The high court, which can choose to hear disputes between states and the federal government, has not yet decided whether to take the case.

Florida State University political science professor Carol Weissart said the dispute is important because a victory for the federal government would clear the way for Congress to make states pay for federal programs, especially at a time when Congress has been cutting domestic initiatives.

Weissart, the editor of Publius, an international journal focusing on issues of federalism, called the so-called clawback payments at the center of the controversy “highly unusual.”

“Basically, it requires states, after the fact, to write a check to the federal government,” she said.

In a brief filed with the Supreme Court May 16, Bush administration lawyers dismissed the idea that the clawback payments were anything more than “merely an accounting mechanism.” 

“A financial arrangement that is designed to result in a net savings for the states under a program that is infused with massive federal support and subject to ongoing financial adjustments cannot sensibly be considered a ‘tax’ that implicates questions of ‘intergovernmental tax immunity,’” the Department of Justice lawyers wrote.

One of states’ top complaints is that the mandatory payments make it impossible for state legislators to do their jobs.

“There can be no debate among the state’s legislators about the best way to spend the funds. There can be no compromise among competing interests. Instead, the states must hand over to the federal government a specified dollar amount for the support and operation of an entirely federal program,” the five suing states argued.

The supporting cast of states argued that allowing the federal government to tax states makes both state and federal lawmakers less accountable to voters.

Congress “has engineered a means of obtaining billions of dollars from state governments so that it can take credit for bestowing a prescription drug benefit without having to risk paying the political price that would accompany raising federal taxes or cutting other federal funding to cover the benefit,” they wrote in their brief.

“Simultaneously, state governments, who have no control over the amount of their clawback bills, may face their constituents’ political ire for failing to use the funds that the clawback requisitions to address other problems or for raising taxes if they are forced to do so because of clawback bills,” the states continued.

Under the 2003 Medicare law, states that don’t make the clawback payment will be docked that amount from the total they receive from the federal government for its share of Medicaid costs. 

But that could set a dangerous precedent, the 10 states said. For instance, the federal government could require states to pay for a nuclear safety program or else lose money they would have received for highway safety or child-support enforcement, they said.

“That fact may be obscured, however, because Medicare and Medicaid may appear on the surface to be different aspects of the same program. They are not,” they wrote. Medicare is an entirely federal program for seniors. Medicaid is run by states using both state and federal money. It covers poor elderly, blind and disabled residents and low-incomes families. 

But administration lawyers said the payments for the prescription drug benefit work essentially the same as Medicaid premiums for physician visits. State Medicaid programs must cover the premiums and co-payments for dual eligibles, and that money goes into the federal account that funds Medicare, the attorneys noted.


The 10 states joining in the friend-of-the-court brief are Arizona, Alaska, Connecticut, Kansas, Mississippi, New Hampshire, Ohio, Oklahoma, South Carolina and Vermont. The case is Texas, et al. v. Michael O. Leavitt, etc., No. 22O135.

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