Header graphic for print
Triage Healthcare reform winners & losers

U.S. Supreme Court Rules the Individual Mandate Is Constitutional and Limits Medicaid Expansion Laws

Posted in Department of Health and Human Services, PPACA

The decision we’ve all been waiting for is in — the U.S. Supreme Court has ruled that the statute commonly known as the individual insurance mandate (everyone must have minimum health insurance coverage or pay a penalty) is constitutional under Congress’ taxing power.  Because the individual mandate was upheld, the rest of the Affordable Care Act (“PPACA”) has also survived.  The Medicaid expansion also survived, though the federal government cannot withhold existing Medicaid funding if a state does not participate in the expansion.

In a total of 187 pages of opinion, the decision is an unexpected 5-4, with Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan in the majority.  Justices Scalia, Kennedy, Thomas, and Alito dissented.  Below is a brief overview of the key rulings, and additional detail can be found on the SCOTUS blog.

In the next few days and weeks, we will post more detailed analyses and discuss what the decision means for the various stakeholder groups.

1.   The Individual Mandate

In a somewhat unexpected turn, the PPACA decision was decided as a Taxing Power case, rather than a Commerce Clause case.  Only four Justices would have found that the law was permissible as a regulation of interstate commerce; the rest concluded in separate opinions that the government was improperly trying to create commerce in order to regulate it.

But the Court determined that the individual mandate was still constitutional because it was a lawful exercise of the Taxing Power.  The majority held that all a statute has to do to come within the taxing power is levy a tax.  The penalty if one does not buy insurance was held to be a tax because the payment was not so high that it essentially forced purchase of insurance, the penalty is not related to unlawful conduct or willful violation of the law, and it is collected by the IRS through the typical taxation process.

Because the individual mandate was upheld, there was no need to address the severability issues.  PPACA survives as a whole.

2.  The Medicaid Expansion

The bottom line for the Medicaid expansion is that the government may withhold federal funding for the expansion from states that don’t participate in the expansion, but existing Medicaid funding will not be affected if a state does not participate in the expansion.

Getting there, though, was complicated.  Three separate groups of Justices came to three separate conclusions on whether the Medicaid expansion was unconstitutional in whole or in part.  The ultimate outcome was the result of a majority (Chief Justice Roberts and Justices Breyer, Ginsburg, Sotomayor, and Kagan) that concluded that the remedy, if the law was unconstitutional, was to strike only the provision that allowed the federal government to withhold existing Medicaid funding if a state did not participate in the expansion.

3.  The Anti-Injunction Act

The Court concluded that it would not violate the Anti-Injunction Act to decide the case at this time because the individual mandate penalty was called a “penalty.”  Even though that label was not controlling for purposes of the constitutionality of the law under the Taxing Power, it was controlling for purposes of the Anti-Injunction Act because the law only applies to things Congress formally labels as “taxes.”

Stay tuned as we provide further analysis of the opinion and its effect for providers, hospitals, insurers, patients, and more.