One of the lines of argument he covered struck me as raising some broader issues. The new rules require states to expand medicaid coverage in expensive ways. The states argue that this amounts to commandeering them, compelling states to implement, and pay for, policies imposed on them by the federal government.
The other side argues that there is no compulsion. Medicaid is a program run by the states, although largely paid for by the federal government, and any state unhappy with the new rules is free to abolish its medicaid program—and, of course, stop receiving federal dollars to pay for it. The states respond that that is not a real alternative, both because many of their citizens are now dependent on the program and because the amount of money involved comes to a sizable fraction of the total state budget. My colleague's view is that the states are unlikely to win on this one, since past cases have made it clear that the federal government can get states to do things—impose a 55 mile per hour speed limit, for instance—by threatening to reduce or eliminate federal subsidies if they don't.
Which raises the following question ... . Suppose the federal government wants to force the states to do something which, according to the Supreme Court, is not within its power—for instance to ban firearms within 1000 feet of a school (United States v. Lopez —but see this Wikipedia article for complications). It does so by creating an income surtax calculated to bring in fifty billion dollars a year, and announces that the money will be used to help states with their budget difficulties—but only states that have passed the ban. To make the logic of what it is doing even clearer, it adds a second condition—states that accept the new money must use it to give every citizen a credit on his state taxes equal to the amount of the surtax.
Aside from some extra paperwork, the law has no effect on states that agree to pass the ban, but acts as a steep fine on states that do not. My colleague's opinion was that such a law—absent the final step, which hadn't occurred to me when I put the question to him—would be found constitutional. There is no constitutional requirement that federal expenditures be allocated fairly among the states, whatever that might mean.
There is a requirement with regard to allocating taxation—Article I Section 2 ("Representative and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers ..."). Later amendments changed the details, but I believe it would still be found unconstitutional for the federal government to announce a tax that would be collected only from some states but not others—not, for instance, from states that had passed regulations the federal government wanted them to pass. So the federal government can evade constraints on its power over the states by targeted expenditures but not by targeted taxes.
When the Constitution was written, that may have been sufficient. So long as all expenditure was for "the common Defense and general Welfare," targeting would not be an issue—although no doubt, in practice, ways were found of promoting the welfare of some people more than others.
My conclusion is that the destruction of one part of the original Constitutional scheme resulted in the indirect destruction of a different part. Once it is accepted that Congress has an almost unrestricted power to tax as much money as it wants to be spent in whatever way it likes, it becomes impossible in practice to restrict its ability to make states do things. All it has to do is take enough money away from their citizens and offer to return it if, and only if, the states are suitably obedient to Congressional commands.