What’s Empathy Got to Do with It: Medicaid Expansion and Empathic Space

By James Corbett, M.Div., J.D.

I. Introduction

            Empathy, the ability to understand the thoughts and emotions of another person, is crucial in modern healthcare at a time when patients have become reliant on the specialized skills of strangers. A landmark study recently confirmed what many intuitively suspected: clinical empathy can improve health outcomes.[1] However, while clinical empathy is typically thought of as an individual transaction, the importance of creating empathic space in order to stimulate empathy through structural mechanisms is regularly overlooked. As the legal scholar Lawrence Rosen indicates, “Law creates culture,”[2]and legislation has the capacity to create empathic space. This article is a historical and structural analysis of Medicaid expansion and the likely impact of the Supreme Court’s ruling on the Medicaid provision of the Patient Protection and Affordable Care Act (hereinafter “ACA”) [3] in National Federation of Independent Business v. Sebelius (hereinafter “NFIB”).[4] If, as commonly is held, the test of the morality of a society is the treatment of its most vulnerable residents, then the ruling on the expansion of Medicaid may be the most significant aspect of the Supreme Court’s most recent term.

In 2010, in the midst of the greatest financial downturn since the Great Depression,[5] President Obama signed into law the ACA in an effort to improve the health of the Nation while at the same time reducing unsustainable health care costs.[6] One controversial aspect of the ACA was that the law expanded Medicaid and tied existing federal funding to the expansion of the program. Due to objections by twenty-six states, the Supreme Court ruled on the constitutionality of the Medicaid provision of the ACA in NFIB.[7]

The Supreme Court declared the withholding of a state’s entire Medicaid budget for non-compliance with the ACA to be unconstitutional.[8] However, the Court upheld the ACA’s Medicaid expansion by preserving the existing Medicaid program and interpreted the ACA expansion to be a new program rather than an amendment, which would expand the existing Medicaid program.[9] In the NFIB ruling, seven of the nine Justices voted to limit the power of the Federal Government to impose conditions on federal funding allocated to the states. However, five Justices upheld Medicaid expansion as a new program, distinct from existing Medicaid funding. The holding allows Congress to offer federal funds to states to expand Medicaid, and if states accept the funds, Congress may require states to comply with the terms of the new grant.[10] Nevertheless, declining the Medicaid expansion cannot cause pre-existing federal funds to be withdrawn. Thus, post-NFIB, a state’s practical considerations regarding Medicaid expansion will involve several issues, including how a state views its obligations to its most vulnerable residents, fiscal capacity, and, of course, political factors.

II. History of Medicaid Expansion

Medicaid has been successful in providing coverage to some of the Nation’s most vulnerable populations, and “enrollees have consistently received more regular medical care than the uninsured through that time.”[11] To appreciate the impact of the NFIB decision, it is necessary to understand the history of Medicaid and the goals of its expansion under the ACA.

In 1960, President Eisenhower signed into law the Kerr-Mills Act, which created a new grant program to fund states that provided medical assistance for certain elderly individuals.[12] In 1965, Congress expanded the Kerr-Mills Act, adopting a combination of approaches to improve access to health care for the elderly.[13] The Social Security Amendment Act of 1965 created a hospital insurance program to cover nearly all of the elderly (Medicare Part A) and a voluntary supplementary medical insurance program (Medicare Part B).[14] At the same time, Congress also decided to cover other vulnerable populations including families with children, the blind and the disabled through the creation of Medicaid,[15] an individual entitlement program with open-ended federal matching of funds.[16]

In order to respect state autonomy, Medicaid was originally envisioned as a voluntary program to provide the means for states to offer medical coverage to vulnerable populations. States had the option of opting into or declining to participate in Medicaid.[17] If a state chose to participate, it was required to provide coverage to all individuals who qualified for coverage under the federal government’s guidelines, although each participating state was free to add to the minimum federal requirements.[18] From the inception of the Medicaid program, Congress retained the ability to alter, recall, or replace it with a new law. Since 1965, Medicaid has been expanded on multiple occasions.[19]

The ACA expansion requires coverage for participating states to include adults under age 65 with incomes up to 133% of the federal poverty level.[20] This translates to an income of approximately “$14,800 for individuals and $25,400 for a family of three.”[21] The constitutionality of this mandated coverage, and the threat of the total withdrawal of Medicaid funds for a state choosing not to participate, spurred state protestation.

