Supreme Court Upholds Health Care Law - Individual Mandate Upheld as a Tax; Medicaid Expansion Made Voluntary to States

US Supreme Court Upholds Health Care Law (the Patient Protection & Affordable Care Act)The U.S. Supreme Court today issued its much awaited decision on President Obama’s signature health care law (the Patient Protection & Affordable Care Act or “Affordable Care Act”).

In its majority opinion written by Chief Justice John Roberts, the Court upheld the challenged individual insurance mandate in the law as a valid exercise of Congress’ Taxing Power under the U.S. Constitution.

The Court upheld the entire health care law, with the exception only of the mandatory provision in the vast Medicaid expansion included under the law.

The Court narrowly struck down the provision of the Medicaid expansion that allowed the Secretary of Health & Human Services to penalize any State declining to participate in the Medicaid expansion under the Act, by withhold all of that State’s existing federal funding for Medicaid – a joint federal/ state program.

The Court found that particular penalty provision in the Medicaid expansion beyond Congress’ power under the Spending Clause of the Constitution, but upheld the remainder of the law. This effectively leaves it up to the States to choose whether to participate in the Medicaid expansion provided for under the Affordable Care Act.

The full text of the Court’s majority, concurring and dissenting opinions (totaling 193 pages) is available from the Supreme Court’s website (as a PDF document).

Individual Insurance Mandate Upheld under Congress’ Constitutional Power to Impose Taxes

The majority opinion (by Chief Justice Roberts, and joined in by Justices Ginsburg, Breyer, Sotomayor and Kagan) upheld the challenged individual insurance mandate in the law as a proper exercise of Congress’ Constitutional power to impose taxes.

What is the “Individual Insurance Mandate?” The “individual insurance mandate” refers the provision of the Affordable Care Act requiring all uninsured individuals (who are not otherwise exempted from the requirement under the law) to purchase health insurance by 2014 or pay a penalty, which Congress called a “shared responsibility payment” to be “assessed and collected in the same manner as tax penalties.” The Affordable Act also provides for an expansion of the federal-state Medicaid program to cover medical care for all individuals with incomes at or below 133% of the poverty level and exempts such individuals from the individual mandate, in addition to providing substantial financial assistance in the form of tax credits, subsidies and other assistance to those not eligible for Medicaid but unable to afford health insurance. (For a fairly exhaustive summary of the provisions of the Affordable Care Act, see 11th Circuit Appeals Panel Strikes Insurance Mandate, Upholds Rest of Health Care Law).

The Law’s “Shared Responsibility Payment” for Failure to Purchase Health Insurance Held a “Tax.” The Supreme Court majority opinion found the penalty (or “shared responsibility payment”) that Congress imposed, starting in 2014, on individuals who fail to purchase health insurance, to be a “tax” within Congress’ Taxing Power in Article I of the U.S. Constitution, and as such clearly within Congress’ power to legislate.

The fact that Congress called the “shared responsibility payment” a “penalty” rather than a “tax” in the Affordable Care Act, the Court found, did not control “whether [such an] exaction is within Congress’s power to tax.” Citing a previous Supreme Court precedent, the Court held that “In answering that constitutional question, this Court follows a functional approach,“ [d]isregarding the designation of the exaction, and viewing its substance and application.”

Grounds for Characterizing the “Shared Responsibility Payment” as a “Tax.”As set forth in the Court’s Syllabus of its opinion, Justice Roberts and the majority opinion reasoned that the “shared responsibility payment” in the Affordable Care Act, in substance, “may for constitutional purposes be considered a tax,” rather than a penalty to enforce conduct, for several reasons:

  • The payment is not so high that there is really no choice but to buy health insurance;
  • The payment is not limited to willful violations, as penalties for unlawful acts often are;
  • The payment is collected solely by the IRS through the normal means of taxation;
  • While “none of this is to say that payment is not intended to induce the purchase of health insurance,” “the mandate need not be read to declare that failing to do so is unlawful.” “Neither the Affordable Care Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS;”
  • Congress’s choice of language—stating that individuals “shall” obtain insurance or pay a “penalty”—does not require reading [the provision imposing the "shared responsibility payment"] as punishing unlawful conduct. It may also be read as imposing a tax on those who go without insurance. [citing a previous Supreme Court case as authority]

Presumption of Constitutionality Required for Statutes Passed By Congress. Citing previous cases of the Supreme Court as authority, the majority said “Because “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality,” the question is whether it is “fairly possible” to interpret the mandate as imposing such a tax.

The Court found that it is, and upheld the individual insurance mandate as within Congress’ Taxing Powers under Article I of the U.S. Constitution.

