Health Care Reform and the Supreme Court


By Kevin W. Ryan JD, MA

“On March 23, 2010, the Patient Protection and Affordable Care Act (ACA) was signed into law.” That is how the article “Health Care Reform Made Simple” by this author began in the spring 2011 edition of @Law. In that article, I sought to distill down the essence of the hundreds of pages of the ACA as passed by Congress and the tens if not hundreds of thousands of pages of rules, regulations, guidance, and analyses that have been generated since that spring day in March two years ago. Despite the inherent complexity, at its core, the ACA is focused on two goals: (a) maintaining health insurance coverage for those already insured, and (b) expanding coverage to individuals and families that are, at present, uninsured.

It was noted in the spring 2011 article that the timeline for implementation of the ACA could be delayed or even derailed in the face of significant political opposition and legal challenge. To date, attempts to overturn or even modify the ACA through the political arena have garnered attention but have been largely ineffectual in halting its implementation. However, ACA opponents have made significant progress towards arresting the statute’s overhaul of the health care system by challenging the Act through the legal system. In 2010 and 2011, numerous state attorneys general (ultimately 26) began filing lawsuits alleging that certain provisions of the ACA were beyond Congress’ authority to legislate and, as such, an unconstitutional exercise of power. Cases in the lower federal courts yielded disparate results ranging from a ruling that the entire ACA was unconstitutional, to another court holding that only the individual mandate was improper, to still others that held the Act was proper in its entirety.

Not surprisingly, given this disparity in lower court holdings in an area of such reach and import, when requested to resolve these differences, the U.S. Supreme Court granted a writ of certiorari on November 14, 2011. In granting the writ, upon petition to hear, at least four of the nine Justices had to agree that the case should be ruled upon by the Supreme Court. The writ was granted and oral arguments by supporters and opponents of the Act for National Federation of Independent Businesses v. Sebellius were scheduled for March 2012.

After months of much-discussed anticipation, three days of oral arguments were conducted before the Supreme Court. Reflective of the Act, the legal challenges, while complex, were distillable down to four: (a) whether the Anti-Injunction Act applied which, if so, meant the case could not be heard until at least 2015, (b) whether the individual mandate is an overreach of Congress’ authority, (c) whether the ACA can be implemented if some part of it is found unconstitutional (e.g., if the individual mandate to purchase is held improper, can it be “severed” and the rest of the Act allowed to be implemented in what is known as the doctrine of severability), and finally (d) whether the federal government can require states to expand their Medicaid programs to low-income adults as a condition of participation in the program.

After much anticipation, on June 28, 2012, the Supreme Court released its decision. To the delight of the proponents of the ACA, the consternation of the opponents, and in many ways to the surprise of all (especially given the legal reasoning used), the Supreme Court held in a 5-4 decision that the ACA was constitutional . . . well for the most part. Let’s look at what they said.

There are four major issues the Supreme Court considered in its deliberations:

Issue 1 – Did the Anti-Injunction Act apply?

This statute passed by Congress requires a person to have experienced actual harm (i.e., paid a tax they believe wrong) in order to bring a case before the Supreme Court. The argument here is that since the financial penalties for noncompliance with the ACA do not kick in until 2015, the Supreme Court would have to defer its holding until then. Most analysts believed that the Supreme Court would not apply this doctrine and indeed it did not but for reasons that are somewhat confusing at first blush. In the majority’s opinion, authored by Chief Justice Roberts, it was stated that since Congress had passed the Anti-Injunction Act (AIA) for the reason stated above and in which the term “tax” was used, and it was Congress that passed the ACA in which the term “penalty” not the term “tax” was used as to what was to be assessed if a person did not comply with the individual mandate to purchase health insurance, then the AIA did not apply. In other words, if you call it a duck it is a duck, even if it walks, honks, and looks like a goose.

Issue 2 – Is the individual mandate to have health insurance permissible?

Congress has authority under the Commerce Clause of the Constitution to regulate financially related activities that cross state borders. Historically, the Supreme Court has taken a very broad interpretation of how far this power extends and only very rarely held that an act of Congress was not supportable in this manner. However, the individual mandate to purchase health insurance represents new ground, not merely allowing Congress to regulate elective financial activities but actually requiring that individuals make a purchase of a good or service (health insurance).

The majority upheld the constitutionality of the individual mandate but, importantly, not under Congress’s authority to regulate interstate commerce. Instead, in reasoning that seemingly surprised all Supreme Court watchers, Chief Justice Roberts and the majority wrote that while the Commerce Clause did not allow Congress to regulate interstate commerce, the requirement that “certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass judgment upon its wisdom or fairness.” (quoting from the Supreme Court’s majority opinion). So for this issue, the Supreme Court said, in effect, that even though Congress did not call the assessment for noncompliance a tax, since it functioned like a tax, and since this type of tax IS within Congress’s authority, the assessment is constitutional. In other words, even if you call it a goose, if it quacks like a duck and walks like a duck . . . it IS a duck!

