TIM JOST INTERVIEWS ANDY KOPPELMAN ABOUT KOPPELMAN’S NEW BOOK, THE TOUGH LUCK CONSTITUTION (Oxford University Press 2013).
Professor Andrew Koppelman
Q. (Tim Jost) Your book explains, for the general reader, what was at stake in the health care fight and what the Supreme Court did. Why should the general reader care? All this is old news.
A. (Andy Koppleman) If you’re sitting on a hill, and a large boulder rolls past you, it’s a good idea to look uphill to see if any more boulders are coming. The history matters because it shows that there are real dangers.
Last spring, the Supreme Court came within one vote of taking health insurance away from more than 30 million people. Chief Justice John Roberts declined to join the four judges who wanted to do that, but he embraced all their principles. Those principles are nasty. All five judges think that universal health care would be unconstitutional. All are suspicious of a law that asks the healthy and rich to support medical care for the sick and poor. All of them are still on the Supreme Court. They continue to exercise political power over the rest of us. Americans need to understand what happened.
Q. So what do you tell us that we don’t already know from the news stories?
A. My book explains why Obama decided to include the unpopular provision requiring everyone to have insurance. I also show that the Republicans, who originally proposed that idea, turned against it just because they wanted to deny Obama a victory. Most importantly, I show where they got the idea that the mandate was somehow a violation of an important liberty.
Q. Why did the constitutional case take the form it did?
A. The Republicans’ objection to the Act was a combination of politics and substance. Some of them honestly thought it was bad policy. But you can’t challenge a law in court because you don’t like the policy. You need to make a constitutional objection. The constitutional objection was invented, in sketchy form, just as the bill neared passage and almost instantly became Republican Party orthodoxy. It relied on an extreme libertarian philosophy, which holds that, if you get sick and can’t pay for it, that’s your tough luck. The challengers’ arguments would have struck down the Act even if the alternative was a huge population of uninsured. The dark heart of the case against the ACA is the notion that the law’s trivial burden on individuals was an outrageous invasion of liberty, even when the alternative was a regime in which millions were needlessly denied decent medical care.
Q. What about the legal arguments?
A. These are less complex than many people think. Insurance is part of commerce among the several states. Congress can regulate it. Therefore, Congress can prohibit health insurers from discriminating on the basis of preexisting conditions. Under the Necessary and Proper Clause, it gets to decide what means it may employ to make that regulation effective. I explain how the challengers tried, and failed, to get around this simple argument.
Q. Much of your book deals with the history of these constitutional provisions that formed the basis for the ACA litigation. Why should we care about this history?
There are two reasons. One is that, in interpreting any law, it is helpful to know the reasons why the law was passed. The second is that the framers of the Constitution were very bright people, and their insights are useful in addressing today’s problems.
The Constitution was adopted specifically in order to give Congress power adequate to address the nation’s problems. That is its fundamental and overriding purpose. The health care issue is one that the states had tried and failed to address: only Massachusetts did it, and its circumstances were very unusual. A situation in which neither the states nor the federal government could solve the country’s problems was what we had under the Articles of Confederation. It is precisely what the Constitution was intended to prevent.
Q. What are the boulders that you suggest may still be coming down the hill?
A. The real moral force behind the challenge to the ACA wasn’t any technical legal argument. It was most clearly stated at the oral argument, by Justice Antonin Scalia. The counsel for the United States argued that the state legitimately could compel Americans to purchase health insurance, because the country is obligated to pay for the uninsured when they get sick. Scalia responded: “Well, don’t obligate yourself to that.”
Q. Does Justice Scalia really think that there’s no obligation to care for sick people? Why was he saying this?
A. The answer has to do with the structure of constitutional law. If you want to trash the ACA –- and Scalia did –- you have to assert constitutional limits that would exist even if there were no other way to deliver medical care to everyone.
This is why so many people (including, in the end, a near-majority of the Court) who were not Tough Luck Libertarians at all, who would find that philosophy repellent, nonetheless found themselves saying Tough Luck Libertarian things, and making claims based on a Tough Luck Constitution –- a constitution in which there is no realistic path to universal health care. That Constitution won’t be attractive unless Tough Luck Libertarianism is right that it is acceptable to deny people the medical care they need. The challengers to the ACA talked a lot about slippery slopes – at the bottom of this one was a law requiring you to buy broccoli – but there’s a slope in the other direction as well. Once you decide that it’s acceptable to hold your nose and make this kind of argument, it will be easier next time.
