3Qs: Breaking down the Supreme Court’s health-​​reform ruling

Kristin Madison

In a land­mark deci­sion authored by Chief Jus­tice John Roberts, the Supreme Court ruled 5–4 on Thursday that the Afford­able Care Act — the land­mark health-​​care reform law known to many as “Oba­macare” — is con­sti­tu­tional. We asked Kristin Madison, a pro­fessor with dual appoint­ments in the School of Law and the Bouvé Col­lege of Health Sci­ences, to inter­pret the court’s deci­sion, which found the fed­eral gov­ern­ment has the power to require most cit­i­zens to pur­chase health insurance.

Law and health sciences professor Kristin Madison analyzes the Supreme Court’s 5-4 ruling upholding President Obama’s Affordable Care Act. Photo by Dreamstime.

Why did the Supreme Court uphold the individual mandate as constitutional? Does the Court's decision imply that Congress now has the power to force people to buy broccoli, a concern raised during the oral arguments last March — and again Thursday by House Speaker John Boehner in a press conference following the ruling?

The U.S. Constitution grants the federal government a limited set of powers; if a federal statute does not fall within at least one of these powers, it is unconstitutional. The federal government argued that the mandate regulates "the way individuals finance their participation in the health-care market," and therefore is constitutional under Congress' power to regulate interstate commerce.

A five-member majority of the court rejected this argument. Chief Justice Roberts said that the mandate "does not regulate existing commercial activity" but "instead compels individuals to become active in commerce by purchasing a product," and that the framers of the Constitution "gave Congress the power to regulate commerce, not to compel it." Congress cannot use the Commerce Clause to justify the individual mandate — or a requirement to buy broccoli.

Four of the five justices who rejected the commerce argument would have struck down the entire statute. But Chief Justice Roberts, joined by the remaining four justices of the Supreme Court, decided that the mandate was permissible under Congress' power to impose taxes. While the ACA says that individuals "shall" ensure that they maintain appropriate insurance coverage, the sanction for failing to do so is merely an IRS-enforced penalty collected from taxpayers. Individuals act lawfully regardless of whether they choose to purchase insurance or pay the penalty. Even if Congress did not call the mandate a tax, it essentially is one, and is therefore constitutional under the taxing power.

Analysts have long been concerned that the ACA’s penalties might be too small to encourage individuals to purchase insurance. One interesting question is whether the Supreme Court’s opinion will lead more people to see purchasing insurance as truly a “choice,” rather than a requirement, and therefore reduce the mandate’s effectiveness.

The court also ruled that the federal government couldn’t cut Medicaid funding from states that refuse to participate in the program's expansion. What does this mean for the implementation of this legislation?

Under the Constitution's Spending Clause, Congress has the power to attach conditions to federal funding, even if it would not have the power to impose the same requirements in the absence of federal funding. The ACA challengers argued, however, that Congress went too far when it significantly expanded Medicaid eligibility by requiring states to cover nearly all individuals with incomes below 133 percent of the federal poverty line. Specifically, they argued that "[t]he ACA threatens States with the loss of every penny of federal funding under the single largest grant-in-aid program in existence — literally billions of dollars each year — if they do not capitulate to Congress' steep new demands" and that "Congress may not use its spending power to coerce the States."

Seven justices shared the states' concerns about coercion.  Justices Scalia, Kennedy, Thomas and Alito stated that “it is perfectly clear from the goal and structure of the ACA that the offer of the Medicaid Expansion was one that Congress understood no State could refuse.” Chief Justice Roberts, joined by Justices Breyer and Kagan, viewed the possibility of withholding funding as a “gun to the head” and concluded that Congress is not permitted to "penalize States that choose not to participate in that new program by taking away their existing Medicaid funding." Chief Justice Roberts’ opinion also concluded, however, that Congress can implement the expansion, and "require that States accepting such funds comply with the conditions on their use."  Justice Ginsburg, joined by Justice Sotomayor, agreed with this last point, stating that "Congress' extension of Medicaid remains available to any State that affirms its willingness to participate."

In short, states can either continue to operate under the traditional contours of the Medicaid program, or they may expand their program under the ACA, taking advantage of the associated federal funding. Given the magnitude of this funding — the federal government will pay 100 percent of states' costs from 2014 through 2016, and 90 percent of costs in the longer term — most states are likely to expand their programs. States that choose not to do so will likely have higher rates of uninsured individuals, and these individuals may be more likely to face the prospect of paying tax penalties.

What will this decision mean for the future of health-care reform?

Insurers and health-care providers have already begun implementing changes in anticipation of the reforms made by Affordable Care Act, and will continue with their efforts. States that have been waiting for the Supreme Court's decision will now need to take action. For example, states that have chosen to implement their own insurance exchanges rather than rely on the federal government to do so will need to scramble to meet statutory deadlines.

It is clear that the Supreme Court's decision has important implications for health-care reform. It is equally clear, however, that Congress' actions in coming months could be even more important: Congress could repeal the ACA in part or in full, or defund its provisions. Health-care reform will undoubtedly remain in the news for the foreseeable future.

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