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Health Law Practice Group Discusses Supreme Court's Ruling on the Patient Protection and Affordable Care Act

June 28, 2012

Today, the United States Supreme Court issued its long awaited decision on the constitutionality of the Patient Protection and Affordable Care Act enacted by Congress in March 2010.  In sum, the most controversial section of the Affordable Care Act, the individual mandate which requires individuals to purchase health insurance was upheld as being constitutional.  This decision has major implications not only because of its transformative nature with respect to health care, but because of its significant constitutional law issues with respect to Congress’ authority to regulate health care.

Specifically, the issue before the Court was whether Congress had the authority under the Constitution’s Commerce Clause to mandate individuals to purchase health insurance.  The Court concluded that because the Commerce Clause only permits Congress to regulate commercial activity, Congress cannot regulate an individual’s decision not to purchase health insurance.  “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.”  While the Court concluded that Congress did not have such authority under the Commerce Clause, it did find that Congress’ authority to “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts” gave them considerable authority to regulate where they would otherwise not have the authority to do so and, thus, impose a tax upon those individuals who did not buy health insurance.  In the words of the Court, “The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control.”

While the Court upheld the individual mandate, the Court did not uphold that portion of the Affordable Care Act that permitted the Federal government to deny all Federal Medicaid funding to those states that refused to expand the scope of their Medicaid program to provide Medicaid coverage to adults whose incomes are up to 133% of the federal poverty level.  Threatening the states with the loss of existing Medicaid funding if they decline to comply with the expansion was held to be unconstitutional.  Therefore, states now have the option to decide whether to expand their Medicaid programs under the Affordable Care Act without risking the loss of funding for their entire Medicaid programs.

If states choose not to expand their Medicaid coverage, there will undoubtedly remain individuals who cannot afford to purchase insurance and who will remain uninsured.  Unfortunately, under the Affordable Care Act, the reimbursement for hospitals and other providers is being significantly reduced.  Presumably, the reductions in disproportionate share and other payments to hospitals were designed with the expansion of Medicaid in place.  Hospitals in those states that choose not to expand Medicaid are likely to be concerned that they will be left holding the tab for those individuals who remain uninsured.

While uncertainties remain regarding the expansion of Medicaid to some states and post election Congressional action, it is fair to say that the ruling provides more certainty to providers regarding the future of health care.  Providers can now focus on implementing innovative models of care that enhance quality and reduce cost knowing that such measures will be valued.  Those that took a wait and see approach may have some catching up to do.

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