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Wed June 27, 2012
Shots - Health Blog

Medicaid Expansion Goes Overlooked In Supreme Court Anticipation

Originally published on Wed June 27, 2012 6:20 pm

When the Supreme Court announces its long-anticipated decision on the constitutionality of the Affordable Care Act on Thursday, all eyes will be on the so-called individual mandate. That's the section of the law that requires most Americans to either have health insurance or pay a penalty starting in 2014.

But there's another important constitutional question before the court that most pundits haven't talked about much — a broad expansion of Medicaid, the joint federal-state program for people with low incomes.

"Medicaid often doesn't get as much attention as other matters, so it's not shocking," says Alan Weil, executive director of the National Academy for State Health Policy. "But given the stakes for the Medicaid program, I think it warrants a little bit more attention."

Specifically, the court has been asked whether the part of the law that would expand Medicaid to an estimated 17 million more people over the next 10 years is an unconstitutional infringement of states' rights.

"About half of the people who are expected to gain coverage under the Affordable Care Act gain it through the Medicaid program," Weil says. "So this is not a small change to Medicaid, and it's also not a small part of the Affordable Care Act."

The law would expand Medicaid coverage to everyone with incomes under 133 percent of the federal poverty level. In 2012, that's $14,856. In practice, the expansion will mostly cover adults without children or disabilities, since low-income children, parents and those with disabilities are mostly already eligible.

But unlike the rest of Medicaid, whose costs are mostly shared between the federal government and the states, the federal government picks up the entire cost of the additional coverage for the first several years; eventually states have to pay 10 percent.

"It's a very favorable formula from a state government perspective," Weil says.

But that hasn't stopped states from complaining. Twenty-six of them, in fact, are parties to the lawsuit now before the Supreme Court.

They say the federal government is basically blackmailing them into expanding Medicaid. That's because while the Medicaid program is theoretically voluntary for the states, it's gotten so large, they say, they no longer have a choice about whether to participate.

"The argument is that the federal government overreached by essentially coercing states into a big expansion of the social safety net," says Douglas Holtz-Eakin, an economist and former director of the Congressional Budget Office who now heads the American Action Forum, a conservative think tank. His group wrote a brief in support of the states.

"With these Medicaid expansions," Holtz-Eakin says, "states don't have a real choice. If they were to give up their federal funds, they would have to come up with another 22 percent of the average state's budget to cover the existing Medicaid programs. It would be a 34 percent tax increase for the typical state. Those are enormous numbers."

On the other hand, Holtz-Eakin concedes, there's a long history of the federal government getting to say how money it provides from federal taxpayers should be spent.

"When we went to a nationwide 55 mph speed limit, the way it was done was to say, 'Do this or you don't get your highway funds,'" he says. "So it's very common for the federal government to use the funding mechanism as a way to get the states to do what they want."

And if the court did accept the states' arguments about Medicaid, says Weil, it could affect a lot more than just Medicaid.

"Once you go down the path of saying the federal government is limited in its ability to use its spending power to encourage states to take a particular action, you call into question the structure of dozens and dozens of federal programs where the federal government expects the states to put up a share of the funds," says Weil, "whether it's in transportation or social services or health care or environmental protection.

"Anywhere where the federal government says we want to share in the costs, if the court accepts this argument of coercion, pretty much everything with that structure would have to be re-examined."

Most legal scholars, however, consider it unlikely that the court will buy the states' arguments. Holtz-Eakin says his group polled 400 lawyers who either worked as clerks for Supreme Court justices or have argued cases before the court. Before the oral arguments in the case, only 19 percent of them thought it was likely the Medicaid expansion would be found unconstitutional. And after the arguments? "It had gone to 22 percent," he said.

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Transcript

AUDIE CORNISH, HOST:

We're expecting a ruling on health care from the Supreme Court tomorrow. This is the decision that everybody is waiting for about the 2010 Affordable Care Act. Specifically, the justices are deciding whether Congress acted constitutionally in requiring most Americans to have health insurance starting in 2014. But as NPR's Julie Rovner reports, there's another constitutional question within that same case, a question that's gone largely ignored. It has to do with the Medicaid program.

JULIE ROVNER, BYLINE: Specifically, the court has been asked whether the part of the law that would expand Medicaid to an estimated 17 million more people over the next 10 years is an unconstitutional infringement of states' rights. It's not an insignificant part of the law, says Alan Weil. He's head of the National Academy for State Health Policy, a non-partisan think tank.

