectunder the State plan or under a waiver of theplan on the date of enactment of the PatientProtection and Affordable Care Act for purposesof determining compliance with therequirements of paragraph (1), (2), or (3).”.

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(c) MEDICAID BENCHMARK BENEFITS MUST CONSIST OFAT LEAST MINIMUM ESSENTIAL COVERAGE.—Section1937(b) of such Act (42 U.S.C. 1396u–7(b)) isamended—

(1) in paragraph (1), in the matter precedingsubparagraph (A), by inserting “subject toparagraphs (5) and (6),” before “each”; (2) in paragraph (2)—

(A) in the matter preceding subparagraph (A), byinserting “subject to paragraphs (5) and (6)”after “subsection (a)(1),”;(B) in subparagraph (A)—

(i) by redesignating clauses (iv) and (v) asclauses (vi) and (vii), respectively; and (ii) by inserting after clause (iii), thefollowing: “(iv) Coverage of prescriptiondrugs. “(v) Mental health services.”; and

(C) in subparagraph (C)— (i) by striking clauses (i) and (ii); and (ii) by redesignating clauses (iii) and (iv) asclauses (i) and (ii), respectively; and

(3) by adding at the end the following newparagraphs: “(5) MINIMUM STANDARDS.—Effective January 1,2014, any benchmark benefit package underparagraph (1) or benchmark equivalent coverageunder paragraph (2) must provide at least essentialhealth benefits as described in section 1302(b) of thePatient Protection and Affordable Care Act. “(6) MENTAL HEALTH SERVICES PARITY.—

“(A) IN GENERAL.—In the case of any benchmarkbenefit package under paragraph (1) orbenchmark equivalent coverage underparagraph (2) that is offered by an entity that isnot a medicaid managed care organization and

App. 89

that provides both medical and surgical benefitsand mental health or substance use disorderbenefits, the entity shall ensure that thefinancial requirements and treatmentlimitations applicable to such mental health orsubstance use disorder benefits comply with therequirements of section 2705(a) of the PublicHealth Service Act in the same manner as suchrequirements apply to a group health plan. “(B) DEEMED COMPLIANCE.—Coverage providedwith respect to an individual described in section1905(a)(4)(B) and covered under the State planunder section 1902(a)(10)(A) of the servicesdescribed in section 1905(a)(4)(B) (relating toearly and periodic screening, diagnostic, andtreatment services defined in section 1905(r))and provided in accordance with section1902(a)(43), shall be deemed to satisfy therequirements of subparagraph (A).”.

(d) ANNUAL REPORTS ON MEDICAID ENROLLMENT.— (1) STATE REPORTS.—Section 1902(a) of the SocialSecurity Act (42 U.S.C. 1396a(a)), as amended bysubsection (b), is amended—

(A) by striking “and” at the end of paragraph(73); (B) by striking the period at the end ofparagraph (74) and inserting “; and”; and (C) by inserting after paragraph (74) thefollowing new paragraph: “(75) provide that, beginning January 2015, andannually thereafter, the State shall submit areport to the Secretary that contains— “(A) the total number of enrolled and newlyenrolled individuals in the State plan or under awaiver of the plan for the fiscal year ending on

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September 30 of the preceding calendar year,disaggregated by population, including children,parents, nonpregnant childless adults, disabledindividuals, elderly individuals, and such othercategories or sub-categories of individualseligible for medical assistance under the Stateplan or under a waiver of the plan as theSecretary may require; “(B) a description, which may be specified bypopulation, of the outreach and enrollmentprocesses used by the State during such fiscalyear; and “(C) any other data reporting determinednecessary by the Secretary to monitorenrollment and retention of individuals eligiblefor medical assistance under the State plan orunder a waiver of the plan.”.

(2) REPORTS TO CONGRESS.—Beginning April 2015,and annually thereafter, the Secretary of Healthand Human Services shall submit a report to theappropriate committees of Congress on the totalenrollment and new enrollment in Medicaid for thefiscal year ending on September 30 of the precedingcalendar year on a national and State-by-Statebasis, and shall include in each such report suchrecommendations for administrative or legislativechanges to improve enrollment in the Medicaidprogram as the Secretary determines appropriate.

(e) STATE OPTION FOR COVERAGE FOR INDIVIDUALS WITHINCOME THAT EXCEEDS 133 PERCENT OF THE POVERTYLINE.—

(1) COVERAGE AS OPTIONAL CATEGORICALLY NEEDYGROUP.— Section 1902 of the Social Security Act(42 U.S.C. 1396a) is amended—

(A) in subsection (a)(10)(A)(ii)—

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(i) in subclause (XVIII), by striking “or” atthe end; (ii) in subclause (XIX), by adding “or” at theend; and (iii) by adding at the end the following newsubclause:

“(XX) beginning January 1, 2014, who areunder 65 years of age and are notdescribed in or enrolled under a previoussubclause of this clause, and whoseincome (as determined under subsection(e)(14)) exceeds 133 percent of the povertyline (as defined in section 2110(c)(5))applicable to a family of the size involvedbut does not exceed the highest incomeeligibility level established under theState plan or under a waiver of the plan,subject to subsection (hh);” and

(B) by adding at the end the following newsubsection:

“(hh)(1) A State may elect to phase-in the extension ofeligibility for medical assistance to individualsdescribed in subclause (XX) of subsection (a)(10)(A)(ii)based on the categorical group (including nonpregnantchildless adults) or income, so long as the State doesnot extend such eligibility to individuals described insuch subclause with higher income before makingindividuals described in such subclause with lowerincome eligible for medical assistance.

