On June 28, 2012, the United States Supreme Court handed down its anxiously awaited decision on the constitutionality of the Affordable Care Act (ACA) in a case entitled National Federation of Independent Businesses et al v. Sibelius (“NFIB”). The decision, while upholding the constitutionality of the ACA, creates several issues of potentially great future significance involving the U.S. Constitution’s commerce clause and spending clause. But the NFIB case, by holding that states may not be sanctioned by the federal government for not implementing ACA’s mandated Medicaid expansion has also created more immediate, hugely important issues to be resolved by states in implementing ACA.
Although the NFIB decision held ACA constitutional, it did so with five of nine justices saying ACA was unconstitutional under the commerce clause, but was constitutional under the Constitution’s taxing clause. The five justices’ commerce clause jurisprudence was bottomed on an outmoded distinction between regulating “activity” versus “inactivity,” which in the future likely will invite constitutional challenges to what hitherto have seemed accepted exercises of federal power.
The NFIB decision also, for the first time, concluded that an exercise of Congress’s power under the spending clause was unconstitutionally “coercive.” While this concept has been adverted to in decisions previous to NFIB, it had not previously been applied. In the NFIB case the Supreme Court, for the first time, did apply the coercion concept. The Court reached this conclusion by trying to draw distinctions between various types of conditions Congress has placed on states’ eligibility to participate in federal spending programs which, as the separate opinion of Justice Ginsberg so witheringly pointed out, are simply, intellectually untenable.
The Supreme Court’s holding of undue coercion under the Constitution’s spending clause was used by the Court to strike down as unconstitutional a power vested in the U.S. Department of Health and Human Services to withhold from states federal funds for a state’s failure to meet ACA’s requirement to expand Medicaid eligibility to everyone under 65 years of age whose income is less than 133% of the federal poverty level (“FPL”) even though ACA will provide states with 100% federal funding for the cost of this increase in eligibility in the 1st three years (2014-2016) and no less than 90% thereafter.
Governors in Texas, Florida, Louisiana, South Carolina, Mississippi, and Nebraska promptly announced the intention of their states not to participate in Medicaid expansion, but it is our belief that opting out of Medicaid expansion is extremely ill advised both from a humanitarian as well as the state’s self-interested fiscal point of view. Happily, Pennsylvania has to date indicated it will examine more thoughtfully the consequences of failing to implement Medicaid expansion.
Failure to take advantage of ACA’s requirement to expand Medicaid eligibility (mostly at federal expense) will have the following very negative consequences.
Nationwide, as a result of the full implementation of ACA’s Medicaid expansion provision, about 16 million additional low-income individuals would end up receiving Medicaid. Pennsylvania’s share of this 16 million is probably about 700,000. About 2/3 of these 700,000 will be poor adults most of whom will, in all probability, end up with no health insurance coverage. Another 1/3 are children (over 6 years of age whose family incomes are between 100% and 133% of FPL who, though eligible for low cost health insurance coverage through the State Children’s Health Insurance Program (SCHIP), will- because SCHIP is not an entitlement like Medicaid- put such pressure on the limited state and federal funds available for the SCHIP program, that those funds will be exhausted and the program closed to new applicants. ACA’s scheme of providing affordable health insurance to virtually everyone, which depends on the availability of Medicaid coverage for the poorest adults and children through Medicaid, will therefore have a major hole which cannot be repaired by other provisions.
ACA, in expectation of the expansion of mandated Medicaid eligibility to 133% of FPL, will reduce by 75% the “disproportionate share” payments the federal government currently makes to hospitals which take care of the uninsured. ACA’s 75% reduction of disproportionate share payments will take place whether or not states go through with Medicaid expansion. Hospitals in states which have expanded Medicaid coverage to everyone up to 133% of FPL will end up treating far fewer uninsured patients.
Taxpayers in states which refuse to implement Medicaid expansion will not get any reduction in the federal taxes their citizens they pay and consequently, those citizens will end up paying for Medicaid expansion in other states without getting the benefit in their home state.
Some governors have used as an argument against moving forward with Medicaid expansion that to do so is likely to precipitate enrollment in Medicaid of more individuals who are eligible for Medicaid under the pre-expansion income limits but who have not previously enrolled, and the costs of providing Medicaid for these individuals must be paid for 25-50% by the states rather than at the 0% to 10% rate states will have to pay for enrollment only made eligible by Medicaid expansion. The fallacy of this argument is the fact that, entirely without the Medicaid expansion, ACA contains mechanisms to screen all uninsured individuals which will result in informing many preciously uninformed persons of their eligibility for pre-expansion Medicaid channeling them into the existing Medicaid programs.
Lastly, states which forego the expansion of Medicaid eligibility to those up to 133% of FPL will miss out on the stimulative effect on their state economies of the substantial additional federal dollars paying for Medicaid expansion which will flow to those states’ doctors, hospitals and other Medicaid providers.