“Well written and an interesting perspective.” Clan Rossi --- “Your article is too good about Japanese business pushing nuclear power.” Consulting Group --- “Thank you for the article. It was quite useful for me to wrap up things quickly and effectively.” Taylor Johnson, Credit Union Lobby Management --- “Great information! I love your blog! You always post interesting things!” Jonathan N.

Thursday, June 28, 2012

SCOTUS Decision on Obama's Healthcare Act: The States v. The Poor

The U.S. Supreme Court ruled on June 28, 2012 that the mandate in the Affordable Healthcare Act (“Obamacare”) is not constitutional under the commerce clause (i.e., Congress cannot force citizens and residents to buy health insurance). As per Scalia’s dissent, “when Congress provides that (nearly) all citizens must buy an insurance contract, it goes beyond ‘adjust[ing] by rule or method,’” which is how “to regulate” has been defined. To adjust by rule or method is not to bring the product of commerce into being, but, rather, to assume its existence.  Instead of being considered a regulation affecting commerce between the states, the core element of the Affordable Care Act of 2010 survives in the decision as a penalty under “Congress’s enumerated power to ‘lay and collect Taxes.’ (Art I, sec. 8, clause 1).” Essentially, Congress has the authority to tax people who decide to go without health insurance. From Robert’s opinion for the Court, “the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes . . . And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax” (p. 32). This reasoning essentially saved the Act.

To be sure, the Court did not allow the Affordable Care Act to survive intact. Besides invalidating the rationale for the mandate under the commerce clause, the decision holds that states can refuse to go along with the expansion of Medicaid under which more of the poor, who are not able to afford insurance for lack of income, are to be included in the program. At the time, “the Medicaid program required states to cover only certain discrete categories of needy individuals—pregnant women, children, needy families, the blind, the elderly, and the disabled.” There was no mandatory coverage for most childless adults. In the expansion, all individuals under the age of 65 with incomes below 133 percent of the federal poverty line are covered.

It can be asked whether people who cannot afford insurance at all will be able to be covered by the expanded Medicaid program, given that the decision enables states to refuse the expansion. In its decision, the Court ruled that Congress cannot withhold the existing Medicaid funds of states that refuse to go along with the change. In her statement from the bench, Ginsburg noted that "seven members of the Court . . . buy the argument that prospective withholding of anticipated funds exceeds Congress' spending power." In other words, Congress cannot use its spending power to threaten states.  In his majority opinion, Chief Justice Roberts points out that Congress can offer additional grants to states—essentially bribing them into going along with the expansion—but a state’s existing Medicaid funding cannot be threatened.

House Minority Leader Nancy Pelosi (D-Calif.) reacted to the ruling by opining that, nonetheless, the states would find the Medicaid funds hard to resist. “A big expansion of Medicaid is part of this bill, as you know, and in order to make it saleable and tactical, we have 300 percent of the benefits described in this bill paid for in Medicaid to the states those first three years of the bill. I don't think the governors will turn that down,” she said. "First of all, the people will have the need; the urgency is there. They don't have to have any matching funds. . . . I believe that once this bill is rolling and states experience the benefits of it, it will be very hard for a state to say, ‘I'm not taking 100 percent of the coverage that Medicaid would provide for these people.’ That's our thinking on the subject," she added. She did not say, however, that after 2016 the states could have to pick up as much as 10 percent of the cost of the expanded benefits. Moreover, she did not address the possibility that ideology could trump even the financial incentives. 

Indeed, some Republican Governors were already holding back from saying whether they would accept the Medicaid funds. One Republican governor, Florida's Rick Scott, didn't waste any time in coming out against the expansion on the grounds that the government of Florida could not afford the increase. "Florida will opt out of spending approximately $1.9 billion more taxpayer dollars required to implement a massive entitlement expansion of the Medicaid program," the former health care executive said. At the time, roughly 4 million of 19 million Floridians lacked health insurance. That's a bit more than 20 percent of the population. To be sure, Scott acknowledged that for three years, from 2014 to 2016, the federal government would pay all the costs of the expansion, but after that, "the burden increasingly shifts to Florida taxpayers." Of course, those taxpayers are also U.S. taxpayers, and in this capacity they would be contributing to the expansion in other states beginning in 2014, without any benefit going to themselves. 

Thinking along such lines, Jacob Lew, the White House chief of staff at the time, predicted that the "vast majority of the states will come in. For those few that are slow to come in, they're going to have to answer to people why they're turning this down and why they're letting people go without coverage." However, Republican Governors such as Scott could appeal to other priorities, especially those that are favored by voters who already have health insurance. Accordingly, Scott argued that Medicaid was "growing three and a half times as fast as Florida's general revenue," and was already taking away money needed for education. In effect, Scott was already building an electoral majority with an interest in letting 20% of the population in Florida continue without health insurance. 

Accordingly, the Democratic leaders in the federal government may have been overly optimistic in assuming that universal coverage in these United States would result from the law. To be sure, some of the states that had Republican governments at the time would probably "flip over" to the Democrats at some point. It would be difficult for a later Republican governor to take the expanded benefits away. Even so, Scott's ideological preference for education over an expansion in medical entitlements for the poor can be expected to be more popular in some of the American republics than in others. The U.S. itself is a veritable empire, both in terms of territory and in being a union of republics. A one-size-fits-all federal law that involves ideological preferences is thus suboptimal. In other words, it makes perfect sense that states should be free to opt out of the expansion of Medicaid (i.e., as per their respective ideological preferences). There is, however, a cost, which is borne more by some than others.

Republican Governors Rick Scott (FL), Scott Walker (WI) and Bobby Jindal (LA)

Were other states, like Louisiana and Wisconsin, to say “thanks but no thanks” to the expansion, the Affordable Care Act would fall significantly short of providing universal health insurance. In the states without the expanded Medicaid, the poor people would presumably not be able to afford individual health insurance (which does not have the required cost advantages of group plans), and yet the mandate would apply so they would be subject to the tax imposed on people who do not have health insurance. The 4 million uninsured Floridians would find themselves suddenly subject to an annual tax collected by the IRS were they unable to afford the premiums for private individual insurance. Scott may really have been putting poor Floridians in dire straits. At the very least, Congress could exempt them from the tax, even if doing so would give other states more of an incentive to balk on the expansion.

As a guiding principle, Congress should encourage rather than thwart state-choice, restricting it when necessary to preserve the Union, even as Congress also provides minimum U.S.-wide protection to the minority position in any state so the people don't fall through the cracks. To fortify federalism without leaving the most vulnerable out in the cold in terms of health-care, the Congress could establish a minimum level of sustenance as a basic human right deserved by any American citizen. Given their sovereignty retained, the fifty American republics could decide for themselves whether to go beyond the “basic common 'human' denominator.” The federal government would be directly responsible for the floor, with the states having as their own programs anything above the foundation.


National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al., 567 U.S. Supreme Court (2012).

Alex Becker, "Obama Health Care Law: Republican Governors, Legislators Not Ready to Fully Commit," The Huffington Post, June 30, 2012. 

Robert Pear, "Republican Governor of Florida Says State Won't Expand Medicaid," The New York Times, July 2, 2012.  

Amanda Terkel, “GOP Governors Resist Implementing Obama’s Health Care Law Despite Supreme Court Ruling,” The Huffington Post, June 29, 2012. http://www.huffingtonpost.com/2012/06/29/gop-governors-obama-health-care_n_1637456.html