“(2) If an individual described in subclause (XX) ofsubsection (a)(10)(A)(ii) is the parent of a child whois under 19 years of age (or such higher age as theState may have elected) who is eligible for medicalassistance under the State plan or under a waiverof such plan, the individual may not be enrolled

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under the State plan unless the individual’s child isenrolled under the State plan or under a waiver ofthe plan or is enrolled in other health insurancecoverage. For purposes of the preceding sentence,the term ‘parent’ includes an individual treated asa caretaker relative for purposes of carrying outsection 1931.”. (2) CONFORMING AMENDMENTS.—

(A) Section 1905(a) of such Act (42 U.S.C.1396d(a)), as amended by subsection (a)(5)(C), isamended in the matter preceding paragraph(1)—

(i) by striking “or” at the end of clause (xiii); (ii) by inserting “or” at the end of clause (xiv);and (iii) by inserting after clause (xiv) thefollowing: “(xv) individuals described insection 1902(a)(10)(A)(ii)(XX),”.

(B) Section 1903(f)(4) of such Act (42 U.S.C.1396b(f)(4)) is amended by inserting“ 1 9 0 2 ( a ) ( 1 0 ) ( A ) ( i i ) ( X X ) , ” a f t e r“1902(a)(10)(A)(ii)(XIX),”. (C) Section 1920(e) of such Act (42 U.S.C.1396r–1(e)), as added by subsection (a)(4)(B), isamended by inserting “or clause (ii)(XX)” after“clause (i)(VIII)”.

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009, § 5001

SEC. 5001. TEMPORARY INCREASE OF MEDICAIDFMAP.

(a) PERMITTING MAINTENANCE OF FMAP.—Subject tosubsections (e), (f), and (g), if the FMAP determinedwithout regard to this section for a State for—

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(1) fiscal year 2009 is less than the FMAP as sodetermined for fiscal year 2008, the FMAP for theState for fiscal year 2008 shall be substituted forthe State’s FMAP for fiscal year 2009, before theapplication of this section; (2) fiscal year 2010 is less than the FMAP as sodetermined for fiscal year 2008 or fiscal year 2009(after the application of paragraph (1)), the greaterof such FMAP for the State for fiscal year 2008 orfiscal year 2009 shall be substituted for the State’sFMAP for fiscal year 2010, before the application ofthis section; and (3) fiscal year 2011 is less than the FMAP as sodetermined for fiscal year 2008, fiscal year 2009(after the application of paragraph (1)), or fiscalyear 2010 (after the application of paragraph (2)),the greatest of such FMAP for the State for fiscalyear 2008, fiscal year 2009, or fiscal year 2010 shallbe substituted for the State’s FMAP for fiscal year2011, before the application of this section, but onlyfor the first calendar quarter in fiscal year 2011.

(b) GENERAL 6.2 PERCENTAGE POINT INCREASE.— (1) IN GENERAL.—Subject to subsections (e), (f), and(g) and paragraph (2), for each State for calendarquarters during the recession adjustment period (asdefined in subsection (h)(3)), the FMAP (after theapplication of subsection (a)) shall be increased(without regard to any limitation otherwisespecified in section 1905(b) of the Social SecurityAct (42 U.S.C. 1396d(b))) by 6.2 percentage points. (2) SPECIAL ELECTION FOR TERRITORIES.—In thecase of a State that is not one of the 50 States or theDistrict of Columbia, paragraph (1) shall only applyif the State makes a one-time election, in a formand manner specified by the Secretary and for the

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entire recession adjustment period, to apply theincrease in FMAP under paragraph (1) and a 15percent increase under subsection (d) instead ofapplying a 30 percent increase under subsection (d).

(c) ADDITIONAL RELIEF BASED ON INCREASE INUNEMPLOYMENT.—

(1) IN GENERAL.—Subject to subsections (e), (f), and(g), if a State is a qualifying State under paragraph(2) for a calendar quarter occurring during therecession adjustment period, the FMAP for theState shall be further increased by the number ofpercentage points equal to the product of—

(A) the State percentage applicable for the Stateunder section 1905(b) of the Social Security Act(42 U.S.C. 1396d(b)) after the application ofsubsection (a) and after the application of ½ ofthe increase under subsection (b); and (B) the applicable percent determined inparagraph (3) for the calendar quarter (or, ifgreater, for a previous such calendar quarter).

(2) QUALIFYING CRITERIA.— (A) IN GENERAL.—For purposes of paragraph (1),a State qualifies for additional relief under thissubsection for a calendar quarter occurringduring the recession adjustment period if theState is 1 of the 50 States or the District ofColumbia and the State satisfies any of thefollowing criteria for the quarter:

(i) The State unemployment increasepercentage (as defined in paragraph (4)) forthe quarter is at least 1.5 percentage pointsbut less than 2.5 percentage points. (ii) The State unemployment increasepercentage for the quarter is at least 2.5

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percentage points but less than 3.5percentage points. (iii) The State unemployment increasepercentage for the quarter is at least 3.5percentage points.

(B) MAINTENANCE OF STATUS.—If a Statequalifies for additional relief under thissubsection for a calendar quarter, it shall bedeemed to have qualified for such relief for eachsubsequent calendar quarter ending before July1, 2010.

(3) APPLICABLE PERCENT.— (A) IN GENERAL.—For purposes of paragraph (1),subject to subparagraph (B), the applicablepercent is—

(i) 5.5 percent, if the State satisfies thecriteria described in paragraph (2)(A)(i) forthe calendar quarter; (ii) 8.5 percent if the State satisfies thecriteria described in paragraph (2)(A)(ii) forthe calendar quarter; and (iii) 11.5 percent if the State satisfies thecriteria described in paragraph (2)(A)(iii) forthe calendar quarter.

(B) MAINTENANCE OF HIGHER APPLICABLEPERCENT.—

(i) HOLD HARMLESS PERIOD.—If the percentapplied to a State under subparagraph (A)for any calendar quarter in the recessionadjustment period beginning on or afterJanuary 1, 2009, and ending before July 1,2010, (determined without regard to thissubparagraph) is less than the percentapplied for the preceding quarter (as sodetermined), the higher applicable percent

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shall continue in effect for each subsequentcalendar quarter ending before July 1, 2010. (ii) NOTICE OF LOWER APPLICABLEPERCENT.—The Secretary shall notify a Stateat least 60 days prior to applying any lowerapplicable percent to the State under thisparagraph.

