The Supreme Court Ruling on Healthcare
In the most hotly-anticipated Supreme Court decision in decades, the Supreme Court has upheld President Obama’s healthcare law. Learn what the Court actually decided and how it will shape the future implementation of the law.
Today’s topic: The Supreme Court Ruling on Healthcare
And now, your daily dose of legalese: This article does not create an attorney-client relationship with any reader. In other words, although I am a lawyer, I’m not your lawyer. In fact, we barely know each other. If you need personalized legal advice, contact an attorney in your community.
Breaking: The Healthcare Law is Constitutional!
In the most hotly-anticipated Supreme Court decision in decades, the Court has upheld the constitutionality of President Obama’s signature healthcare law, known as the Affordable Care Act (aka Obamacare). The Court’s decision took many by surprise, since it was written by the conservative Chief Justice John Roberts, and was based on an argument that few people took seriously. In this episode, I’ll explain what the Court decided and how it will shape the future implementation of the law.
The Individual Mandate
The Affordable Care Act, or ACA, is a massive law – over 2,700 pages long – but the Supreme Court focused on just two parts of the law. One was the so-called Individual Mandate, which is the requirement that virtually every U.S. resident purchase a health insurance policy or face financial penalties. The challengers argued that Congress has no constitutional authority to compel individuals to purchase a product or service. The Constitution grants only certain “enumerated powers” to Congress. The Obama administration argued primarily that the mandate is an exercise of Congress’s power to regulate “commerce . . . among the several states,” and/or Congress’s power to pass laws that are “necessary and proper” to exercise its commerce power.
As I discussed in an earlier episode on Healthcare and the Constitution, the oral argument in this case revealed a Supreme Court deeply skeptical of the government’s argument. A number of justices expressed concern about the implications of the individual mandate. Justice Kennedy wondered whether the government could “create” commerce rather than merely “regulating” it, while Justice Scalia worried about future individual mandates to eat our broccoli. In the end, the Court held, by a five-to-four majority that the Commerce power allows Congress to regulate pre-existing commerce, but does not allow Congress to force people to enter commerce.
The General Welfare Clause Saves the Mandate
But then, catching almost everyone by surprise, the Court upheld the mandate based on a fallback argument that few people expected to succeed, namely, that the mandate is an example of Congress’s constitutional power to impose taxes. The Court reached this result by labeling as a tax the “shared responsibility payment,” which is the penalty individuals will have to pay if they fail to buy health insurance after 2014.
The result is that the government cannot force you to buy health insurance, but it can penalize you if you don’t. If you find that a little odd, you’re not alone. But there are precedents to support this result. Article I of the Constitution empowers Congress to impose taxes to provide for the “general welfare.” During the 19th and early 20th centuries, the general view was that Congress could not use its taxing power to achieve ends beyond its other enumerated powers. But that changed with the 1937 case of Helvering v. Davis, in which the Supreme Court upheld the Social Security Act as an exercise of Congress’s power to tax (and spend) for the general welfare, even though the government did not claim that the Social Security program was necessary for the regulation of commerce.
The Medicaid Expansion Goes Too Far
The other part of ACA that the Supreme Court considered – and partially struck down – is the expansion of the Medicaid, which is the state/federal health program for low-income individuals. The healthcare law provides funds to states to expand their Medicaid rolls. States that opt not to expand their Medicaid program, however, would lose all of their Medicaid funding, and not just the incremental amount tied to the expansion. On two earlier occasions, the Supreme Court has warned that the federal government must not use its spending power to coerce states to adopt certain policies, but the Court has never actually struck down a conditional grant program before. This ruling marks the first time the Court has held that Congress went too far in pressuring states to agree to a federal program. This part of the ruling is considered a victory for advocates of the 10th Amendment, which preserves state sovereignty in areas not delegated to the federal government.
The New Limits on Federal Power
Turning back to the mandate, it is now clear that the government can tax people who fail to buy goods or services that the government deems desirable, like health insurance. The Chief Justice’s opinion, however, places certain limits on this power:
The tax cannot be so high that people have no choice but to purchase the good or service;
Congress cannot attach any other “negative legal consequences” to the failure to engage in commerce. For example, Congress cannot impose criminal or civil penalties for failing to buy health insurance.
The tax must be imposed regardless of intent, which means that Congress can’t impose a tax only on those who “intentionally refuse to buy health insurance.”
The tax must be collected in the same manner as other taxes, that is, via the IRS.
Thus, even though the individual mandate was upheld, the government will not be able to impose criminal fines or jail time for refusing to buy insurance. You might have to pay a tax, but it will have to be a relatively modest tax, one that leaves you genuinely free to choose not to buy insurance if you so wish.
So here’s wishing you good health – and thanks for reading!
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