NFIB Sebelius Roberts

  45

therefore constitutional, because it can reasonably be read
as a tax.

IV
A

  The States also contend that the Medicaid expansion
exceeds Congress’s authority under the Spending Clause.
They claim that Congress is coercing the States to adopt
the changes it wants by threatening to withhold all of a
State’’s Medicaid grants, unless the State accepts the new
expanded funding and complies with the conditions that
come with it.  This, they argue, violates the basic principle
that the “”Federal Government may not compel the States
to enact or administer a federal regulatory program.””  New
York, 505 U. S., at 188.

  There is no doubt that the Act dramatically increases
state obligations under Medicaid. The current Medicaid
program requires States to cover only certain discrete
categories of needy individuals-—pregnant women, chil-
dren, needy families, the blind, the elderly, and the dis-
abled. 42 U. S. C. §1396a(a)(10).  There is no mandatory
coverage for most childless adults, and the States typically
do not offer any such coverage.  The States also enjoy
considerable flexibility with respect to the coverage levels
for parents of needy families. §1396a(a)(10)(A)(ii). On
average States cover only those unemployed parents who
make less than 37 percent of the federal poverty level, and
only those employed parents who make less than 63 per-
cent of the poverty line.  Kaiser Comm’n on Medicaid and
the Uninsured, Performing Under Pressure 11, and fig. 11
(2012).

  The Medicaid provisions of the Affordable Care Act, in
contrast, require States to expand their Medicaid pro-
grams by 2014 to cover all individuals under the age of 65
with incomes below 133 percent of the federal poverty line.
§1396a(a)(10)(A)(i)(VIII). The Act also establishes a new

46

“”[e]ssential health benefits”” package, which States must
provide to all new Medicaid recipients—a level sufficient
to satisfy a recipient’’s obligations under the individual man-
date. §§1396a(k)(1), 1396u–7(b)(5), 18022(b).  The Af-
fordable Care Act provides that the Federal Government
will pay 100 percent of the costs of covering these newly
eligible individuals through 2016.  §1396d(y)(1). In the
following years, the federal payment level gradually de-
creases, to a minimum of 90 percent.  Ibid. In light of
the expansion in coverage mandated by the Act, the Federal
Government estimates that its Medicaid spending will in-
crease by approximately $100 billion per year, nearly 40
percent above current levels.  Statement of Douglas W.
Elmendorf, CBO’s Analysis of the Major Health Care
Legislation Enacted in March 2010, p. 14, Table 2 (Mar.
30, 2011).

 The Spending Clause grants Congress the power “”to pay
the Debts and provide for the . . . general Welfare of the
United States.””  U. S. Const., Art. I, §8, cl. 1.  We have
long recognized that Congress may use this power to grant
federal funds to the States, and may condition such a
grant upon the States’’ ““taking certain actions that Con-
gress could not require them to take.””  College Savings Bank,
527 U. S., at 686.  Such measures “”encourage a State
to regulate in a particular way, [and] influenc[e] a State’’s
policy choices.””  New York, supra, at 166. The con-
ditions imposed by Congress ensure that the funds are
used by the States to “”provide for the . . . general Welfare””
in the manner Congress intended.

  At the same time, our cases have recognized limits on
Congress’’s power under the Spending Clause to secure
state compliance with federal objectives. “”We have re-
peatedly characterized . . . Spending Clause legislation as
‘’much in the nature of a contract.'” ”  Barnes v. Gorman,
536 U. S. 181, 186 (2002) (quoting Pennhurst State School
and Hospital v. Halderman, 451 U. S. 1, 17 (1981)).  The