Canada: US Supreme Court’s Decision On Obamacare Could Impact Shared Spending In Canada

Last Updated: July 10 2012
Article by Nathan Whitling

On June 28, 2012, the Supreme Court of the United States upheld the Constitutionality of the Patient Protection and Affordable Care Act, being health care legislation commonly referred to as "Obamacare". Although the decision is being widely reported as a victory for the Obama administration, one has to read the fine print in order to appreciate the decision's full effect. This fine print may also lay the groundwork for future Constitutional litigation north of the border.

In National Federation of Independent Business v. Sebelius, the Court held, by a 5-4 split that the "linchpin" of Obamacare, being the "individual madate" requiring individuals to purchase "minimum essential" private health care, is Constitutionally valid. Surprisingly, the "linchpin" member of the Court was Chief Justice Roberts, who broke ranks with his conservative colleagues Scalia, Alito, and Thomas JJ. to join with the Court's liberal wing of Ginsburg, Breyer, Sotomayor, and Kagan JJ., thereby tipping the scales in favour of the legislation. (The one unpredictable member of the Court, Justice Kennedy, joined the dissenters.) Presumably as a result of the Republican-appointed Chief Justice's wish not to appear to be too agreeable with a Democratic administration, the majority's basis for upholding this aspect of the regime was not the federal Commerce power (being a head of power which, unlike Canada's equivalent, has been interpreted in an almost limitless manner), but rather Congress' power to levy a tax.

While today's media coverage of the Sebelius decision has focused upon the validity of Obamacare's "individual madate" requirement, buried within the decision is an interesting tidbit of Constitutional jurisprudence which could have ramifications in Canada.

The aspect of Obamacare of less notoriety than the individual mandate is the enforcement mechanism adopted by Congress in order to ensure that the states buy-in to the program. Section 1396d(y)(1) of the Act increases federal funding to cover the States' costs in expanding Medicaid coverage, but by operation of §1396c, if a State does not comply with the Act's new coverage require¬ments, it may lose not only the federal funding for those require¬ments, but all of its federal Medicaid funds. In other words, Congress coerced the states to cooperate by threatening to cut-off their federal funding.

If a shared-costs healthcare program of this nature sounds familiar, it should. In Canada, under the Canada Health Act, the ability of the Provinces to obtain federal health care grants is dependent upon their willingness to adopt and apply the health care standards promulgated by the federal government. In this manner, federal legislation indirectly regulates the field of health care — a legislative field conferred exclusively upon the Provinces under ss. 92(7) and (13) of the Constitution Act, 1867. While some might view such an approach as an undesirable intrusion into Provincial authority, the principles reflected in the Canada Health Act are not only widely accepted in Canadian society, Justice Deschamps noted in Chaoulli v. Quebec (Attorney General), [2005] 1 S.C.R. 791, 2005 SCC 35 "These broad principles have become the hallmarks of Canadian identity."

Is it Constitutionally permissible for the Parliament of Canada to indirectly legislate into the Province's fields of jurisdiction through the exercise of its spending power? The academic opinions on this issue are mixed. Pierre Elliott Trudeau (before assuming high federal office) argued that the exertion of pressure through conditional spending programs constituted an unconstitutional intrusion upon Provincial authority since "the decision of a Provincial Legislature to exercise its constitutional right not to participate in any programme, even given a national consensus, should not result in a fiscal penalty being imposed on the people of the province." (Trudeau, Federal Provincial Grants and the Spending Power of Parliament (1969)). For his own part, Peter Hogg expresses the view that "the federal Parliament may spend or lend its funds to any government or institution or individual it chooses, for any purpose is chooses; and that it may attach to any grant or loan any conditions it chooses, including conditions it could not directly legislate." (Hogg, Constitutional Law of Canada)

As might be expected, challenges to shared spending legislation have been rare. Although it is the Provinces whose legislative authority is arguably eroded by such legislation, they are unlikely challenge such authority, such a challenge being tantamount to biting the hand that feeds them. However, in Reference Re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525, the Attorney General of Manitoba, as Intervener, did dare to suggest that a withdrawal or reduction of previously promised funding from the federal government was tantamount to legislating within provincial jurisdiction. Justice Sopinka dismissed this argument in the following terms:

The written argument of the Attorney General of Manitoba was that the legislation "amounts to" regulation of a matter outside federal authority. I disagree. The Agreement under the Plan set up an open-ended cost-sharing scheme, which left it to British Columbia to decide which programmes it would establish and fund. The simple withholding of federal money which had previously been granted to fund a matter within provincial jurisdiction does not amount to the regulation of that matter.

The one direct challenge to the federal practice of shared funding programs was addressed in the 1989 decision of the Alberta Court of Appeal in Winterhaven Stables Ltd. v. Canada (A.G.) (1989), 91 A.R. 114 (C.A.). In this case, a taxpayer argued that he should not be required to pay federal tax since the revenues raised by the federal government would be partially spent upon matters within provincial jurisdiction, thereby rendering the federal tax collection statutes ultra vires. This ingenious challenge was unsuccessful, Justice Irving writing that "[t]he constitution does not proscribe those incentives or economic pressure. If, for example, all or a substantial number of provinces decided not to accept the conditions, there would be no effect on matters within provincial jurisdiction."

Returning to today's decision on Obamacare, a majority of 6 out of 9 members of the Court struck down the regime's Medicaid enforcement provisions as unconstitutional. In their view, although federal shared funding programs are not per se unconstitutional since the states willingly and voluntarily enter into them, a threat to withdraw such funding in order to achieve a federal legislative outcome did violate the Constitution. Scalia, Kennedy, Thomas, and Alito JJ., addressed this issue as follows:

The ACA does not legally compel the States to partici¬pate in the expanded Medicaid program, but the Act au¬thorizes a severe sanction for any State that refuses to go along: termination of all the State's Medicaid funding. For the average State, the annual federal Medicaid subsidy is equal to more than one-fifth of the State's expenditures. A State forced out of the program would not only lose this huge sum but would almost certainly find it necessary to increase its own health-care expenditures substantially, requiring either a drastic reduction in funding for other programs or a large increase in state taxes. And these new taxes would come on top of the federal taxes already paid by the State's citizens to fund the Medicaid program in other States.

Chief Justice Roberts, along with Justices Breyer and Kagan, reached a substantially similar conclusion. The ability of Obamacare to survive absent its central enforcement mechanism remains to be seen.

In Canada, the reasoning reflected in Sebelius would appear to create a useful precedent for any future attacks to federal legislation regarding federal-provincial shared funding programs. While it appears highly unlikely that such legislation would be found to be unconstitutional per se, it would appear that a threatened withdrawal of federal funding in order to achieve a collateral policy or purpose may well be subject to Constitutional attack.

For more information, visit our Constitutional Law blog at

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