Ronald Bailey reacts to a US Supreme Court ruling yesterday upholding Maine’s right to require drug companies to sell their products at the Medicaid price to all residents. I agree with Bailey that Maine’s policy is a bad idea–anything that puts downward pressure on prices does the same to the incentive to create the product, after all–but the decision itself seems reasonable.
The really odd thing about the case to me is that the Opinion would allow HHS Secretary Thompson to rule independently that the Maine statute constitutes an impermissible amendment to Medicaid and thus void it:
Even as the court seemed to validate state efforts to cope with the high cost of medicine at a time of deadlock between the White House and Congress, it set the stage for possible wrangling between the states and the Bush administration over the politically sensitive issue.
Emphasizing that yesterday’s opinion would not be the last word, four justices in the majority said that the ultimate fate of Maine’s program, and others like it being contemplated elsewhere, could hinge on the view of Health and Human Services Secretary Tommy G. Thompson, who has supervisory authority over state implementation of Medicaid.
“The issue we confront is, of course, quite different from the question that would be presented if the Secretary, after a hearing, had held that the Maine Rx program was an impermissible amendment of its Medicaid Plan,” Stevens, joined by Souter, Ginsburg and Breyer, wrote. “In such event, the Secretary’s ruling would be presumptively valid.”
It is unclear, though, how or even when Thompson would have a chance to rule.
A spokesman for HHS, Campbell Gardett, said the court had “vindicated” the department’s position that states must come to the secretary for approval. HHS “anticipates” that Maine will now do so, he added.
But Rowe said the court had actually left that point open. “We do not believe there is any legal requirement” that the state go to Thompson for permission, he said. But he added, “We want to work with the federal government.”
If Maine or other states were to implement plans without HHS approval, the department would have the option of cutting off Medicaid funding. But both sides have reasons to avoid that politically explosive step.
Since when do cabinet secretaries have the authority to nullify state law?! It would be one thing for Congress to have included a provision in the legislation that said states couldn’t tie anything else to Medicaid (an overreach that I would oppose but find constitutionally acceptable since the only penalty would be denial of the right to participate in a federal program) but it’s quite another to vest such power in a mere functionary.