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Breakdown of Supreme Court's Decision to Uphold ACA

Individual mandate a constitutional use of Congress' taxing power; states cannot be penalized for not participating in Medicaid expansion.

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The Supreme Court today upheld the Patient Protection and Affordable Care Act of 2010 (ACA), enabling one of the most expansive pieces of healthcare legislation in history to stand.

By a vote of 5-4, with Chief Justice John G. Roberts Jr., siding with the majority, the Court found that the minimum essential coverage provision, also known as the "individual mandate" to purchase health insurance, was a constitutional use of Congress' taxing power.

The majority of the Court did not support the opinion that the mandate was a constitutional use of Congress' power to regulate interstate commerce. The other four assenting Justices - Ginsburg, Sotomayor, Breyer and Kagan - did find the mandate a constitutional use of the Commerce Clause, as Justice Ginsburg wrote in her opinion. However, what allowed the mandate to survive was Chief Justice Roberts' opinion, in agreement with the other four Justices, that the penalty an individual must pay for not purchasing insurance is a valid exercise of Congress' taxing power.

According to the Syllabus of the Court's decision, "The shared responsibility payment" -- ie, the penalty paid for not obtaining health insurance -- "may for constitutional purposes be considered a tax. The payment is not so high that there is really no choice but to buy health insurance; the payment is not limited to willful violations, as penalties for unlawful acts often are; and the payment is collected solely by the IRS through the normal means of taxation." (p. 4)

The Court also went on to emphasize that individuals do have the ability to refuse to purchase coverage, and as a result would be subject to the tax penalty. A footnote to the Chief Justice's opinion reads: "Those subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing they may not lawfully do is not buy health insurance and not pay the resulting tax." (p. 44, Opinion of the Court)

The other major aspect of the case focused on the expansion of the Medicaid program. The ACA would expand Medicaid coverage to an additional 17 million individuals, mostly low-income adults. The plaintiffs in the case argued that the expansion of the program amounted to coercion -- states rely so heavily on federal Medicaid funding that they could not refuse to participate in the expansion program. The federal government, they said, was making the states an offer they could not refuse.

The Court ruled that, while the expansion of the program itself was constitutional, it would not be constitutional for Congress to withdraw funding for the current Medicaid program if states refused to participate in the expansion. As Chief Justice Roberts wrote in his opinion, "What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding." (p. 55)

In the dissenting opinion, Justices Scalia, Thomas, Kennedy and Alito wanted to see the entire ACA struck down. Regarding the individual mandate, the Justices wrote, "Whatever may be the conceptual limits upon the Commerce Clause and upon the power to tax and spend, they cannot be such as will enable the Federal Government to regulate all private conduct..." (Dissenting Opinion, p. 2)

Regarding the Medicaid expansion, the dissenting Justices argue that it is constitutional for the federal government to grant funds to the states to run general-welfare programs that the federal government would find too onerous to run itself. However, "it is a blatant violation of the constitutional structure when the States have no choice." (Dissenting Opinion, p. 3)

The Court's entire opinion, National Federation of Independent Businesses v. Sebelius, comprising nearly 200 pages, can be found at http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf.


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As the dust settles on the PPACA ruling, states will soon start focusing not on dissecting the outcome, but on how to get a Health Insurance Exchange up and running in time for them to be fully operational for October 2013 enrollments and January 2014 coverage effective dates. Most will want to begin building their own exchange soon, as to not be forced into using the federal government’s default exchange. No doubt there will continue to be numerous debates on healthcare reform for months, and years to come, but for now we must all move forward and prepare for key milestones ahead.

- Will Saunders
Group President
Government Healthcare Solutions
Xerox

Will Saunders,  Group President,  XeroxJune 28, 2012
Richmond, VA




     

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