The Leadership Conference on Civil and Human Rights

The Supreme Court Decision on Health Care Reform

Leonardo Cuello

On June 28, 2012, the Supreme Court issued a complicated ruling that upheld the constitutionality of the Affordable Care Act (ACA), the health care reform law passed by Congress and signed by President Obama in 2010. While the decision ultimately supported health care reform, it also created some new problems for ACA implementation and signaled a continued threat to the Constitution’s role as a protector of civil rights.

The Supreme Court decision
The Supreme Court’s decision addressed the two critical issues that were at the core of all pending ACA litigation. First, the Court addressed the constitutionality of the individual mandate. The individual mandate is the ACA provision that creates a financial penalty, known as the “shared responsibility payment,” for individuals who do not get health care coverage of some kind. Although the majority of courts and scholars agreed that the individual mandate was valid under Congress’s constitutional authority to regulate interstate commerce, the Court’s analysis concluded that the individual mandate penalty was not permissible under the Commerce power because it applies to individuals who choose not to get coverage, and the Commerce power can only be used to regulate activity, not inactivity.

However, the Court ultimately held that the individual mandate is valid based on Congress’s constitutional Taxing power. The Court analyzed the mandate and determined it functions like a permissible tax. For example, the ACA requires the penalty to be paid to the IRS on tax day using normal tax forms. Thus, the Court concluded, the individual mandate stands.

Second, the Court addressed the constitutionality of the Medicaid expansion. The Medicaid expansion is a new category of eligibility in the Medicaid program that will cover individuals below roughly 133 percent of the federal poverty level who are not currently eligible for Medicaid. The Medicaid expansion is projected to insure about 17 million individuals, about one-third of the nation’s current uninsured population.

The lower courts found the Medicaid expansion to be a valid exercise of Congress’s constitutional Spending power. Nonetheless, the Supreme Court viewed the Medicaid expansion as unconstitutionally coercive upon states to the extent a state would lose all of its existing Medicaid funding if it failed to implement the new Medicaid expansion category. The Supreme Court reasoned that when states first started their Medicaid programs, they could not have expected this new category would be part of the deal. However, instead of declaring the Medicaid expansion unconstitutional, Chief Justice John Roberts developed a remedy to address the coercion by simply invalidating the power of the federal government to withhold all Medicaid funding to a state that doesn’t implement the Medicaid expansion—i.e. the federal government can only withhold Medicaid expansion category funds. This very specific remedy is the only way in which the Supreme Court’s decision impacts the ACA.

Impact on health care reform
The Medicaid expansion decision creates some problems for ACA implementation, in that it effectively separates the new expansion category from the rest of the Medicaid program, and each state can decide whether to implement the expansion. Since there is no power to withhold all Medicaid funding, there is no federal enforcement power to make a state implement the expansion. The practical effect of this is that it is possible that a state would choose not to implement the expansion.

A state choosing not to implement a Medicaid expansion would create a number of problems. This is because the various pieces of the ACA were designed to fit together. The Medicaid expansion was the coverage vehicle for lower-income people (below 133 percent of the poverty level), and the new exchanges (with subsidies) created through the ACA are the coverage vehicle for higher-income people. If a state does not implement the Medicaid expansion, the system will contain a gaping, unfair hole: higher-income individuals will be covered through exchanges while lower-income individuals will have no coverage option whatsoever. It would be a terrible outcome for the lowest income individuals in a state.

The critical question is therefore whether states will choose to implement the Medicaid expansion. Unfortunately, a few states have viewed this only as a chance to score political points against the ACA and Obama’s re-election campaign—and they have therefore publically rejected the Medicaid expansion. However, it is simply irrefutable that the Medicaid expansion is a fantastic deal for states, and any state conducting an honest financial analysis will realize this to be the case. The costs of the Medicaid expansion are low—the federal government will reimburse 100 percent of the costs of services in the first three years, and 90 percent in perpetuity.

While the costs are low for a state, the savings are enormous. For example, states spend millions of dollars on state health programs to cover the uninsured, but if a state implements a Medicaid expansion it will save on these expenses since the individuals will no longer be uninsured. All reputable economic analyses show that states that implement a Medicaid expansion will actually make money in the early years and come out nearly financially even in the later years—all the while insuring thousands upon thousands of state residents. For this reason, any rational state policymaker would implement a Medicaid expansion, and it is likely the vast majority of states will do so.

Civil rights perspective
While the Supreme Court largely upheld the ACA and the decision may create problems only in a few states, the Supreme Court invented two new theories that could limit federal constitutional power in the future. The Court introduced a new “activity” test for Commerce power and found “coercion” in a Spending clause enactment. As a matter of precedent, these decisions may not be especially problematic, since the ACA case was very unusual. It is unlikely that Congress will attempt to regulate commercial “inactivity” again soon, if ever, and it is equally unlikely that we will see a Spending power case with the magnitude of the Medicaid expansion issue. Nonetheless, at its core, this case signals a threat to civil rights.

Beyond the direct precedential value, the ACA case was an attack on the federal authority to implement national solutions to national problems. By attacking congressional power to undertake national projects under the Commerce and Spending powers, the ACA decision reflects the ideology of the conservative justices, who view the nation as decentralized with minimum national standards. This stands in stark contrast to the history of civil rights legislation, which has more often been driven by federal reforms that states have fought to resist.

The Supreme Court decision regarding the Spending power (Medicaid expansion) also represents a step backwards for additional reasons. First, as a practical matter, the Medicaid expansion will be beneficial to women and minority communities—such as persons of color, LGBT individuals, and individuals with chronic conditions—who are disproportionately uninsured and consequently likely to live in poor health. For these individuals, the Medicaid expansion is a real solution to real problems, and the Supreme Court decision has opened the door to allow some states to reject this solution, which will hurt these communities.  

Second, as a matter of principle, the Supreme Court’s decision could restrain the ability of federal programs to evolve. The Supreme Court did not establish a coercion test, and it gave little guidance to Congress about how actions are to be assessed for their coercive qualities in the future. Future Congresses and courts will have to act against this confusing backdrop. As a result, numerous lawsuits can be expected to test the range of congressional authority to improve national initiatives created through the Spending power. Improvements in areas such as Medicaid, antidiscrimination, disability rights, public health, education, child welfare, domestic violence, public safety, and the environment could all be stifled to the detriment of civil rights.

Conclusion
While Medicaid has historically provided coverage only to certain low-income individuals, the Medicaid expansion creates a category to ensure coverage for all low-income individuals. In this sense, the Medicaid expansion may be the largest step in American history toward viewing health care as a human right. The Supreme Court has jeopardized that progress with its ACA decision, and the conservative Supreme Court justices have shown that they will oppose federal authority despite the fact that federal authority in the United States has, for years, paved the way for significant and long term advances in civil rights.

Leonardo Cuello is the director of health reform at the National Health Law Program.

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