KHN legal analyst Stuart Taylor talks to Jackie Judd about the source of constitutional authority that the Supreme Court found to uphold the law — and the new options states will have for the Medicaid program.

JACKIE JUDD: Good day and welcome to Health Reform and the Court. I’m Jackie Judd. The historic decision from the Supreme Court today leaves the health overhaul law largely intact. The individual mandate is declared constitutional. The court also ruled that states cannot be financially penalized if they choose not to expand Medicaid to millions of the uninsured. Those are the headlines, here with the details is our legal analyst Stuart Taylor who was in the courtroom when the decision was announced. What was it like?

STUART TAYLOR: It was the most amazing Supreme Court theater I’ve ever seen for 50-some minutes. Roberts the chief justice went on for 20 minutes. When you’re three minutes in, you think “Oh my gosh, they’re going to strike down the mandate.” When you’re eight minutes in, you think “Oh no! They’re going uphold it.” And they do uphold it. They uphold it under the taxing power.

JACKIE JUDD: And he, of course, is the deciding vote.

STUART TAYLOR: He is the deciding vote on everything, pretty much. Then, when he starts in on the Medicaid expansion, he starts in, “Oh, they’re striking it down. By 7-2.” And indeed they were. But the footnote is, all this means is the law cannot force the states to join this new expansion by threatening them with the loss of all their existing Medicaid funds if they don’t.

JACKIE JUDD: Let’s start first with the mandate. As I said, it was a 5-4 vote with Roberts breaking the tie. How did they reach that conclusion?

STUART TAYLOR: Well, there were two sources of federal power that the government claims sustained the mandate. The first is the power to regulate interstate commerce, and 90 percent of the public discussion has been about that issue: Can in the name of regulating interstate commerce, can you force people to buy an unwanted commercial product?

By 5-4, Roberts and the conservatives said, “No, you can’t. The Commerce power does not allow this.” And the liberals were very angry about that. But then the question was: What about the power to levy and collect taxes? Does that sustain the individual mandate? And the government had made that argument; it had gotten much less attention. It was on that basis that the Chief Justice and the four more liberal justices upheld the mandate. They said that it was a valid exercise of Congress’s power to tax.

JACKIE JUDD: And calling it a tax, which is something Congress did not do, is it a distinction with a difference or does this mean that the law as it stands will be implemented as the architects had envisioned?

STUART TAYLOR: It will be implemented exactly as the architects had envisioned, except maybe Medicaid to some extent. In other words, it’s upheld all the way. The question is: What’s the source of constitutional authority? Why does it make a difference? It can make a difference in future cases. The gist is, the court says Congress can tax anybody, anytime, anyway to support the general welfare. And they don’t have to call it a tax. If it acts like a tax, it quacks like a tax, it doesn’t have to be called a tax. But they can only do so much under their power to regulate interstate commerce, which the court seems to think of as a more dangerous power, in terms of “expansionability.” The taxing power has the virtue that the voters watch rather carefully when they’re being taxed.

JACKIE JUDD: Let’s move now to the Medicaid issue. In the Affordable Care Act, the ACA, it forced, essentially, the states to expand Medicaid beginning in 2014, to millions of the uninsured. And if states chose not to, the financial penalty could have been the total withdrawal of all federal funding, which is sizeable.

STUART TAYLOR: Correct. The court said that the threat to withdraw all Medicaid funding was coercive — unduly coercive. The federal government can be a little bit coercive towards the states under case law but they can’t be unduly [coercive]. It’s a matter of degree or kind.

The court says, here, “This is way too coercive, states have no choice. They couldn’t possibly say ‘Sure, take away all of our Medicaid funding, we’re not going along with this.’ Therefore, that violates the sovereignty of the states.” And there were seven votes for that proposition. Interestingly, two of the more liberal justices, [Stephen] Breyer and [Elena] Kagan, joined in that. But then, the question is: OK, so it’s unconstitutional to threaten the states with losing all their [Medicaid] funds. What’s the remedy for that? We just let the states opt out, without losing all their funds. If the states want to go along with the expansion, everything is fine. Most people think the states will want to go along.

JACKIE JUDD: Because in the early years, the federal government is paying 100 percent of the cost.

STUART TAYLOR: Right, and even in 10 years, it goes down only to 90 percent. Now, theoretically, 20 years from now, the federal government could say: ‘Joke’s on you, states, now you’re going to have to pay 80 percent,’ which I think is the sort of thing conservatives were worried about in their dissent. But that’s a long way down the line.

JACKIE JUDD: Thank you so much, it was fascinating. Thank you so much for watching. Please join us again, at 4:00 Eastern Time, this [Thursday, June 28th] afternoon to hear more about the decision. Stuart will be with us, as well as KHN reporters and Tom Goldstein and Lyle Denniston of SCOTUSblog. We hope to see you then.