(4) COMPUTATION OF STATE UNEMPLOYMENTINCREASE PERCENTAGE.—

(A) IN GENERAL.—In this subsection, the “Stateunemployment increase percentage” for a Statefor a calendar quarter is equal to the number ofpercentage points (if any) by which—

(i) the average monthly unemployment ratefor the State for months in the most recentprevious 3-consecutive-month period forwhich data are available, subject tosubparagraph (C); exceeds (ii) the lowest average monthlyunemployment rate for the State for any 3-consecutive-month period preceding theperiod described in clause (i) and beginningon or after January 1, 2006.

(B) AVERAGE MONTHLY UNEMPLOYMENT RATEDEFINED.—In this paragraph, the term “averagemonthly unemployment rate” means the averageof the monthly number unemployed, divided bythe average of the monthly civilian labor force,seasonally adjusted, as determined based on themost recent monthly publications of the Bureauof Labor Statistics of the Department of Labor. (C) SPECIAL RULE.—With respect to—

(i) the first 2 calendar quarters of therecession adjustment period, the most recentprevious 3-consecutive-month period

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described in subparagraph (A)(i) shall be the3-consecutive-month period beginning withOctober 2008; and (ii) the last 2 calendar quarters of therecession adjustment period, the most recentprevious 3-consecutive-month perioddescribed in such subparagraph shall be the3-consecutive-month period beginning withDecember 2009, or, if it results in a higherapplicable percent under paragraph (3), the3-consecutive-month period beginning withJanuary 2010.

(d) INCREASE IN CAP ON MEDICAID PAYMENTS TOTERRITORIES.—Subject to subsections (f) and (g), withrespect to entire fiscal years occurring during therecession adjustment period and with respect to fiscalyears only a portion of which occurs during such period(and in proportion to the portion of the fiscal year thatoccurs during such period), the amounts otherwisedetermined for Puerto Rico, the Virgin Islands, Guam,the Northern Mariana Islands, and American Samoaunder subsections (f) and (g) of section 1108 of theSocial Security Act (42 6 U.S.C. 1308) shall each beincreased by 30 percent (or, in the case of an electionunder subsection (b)(2), 15 percent). In the case of suchan election by a territory, subsection (a)(1) of suchsection shall be applied without regard to any increasein payment made to the territory under part E of titleIV of such Act that is attributable to the increase inFMAP effected under subsection (b) for the territory. (e) SCOPE OF APPLICATION.—The increases in theFMAP for a State under this section shall apply forpurposes of title XIX of the Social Security Act andshall not apply with respect to—

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(1) disproportionate share hospital paymentsdescribed in section 1923 of such Act (42 U.S.C.1396r–4); (2) payments under title IV of such Act (42 U.S.C.601 et seq.) (except that the increases undersubsections (a) and (b) shall apply to paymentsunder part E of title IV of such Act (42 U.S.C. 670 etseq.) and, for purposes of the application of thissection to the District of Columbia, payments undersuch part shall be deemed to be made on the basisof the FMAP applied with respect to such Districtfor purposes of title XIX and as increased undersubsection (b)); (3) payments under title XXI of such Act (42 U.S.C.1397aa et seq.); (4) any payments under title XIX of such Act thatare based on the enhanced FMAP described insection 2105(b) of such Act (42 U.S.C. 1397ee(b)); or (5) any payments under title XIX of such Act thatare attributable to expenditures for medicalassistance provided to individuals made eligibleunder a State plan under title XIX of the SocialSecurity Act (including under any waiver undersuch title or under section 1115 of such Act (42U.S.C. 1315)) because of income standards(expressed as a percentage of the poverty line) foreligibility for medical assistance that are higherthan the income standards (as so expressed) forsuch eligibility as in effect on July 1, 2008,(including as such standards were proposed to be ineffect under a State law enacted but not effective asof such date or a State plan amendment or waiverrequest under title XIX of such Act that waspending approval on such date).

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(f) STATE INELIGIBILITY; LIMITATION; SPECIAL RULES.— (1) MAINTENANCE OF ELIGIBILITY REQUIREMENTS.—

(A) IN GENERAL.—Subject to subparagraphs (B)and (C), a State is not eligible for an increase inits FMAP under subsection (a), (b), or (c), or anincrease in a cap amount under subsection (d), ifeligibility standards, methodologies, orprocedures under its State plan under title XIXof the Social Security Act (including any waiverunder such title or under section 1115 of suchAct (42 U.S.C. 1315)) are more restrictive thanthe eligibility standards, methodologies, orprocedures, respectively, under such plan (orwaiver) as in effect on July 1, 2008. (B) STATE REINSTATEMENT OF ELIGIBILITYPERMITTED.—Subject to subparagraph (C), aState that has restricted eligibility standards,methodologies, or procedures under its Stateplan under title XIX of the Social Security Act(including any waiver under such title or undersection 1115 of such Act (42 U.S.C. 1315)) afterJuly 1, 2008, is no longer ineligible undersubparagraph (A) beginning with the firstcalendar quarter in which the State hasreinstated eligibility standards, methodologies,or procedures that are no more restrictive thanthe eligibility standards, methodologies, orprocedures, respectively, under such plan (orwaiver) as in effect on July 1, 2008. (C) SPECIAL RULES.—A State shall not beineligible under subparagraph (A)—

(i) for the calendar quarters before July 1,2009, on the basis of a restriction that wasapplied after July 1, 2008, and before thedate of the enactment of this Act, if the State

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prior to July 1, 2009, has reinstatedeligibility standards, methodologies, orprocedures that are no more restrictive thanthe eligibility standards, methodologies, orprocedures, respectively, under such plan (orwaiver) as in effect on July 1, 2008; or (ii) on the basis of a restriction that wasdirected to be made under State law as ineffect on July 1, 2008, and would have beenin effect as of such date, but for a delay in theeffective date of a waiver under section 1115of such Act with respect to such restriction.

