The ACA Decision Is In

The Supreme Court decision on the constitutionality of the Affordable Care Act is finally in.

Before it was announced, most people seemed to think that the individual mandate would be overturned. 

It did not play out that way.  The individual mandate was upheld – not under the Commerce Clause of the Constitution, but as a tax.  Justice Roberts proved to be the swing vote.

Also left intact are the expansions of Medicaid eligibility and, as a result, the entire law, with all of its consumer protections.

However, there is a major caveat here.


States can opt out of the expansion of the Medicaid program without jeopardizing the rest of its Medicaid funding.  In other words, the Court is allowing a state to refuse to expand Medicaid eligibility to 133% of poverty and to refuse to cover all of the ACA-mandated basic benefits in its program.  If it does, it will only have to give up the new federal money that pays for these benefits.

The consequences may be devastating for lower income people if a state decides to make them scapegoats for a decision it finds otherwise unpopular, and I will be writing more about this in a couple of days. 

The Court's decision is considered to be a major political victory for President Obama.  That may or may not prove to be true in the short term.

And the biggest blow may be felt by those who still believe that a private health insurance marketplace – unsubsidized by the government – has a bright future in America. 

Here’s why.

While the individual mandate will affect as little as 2% of the population directly (because most people who can afford insurance already have it), it was also government’s the last gasp “carrot and stick” approach to convincing people to buy a product – health insurance – that few people actually want or like.

“If you buy insurance,” the federal government has said through ACA, “we’ll subsidize it to the tune of a $9,000 tax credit for a family of 4 making $60,000.  If you refuse, we’ll impose a tax penalty of $2,085 on you.”

“No deal,” said 61% percent of Americans in a poll released this week.  If insurance were popular, would people have to be forced to buy it?

That’s why John Boehner has already announced that he will try to repeal the mandate through legislation, and this will likely become a major political campaign issue this year.

The truth is that ACA is going to have little effect on overall health spending in America, and even with the individual mandate in place the share of health costs paid by private insurance is going to go down. 

To understand why, take a look at the 2012 health spending projections made by CMS personnel and reported in the article entitled National Health Expenditure Projections, published online by Health Affairs in June 2012 and in the July 2012 print issue. 

CMS projects that overall health spending – now at $2.6 trillion a year – will increase by over 62%, or 5.7% annually, through 2021, to $4.5 trillion per year.  The ACA effect?  Under 5% of that, or a cumulative 3.1%, well within the rounding error!   

With two exceptions, ACA won’t change too dramatically who pays the bill.  As is clear from the chart above, only two categories of payers will see their share shift by even 2%.  The first is the Federal share of the Medicaid program, largely because the federal government was paying 100% of the cost of the Medicaid expansion.  The second is the out-of-pocket, or self-pay, share, largely because fewer people would be uninsured.

The biggest surprise?  The share of health expenditures to be paid by private insurance goes down by 1% over the next ten years, in spite of the individual mandate that everyone who can afford it must carry health insurance!

What this means is that even with ACA upheld, we will continue our excruciatingly slow and tortuous march toward a governmental payer, Medicare or Medicaid for all, basic health care financing system.  But for "Medicare for all" advocates – it probably won’t happen in your lifetime.

For all the arguments I and others will make in the coming days that the impact of ACA and the Supreme Court’s ruling on healthcare financing may now be overstated, another truth is that it remains the most significant piece of health care financing legislation to pass Congress since Medicare and Medicaid.

And that the Supreme Court has affirmed this.

This is the first in a series of five OHPM columns on the impact of the Supreme Court decision on the Affordable Care Act.  Tomorrow: What the Decision Means for You