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The attorneys general of 13 states recently filed a lawsuit in federal court challenging the constitutionality of the Medicaid portions of the new health law. Given the dismal track record states and individuals have had challenging New Deal social programs, many pundits have concluded their suit will be dismissed out of hand. I wouldn't be so sure.

The new health law gives states frontline responsibility for setting up an untried system of "exchanges" through which individuals will purchase health-care insurance. States receive partial federal support for running the exchanges up to 2015, after which they run them at their own considerable but uncertain expense. States can opt out of organizing these exchanges—but only if they extend Medicaid coverage to more of their...