U.S. Supreme Court Upholds Key Provisions of PPACA in Historic Decision

The U.S. Supreme Court on June 29, 2012 upheld almost all portions of the Patient Protection and Affordable Care Act (“PPACA”) being challenged on the basis of Constitutionality. The two provisions before the Court were the Medicaid expansion requirements and the “shared responsibility payment” also called the “individual mandate,” which must be paid by all persons required to file a tax return and do not purchase health insurance. Chief Justice John Roberts wrote the majority opinion of the Court. The Court also ruled that the government could not compel states to expand Medicaid by threatening to withhold Medicaid funds for existing Medicaid programs. This still allows the federal government to enforce the program restrictions set out in PPACA if states voluntarily choose to participate in the expansion.

The Court’s ruling on Medicaid limited the federal government’s incentive to induce states to participate in its expanded health coverage. If it were found to be Constitutional as written, the Medicaid expansion provisions would have allowed the government to withhold all Medicaid money to states that did not agree to the expansion of Medicaid to cover people who earned up to 133 percent of the federal poverty level. These provisions were alleged by the federal government to be allowed under the “Spending Clause” of the Constitution.  This marks the first time that the power of Congress under the Spending Clause has been limited. Prior decisions have discussed the limitation used in this decision, which is called the “unconscionability theory.” This is theory discusses the idea that federal government can not withhold funding to the states to the extent that the states have no choice but to agree to implement a federal policy when the policy itself is so onerous that such an arrangement creates an unconscionable coercion by the federal government. This marks the first case where this theory has been used to limit Congress’s power.

In addition to limiting the Medicaid expansion, the opinion written by Roberts concluded that while the shared responsibility payment was designated as a penalty, it is calculated and enforced as a tax.  Therefore, in a Constitutional analysis, it does not matter what Congress calls the payment, it matters how it operates allowing for an analysis under Congress’ taxing power.  The majority of the Court agreed with Roberts’ analysis, but Justices Ginsburg, Sotomayor, Kagan, and Breyer also dissented on the issue of whether PPACA is Constitutional under Congress’s Commerce Clause powers.  The four justices agreed that it is a valid exercise of Congress’s Commerce Clause power; however, they lacked another vote to allow this analysis to be the opinion of the majority. Under the individual mandate, people who refuse to buy insurance will face a tax penalty. By the year 2016, that amount will be either $695 a year or 2.5 percent of annual income, whichever is greater.

 While this is a landmark case in the history of PPACA, based on the number of provisions in the law and the limited number of provisions challenged in this case, there will certainly be more challenges to the law, including at the Congressional level pending the outcome of the 2012 election.