“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax,” the Court concluded. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness,” Justice Roberts wrote in the majority opinion.

As referenced, this portion of the Court’s opinion, upholding the individual insurance mandate, was joined in by five of the nine Justices on the Supreme Court: Justices Roberts, Ginsburg, Breyer, Sotomayor and Kagan. Justices Scalia, Kennedy, Thomas and Alito dissented.

Commerce Clause Rejected as an Alternative Basis for Upholding the Individual Insurance Mandate

Roberts Accepts Challengers View of Commerce Clause; Declines to Characterize Individual Mandate as Regulating Commerce. In his majority opinion, however, Justice Roberts rejected the government’s argument that the individual insurance mandate could also be upheld under the Commerce Clause of the Constitution. Justice Roberts, along with the dissenting Justices (Scalia, Kennedy, Thomas and Alito) accepted the challengers’ arguments that under the Commerce Clause, Congress is limited to regulating commercial activity, and that “the individual insurance 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.”

Concurring Opinion Disagrees on Commerce Clause Reasoning. Justice Ginsburg filed a Concurring Opinion in which she (joined by Justices Sotomayor, Bryer, and Kagan) disagreed with Justice Roberts’ reasoning as to the Commerce Clause, and said that those Concurring Justices would also have found the individual insurance mandate to be within Congress’ powers under the Commerce Clause of the Constitution.

Commerce Clause Discussion Irrelevant to Outcome. The fact that five of the Justices disagreed with the Government’s reasoning for upholding the Affordable Care Act under the Commerce Clause of the Constitution did not matter to the outcome of the case. The individual insurance mandate is Constitutional if within any one of Congress’ enumerated authorities under the Constitution. The holding by five of the nine Justices that it was within Congress’ Taxing Power is sufficient to uphold the law.

Having decided and voted (5 to 4) that the individual mandate is Constitutional under the Taxing Power provided to Congress in the Constitution, it was not in fact necessary for the Court even to reach or decide the question of whether the mandate is also supported by the Commerce Clause of the Constitution. This is so, even though the Government advanced the Commerce Clause argument as its first justification for the law, as the Court noted.

Under the doctrine of judicial restraint, many legal scholars and judges argue that having found a proper and sufficient Constitutional ground to uphold a statute, a Court should go no further and should not discuss other potential grounds. All lawyers are taught in law school that any such discussion in a Court opinion that is not strictly necessary to the outcome of the case is mere “dictum” – meaning that it does not have strong precedential value for other cases in the future.

Given these fundamental principles of the legal doctrine of judicial restraint, which Conservatives historically have espoused, it is in fact remarkable that the Court chose to open its discussion of the Constitutionality of the individual mandate with a discussion of the Commerce Clause, and conclusion that it did not apply to support the mandate. Some would suggest this may have more of a political explanation than a legal one — perhaps reflecting an awareness by the Court of the politically charged battle being waged over health care, and a deference to Conservatives by including the Court’s reasoning in their favor on the Commerce Clause issues — even though that reasoning did not determine the outcome of the case.

In upholding the individual insurance mandate, the Supreme Court reversed in part the decision of the Eleventh Circuit Court of Appeals which the High Court was reviewing. The Eleventh Circuit had found the individual insurance mandate to be unconstitutional.

Authority to Deny Existing Federal Medicaid Funding to States that Decline to Participate in Medicaid Expansion Held Unconstitutional, but Remainder of Law Upheld — Making Acceptance of Medicaid Expansion Voluntary to States

In a surprising outcome on Medicaid Expansion, the Court struck down the provision in the Medicaid expansion part of the law which allowed the Secretary of Health & Human Services (HHS) to penalize States that decline to participate in the law’s Medicaid expansion by removing all of their existing Medicare funding. The Eleventh Circuit Court of Appeals had upheld this provision of the health care law, and the Supreme Court reversed this finding of the Eleventh Circuit.

The Supreme Court, however, upheld all of the remainder of the Medicaid expansion provisions, and left in effect all of the remainder of the Affordable Care Act. In so doing, the Court effectively made the Medicare expansion voluntary to the States. This leaves it up to the individual States to choose whether to participate in the vast Medicaid expansion that is funded largely by the federal government under the Affordable Care Act.

What is Medicaid? As explained in the Court’s Syllabus of its opinion, “The current Medicaid program offers federal funding to States to assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care. The Affordable Care Act expands the scope of the Medicaid program and increases the number of individuals the States must cover.”

The Medicaid Expansion in the Affordable Care Act. The Court’s majority opinion noted that, “Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level.” One hundred percent of the funding for this Medicaid expansion is provided by the federal government through 2016. However, after that, participating States will be required to participate in a portion of the funding, with the federal government gradually reducing its portion of the funding to 90% in future years.

