U.S. Supreme Court Upholds Health Reform But Creates New Threat to Medicaid

June 28, 2012
by Jos G. Linn, Senior Associate, RESULTS U.S. Poverty Campaigns

Unless you just returned from Mars, you are well aware that today the U.S. Supreme Court announced its decision on the constitutionality of the Patient Protection and Affordable Care Act (ACA), the 2010 health reform passed by Congress. At issue was the constitutionality of several provisions in the law, including the “individual mandate” and the expansion of Medicaid. In a 5-4 decision, the Court held that these provisions were permissible uses of federal power under the U.S. Constitution. Chief Justice John Roberts wrote the majority opinion, joined by Justices Breyer, Ginsberg, Sotomayor, and Kagan.

Let’s first explain the ruling on the mandate. As a reminder, beginning in 2014 the ACA requires that all persons in the U.S. carry health insurance, either through a private insurance company or public program. The rationale is that without the mandate, many people would simply wait to buy insurance when they got sick or go to the emergency room for care. This would increase costs for everyone through higher insurance premiums. For those who refuse to get coverage, the IRS will assess a tax penalty (there are hardship waivers available in certain cases). The penalty is as follows:

  • 2014: the greater of one percent of taxable income or $95 per adult family member (maximum $285 per family)
  • 2015: the greater of 2 percent of taxable income or $325 per adult (maximum of $975),
  • 2016, the greater of 2.5 percent of taxable income or $695 per adult (maximum of $2,085).
  • 2017 and beyond: 2016 levels plus annual cost-of-living adjustment

States filed suit claiming that the mandate was an unconstitutional use of federal power. The Obama Administration countered that it was a proper use of Congress’ power to regulate interstate commerce. A majority of the Court agreed with the challengers that the mandate was not permissible under the Commerce Clause (Justices Roberts, Kennedy, Scalia, Thomas, and Alito). However, in a surprise move, Chief Justice Roberts concluded that the mandate was constitutional under Congress’ taxing power (because of the penalty for non-compliance). Justices Breyer, Ginsberg, Sotomayor, and Kagan agreed with Roberts thus upholding the mandate.

The other major component of the Court’s case, and of particular concern for RESULTS, was the constitutionality of the Medicaid expansion. Beginning in 2014, the ACA requires states to expand Medicaid to all persons earning up to 133 percent of the federal poverty line ($30,656 for a family of four in 2012). The federal government will cover all of the cost of the expansion for the first three years and then its share gradually drops to 90 percent. Estimates are 16 million uninsured will get coverage under the Medicaid expansion. RESULTS worked vigilantly in 2009 and 2010 to secure this expansion, which will help America’s lowest income individuals and families get coverage.

At issue in the case was the fact that under the ACA, states that refused to expand Medicaid could be penalized up to ten percent of their current federal Medicaid funding. The states argued that this amounted to coercion. The Court agreed, stating that while the federal government could refuse to provide the expansion money for states that refused to expand Medicaid, the government could not cut existing Medicaid funding. Health reform advocates fear that without the penalty, some states will simply refuse to expand Medicaid in 2014, potentially leaving millions of low-income Americans without coverage. Remember that Medicaid is already under attack. The 2012 House Republican Budget would cut Medicaid by $800 billion and turn it into a block grant to states, as well as eliminate the entire ACA expansion.

Reactions to the ruling have obviously been divided, with health reform advocates celebrating and opponents vowing to fight on. House leaders announced that they would once again vote to repeal the ACA on July 11.

RESULTS applauds the Court for upholding the ACA and not taking us back to square one in repairing America’s broken health care system. While we have concerns about how the Medicaid ruling will play out (which will be fought out in individual states), we are pleased with the outcome of the case. RESULTS still supports a Medicare for All, single-payer health system for the United States but the ACA is an important step forward in reaching our goal of securing health care for all Americans.

TAKE ACTION: Use our Recent Development in Health Care page for an overview of the ACA. Also, for a helpful and fun overview of the ACA, see this 10-minute video from the Kaiser Family Foundation.

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