III. NFIB and Medicaid Expansion

            Twenty-six state plaintiffs claimed that by making the states’ existing Medicaid funding contingent on agreeing to participation in the expanded program, the ACA’s conditions were coercive, and a violation of principles of federalism.[22] Chief Justice Roberts’s controlling opinion posited that Congress could require the states to adhere to the ACA’s conditions in order to qualify for the ACA’s newfunding for Medicaid expansion, but Congress could not require the states to participate in the ACA’s “new program” by threatening the loss of existing Medicaid funds.[23]

Chief Justice Roberts began his Medicaid expansion opinion with the notion that under the Spending Clause, Congress may condition grants of funds in a way that might “encourage a State to regulate in a particular way, [and] influenc[e] a State’s policy choices.”[24] But, Chief Justice Roberts recognized that there are limits; he articulated that “when ‘pressure turns into compulsion,’ the legislation runs contrary to our system of federalism… [and] the Constitution simply does not give Congress the authority to require the States to regulate.”[25] Thus, as a federal grant of funds, Medicaid is subject to Spending Clause constitutional standards and by threatening the withholding of a state’s entire Medicaid budget, Congress forced the states’ hands.

Medicaid funding is a substantial portion of state budgets and on average comprises twenty percent of a state’s budget across the country.[26] As Chief Justice Roberts indicates, “[t]he threatened loss of over 10 percent of a State’s overall budget … is economic dragooning that leaves the States with no real option except to acquiesce to the Medicaid expansion.”[27] Chief Justice Roberts’s opinion expressed his belief that the original Medicaid legislation covered a relatively narrow population, only America’s most vulnerable,[28] whereas the ACA’s attempt to use Medicaid expansion to meet the health needs of the entire non-elderly population with income below 133 percent of the poverty level is a new program and “an element of a comprehensive national plan to provide universal health insurance coverage.”[29]

Thus, as a new program, funds that were previously committed under existing Medicaid grants could not be withdrawn for noncompliance with the new legislation. Despite what he considered to be a fundamental change in Medicaid, Chief Justice Roberts found that “[n]othing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availa­bility of health care, and requiring that States accepting such funds comply with the conditions on their use” as an independent program.[30] As a result, the Supreme Court found Medicaid expansion under the ACA to be a voluntary program, which states are free to enter as they choose, and the Secretary of Health and Human Services is free to condition entry and exit of the program within the parameters of the NFIB holding.

Notably, Chief Justice Roberts’ opinion has a broader impact regarding rights retained by the states. Under Chief Justice Roberts’s opinion, the Medicaid condition at issue would impermissibly coerce the states and therefore exceed Congress’s power to spend the federal fisc on behalf of the general welfare.[31] In attempting to differentiate between “pressure” and “compulsion,” the Court distinguished South Dakota v. Dole, a previous case on conditions of federal funding, on the grounds that the only funding at issue in Dole was five percent of a State’s federal highway funds, whereas in NFIB a substantial portion of the states’ budgets would be threatened.[32] The Court upheld the ACA by interpreting it as conditioning the receipt of new funds only on acquiescence to the Medicaid expansion as a new program, removing Congress’s ability to withhold existing Medicaid funding, and thereby preserving state autonomy. Thus, “less than half of one percent” of a state’s budget in Dole would be pressure, whereas a state’s entire Medicaid budget, often “20 percent of the average State’s total budget,” would be coercion, akin to “a gun to the head.”[33]

Essentially, the Court in NFIB affirmed that Congress cannot achieve indirectly through its spending clause power what it has no power to do directly.[34] Congress cannot “commandeer” state legislatures and force them to expand Medicaid, and thus Congress cannot achieve Medicaid expansion by offering the states a financial incentive that they cannot refuse.[35] The Court recognized the nature of political accountability inherent in our federal system, and the danger of allowing Congress to remove the choice from accepting federal programs, which may be unpopular, whereby the state legislators would bear the brunt of political backlash, rather than Congress.[36]

This is consistent with traditional notions of federalism. As Justice Brandeis noted, “It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”[37] NFIB upholds this concept by allowing Congress to provide the means to create state Medicaid expansion programs, while allowing the several states to create what would best suit individual state needs, but not allowing Congress to penalize states for choosing not to so experiment.

In a dissenting opinion, joined by Justice Sotomayor, Justice Ginsburg suggested that “the expansion [will not] exorbitantly increase state Medicaid spending [and] [t]he Congressional Budget Office projects that States will spend 0.8% more than they would have, absent the ACA” and was thus not unconstitutionally coercive.[38] However, this view fails to fully account for the financial crisis states face. Notably, any additional funding to health care would likely come at the expense of other state programs such as education, housing, employment, or other programs, and detracting from these programs may negatively impact other social determinants of health that can be of equal import to health outcomes. With the decision to expand Medicaid left to the states, the speculation of what states will do has intensified, but perhaps the answer to what this decision portends can best be discerned from the response to the creation of Medicaid, which was equally contentious.

