Summary of Today's Landmark Supreme Court Health Care Decision

Health Law Bulletin

Summary of the Supreme Court's Landmark Decision under PPACA

June 28, 2012

Despite the political hype, the Supreme Court decision concerning the Patient Protection and Affordable Care Act ('PPACA") focused on two constitutional issues: (1) Is the individual mandate constitutional? and (2) Is the Medicaid expansion constitutional?  PPACA requires most Americans to possess health insurance [the mandate] as of 2014 and imposes a penalty on those who do not comply.  The penalty will be paid as a federal tax liability on income tax returns and is enforced by the federal Treasury.  Further, PPACA offers increased federal funding to states to expand Medicaid coverage [Medicaid expansion] and imposes conditions on those states that accept the new federal funds.  The conditions require the states that accept the new federal funds to provide health care coverage, via the state's Medicaid program, to certain individuals who were ineligible for Medicaid previously, e.g., low income adults with no dependent children.  Of great significance, PPACA would also eliminate federal Medicaid funding to those states that do not accept federal funds under PPACA.  The purpose of PPACA is to increase the number of Americans who can attain and afford health care services.  However, both the mandate and the Medicaid expansion provisions were challenged in various district and appellate courts across the United States, which prompted the Supreme Court to rule on the issues.  Therefore, to the degree that the mandate and the Medicaid expansion survived Supreme Court review, a large number of citizens would gain access to health care services when previously they were arguably unable to afford such care on their own.

The Supreme Court Decision

1. In a 5-4 decision authored by Chief Justice Roberts, the Court upheld the penalty for noncompliance with the mandate as a valid exercise of Congress' taxing power.  Therefore starting January, 1, 2014, barring future congressional action or political upheaval, a large number of currently uninsured individuals are required to acquire health insurance or pay a tax penalty.  However, the number of individuals who will choose to pay the penalty rather than acquire insurance is unknown and difficult to predict.  Further complicating the issue is the IRS's lack of power to enforce the penalty under PPACA, which bars the IRS from using several of its normal enforcement tools, such as criminal prosecutions and levies.

2. The Court also upheld the Medicaid expansion in part, allowing the offer of increased federal Medicaid funds with conditions attached.  However, the Court struck down the provision eliminating federal Medicaid funding for those states that do not accept the new increased funds, because such a provision constitutes unlawful coercion of the states by the federal government.  Therefore, states can choose to accept or not to accept the new federal Medicaid funds with the attached conditions, without risking the loss of all federal Medicaid funding.  

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