From the beginning, the Obama administration’s health care reform, the Affordable Care Act (ACA) more commonly known as Obamacare, has been a political battleground. Only a few observers expected the act would face serious constitutional challenges, yet here we are, recounting a momentous Supreme Court decision upholding the Act’s constitutionality.

The Ruling

The ruling consists of three separate opinions on the two major issues that dominated the hearings.  Does the mandate exceed congressional authority? Is the Medicaid expansion coercive to the states?

1. By a 5-4 vote, the Court ruled that the entire act, including the individual health insurance mandate, is constitutional. Instead of the expected rationale of the Commerce Clause, the majority opinion, written by Chief Justice John Roberts (and, in part, including Justices Ruth Bader Ginsburg, Sonia Sotomayor, Stephen Breyer and Elena Kagan), relied on Congress’ taxing authority to uphold the mandate. Even though the ACA described the failure to purchase insurance as a penalty, Chief Justice Roberts wrote that the act "may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it.”

2. By a 5-4 vote, a different alignment of justices ruled that the mandate exceeded Congress' authority under the Commerce Clause. Among other reasons, Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito (with Chief Justice Roberts providing the fifth vote) wrote that the mandate “threatens [the constitutional] order because it gives such an expansive meaning to the Commerce Clause that all private conduct (including failure to act) becomes subject to federal control, effectively destroying the Constitution’s division of governmental powers.” These five justices ruled that Congress could not force someone to enter into commercial activity, otherwise there would be no limits to congressional power over the states and individuals.

Justice Ginsburg, writing for Justices Breyer, Kagan and Sotomayor, called this result, “stunningly retrogressive.” Aside from suggesting that there are clearly defined limits to congressional authority, Justice Ginsburg argued that the health care market is fundamentally different from other consumer goods and services. However, the majority explicitly rejected that health care is a different argument, reiterating concerns that Congress could then require all sorts of activity, such as mandating the purchase of cars or vegetables.

3. By a 7-2 vote, the Court ruled that the ACA’s Medicaid expansion (the way in which uninsured individuals would be covered) coerced the states into accepting new Medicaid beneficiaries or risk losing their entire Medicaid budget. Under the Constitution’s Spending Clause, Congress has the power to impose conditions on the states in return for accepting the funds. The Court ruled, though, that the Medicaid expansion left states with no choice but to accept new enrollees; hence, participation would not be voluntary. As a result, “the two-government system established by the Framers would give way to a system that vests power in one central government, and individual liberty would suffer.” Because the majority held that the Medicaid expansion violates the Constitution, the Court then had to determine whether the rest of the act could stand. By a 5-4 vote, the Court held that Congress would want the rest of the act to stand. “Unless it is ‘evident’ that the answer is no, we must leave the rest of the Act intact. We are confident that Congress would have wanted to preserve the rest of the Act.”

The opinions raise other issues and many nuances within the ones discussed here, but these are the main rulings of general interest. Taken together, the three opinions represent an extraordinary lesson in the fundamental precepts of our political system, especially federalism; the relations between the federal and state governments; and the separation of powers between the executive, legislative and judicial branches of government. Whether you agree or disagree with the decision, reading the opinions will be illuminating. 

The Implications for Medicare Enrollees

Most readers of the Medicare NewsGroup are primarily interested in how the decision affects Medicare beneficiaries and providers. For a full accounting of the economic issues, readers should refer to Donald Sjoerdsma’s post on June 28, 2012, titled Court's Decision on ACA Allows Medicare Economic Provisions To Unfold and Alison Szot’s post on June 28, 2012, titled Supreme Court Upholds Obama's Landmark Health Care Law in 5-4 Vote.

The most obvious financial benefits that are saved include the drug benefits reducing the donut hole (that is, the gap in prescription drug coverage under Medicare Prescription Drug Plans (Part D)) and access to preventive care, such as colonoscopies, mammograms and annual well visits, without copays or deductibles. Aside from these financial savings, the ACA may lead to fewer people skipping medication doses, taking only a portion of the medication or failing to fill a prescription altogether. If so, the ACA may have already contributed to healthier lives for Medicare beneficiaries.

For providers, the ACA reduced reimbursement but did not settle a host of financial concerns that still need to be addressed. In particular, the Sustainable Growth Rate (SGR) for physician payment remains a highly contentious policy dispute. 

An even more contentious political battle will be over the Independent Payment Advisory Board (IPAB), a body that has authority under the ACA to propose spending reductions if Medicare expenditures grow more rapidly than is warranted. Critics have accused the IPAB as being unelected bureaucrats whose goal will be to ration care. 

