Supreme Court Rules Individual Mandate Constitutional; Withholding of Medicaid Funds to States Is Coercive Penalty

Author: Jayne Zanglein, Western Carolina University

In National Federation of Independent Business v. Sebelius, +2012 U.S. LEXIS 4876 (June 28, 2012), the United States Supreme Court addressed the constitutionality of the individual mandate and expansion of Medicaid provisions in the Patient Protection and Affordable Care Act of 2010 (ACA).

The ACA imposes an individual mandate - shared responsibility payment or "penalty" paid to the Internal Revenue Service - on persons who fail to purchase health insurance. The ACA also requires states to expand Medicaid to cover a new category of low-income residents, subsidized almost completely by the federal government. If a state refuses to expand Medicaid as directed by the ACA, the federal government could withhold all of the state's Medicaid subsidy (including the new subsidy) as a penalty.