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Focus on Regulation

Supreme Court Issues Long-Awaited Health Reform Decision: Upholds Entire Law, but Imposes Certain Restrictions on Medicaid Expansion

In the most closely-watched decision of its 2012 term, Chief Justice Roberts delivered the opinion for a majority of a divided Supreme Court today upholding the individual mandate in the Affordable Care Act (ACA).  The vote was 5-to-4.  While the Court also upheld the Medicaid expansion, it narrowly read the federal government’s power to terminate states’ Medicaid funds.  The dissent by Justice Scalia was joined by Justices Kennedy, Thomas, and Alito, all of whom would have invalidated the law in its entirety.  Although the Supreme Court has resolved the question of the ACA’s constitutionality, we expect the political battle over the funding and implementation of the law to continue.

A brief description of the Court’s analysis with respect to each of the questions presented follows. 

Constitutionality of Individual Mandate.  Chief Justice Roberts concluded that requiring individuals to obtain “minimum essential coverage” or pay a penalty is a valid exercise of Congress’ Taxing power.  Four of the five Justices—Ginsburg, Breyer, Sotomayor, and Kagan—would have upheld the individual mandate under the Commerce Clause as well. 

Constitutionality of Medicaid Expansion.  A majority of the Court also held that Congress is permitted to offer funds under the ACA to states to expand Medicaid eligibility to childless adults with incomes at or below 133 percent of the federal poverty level, and require that states that accept such funds comply with the conditions on their use.  However, the majority also found that Congress is not permitted to penalize States that choose not to participate in the expansion by taking away their existing Medicaid funding.  The opinion of Chief Justice Roberts explains:  “Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availa­bility of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.”

Severability.  Because the Court upheld both the individual mandate and Medicaid provisions, it did not need to address the severability question. 

Anti-Injunction Act.  As expected, the Court found that the Anti-Injunction Act did not preclude the Court from addressing the merits of the case now, rather than in 2014 after the individual mandate takes effect, because the ACA denominated the “shared responsibility payment” a “penalty” rather than a “tax.”  Chief Justice Roberts notes that this label governs the decision under the Anti-Injunction Act, but not for purposes of the Constitutionality.