Q. The NFIB case which the Supreme Court decided was only one of dozens of cases that have been brought challenging the Affordable Care Act. One of those cases brought by Liberty University challenged that provision of the ACA requiring large employers to offer health insurance to their employees or pay a tax penalty. Liberty University lost that case in the Fourth Circuit Court of Appeals, but the Supreme Court remanded it for reconsideration. Is there any possibility the courts will find that Congress lacks the power to require large employers to offer health insurance? Would Tough Luck Libertarianism go this far?
A. It’s hard to see how. The employer mandate is described as a tax in the statute. The individual mandate isn’t, but the Court upheld it as a tax. Chief Justice Roberts also objected to the mandate because you don’t have to do anything to be subject to it. To be subject to the employer mandate, you have to decide to employ people. Congress has had the power to regulate economic transactions for nearly a century. Even the Roberts Court isn’t going to change that.
Q. Several states are refusing to implement the insurance market reforms imposed by the ACA and one state is considering legislation that would prohibit the licensure of an insurance plan that would participate in an ACA exchange. Does the Supreme Court’s decision give any hope to states that are still refusing to assist in implementing the ACA?
A. If states won’t participate in the health exchanges, then the Federal government can and will do it for them. That has already been happening. It has been well settled for years that state laws designed to disrupt the operation of a federal law are unconstitutional.
The one part of the Court’s decision that empowers the states to stay out of the federal scheme is Chief Justice Roberts’s decision that states could refuse to provide Medicaid to their poorest citizens. The Court ruled that the states could turn down the Medicaid expansion while continuing to participate in the old Medicaid program. One might have expected that no state would turn down such a good deal: the federal government will pick up 100% of the costs until 2016, with its contribution gradually declining to 90% in 2020 and thereafter. And there is added pressure to take the money, because previous forms of federal aid were cut off. Hospital associations agreed to accept cuts to their reimbursement rates, expecting that this would be more than made up by money from patients newly insured through Medicaid. States refusing the money would not only be hurting their own working poor. They’d be rejecting a huge infusion of cash into their economies, creating many, many jobs –- good jobs, for doctors and well-paid medical technicians. That money has a powerful multiplier effect, creating jobs outside the health sector as well.
Many Republican governors have now turned down the money, but that number is shrinking. Gov. Rick Scott of Florida, for instance, recently changed his mind. The big question mark is Texas. One in four Texans is uninsured. The ACA would insure almost two million of them. The expansion would give Texas an additional $52.5 billion from 2014-2019, which is more than half of the state’s annual budget. Gov. Rick Perry has insisted that he won’t take the money. If you are a hospital executive in Texas, you probably have a fiduciary duty to do all you can to defeat Rick Perry. Meanwhile, the Court has succeeded in hurting millions of people. Four days before Perry announced his decision, the federal Agency for Healthcare Research and Quality ranked Texas as having the worst health care in the nation. This is the Court’s notion of “liberty.”
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Timothy S. Jost holds the Robert L. Willett Family Professorship of Law at the Washington and Lee University School of Law. He is a co-author of the casebook, Health Law, used widely throughout the United States in teaching health law, and of a treatise and hornbook by the same name. His other publications are simply to numerous to list.
Andrew Koppelman is John Paul Stevens Professor of Law, Northwestern University. He has written extensively about the legal debate surrounding the Affordable Care Act for Salon. His latest book, The Tough Luck Constitution and the Assault on Healthcare Reform, will be published by Oxford University Press on March 22, 2013 and available online and through bookstores everywhere.
“Andrew Koppelman has magnificently captured the current legal, political and policy-related lay of the land in Washington. His insightful analysis here should be mandatory reading for anyone concerned about the future of health care in America.”
–Tom Daschle, former Senate Majority Leader
Adventures in Health Care Cost Cutting
Expect to keep hearing more talk about health care cost cutting, despite charts like this. It’s an idee fixe of the Wall Street/Washington corridor, and will only be implemented more vigorously over time. So perhaps we should take stock of a few cost cutting initiatives. Medicare Part D, it seems, is coming way under its projected budget. But maybe that’s because of ”a sharp fall in the number of breakthrough drugs,” a sign that innovation in pharma is stalling. Cost cutting triumph, or logical outgrowth of a system that fails to reward actual contributions to health?
There’s also been a lot of pressure on skilled nursing facilities to hold the line on costs. What are we getting in return? Here’s a summary from OIG:
Skilled nursing facilities (SNF) are required to develop a care plan for each beneficiary and provide services in accordance with the care plan, as well as to plan for each beneficiary’s discharge. . . For 37 percent of stays, SNFs did not develop care plans that met requirements or did not provide services in accordance with care plans. For 31 percent of stays, SNFs did not meet discharge planning requirements. . . . [R]eviewers found examples of poor quality care related to wound care, medication management, and therapy. These findings raise concerns about what Medicare is paying for. They also demonstrate that SNF oversight needs to be strengthened to ensure that SNFs perform appropriate care planning and discharge planning.