IV. Empathic Space

            The passing of two signature pieces of federal legislations – the Civil Rights Act of 1964[39] and the Social Security Amendment Act of 1965[40] – had a positive impact on health outcomes, but not without controversy. The Civil Rights Act outlawed discrimination in voting and ended racial segregation in schools, the workplace, and public accommodations, which meant that blacks could no longer be barred from hospitals based on race. The Social Security Amendment Act established Medicare and Medicaid, which meant that many of America’s poorest residents garnered health insurance.[41] Notably, the receipt of both Medicaid and Medicare was conditioned on adherence to the Civil Rights Act.

More than 8,000 hospitals were subject to civil rights legislation set forth in Title VI of the Civil Rights Act and within two years of the enactment of the Social Security Amendment Act most hospitals were complying with desegregation laws.[42] Of the 8,000 hospitals approved for participation in Medicaid and Medicare, more than 3,000 had to revise their traditional practices in order to participate.[43] Although the receipt of federal funding for hospitals was an economic boon and led to increased revenue and hospital building booms throughout the country, 250 hospitals, predominantly in the South, refused to comply with Title VI and were barred from receiving Medicare and Medicaid funding.[44] Rejecting the federal funding was based on ideological rationales, as hospitals were initially resistant to desegregation, but by refusing federal dollars so as to not have to integrate their institutions, these hospitals lost revenue and prevented both blacks and whites alike from utilizing federal health insurance funding in their institutions, which negatively impacted health outcomes. Eventually, due to practical financial and medical rationales, these hospitals changed course and accepted the conditioned federal funding.[45]

As a result of the empathic space created by the Civil Rights Act and the Medicaid and Medicare Expansion Act, health outcomes dramatically improved for those who were previously uninsured.[46] For African Americans, the new regulations and capacity to receive better healthcare as a result of health insurance led to the greatest improvement in health disparities in the history of the country.[47] From 1965 to 1980 the overall age-adjusted death rates fell 25.2% for blacks and 21.1% for whites.[48]

The expansion of Medicaid authorized in the ACA has the similar potential to reduce the health disparities that are based on income, as it will allow individuals who previously could not afford health insurance coverage to receive care. Chief Justice Robert’s opinion highlights that allowing states to voluntarily accept federal funds to expand Medicaid when the state is financially ready recognizes that health is not determined by coverage alone, but is multifaceted and impacted by multiple state-funded programs. However, with the large amount of bad debt and charity care that hospitals in states with uninsured individuals encounter, it is likely that states will be under inordinate pressure to accept the Medicaid expansion funding, and like the hospitals who initially refused insurance funding in the 1960’s, it is expected that the states too will eventually accept Medicaid expansion funding.

To be sure, empathy can exist separate from health insurance, but health insurance does help create the empathic space where hospitals and providers who can expect reimbursement can diminish the practical fiscal obstructions that limit the care and empathic space for the uninsured.[49] In fact, if we look at outcomes alone, it is clear that those who have Medicaid have better health outcomes than those without health insurance.[50] The Institute of Medicine estimates that health insurance may reduce adult mortality by 25%.[51] Consequently, the states that refuse to accept the Medicaid funding, if otherwise financially able to expand, would be negatively impacting the health of some of their poorest residents.

V. Conclusion

            Chief Justice Roberts presented each state with a choice. On one hand, to expand Medicaid per Congress’s offering which would improve health and provide the tools to providers to create empathic space for the practice of medicine. On the other, refrain from expansion at a great cost to its most vulnerable citizens. Recent studies confirm that Medicaid insurance improves health outcomes.[52] Despite the clear public health rationale, for Medicaid expansion there remains the possibility that ideological or political factors, may, at least initially, prevent expansion. But sometimes the best political argument can be a financial one.

The federal government will pay 100% of the cost of the newly insured Medicaid beneficiaries through 2016 and 90% after 2020 instead of the 50% to 83% that it currently pays for eligible categories across the country.[53] Furthermore, Medicaid ACO demonstration projects in Oregon and payment reform in Massachusetts may lower the cost curve even further making the financial consequences of not accepting the funding too great for any state to resist.[54] A country that seized the opportunity to improve the health of its most vulnerable residents would be a repudiation of the misguided characterization of DH Lawrence who claimed, “The essential American soul is hard, isolate, stoic, … and has never yet melted.”[55] If a common test of the morality of a society is indeed its treatment of its most vulnerable residents, perhaps the empathic space created by health insurance expansion is more important to the country than we recognize.

James Corbett, M.Div., J.D. is the System Vice President of Community Health & Ethics at Steward Health Care System. James is also a Fellow at Harvard Medical School, Division of Medical Ethics. At Steward, James provides oversight to Community Health, Behavioral Health and Ethics. He received his BA in International Relations from Syracuse University, a Juris Doctor from Saint John’s Law School, and a Master of Divinity from Duke University. James has taught health care law and ethics courses at both the University of Maine Law School of law and New England School of Law. James presents on topics related to health, ethics and empathy internationally.