Dec. 16, 2010 -- A federal judge in Florida today heard oral arguments in a lawsuit challenging the constitutionality of the individual mandate in the new health care law and the expansion of Medicaid.
The proceedings come just days after a Virginia judge dealt a resounding blow to the Obama administration. He ruled that the federal government is overstepping its constitutional boundaries by requiring Americans to carry health insurance by 2014.
What sets the Florida case apart, though, is that it's brought on behalf of 20 states and is the first court challenge against Medicaid expansion.
The new law's requirement that Medicaid be expanded to cover Americans whose incomes are at or below 133 percent of the federal poverty level (about $14,000 in 2010 for a person living alone) has triggered a flurry of protests from some states.
Arizona's incoming state Senate president has rejected billions in federal help. Republican lawmakers in Texas recently threatened to eliminate Medicaid altogether because of rising costs. And incoming Florida Gov. Rick Scott has called the health care law the "biggest job killer in the history of this country."
The 20 states that are part of the lawsuit in Florida argue that Medicaid expansion will further burden their already crumbling budgets. But the federal government is supposed to pick up much of the tab, paying $443.5 billion -- or 95.4 percent of the total cost -- between 2014 and 2019, according to an analysis by the non-partisan Kaiser Family Foundation. The states would contribute $21.2 billion, Kaiser said.
Under the new law, Medicaid enrollment will climb by 15.9 million more people by 2019 than it otherwise would have, and the number of uninsured will fall by more than 11 million.
Supporters say the expansion is desperately needed because the current income threshold is dismally low.
In 43 states, dependents who don't have any children are ineligible for Medicaid even if they don't have any source of income. In Florida -- the battleground for this case -- if an individual's annual income is above $9,074, they cannot apply for Medicaid, an eligibility standard that health reform supporters say is dismal.
"For the states to complain that this is a real problem for them is somewhat ridiculous because remember, when you get all these people newly into health care coverage, the states' other expenses like providing charity care and those kinds of things, those things come down," said Ron Pollack, executive director of non-profit Families USA.
The Florida case will also once again shed a spotlight on the individual mandate -- the requirement that everyone get medical insurance -- that has brought much criticism from states.
"The act would leave more constitutional damage in its wake than any other statute in our history," David Rivkin, the lawyer representing the 20 states in the Florida lawsuit, said today.
That issue is ultimately expected to end up in the Supreme Court, but at a time when the Obama administration is working vigorously to roll out the new plan, it creates more uncertainty and challenges.
Eleven similar cases were dismissed and two federal judges in Virginia and Michigan ruled in favor of the administration when faced with a similar case. But, like Virginia's U.S. District Judge Henry E. Hudson, Florida U.S. District Judge Roger Vinson has expressed some skepticism of the administration's position.
Vinson was appointed by Republican president Ronald Reagan.
The 20 states in the lawsuit include Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Indiana, Idaho, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Pennsylvania, South Carolina, South Dakota, Texas, Utah and Washington.
The individual mandate is a central feature of the new health care law. Its proponents argued that the mandate was necessary to prevent people from exploiting the system and only buying insurance when they had to, thus making health care more costly across the board.
Florida Next Battleground for Health Care
The idea that individuals must carry insurance was first conceived by Republicans in the 1990s and was a central feature of the Massachusetts health care plan under then-GOP Gov. Mitt Romney. In the current health care law, it was designed to make sure that young and healthy Americans were also buying insurance, not just the sick and the elderly.
With insurance companies having to comply with new rules that limit their ability to discriminate -- such as denying care to patients with pre-existing conditions -- tearing away the individual mandate could further fuel the cost problem.
"If the [Supreme] Court rules along the same lines as the initial ruling, then the rest of the law stays intact. But then you have the situation where there's this obvious problem of selection. Why should anyone sign up for insurance until they're actually sick? That almost certainly would raise costs," said Dean Baker, an economist and co-director at the Center for Economic and Policy Research.
Experts are already mulling other options to replace the individual mandate if courts strike it down.
Some argue for a system like that set up for Medicare prescription drugs, where a person pays higher premiums the longer they decide to wait and enroll in a health insurance plan. Another alternative that has been suggested is requiring Americans to buy insurance only during open enrollment periods, not when they get sick.
"Given how tepid the current individual mandate penalties are, such an alternative scheme could be much more effective in protecting the insurance markets, as well as far more politically palatable for consumers faced with paying either an unaffordable insurance fine or an even more unaffordable insurance premium, than the current weak individual mandate before the courts," Robert Laszewski, president of the consulting firm Health Policy and Strategy Associates, wrote in a blog.
As the Obama administration plans to roll out a slew of new provisions in January, they also face many challenges in Washington, where the House will be controlled by Republicans in just a few weeks.
Many incoming members of Congress have vowed to repeal parts of the health care law, or at least bar funding for them, which could become another thorn in the administration's strategy.
Supporters say opponents are playing pure politics with Americans' health care.
"These are really serious lawsuits and they're really brought for political purposes. It's part of an effort to undermine public support for the Affordable Care Act and to undermine President Obama," Pollack said. "I think at the end of the day, it won't have an impact."
Kaiser Family Foundation's latest tracking poll shows the public still divided in its views of the health reform law, a sentiment largely unchanged since the law's enactment in March. Forty-two percent of Americans say they have a generally favorable view of the law, while 41 percent say the opposite.
But opposition from seniors seems to be on the decline. The share of those aged 65 and up holding unfavorable views of health reform dropped to 40 percent in December, the lowest since the passage of the law.
"The real challenge in the short term is neither the state of the court challenges nor the threat of repeal or even the threat of substantial starvation of appropriations. I think it has to do with reaching the public and educating them about what's in the bill," said Edward F. Howard, executive vice president of Alliance for Health Reform. "The real battle over the next couple of years wll be making your case to the American public whether this is a good deal or a bad deal."