Feature | June 28, 2012| Dave Fornell

Supreme Court Explains its Support of Healthcare Reform

Justices take issue with language in the act, but support the overall purpose and constitutionality

June 28, 2012 — The U.S. Supreme Court ruled today that the provision of the Patient Protection and Affordable Care Act (ACA) requiring minimum health insurance coverage is valid and is not a constitutional obstruction. The court also ruled that the expansion of Medicaid is within Congress’ spending power. The court ruled that the law is constitutional by a 5-4 vote.

“When a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislature’s dominant objective,” said Supreme Court Justice Ruth Joan Bader Ginsburg. “In this case, that objective was to increase access to healthcare for the poor by increasing the states’ access to federal funds.”

Chief Justice John G. Roberts Jr. delivered the opinion of the court. He said the court’s main objective was to determine whether Congress has the power under the constitution to enact the challenged provisions of the ACA. He said research into court precedents shows Congress may regulate the channels, persons and activities that substantially affect interstate commerce. The court’s opinion is that healthcare expands beyond state borders and impacts the national economy.

“Put simply, Congress may tax and spend,” Roberts said. “This grant gives the federal government considerable influence, even in areas where it cannot directly regulate. The federal government may enact a tax on an activity that it cannot authorize, forbid or otherwise control. And in exercising its spending power, Congress may offer funds to the states and may condition those offers on compliance with specified conditions.”

Dissenters took the position that states rely on federal funds and this limits Congress’ authority to alter its spending programs. The majority disagreed with this and said it was a “backwards” view, instead stating Congress, not the states, is tasked with spending federal money in service of the general welfare. Each successive Congress is empowered to appropriate funds as it sees fit, and in reality there are no dedicated funds, only the anticipation of this money by the states.

The court cited numerous past legal challenges and referred to the original Medicare Act of 1965, which indicated Congress has the right to change the rules of the program.

Regardless of the strings attached to federal Medicaid funding, there are over-arching concerns about the American healthcare system the law was created to address.

“The crisis created by the large number of U.S. residents who lack health insurance is one of national dimension that states are ‘separately incompetent’ to handle,” Ginsburg said. “Far from trampling on states’ sovereignty, the ACA attempts a federal solution for the very reason that the states, acting separately, cannot meet the need.  Notably, the ACA serves the general welfare of the people of the United States while retaining a prominent role for the states.”

The Court Challenge to Healthcare Reform

In 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA) in order to increase the number of Americans covered by health insurance and decrease the cost of healthcare. The idea was that if more people paid into the national health insurance pool, the overall costs for healthcare should decrease. This would also pave the way for more people to have access to and the ability to pay for healthcare, including those with pre-existing conditions who are often excluded from insurance plans or charged high rates. The act was the federal government's attempt to address the inequities in the national healthcare system. It was also designed to lower healthcare costs, which are growing at a rate that is unsustainable.

One key provision is the individual mandate, which requires most Americans to maintain “minimum essential” health insurance coverage. Individuals who are not exempt and who do not receive health insurance through an employer or government program will be required to purchase insurance from a private company.  Beginning in 2014, those who do not comply with the mandate must make a penalty payment to the Federal Government via the Internal Revenue Service as part of an individual’s taxes.

Another key provision of the act is Medicaid expansion. The current Medicaid program offers federal funding to states to assist pregnant women, children, needy families, the blind, the elderly and the disabled in obtaining medical care. The ACA expands the scope of Medicaid to increase the number of individuals that states must cover. If a state does not comply with the act’s new coverage requirements, it may lose not only the federal funding for those requirements, but also all of its federal Medicaid funds. 

Twenty-six states, several individuals and the National Federation of Independent Business brought suit in Federal District Court challenging the constitutionality of the individual mandate and Medicaid expansion. The Court of Appeals for the 11th Circuit upheld the Medicaid expansion as a valid exercise of Congress’ spending power, but concluded that Congress lacked authority to enact the individual mandate. Finding the mandate severable from the act’s other provisions, the 11th Circuit left the rest of the act intact.

The Supreme Court heard arguments in the case in March and issued its decision June 28, 2012. It preserved the act in its entirety with modification to its language.

Expanding Medicaid

The ACA calls for Medicaid expansion to cover all citizens earning no more than 133% of the current federal poverty line. This would include single adults earning no more than $14,856 per year. This expansion to cover more needy individuals was not viewed as an exorbitant increase. The Congressional Budget Office (CBO) projects that states will spend 0.8 percent more than they would have without ACA. This expansion is set to begin in 2014.

Compared to past Medicaid alterations (more than 50 since its inception), the court said ACA is notable for the extent to which the federal government will pick up the tab. Medicaid’s 2010 expansion is financed largely by federal outlays. In 2014, federal funds will cover 100 percent of the costs for newly eligible beneficiaries; that rate will gradually decrease before settling at 90 percent in 2020.

Court Explains Technical Issues With ACA Language

The court said there were several issues in the language of ACA, which if taken at face value would invalidate the law. While the court addressed these legal issues, it also said to decide the case on the merits of technicalities alone would defeat the overall goal of Congress’ intent to address serious national issues.

The court took issue with the term “penalty,” which Congress used to describe payments for anyone who is not insured after 2014. The court said it is really a tax, which is within the scope of Congress’ authority. The court also said it is not Congress’ intent to force people to buy a product, but to tax for the purpose to fund greater good of the health of the country.

The act empowers the Secretary of Health and Human Services to withhold all Medicaid funding if a state refuses to comply with the ACA requirements to expand its program. The court viewed this as a constitutional violation, but said it is fully remedied by precluding the Secretary from applying any withdraw of existing Medicaid funds for failure to comply with the requirements set out in the expansion. The court said the language should read that Congress has the ability to set requirements for Medicaid funding and has the right to decide if funds will be withheld.

One complaint about ACA is that states will have issues affording increased healthcare costs and the court’s final decision mentioned that it expects to see cases brought before it on that point.  The court said there are many variables in each state, making each state’s case unique. As an example, it was pointed out Florida complained it cannot fund Medicaid without federal funding, yet it has no income tax as other states do to fund their programs. 

To see the complete ruling from the Supreme Court, visit www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf.

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