Medicaid Expansion and the Supreme Court

John Channing Ruff
Student Contribution

The Affordable Care Act (ACA) offers states the option of a completely federally-funded expansion of Medicaid for the next three years, but many governors have declined that expansion. As a result, there are approximately fifteen million potential Medicaid-eligible people without insurance coverage. The federal government has been unable to compel wayward governors to expand Medicaid due to a ruling by the Supreme Court and political realities. I explain and outline the controversial provisions and their impacts while explaining the Supreme Court’s impact on the legislation’s effectiveness.

When passed in 2010, the Affordable Care Act called for states to begin expanding their Medicaid programs, gave Health and Human Services (HHS) the authority to enforce the expansion, and instituted a system by which states that refused to comply would see a reduction in federal aid (Musumeci 1). The Supreme Court famously upheld the individual mandate which required most people to maintain a minimum level of coverage in its 2012 ruling. The Court’s logic was that the penalty assessed to those who failed to meet the coverage requirement fell under the federal government’s constitutional authority to tax. The Supreme Court had ruled that the ACA’s Medicaid expansion was unconstitutional because states had not received “adequate notice to voluntarily consent” to expansion, and a state’s entire federal Medicaid funds were at risk for non-compliance; they called the Medicaid expansion “unconstitutionally coercive” (Musumeci 1; Kliff). The Court’s decision meant that the expansion of Medicaid was left to the discretion of individual states. Predictably, the majority of Republican governors chose not to accept the additional funds, meaning their state programs maintained the status quo, while Democratic governors happily expanded their Medicaid programs.

The most obvious obstacle to the federal government now faces to mandating an expansion of Medicaid is the “constitutional” barrier set forth by the Supreme Court. That being said, an extraordinary impediment more significant than the Court’s decision would need to be overcome in order to expand Medicaid. The political chasm that runs through the heart of healthcare policy would prevent such an expansion even if the political will existed in Congress and plenty of notice were given to states (effectively resolving the Court’s concern with the mandate). It is therefore necessary to define and quantify the nature of this political fracas.

The crux of the disagreement between Democrats and Republicans is over the issue of revenue and personal responsibility. Practically every Republican that is elected to the House of Representatives and Senate is goaded into signing a pledge to never raise taxes; they are then obliged to abide by this pledge or be financially severed from the party and left to wither in the political wilderness (60 Minutes). Their anti-tax stance means that an entitlement program such as Medicaid is the bane of the Republican Party’s existence and the object of their most vitriolic ridicule. Republican governors view Medicaid expansion with suspicion; forty-three percent of the nation’s budget is already fixed on entitlements and though their states would not have to bear the burden of expansion, they recognize that additional revenues must come from somewhere (Week 9, slide 4). They also recognize that “revenue” is political doublespeak for taxes, from their point of view, a Medicaid expansion means either growth in the national debt or a Federal tax increase on their constituents. Democrats argue that the Federal government extracts the revenues that would be used for Medicaid expansion anyways and that these funds might as well be brought back to the states. (Bluestein)

It would be foolish to assume that the nature of the political conflict over healthcare is based solely on principle. Alas, healthcare accounts for about $2.7 trillion of our economy every year (which is about one-sixth of our total GDP). It is a massive industry, which means it spends handsomely on lobbying efforts (World Bank, The Toxic Politics of Healthcare). It makes it much easier for politicians to support certain healthcare policies over others when upwards of $400 million is spent lobbying them, more than any other industry (Steinbrook 3). It is important to remember that there are many stakeholders in the healthcare industry and that they often possess opposing interests.

In fact, when it comes to issues like Medicaid expansion individual stakeholders may have internalized opposing interests; they often must choose between the lesser of two evils. For instance, one might logically assume that insurers would support an expansion of Medicaid. The government would pick up the tab for an expensive previously uninsured segment of the population, possibly driving prices down. Insurers save a pretty penny in this scenario, but since the late 1990s many states have pursued a managed care model with their Medicaid programs. This means they pay a flat fee per Medicaid recipient to private insurance companies, who then “manage” the care of each recipient (Week 4, Slide 12). States instituted this model because they believed it would save money, but costs have risen significantly despite the implementation of managed care (Week 4, Slide 15). Any expansion of Medicaid would introduce something that insurance companies despise and spend considerable time trying to mitigate, uncertainty. Expanding the number of recipients also expands the risk pool; this change in insures calculus could make managed care much less lucrative.

