This post was written by Emily W. Parento, O’Neill Institute Research Assistant and Lawrence O. Gostin, Faculty Director of the O’Neill Institute.
President Obama signed the Patient Protection and Affordable Care Act (ACA) into law in March 2010, and lawsuits immediately followed. In March of this year, in consolidated cases National Federation of Independent Business v. Sebelius, the Supreme Court heard arguments on the constitutionality of four aspects of the ACA: whether Congress has the power to enact the individual purchase mandate, whether the Medicaid expansion amounts to unconstitutional federal government coercion of states, severability of the individual mandate and Medicaid expansion from other portions of the ACA, and whether the Anti-Injunction Act bars consideration of the individual mandate’s constitutionality prior to the penalties taking effect in 2015.
On June 28th, the Court handed down its historic ruling on all the issues in a 5-4 decision written by Chief Justice Roberts, upholding the law in its entirety with the sole exception that Congress may not revoke existing state Medicaid funding to penalize states that decline to participate in the Medicaid expansion under the ACA. The Court’s opinion is available here. The Court’s decision was surprising because Chief Justice Roberts joined with more liberal Justices Breyer, Ginsburg, Kagan and Sotomayor to find the individual mandate constitutional. More surprising was Robert’s reasoning under Congress’ power to tax. With simple elegance, the Court stated
Our precedent demonstrates that Congress had the power to impose the exaction in §5000A under the taxing power, and that §5000A need not be read to do more than impose a tax. That is sufficient to sustain it.[i]
Moreover, given the relatively small size of the penalty, the Court found that the tax is not so punitive as to exceed Congress’ power.[ii]
In what may become a signature of the Roberts Court in the future, the Chief Justice Roberts agreed with the Court’s conservative wing that the mandate exceeds Congress’ power under the Commerce Clause. Writing for himself, Roberts endorsed the conservative-led activity-inactivity distinction, stating:
The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.[iii]
The importance of the Court’s upholding of the mandate cannot be overstated because it is the model by which Congress ensured the economic viability of the ACA. The Court acknowledged the integral nature of the mandate to the ACA in its decision, noting
By requiring that individuals purchase health insurance, the mandate prevents cost-shifting by those who would otherwise go without it. In addition, the mandate forces into the insurance risk pool more healthy individuals, whose premiums on average will be higher than their health care expenses. This allows insurers to subsidize the costs of covering the unhealthy individuals the reforms require them to accept.[iv]
As health economists have long argued, the mandate is part of a “three-legged stool” along with the popular provisions of “guaranteed-issue” (requiring insurers to offer coverage to all applicants) and “community-rating” (prohibiting insurers from charging differential premiums based on health status). Without the mandate, individuals would have a strong economic incentive to forego coverage with the knowledge that they could always obtain it at a later date, and at the same affordable cost.
In point of fact, individuals have always been and will continue to be permitted to be uninsured if they so desire – but if they do choose to forego insurance they will be taxed as a consequence. The effectiveness of the tax “stick,” however, is debatable because Congress sharply limited the power of the IRS to collect the tax, prohibiting normal enforcement mechanisms such as liens and criminal prosecutions. Some have characterized the Court’s decision as re-framing the mandate such that Americans now have an “invitation” to purchase insurance with the only a relatively small tax for failure to accept.
Perhaps this is a more palatable view of the mandate for those who oppose it. Regardless, there is and will continue to be considerable debate about the effectiveness of the mandate at encouraging people to buy insurance. From an economic standpoint, the answer will depend on the size of the penalty relative to insurance premiums. If premiums are still expensive relative to the penalty, there will undoubtedly be people who will choose to pay the penalty rather than purchase insurance.
This raises two essential economic questions: (1) whether enough healthy people will opt out of insurance, rendering the existing pool unsustainable, and (2) whether public support for EMTALA, the law requiring that hospitals provide emergency care to insured and uninsured alike, will wane now that virtually everyone will have access to relatively affordable insurance.
A critical part of the decision is the Court’s ruling on the Medicaid expansion. Under the ACA, states are required to expand their Medicaid eligibility rules to cover all people with incomes less than 133% of the federal poverty level. If they decline to do so, the ACA would allow Congress to revoke not only the money for the Medicaid expansion, but also the federal funding for existing state Medicaid programs. In a narrow decision, the Court upheld the Medicaid expansion but found that the federal government “cannot . . . withdraw existing Medicaid funds for failure to comply with the . . . [Medicaid] expansion.”[v] Thus, if states decline to comply with federal spending conditions requiring expansion for the poor, they will forego the federal share of funding for the expansion only, but HHS will not be permitted to withhold other Medicaid funding.
In essence, the Court considered that the existing Medicaid program must be treated separately from the Medicaid expansion under the ACA. In his opinion, Chief Justice Roberts distinguished the existing Medicaid program from the Medicaid expansion, observing that the “original program was designed to cover medical services for four particular categories of the needy: the disabled, the blind, the elderly, and needy families with dependent children,” whereas the ACA transforms Medicaid “into a program to meet the needs of the entire nonelderly population with income below 133 percent of the poverty level.”[vi] In a point subject to debate, Roberts considered that the expansion transforms Medicaid such that it “is no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage.”[vii] In her opinion concurring in part and dissenting in part, Justice Ginsburg aptly observed that “[s]ingle adults earning no more than $14,586 per year – 133% of the current federal poverty level – surely rank among the Nation’s poor.”[viii]
Under the Court’s ruling states are now essentially free to decline to participate in the Medicaid expansion. Each state’s decision whether to do so could be enormously consequential, as the Medicaid expansion is projected to account for fully half of the increased coverage under the ACA – 16 million of the 32 million people who will be covered. Indeed, it is unclear under the Court’s ruling exactly what measures Congress could take to encourage states to participate in the expansion, short of increasing federal funding above the already generous levels, 100% from 2014 to 2016, decreasing to 90% after 2019.
From a social justice perspective, states declining to participate in the Medicaid expansion would be a disastrous result, but it is not an inconceivable one given that many states are currently cutting Medicaid funding in the face of budgetary constraints. If public officials truly cared for the poor within their states, surely they would cover them with such generous federal funding. But then again, politics so often seems to trump reason and compassion.
In short, even though the Court has brought much-needed certainty to the constitutionality of the Affordable Care Act, there remains uncertainty about the practical effectiveness of the mandate in ensuring that individuals actually purchase insurance, as well as whether states will participate in the Medicaid expansion.
The Court’s decision to uphold the ACA also has significant policy and political implications. Given the mandate’s unpopularity and political resistance to the ACA by the Republican Party, there will certainly be efforts to slow and perhaps even undermine the full implementation of the law. Indeed, the Republican-led House has already scheduled another vote to repeal the ACA, and presumptive Republican presidential nominee Mitt Romney is using the Court’s decision as a rallying point for supporters, promising to “repeal and replace” the act on day one if elected. (Which, of course, is beyond the constitutional capacity of any President).
The months and years ahead will tell the full fate of the ACA, but for now, the Court’s decision allows the country to continue on its democratically chosen path toward fulfilling the enormously important obligation of ensuring access to affordable health care for all Americans – an aspiration already achieved by virtually all Westerns nations.