Over the course of the next three days the U.S. Supreme Court will consider several challenges to the constitutionality of the Affordable Care Act, the sweeping 2010 overhaul of the American medical system that is sometimes referred to pejoratively as Obamacare. Acknowledging the complexity and importance of the issues, the justices have scheduled an extraordinary six hours for oral argument, instead of the typical one hour.
Most of the pre-argument discussion has centered on the constitutionality of the individual mandate, the requirement within the ACA that everyone who can afford it must purchase health insurance. Lower courts considering the ACA have split on this issue as they have tried to interpret the outer bounds of the Constitution's Commerce Clause, especially in light of recent Supreme Court cases that show a willingness on the part of the high court to limit Congress' sweeping power to regulate commerce.
There is, however, another critical constitutional question being considered by the Supreme Court with these cases that has been largely overlooked by the media and commentators. The issue is whether Congress has impermissibly coerced states through ACA's expansion of the jointly administered Medicaid program.
This constitutional question deals with the limits on Congress' power to regulate through its ability to spend. Relying on vague existing precedents, none of the lower courts ruled for the states challenging Medicaid's expansion on this issue, but they did note that the Supreme Court might wish to clarify the contours of Congress' power to regulate through spending. This week the justices will have precisely that opportunity.
The states, still wrestling with the most severe fiscal crisis since the Great Depression, are justifiably concerned about how the ACA expands Medicaid. Prior to the ACA, Medicaid attempted to provide for the medical care for certain "categorically needy" groups, such as poor families, children and the disabled. States enjoyed significant flexibility in determining who else qualified for Medicaid and what was covered.
Beginning in 2014, however, the ACA requires that Medicaid coverage extend to everyone under 65 whose income is 133 percent of the federal poverty level. This will constitute a major conceptual shift in thinking and administering Medicaid while dramatically expanding the number of individuals eligible.
Indeed, the Modified Adjusted Gross Income formula used to provide for a nationwide standard of eligibility is so complex that experts are still uncertain of just how many new individuals are likely to come into the program, although a figure typically used is 16 million people. But experts agree that those brought into Medicaid under ACA will be an expensive group to insure, certainly initially.
The costs of the initial expansion will be borne entirely by the federal government, but starting in 2017, states will be forced to spend their funds on the increased Medicaid population. In 2020, states will pay their full freight for the new populations.
During the debates about the ACA, the nonpartisan Congressional Budget Office, notorious for underestimating the costs of entitlement programs, estimated that new state costs for the expanded Medicaid program would be an additional $20 billion between 2017 and 2019. A Kaiser Family Foundation study put the estimate at $43.2 billion. Revised CBO projections now estimate that states will pay an additional $60 billion through 2021. A joint report from Republican members of Congress estimates the costs at nearly $120 billion through 2023, with Utah shouldering an additional $1.2 billion.
The reality is that because of all the moving pieces related to qualifications, reimbursement rates and other assumptions, nobody knows the true costs of this expansion. What is clear, however, is that if states do not comply with challenging "maintenance of effort" conditions baked into Medicaid's expansion, they could forfeit all current Medicaid funding and federal funds for other important cooperative programs.
Most court observers will be listening carefully this week for signs about whether the individual mandate is unconstitutional. But budget-conscious governors and state legislators will be particularly interested in whether the justices think the ACA, with its unpredictable but forced cost increases coupled with sweeping threats to federal funds, is a coercive use of the spending power that violates principles of federalism. Billions of state taxpayer dollars depend on the answer to this question.