It has often been remarked that the American federal government was designed to make dramatic change very difficult. Legislation must be approved by both houses of Congress and signed by the President. In recent years, it is not enough that legislation receives majority support in Congress; most controversial legislation must pass the Senate – the upper house – with a three-fifths vote. When government is divided between our two political parties – which have become increasingly polarized ideologically – merely keeping the government running has proved a major challenge.

A unique set of circumstances, however, came together in 2009 and 2010 that made possible the adoption of a major health care reform bill – the brass ring that progressives had failed to grasp for almost a century. The disastrous policies of the Bush administration, which had led to a near complete collapse of the American economy, resulted in the Democrats securing an overwhelming majority in the House and a three-fifths majority in the Senate in the 2008 elections, as well as the election of Barak Obama, a Democrat, as president. The number of Americans without access to health insurance, a chronic problem, grew rapidly as Americans lost their jobs in the recession. By 2009, nearly 50 million Americans were uninsured (DeNavas-Walt et al., Reference DeNavas-Walt, Proctor and Smith2011). Congress finally acted, and despite delays, missteps and compromises – which led to the adoption of a far more complex and less comprehensive piece of legislation than what may have been desirable – the Affordable Care Act (ACA) became the law of the land in March of 2010.

It turned out, however, that even this Democratic party domination of the elected branches of government was not sufficient to secure health care reform; the law also had to receive the imprimatur of the third branch of government, the judiciary. This meant the law had ultimately to be approved by the Supreme Court, which is currently dominated by conservative Republican appointees. This approval was by no means a foregone conclusion.

Within minutes of the President signing the ACA into law, a number of states filed lawsuits both in Florida and Virginia challenging the constitutionality of the law. Within months about 30 lawsuits were filed across the country claiming that the ACA was unconstitutional.Footnote ¹ These lawsuits raised a host of constitutional issues, some significant, some frivolous, some bizarre. One lawsuit, for example, claimed that the law was improperly adopted because the President was not born in the United States. The primary objection raised in the litigation, however, was that Congress lacked the constitutional authority to adopt one particular provision of the law – the individual responsibility provision, which requires Americans who are not otherwise insured to purchase health insurance if they can afford it.

Under the American Constitution, plenary police power to address issues that affect the public health, welfare and safety resides in the states. The federal Congress is limited in its authority, and can only adopt laws in fulfillment of its enumerated powers. However, several of these powers are general in nature. In particular, Congress has the authority to ‘regulate commerce … among the several states’, to ‘lay and collect Taxes…and provide … for the general welfare’, and to ‘make all Laws which shall be necessary and proper for carrying into Execution’ its other enumerated powers.Footnote ² Since President Franklin Roosevelt's New Deal, these powers have been interpreted very broadly by the courts. The courts have always recognized, however, that there are limits to the authority of Congress, and on rare occasions the courts have found that Congress has exceeded its powers.

It is generally agreed that Congress could have created a new federal public insurance program or expanded an existing federal program to cover the uninsured relying on its authority to spend for the general welfare. However, Americans have a deep and abiding faith in the magic of private markets to solve all problems, as well as antipathy to taxes and to government in general, and it was clear from the beginning that health care reform would find some way to make private health insurance work rather than a public insurance approach.

If private insurance is to be used to provide universal coverage, two problems must be surmounted. First, financial assistance must be made available to persons who cannot afford private health insurance, which in the United States is very expensive even for healthy persons. Second, insurers must be persuaded to cover all applicants, regardless of health status. As long as insurers are allowed to underwrite based on health status, insurance will be unaffordable or completely unavailable to persons who will predictably need a significant amount of health care. Insurers will also exclude coverage for preexisting conditions if allowed to do so.

The ACA solved the first problem by expanding the federal/state Medicaid program – which has until now covered only persons who are both indigent and either elderly, disabled, blind, pregnant, children or the parents of dependent children – to cover all poor and near-poor Americans (with household incomes up to 138% of the federal poverty level) and by extending means-tested tax credits to lower- and middle-income Americans. It attempted to address the second problem by outlawing health status underwriting, requiring insurers to issue insurance to all comers, establishing risk adjustment and reinsurance programs, penalizing large employers who fail to provide their employees with insurance if employees end up collecting public subsidies, and, finally, by requiring all Americans who can afford health insurance to be insured.

Initially it seemed that it was well within the powers of Congress to adopt these provisions. But even before the ACA was enacted, anti-reform advocates began arguing that the individual responsibility provision was an unconstitutional extension of the commerce power. Their argument was that Congress can only regulate existing commerce, it cannot call commerce into being. Congress can only regulate activity, not inactivity. Reduced to a sound bite, if Congress can make people buy insurance, it can make them eat broccoli (which apparently for some is a frightening possibility).

The response to this was twofold. First, since most hospitals that have emergency departments are required to provide emergency care without regard to ability to pay, uninsured Americans consume vast quantities of uncompensated care. Everyone eventually uses health care, and someone must pay for it. Either people purchase insurance (or get it through a public program for which they qualify) or they self-insure – often inadequately. Congress can require people who eventually will incur health care bills to make provision in advance for the payment of their inevitable health care bills.

Second, Congress undoubtedly has authority to regulate insurers. If Congress can require insurers to guarantee acceptance of all applicants at community rates without preexisting condition exclusions, insurers must have available healthy as well as unhealthy enrollees. Requiring Americans who can afford it to purchase of health insurance is ‘necessary and proper’ for the regulation of insurance markets.

