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Thursday, June 28, 2012

Health Reform Upheld: A Summary of the Supreme Court's Decision

In a 5-4 decision, the Supreme Court handed down its long-awaited decision on the health reform bill, National Federation of Independent Business v. Sebelius, this morning. This historic decision has upheld the constitutionality of the Patient Protection and Affordable Care Act (ACA) as a whole (striking down only one penalty provision as unconstitutional), upholding measures improving access to and the quality of healthcare in the United States by expanding coverage, increasing benefits, and ensuring access to preventive services for many. This is a victory for communities and public health advocates throughout the country, and a relief for the many Americans already benefiting from some of the ACA’s programs.

Chief Justice Roberts delivered the opinion of the Court, and upheld the constitutionality of the individual mandate under Congress’s Taxing Power. [See here for a table of how all of the Justices' voted]. The individual mandate provision of the ACA states that individuals shall purchase health insurance, or pay a penalty. The Court considered the substance and application of the payment, and not its label. It was noted that the payment is collected by the IRS through the normal means of taxation. While undoubtedly intended to induce individuals to purchase health insurance, that a tax may have the purpose of influencing behavior rather than generating revenue is not problematic. This payment was likened to the taxes imposed on cigarettes for the purposes of smoking deterrence. Furthermore, the fact remained that the payment for failing to obtain insurance did not amount to a punishment for unlawful activity since it was not limited to willful violations of the mandate (as unlawful actions frequently are). Consequently, the Court concluded that mandate “leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.” Page 44.

The Court was unpersuaded by the argument that the individual mandate fell within Congress's Commerce Power. The Constitution grants Congress the power to regulate commercial activity, however, the Court found the mandate not a regulation of existing commercial activity, but instead compulsion to engage in commercial activity, an action beyond the limited power given to the government under the Constitution.

While the individual mandate was upheld, the Supreme Court, however, did strike down the penalty of the Medicaid expansion provisions of the ACA as unconstitutional. Under the Medicaid program, the federal government provides funds to participating states, and in return the states agree to follow certain standards. The ACA expanded eligibility for Medicaid, and required states to expand coverage of their state’s Medicaid programs in accordance with the ACA, or lose all federal Medicaid funding (typically 50 to 83 percent of the state’s Medicaid program spending).

Although the Spending Power grants Congress the authority to create cooperative state-federal spending programs such as Medicaid, states must voluntarily accept the terms of such spending programs. The Court held that, because the ACA penalizes states who choose not to participate in the Medicaid expansion by withholding existing federal funding under the Medicaid program, the provision was coercive. In choosing not to participate in the Medicaid expansion, states would lose over 10 percent of their overall budget (page 51), an effect the Court found to leave states with no real option but to accept the terms of the program, making participation non-voluntary and the program unconstitutional.

Furthermore, the expansion was found to be not a modification of an existing program, but instead the creation of a new one. Medicaid as initially enacted covered four distinct categories of people: “the disabled, the blind, the elderly, and needy families with dependent children.” However, the expansion changes the program into one that covers the entire nonelderly population with incomes less than 133 percent of the poverty level (or 138% FPL if you count the 5% modified adjusted gross income or MAGI). The Court found this not to be a mere modification of an existing program to provide healthcare to needy populations, but instead a transformation of the program into “an element of a national plan to provide universal health coverage.” Pages 53-54. The Court concluded by explaining that its opinion did not prevent the federal government from offering funds to expand Medicaid eligibility, only that states choosing not to participate in the new expansion could not be penalized through the loss of their existing federal Medicaid funding.

Today the United States has taken a great step towards reshaping the American healthcare system. The ACA and its reforms to the system will have a lasting affect on the way people receive and pay for personal medical care, improving access and quality while containing costs, and improving the health of our nation as a whole.

Amanda Swanson
Guest Blogger for Illinois Health Matters

*To read a summary of the Supreme Court hearings on the ACA, please see the post Supreme Court Wrap Up – A Law Student’s Perspective.

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