Health Reform and the Supreme Court Decision – Part 4

Jones & Bartlett Learning Author and Health Policy Expert Joel Teitelbaum Weighs in on the Health Reform Case Before the Supreme Court.

The U.S. Supreme Court has spoken: the Affordable Care Act is constitutional.  The Court last week handed down, by a 5-4 margin, a remarkable, surprising, and complex opinion in NFIB v. Sebelius.  The opinion is remarkable for what it did – it upheld the entirety of the ACA, yet it also narrowed the scope of congressional Commerce Clause and Spending Clause powers.  It is surprising for how it was decided – with Chief Justice Roberts siding with the Court’s liberal bloc using a theory of law that was not seriously on most scholars’ radar.  And it is complex for a host of reasons related to constitutional jurisprudence, the separation of government powers, and health policy.[1]

The majority opinion, [2] authored by Chief Justice Roberts and joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan, began with a determination that “[t]he Affordable Care Act does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act.”  This finding gave the Court the jurisdiction it needed – as discussed in a prior blog post – to move on to consider the merits of the challenges to the ACA.

Having reached the merits, the Court ruled initially that under congressional Commerce Clause powers, passage of the minimum coverage requirement (aka the “individual mandate”) was an unconstitutional reach on the part of federal legislators:

The individual mandate . . . 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.

However, in a surprise ruling few saw coming, the Chief Justice pivoted to another congressional power – the power to tax – and upheld the ACA’s minimum coverage requirement.  The Chief noted that a statute that has been found unconstitutional under one type of congressional power may be permissible under a different one, even if the latter power was not the one envisioned by Congress when it passed the provision in the first place. The majority explained: “The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects….In distinguishing penalties from taxes, this Court has explained that ‘if the concept of penalty means anything, it means punishment for an unlawful act or omission.’ While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful. Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS.”  In the end, the distinction the Court majority drew was this: the minimum coverage requirement is valid not as a command to Americans to buy insurance, but as a tax under the Internal Revenue Code should people choose not to purchase health insurance. [3]

Having upheld the minimum coverage requirement, the majority turned his attention to the second major constitutional question in the case: whether the Medicaid expansion passed as part of the ACA (also discussed in a prior post) amounted to, as contended by 26 states which served as plaintiffs in the case, an unlawfully coercive act of Congress under the federal Constitution.  On this topic, the Court responded in two ways.  It upheld the constitutionality of the expansion itself, and nothing prevents states from moving forward with the expansion and receiving federal funding for it.  At the same time, however, the Court did put the brakes on Congress’s spending powers, striking down as unconstitutional the provision in the ACA that penalized a state that chose not to implement the expansion with the termination of all of the state’s Medicaid funding:

The Constitution simply does not give Congress the authority to require the States to regulate. That is true whether Congress directly commands a State to regulate or indirectly coerces a State to adopt a federal regulatory system as its own…. When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressuring the States to accept policy changes….  [Furthermore, the Medicaid expansion] accomplishes a shift in kind, not merely degree. 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. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. 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.

As a result of the Court’s decision pertaining to the authority of the Executive Branch to remedy a state’s failure to not implement the ACA Medicaid coverage expansion, the ruling appears to separate the penalties that can be applied under the Medicaid program in existence at the time the ACA was passed from those which can be applied to the new expanded coverage group under the ACA.  What this also means, however, is that the ruling should be viewed as unique to the ACA Medicaid expansion and does not in any way undermine the overall legality of the Medicaid program.

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Joel Teitelbaum, JD, LLM is an Associate Professor and the Vice Chair of Academic Affairs in the Department of Health Policy at the George Washington University School of Public Health and Health Services. He also serves as Managing Director of the School’s Hirsh Health Law and Policy Program. Along with co-author Sara Wilensky, Professor Teitelbaum is the author of Essentials of Health Policy and Law from Jones & Bartlett Learning, which recently published in a Second Edition. (Qualified instructors are invited to request review copies here.  Professors Teitelbaum and Wilensky are also the authors of an eChapter on Health Reform which may be bundled with any Jones & Bartlett Learning text at no additional cost.