Why the Affordable Care Act is constitutional: Part Two - Unbiased summary of Obamacare and the Medicare Expansion

This is part two of my overview on the Obamacare / Affordable Care Act ruling by the U.S. Supreme Court, now focusing on the second challenged provision, the Medicare expansion. If you're looking for information on the first challenged provision, the individual mandate, here's the link to Part One of this summary.

The most controversial part of the ruling was on the individual mandate, which was upheld under the scope of Congress' tax powers. (If you're interested, I refer you back to the link above.) But the provision that was actually ruled unconstitutional and severed from the act was the Medicare expansion. This hub will focus on summarizing how and why that was removed. However, I'd ask you to consider just reading the full ruling if at all possible. The first 60 or so pages are the majority opinion of the SCOTUS and the section on the Medicare expansion can be found from 45 - 58 ish. Here is the link to the complete ruling.

Comments are welcome, but as I do not censor, please comment responsibly.

First, we need a solid understanding of what the ACA is. In the words of Justice Roberts (underlining provided by me, for emphasis): "The individual mandate requires most Americans to maintain “minimum essential” health insurance coverage. 26 U. S. C. §5000A. The mandate does not apply to some individuals, such as prisoners and undocumented aliens. §5000A(d). Many individuals will receive the required coverage through their employer, or from a government program such as Medicaid or Medicare. See §5000A(f). But for individuals who are not exempt and do not receive health insurance through a third party, the means of satisfying the requirement is to purchase insurance from a private company" (p.7). Like stated in Part One, just so we're clear, Obamacare does not cover illegal immigrants.

"Beginning in 2014, those who do not comply with the mandate must make a “[s]hared responsibility payment” to the Federal Government. §5000A(b)(1). That payment, which the Act describes as a “penalty,” is calculated as a percentage of household income, subject to a floorbased on a specified dollar amount and a ceiling based on the average annual premium the individual would have to pay for qualifying private health insurance. §5000A(c). In 2016, for example, the penalty will be 2.5 percent of an individual’s household income, but no less than $695 and no more than the average yearly premium for insurance that covers 60 percent of the cost of 10 specified services (e.g., prescription drugs and hospitalization)." (p.7) This paragraph deals with the "shared responsibility payment", better known as the individual mandate. Justice Roberts goes on to explain his argument for the mandate's constitutionality; the summary is in Part One.

Justice Roberts then moves onto the proposed Medicare expansion. First, let's review what the healthcare is like now in the individual States. Though all the States' individual programs are different, many of them are quite similar to each other. As summarized by Justice Roberts: "The current Medicaid program requires States to cover only certain discrete categories of needy individuals—pregnant women, children, needy families, the blind, the elderly, and the disabled. 42 U. S. C. §1396a(a)(10). There is no mandatory coverage for most childless adults, and the States typically do not offer any such coverage. The States also enjoy considerable flexibility with respect to the coverage levels for parents of needy families. §1396a(a)(10)(A)(ii). On average States cover only those unemployed parents who make less than 37 percent of the federal poverty level, and only those employed parents who make less than 63 percent of the poverty line. Kaiser Comm’n on Medicaid and the Uninsured, Performing Under Pressure 11, and fig. 11 (2012)" (p.45).

What the expansion would do is require all States to cover anyone and everyone under the age of 65 if they are within 133% of the federal poverty line, which would include childless adults. The States would also need to provide a care package for the newly eligible Medicare recipients that at least includes the minimum to satisfy the individual mandate.

The Federal Government would pay for all of the costs of the expansion until 2016, when it will slowly reduce its percentage to a minimum of 90%. The estimated cost, as CJ Robert's opinion states, is that "the Federal Government estimates that its Medicaid spending will increase by approximately $100 billion per year, nearly 40 percent above current levels. Statement of Douglas W. Elmendorf, CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010, p. 14, Table 2 (Mar. 30, 2011)" (p.46). Having healthcare available for all sounds pretty decent to me, as long as we can figure out how to pay for it. But more on that some other time.

The States' problem with the Medicare expansion is nicely summarized by Justice Roberts, so I'll quote him verbatim: "The States also contend that the Medicaid expansion exceeds Congress’s authority under the Spending Clause. They claim that Congress is coercing the States to adopt the changes it wants by threatening to withhold all of a State’s Medicaid grants, unless the State accepts the new expanded funding and complies with the conditions that come with it. This, they argue, violates the basic principle that the “Federal Government may not compel the States to enact or administer a federal regulatory program.” New York, 505 U. S., at 188" (p.45).

The section of the bill the States are criticizing here is the threat of the Federal Government to take away all of a State's Medicare funding (almost or over 10% of budget, depending on the State) if the State does not implement the new expansion. Not just the new funding that will be offered, but all of the funding for all of Medicare.

