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Supreme Court upholds Affordable Care Act

Court sets limits on Medicaid expansion

Topics: Health Policy, Market Trends, Strategy

June 28, 2012

Updated at 2:15 p.m.

Dan Diamond, Managing Editor

The Affordable Care Act has been deemed constitutional—by one vote.

In a 5-4 decision, the Supreme Court on Thursday narrowly upheld the law, after a two-year-long legal saga that saw lower courts rule that several elements of the ACA were unconstitutional. Chief Justice John Roberts issued the deciding vote to uphold the law's controversial individual mandate, with the Court concluding that the mandate was constitutional when interpreted as a form of tax.

According to Roberts' majority opinion in NFIB v. Sebelius (PDF link), the ACA's "requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax" and thus falls under Congress' taxing power. 

Medicaid expansion curtailed
However, the Court did elect to limit the law's planned Medicaid expansion:

  • Under the ACA, the federal government proposed a major Medicaid eligibility expansion, which included new Medicaid funds for states that expanded coverage to adults with incomes up to 133% of the federal poverty level beginning in 2014.
  • However, the government would have been able to terminate all state Medicaid funding for states that refused to fully comply with the law's changes.
  • According to the Court, the government can terminate the ACA's new Medicaid funds when states refuse to comply with the law's new provisions, but not do away with existing Medicaid funds.

Dissenting justices would have struck down entire law
In a mild surprise, Justice Anthony Kennedy joined with Justices Antonin Scalia, Clarence Thomas and Samuel Alito in concluding that the entire health reform law should have been struck down.

The ACA "exceeds federal power both in mandating the purchase of health insurance and in denying nonconsenting states all Medicaid funding," Kennedy wrote. "These parts of the Act are central to its design and operation...In our view it must follow that the entire statute is inoperative."

House Republicans have already pledged that they wil hold another vote to repeal the ACA, to be held the week of July 9. However, any repeal measure would likely not survive the Democrat-control Senate.

Expectations had soared that law would be overturned
Observers are terming the decision a "striking victory" for Democrats and the Obama administration. Many forecasters projected that the individual mandate would be overturned, in the wake of oral arguments in late March that saw Solicitor General Don Verrilli seemingly struggle to defend the provision and the law's popularity continue to lag.

Click to expand graphic.

In a televised statement, President Barack Obama called the decision "a victory for people all over this country whose lives are more secure because of this law." The president had prepared three different speeches based on Thursday's outcome.

Sources: Vicini, Reuters, 6/28; Barnes/Aizenman, Washington Post, 6/28. Appleby, Kaiser Health News, 6/28; Kim, Politico, 6/28; New York Times, 6/28.

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