To date, Deltek’s coverage of the United States Supreme Court’s ruling on the Patient Protection and Affordable Care Act (ACA) has centered on the impact to the implementation of state-run health insurance exchanges. However, equally important to the future of states is the fate of Medicaid following the ruling. As any individual who follows the news can attest, the headline-grabbing component of the two-year argument about the constitutionality of the ACA was the individual mandate. Medicaid expansion, though not as attractive to the national media, will have a far greater fiscal impact on the future of each state. With that in mind, it becomes clear that the ruling of the court was indeed a win for the states.
The ruling: A win for states
As mentioned above, the individual mandate became the focus of much discussion surrounding the constitutionality of the ACA. That provision, requiring individuals to purchase insurance or face a penalty in the form of a “shared responsibility payment,” survived scrutiny under Congress’s Article I, Section 8, power to lay and collect taxes. Chief Justice John Roberts rejected the more sweeping interstate commerce argument in favor of the established taxing power of Congress. Roberts sided with state petitioners in their argument that the individual mandate, if considered under Congress’s power to regulate interstate commerce, would most certainly be unconstitutional because it “forces individuals into commerce precisely because they elected to refrain from commercial activity.” Roberts further limited the use of the Commerce Clause by stating it was “not general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions;” insofar as that power exists, it is part of a “police power to regulate individuals … [which] … remains vested in the states.”
Likewise, when it came to the expansion of Medicaid, the chief justice exercised restraint in favor of the states. As we know, the ACA increases the obligations on states by requiring the dramatic expansion of Medicaid. The federal government currently requires Medicaid to cover only certain categories of low-income/asset individuals. This includes pregnant women, children, single parents, the disabled and the elderly. Under the program, as constituted prior to the passage of the ACA, childless adults were generally not eligible without extenuating circumstances; however, states had considerable flexibility for setting those coverage levels. With the passage of the ACA, states are required to expand coverage to all individuals younger than 65 years of age with an income below 133 percent of the federal poverty line (FPL), and provide an essential health benefits package to Medicaid recipients. If a state chooses not to expand coverage, it will lose federal funds for its entire Medicaid program.
As noted in a previous analyst perspective on Medicaid expenditures in the states, Medicaid spending accounts for more than 20 percent, on average, of a state’s total budget. Indeed, our budget work has shown that Medicaid, in its current manifestation, is generally one of the top three biggest budget expenditures. Without the $3.3 trillion in federal funds (government’s estimate for federal spending on the current Medicaid program from 2010 to 2019), states would certainly face a fiscal catastrophe.
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