On June 28, 2012—the last day of the 2011
term—the U.S. Supreme Court ruled in a 5-4 decision,
with Chief Justice Roberts writing for the majority, that the
individual mandate provision of the Patient Protection and
Affordable Care Act (the "Act") is constitutional based
on Congress's taxing power. A key passage read from the bench
by Chief Justice Roberts is as follows:
"Put simply, Congress may tax
and spend. This grant gives the Federal Government considerable
influence even in areas where it cannot directly regulate. . . .
The Federal Government may enact a tax on an activity that it
cannot authorize, forbid, or otherwise control."
For the most part, the Court declared the Act constitutional,
except for the Medicaid expansion provisions.
Medicaid: Expansion Struck Down in Part
The Court found that the mandated expansion of the Medicaid
program was not a valid exercise of the federal power because any
state that failed to comply with the expanded program could lose
all of its federal funding for its Medicaid program. The Court
proposed a simple correction to this constitutional violation by
invalidating the Secretary of the Treasury's authority to
withdraw existing Medicaid funding from a state that chose not to
participate. This finding raises some complex issues for hospitals
and physicians providing care to those patients in states that
chose not to expand their Medicaid programs. Those states that
objected to the cost of the expanded coverage and those states that
cannot afford the Medicaid expansion now may opt out of the program
without suffering any financial repercussions.
Under the Medicaid expansion, states are required to provide
coverage by 2014 for adults with incomes of up to 133 percent of
the poverty level. Many states cover only adults with children.
Childless adults in many states are not covered. If this group of
people are not covered by Medicaid, they fall into the individual
mandate " trap." Under the individual mandate, every
citizen must have "qualifying health coverage." If these
newly uninsured, low-income adults cannot obtain health insurance
coverage, they will have to apply for a financial hardship
exception or pay the appropriate penalty. In either event, these
people will not obtain health insurance coverage.
What Does This Mean for Hospitals and Physicians?
Even though the costs of the Medicaid expansion are fully paid
by the federal government for the first three years, it is unlikely
that many of the 26 states that opposed the expansion would
participate. Hospitals should consider that there might be another
"donut hole" of uninsured consumers who do not qualify
for Medicaid, who do not have replacement health insurance coverage
and do not qualify for the insurance subsidy because they are below
the poverty level. The law assumed that the Medicaid
expansion would cover these people. Therefore, the goal of
universal healthcare still eludes the policy makers, and hospitals
and physicians will once again have to bear the financial
consequences of this part of the Court's decision.
This article is for general information and does not include
full legal analysis of the matters presented. It should not be
construed or relied upon as legal advice or legal opinion on any
specific facts or circumstances. The description of the results of
any specific case or transaction contained herein does not mean or
suggest that similar results can or could be obtained in any other
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subject to varying results. The invitation to contact the authors
or attorneys in our firm is not a solicitation to provide
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Duane Morris LLP, a full-service law firm with more than 700
attorneys in 24 offices in the United States and internationally,
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a full-service law firm with more than 700 attorneys in 24 offices
in the United States and internationally, offers innovative
solutions to the legal and business challenges presented by
today's evolving global markets. The
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