Blumstein: Obamacare mandates at risk in coming Supreme Court ruling

Friday, June 15, 2012, Vol. 36, No. 24
By Kathleen Carlson

When the Supreme Court decides the fate of the Affordable Care Act later this month, its mandates – for people and for the states – are sure to be a major focus, says Vanderbilt Law Professor James Blumstein.

Under the ACA, also known as Obamacare, millions of now-uninsured people gain health coverage, says Blumstein, a nationally known health law scholar. They become insured either through their employer, by buying their own coverage on state-run exchanges or markets at federally subsidized rates, or through an expansion of state Medicaid insurance programs for the poor.

The ACA includes carrots and sticks to nudge states into adding more people to their Medicaid rolls. If states expand Medicaid coverage, the states receive a greater, phased-in federal match for state dollars spent on the newly eligible enrollees, Blumstein says. If they don’t, they lose all matching funds on all Medicaid beneficiaries, he says, not just for new enrollees.

If a state received no federal matching money for what it spent for health care for poor people, it would face financial disaster, he says.

The question is whether the ACA’s incentives for states to expand Medicaid are legal inducements or illegal coercion.

The Supreme Court took up inducement and coercion in a 1987 drinking age case, Blumstein says. The federal government had tried to get states to raise their drinking age to 21 or risk losing 5 percent of federal highway funds. Losing that small part of funding was considered inducement, which is legal, he says.

The ACA’s Medicaid mandate, however, “puts a state to a set of choices that are impossible to view as free rather than coercive,” Blumstein says. A law that encourages states to cover more people under Medicaid is “OK as long as the price of inaction is not … financial catastrophe.” Any incentive would “have to allow states to act without suffering adverse consequences compared to the status quo,” he says.

He estimates that there’s a 55 percent to 60 percent likelihood that the Medicaid mandate will be overturned, and in his opinion it should be overturned. Back in March when they heard the case, liberal justices Stephen Breyer and Ruth Bader Ginsburg expressed concern about the government using excessive leverage to get states to add to their Medicaid rolls, he says.

The ACA’s individual mandate faces legal challenge on whether it’s a tax or a penalty. If the penalty for not buying health insurance were an income tax with an offsetting credit for those who had health insurance, Blumstein says, the individual mandate would probably stand legally, but Democrats intentionally called it a penalty to avoid breaking campaign promises not to raise taxes. The federal government’s efforts to describe the penalty as a tax probably won’t wash with the Supreme Court, when the ACA’s supporters in Congress previously took pains to not call it a tax. But there are other legal grounds under which the individual mandate could be upheld, he says.

If the individual mandate isn’t upheld as a tax, it could be upheld under the Commerce Clause as regulation of commerce, he says. If it’s legal under the Commerce Clause to require insurers to cover everyone regardless of pre-existing medical conditions, it also would be “necessary” and perhaps also “proper” (under the Constitution’s necessary and proper clause) to require virtually everyone to obtain insurance. The reasoning is that without forcing everyone to buy health insurance, people would wait until they were sick to buy it, knowing they couldn’t be turned away.

Opponents of the individual mandate don’t see it as a regulation of insurers. They say it’s not a constitutional regulation of commerce because the ACA forces people to engage in commerce – by buying insurance – so the government can then regulate it.

Blumstein says he first thought it would be possible for the Supreme Court to “surgically strike” portions of the ACA. The problem with that lies in all the legislative horse-trading it took to get the ACA passed, he says.

If one part gets cut, it’s impossible to know whether Congress would have passed any or all of the remaining provisions, especially narrowly targeted taxes such as one on using tanning beds that were designed to pay for subsidies.

“It’s a law with a lot of moving parts, and each part was there for a purpose,” he says. “If both the Medicaid and individual mandates go down, the whole thing likely goes down.”