Maine And Four Other States Challenge U.S. Govt Over Constitutionality Of Medicare Drug Benefit

March 3, 2006

Attorney General Steve Rowe and Governor John Baldacci today announced that Maine joined four other states in challenging the constitutionality of provisions requiring states to pay part of the cost of the new Medicare Part D prescription drug benefit. The challenge was filed in the United States Supreme Court today. Ten other states joined in a brief supporting the five petitioning states.

The new Medicare Part D prescription drug benefit program took effect on January 1, 2006. It is administered by the United States Department of Health and Human Services, Centers for Medicare & Medicaid Services ("CMS"). The program provides optional outpatient prescription drug coverage to all Medicare beneficiaries, including individuals (known as "dual eligibles") who previously received prescription drug coverage under the states' Medicaid programs.

Congress shifted a large portion of the expense of this new federal program to the states. The new Medicare law requires that states contribute to financing the new prescription drug benefit for dual eligibles by remitting to the federal government the savings that Congress had anticipated states would realize from no longer providing prescription drug coverage for these individuals under their Medicaid programs. The payment has become known as the "clawback."

Based on the latest clawback payment amounts for Maine, the State is expected to pay $3 million more to CMS this fiscal year than we would have paid for the dual eligibles under MaineCare (Maine's Medicaid program). Next fiscal year, the additional cost is expected to be more than $17 million. By 2010, the additional annual amount is expected to total more than $35 million.

The states' lawsuit claims that the clawback scheme taxes the states and commandeers the state legislative power in violation of the Tenth Amendment to the United States Constitution. That amendment provides: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The lawsuit claims the clawback also violates the Guarantee Clause of the federal Constitution because it infringes upon essential functions of state government, and the autonomy of state government. The suit alleges that the clawback reduces the authority of state legislatures over their budgets and delivers that authority into the hands of agents of the federal government.

Attorney General Rowe said, "The clawback ignores the system of 'dual sovereignty' that is ingrained in our federal Constitution. Congress treats states as agents of the federal government, rather than as separate sovereigns in their own right."

Rowe noted that "The clawback requires state legislatures to collect, allocate, and remit state funds to the federal government to operate a purely federal program. This violates the intergovernmental tax-immunity doctrine grounded in the Tenth Amendment of our federal Constitution."

In comparing the Medicare clawback to state Medicaid payments, Rowe stated, "Congress may put conditions on the receipt of federal funds by states. A good example is the Medicaid program. State compliance with certain requirements is a condition for state participation in the Medicaid program and the receipt of federal Medicaid funding. In the new Medicare law, however, Congress commands that states pay certain amounts for a purely federal program. If those state payments are not made, the federal government can offset the amount owed against the states' share of the federal Medicaid funding that they would have received."

Governor Baldacci said, "We should not have to pay a clawback. It was a process that was supposed to save money but ended up costing states money."

The states challenging the clawback are Maine, Texas, New Jersey, Missouri and Kentucky. The states filing a brief in support of the challenge are Arizona, Alaska, Connecticut, Kansas, Mississippi, New Hampshire, Ohio, Oklahoma, South Carolina, and Vermont.