On June 28, 2012, the United States Supreme Court ruled on the constitutionality of the Patient Protection and Affordable Care Act of 2010 (ACA) when it decided National Federation of Independent Business v. Sebelius. The case focused on two issues: (i) the individual mandate, which requires that all U.S. citizens or legal residents have health insurance or pay a penalty, and (ii) the Medicaid expansion, which provides for additional funding of the expansion of state sponsored Medicaid programs using federal matching funds if the expanded programs meet certain requirements.
As to the first issue, the Supreme Court upheld the individual mandate under the Taxing Clause of the U.S. Constitution, finding that the "shared responsibility payment" looks like a tax, acts like a tax and therefore must be a tax. The Supreme Court discounted the "penalty" label and concluded that "magic words or labels" do not change the practical operation of the provision.
With respect to the second issue, the Supreme Court struck down the Medicaid expansion under the Spending Clause of the U.S. Constitution, reasoning that while Congress can use its power to grant federal funds to states so long as the states meet certain conditions, Congress cannot compel states to regulate. The Supreme Court noted that Medicaid spending accounts for more than 20% of the average state's total budget and that federal funds cover 50% - 83% of these costs. As a result, the Supreme Court reasoned that threatening to withdraw all previously committed Medicaid funds if a state chooses not to expand its Medicaid program is akin to "a gun to the head". The Court's decision means that Congress can condition payment to a state of the new funds allocated for Medicaid expansion on that state's willingness to expand its program, but that the state's existing Medicaid funds cannot be jeopardized.
It is helpful to remember that this decision involved the Patient Protection and Affordable Care Act (ACA). Two Healthcare IT-related initiatives, payments to encourage the use of electronic health records (called by some Meaningful Use funds) and the restrictions on use of patient healthcare information that are contained in the Health Information Technology for Economic and Clinical Health Act (HITECH), are part of the American Recovery and Reinvestment Act of 2009 (ARRA), a different statute than the ACA. Therefore, even if the Supreme Court had struck down the ACA in its entirety, payments for Meaningful Use and HITECH restrictions would still continue in effect.
Nonetheless, when the Supreme Court upheld the ACA, numerous healthcare IT provisions contained in the ACA will continue in effect, including those related to Accountable Care Organizations (which look to Meaningful Use), numerous quality improvement provisions, and various grants to help organizations transition to and incorporate healthcare information technology.
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