U.S. Supreme Court ruling on health care law lets states opt out of Medicaid expansion

By Jamey Dunn

The U.S. Supreme Court upheld most of the key pieces of the federal Patient Protection and Affordable Care Act but left the door open for states to opt out of the law's massive expansion of the Medicaid program.

 The court upheld the provision known as the personal mandate — geared at getting everyone in the country who can afford health insurance to buy it. The ruling said the mandate is constitutionally protected because the penalty for not complying with the law is actually a tax. In its main argument for the law, the Obama administration had put forth that the law is protected under the Commerce Clause of the U.S. Constitution, but the court rejected that contention.


The court ruled that the government does not have the power to force citizens to buy health insurance under the Commerce Clause. President Barack Obama’s administration had argued that the mandate fell under the federal government’s power to regulate interstate commerce. The court found that giving Congress the power to regulate inactivity — in this case not purchasing insurance — was a step too far. “The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. 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. Every day, individuals do not do an infinite number of things. In some cases they decide not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and — under the government’s theory — empower Congress to make those decisions for him,” wrote U.S. Supreme Court Chief Justice Roberts in the majority opinion.

Roberts wrote that just because the administration argued that buying insurance would have a positive outcome on commerce by potentially decreasing costs for everyone in the marketplace doesn’t give Congress the power to compel people to do it. “People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures — joined with the similar failures of others — can readily have a substantial effect on interstate commerce. Under the government’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the government would have them act.”

However, the ruling said that the law presents uninsured American a choice: Get health insurance or pay a tax. “Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’ constitutional power to tax.” Roberts conceded that the tax is intended to compel action from consumers, but he wrote that such a move has been a component of taxation throughout the nation’s history. “None of this is to say that the payment is not intended to affect individual conduct. Although the payment will raise considerable revenue, it is plainly designed to expand health insurance coverage. But taxes that seek to influence conduct are nothing new. Some of our earliest federal taxes sought to deter the purchase of imported manufactured goods in order to foster the growth of domestic industry.”

The ruling limited the federal government’s power to push states to accept the large Medicaid expansion that is part of the law. Under the Affordable Care Act, states are required to expand Medicaid coverage to all people under age 65 with incomes below 133 percent of the federal poverty line in 2014. Currently, states are only required to cover certain populations, such as children, parents, the elderly and the disabled. The federal government would cover 100 percent of expansion costs for two years and then gradually step down some of its support.

As written, the law required that states take on this expansion or lose all federal matching funds. The court struck down that provision, saying it offered states a false choice. “As for the Medicaid expansion, that portion of the Affordable Care Act violates the Constitution by threatening existing Medicaid funding. Congress has no authority to order the states to regulate according to its instructions. Congress may offer the states grants and require the states to comply with accompanying conditions, but the states must have a genuine choice whether to accept the offer. The states are given no such choice in this case: They must either accept a basic change in the nature of Medicaid or risk losing all Medicaid funding.” Roberts wrote that now states have the option to decline the expansion. “States may now choose to reject the expansion; that is the whole point. But that does not mean all or even any will. Some states may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administrative resources necessary to support the expansion. Other states, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the act offers at the outset.”

Robert Rich, director of the University of Illinois' Institute of Government and Public Affairs, said he is not surprised the court curtailed the federal government’s reach on this issue. “This ruling says carrots are OK; sticks are not,” he said. “I think it’s consistent with where the Supreme Court has come down on federalism in the past.”

Rep. Sara Feigenholtz, a Chicago Democrat, is optimistic that many states, including Illinois, will agree to the expansion. “I think that it’s going to be a rare case when a state says no,” she said. Feigenholtz, who spearheaded recent efforts to cut the state’s Medicaid liability by $2.7 billion, acknowledged that the law has become a political hot potato on both the state and federal level. “Yes, it is a states' rights issue, but I would hope that at the end of the day cooler heads prevail.”

Roberts distanced opinion from any commentary on the merits of the law. “We do not consider whether the act embodies sound policies. That judgment is entrusted to the nation’s elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions.” But the political fight over the federal health care reform law seems far from over.