As significant as these issues are on a daily basis for Medicare enrollees and their health care providers, the key concern remains Medicare’s solvency over time. Despite the charged rhetoric over the ACA’s reduction in benefits to save costs, nothing in the Court’s decision changes Medicare’s underlying financial fundamentals. If anything, the decision should be welcome news to current beneficiaries because the ACA extends Medicare Hospital Insurance (Part A) until 2024. To be sure, the ACA extends these benefits by reducing Medicare’s rate of growth, especially payments to physicians and other providers as noted earlier, a point that the act’s opponents have repeatedly cited.

Finally, the decision allows the government to continue funding a range of demonstration projects that are designed to lower costs while improving quality of care. Many academics are optimistic that these demonstration projects will lead to real gains for Medicare beneficiaries.

The Political Implications

In some ways, the biggest winner is the concept of health reform. A loss in the Supreme Court would have been the end of health reform for another generation—at least. Winning hardly ensures its implementation, but if President Obama is re-elected, health reform will go forward. 

My initial reaction was that millions of uninsured individuals could now look forward to greater access to health care (unless the ACA is repealed in a Mitt Romney administration).  However, as Jim Morone notes in Seven Consequences of the Health Care Ruling, the Medicaid portion of the decision means that some states may refuse to expand Medicaid. Will the health insurance exchanges and federal subsidies be a sufficient substitute? 

The biggest stakeholder winners are the hospital, pharmaceutical and health insurance industries. The bargains they struck with the Obama administration hold. In particular, the health insurance industry stood to be a big loser if the Court had ruled against the individual mandate without overturning the entire act because that would have deprived the industry of the expected new customers while being forced to implement the provisions of the act, including the ban on pre-existing condition exclusions.

Between the two presidential candidates, President Obama could least afford to lose the case.  Beyond that, let the political spinning begin. As far as I’m concerned, the American public will decide what it wants on the first Tuesday in November. Until then, it’s all just spin!

For the states, the decision is mixed. Many states have delayed developing the health insurance exchanges, hoping that the act would not survive the constitutional challenge. More importantly, states will have greater flexibility to determine whether to participate in the Medicaid expansion. Governor Walker of Wisconsin has already announced that he will not participate. 

Given that the federal government will largely subsidize the expansion, the states refusing to participate won’t be saving any money, but the costs of providing care to the uninsured population won’t go away. Instead, the costs will be shifted to hospitals and eventually to higher insurance premiums. It will be interesting to see if state hospitals and medical associations lobby to have states participate in the Medicaid expansion.

The Decision’s Legal Impact

On one level, the legal impact of the decision is minimal. Since there’s no way that Congress will mandate anything like this in the future, the effects on Congress’s authority under the Commerce Clause remain extensive. In practical terms, the decision has only a minimal effect on congressional authority over interstate commerce. The risk was always the congressional power would be limited, not that it would be expanded (at least in practical terms).

At the same time, the ruling on Medicaid is potentially very significant. Does it represent a real constraint on federal power relative to the states, or will it be an aberration limited to the facts of this case? One thing I’m willing to predict is that libertarians and other opponents of an expanded federal government will certainly use this opinion to challenge other federal programs.  It is also likely to provide the context for congressional debates over subsequent legislation involving federal-state programs and relations.

Another interesting facet, already apparent, is how the legal academy and the popular press will treat Chief Justice John Roberts. Twice this week, he has sided with the federal government, first in the Arizona immigration case and then in the ACA decision. This contrasts with some of his other decisions over the past few years favoring corporate interests (as in the Citizens United case removing limits on campaign contributions), and it certainly will be disappointing to many conservative or libertarian voters and politicians. It may force Justice Roberts’ detractors to take a second look. Or it may give the chief justice some leeway in contentious cases to follow, such as affirmative action and abortion restrictions.

Final Thoughts

I think the Court made the right decision today based on precedent and deference to Congress.  The litigation has been a distraction from what needs to be done to provide health care to all Americans and protect Medicare’s long-term viability. While this has been a great exercise in educating the public about the role of the courts in our governmental system, Harold Pollack notes in The Enduring Damage of the Obamacare Case, the toll it has taken on the act’s popularity and implementation.. 

Readers who basically support the ACA probably agree with the decision and are perhaps likely to support Barack Obama in November. Readers who oppose the ACA either on principle (opposition to the individual mandate) or because they believe it is as pernicious as its fiercest critics have claimed (that is, the false claims about death panels) will probably redouble their efforts to elect Mitt Romney in November. 

That’s as it should be. The proper venue for the health reform debate remains where it should have been all along: with our elected representatives.  As Chief Justice Roberts noted in his summary of the legal principles in the case:

"Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices."

Round 1 went to Obama when the ACA was enacted. Round 2, the battle for driving the narrative to explain the law, went decisively—by a TKO—to the ACA’s opponents, especially the Tea Party. Round 3 has now gone to Obama.  Round 4 comes in November—winner take all.