Rob Natelson
August 8, 2012

Yes, the Supreme Court’s Medicaid Decision was Good Contract Law

In NFIB v. Sebelius (the Obamacare decision) a 7-2 majority voided that part of the law that required states to join the Medicaid expansion or lose all (not just a part) of their Medicaid funds. The court treated the federal-state Medicaid relationship as a contract. It essentially held that while the states had granted the federal government power to make changes in the program, any changes the feds imposed had to be reasonable and foreseeable.

Former Solicitor-General Charles Fried has attacked this part of the decision on Scotus Blog, referring to it as“The Court’s Bad Contract Law:” He compares the states’ position to

“a commercial tenant who has a lease in commercial premises in which he has invested heavily and where he has lots of good will (e.g., a neighborhood restaurant). The lease is terminable after five years on sixty days’ notice and the lessor insists on a greatly increased rent. I submit that the tenant’s complaint that this constituted duress would get nowhere.”

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