'Obamacare': Supreme Court Turns to Medicaid

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Now that the hoopla of the arguments surrounding the individual insurance mandate is over, don't overlook two important issues today when Supreme Court hearings on the constitutionality of the Affordable Care Act continue.

First off:  If the court strikes down the individual mandate, what happens to the rest of the  law? It contains many provisions that have little to do with the mandate. Should the whole law go down?

Yesterday's arguments-which went badly for the government-could make today's question critical.

Lawyers for the Obama administration say that if the mandate falls, two popular provisions would also fall, but the rest of the law should survive. The most popular part of the law that would fall is the "guaranteed issue" that, in part, requires health insurance companies to offer and renew coverage even if an individual has a pre-existing condition.

But at a recent event hosted by Bloomberg Law and Scotusblog, Michael Carvin, a lawyer representing the National Federation of Independent Business and four individuals, said the entire law must fall if the mandate is struck down.

"Once you've ripped the heart and the lung out of the body, it doesn't matter that the fingers continue to actually move, " Carvin said. "What matters is if they can move in the way Congress intended."

The court has appointed a lawyer to argue a third position that was taken by the 11th Circuit Court of Appeals: Even if the mandate falls, every other provision of the law should still stand.

To recap: If the individual mandate is struck down, the challengers of the law argue every other part of the law should fall. The government argues that only two popular provisions should fall and the Amicus counsel argues that every other provision should still be able to stand.

This afternoon the court will hear an hour of arguments on the law's expansion of Medicaid.

"In all the excitement of the individual mandate, don't lose sight of this issue," Paul Clement, the lawyer for the states, warned recently at an event at Georgetown University Law Center, referring to a part of the law that expands Medicaid.

No lower court has struck down the Medicaid expansion of the law, but the Supreme Court thought the issue was important enough to warrant an hour of oral argument.

Clement argues that Medicaid was established in 1965 as a cooperative federal-state partnership but the new law creates a "dramatic transformation" of that relationship. Beginning in 2014, states will be asked to cover all individuals younger than 65 with incomes up to 133 percent of the poverty level. Although the federal government will initially fund 100 percent of that expansion, by 2017, states will be responsible for 5 percent of those costs, with that number increasing to 10 percent by the end of the decade.

Congress made the new terms a condition of continued participation in Medicaid. Opponents say the government is forcing the states to participate because no state could reasonably expect to withdraw from the program. "The ACA threatens states with the loss of every penny of federal funding under the single largest grant-in-aid program in existence, literally billions of dollars each year, if they do not capitulate to Congress' steep new demands," Clement writes.

And he says the law provides no means, other than Medicaid, for the nation's neediest residents to obtain insurance and thereby comply with the mandate.

The government argues, however, that although Medicaid has expanded over the years, many low-income individuals have remained ineligible. So Congress addressed the crisis by extending Medicaid eligibility to certain individuals.

It argues that the federal government will bear nearly the entire cost of medical assistance for individuals made newly eligible and that the states' spending on Medicaid "will be offset by other savings the states will achieve as a result of the ACA's reforms."

The government says that from the outset, Congress specifically reserved the right to "alter, amend or repeal" any provision of the Medicaid Act and that states "remain free to opt out of Medicaid if they so choose."

The 11th Circuit Court of Appeals rejected the states' claim in part because states were warned from the beginning that Congress reserved the right to make changes to Medicaid, that the federal government will bear nearly all the costs associated with the expansion and that the states have the power to tax and raise revenue and, therefore, can create and fund programs of their own if they do not like Congress' terms.

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