The Health Care Ruling — Big Takeaways and New Questions

Now that the dust is settling from this morning’s Supreme Court ruling, I thought I’d stop to highlight a few big takeaways from the opinion and identify the big questions going forward.  The biggest of those:  What will happen with the Medicaid expansion?  Read on for my initial thoughts.

The First Big Question:  Will Any States Decline to Expand Their Medicaid Programs?

Under the majority opinion, if states refuse to expand their Medicaid programs pursuant to the ACA, the federal government cannot punish them by withdrawing all existing federal Medicaid funds.  That raises the first big question:  With Congress’ biggest stick taken away, will some states now decide not to expand Medicaid?  Only time will tell.  But if any states do go that route, it likely would mean more Americans remain without health coverage, and as a result hospitals may face greater uncompensated-care costs than the ACA anticipated.

On this topic, hospitals will simply have to stay tuned.  It’s impossible at this juncture to predict which states — if any — will refuse to participate in the ACA’s Medicaid expansion.

The Second Big Question:  If a State or States Does Not Expand Medicaid, What Can the Feds Do?

Chief Justice Roberts’ opinion makes clear that the federal government cannot coerce states to participate in the Medicaid expansion by threatening them with the loss of all “existing Medicaid funds” if they refuse.  But the opinion does not appear to foreclose  the use of smaller “sticks” to encourage state participation.  For example, could the federal government tell states that they will lose other PPACA-based funds if they decline to participate?  (Those funds, after all, are not “existing” funds, in the sense Roberts appears to use the term.)  Could it threaten states with the loss of some subset of pre-existing Medicaid funds, but not all of them?  (The idea there is that a smaller threat would not push the case over the line from encouragement to coercion.)

The answer isn’t clear; it’s very possible that the federal government would interpret the opinion to say it can make these threats, while states would interpret the opinion to say the feds cannot do so.  Of course, it remains to be seen whether any states will decline to participate in the expansion.  But if they do, the federal government will have hard choices to make about how it can and should respond.

Big Takeaway #1 — The Court’s Conservatives Really Wanted to Foreclose Mandates

Chief Justice Roberts easily could have skipped the Commerce Clause discussion and gone straight to the tax power.  He could have said, in effect, “the challengers say this law is invalid under the Commerce Clause, but we don’t have to consider that issue, because the law is valid under Congress’s taxing authority.”  In fact, that is what a judge normally would do; judges typically do not decide questions unnecessary to the outcome.  And yet Chief Justice Roberts instead wrote a long opinion explaining why Congress cannot make Americans buy a product (here, health insurance) using the commerce power.  The four dissenting justices agreed, and so that position, with a total of five votes, arguably is the law.  Chief Justice Roberts thus managed to uphold the ACA while still reaching out and sharply warning Congress against mandates.  A deft move from a judge always known for his skills in advocacy.

Big Takeaway #2 — The Medicaid Portion of the Case Is the Most Important, Legally Speaking

The Chief Justice’s majority opinion arguably forecloses Congress from trying to enact product-purchase mandates.  That is important, but not something that will come up often; after all, Congress has rarely if ever tried to make Americans buy a product.  Likewise, the Chief Justice’s opinion on the tax power is important to this case, of course, because it allowed him to uphold the law.  But that piece of the opinion also may not apply in too many cases.

The Medicaid piece of the case is another matter altogether.  As I have said in other posts, the idea pushed by the states here — that if Congress offers excessive “encouragement” to states to regulate in a certain way, it amounts to an unconstitutional direct command — has never been squarely accepted by the Supreme Court until today.  Put another way, the Court has never said — not in 200-plus years — that a Congressional spending offer to the states was so coercive as to be unconstitutional.  Now, however, the “coercion doctrine” is the law.  And that means states may be able to object to changes to various cooperative federal-state programs on the theory that those changes are coercive.  It also means states may be able to object to some future changes to Medicaid, depending on how those changes are structured.

The Medicaid portion of the decision, in short, is a big change in the law, and it has the potential to interfere with Congress’ ability to tweak federal-state programs as appropriate.  It was a sleeper, but it may turn out to be the most significant piece of the decision in the long run.

more on the majority opinion

Chief Justice Roberts, writing for a majority of the Court, holds that:

(1) the individual mandate would have been unconstitutional under the Commerce Clause.

