If you haven’t heard Thursday’s big news from the Supreme Court, please tap your life’s Settings button and ensure that Airplane Mode is disabled before reading on. (Come to think of it, if you haven’t heard the news, you probably won’t get that joke.) Okay, the Kanye West/Kim Kardashian saga has been interesting, but SCOTUS’ affirmation of the Affordable Care Act was arguably the biggest news story of the year (Kanye, I’ma let you finish, but the Supreme Court…). In a surprising 5-4 decision the high court ruled that the law’s individual mandate, or the requirement to buy health insurance, is indeed constitutional, and thus the majority of Obamacare as well. SCOTUS did, however, rule that the federal government couldn’t coerce states into expanding eligibility for Medicaid. I appreciate the possibility that all that sounds like nonsense, so in this post, I’d like to decode what Thursday’s news means for our generation.
But first, I want to linger on how absolutely epic the story was, for those who haven’t had night sweats or chronic indigestion as a result of the past few weeks’ suspense. As Adrianna’s tweetsaga attests, the Twittersphere has been abuzz with rumors of the announcement for far longer than you might want to know. And that buzz was overwhelmingly negative: Intrade, a typically reliable prediction market, put the odds that the individual mandate would be overturned at almost 80%. (Though I was in Vegas when the news broke, I promise I wasn’t betting on it.) Finally, as has been the case in the past, most predicted that Justice Anthony Kennedy would be the deciding vote. I couldn’t have been more surprised with the outcome—the individual mandate was upheld, Republican-appointed Chief Justice John Roberts was the deciding vote, and Medicaid expansion was what they took issue with. It’s safe to say that journalists had good reason to gallop full-speed out of the Supreme Court when the decision came out.
On to us. As I discussed in an earlier post, the only ACA provision targeted at our age group—the requirement that insurers let children stay on their parents’ plans till age 26—has actually been embraced by insurers themselves; several promised to continue under-26 coverage even if the entire law were thrown out. The same goes for full coverage of certain preventive services like primary care checkups, STD counseling, and contraception: those insurers said they’d make sure you don’t pay anything out-of-pocket whatever SCOTUS decided. I imagine that the rest of the industry would’ve followed suit, so truth be told, I’m not jumping with excitement because these part of the law was upheld. Let’s not forget, too, that if your parents don’t have health insurance, the under-26 provision doesn’t help you at all.
But as I mentioned earlier, the big news was the individual mandate. I won’t get into the legal arguments’ specifics—check out Adrianna’s first post for those—but if you ever wondered what broccoli has to do with healthcare reform, the individual mandate is it. During the oral arguments, Justice Antonin Scalia essentially asked, if the government can force us to buy health insurance, why can’t it force us to buy broccoli? In the majority opinion, Justice Roberts took an unexpected route to his conclusion that it was constitutional. Whereas Obama’s lawyers justified the individual mandate under Congress’s power to regulate interstate commerce, Roberts noted that the penalty for failing to comply with the mandate worked like a tax, and Congress is certainly allowed to tax.
As it pertains to us, the individual mandate is a double-edged sword. Honestly, since most people our age are pretty healthy, from a selfish perspective the individual mandate kind of bites. We’ll be required to pay for insurance, even though it might be cheaper to pay for sporadic care (think MinuteClinic) out-of-pocket. But from a broader perspective, the individual mandate is crucial to the ACA’s most significant aim: guaranteeing insurance coverage for every American. The law prevents insurers from denying coverage to patients with pre-existing conditions, but if people could just sign up for insurance when they got sick, the whole system could unwind. How do we know? Because it happened in Washington state: they enacted an individual mandate and pre-existing condition coverage requirement, but after repealing the mandate, healthy people dropped their plans, the insurance market spiraled, and insurers ended up fleeing the state.
