Ted Cruz once took the Bush administration to court over prescription drugs for seniors

Ted Cruz has been an ardent Obamacare opponent; he held a 21-hour filibuster in 2013 to protest federal funding for the health overhaul.

But before Cruz focused on attacking Obamacare, he launched a lesser-known challenge to another big entitlement program: the Medicare Modernization Act.

Passed in 2003 during the George W. Bush administration, the Medicare Modernization Act created a new federal entitlement program to cover seniors' prescription drug costs. Cruz, then serving as Texas's solicitor general, petitioned the Supreme Court to repeal that law, arguing that it was an unconstitutional overstep by the federal government.

"Congress has entered uncharted territory," Cruz argued in the case, Texas v. Leavitt. "No other federal statute conscripts state governments directly to fund a federal program."

The Bush administration passed Medicare drug coverage in 2003

President George W. Bush campaigns for Medicare prescription drug coverage. (Tim Sloan/AFP via Getty News Images)

Cruz's fight over the prescription drug program centered on challenging how much states should have to chip in to pay for seniors' prescription costs.

Initially, the Medicare Modernization Act seemed like it would be a great deal for states on this front. For decades, their Medicaid programs had to cover prescription drug costs for the poorest seniors who, because of their old age and low income, qualified for both Medicaid and Medicare. MMA would shift the cost of drugs from Medicaid (a program states help pay for) to Medicare (a program the federal government completely funds).

states initially thought mma would be a good deal. then they thought twice about it.

But the law didn't let states off the hook completely: instead, it relied on states contributing a slowly shrinking amount of money to help pay these beneficiaries' drug costs. States would, under MMA, pay 90 percent of the bill in 2006. The contribution would fall, year by year, down to a floor of 75 percent in 2014. The payments would total $6 billion in 2006, the first year they were to exist.

Here's how that would work out in Texas. In 2003, Medicaid spent, on average, $163.46 each month covering these beneficiaries' prescriptions. The Bush administration expected that cost to rise to $221.54 in 2006, as a result of inflation and overall drug price increases.

Texas doesn't pay that entire amount. Like the rest of the Medicaid program, it splits the cost with the federal government and picks up about 39 percent of the bill. (This split is different for each state.)

Without MMA, the Bush administration estimated Texas would spend $87.16 in monthly, per-person drug costs in 2006. With the new law, Texas was on the hook for 90 percent of that: $78.44.

The federal government said states would save money. Texas disagreed.

(Joe Raedle/Getty News Images)

Texas Governor Rick Perry was a vocal critic of these payments. He argued the payments expected of states were far too high. Moreover, he criticized the Bush administration's formula, arguing that it had drug costs rising too steeply — and therefore overestimated the amounts that states would need to pay.

The law, Perry wrote in a wrote in a 2007 statement, "penalizes states like Texas that have taken innovative steps to provide Medicaid drug benefits, control drug cost increases, and manage overall program costs trends."

Other states were up in arms, too: then–California Gov. Arnold Schwarzenegger threatened simply to not send the federal government the payments required under the new law. (The Bush administration got around this challenge by telling states it would just deduct the payments from their Medicaid funding money).

But it was Texas that led the legal charge and, in February 2006, filed the lawsuit on the issue, Texas v. Leavitt, with Cruz as solicitor general on the case.

Cruz's argument: forcing states to spend on drugs was unconstitutional

(Spencer Platt/Getty News Images)

Texas v. Leavitt brought together an unexpected group of governors across the political spectrum. New Jersey, led by Democratic Governor Jon Corzine, became a party to the suit, as did Schwarzenegger's California.

What they had in common: these states were expected to make some of the biggest contributions to funding the prescription drug programs. They had, in other words, a reason to dislike what MMA was doing to their state budgets.

In a filing with the Supreme Court (states can file constitutional challenges directly to the high court), Cruz argued that the law amounted to the federal government unconstitutionally commandeering state budgets.

cruz argued the drug program "entered uncharted territory"

The Medicare Modernization Act, Texas v. Leavitt argued, "eliminates all control over a significant portion of each State's available resources. The States must hand over to the federal government a specified dollar amount for the support and operation of an entirely federal program."

The legal brief Cruz filed with the Supreme Court is 29 pages, mostly making this argument about states' rights — and the unconstitutionality of the federal government directing how states would spend a significant portion of their budget.

The Bush administration responded to the Texas brief in May 2006, arguing that the federal government had full right to ask the states to pay this money. Medicaid, after all, is an optional program — states could drop out of the public insurance plan and no longer be subject to these spending obligations.

The law's "provisions are functionally identical to other longstanding Medicare provisions that make adjustments to federal funding of state Medicaid programs," the Department of Justice argued in its brief.

The suit, however, did not go far: the Supreme Court declined to hear the case in June 2006. All 50 states (including Texas) had to help pay for seniors' prescription drugs, and the law still stands today.

At the time, there was a political case for challenging Medicare drugs

Right now, it seems terrible politics to challenge the Medicare prescription drug program in court. Thirty-seven million seniors now rely on the program, and they really like it. One recent poll showed that 90 percent of seniors who use it say they're satisfied with their coverage.

But back in 2006, it was a totally different story: Medicare's prescription drug program was actually less popular than Obamacare when it started. One comparison of polls of the two programs shows 21 percent of Americans thought the Medicare Modernization Act was a good program before it started — compared with the 35 percent of Americans who viewed Obamacare favorably before its rollout.

(Robert Wood Johnson Foundation)

Even though seniors now really like their drug coverage, Cruz appears to think it could be a winning issue today, too. On his campaign website he now touts "suing the federal government to strike down portions of the Medicare Prescription Drug program as an unconstitutional intrusion in the sovereign authority of the States."

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