SCOTUS Ruling on the Affordable Care Act: Individual Mandate Upheld as a Tax, Limits Imposed on Medicaid Expansion


On June 28, 2012, in the most highly anticipated ruling of this Term, the U.S. Supreme Court issued its opinion regarding the constitutionality of the Patient Protection and Affordable Care Act of 2010 (the ACA) in National Federation of Independent Business v. Sebelius (No. 11-393) (see link to opinion). By a 5-4 vote, the Court upheld the constitutionality of the “individual mandate”— doing so pursuant to Congress’s power to impose taxes, while a different 5-4 majority rejected the government’s position that the mandate is a valid exercise of Congress’s Commerce Clause power. The Court also concluded that the ACA’s expansion of individuals eligible for benefits under the Medicaid program is constitutional, but limited the penalties that the federal government may impose on states for failure to comply with such an expansion, thereby effectively providing states with an option to expand Medicaid eligibility or maintain the status quo. Other than this limitation to the Medicaid expansion provision, the Court’s decision leaves the ACA valid and effective.

As such, the healthcare and life sciences industries are relatively unaffected by the Court’s decision. Efforts to comply with the provisions of the ACA will continue with more direction and urgency now that the constitutionality of the ACA has been largely established. Also, the Obama Administration will likely accelerate ACA implementation efforts given the impending November election. In one area, however, the decision does create an element of uncertainty regarding whether all states will opt to expand eligibility for Medicaid. If not, large segments of the low-income population will remain uninsured in 2014—which is a departure from the one of the primary goals of the ACA—the access to affordable health insurance by most Americans. Developments in this area should be closely monitored at the state level. Depending upon state reactions to the watered-down Medicaid expansion provisions, life sciences manufacturers may need to adjust expectations regarding market access to their products by low-income individuals, as well as re-evaluate whether existing or modified patient assistance programs will be effective to meet demands of the uninsured and under-insured. Similarly, health care providers and suppliers may continue to be faced with uninsured low-income patients and the problems of uncompensated care, despite an overall expansion in coverage among the American population through the state-run health insurance exchanges...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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