Maine sues over Part D State ‘clawback’ payments at issue

AUGUSTA – Maine and four other states sued the U.S. government Friday, challenging the constitutionality of federal provisions requiring them to pay part of the cost of the new Medicare prescription drug benefit.

Maine Attorney General Steven Rowe and Gov. John Baldacci said the state had joined Texas, New Jersey, Missouri and Kentucky in filing the lawsuit with the U.S. Supreme Court. Ten other states filed a friend of the court brief supporting the lawsuit.

“The federal government has placed what amounts to a direct tax upon Texas and other states in violation of the U.S. Constitution,” Texas Attorney General Greg Abbott said in a statement.

The new Medicare Part D program which began Jan. 1 was designed to provide optional prescription drug coverage to Medicare beneficiaries, including individuals referred to as “dual eligibles” under the program who had received drug coverage previously under the states’ Medicaid programs.

Under the new federal program administered by the U.S. Department of Health and Human Services, states are required to pay back what they should be saving by no longer providing drug coverage under their Medicaid programs. The payment has become known as the “clawback.”

The states involved in the lawsuit are alleging that the payments violate the 10th Amendment by forcing them to relinquish control over how they budget taxpayer dollars to pay for a federal program.

Rowe and the governor said Friday the state was expected to pay $3 million more to the federal government this fiscal year than it would have paid for the dual eligibles under MaineCare, the state’s Medicaid program. Next fiscal year, they said, the additional cost is expected to be more than $17 million. By 2010, the additional annual amount is expected to total more than $35 million.

“We should not have to pay a clawback,” Baldacci said in a prepared statement. “It was a process that was supposed to save money but ended up costing states money.”

Gary Karr, a spokesman for the federal Centers for Medicare and Medicaid Services – an arm of the DHHS – said states are going to save billions of dollars under the new program.

“That’s why very few states decided to join this lawsuit, despite requests for them to do so,” Karr said.

U.S. Rep. Tom Allen, D-Maine, who said the action was necessary to protect Maine taxpayers, supported Rowe’s decision.

“Medicare is a federal health benefit,” Allen said. “The ‘clawback’ provision requires states to assume part of the cost of providing this federal benefit. … I will continue to work in Congress to fix the serious problems with this new law.”

Rep. Hannah Pingree, D-North Haven and House chairman of the Legislature’s Health and Human Services Committee, said it was important that Maine was questioning the constitutionality of the federal clawback.

“I know that as a policy the clawback is wrong, and it’s good to know that it may be unconstitutional,” she said. “Maine has been working really hard to take care of our people, despite all of the problems with Medicare Part D. Should we have to pay this clawback, it will really diminish our ability to care for our seniors.”

The states’ lawsuit claims the clawback provision taxes the states and commandeers the state legislative power in violation of the 10th Amendment to the U.S. Constitution. That amendment provides: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

The lawsuit claims the clawback also violates the guarantee clause of the Constitution because it infringes upon essential functions of state government and the autonomy of state government. The suit alleges that the clawback reduces the authority of state legislatures over their budgets and delivers that authority into the hands of agents of the federal government.

“The clawback ignores the system of ‘dual sovereignty’ that is ingrained in our federal Constitution,” Rowe said. “Congress treats states as agents of the federal government, rather than as separate sovereigns in their own right. The clawback requires state legislatures to collect, allocate and remit state funds to the federal government to operate a purely federal program. This violates the intergovernmental tax-immunity doctrine grounded in the 10th Amendment of our federal Constitution.”

Rowe said that while there is no certainty the U.S. Supreme Court will take the case, he believed it raises issues that are of great constitutional magnitude and that no adequate alternative forum for resolving the dispute is available. He said that, historically, the court has accepted cases only when those two criteria have been present.

The federal government will have 60 days to respond to the states’ allegations. Once the response is received, the states have 10 days to file a reply to the federal government’s position. Should the U.S. Supreme Court decide to review the case, Rowe said, the states were hoping for a decision before the end of May when the high court recesses until October.

Although states have banded together in the past to challenge federal mandates or policies, Rowe said challenges under the 10th Amendment are unusual.

“But this is a very unusual case,” he said. “I’ve certainly never seen anything like it before.”

The 10 states supporting the lawsuit are: Arizona, Alaska, Connecticut, Kansas, Mississippi, New Hampshire, Ohio, Oklahoma, South Carolina and Vermont.

The Associated Press contributed to this report.