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

Last Updated: July 19 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 Doing Business in Canada blog at

About Fraser Milner Casgrain LLP (FMC)

FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions