Days of Reckoning

Published March 26, 2012

Consumer Power Report #320

Today I’m participating in a liveblog reacting to the Supreme Court’s first day of consideration of the case against President Barack Obama’s health care law. You can join in here.

When it comes to what was discussed today, I’ll leave it to Tevi Troy to explain:

The third issue would result in one of the biggest anticlimaxes in American history on the day the Court delivers its opinion in June. It has to do with the applicability of an ancient piece of legislation called the Anti-Injunction Act, which holds that a tax cannot be challenged before it has been imposed on the taxpayers. The mandate is scheduled to go into effect in 2014. If the Court rules that the mandate is a tax, then it can refuse to issue any decision on the law’s constitutionality until the penalty for not complying with the mandate is upon the American people–in 2015.

Timothy Sandefur from the Pacific Legal Foundation was at the arguments this morning:

I just left the Supreme Court building having heard an hour and a half of oral arguments on whether the Court has jurisdiction to hear the Obamacare cases in the first place. The question arises under the Anti-Injunction Act, which bars courts from hearing cases brought “for the purpose of restraining the collection of a tax.” As I predicted, much of the argument centered on whether this case is brought “for that purpose” or for the purpose of striking down the Mandate itself, a point Gregory Katsas, the plaintiffs’ attorney, emphasized. It was interesting that the justices asked relatively few questions, and avoided using the word “mandate” until about halfway through, when Chief Justice Roberts used it, followed by a few others. But Justice Ginsburg insisted on calling it the “must buy provision.” Also interesting was that all the justices seemed extremely skeptical of the idea that the Mandate is an exercise of Congress’ taxing power. Justice Alito and Justice Breyer particularly seemed to regard that idea as a stretch.

Sandefur’s view is consistent with nearly all the initial reports from the Supreme Court, which indicate the justices expressed a strong degree of skepticism regarding the anti-injunction act’s effect on the case, and whether there was any need to wait until the individual mandate becomes active in order to rule on the matter’s constitutionality. This is a good sign that the Court intends to move forward, and should bolster the views of those who reject the idea that the Court will wait past election day to hand down a definitive ruling. The audio is available here.

Whether you believe this helps or hurts your party depends on your political views, but it’s certainly helpful to those states and firms that have been uncertain how to proceed. Within the next seven months, states and firms will have a Court decision and an election that will determine the future of the health care law one way or the other. This is a good thing.

— Benjamin Domenech



The schedule for the week:

Today the Court will hear 90 minutes of argument on the issue of whether a federal law that bars pre-enforcement challenges to tax laws, the Anti-Injunction Act, bars the challenge to the individual mandate, which carries with it a penalty for non-compliance. The Court will consider whether the penalty is a tax and thus, whether the lawsuit can be brought in the courts now or whether the plaintiffs must wait until the penalty is actually imposed in 2015 to challenge it.

On Tuesday, the Court will hear two hours of argument on the individual mandate, the centerpiece of the President’s healthcare law. The Court will consider whether Congress exceeded its authority under the Commerce Clause by mandating that nearly every American purchase government-approved health insurance.

On Wednesday, the final day, the Court will hear 90 minutes of argument on the severability issue. The Court will consider whether, in the event the mandate is found unconstitutional, all or some of the remainder of the Act must also be stricken.

The Court will conclude Wednesday’s proceedings by hearing one hour of oral argument on the law’s Medicaid expansion provisions. Here the Court will decide whether Congress exceeded its powers and violated basic principles of federalism by coercing the states into accepting onerous conditions on Medicaid, the nation’s single largest grant-in-aid program. These conditions mandate that states expand their Medicaid eligibility pools, which will cost billions of dollars, or be cut off from the program altogether, which is not a viable alternative at all.

SOURCE: Goldwater Institute


Here are several options the Court could take – the last one, Punting, seems less likely now.

Strike down the entire law

It’s not the most likely scenario, but if the court does find the individual mandate unconstitutional, it could overturn the entire law because the justices can’t decide what is and isn’t linked to the mandate. That’s the position taken by Judge Roger Vinson of Florida, who ruled in January 2011 that the whole law should fall because the mandate is unconstitutional. Because the law doesn’t have a “severability clause” – standard language that says if one part of the law is overturned, the rest of it still stands – Vinson ruled that “the individual mandate and the remaining provisions are all inextricably bound together in purpose and must stand or fall as a single unit.”

Strike down the mandate

More likely than overturning the whole law, the court could find the individual mandate unconstitutional and leave the rest intact. The court would declare that Congress overstepped its authority and that forcing people to buy health insurance goes beyond its constitutional powers. Under this scenario, Congress would face tremendous pressure to come up with an alternative to the mandate to encourage healthy people to buy health insurance. That’s because the law also requires insurance companies to cover everyone with pre-existing conditions – and if they don’t also get more healthy people to spread the costs, the insurers could raise everyone’s premiums to make up for it.

SOURCE: Politico


The Doctors Company (TDC), the country’s largest insurer of physician and surgeon medical liability, surveyed more than 5,000 doctors to determine what physicians are thinking and feeling about health reform. Among their many findings:

– 65 % of responding doctors do not think that health care reform will reduce defensive medicine.

· 60 % of responding doctors believe that health care reform will negatively impact patient care.

· 51 % of responding doctors believe that health care reform will negatively impact their relationship with patients.

· 43% of responding doctors said they would consider retiring over the next five years because of health care reform’s effects.

· 11 % of responding doctors are likely to recommend the medical profession to their children or other family members due to health care reform.