(2 ) CO M P L I A N C E W I T H P R O M P T P A YREQUIREMENTS.—

(A) APPLICATION TO PRACTITIONERS.— (i) IN GENERAL.—Subject to the succeedingprovisions of this subparagraph, no Stateshall be eligible for an increased FMAP rateas provided under this section for any claimreceived by a State from a practitionersubject to the terms of section 1902(a)(37)(A)of the Social Security Act (42 U.S.C.1396a(a)(37)(A)) for such days during anyperiod in which that State has failed to payclaims in accordance with such section asapplied under title XIX of such Act. (ii) REPORTING REQUIREMENT.—Each Stateshall report to the Secretary, on a quarterlybasis, its compliance with the requirementsof clause (i) as such requirements pertain toclaims made for covered services during eachmonth of the preceding quarter. (iii) WAIVER AUTHORITY.—The Secretary maywaive the application of clause (i) to a State,or the reporting requirement imposed under

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clause (ii), during any period in which thereare exigent circumstances, including naturaldisasters, that prevent the timely processingof claims or the submission of such a report. (iv) APPLICATION TO CLAIMS.—Clauses (i) and(ii) shall only apply to claims made forcovered services after the date of enactmentof this Act.

(B) APPLICATION TO NURSING FACILITIES ANDHOSPITALS.—

(i) IN GENERAL.—Subject to clause (ii), theprovisions of subparagraph (A) shall applywith respect to a nursing facility or hospital,insofar as it is paid under title XIX of theSocial Security Act on the basis ofsubmission of claims, in the same or similarmanner (but within the same timeframe) assuch provisions apply to practitionersdescribed in such subparagraph. (ii) GRACE PERIOD.—Notwithstanding clause(i), no period of ineligibility shall be imposedagainst a State prior to June 1, 2009, on thebasis of the State failing to pay a claim inaccordance with such clause.

(3) STATE’S APPLICATION TOWARD RAINY DAYFUND.—A State is not eligible for an increase in itsFMAP under subsection (b) or (c), or an increase ina cap amount under subsection (d), if any amountsattributable (directly or indirectly) to such increaseare deposited or credited into any reserve or rainyday fund of the State. (4) NO WAIVER AUTHORITY.—Except as provided inparagraph (2)(A)(iii), the Secretary may not waivethe application of this subsection or subsection (g)

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under section 1115 of the Social Security Act orotherwise. (5) LIMITATION OF FMAP TO 100 PERCENT.—In nocase shall an increase in FMAP under this sectionresult in an FMAP that exceeds 100 percent. (6) TREATMENT OF CERTAIN EXPENDITURES.—Withrespect to expenditures described in section2105(a)(1)(B) of the Social Security Act (42 U.S.C.1397ee(a)(1)(B)), as in effect before April 1, 2009,that are made during the period beginning onOctober 1, 2008, and ending on March 31, 2009, anyadditional Federal funds that are paid to a State asa result of this section that are attributable to suchexpenditures shall not be counted against anyallotment under section 2104 of such Act (42 U.S.C.1397dd).

(g) REQUIREMENTS.— (1) STATE REPORTS.—Each State that is paidadditional Federal funds as a result of this sectionshall, not later than September 30, 2011, submit areport to the Secretary, in such form and suchmanner as the Secretary shall determine, regardinghow the additional Federal funds were expended. (2) ADDITIONAL REQUIREMENT FOR CERTAINSTATES.—In the case of a State that requirespolitical subdivisions within the State to contributetoward the non-Federal share of expenditures underthe State Medicaid plan required under section1902(a)(2) of the Social Security Act (42 U.S.C.1396a(a)(2)), the State is not eligible for an increasein its FMAP under subsection (b) or (c), or anincrease in a cap amount under subsection (d), if itrequires that such political subdivisions pay forquarters during the recession adjustment period agreater percentage of the non-Federal share of such

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expenditures, or a greater percentage of the non-Federal share of payments under section 1923, thanthe respective percentage that would have beenrequired by the State under such plan onSeptember 30, 2008, prior to application of thissection.

(h) DEFINITIONS.—In this section, except as otherwiseprovided:

(1) FMAP.—The term “FMAP” means the Federalmedical assistance percentage, as defined in section1905(b) of the Social Security Act (42 U.S.C.1396d(b)), as determined without regard to thissection except as otherwise specified. (2) POVERTY LINE.—The term “poverty line” has themeaning given such term in section 673(2) of theCommunity Services Block Grant Act (42 U.S.C.9902(2)), including any revision required by suchsection. (3) RECESSION ADJUSTMENT PERIOD.—The term“recession adjustment period” means the periodbeginning on October 1, 2008, and ending onDecember 31, 2010. (4) SECRETARY.—The term “Secretary” means theSecretary of Health and Human Services. (5) STATE.—The term “State” has the meaning givensuch term in section 1101(a)(1) of the SocialSecurity Act (42 U.S.C. 1301(a)(1)) for purposes oftitle XIX of the Social Security Act (42 U.S.C. 1396et seq.).

(i) SUNSET.—This section shall not apply to items andservices furnished after the end of the recessionadjustment period. (j) LIMITATION ON FMAP CHANGE.—The increase inFMAP effected under section 614 of the Children’sHealth Insurance Program Reauthorization Act of 2009

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shall not apply in the computation of the enhancedFMAP under title XXI or XIX of the Social Security Actfor any period (notwithstanding subsection (i)).