Issue 3 – Severability. If the individual mandate (or any other element of the Act) is unconstitutional, can the remainder of the ACA be given effect or must the entire Act be overturned?

Since the very early case of Marbury v. Madison, the Supreme Court has a long-standing practice of deferring to Congress and allowing its actions to stand if constitutionally appropriate. Similarly, if a part of a statute is found unconstitutional, the Supreme Court will attempt to sever it and uphold the remainder of the law or action. If the Supreme Court had found any element of the Act improper, but most notably, the individual mandate requirement, it would have attempted to give effect to the remainder of the ACA. However, since no element of the ACA was thrown out in entirety, the majority wrote that this issue was moot. It should be noted that the four-justice minority held in their dissent that, in their opinion, no part of the ACA was severable and that if any element was unconstitutional then they would have held the ENTIRE Act invalid.

Issue 4 – Is the requirement that states expand Medicaid eligibility to low-income adults as a condition of participation in the program constitutional?

Opponents to the ACA argued that requiring states to expand their Medicaid programs to allow nondisabled, low-income adults to enroll will be unduly burdensome. Medicaid programs are funded through a combination of state and federal funds, so expanding these services can impact state budgets. Since almost all states face increasing budget problems, requiring additional expenditures are very unwelcome. The Obama administration responded that all states choose whether to participate in Medicaid and, as such, any additional burden is elective. Also, the ACA requires that the federal government reimburse states for 100% of the costs of expanding their programs for the first three years of the expansion, then 90% thereafter, so the burden is much less significant than opponents maintain.

Here again, while the Supreme Court upheld the validity of this part of the ACA, they qualified their response and surprised many analysts with their reasoning. Again, Chief Justice Roberts, in writing for the majority, stated that while Congress clearly has the authority to “offer . . . funds under the Affordable Care Act to expand availability of health care,” it may not “penalize states that choose not to participate in that new program by taking away their existing Medicaid funding.”

The Supreme Court stated that Congress can provide federal funding with certain conditions (e.g., states can receive certain federal highway funds but only if they raise their drinking age to 21 years) but that in this case, since Medicaid comprises such a large part of all state budgets (as much as 10% or more), that to take away ALL of their Medicaid funding as a condition of not expanding their programs to uninsured adults is excessively onerous. As such, the Supreme Court held that states may elect to expand their programs under the ACA but if they do not, their existing Medicaid programs are not imperiled.

So, what are the impacts and ramifications of the Supreme Court’s decision with regard to the Affordable Care Act and health care reform? In the short run, of course, there is affirmation that the elements of the Act already implemented (examples include allowing children to stay on their parents’ plans until age 26 years, elimination of pre-existing exclusion clauses for children, first dollar coverage for certain preventive services, etc.) will continue to be allowed. Additionally, states will continue their existing efforts to develop and implement health insurance exchanges required by the Act (although a number of states that elected to wait on the Supreme Court’s decision will now have to engage in accelerated efforts in this area in order to meet the deadlines). Insurance carriers and the business sector will continue to plan for full implementation of the Act with the knowledge and security that the challenges are now concluded.

Except, of course, they are not concluded. Immediately after the Supreme Court’s decision, opponents to the Act began making statements that they intended to engage in the political process in order to “repeal and replace” the ACA. In July, the U.S. House of Representatives voted (largely along party lines) to overturn the Act; a vote that had already occurred 32 previous times, without hope of advancing through the Senate. Presidential candidate Governor Mitt Romney has embraced overturning the Act as a core of his campaign platform and promises to do so if elected in November.

Additionally, a number of states have already announced that they will NOT expand their Medicaid programs to low-income adults as permissively authorized by the Act and the Supreme Court. As a result, the targeted goals of reducing the numbers of uninsured are, in the short term, imperiled.

In conclusion, while the Supreme Court provided closure regarding the constitutionality of the Affordable Care Act, it by no means settled the political process and potential changes still certain to occur in the area of health care. As always, we must monitor and participate in decisions and developments in this area that impacts us all.

|@Law|

Kevin W. Ryan, JD, MA, is an attorney with a focus on public health law and health care finance. He is an Associate Professor in the Department of Health Policy and Management at the Fay W. Boozman College of Public Health at the University of Arkansas for Medical Sciences, where he serves as the Assistant Dean for MPH Programs. Professor Ryan is also the Senior Advisor for Law and Policy at the Arkansas Center for Health Improvement in Little Rock. He can be reached at ryankevinw@uams.edu.

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  1. #1 by Marina Anna Baker on September 28, 2012 - 4:57 pm

    I do not believe the ACA will do anything to curb the cost of healthcare, if anything, it will cause it to increase. It is fraught with problematic issues; Medicaid being the least of these. It has to go!

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