(2) the individual mandate can be sustained as a tax under Congress’ taxing power.

(3) The Medicaid expansion is unconstitutionally coercive if states are threatened with loss of all their Medicaid funding if they don’t comply with the expansion.  With that threat stripped from the statute, it survives review.

Those holdings mean that the ACA – including all provisions relevant to hospitals and their regulatory environment, with some exceptions relating to Medicaid – survives.

Below is a quick overview of Chief Justice Roberts’ majority opinion, which is all I’ll have time for at this stage.  I’ll publish a more complete analysis this afternoon.  (I have omitted citations and other detritus when I quote his opinion.)

Roberts on the Commerce Clause

He accepts the states’ argument that Congress can’t force people into commerce in order to regulate it.

– “The power to regulate commerce presupposes the existence of commercial activity to be regulated.”

– “As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching ‘activity.’  The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.”

- “Under the Government’s theory, Congress could address [America’s] diet problem by ordering everyone to buy vegetables.”

–“Under the Government’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act.  That is not the country the Framers of our Constitution envisioned.”

– “The proposition that Congress may dictate the conduct of an individual today because of prophesied future activity finds no support in our precedent. . . . Everyone will likely participate in the markets for food, clothing, transportation, shelter, or energy; that does not authorize Congress to direct them to purchase particular products in those or other markets today. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions.”

Roberts on why the individual mandate can be upheld as a tax

Roberts says the mandate can be upheld as a tax because (1) it looks an awful lot like a tax and (2) courts are required to give statutes the benefit of the doubt to find that they are constitutional.

– “Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. See §5000A(b). That, according to the Government, means 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, like buying gasoline or earning income. 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.”

– “The question is not whether that is the most natural interpretation of the mandate, but only whether it is a ‘fairly possible’ one.  As we have explained, ‘every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.’ The Government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the Constitution. Granting the Act the full measure of deference owed to federal statutes, it can be so read.”

– “While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful. Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS. The Government agrees with that reading, confirming that if someone chooses to pay rather than obtain health insurance, they have fully complied with the law.”

Roberts on why the mandate is a “tax” for constitutional purposes but not for purposes of the Anti-Injunction Act

Basically, Roberts finds that the mandate is a “tax” for constitutional purposes because it has the features of a tax.  It’s not a “tax” for purposes of the Anti-Injunction Act, however, because Congress chose not to call it a tax, and when it comes to federal statutes, Congress is in charge of how to characterize things.

– “The Anti-Injunction Act applies to suits ‘for the purpose of restraining the assessment or collection of any tax.’ Congress, however, chose to describe the ‘[s]hared responsibility payment’ imposed on those who forgo health insurance not as a ‘tax,’ but as a ‘penalty.’ . . . Amicus argues that even though Congress did not label the shared responsibility payment a tax, we should treat it as such under the Anti-Injunction Act because it functions like a tax. It is true that Congress cannot change whether an exaction is a tax or a penalty for constitutional purposes simply by describing it as one or the other. . . . The Anti-Injunction Act and the Affordable Care Act, however, are creatures of Congress’s own creation. How they relate to each other is up to Congress, and the best evidence of Congress’s intent is the statutory text.”

Roberts on Medicaid

Roberts accepted the “coercion” doctrine – i.e., the principle that if Congress offers the states inducements to regulate that are impossible to turn down, that amounts to a direct command that violates the Constitution.  (That idea got seven votes, so the “coercion doctrine” is now the law.)  But he held that, in this case, the problem can be solved by forbidding Congress to take away all Medicaid funds from a state that refuses to expand Medicaid as ordered by the PPACA.  Congress instead can only threaten the states with loss of new funds provided by the Act.

– “Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.”

– “Section 1396c gives the Secretary of Health and Human Services the authority to do just that. It allows her to withhold all ‘further [Medicaid] payments . . . to the State’ if she determines that the State is out of compliance with any Medicaid requirement, including those contained in the expansion. In light of the Court’s holding, the Secretary cannot apply §1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion.”

We have the opinion

The Supreme Court’s opinion is posted here: http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf

There likely will be radio silence on my end for about 45 minutes as I review the opinion and craft a somewhat longer summary.  I will post that by 11:30 a.m.  That will be it for several hours; I will then have a longer post with analysis later this afternoon.

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