ACT OF AUGUST 10, 2010, § 201

PUBLIC LAW 111–226—AUG. 10, 2010

124 STAT. 2393

TITLE II

STATE FISCAL RELIEF AND OTHERPROVISIONS; REVENUE OFFSETS

Subtitle A—State Fiscal Relief and OtherProvisions

EXTENSION OF ARRA INCREASE IN FMAP

SEC. 201. Section 5001 of the American Recovery andReinvestment Act of 2009 (Public Law 111–5) isamended—

(1) in subsection (a)(3), by striking “first calendarquarter” and inserting “first 3 calendar quarters”; (2) in subsection (b)—

(A) in paragraph (1), by striking “paragraph (2)”and inserting “paragraphs (2) and (3)”; and (B) by adding at the end the following:

“(3) PHASE-DOWN OF GENERAL INCREASE.— “(A) SECOND QUARTER OF FISCAL YEAR2011.—For each State, for the second quarter offiscal year 2011, the FMAP percentage increasefor the State under paragraph (1) or (2) (asapplicable) shall be 3.2 percentage points. “(B) THIRD QUARTER OF FISCAL YEAR 2011.—Foreach State, for the third quarter of fiscal year2011, the FMAP percentage increase for the

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State under paragraph (1) or (2) (as applicable)shall be 1.2 percentage points.”; (3) in subsection(c)— (A) in paragraph (2)(B), by striking “July 1,2010” and inserting “January 1, 2011”; (B) in paragraph (3)(B)(i), by striking “July 1,2010” and inserting “January 1, 2011” eachplace it appears; and (C) in paragraph (4)(C)(ii), by striking “the 3-consecutive-month period beginning withJanuary 2010” and inserting “any 3-consecutive-month period that begins after December 2009and ends before January 2011”;

(4) in subsection (e), by adding at the end thefollowing: “Notwithstanding paragraph (5), effectivefor payments made on or after January 1, 2010, theincreases in the FMAP for a State under thissection shall apply to payments under title XIX ofsuch Act that are attributable to expenditures formedical assistance provided to nonpregnantchildless adults made eligible under a State planunder such title (including under any waiver undersuch title or under section 1115 of such Act (42U.S.C. 1315)) who would have been eligible for childhealth assistance or other health benefits undereligibility standards in effect as of December 31,2009, of a waiver of the State child health planunder the title XXI of such Act.”; (5) in subsection (g)—

(A) in paragraph (1), by striking “September 30,2011” and inserting “March 31, 2012”; (B) in paragraph (2), by inserting “of such Act”after “1923”; and (C) by adding at the end the following:

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“(3) CERTIFICATION BY CHIEF EXECUTIVEOFFICER.—No additional Federal funds shall bepaid to a State as a result of this section withrespect to a calendar quarter occurring during theperiod beginning on January 1, 2011, and ending onJune 30, 2011, unless, not later than 45 days afterthe date of enactment of this paragraph, the chiefexecutive officer of the State certifies that the Statewill request and use such additional Federalfunds.”; and (6) in subsection (h)(3), by striking “December 31,2010” and inserting “June 30, 2011”.

STATUTES – CODIFIED STATUTES

42 U.S.C. § 1396a(a)(10)

(a) ContentsA State plan for medical assistance must—

* * *(10) provide—

(A) for making medical assistance available,including at least the care and services listed inparagraphs (1) through (5), (17), (21), and (28) ofsection 1396d(a) of this title, to—

(i) all individuals—(I) who are receiving aid or assistanceunder any plan of the State approvedunder subchapter I, X, XIV, or XVI of thischapter, or part A or part E of subchapterIV of this chapter (including individualseligible under this subchapter by reasonof section 602(a)(37), [1] 606(h), [1] or673(b) of this title, or considered by theState to be receiving such aid as

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authorized under section 682(e)(6) [1] ofthis title),(II)

(aa) with respect to whomsupplemental security income benefitsare being paid under subchapter XVIof this chapter (or were being paid asof the date of the enactment of section211(a) of the Personal Responsibilityand Work Opportunity ReconciliationAct of 1996 (P.L. 104–193) and wouldcontinue to be paid but for theenactment of that section), (bb) whoare qualified severely impairedindividuals (as defined in section1396d(q) of this title), or (cc) who areunder 21 years of age and with respectto whom supplemental securityincome benefits would be paid undersubchapter XVI if subparagraphs (A)and (B) of section 1382(c)(7) of thistitle were applied without regard tothe phrase “the first day of the monthfollowing”,

(III) who are qualified pregnant women orchildren as defined in section 1396d(n) ofthis title,(IV) who are described in subparagraph(A) or (B) of subsection (l)(1) of thissection and whose family income does notexceed the minimum income level theState is required to establish undersubsection (l)(2)(A) of this section for sucha family; [2]

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(V) who are qualified family members asdefined in section 1396d(m)(1) of thistitle,(VI) who are described in subparagraph(C) of subsection (l)(1) of this section andwhose family income does not exceed theincome level the State is required toestablish under subsection (l)(2)(B) of thissection for such a family,(VII) who are described in subparagraph(D) of subsection (l)(1) of this section andwhose family income does not exceed theincome level the State is required toestablish under subsection (l)(2)(C) of thissection for such a family; [2](VIII) beginning January 1, 2014, who areunder 65 years of age, not pregnant, notentitled to, or enrolled for, benefits underpart A of subchapter XVIII, or enrolled forbenefits under part B of subchapterXVIII, and are not described in a previoussubclause of this clause, and whoseincome (as determined under subsection(e)(14)) does not exceed 133 percent of thepoverty line (as defined in section1397jj(c)(5) of this title) applicable to afamily of the size involved, subject tosubsection (k); [2] or(IX) who—

(aa) are under 26 years of age;(bb) are not described in or enrolledunder any of subclauses (I) through(VII) of this clause or are described inany of such subclauses but haveincome that exceeds the level of

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income applicable under the Stateplan for eligibility to enroll for medicalassistance under such subclause;(cc) were in foster care under theresponsibility of the State on the dateof attaining 18 years of age or suchhigher age as the State has electedunder section 675(8)(B)(iii) of thistitle; and(dd) were enrolled in the State planunder this subchapter or under awaiver of the plan while in such fostercare; [3] So in original. Probablyshould be followed by “and”.