The lawsuit brought by Florida and eventually 25 other states also raised another issue. The states argued that Congress could not expand the federal Medicaid program to cover low-income Americans under threat of terminating all Medicaid funding for states that refused to expand coverage. Medicaid is a jointly funded and administered program for the poor. Historically, the federal government has paid for half or more of the costs of Medicaid programs; the states have covered the rest of the cost. States have some flexibility in operating their programs, but must meet federal eligibility and coverage.

The ACA dramatically expanded the population covered by the Medicaid program, but offered 100% federal financing for the expansion population. But a state had to accept the expansion or lose all federal funding for Medicaid, the largest source of federal money to the states. The United States Constitution prohibits Congress from compelling the states to participate in federal regulatory programs. Drawing on speculation in a couple of earlier Supreme Court cases, the states argued that the ACA unconstitutionally coerced them to change radically the nature of their Medicaid programs under the threat of the loss of all federal Medicaid funding.

Throughout 2010, the ACA cases churned their way up through the federal court system. Many of the cases were thrown out on jurisdictional technicalities. Three district courts (the lowest level of the federal courts) found the individual responsibility unconstitutional; three found it constitutional. One of those courts – the Florida court in which the states’ case was being heard – declared that the entire ACA was null and void, including hundreds of provisions that had nothing to do with the individual responsibility provision, or even the insurance reforms. On appeal, three of the intermediate appellate courts found the ACA constitutional; one, again the court hearing the Florida case, found just the individual responsibility provision unconstitutional (although not the remainder of the ACA). None of the lower courts identified a constitutional problem with the Medicaid expansion.

Late in 2011, the issue reached the Supreme Court. In March of 2012, the Court heard an unprecedented-in-modern-times three days of arguments and accepted over a hundred amicus briefs. On the last day of the 2011 term – 28 June 2012 – the Court decided the case.Footnote ³

The decision was mixed, but largely left the ACA intact. The Court divided sharply. The four Democratic appointees would have upheld the ACA entirely; four of the Republican appointees would have nullified the entire law. The decision was written, however, by Chief Justice Roberts, a Republican appointee. The Chief Justice bought the broccoli argument, holding that Congress lacked authority under the Commerce Clause to require Americans to purchase a private product. He proceeded, however, to also hold that the penalty enforcing the requirement is in fact a tax, properly adopted under the power of Congress to tax. This was a secondary argument that had been made by the federal government throughout the litigation, but largely rejected by the lower courts. The Chief Justice also held, to the surprise of many, that the Medicaid expansion was unconstitutionally coercive. He did not strike the Medicaid expansion down, however, but merely made it a state option.

What is the consequence of this decision? The legal consequences remain to be seen. Recent Supreme Court decisions limiting the power of Congress are few and far between. This case could signal a greater willingness on the part of the Court to limit the power of Congress, but the Court may also in the future limit the applicability of the case to its peculiar circumstances. In fact, Congress is unlikely ever again to even consider requiring Americans to purchase a product in a private market; only the unique circumstances of the ACA even presented this possibility. There is likely to be more litigation in the future challenging federal conditions on grants to the states, but the courts are likely to limit the holding of the ACA case to its unique circumstances – a dramatic change in the biggest federal grant program to the states with continued receipt of federal funding for the traditional program conditioned on participation in the new program.

The political consequences of the case are much more significant. Had the Court held the ACA entirely unconstitutional, the case would have provoked a constitutional crisis of the first order. A Republican court would have by a straight-line political party vote nullified the signature accomplishment of a Democratic president and Congress. Much of the ACA has already been implemented and unwinding the implementation would have presented impossible legal, political and practical difficulties. There is speculation that Chief Justice Roberts may have decided to uphold the ACA primarily to avoid this thicket.

The practical consequences of a decision largely upholding the ACA, however, are surprisingly minimal. With the ACA having been passed by the House and the Senate (by a super-majority), signed by the President, and now approved by the Supreme Court, one would think that implementation could move forward. The ACA envisions the states taking the lead in implementing important parts of the insurance reforms, however, most notably the health insurance exchanges – regulated markets in which standardized health insurance policies and federal assistance to purchase them will be available. As of this date, it looks like most Republican-dominated states will not be establishing exchanges. There had been hope that if the Court upheld the law, these states might move forward. In fact, however, most decided to wait until after the 2012 presidential election to decide. With President Obama reelected, implementation can move forward, but it is probably too late for many states to implement the legislation, particularly by 2014. At least initially, the federal government will implement the reforms in most states.

Each state does get to choose under the Supreme Court's decision whether or not to proceed with the Medicaid expansion. However, the ACA makes no other provision for covering the poorest Americans. Only Americans with incomes above the poverty level are eligible for the premium tax credits. Providers in states that refuse to expand Medicaid will continue to run up enormous debts for uncompensated care, for they still must provide at least emergency care regardless of ability to pay. The Medicaid expansion will be largely financed by the federal government, moreover, and citizens of states that refuse to expand will still have to pay federal taxes to pay for the expansion in states that do expand. While some states will undoubtedly refuse to expand Medicaid, their citizens will pay a high price for political decisions based not on the best interests of the states but rather on ideology and pique.

The great irony is that the ACA is a fundamentally conservative, private sector, free-market attempt to expand access to health care. Again, it would have been much simpler to simply expand public insurance coverage to the uninsured. The basic ACA program – including the individual responsibility provision – is drawn from proposals put forward in the past by Republicans to make private insurance work (Klein, Reference Klein2012). That Republicans would try so hard to defeat a program based on their own proposals is a testimony to how deeply dysfunctional American politics have become. By largely upholding the ACA, the Supreme Court narrowly avoided a further descent into political gridlock. It remains to be seen, however, whether the American system of government is in fact capable of dealing with the major domestic policy crises that confront it, in particular the problem of making health care available to all.