The outrage had prompted several governors (most prominently, Louisiana Governor Bobby Jindal and Florida Governor Rick Scott) to decry the ACA, usually referred to as Obamacare, and promise to fight for its repeal. (Though even after the Court ruled, several Governors are sticking to their guns. But again, that's for some other time.)

The two videos below don't have much to do directly with the Medicare expansion, but they're worth watching anyway.

The ruling began with a summary of what the situation is, what the Government claimed, and what the States thought was unconstitutional. Briefly, let's have it again. Simply stated: the Government wishes to expand healthcare coverage to more people, but the States feel its "stick" (taking away all of the States' Medicare funding) is harsh enough to qualify as a sort of blackmail, because no real options remain for the State but to accept. The claim is that this is unconstitutional and threatens the balance of the federalism.

Chief Justice Roberts began with quoting what Congress does have the power to do. In his words: "The Spending Clause grants Congress the power “to pay the Debts and provide for the . . . general Welfare of the United States.” U. S. Const., Art. I, §8, cl. 1. We have long recognized that Congress may use this power to grant federal funds to the States, and may condition such a grant upon the States’ “taking certain actions that Congress could not require them to take.” College Savings Bank, 527 U. S., at 686" (p.46). The Supreme Court recognizes that Congress has the power to pass federal laws, and even to condition the grants in a way as to be an incentive.

However, he goes on to state the limits of Congress' control over the States. "At the same time, our cases have recognized limits on Congress’s power under the Spending Clause to secure state compliance with federal objectives. “We have repeatedly characterized . . . Spending Clause legislation as‘much in the nature of a contract.’” Barnes v. Gorman, 536 U. S. 181, 186 (2002) (quoting Pennhurst State School and Hospital v. Halderman, 451 U. S. 1, 17 (1981)). The legitimacy of Congress’s exercise of the spending power “thus rests on whether the State voluntarily and knowingly accepts the terms of the ‘contract.’” Pennhurst, supra, at 17" (p.46-47).

Roberts then goes on to remind the reader why a federalist (balancing power between a central government and lower governments) government works. He also points to precedents where the Supreme Court has struck down bills and arguments because Congress was coercing the States.

Briefly, here is a summary in his own words of the importance of federalism. "Permitting the Federal Government to force the States to implement a federal program would threaten the political accountability key to our federal system... Spending Clause programs do not pose this danger when a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds. In such a situation, state officials can fairly be held politically accountable for choosing to accept or refuse the federal offer. But when the State has no choice, the Federal Government can achieve its objectives without accountability... Indeed, this danger is heightened when Congress acts under the Spending Clause, because Congress can use that power to implement federal policy it could not impose directly under its enumerated powers" (p.48). The shortening of the selection is for the sake of brevity; you can read the full selection from the link in the beginning.

He then goes on, after a brief reestablishment that he acknowledges the right of Congress to direct the use of federal funds through establishing conditions, to agree with the States that the consequences set by the ACA for not complying with the expansion are inconsistent with a working federalism. Here are his reasons:

1.) "States contend that the expansion is in reality a new program..." He states that the justification that the Government gives for considering the States to have already accepted Medicare is unacceptable. In his view, the change "not merely in degrees but in kind" equals a new policy that the States did not consensually agree to.

2.) The consequence is too harsh. The Court majority rules that taking 10% of a State's budget is basically blackmail, as it doesn't leave any viable options for the State. They rule that Congressional incentives are acceptable only so long as the decision “remain the prerogative of the States not merely in theory but in fact.”

With that, he concludes that the currently planned consequence for non-compliance, losing all of the Medicare funding, is unconstitutional, and he severs it from the rest of the ACA with the agreement of the majority. Roberts, however, made it a point to say there would be no problem with the Federal Government choosing to only withhold the additional funding (that would be provided for the expansion) from States that chose not to take on the expansion. The rest of the Affordable Care Act remains untouched.

In summary of the entire ruling, including the individual mandate, allow me to quote pages 58-59 verbatim.

"The Affordable Care Act is constitutional in part and unconstitutional in part. The individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause. That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it. In this case, however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance. Such legislation is within Congress’s power to tax."

"As for the Medicaid expansion, that portion of the Affordable Care Act violates the Constitution by threatening existing Medicaid funding. Congress has no authority to order the States to regulate according to its instructions. Congress may offer the States grants and require the States to comply with accompanying conditions, but the States must have a genuine choice whether to accept the offer. The States are given no such choice in this case. They must either accept a basic change in the nature of Medicaid, or risk losing all Medicaid funding. The remedy for that constitutional violation is to preclude the Federal Government from imposing such a sanction. That remedy does not require striking down other portions of the Affordable Care Act."

"The Framers created a Federal Government of limited powers, and assigned to this Court the duty of enforcing those limits. The Court does so today. But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people."

"The judgment of the Court of Appeals for the Eleventh Circuit is affirmed in part and reversed in part."

It is so ordered.