(ii) at the option of the State, to [4] anygroup or groups of individuals described insection 1396d(a) of this title (or, in the case ofindividuals described in section 1396d(a)(i) ofthis title, to [4] any reasonable categories ofsuch individuals) who are not individualsdescribed in clause (i) of this subparagraphbut—

(I) who meet the income and resourcesrequirements of the appropriate Stateplan described in clause (i) or thesupplemental security income program(as the case may be),(II) who would meet the income andresources requirements of the appropriateState plan described in clause (i) if theirwork-related child care costs were paidfrom their earnings rather than by aState agency as a service expenditure,(III) who would be eligible to receive aidunder the appropriate State plan

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described in clause (i) if coverage undersuch plan was as broad as allowed underFederal law,(IV) with respect to whom there is beingpaid, or who are eligible, or would beeligible if they were not in a medicalinstitution, to have paid with respect tothem, aid or assistance under theappropriate State plan described in clause(i), supplemental security income benefitsunder subchapter XVI of this chapter, ora State supplementary payment; [2](V) who are in a medical institution for aperiod of not less than 30 consecutivedays (with eligibility by reason of thissubclause beginning on the first day ofsuch period), who meet the resourcerequirements of the appropriate Stateplan described in clause (i) or thesupplemental security income program,and whose income does not exceed aseparate income standard established bythe State which is consistent with thelimit established under section1396b(f)(4)(C) of this title,(VI) who would be eligible under the Stateplan under this subchapter if they were ina medical institution, with respect towhom there has been a determinationthat but for the provision of home orcommunity-based services described insubsection (c), (d), or (e) of section 1396nof this title they would require the level ofcare provided in a hospital, nursingfacility or intermediate care facility for

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the mentally retarded the cost of whichcould be reimbursed under the State plan,and who will receive home orcommunity-based services pursuant to awaiver granted by the Secretary undersubsection (c), (d), or (e) of section 1396nof this title,(VII) who would be eligible under theState plan under this subchapter if theywere in a medical institution, who areterminally ill, and who will receivehospice care pursuant to a voluntaryelection described in section 1396d(o) ofthis title; [2](VIII) who is a child described in section1396d(a)(i) of this title—

(aa) for whom there is in effect anadoption assistance agreement (otherthan an agreement under part E ofsubchapter IV of this chapter) betweenthe State and an adoptive parent orparents,(bb) who the State agency responsiblefor adoption assistance hasdetermined cannot be placed withadoptive parents without medicalassistance because such child hasspecial needs for medical orrehabilitative care, and(cc) who was eligible for medicalassistance under the State plan priorto the adoption assistance agreementbeing entered into, or who would havebeen eligible for medical assistance atsuch time if the eligibility standards

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and methodologies of the State’s fostercare program under part E ofsubchapter IV of this chapter wereapplied rather than the eligibilitystandards and methodologies of theState’s aid to families with dependentchildren program under part A ofsubchapter IV of this chapter; [2]

(IX) who are described in subsection (l)(1)of this section and are not described inclause (i)(IV), clause (i)(VI), or clause(i)(VII); [2](X) who are described in subsection (m)(1)of this section; [2](XI) who receive only an optional Statesupplementary payment based on needand paid on a regular basis, equal to thedifference between the individual’scountable income and the incomestandard used to determine eligibility forsuch supplementary payment (withcountable income being the incomeremaining after deductions as establishedby the State pursuant to standards thatmay be more restrictive than thestandards for supplementary securityincome benefits under subchapter XVI ofthis chapter), which are available to allindividuals in the State (but which maybe based on different income standards bypolitical subdivision according to cost ofliving differences), and which are paid bya State that does not have an agreementwith the Commissioner of Social Security

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under section 1382e or 1383c of this title; [2](XII) who are described in subsection(z)(1) of this section (relating to certainTB-infected individuals); [2](XIII) who are in families whose income isless than 250 percent of the incomeofficial poverty line (as defined by theOffice of Management and Budget, andrevised annually in accordance withsection 9902(2) of this title) applicable toa family of the size involved, and who butfor earnings in excess of the limitestablished under section 1396d(q)(2)(B)of this title, would be considered to bereceiving supplemental security income(subject, notwithstanding section 1396o ofthis title, to payment of premiums orother cost-sharing charges (set on asliding scale based on income) that theState may determine); [2](XIV) who are optional targetedlow-income children described in section1396d(u)(2)(B) of this title; [2](XV) who, but for earnings in excess of thelimit established under section1396d(q)(2)(B) of this title, would beconsidered to be receiving supplementalsecurity income, who is at least 16, butless than 65, years of age, and whoseassets, resources, and earned or unearnedincome (or both) do not exceed suchlimitations (if any) as the State mayestablish; [2]

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(XVI) who are employed individuals witha medically improved disability describedin section 1396d(v)(1) of this title andwhose assets, resources, and earned orunearned income (or both) do not exceedsuch limitations (if any) as the State mayestablish, but only if the State providesmedical assistance to individualsdescribed in subclause (XV); [2](XVII) who are independent foster careadolescents (as defined in section1396d(w)(1) of this title), or who arewithin any reasonable categories of suchadolescents specified by the State; [2](XVIII) who are described in subsection(aa) of this section (relating to certainbreast or cervical cancer patients); [2](XIX) who are disabled children describedin subsection (cc)(1); [2](XX) beginning January 1, 2014, who areunder 65 years of age and are notdescribed in or enrolled under a previoussubclause of this clause, and whoseincome (as determined under subsection(e)(14)) exceeds 133 percent of the povertyline (as defined in section 1397jj(c)(5) ofthis title) applicable to a family of the sizeinvolved but does not exceed the highestincome eligibility level established underthe State plan or under a waiver of theplan, subject to subsection (hh); [2](XXI) who are described in subsection (ii)(relating to individuals who meet certainincome standards); [2] or

