Health Care Reform in Limbo

The 2012 Health Reform law, known as the Patient Protection and Affordable Care Act of 2010 (PPACA), may be one of the most controversial pieces of health care legislation Congress has passed in recent memory. The Congressional Budget Office (CBO) has estimated that this law would expand coverage by about 31 million people, split roughly between public and private coverage, increasing the number of Americans with health insurance to more than 93 percent of the non-elderly population. Federal government spending associated with the law’s expansion of public and private insurance is projected to total more than $1.2 trillion from 2013 to 2020.

Under PPACA, the individual mandate provision requires individuals without health insurance to either purchase health insurance or pay a fine. The costs associated with the individual mandate would be borne by the federal government and by individual consumers. According to the CBO, the federal subsidies that would pay a portion of the premiums would cost the government an estimated $557 billion from 2013 to 2020. Adding the consumer share of the premiums brings total projected new spending to $879 billion.

The law also included a significant expansion of Medicaid coverage. The PPACA law would expand coverage to include individuals above 133 percent and below 400 percent of the federal poverty level. The expansion of Medicaid is projected to cost the federal government an estimated $669 billion from 2013 to 2020.

The individual mandate and Medicaid coverage expansion provisions account for more than 98 percent of all new federal spending in the law from 2013 to 2020. The share of new federal spending going to insurers is estimated to be 58 percent; the remainder is the amount of Medicaid money estimated to go to health care providers.

Almost immediately after President Obama signed the bill, multiple lawsuits were filed to challenge different aspects of the law, including suits filed by the attorneys general of Florida and Virginia which were later joined by two dozen other states. Rulings at the federal appellate court level have been mixed, resulting in numerous appeals by both sides and, ultimately, the need for final resolution by the Supreme Court.

The Supreme Court heard oral arguments on the constitutionality of the law during three days of hearings in March. The challenges made against the law were based on multiple legal grounds and, as a result, the possible decisions the court may make are just as variable. The law has been challenged on several fronts, including the following issues:

• Can the case be heard by the Supreme Court now? This challenge looks at whether the penalty or fine to be levied on individuals who refuse to obtain health coverage is a tax. If it is a tax, the fact that it wouldn’t take effect until 2015 may mean the Supreme Court does not yet have jurisdiction, since no injury or harm can take place until the tax is paid. The Supreme Court may still conclude that the court has jurisdiction and can rule now.

• Is the law severable? If one provision, such as the individual mandate or the Medicaid expansion, is found to be unconstitutional, the question is whether the Supreme Court can strike down that provision (and possibly some related provisions) and retain the rest of the law. If a majority of justices say it’s severable, then the court can preserve some part of the law and get rid of others. If not, then a single provision found to be unconstitutional would invalidate the entire law.

• Is the individual mandate constitutional? At issue is whether the federal government can require private citizens to purchase a product, in this case health insurance, even if they don’t want to do so. The Supreme Court could limit its ruling to the individual mandate itself, or it may extend the ruling to include related provisions, such as the law’s requirement that insurers must guarantee similar coverage to all, and possibly the requirement that insurers must set common insurance rates within a geographical community

• Is the Medicaid expansion constitutional? The Supreme Court heard arguments on whether the expansion of Medicaid constitutes a coercive act on the states by the federal government and therefore violates the 10th amendment of the U.S. Constitution regarding federalism and protection of states’ rights. The question comes down to whether the Medicaid expansion gives states no realistic option but to comply with the new Medicaid provisions to avoid putting their entire Medicaid program at risk.

The Supreme Court decision is expected to be announced by the end of June, and its impact will be significant, whether the court upholds or strikes down the entire law, or if it lets some provisions stand while allowing others to fall.