Justices Consider Severability and Medicaid

  • March 28, 2012
  • By Christine Vestal

In the morning, the court will hear 90 minutes of oral arguments on the question of whether all or parts of the health law must be struck down if the requirement that almost everyone purchase health insurance is found unconstitutional.

In the afternoon, attorneys will have one hour to present arguments on the question of whether Congress exceeded its power by "coercing" states to substantially expand Medicaid coverage.

Severability 

The sprawling Affordable Care Act includes many provisions that have little or nothing to do with the individual mandate. For example, insurance companies must allow parents to keep their adult children on their policies until they reach the age of 26. Chain restaurants must disclose nutritional information about the food they serve, and doctors and hospitals must change the rates they charge Medicare, the federal health program for seniors.

The U.S. Court of Appeals for the 11th circuit, whose decision the high court is hearing on appeal, held that the "lion's share" of the health law had nothing to do with private insurance or the individual mandate. It struck down the mandate and upheld the rest of the law.

But the administration, despite its obvious interest in preserving the law, has argued that two of its provisions are inextricably tied to the mandate and must fall, if the mandate is ruled unconstitutional. Those are a requirement that insurance companies provide coverage to people with pre-existing medical conditions and another that requires carriers to charge the same rates to people within a given community regardless of their health status.

Without the mandate, the administration argues, people could wait until they become sick or injured to sign up for coverage. If that were to happen, the insurance pool would likely be too small to keep insurance premiums affordable. The result would be sharp rate increases for everyone.

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Source: The Kaiser Family Foundation

If the Supreme Court upholds the mandate or decides it cannot rule on it because the anti-injunction act applies, it will not have to address the question of severability. If the mandate is struck down, the issue becomes crucial.

Plaintiffs in the case, both states and the private parties, argue that Congress never would have adopted the health law without the individual mandate. Therefore, the entire statute should be invalidated if the mandate falls.

One court has agreed. U.S. District Court Judge Roger Vinson, in Pensacola, Florida, declared the individual mandate unconstitutional and ruled that it was so integral to the law that the entire statute was invalid.

Since none of the parties is arguing that the mandate could fall and the entire remaining law still stand, the court appointed outside counsel to argue that position.  In past cases involving severability, the Supreme Court has ruled that it must retain portions of a statute if they are constitutionally valid, capable of functioning independently, and consistent with Congress' intent. 

Medicaid expansion 

The health care law calls on states to expand their Medicaid programs to cover all individuals with incomes at or below 133 percent of the federal poverty line — an estimated 16 million uninsured people. 

Under the law, the federal government pays 100 percent of the cost of coverage for newly eligible individuals through 2016. After that, the federal share gradually decreases to 90 percent in 2020 and remains at that level. In addition, the federal government pays for 90 percent of states' administrative costs for the expansion. 

In the existing Medicaid program, the federal share ranges from 50 percent to 83 percent, depending on a state's average income. The federal share of administrative costs is 50 percent. Under the law, states that chooses not to expand their Medicaid programs will lose federal funding for the entire program.

Even though all 50 states currently run a Medicaid program, the 1965 federal law gave states a choice. The group of 26 states suing the federal government argue the health law does not give states the same kind of choice. Instead of encouraging states to expand the program, they argue the law "coerces" states.

Plaintiffs argue that the threat of losing the huge amount of federal support they currently receive for Medicaid amounts to an offer states can't afford to refuse. Because of this, they contend that the health law's expansion exceeds Congress' power to set conditions on the receipt of federal funds — a violation of the Tenth Amendment and related federalism principles.

The administration contends that the "spending clause" and the "appropriations clause" in the Constitution give Congress broad authority to set conditions on the receipt of federal money. They point to several Supreme Court decisions that have determined the government can set the terms of spending so long as it does not "compel" states to implement federal programs.

The health law's expansion, the administration points out, does not break new ground. The government has modified the Medicaid program several times in the past, and each time, states were required to accept the new terms as a condition of participating in the federal-state program. Thirteen states have joined the administration in support of the Medicaid expansion.

Only one lower court agreed to consider the Medicaid expansion issue, but dismissed the states' claims out of hand. The U.S. Court of Appeals for the 11th Circuit concurred before the case moved to the high court.

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