I’m sure the health care cost cutters will use this evidence to demand the SNFs be paid even less–rather than, say, investing real funding in proper training and pay in this vital service sector. At some point, though, costs get cut so much that Medicaid will become little more than a meaningless plastic card, and “SNF” will stand for “Scarce Nursing Forever.”
This post first appeared on HealthLawProf Blog.
Professor John Jacobi in The Record on ‘How Medicaid expansion will help New Jerseyans’
Filed under: Health Law, Health Reform, Medicaid
Professor John Jacobi published a feature Op-ed in The Record, New Jersey’s most awarded newspaper, on the impact Governor Chris Christie’s decision to expand Medicaid under the ACA will have.
Professor Jacobi writes:
GOVERNOR CHRISTIE’S decision to expand Medicaid coverage to more residents will improve the health of many low-income New Jerseyans, and save the lives of some. In addition, the expansion dovetails with other reform efforts in the state, furthering implementation of innovative programs for the poor and vulnerable.
The governor’s announcement is great news for low-income individuals. The Rutgers Center for State Health Policy estimates that the expansion will lead to an enrollment increase of about 234,000 in NJ FamilyCare, which combines New Jersey’s Medicaid and Children’s Health Insurance Program.
The expansion addresses gaps in the current Medicaid system, under which many poor people were ineligible even if they had absolutely no income or assets.
The expansion will plug those gaps, allowing people to enroll so long as they are lawful residents with an income of no more than about $15,414 per year, which is about the gross income of a full-time minimum wage worker.
Health insurance coverage is important to personal health, and it is simply not true that all Americans have meaningful access to health care. As the Institute of Medicine of the National Academy of Sciences has found, people who have health insurance — including Medicaid — have better access to a regular source of health care. Those with no coverage, in contrast, are more likely to do without medically necessary care, particularly for chronic conditions, and to not fill prescriptions due to cost.
As a consequence, the uninsured are more likely to be in “fair” or “poor” health — and to die before their time. Medicaid expansion will keep people healthy and even save lives.
Read the full feature, “How Medicaid expansion will help New Jerseyans”
Congressional Testimony of Professor Timothy Jost on IRS Rule on Exchange Tax Credits
Filed under: Health Law, Health Reform
On September 19, the Oklahoma attorney general Scott Pruitt filed an amended complaint in Oklahoma v. Sebelius asking the court to decide that the IRS rule permitting federally facilitated exchanges to issue premium tax credits is illegal. While this case will almost certainly be dismissed for lack of standing, this issue is unlikely to go away. Reproduced below is testimony I recently submitted to a House Committee explaining why the IRS rule should in fact be sustained.
The Internal Revenue Service’s Implementation and Administration of the Democrat’s Health Care Law
Testimony of Timothy Stoltzfus Jost
In a little more than a year, millions of uninsured Americans will begin enrolling in health insurance plans through the American Health Benefits Exchanges. These Americans– your constituents– will be able to purchase health insurance because of the availability of premium tax credits. At this point, it appears that many states are choosing not to create their own exchanges in 2014, but rather to have their citizens purchase health insurance through federally facilitated exchanges. It is essential that these uninsured Americans be able to receive premium tax credits through these federal exchanges. My testimony addresses the provisions of the Affordable Care Act that will make it possible for this to happen.
My name is Timothy Stoltzfus Jost and I am a law professor at Washington and Lee University. I am also a consumer representative to the National Association of Insurance Commissioners and an elected member of the Institute of Medicine. I have written extensively about the Affordable Care Act, and blog regularly about Affordable Care Act implementation at www.healthaffairs.org/blog.
My remarks today address assertions by Michael Cannon of the CATO institute that the Department of the Treasury’s rule providing for the federal exchange to issue tax credits is not authorized by the Affordable Care Act. This assertion has been widely publicized and seems to be causing confusion among state lawmakers. Mr. Cannon’s position, however, is based on a misunderstanding of the law, its structure, and history, as I will explain.
The Affordable Care Act Exchanges and Premium Tax Credits
To understand this issue it is necessary to understand the role of the exchange in the Affordable Care Act. The American Health Benefits Exchange is fundamentally a market in which health insurance is bought and sold. The exchange is also responsible for ensuring that insurers who sell their products through the exchange meet certain minimum standards to ensure that individuals and small employers who purchase in the exchange are getting value for their dollar. Finally, the exchange is the gateway to federal premium tax credits, Medicaid, and other assistance programs for those unable to afford health insurance. The exchange concept has until very recently enjoyed broad bipartisan support as a tool for making private sector health insurance widely available and affordable to Americans. Indeed, Congressman and Vice President nominee Paul Ryan’s Roadmap for America includes health insurance exchanges.
