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With Medicaid Expansion, Will the ACA Achieve Its Vision of Near-Universal Coverage?

The Supreme Court’s decision last week on the constitutionality of the Affordable Care Act (ACA) has been acclaimed as a victory for health care reform, as well as for President Obama. A critical part of the decision, however, goes to the heart of the ACA’s promise of near-universal coverage. The law set vital new conditions on the receipt of federal funding for Medicaid: it requires states to expand their eligibility rules to cover all people with incomes less than 133% of the federal poverty level, and if they decline to do so, they could lose not only federal funding for the Medicaid expansion but also federal funding for existing state Medicaid programs.

Lawrence Gostin, JD

The Court, on a 7-2 vote, allowed the federal government to withhold funding for Medicaid expansion if a state declines to change its eligibility rules. However, it also ruled that the federal government could not also withdraw existing Medicaid funds from states that fail to comply with Medicaid expansion, finding that it would be unduly coercive. Thus, if states decline to comply with federal spending conditions to expand coverage for the poor, they will forego only the federal share of funding for the expansion.

(As an aside, the Justices’ horse-trading on this provision is a story in itself, as recounted on SCOTUSblog: Justices Sotomayor and Ginsburg reportedly wanted to uphold the federal government’s power to withhold all Medicaid funding; Scalia, Alito, Thomas, and Kennedy wanted to strike down the entire expansion; and Roberts, Kagan, and Breyer wanted to allow Medicaid expansion funding incentives but not all Medicaid funding. The latter view prevailed when Sotomayor and Ginsburg joined the Roberts group.)

Chief Justice Roberts, writing for the Court, said that the Medicaid expansion went beyond the original Medicaid program, which 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.” The expansion of Medicaid under ACA, he reasoned, changed it into “a program to meet the needs of the entire nonelderly population with income below 133 percent of the poverty level,” transforming it so that “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.”

Justice Roberts was correct in his first point but insensitive and mistaken on his second point. Medicaid is typically regarded as a program for very poor people, which it is. But it is structured such that poverty alone is insufficient for most adults unless they have another qualification, such as disability. That is one of the unjust aspects of the existing program because it leaves even the poorest able-bodied man without coverage. As to Justice Robert’s claim that the expansion would extend beyond the “neediest among us,” Justice Ginsburg aptly observed that “single adults earning no more than $14,586 per year—133% of the current federal poverty level—surely rank among the Nation’s poor.”

Constitutional Ramifications

From a constitutional perspective, the Court’s decision on the Medicaid expansion was problematic, foreshadowing an activist judicial agenda. To uphold the expansion, the Court had to rewrite the ACA, which granted the Secretary for Health and Human Services discretion to withdraw all Medicaid funding as a lever to ensure coverage of the poor. As Justice Kennedy warned, the Court disregarded the legislative intent of the ACA, leaving in place a statute that Congress never enacted.

Supreme Court precedent holds that Congress has power to withhold federal funds as long as there’s a reasonable relationship between the funding and the conditions—in this case, Medicaid funds as a condition of revising the program’s rules. When Congress created Medicaid, it made clear from the onset that it can alter and even abolish the program at any time. The Court previously granted the federal government wide latitude in linking funding with conditions on spending—for example, upholding the loss of highway funds to states for their failure to raise the minimum drinking age. Given that public health, safety, and environmental programs are typically justified under the spending power, it’s concerning that such programs may be in jeopardy going forward.

The Universal Coverage Agenda

The Court’s ruling frees the states to reject Medicaid expansion, which accounts for half the ACA’s increased coverage—16 million of the 32 million people projected to be insured. From a social justice perspective, if states opt out, the promise of near-universal coverage will remain unfulfilled. The 26 states that challenged the ACA contain more than half the total projected to be newly eligible for Medicaid.

Governors would have to be callous to the needs of poor people if they declined to expand Medicaid. From a socioeconomic perspective, it would make little sense because from 2014 to 2016, the federal government pays 100% of costs to cover the expansion, decreasing gradually to a 90% level in 2020 and thereafter. That means governors would renounce substantial federal funds while absorbing the unreimbursed health care costs of uninsured individuals.

State recalcitrance, however, is not inconceivable, particularly in the face of budgetary constraints and ideological purity. Republicans would like to restructure Medicaid, giving governors the power to set eligibility levels, ultimately through block grants. With a national election looming, states could use the power afforded by the Supreme Court to turn down funds to expand Medicaid as a bargaining chip toward lowering, not raising, eligibility levels. Whether the socioeconomic or the political calculus prevails will determine the future viability of Medicaid expansion. And remember, the ACA leaves out undocumented immigrants, so even if the ACA’s goals for coverage are met, the political struggle for universal coverage goes on.

About the author: Lawrence Gostin is University Professor and Faculty Director, O’Neill Institute for National and Global Health Law, Georgetown University Law Center, and Director of the World Health Organization Collaborating Center on Public Health Law and Human Rights.
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