Squabbling between the two parties has led to Illinois putting the creation of its online insurance marketplace, also part of the affordable care act, on hold until after today’s decision. Rep. Frank Mautino, a Spring Valley Democrat, told the Associated Press this week that the state will likely not meet the deadline to create its own insurance exchange and would instead have to partner with the feds on an exchange. Mautino chairs the committee that was established to create the state’s exchange.

Republicans on the state and federal level stepped up after today's ruling to blast the law, dubbed “Obamacare,” and call for its repeal. “While I respect the court’s decision, the health care law threatens our economic recovery by raising taxes, imposing new regulations and creating a drag on the economy,” Illinois Republican Sen. Mark Kirk, said in a written statement. “Congress should repeal the health care law and replace it with common sense, centrist reforms that give Americans the right to buy insurance across state lines and expand coverage without raising taxes, while blocking the government from coming between patients and their doctors.”

Illinois House Minority Leader Tom Cross, who pushed back against efforts to implement the law on the state level, said in a written statement: “We have made tremendous efforts this year in Illinois to reduce our state-run health care program because we could no longer afford to provide the services that were once promised. Today’s Supreme Court decision affirms a federal law that has the potential to pile billions of dollars of additional expenses into our state budget that we cannot afford. We are encouraging Congress to repeal Obamacare at the federal level as soon as possible, and provide Illinois the ability to administer an efficient Medicaid program."

Comptroller Judy Baar Topinka warned that the ruling will cost Illinois when residents who are eligible for Medicaid but never signed up rush to the program to avoid paying the penalty for not being insured. “There is no doubt that this will cost the state; the only question is how much?” Topinka said. “We have thousands of residents around the state that are eligible for Medicaid but have never enrolled for one reason or another. We expect they will increasingly come forward, and I urge lawmakers to start saving now for those added costs.”

Topinka estimated that the growth in Medicaid costs could total $2.4 billion over the next six years. “Illinois is a textbook example of what can happen if financial challenges are not proactively addressed,” Topinka said. “The state needs to learn from experience and take steps today to address the increased Medicaid costs that will occur in coming months and years.”

Health care advocates heralded the ruling as a victory and pushed for Illinois to implement the law. “Today’s Supreme Court decision helps to strengthen our nation’s tattered social fabric and provides hope that constitutional law and democracy matters,” Jim Duffett, executive director of the Campaign for Better Health Care, said in a written statement. “It is time for the obstructionists in the Republican Party in Congress and in Springfield, and a handful of insurance-industry backed Democrats in Springfield, to stop their crusade against Obamacare. It is time to put America and Illinois first, act like adults, and do something positive for a change that will help small businesses and hard-working Americans by implementing Obamacare. Meanwhile, we are urging Gov. [Pat] Quinn to immediately sign an executive order and begin implementing the new insurance marketplace so Illinois' hard-working families and small businesses will continue to enjoy the benefits of access to affordable, quality health care.”

Quinn today continued to call on state lawmakers to approve legislation to begin the creation of an exchange. However, he said that Illinois would likely partner with the federal government to create its exchange instead of doing it independently. “What we learned today is, the legal cloud has been eliminated. The U.S. Supreme Court, the highest court in our land, has said the Affordable Care Act is the law of the land, and we in Illinois plan to carry it out and make sure that people who need health care coverage, health insurance, are covered. That’s our goal.”

Quinn said he wants the state to adopt the Medicaid expansion in the law. “The state of Illinois is going forward with the president of our country, President Barack Obama, to expand using Medicaid [to offer health care to] those who would be covered under the Affordable Care Act. That is the law. We’re not backing down. We want to go forward. This is fully funded by the federal government beginning in 2014 and ultimately 90 percent funded." He said he hopes the state will "insure as many people as we can in Illinois who have fallen through the cracks.”  

Despite the heated rhetoric, Feigenholtz said she thinks the state can successfully implement the law, which she says will make life better for many. “I think millions of people across the state and people across this country will have greater access to affordable high quality health care.” She added: “I am frankly a little disappointed that we haven’t moved forward on this. But I think that today brings new hope. ... I think we can work through this. Hopefully tomorrow is designed to be better than yesterday.”