ALAN WEIL: About half of the people who are expected to gain coverage under the Affordable Care Act gain it through the Medicaid program. So this is not a small change to Medicaid, and it's also not a small part of the Affordable Care Act.

ROVNER: The law would expand Medicaid coverage to everyone with incomes under 133 percent of the federal poverty level. That's just under $15,000 for an individual this year. In practice, that expansion will mostly cover adults without children or disabilities. Right now, Medicaid's costs are mostly shared between the federal government and the states. But that's not how this expansion will work, Weil says.

WEIL: The expansion in the Affordable Care Act is borne entirely by the federal taxpayer, although after a number of years, states do have to pick up a 10 percent share of the cost. It's a very favorable formula from a state government perspective.

ROVNER: But that hasn't stopped states from complaining. Twenty-six of them, in fact, are parties to the lawsuit now before the Supreme Court. They say the federal government is basically blackmailing them into expanding Medicaid. That's because while the Medicaid program is theoretically voluntary for the states, it's gotten so large they say they no longer have a choice about whether to participate.

DOUGLAS HOLTZ-EAKIN: The argument is that the federal government overreached by essentially coercing states into a big expansion of the social safety net.

ROVNER: Douglas Holtz-Eakin is an economist who heads the American Action Forum, a conservative think tank. His group wrote a brief in support of the states.

HOLTZ-EAKIN: With these Medicaid expansions, states don't have a real choice that, if they were to give up their federal funds, they would have to come up with another 22 percent of the average state's budget to cover the existing Medicaid programs. It would be a 34 percent tax increase for the typical state. Those are enormous numbers.

ROVNER: On the other hand, Holtz-Eakin concedes, there's a long history of the federal government getting to say how money it provides should be spent.

HOLTZ-EAKIN: When we went to a nationwide 55 mile per hour speed limit, the way it was done was to say, do this or you don't get your highway funds. And so it's very common for the federal government to use the funding mechanism as a way to get the states to do what they want.

ROVNER: And if the court were to accept the states' arguments about Medicaid, says Alan Weil, it could affect a lot more than just Medicaid.

WEIL: Anywhere that the federal government says, we want to share in the cost, if the court accepts this argument of coercion, pretty much everything with that structure would have to be reexamined.

ROVNER: That includes major education, transportation and welfare programs. For now, the consensus among most legal scholars is that the court probably won't strike down the Medicaid expansion, at least not as an infringement of states' rights, but no one knows for sure.

Julie Rovner, NPR News, Washington.

CORNISH: And Julie joins us in the studio now with a preview of what we can expect tomorrow when the court rules. Hi there, Julie.

ROVNER: Hi, Audie.

CORNISH: So when exactly will we get this ruling?

ROVNER: Well, the court meets at 10:00 a.m. Eastern and, unlike most of the rest of official Washington, when the court says it will meet at 10:00, the court actually meets at 10:00. But there are two other cases left on the court's docket that they haven't announced yet and they'll probably do those first, so we'll probably hear about the health law at about - between 10:15 and 10:30 tomorrow morning.

CORNISH: And refresh our memories. I know there are four questions the court is weighing. One of them is this Medicaid issue. What are the other three?

ROVNER: Well, one of them is whether the court can even take up this case yet. There's something called the Tax Anti-Injunction Act and what that basically says is that you can not challenge a tax until after it's been paid. So if the court decides that this penalty for not having health insurance is, in fact, a tax, then nobody can bring a lawsuit until after that tax has been paid. In this case, that won't happen until 2015, so the entire case would have to go away and nobody could sue and they'd have to come back in 2015.

CORNISH: And that penalty is a result of the individual mandate, which is a core part of the law. Talk about those issues.

ROVNER: That's right. And that's what's considered the heart of this case. That's - the second question is that individual mandate, the requirement that just about every American either have health insurance or pay this penalty starting in 2014, whether Congress was within its constitutional rights in putting that in the law.

If Congress was not within its rights and that is found unconstitutional, the next question is can the rest of the law stand without that or would the court have to strike down other parts of the law or would the court have to strike down the entire rest of the law?

CORNISH: And, lastly, how sure are we that this is actually going to happen tomorrow?

ROVNER: Well, nothing is absolutely sure with the Supreme Court until you actually get those decisions in your hand, but we do know the court has announced that tomorrow is the last day of the term. There are only these three cases left, so we're pretty sure that we're going to see those last three cases, including, as I say, this much, much, much anticipated health care case.

CORNISH: Julie, I guess we'll talk to you tomorrow.

ROVNER: Yes, you will.

CORNISH: That's NPR's Julie Rovner. Transcript provided by NPR, Copyright NPR.

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