TRENTON
– Attorney General Zulima V. Farber
announced today that New Jersey has filed
a lawsuit in the U.S. Supreme Court challenging
a provision of a new federal prescription
drug benefits plan that requires states
to help pay for certain outpatient prescription
drug coverage provided under Medicare.
In filing its complaint with the Supreme
Court in Washington, D.C., New Jersey joins
four other states – Texas, Kentucky,
Missouri and Maine – in challenging
a provision of the new federal law governing
prescription drug coverage for “dual
eligibles” under Medicare. Dual eligibles
are low-income elderly persons or disabled
individuals who are enrolled in both Medicare
and Medicaid. There are approximately 140,000
dual eligibles in New Jersey.
Under the new law, which took effect in
January of this year, New Jersey and the
49 other states are required to help fund
federal Medicare coverage for dual eligibles
via a monthly payment to Medicare commonly
referred to as the “clawback.”
It represents the first time since enactment
of the Medicare program in 1965 that a significant
portion of a federal Medicare benefit is
being financed by state payments. New Jersey’s
lawsuit contends that, in requiring states
to help fund an entirely federal program,
the federal government is encroaching on
the State’s sovereignty.
“Our
contention is that the Medicare clawback
provision is unconstitutional because, among
other things, it undermines the ability
of New Jersey to control its own destiny
as a state,” said Attorney General
Farber. “In requiring the states to
pay a specified dollar amount to support
a federal program, the new law eliminates
our ability to exercise control over a fundamental
state function – spending.”
Farber
acknowledged that, in bypassing lower appeals
court levels and directly petitioning the
U.S. Supreme Court, the states are taking
an unusual action. The Attorney General
explained, however, that such an extraordinary
action is warranted because the Medicare
clawback matter presents important constitutional
issues, and could threaten the states with
fiscal harm.
“We believe that, constitutionally
speaking, the clawback provision takes us
into uncharted waters as a nation,”
said Farber. “New Jersey and the other
states are not aware of any other federal
statute that has conscripted state governments
to fund a federal program. Plainly put,
our position is that this is the first time
Congress has expanded its power to include
direct taxation of the sovereign states.”
Prior to enactment of the new federal “Medicare
Part D” law in January, states paid
for the outpatient prescription drugs of
dual eligibles through Medicaid. Under Medicare
Part D, dual eligibles are now covered under
Medicare, and states are required to help
fund the cost by remitting a monthly payment
to the federal government. The amount of
each state’s monthly payment is calculated
by a federally-determined formula, and is
supposed to approximate the amount each
state would pay if it continued to fund
prescription drugs for its own dual eligibles
via Medicaid.
Attorney General Farber noted that, while
some states have taken issue with the amount
of their financial obligation to Medicare
as calculated by the federal government,
New Jersey is not, at this juncture, claiming
direct fiscal harm as a result of the new
Medicare Part D provision.
However, Farber said, being required to
help pay for an entirely federal program,
and having no ability to control, influence
or anticipate the annual cost of doing so,
imposes an element of unpredictability on
state legislative and budget processes that
not only violates the Tenth Amendment, but
could one day result in fiscal harm.
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