Health and Human Services Secretary Kathleen Sebelius said a federal judge’s ruling against the administration’s health reform law is “a case of judicial overreach” that will ultimately be overturned.

Sebelius said she expects the U.S. Supreme Court to eventually determine the fate of the law, which on Monday was ruled entirely void by Judge Roger Vinson of the U.S. District Court for the Northern District of Florida. Vinson said that the law's mandate requiring all Americans to acquire health insurance was a violation of the Constitution's commerce clause.

“The judge declared the entire law null and void, even though he only found that one single provision related to the individual responsibility portion of the law was unconstitutional,” Sebelius told conferees at GOVERNING’s Outlook in the States & Localities conference in Washington Wednesday.

Sebelius also said Vinson’s decision to dismiss the entirety of the law did not follow precedent, since a judge should seek to preserve the body of a law and only nullify the parts that are deemed unconstitutional.

Her department is now working with the Justice Department to determine the administration's legal options in the wake of Vinson’s ruling. Meanwhile, the federal government will continue to move forward with its implementation of health refrom, Sebelius said, adding that she is “confident that, at the end of the day, the law will be found to be constitutional.”

Sebelius also spoke about the impact that soaring health care prices will have on the budgets of states, which will likely have to make cuts elsewhere to continue paying for Medicaid. States spend more money on Medicaid – about 22 percent of their budgets – than any other item, said David Adkins, head of the Council of State Governments.

As the country has struggled with a recession and unemployment, Medicaid rolls have swelled, causing further financial stress on states that fund the program. That stress will only be exacerbated in 2014, when provisions of health reform take effect and expand eligibility for the program. While the federal government has provided some additional aid to states to deal with the growing number of Medicaid patients, the extra assistance ends in June.

At that point, states will have to figure out creative ways to reduce Medicaid costs, because they face restrictions on their ability to reduce eligibility for the program. Those who follow state governments are closely following Arizona, which has formally sought permission from HHS to drop Medicaid coverage for 280,000 residents in light of its budgetary struggles. That state is viewed as a bellwether for the waiver process.

Meanwhile, 33 governors have signed a letter asking the federal government to remove a restriction on the Medicaid aid they received that prevents them from tightening eligibility requirements in order to reduce the size of their Medicaid rolls. They call the restrictions “unconscionable” and say they force governors to cut from other areas such as education to fund Medicaid.

Sebelius, a former Kansas governor, did not specifically address the Arizona request or the governors’ letter. But she said she has started meeting with newly-elected governors to help them examine ways they can formulate their Medicaid budgets to promote efficiency.

She also said leaders will have to focus on ways to reduce health care costs for the small portion of patients who make up the overwhelming majority of all Medicaid costs. Meanwhile, government officials are ramping up their efforts to battle fraud and abuse in both the Medicaid and Medicare programs, she said.

Sebelius also mentioned HHS other priorities beyond health reform, which include:

  • Combating smoking and obesity, which are the underlying basis of the majority of chronic medical conditions.
  • Reducing wasteful and inefficient medical spending. Sebelius said 30 percent of medical costs are considered excessive and don’t contribute to a patient’s well-being.
  • Conducting best-practices research to find areas and programs that are doing innovative, cost-saving work that can be replicated elsewhere.
  • Reducing the 100,000 deaths caused by hospital-borne illness each year.