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(XXII) who are eligible for home andcommunity-based services under needs-based criteria established underparagraph (1)(A) of section 1396n (i) ofthis title, or who are eligible for home andcommunity-based services underparagraph (6) of such section, and whowill receive home and community-basedservices pursuant to a State planamendment under such subsection;

42 U.S.C. § 1396a(l)

(l) Description of group(1) Individuals described in this paragraph are—

(A) women during pregnancy (and during the60-day period beginning on the last day of thepregnancy),(B) infants under one year of age,(C) children who have attained one year of agebut have not attained 6 years of age, and(D) children born after September 30, 1983 (or,at the option of a State, after any earlier date),who have attained 6 years of age but have notattained 19 years of age,

who are not described in any of subclauses (I) through(III) of subsection (a)(10)(A)(i) of this section and whosefamily income does not exceed the income levelestablished by the State under paragraph (2) for afamily size equal to the size of the family, including thewoman, infant, or child.

(2)(A)

(i) For purposes of paragraph (1) with respectto individuals described in subparagraph (A)

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or (B) of that paragraph, the State shallestablish an income level which is apercentage (not less than the percentageprovided under clause (ii) and not more than185 percent) of the income official povertyline (as defined by the Office of Managementand Budget, and revised annually inaccordance with section 9902(2) of this title)applicable to a family of the size involved.(ii) The percentage provided under thisclause, with respect to eligibility for medicalassistance on or after—

(I) July 1, 1989, is 75 percent, or, ifgreater, the percentage provided underclause (iii), and(II) April 1, 1990, 133 percent, or, ifgreater, the percentage provided underclause (iv).

(iii) In the case of a State which, as of July 1,1988, has elected to provide, and provides,medical assistance to individuals describedin this subsection or has enacted legislationauthorizing, or appropriating funds, toprovide such assistance to such individualsbefore July 1, 1989, the percentage providedunder clause (ii)(I) shall not be less than—

(I) the percentage specified by the Statein an amendment to its State plan(whether approved or not) as of July 1,1988, or(II) if no such percentage is specified as ofJuly 1, 1988, the percentage establishedunder the State’s authorizing legislationor provided for under the State’sappropriations;

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but in no case shall this clause require thepercentage provided under clause (ii)(I) toexceed 100 percent.

(iv) In the case of a State which, as ofDecember 19, 1989, has established underclause (i), or has enacted legislationauthorizing, or appropriating funds, toprovide for, a percentage (of the incomeofficial poverty line) that is greater than 133percent, the percentage provided underclause (ii) for medical assistance on or afterApril 1, 1990, shall not be less than—

(I) the percentage specified by the Statein an amendment to its State plan(whether approved or not) as of December19, 1989, or(II) if no such percentage is specified as ofDecember 19, 1989, the percentageestablished under the State’s authorizinglegislation or provided for under theState’s appropriations.

(B) For purposes of paragraph (1) with respect toindividuals described in subparagraph (C) ofsuch paragraph, the State shall establish anincome level which is equal to 133 percent of theincome official poverty line described insubparagraph (A) applicable to a family of thesize involved.(C) For purposes of paragraph (1) with respect toindividuals described in subparagraph (D) ofthat paragraph, the State shall establish anincome level which is equal to 100 percent (or,beginning January 1, 2014, 133 percent) of theincome official poverty line described in

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subparagraph (A) applicable to a family of thesize involved.

(3) Notwithstanding subsection (a)(17) of thissection, for individuals who are eligible for medicalassistance because of subsection (a)(10)(A)(i)(IV),(a ) (10) (A) ( i ) (VI ) , (a ) (10) (A) ( i ) (VII ) , or(a)(10)(A)(ii)(IX) of this section—

(A) application of a resource standard shall be atthe option of the State;(B) any resource standard or methodology thatis applied with respect to an individualdescribed in subparagraph (A) of paragraph (1)may not be more restrictive than the resourcestandard or methodology that is applied undersubchapter XVI of this chapter;(C) any resource standard or methodology thatis applied with respect to an individualdescribed in subparagraph (B), (C), or (D) ofparagraph (1) may not be more restrictive thanthe corresponding methodology that is appliedunder the State plan under part A of subchapterIV of this chapter;(D) the income standard to be applied is theappropriate income standard established underparagraph (2); and(E) family income shall be determined inaccordance with the methodology employedunder the State plan under part A or E ofsubchapter IV of this chapter (except to theextent such methodology is inconsistent withclause (D) of subsection (a)(17) of this section),and costs incurred for medical care or for anyother type of remedial care shall not be takeninto account.

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Any different treatment provided under thisparagraph for such individuals shall not, because ofsubsection (a)(17) of this section, require or permitsuch treatment for other individuals.(4)

(A) In the case of any State which is providingmedical assistance to its residents under awaiver granted under section 1315 of this title,the Secretary shall require the State to providemedical assistance for pregnant women andinfants under age 1 described in subsection(a)(10)(A)(i)(IV) of this section and for childrendescribed in subsection (a)(10)(A)(i)(VI) of thissection or subsection (a)(10)(A)(i)(VII) of thissection in the same manner as the State wouldbe required to provide such assistance for suchindividuals if the State had in effect a planapproved under this subchapter.(B) In the case of a State which is not one of the50 States or the District of Columbia, the Stateneed not meet the requirement of subsection(a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), or(a)(10)(A)(i)(VII) of this section and, for purposesof paragraph (2)(A), the State may substitute forthe percentage provided under clause (ii) of suchparagraph any percentage.