Section 1396c of the Medicaid Act, as applied to the Medicaid expansion under the Affordable Care Act, gives the Secretary of Health & Human Services (HHS) authority to penalize States that choose not to participate in the vast expansion of Medicaid under the Affordable Care Act, by taking away their existing Medicaid funding — an amount which according to the Court could amount to 10 percent of a State’s overall budget.

Authority given to HHS to Deny Existing Medicaid Funding to Penalize States Refusing to Participate in Expansion Held Beyond Congress Spending Power. The majority opinion by Chief Justice Roberts (in which Justices Breyer and Kagan joined) held that Section 1396c, as applied to the Medicaid expansion under the Affordable Care Act, is unconstitutional and beyond Congress’ powers under the Spending Clause of the Constitution. The Court held that the Secretary of HHS may not apply this provision to remove a State’s existing Medicaid funding in order to penalize the State for refusing to participate in the Medicaid expansion under the Affordable Care Act.

They reasoned that “The threatened loss of over 10 percent of a State’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.”

The opinion cited a prior Supreme Court decision (South Dakota v. Dole) as authority for the Court’s holding that under the Spending Clause of the Constitution, Congress has power to make funds available to “provide for the general Welfare of the United States” — including the “power to establish cooperative state-federal Spending Clause programs” — but this does not include the power to “threaten termination of other grants as a means of pressuring the States to accept a Spending Clause program.”

Justice Roberts (joined by Justices Breyer and Kagan) rejected the Government’s argument that the States accepted such a modification in the Medicaid program when they initially accepted federal Medicaid funding, because in the original Medicaid Act, Congress reserved the “right to alter, amend, or repeal any provision” of Medicaid. The Court characterized the Medicaid expansion under the Affordable Care Act as more than a “modification,” stating: “The expansion accomplishes a shift in kind, not merely degree.”

“Indeed,” the Court majority wrote, “the manner in which the expansion is structured indicates that while Congress may have styled the expansion a mere alteration of existing Medicaid, it recognized it was enlisting the States in a new health care program.”

“We have repeatedly characterized . . . Spending Clause legislation as ‘much in the nature of a contract,’” the majority opinion stated. “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,’” the Court said.

The Court found that in accepting the initial Medicaid program, the States could not be deemed to have agreed to a future expansion in Medicaid as extensive as contained in the Affordable Care Act. “A State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program [in the original Medicaid statute] included the power to transform it so dramatically,” the Court found.

Citing several previous cases, the majority opinion states, “Congress may use its spending power to create incentives for States to act in accordance with federal policies. But when “pressure turns into compulsion,” ibid., the legislation runs contrary to our system of federalism.”

“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,” the majority of the Court concluded.

Remainder of Law Upheld and Left In Tact — Effectively Making Participation in Medicaid Expansion Voluntary to the States. The Court, however, narrowly held only that the Secretary of HHS cannot apply Section 1396c of the Law to withdraw existing Medicaid funds from a state that fails to comply with the requirements of the Medicaid expansion contained in the Affordable Care Act. Finding that this narrow holding “fully remedied” the Constitutional violation, the Court left the rest of the Affordable Care Act in tact, including the federal government’s provisions of funds for Medicaid expansion to States that voluntarily do participate.

“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,” the Court held.

Citing the severability provision in the Medicaid Act, the Court ruled that “The other provisions of the Affordable Care Act are not affected.” “Congress would have wanted the rest of the Act to stand, had it known that States would have a genuine choice whether to participate in the Medicaid expansion,” the Court found, as summarized by the Syllabus with its opnion.

Concurring Opinion Disagrees on Medicaid Reasoning, but Upholds Result. Justice Ginsburg’s Concurring opinion disagreed with the majority’s reasoning on the Medicaid expansion. The Syllabus of the Court’s opinion states that “JUSTICE GINSBURG, joined by JUSTICE SOTOMAYOR, is of the view that the Spending Clause does not preclude the Secretary from withholding Medicaid funds based on a State’s refusal to comply with the expanded Medicaid program.” However, given the majority view, Justices Ginsburg and Sotomayor agreed with the Chief Justice’s conclusion that …. “the Medicaid Act’s severability clause, 42 U. S. C. §1303, determines the appropriate remedy,” such that only application Section 1396c to the Medicaid expansion in the Act is stricken down, and the rest of the law stands.

“Because THE CHIEF JUSTICE finds the withholding—not the granting—of federal funds incompatible with the Spending Clause, Congress’ extension of Medicaid remains available to any State that affirms its willingness to participate,” the Concurring opinion explained.