In the long run, our generation’s stake in healthcare will be a function of its cost. The rate of healthcare cost growth is increasing (yes, that’s confusing—think acceleration, not velocity) at an unsustainable clip, from 5.64% per year in March 2012 to 6.14% per year in April 2012. All that money has to come from somewhere, and as anyone who’s gotten a paystub knows, that somewhere is our wallets—in the form of health insurance and Medicare payroll taxes, among other things. If cost growth continues to accelerate unchecked, the size of those bites out of our paychecks will increase, and despite all that time we’ve paid into Medicare, it’s highly unlikely that we’ll get anything like what our grandparents are enjoying now. So even if we’re not likely to be admitted to the hospital anytime soon, we all have a real stake in taming the cost monster. Fortunately, the ACA includes a host of payment reforms to modify the perverse incentive structure that probably begat the cost monster in the first place, and those reforms made it out of SCOTUS unscathed.
The one casualty of SCOTUS’ decision was the way the ACA enlisted the states into Medicaid expansion. Medicaid, the nation’s safety net health insurance program, is run and funded jointly by the federal government and each state. Each state has traditionally had a tremendous amount of latitude in deciding who should qualify for Medicaid, and in states like Texas, people have to be extremely poor to qualify for it—only parents under 26% of the federal poverty line (FPL) are eligible, or $2,900 in annual income; no plan is available to childless adults. And there’s actually no national requirement whatsoever to cover single men. The ACA required all states to cover every patient under 133% FPL under its Medicaid plan; as a carrot, it offered additional federal funds to help states pay for those new patients, and as a stick, it threatened to withdraw all federal Medicaid support to any state that didn’t expand Medicaid eligibility. SCOTUS, however, ruled this sort of strong-arming unconstitutional, as an unfair infringement on states’ rights. States can choose to expand Medicaid eligibility and accept federal funds for it, but they can’t be forced to. Under the ruling, the federal government can refuse to give additional funds for expanded coverage, but it can’t take away all its Medicaid support entirely.
What this means, however, is that there might be a new “donut hole” in coverage for the poor. In addition to requiring that Medicaid cover everyone up to 133% FPL, the ACA established federal subsidies to help people above 100% FPL afford a policy on one of the new health insurance exchanges. But if a state like Texas refuses to expand Medicaid eligibility, what happens to the people between 26% FPL and 100% FPL? They’re not poor enough for Medicaid, yet too poor for a federal subsidy. Will they still be subject to the individual mandate, even if they can’t afford a policy without subsidies? It’s possible, though, that states will choose to show good faith and expand Medicaid eligibility without a federal requirement. Let’s step back for a minute, though—even prior to the ACA, there was a big gap in coverage for people not poor enough for Medicaid, but not wealthy enough to purchase their own insurance plans (and there were no subsidies for the latter). So the ACA and SCOTUS ruling don’t really create a new donut hole; they make the existing donut hole smaller, starker, and more tangible.
I could go on for days, but I hope you have better things to do this weekend. All things considered, I want to stress that SCOTUS’ decision is—by definition—not a judgment of whether Obamacare is good policy. It is an evaluation of the policy in light of the Constitution and legal precedent. As explained in the Washington Post,
The chief justice went out of his way several times to portray the court as a neutral arbiter of the facts, adjudicating matters of law, not passing judgment on the wisdom of the health-care legislation.
“Those decisions are entrusted to our nation’s elected leaders, who can be thrown out of office if the people disagree with them,” Roberts said. “It is not our job to protect the people from the consequences of their political choices.”
Despite SCOTUS’ approval, this fall’s election will play a huge role in how Obamacare unfolds. A hostile president or Congress could unravel its implementation, and we now know that the states have some wiggle room too. So as you take in the news and eventually hit the polls in November, form your opinions based on whether you think the ACA is sound policy, not based on what the Supreme Court has said. Many things could change, and your vote matters—Obamacare has won this battle, but the war has just begun.
Karan works in strategic research on health care and will begin medical school this fall.
Follow him on Twitter @KRChhabra.