42 U.S.C. § 1396a(gg)

(gg) Maintenance of effort(1) General requirement to maintain eligibilitystandards until State exchange is fully operationalSubject to the succeeding paragraphs of thissubsection, during the period that begins on March23, 2010, and ends on the date on which the

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Secretary determines that an Exchange establishedby the State under section 18031 of this title is fullyoperational, as a condition for receiving any Federalpayments under section 1396b(a) of this title forcalendar quarters occurring during such period, aState shall not have in effect eligibility standards,methodologies, or procedures under the State planunder this subchapter or under any waiver of suchplan that is in effect during that period, that aremore restrictive than the eligibility standards,methodologies, or procedures, respectively, underthe plan or waiver that are in effect on March 23,2010.(2) Continuation of eligibility standards for childrenuntil October 1, 2019The requirement under paragraph (1) shallcontinue to apply to a State through September 30,2019, with respect to the eligibility standards,methodologies, and procedures under the State planunder this subchapter or under any waiver of suchplan that are applicable to determining theeligibility for medical assistance of any child who isunder 19 years of age (or such higher age as theState may have elected).(3) NonapplicationDuring the period that begins on January 1, 2011,and ends on December 31, 2013, the requirementunder paragraph (1) shall not apply to a State withrespect to nonpregnant, nondisabled adults who areeligible for medical assistance under the State planor under a waiver of the plan at the option of theState and whose income exceeds 133 percent of thepoverty line (as defined in section 1397jj(c)(5) of thistitle) applicable to a family of the size involved if, onor after December 31, 2010, the State certifies to

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the Secretary that, with respect to the State fiscalyear during which the certification is made, theState has a budget deficit, or with respect to thesucceeding State fiscal year, the State is projectedto have a budget deficit. Upon submission of such acertification to the Secretary, the requirementunder paragraph (1) shall not apply to the Statewith respect to any remaining portion of the perioddescribed in the preceding sentence.(4) Determination of compliance

(A) States shall apply modified adjusted grossincomeA State’s determination of income in accordancewith subsection (e)(14) shall not be considered tobe eligibility standards, methodologies, orprocedures that are more restrictive than thestandards, methodologies, or procedures in effectunder the State plan or under a waiver of theplan on March 23, 2010, for purposes ofdetermining compliance with the requirementsof paragraph (1), (2), or (3).(B) States may expand eligibility or movewaivered populations into coverage under theState planWith respect to any period applicable underparagraph (1), (2), or (3), a State that applieseligibility standards, methodologies, orprocedures under the State plan under thissubchapter or under any waiver of the plan thatare less restrictive than the eligibility standards,methodologies, or procedures, applied under theState plan or under a waiver of the plan onMarch 23, 2010, or that makes individuals who,on March 23, 2010, are eligible for medicalassistance under a waiver of the State plan,

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after March 23, 2010, eligible for medicalassistance through a State plan amendmentwith an income eligibility level that is not lessthan the income eligibility level that appliedunder the waiver, or as a result of theapplication of subclause (VIII) of subsection(a)(10)(A)(i), shall not be considered to have ineffect eligibility standards, methodologies, orprocedures that are more restrictive than thestandards, methodologies, or procedures in effectunder the State plan or under a waiver of theplan on March 23, 2010, for purposes ofdetermining compliance with the requirementsof paragraph (1), (2), or (3).

42 U.S.C. § 1396b

(a) Computation of amountFrom the sums appropriated therefor, the Secretary(except as otherwise provided in this section) shall payto each State which has a plan approved under thissubchapter, for each quarter, beginning with thequarter commencing January 1, 1966—

(1) an amount equal to the Federal medicalassistance percentage (as defined in section 1396d(b) of this title, subject to subsections (g) and (j) ofthis section and section 1396r–4(f) of this title) ofthe total amount expended during such quarter asmedical assistance under the State plan; plus

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42 U.S.C. § 1396c

If the Secretary, after reasonable notice andopportunity for hearing to the State agency

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administering or supervising the administration of theState plan approved under this subchapter, finds—

(1) that the plan has been so changed that it nolonger complies with the provisions of section 1396aof this title; or(2) that in the administration of the plan there is afailure to comply substantially with any suchprovision;

the Secretary shall notify such State agency thatfurther payments will not be made to the State (or, inhis discretion, that payments will be limited tocategories under or parts of the State plan not affectedby such failure), until the Secretary is satisfied thatthere will no longer be any such failure to comply.Until he is so satisfied he shall make no furtherpayments to such State (or shall limit payments tocategories under or parts of the State plan not affectedby such failure).

42 U.S.C. § 1396d(a)

For purposes of this subchapter—

(a) Medical assistanceThe term “medical assistance” means payment of partor all of the cost of the following care and services orthe care and services themselves, or both (if provided inor after the third month before the month in which therecipient makes application for assistance or, in thecase of medicare cost-sharing with respect to aqualified medicare beneficiary described in subsection(p)(1) of this section, if provided after the month inwhich the individual becomes such a beneficiary) forindividuals, and, with respect to physicians’ or dentists’services, at the option of the State, to individuals (other

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than individuals with respect to whom there is beingpaid, or who are eligible, or would be eligible if theywere not in a medical institution, to have paid withrespect to them a State supplementary payment andare eligible for medical assistance equal in amount,duration, and scope to the medical assistance madeavailable to individuals described in section1396a(a)(10)(A) of this title) not receiving aid orassistance under any plan of the State approved undersubchapter I, X, XIV, or XVI of this chapter, or part Aof subchapter IV of this chapter, and with respect towhom supplemental security income benefits are notbeing paid under subchapter XVI of this chapter, whoare—

(i) under the age of 21, or, at the option of the State,under the age of 20, 19, or 18 as the State maychoose,

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