The SCOTUS Decision, Medicaid, and Coercion

post by Paul Kelleher

Here are a few thoughts on one of the real surprises in today's Supreme Court decision (pdf) on the Affordable Care Act.

Ezra Klein tweeted a question this morning (before the release) that asked whether anyone had blog posts or news story prepared just in case SCOTUS upheld the ACA's mandate but struck down its Medicaid expansion. This was tweeted as something of a joke, I gather, since many (maybe most) experts thought the Medicaid expansion would be upheld without a problem. They were wrong. The mandate was upheld, but SCOTUS ruled that (1) that states can opt out of the ACA's Medicaid expansion (which sought to give Medicaid coverage to those below 133% of the federal poverty line), and (2) that the federal government cannot withhold all Medicaid dollars to states who refuse participate in the expansion. 

This part of the decision is a huge deal. As law prof Tim Jost wrote a month ago,

The ACA provides that, beginning in 2014, individuals will be eligible for refundable premium tax credits if they 1) are not eligible for health insurance coverage through an employer or through a government program; 2) are citizens of or lawfully present in the United States and not incarcerated (other than pending final disposition of charges); and 3) have modified adjusted gross  household incomes (MAGI) between 100 percent and 400 percent of the federal poverty level.

Thus, in light of today's ruling, a person below 100% of the poverty line will be ineligible for exchange subsidies even if she does not qualify for Medicaid under her state's eligibility criteria. This means the ACA may not in fact cover all Americans. In short, we have a new donut hole to deal with. 

So why did the court rule against this part of the ACA? Here is the rationale as expressed in Chief Justice John Robert's majority opinion (pp. 51-52, minus the citations):

In this case, the financial “inducement” Congress has chosen is much more than “relatively mild encourage­ment”—it is a gun to the head. Section 1396c of the Medi­caid Act provides that if a State’s Medicaid plan doesn’t comply with the Act’s requirements, the Secretary of Health and Human Services may declare that “further payments will not be made to the State.” A State that opts out of the Affordable Care Act’s expansion in health care coverage thus stands to lose not merely “a relatively small percentage” of its existing Medi­caid funding, but all of it...The Federal Gov­ernment estimates that it will pay out approximately $3.3 trillion between 2010 and 2019 in order to cover the costs of pre-expansion Medicaid. In addition, the States have developed intricate statutory and administrative regimes over the course of many decades to implement their objectives under existing Medicaid. It is easy to see how the Dole Court could con­clude that the threatened loss of less than half of one percent of South Dakota’s budget left that State with a “prerogative” to reject Congress’s desired policy, “not merely in theory but in fact.” [In contrast,] The threatened loss of over 10 percent of a State’s overall budget, in contrast, is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.

If I read this correctly, the court says that it is unconstitutional coercion to force a state to choose between expanding its Medicaid program and losing all its Medicaid dollars. This is a remarkable claim in the context of a law whose purpose is to prevent individuals from having to choose (in some cases) between serious illness (or even death) and financial ruin or worse (who wouldn't break a law to get one's child desperately needed medical care?). So I ask: why is it a "gun to the head" situation when states face losing their federal Medicaid dollars but not a "gun to the head" situation when individuals face death for lack of insurance? 

Relatedly, it was also tweeted this morning (I can't remember who said it) that if the court can rule that the ACA's mandate penalty is really a tax (despite not being called a tax in the law), what other semantic distinctions in the law can the court ignore? I think we found another in this Medicaid issue. From pages 52-54 of Roberts' opinion:

JUSTICE GINSBURG claims that Dole is distinguishable here because here “Congress has not threatened to withhold funds earmarked for any other program.” But that begs the question: The States contend that the expansion is in reality a new program and that Congress is forcing them to accept it by threatening the funds for the existing Medicaid program. We cannot agree that existing Medicaid and the expansion dictated by the Affordable Care Act are all one program simply because “Congress styled” them as such. [...]

Here, the Government claims that the Medicaid expansion is properly viewed merely as a modification of the existing program because the States agreed that Congress could change the terms of Medicaid when they signed on in the first place. [...]

The Medicaid expansion, however, accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for four particular categories of the needy: the disabled, the blind, the elderly, and needy families with dependent children. Previous amendments to Medicaid eligibility merely altered and expanded the boundaries of these categories. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire non elderly population with income below 133 percent of the poverty level. It is no longer a program to care for the neediest among us, but rather  an element of a comprehensive national plan to provide universal health insurance coverage.

This really is amazing. The court concedes that Medicaid is currently a program that covers several different classes of people. But as soon as Congress seeks to cover yet one more class of individuals (those making less than 133% of the poverty line), all of a sudden Medicaid is transformed into an entirely new program. Um, OK.