Office Hours: Obamacare and the Element of Surprise

Last June 28, Chief Justice John Roberts surprised many when he announced his opinion upholding most of the Affordable Care Act (ACA). Most expected the Supreme Court to strike down the law’s central feature, the “individual mandate,” requiring all Americans to purchase basic health insurance if they were not otherwise covered. It was no surprise that Roberts, joined by the court’s other three conservative members and “swing Justice” Anthony Kennedy, ruled the mandate exceeded Congress’ “commerce power.” The surprise was Roberts, joined by the court’s four liberals, finding the mandate constitutionally supportable under Congress’ power to tax.

The court astonished again when it declared unconstitutional (by 7-2) the ACA’s requirement that states expand their Medicaid programs to include adults below 138 percent of the Federal Poverty Level (FPL) or forfeit all federal Medicaid contributions. Roberts’ opinion reasoned states so depend on this federal funding that requiring them to expand programs to keep that support would be coercive and violate the 10th Amendment.

Three things make this ruling worth our attention. It overlooks the Supreme Court’s 1978 ruling in North Carolina v. Califano upholding a similar requirement in a federal health-planning law. Roberts’ decision never mentions Califano and neither do nearly 200 briefs filed in the Obamacare case. And perhaps most surprising, liberal justices Stephen Breyer and Elena Kagan joined the conservative majority on the Medicaid issue. Cynics might suspect a backroom deal sacrificed mandatory Medicaid expansion to keep the ACA alive.

The challenge to Medicaid expansion was raised by 26 “red” states, which fought it to the Supreme Court. Down to last November’s election, the challengers trumpeted their win and declared they would forego the expansion. With the election now history, what will they actually do?

The time for political posturing is past; reality intrudes, and positions have been changing. The ACA’s Medicaid expansion deal is so sweet that even some diehard Republican governors are stepping up to have their states feed at the federal trough. The Wall Street Journal referred to them in a Feb. 4 article as “the GOP’s Obamacare Flippers.”

As of March, eight GOP governors have announced their states will take the deal. Gov. Chris Christie of New Jersey was the last to sign on. Christie reasoned that if New Jersey refused the Obamacare funds, they would simply be spent elsewhere and declared, “I will make all my judgments as governor based on what I believe is best for New Jersey.”

From 2014 through 2016, the feds will pay all costs of providing “essential health benefits” to previously uncovered adults between 100 percent and 138 percent of the FPL. This will enable most states to enroll tens, even hundreds, of thousands of new people to their Medicaid rolls at no cost during that period. Looking beyond 2016, the CBO estimates that Medicaid expansion could add less than 3 percent to a state’s annual Medicaid cost and, if fully implemented, 17 million adults to the ranks of the insured.

Polls show that the public is solidly behind the Medicaid expansion, and much of the health care industry is too.

So governors not already on board weigh the cost in votes of turning down the big pile of federal money. Starting in 2017, the federal contribution will decline, though not below 90 percent through 2020. Beyond that, the ACA doesn’t specify what will happen. States are wary of taking on a major new obligation without knowing its long-term dimensions; but the current Congress cannot bind its successors, and the future has never come with guarantees. So despite the uncertainties, many states that fought for the right to turn down Medicaid expansion will decide to accept it anyway—the biggest surprise of all.

Looking beyond Medicaid, ACA implementation holds many more open questions, which Wharton’s health services and policy faculty are following: (a) how states will develop and run insurance exchanges, on their own or in partnership with the federal government; (b) whether employers will respond to the ACA by increasing, reducing or dropping employee health insurance; (c) how health care providers and insurers will respond to the ACA’s structural, payment and incentive changes; (d) whether individuals will obey the mandate or choose to pay the relatively modest penalty for noncompliance; and, perhaps above all, (e) whether Obamacare will help to rein in the nation’s long-escalating healthcare costs or bankrupt the system.

Opinions on these questions run strong. I have long maintained that universal health care is a sine qua non of a fair, compassionate nation and have championed this goal. I believe Obamacare is a big step in the right direction; but whether history will record the ACA as a success, a failure, or just another jog on a long and winding road is a question we’re nowhere close to answering.

Arnold J. Rosoff is professor of legal studies and health care management and a senior fellow of the Leonard Davis Institute of Health Economics. He holds a secondary appointment in the Perelman School of Medicine’s Department of Family Medicine and Community Health.