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The Supreme Court's Spending Clause holding in National Federation of Independent Businesses v. Sebelius (NFIB) is likely to be consequential for many reasons. It will have a direct effect on the implementation of the Affordable Care Act (ACA), which relied on the expansion of Medicaid-now made voluntary by the Court-to obtain health care coverage for more than fifteen million previously uninsured people. At this writing, it remains unclear how many states will participate in the expansion. The Congressional Budget Office recently estimated that, as a result of the Court's decision, three million fewer people will obtain new Medicaid coverage under the law than it had originally predicted.

But the Court's Spending Clause ruling will have potentially an even more far-reaching effect on the constitutionality of other federal statutes enacted pursuant to Congress's spending power, as states will be prompted to challenge other conditional spending laws in the education, social welfare, environmental, and civil rights areas as unconstitutionally coercive. The ultimate legal effect of NFIB's Spending Clause holding on these laws is unlikely to be determined without years of litigation.

In this chapter, I focus on another likely effect of NFIB's Spending Clause holding- the case's effect on the day-to-day bargaining between states and the federal agencies that administer cooperative spending programs. I argue that NFIB gives states important new leverage in these negotiations. This new leverage is likely to accelerate the trend toward "federalism by waiver;' in which important questions about the federal-state relationship are resolved by the federal executive branch granting tailored, conditional exemptions from the broad, general spending conditions adopted by Congress. And I will argue that this is not necessarily a bad thing.


Reproduced by permission of Oxford University Press.