On June 28, 2012, the United States Supreme Court ruled on the
constitutionality of the Patient Protection and Affordable Care Act
of 2010 (ACA) when it decided National Federation of
Independent Business v. Sebelius. The case focused on two
issues: (i) the individual mandate, which requires that all U.S.
citizens or legal residents have health insurance or pay a penalty,
and (ii) the Medicaid expansion, which provides for additional
funding of the expansion of state sponsored Medicaid programs using
federal matching funds if the expanded programs meet certain
As to the first issue, the Supreme Court upheld the individual
mandate under the Taxing Clause of the U.S. Constitution, finding
that the "shared responsibility payment" looks like a
tax, acts like a tax and therefore must be a tax. The Supreme Court
discounted the "penalty" label and concluded that
"magic words or labels" do not change the practical
operation of the provision.
With respect to the second issue, the Supreme Court struck down
the Medicaid expansion under the Spending Clause of the U.S.
Constitution, reasoning that while Congress can use its power to
grant federal funds to states so long as the states meet certain
conditions, Congress cannot compel states to regulate. The Supreme
Court noted that Medicaid spending accounts for more than 20% of
the average state's total budget and that federal funds cover
50% - 83% of these costs. As a result, the Supreme Court reasoned
that threatening to withdraw all previously committed Medicaid
funds if a state chooses not to expand its Medicaid program is akin
to "a gun to the head". The Court's decision means
that Congress can condition payment to a state of the new funds
allocated for Medicaid expansion on that state's willingness to
expand its program, but that the state's existing Medicaid
funds cannot be jeopardized.
It is helpful to remember that this decision involved the
Patient Protection and Affordable Care Act (ACA). Two Healthcare
IT-related initiatives, payments to encourage the use of electronic
health records (called by some Meaningful Use funds) and the
restrictions on use of patient healthcare information that are
contained in the Health Information Technology for Economic and
Clinical Health Act (HITECH), are part of the American Recovery and
Reinvestment Act of 2009 (ARRA), a different statute than the ACA.
Therefore, even if the Supreme Court had struck down the ACA in its
entirety, payments for Meaningful Use and HITECH restrictions would
still continue in effect.
Nonetheless, when the Supreme Court upheld the ACA, numerous
healthcare IT provisions contained in the ACA will continue in
effect, including those related to Accountable Care Organizations
(which look to Meaningful Use), numerous quality improvement
provisions, and various grants to help organizations transition to
and incorporate healthcare information technology.
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