The Court Declined to “Punt” – Holding that the Federal Anti-Injunction Act Did Not Bar the Court from Deciding the Case on its Merits at This Time

The Court declined to adopt a position that was taken by the U.S. Circuit Court for the Fourth Circuit. That Court had dismissed suits challenging the health care law on grounds that federal courts were barred by a federal statute (the Anti-Injunction Act) from hearing and deciding a challenge to enforcement the individual insurance mandate in advance of its actual enforcement and imposition of penalties on persons not complying in 2014.

Both the Government and the challengers to the law argued that the Anti-Injunction Act did not apply to bar the Court from reaching and deciding the merits of the present litigation challenging the Affordable Care Act. However, the Supreme Court, at the request of the Government, appointed a special counsel to brief this issue for the Court’s consideration.

As explained in the Court’s Syllabus, “The Anti-Injunction Act provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person,” 26 U. S. C. §7421(a), so that those subject to a tax must first pay it and then sue for a refund.”

The Court, however, unanimously held that the Anti-Injunction Act does not apply to preclude the Court from hearing and deciding this law suit, even though it seeks in advance to restrain collection of the penalty imposed by the Affordable Care Act (starting in 2014) on those who fail to comply with the individual insurance mandate.

Chief Justice Roberts’ majority opinion holds that “Congress did not intend the payment [of the "shared responsibility payment" under the Affordable Care Act] to be treated as a “tax” for purposes of the Anti-Injunction Act.”

Even though the Affordable Care Act does describe the payment as a “penalty,” not a “tax,” the Court ruled that “That label cannot control whether the payment is a tax for purposes of [the Article I Taxing Power of Congress in] the Constitution, but it does determine the application of the Anti-Injunction Act.”

The Court concluded that “The Anti-Injunction Act therefore does not bar this suit.”

On this issue, Justices Ginsburg, Sotomayor, Breyer and Kagen, in their Concurring Opinion, and Justices Scalia, Kennedy, Thomas, and Alito, in their Dissenting Opinion, all agree with Chief Justice Roberts, making the Court’s ruling on this point unanimous. The Dissenting Justices, however, do take issue with the Chief Justice’s characterization of the “shared responsibility payment” in the Affordable Care Act as a “tax” for purposes of the Taxing Clause of the Constitution, but they agree with his conclusion that it is not a “tax” for purposes of the Anti-Injunction Act.

Implications; Reactions to the Ruling

As expected, reaction to the Supreme Court’s decision divided along partisan lines. John Boehner, Mitch McConnell, Mitt Romney, and other Republicans criticized the Supreme Court’s decision, and vowed to pursue “full repeal of Obamacare” in its entirety immediately.

President Obama made a statement from the White House today, in which he characterized the Supreme Court decision upholding the Affordable Care Act as a “victory for people all over this country whose lives will be more secure because of this law and the Supreme Court’s decision to uphold it.” In upholding the health care law, he said, “they’ve reaffirmed a fundamental principle that here in America — in the wealthiest nation on Earth – no illness or accident should lead to any family’s financial ruin.”

Here is the President’s Statement reacting to the Supreme Court’s Health Care Ruling, and explaining again to the American people, in simple terms, what is in the Affordable Care Act and how it will help you:

A written transcript of the President’s remarks is available from the White House.

More Information

To read for yourself the Affordable Care Act, President Obama’s signature Health Care Law, and find out what it in it, see HealthCare.gov, where you will find the full text of the Affordable Care Act, along with a Section by Section presentation and analysis of what is in it.

See related HelpingYouCare™ reports on:

President Obama Lays Out Contents of Health Care Law

Justices Kagan & Breyer Saved Medicaid Expansion by Voting with Chief Justice Roberts

Transcripts of Supreme Court Arguments on Health Care Law Suggest Possible Support for the Law

For detailed discussion of the issues and arguments that were before the Court, see:

Supreme Court Hears Arguments on Health Care Law March 26-28, 2012;

U.S. Government Appeals Health Care Law Litigation to Supreme Court; and

11th Circuit Appeals Panel Strikes Insurance Mandate, Upholds Rest of Health Care Law.

For more news and information on the Affordable Care Act and health care reform, see the HelpingYouCare™ resource pages on VoicesForCare™, including:

_____________

Copyright © 2012 Care-Help LLC, publisher of HelpingYouCare™. All rights reserved.

Editor’s Note: The author of this article, Constance R. Barnhart, is a practicing attorney and Managing Member at Barnhart Law PLC. She is also the founder and Editor of the HelpingYouCare™ website.

NOTICE: If you are reading this article on any website other than HelpingYouCare.com, please click HERE to go to the original article. No website other than HelpingYouCare™ has been given permission to publish this article.

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