Supreme Court Rules On Affordable Care Act: Initial Insights And Implications

On June 28, 2012, the U.S. Supreme Court issued a landmark ruling on the constitutionality of key provisions of the Patient Protection and Affordable Care Act (ACA). In a 5-4 decision, the Court ruled the individual mandate is constitutional. While the ruling upheld the provisions of the ACA and allows implementation of the law to go forward, the Court limited the federal government's ability to require states to implement the Medicaid expansion. Below, we briefly describe some of the key implications of the decision.

Medicaid Expansion

One fundamental element of the Affordable Care Act is the expansion of Medicaid from a program that covers only specified categories of needy individuals to coverage for all individuals with incomes below 133 percent of the federal poverty level. (For an individual, 133 percent of the federal poverty level is currently about $14,856 annually.) The statutory amendments implementing this expansion were structured so that if a state refused to implement the mandatory expansion, the Secretary of Health and Human Services could use her existing enforcement authority to withhold part or all of that state's Medicaid funding. The Court's narrow holding was that the use of that enforcement authority (42 U.S.C. § 1396c) to withhold existing Medicaid funds based on a state's failure to implement the ACA's Medicaid expansion is unconstitutional. The Court did not invalidate any provision of the ACA, but instead limited the federal government's ability to enforce the specific Medicaid expansion requirements in those states that are unwilling to undertake the dramatic Medicaid eligibility expansion that would have been mandated by the ACA.

A majority of the Court agreed that the federal government cannot penalize a state that refuses to implement the Medicaid expansion by taking away the state's existing Medicaid funding. At their option, states are free to implement the expansion, and if they do so, they must comply with the requirements of the ACA. The federal government retains its power to withhold federal Medicaid funding if a state that implements the expansion fails to comply with federal law in doing so. The narrow holding of the Court does not affect the federal government's power to withhold federal Medicaid dollars based on a state's failure to comply with other Medicaid requirements.

Chief Justice Roberts' opinion, in which two other justices joined, concluded that the purpose of the threatened loss of all...