July 10, 2012
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Health Law Alert: Supreme Court Upholds Affordable Care Act
On June 28, in a much-anticipated decision, the Supreme Court upheld the Patient Protection and Affordable Care Act (ACA). Specifically, the Court held that the two challenged provisions of the ACA, which require most Americans to buy health insurance by 2014 and expand the scope of Medicaid, are valid exercises of Congress’s power under the Constitution’s taxing and spending clauses. The decision marks a strong victory for health reform but leaves open questions about ACA’s Medicaid expansion and will undoubtedly serve as political fuel for the November elections, with opponents vowing to seek repeal. With the law settled for now, the efforts of states, providers, insurers, and employers to respond to the ACA, should move forward uninterrupted.
The Court’s opinion in National Federation of Independent Business v. Sebelius can be found here: http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf.
The Court’s decision and its ramifications will be one of the topics discussed at Gray Plant Mooty’s 16th Annual Health Law Conference held at the Earle Brown Heritage Center in Brooklyn Center on July 19th from 8:00 a.m. – 3:30 p.m.
THE INDIVIDUAL MANDATE AND MEDICAID EXPANSION UNDER THE ACA
The ACA also significantly expands the Medicaid program. Under the Act, eligibility for Medicaid expands to cover those with incomes up to 133 percent of the federal poverty line (or $25,390 for a family of three). The ACA provides states that agree to participate in the expansion with additional federal Medicaid funds. As originally envisioned, states that choose to opt out of the expansion would be penalized by losing all of their federal Medicaid funding, including their existing Medicaid funding.
The Supreme Court decided three central questions:
The Court held that: (1) the Anti-Injunction Act did not bar the challenge to the individual mandate; (2) the mandate was a valid exercise of Congress’s taxing power; and (3) the expansion of the Medicaid population was a valid exercise of Congress’s spending power but that the federal government is prohibited from withholding existing Medicaid funds for non-compliance with the expansion requirements.
The Anti-Injunction Act
In the only unanimous opinion in the case, the Court held that the shared responsibility payment is a “penalty” for purposes of the Anti-Injunction Act because Congress decided to label the exaction a “penalty” rather than a “tax” and that there was “no immediate reason to think that a statute applying to ‘any tax’ would apply to a ‘penalty.’ Chief Justice Roberts, who authored the opinion, noted that Congress can manipulate the scope of the Anti-Injunction Act with such labels.
The Individual Mandate
Writing on his own, the Chief Justice then stressed that the Court must resort to “every reasonable construction” of a statute’s meaning to avoid having to strike down the statute on constitutional grounds. He then turned to the government’s alternative argument that the individual mandate was a valid exercise of Congress’s authority to raise and collect taxes under the Taxing Clause. He wrote that the mandate “looks like a tax in many respects.” For example, the payment is collected by the IRS as part of annual filings, is determined based on standard tax factors, and raises revenue for the government. Moreover, he noted that the payment is less like a penalty and more like a tax because it will often be less costly for an individual to make the shared responsibility payment than to pay insurance premiums and unlike most penalties, will be assessed regardless of an individual’s intent. In light of these factors, a majority of the Court (Roberts, Ginsburg, Breyer, Kagan, and Sotomayor) held that the mandate can be viewed as a tax rather than a penalty, and as such, that the mandate was a valid exercise of Congress’s authority “[t]o lay and collect Taxes.”
Having decided that the inducement was unconstitutional, Justices Scalia, Kennedy, Thomas, and Alito would have struck down the entire Medicaid expansion and the entire ACA. Justice Roberts concluded however, that the unconstitutionality could be remedied by enjoining the federal government from making good on its threat to pull all funding for states that refuse to comply with the expansion. Therefore, states that opt out of the Medicaid expansion will not receive the additional funds available under the ACA but will not lose existing federal Medicaid funding.
While the Supreme Court decision addressed only two aspects of the ACA, the ACA contains many significant changes to the legal landscape of the health care industry, including provisions that:
Uncertainty remains, however, regarding whether the November elections will give opponents of the ACA the requisite votes to repeal the law. At minimum, the Supreme Court’s decision will provide significant political fodder over the next several months. Also, uncertainty remains with respect to the ACA’s Medicaid expansion. California, Connecticut, Hawaii, Indiana, Maryland, Massachusetts, Minnesota, Washington, and Vermont are all participating in the expansion and Arkansas and Oregon are likely to participate. Florida, Louisiana, Mississippi, South Carolina, and Wisconsin will not be participating in the expansion and Missouri, Nebraska, Nevada, and Texas are unlikely to participate. It is still unknown what the remaining states will do.
If you have any questions about the Supreme Court’s decision, please contact Jeremy Johnson (email@example.com, 612.632.3035) or Jesse Berg (firstname.lastname@example.org, 612.632.3374).
This article is provided for general informational purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances. You are urged to consult a lawyer concerning any specific legal questions you may have.
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