On June 28, 2012, the United States Supreme Court issued its long-awaited decision in NFIB v. Sebelius, a case which addressed the legality of the Patient Protection and Affordable Care Act of 2010 (“PPACA”). The decision addressed two issues: (1) whether an “individual mandate” was Constitutional and (2) whether an expansion of Medicaid was Constitutional. The decision itself was very long – 193 pages total. This blog entry attempts to parse down the lengthy decision into just a few short paragraphs…
The individual mandate provided that, beginning in 2014, (nearly) every American citizen will be required to maintain a minimum amount of health care insurance, whether it’s through their employer, the government, a third party, or their own means. If an individual does not maintain the minimum amount of health care, the individual would be required to pay a penalty to the IRS. The penalty amount will be based upon the individual’s income level, and by law, cannot exceed the cost of obtaining health care.
The Supreme Court ruled that such an individual mandate was lawful, under Congress’ broad authority to tax American citizens. In other words, in declaring the penalty to be lawful, the Court referred to it as a “tax.” This tax, however, would apply only to individuals who do not have the required health insurance.
The Medicaid expansion essentially increased the amount of services that States would have to provide under Medicaid, and also increased the number of individuals who would be entitled to such coverage. As part of the Medicaid expansion, however, the PPACA also provided that States that refused to go along with the expansion would lose all their Medicaid funding.
The Supreme Court ruled that this threat of loss of all Medicaid funding was unlawful. Rather, the States could choose whether to expand Medicaid services. States that choose to expand Medicaid will get additional funding to do so. States that decline to expand Medicaid will not get any additional funding, but they will not lose their original funding either.