Surely there must be a stakeholder that would welcome an expansion of Medicaid, hospitals and providers for instance. It’s natural to think that an expansion would mean an increase in the number of insured patients and therefore an increase in revenues. If only the economics of healthcare were that simple, Medicaid pays about 59 percent of what Medicare does and the ACA calls for a yearly reduction in provider reimbursements; many providers are already refusing to accept Medicaid patients (Matthews). Doctors and hospitals view Medicaid expansion as a double-edged sword that may cut profits instead of costs.

A duality of self-interest permeates the entire system, as care at a lower cost means that somebody gets paid less and jobs are lost; however, when $2.7 trillion changes hands “no one will happily receive less” (Berwick). The political toxicity of healthcare is readily apparent; the Supreme Court will hear yet another ACA case this session. Republicans driven by big lobbying dollars and their constituents’ suspicion of science, ambivalence about federalism, and ambivalence about the poor are intent on ensuring that the failure of the ACA becomes a self-fulfilling prophecy (Berwick).

Republicans have been successful at stopping the expansion of Medicaid and allowing employers to pick and choose what they will cover; now they are challenging the federal government’s authority to provide subsidies to individuals who did not buy their insurance through a state exchange. About eighty-seven percent of those who bought plans on received subsidies that limit the cost of coverage to no more than nine-point-five percent of their income. Almost five million people received subsidies through the Federal exchange and paid an average of $82 a month while their premiums would have been $346 without assistance (Mears).

Sarah Palin coined the term “death panels” after the ACA was enacted. Since that time the Supreme Court has been the only government body to restrict access to healthcare. Their decisions have severely curtailed the law’s effectiveness and left millions stranded without insurance. The disjointed nature of the American healthcare industry is indicative of interstate commerce gone awry.  Rather than upholding the federal government’s constitutional authority to legislate on this issue, the Court left the law hamstrung. The Court’s decisions caused a myriad of problems with the ACA’s continuity, which has only opened the door to more litigation. The Court would have been wise to make a broad determination of the laws constitutionality; their nitpicking of provisions has transformed the Supreme Court into a quasi-legislative body. This is neither their purpose nor their strength. Lastly, the Court will decide whether to eliminate the healthcare coverage of five million more people, on top of the 15 million who have not received Medicaid coverage due to their 2012 decision, this summer (Beutler). The Supreme Court should realize that they are playing with people’s lives; it is no time to flex their judicial muscle. They should use their discretion in deciding cases involving complicated pieces of legislation, allowing legislators and the executive time to work these issues out through the democratic process.

 Works Cited

Berwick, Donald M. “The Toxic Politics of Health Care.” American Medical Association (2013): n. pag. Web. 05 Nov. 2014, accessed via Blackboard.

Beutler, Brian. “The Supreme Court Is Now a Death Panel.” New Republic. New Republic, 07 Nov. 2014. Web. 08 Nov. 2014.

Bluestein, Greg. “Jason Carter Sharpens Call for a Medicaid Expansion | Political Insider Blog.” Political Insider Blog. The Atlanta Journal Constitution, 13 June 2014. Web. 09 Nov. 2014.

Bream, Shannon. “Supreme Court to Hear New ObamaCare Challenge.” Fox News. FOX News Network, 07 Nov. 2014. Web. 07 Nov. 2014.

CBS 60 Minutes: “The Pledge”

Fisher, Daniel. “Supreme Court Upholds Obamacare: What It Means, What Happens Next.” Forbes. Forbes Magazine, 28 June 2012. Web. 08 Nov. 2014.

“GDP (current US$).” Data. The World Bank, n.d. Web. 08 Nov. 2014.

Kliff, Sarah. “The Supreme Court Surprise: Medicaid Ruling Could Reduce Coverage.” Washington Post. The Washington Post, 28 June 2012. Web. 08 Nov. 2014.

Matthews, Merrill. “Doctors Face A 24% Pay Cut In Both Medicare And Medicaid Reimbursements.” Forbes. Forbes Magazine, 2 Dec. 2013. Web. 09 Nov. 2014.

Mears, William. “Supreme Court to Review Another Obamacare Legal Challenge.” CNN. Cable News Network, 07 Nov. 2014. Web. 07 Nov. 2014.

Musumeci, MaryBeth. “A Guide to the Supreme Court’s Decision on the ACA’s   Medicaid Expansion.” A Guide to the Supreme Court’s Decision on the ACA’s Medicaid Expansion, August 2012 – Brief (n.d.): n. pag. Kaiser Family Foundation. Kaiser Family Foundation, Aug. 2012. Web. 06 Nov. 2014.

Steinbrook, Robert. “Campaign Contributions, Lobbying, and the U.S. Health Sector — An Update.” Massachusetts Medical Society (2008): n. pag. Web. 07 Nov. 2014, accessed via Blackboard.

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