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Nat'l Fed'n of Indep. Bus. v. Sebelius - 567 U.S. 519, 132 S. Ct. 2566 (2012)


The exaction the Patient Protection and Affordable Care Act of 2010 imposes on those without health insurance looks like a tax in many respects. The “shared responsibility payment,” as the statute entitles it, is paid into the Treasury by “taxpayers” when they file their tax returns. 26 U.S.C.S. § 5000A(b). This process yields the essential feature of any tax: it produces at least some revenue for the government. It is of course true that the Act describes the payment as a "penalty," not a "tax." But while that label is fatal to the application of the Anti-Injunction Act, 26 U.S.C.S. § 7421, it does not determine whether the payment may be viewed as an exercise of Congress's taxing power. 


Plaintiffs challenged the individual mandate provision of 26 U.S.C.S. § 5000A, which imposed a “shared responsibility payment” on individuals who failed to maintain health insurance. The Court declined to uphold the individual mandate under the Commerce Clause, U.S. Const. art. I, § 8, cl. 3, or the Necessary and Proper Clause, U.S. Const. art. I, § 8, cl. 18. However, it ruled that the mandate was a valid exercise of the taxing power under U.S. Const. art. I, § 8, cl. 1. Factors such as the manner of collection indicated that the payment was a tax rather than a penalty. Plaintiffs appealed, also challenging the Act's Medicaid expansion provisions.


Can Medical Assistance Programs be constitutionally applied to withdraw existing Medicaid funds?




In a split decision, the Court held that 42 U.S.C.S. § 1396c could not constitutionally be applied to withdraw existing Medicaid funds from a state for failure to comply with the expanded coverage requirements. The remedy was to bar the federal government from imposing such a sanction, without striking down other portions of the Act.

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