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Dr. Sonia Nagda, reform supporter
Dr. Sonia Nagda attaches a pin supporting the reform law in March, as the Supreme Court began three days of arguments.

Reform law clears major hurdle in court

By Modern Healthcare
Posted: December 22, 2012 - 12:01 am ET

The uncertain fate of the Patient Protection and Affordable Care Act defines the first half of the year in healthcare as the law rests in the hands of the nine U.S. Supreme Court justices.

In late March, the court hears six hours of oral arguments on four questions in the case over three days. Many observers think the law is doomed after five justices, including presumed swing vote Anthony Kennedy, deliver sharply critical questions and U.S. Solicitor General Donald Verrilli Jr. fails to answer them effectively.

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Three months later, though, the court upholds the individual insurance mandate viewed as the linchpin of the ACA and does so with legal reasoning so unexpected that CNN and Fox News incorrectly report that the mandate was struck down. Chief Justice John Roberts joins the court's liberal wing to preserve the mandate based on little-noticed legal reasoning floated by the Obama administration: that even if the mandate is an unconstitutional extension of Congress' power under the commerce clause, it's a legitimate exercise of taxing power.

Less noticed in the moment but hugely important in the months that follow, a majority of the justices conclude HHS cannot withhold all Medicaid dollars from states that decline to expand eligibility to at least 133% of the federal poverty level. The Medicaid expansion had been expected to reach 17 million Americans and account for a substantial portion of the reduction in the number of uninsured achieved by the law.

The Congressional Budget Office later estimates that the outcome means 6 million fewer people will get new Medicaid coverage, although the CBO presumes 3 million will instead get subsidized coverage in the health insurance exchanges established under the law. The reality, however, remains murky for the rest of the year as governors see new leverage to pry concessions from the CMS on their Medicaid obligations in exchange for helping the feds meet the ACA's coverage goals.

The Supreme Court's opinion gives dramatic resolution to a long-brewing array of legal challenges, but industry leaders and state officials continue to say they'll wait for the November elections before accepting that the bulk of the ACA will remain intact.

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