Thursday, June 28, 2012

Health Care Reform Act Survives the Supreme Court

In a huge surprise to many on the right, the US Supreme Court upheld the individual mandate provisions of the Patient Protection and Affordable Care Act of 2010 (HCR/Obamacare). The Court ruled that it was a constitutionally permissible tax imposed by Congress.

The bottom line of the Court's decision, where Chief Justice John Roberts broke with the conservative group (Scalia, Thomas and surprisingly Kennedy), is that the entire ACA is upheld, with the exception that the federal government's power to terminate states' Medicaid funds is narrowly read.

That overturns the decisions by the 11th Circuit that found the law unconstitutional.

As I've noted, the individual mandate serves as a tax, and that's the grounds on which the Court found that the individual mandate is constitutional. The mandate provisions are set forth at 26 USC 5000A (the Internal Revenue Code) and imposes an annual penalty of $95, or up to 1% of income, whichever is greater, on individuals who do not secure insurance in 2014, which rises to to $695, or 2.5% of income, by 2016 and after (and adjusted for inflation). Families are hit with higher penalties. There are exemptions to the "fine" in cases of financial hardship or religious beliefs

This is a not insignificant sum of money we're talking about. This provision is expected to raise several billion dollars every year it is in operation beginning in 2014, and is part of the revenue side of reforming the health care funding across the country. It is also seen as a critical tool to getting people into the health care insurance pools so that they can help spread the costs of health care for those who are more likely to utilize the insurance policies.

The tax and spend power of Congress is unquestioned. The question was how the Administration had considered this not to be a tax. I thought that was a poor decision on their part. The Administration focused on a Commerce Clause justification, but the Court found that the power was vested in the Congressional power to tax.

UPDATE:
The decision can be found here: NATIONAL FEDERATION OF INDEPENDENT BUSINESS ET AL. v. SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL. No. 11–393

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