SOURCE: The Doctors Company


Gallup reports:

The Supreme Court … will hear legal challenges to the healthcare law, which are focused on the law’s requirement that all Americans purchase health insurance or pay a fine. Americans overwhelmingly believe the “individual mandate,” as it is often called, is unconstitutional, by a margin of 72% to 20%. Even a majority of Democrats, and a majority of those who think the healthcare law is a good thing, believe that provision is unconstitutional.

Surprisingly, Howard Dean agrees.

SOURCE: Gallup Politics


Richard Epstein’s latest explains why the individual mandate is such an overreach:

The origin of the mandate shapes the sprawling constitutional debate over its constitutionality. The opponents of the ACA, of whom I am one, have argued that the mandate represents an unprecedented assertion of federal power. By forcing people to enter into commerce, the government is now in a position to regulate them. But the supporters of the law take the position that the individual mandate is necessary to stop the financial hemorrhaging of the health-care insurers, making the entire program valid under both the Commerce Clause, which allows Congress to “regulate commerce … among the several states,” and the Necessary and Proper Clause, which empowers Congress to pass all laws that are “necessary and proper for carrying into execution the forgoing powers” – including, of course, the power to regulate commerce among the several states.

Yet this facile position conceals the serious ambiguities in the structure of the ACA. Namely, if the individual mandate is struck down, does the rest of the law go down with it? As Abbe Gluck and Michael Graetz recently noted in the New York Times, both the Obama administration and the states opposing the program insist that the entire ACA will go down the tubes if the mandate is struck down. Their motivations of course diverge. The Obama administration thinks that the all-or-nothing position improves the odds that the mandate will be upheld, given the vast dislocations that will follow if it is struck down. The states think that the mandate is a loser on its own terms, and want to bring the rest of the statute down with it.

Both sides are wrong. As I have urged in a brief coauthored with Mario Loyola of the Texas Public Policy Foundation and Ilya Shapiro of the Cato Institute, Title I at the very least has to fall if the mandate is struck down because it is the only backstop that Congress put in to control adverse selection under the ACA. Writers like Gluck and Graetz are wrong to say that allowing severability rightly puts the issue back into the lap of the next Congress. A future Congress could easily be paralyzed on the issue, which leaves us with an incoherent structure. But we do know that the 111th Congress that passed this bill a year ago on March 23, 2010 did regard the two as indissoluble.

Just because the rest of Title I is not severable from the individual mandate does not mean that the mandate itself is saved from constitutional attack by propping up the Commerce Clause with the Necessary and Proper Clause. The key issue is this: Severability asks whether one part of the legislation can function as Congress intended if another part is stripped out. In contrast, the Necessary and Proper Clause only saves that legislation which is needed to make the statute cohere. As noted earlier, the individual mandate was only introduced as a second-best response to the ACA’s problem of adverse selection risk.

SOURCE: Hoover Institution


This National Affairs piece concerning the judicial response to Obamacare is worth reading:

Most of the lawsuits challenging Obamacare have focused on Section 1501 of the statute, known colloquially as the “individual mandate” or “insurance mandate.” This section, which goes into effect in 2014, will require nearly every American citizen either to maintain health-care coverage or to pay an annual penalty submitted with his tax return. In most cases, the penalty will be around $750, subject to inflation adjustments.

The insurance mandate is absolutely necessary to the architecture of Obamacare; without it, all of the reforms the law envisions will unravel – and so will the mechanism for paying for them. Obamacare will restrict the ability of insurance companies to consider health risks when setting insurance premiums. Since coverage will thus cost roughly the same for people who are sick and people who are healthy, healthy Americans will have little reason to purchase insurance until they get sick. But if only the sick purchase coverage, insurance companies will not be able to build financial reserves from healthy customers who are not filing claims in order to finance coverage for the sick customers who are. In the absence of risk rating, the only way to bring healthy people into the risk pool is by compelling them to participate. Indeed, Section 1501 itself calls this compulsion “essential” to the operation of the law.

But does the Constitution really allow the United States government to compel people to buy insurance? The most commonly cited authority for the individual mandate is the commerce clause, located in Article I, Section 8, of the Constitution. This clause gives Congress “power to regulate Commerce…among the several States.” And that grant, in turn, authorizes Congress to regulate two general fields of activity. One consists of the instrumentalities of commerce – such as the phone lines, waterways, boats, rails, and train cars by which interstate trade is conducted or shipped. The other consists of the goods and services that are traded interstate.

Neither of these categories covers the individual mandate. The purchase of insurance is not an instrumentality of trade, like a broadband cable. Moreover, health insurance need not be – and most of it is not – purchased across state lines. Because insurance is regulated by the states, most Americans can purchase coverage only in their own states. To be sure, self-insured companies (like some large corporations that directly insure their employees rather than purchasing outside coverage on their behalf) can offer coverage across state lines. By and large, however, there is little or no interstate trade in insurance.

SOURCE: National Affairs


In New Mexico, the director of the Office of Health Care Reform has resigned following Gov. Martinez’s refusal to implement Obamacare.

Derksen helped New Mexico win a $34 million federal grant last year to start building the exchange’s computer framework and had submitted a proposal to the state’s Human Services Department recently to apply for more federal dollars to add flesh to that framework, only to be met with resistance, he said.

Derksen’s resignation likely will turn up the heat on the debate here in New Mexico over the merit of the federal health care law. Nationally, the law has generated waves of controversy since its passage in 2010, particularly with many Republican elected officials across the country. Additionally, several states have challenged the law’s constitutionality, with the U.S. Supreme Court scheduled to hear oral arguments on that issue … in Washington.

In the wake of Derksen’s resignation, the Martinez administration has put on hold the process to selecting a winner of a $24 million contract to build the exchange’s computer framework, despite bidders submitting proposals two weeks ago. Citing state law, the Human Services Department won’t say how many bids it received for the contract.

SOURCE: San Fe New