Section 1311 of the Affordable Care Act asks the states to establish American Health Benefits Exchanges. The federal government cannot order a state to operate a federal regulatory program, so section 1321 of the ACA authorizes the Secretary of Health and Human Services to establish a federally facilitated exchange in states that choose not to establish their own exchange.
Mr. Cannon takes the position that federal exchanges cannot offer premium tax credits. He bases this opinion on two subsections of section 36B of the Internal Revenue Code (created by section 1401 of the ACA), which provides for tax credits to help middle-income Americans afford health insurance. In defining the premium tax credit amount and the coverage months for which it is available, sections 36B(b)(2) and 36B(c)(2)(A) refer to persons “enrolled in [a qualified health plan] through an Exchange established by the State under section 1311.” Mr. Cannon argues that this language precludes premium tax credits being issued through the exchanges operated in the states by the federal government. If this is true, it is likely that many–perhaps most–Americans will be denied access to an important middle-class tax benefit in 2014, as it now appears that many states will, at least initially, have federally facilitated exchanges.
In a recent article, Mr. Cannon, together with Professor Jonathan Adler of Case Western University, claims that this language is not only unambiguous but also intentional, that Congress intended to punish states that refused to establish exchanges by refusing premium tax credits to their residents.[1] Cannon and Adler further claim that final rules promulgated by the IRS making premium tax credits available through federal as well as state exchanges are unauthorized by law, and thus illegal.
If this claim is true, uninsured constituents of members of this committee stand to lose billions of dollars in federal tax relief that would have assisted them in purchasing health insurance.
The Affordable Care Act Explicitly Authorizes Federal Exchanges to Provide Premium Tax Credits
Fortunately for your constituents, Mr. Cannon’s claims are simply not true. If the sections that he cites were the only relevant sections of the Affordable Care Act, and if the legislative history and structure of the ACA could be simply ignored, his statutory construction claim would be plausible. But the availability of tax credits through federally facilitated exchanges is recognized through the language of the ACA itself. Moreover, the legislative history of the ACA also establishes that Congress understood that premium tax credits would be available through both federal and state exchanges. The IRS is explicitly authorized by Congress to interpret the statute and its interpretation of the law will be given deference by the courts. The existence of exchanges in every state was assumed both by the Congressional Budget Office and by both proponents and opponents of the ACA as it was being debated. Finally, the structure and purpose of the ACA requires that state or federal exchanges offer premium tax credits in every state.
I begin with the language of the ACA itself. The term “exchange” is a defined term under the ACA, a point that Mr. Cannon does not mention in his article but that would surely be paid great attention by the courts. Section 1563(b) of the ACA states: “The term ‘Exchange’ means an American Health Benefit Exchange established under section 1311 of the Patient Protection and Affordable Care Act.” Section 1311 literally requires that the states “shall” establish an American Health Benefits Exchange by January 1, 2014. Because the Constitution prohibits the federal government from literally requiring states to establish exchanges, however, section 1321(c), provides that “the [HHS] Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State.” Under the ACA’s definition of exchange, the term “Exchange” in section 1321 means a section 1311 exchange. This is reinforced by section 1321 itself, in which the term “such Exchange,” refers to the “required exchange” mentioned in section 1321(c)(1)(B)(i), which is to say the 1311 exchange. When section 1321 directs HHS to establish an “Exchange,” therefore, it means to establish a section 1311 exchange, which section 36B authorizes to provide premium tax credits. Moreover, section 1311(d)(1) defines an exchange as an exchange established by the state, therefore by definition a section 1321 federally facilitated exchange is an exchange established by a state under section 1311.
Section 36B is not the only section of the ACA that imposes duties on the state and federal exchanges relevant to premium tax credits. Section 1311(d)(4)(G) requires exchanges to provide their enrollees with premium calculators that include a deduction for premium tax credits. Section 1311(d)(4)(I), requires exchanges to forward to the IRS information about enrollees who are eligible for premium subsidies. Section 1311(d)(4)(J), requires an exchange to notify employers if their employees are receiving premium tax credits. Finally, section 1413 requires state and federal exchanges to use streamlined applications and eligibility assessments to help people qualify for “health subsidy programs,” which programs specifically include premium tax credits, see section 1413(e)(1). All of these sections apply to federal as well as state exchanges.
Most importantly, a third subsection of section 36B itself clarifies that premium tax credits are available through both state and federal exchanges. The ACA is composed of the Senate version of the Patient Protection and Affordable Care Act, Public Law 111-148, and the Health Care and Education Reconciliation Act, Public Law 111-152. The Senate adopted the bill that became Public Law 111-148 in December of 2009, but the House adopted it only in March of 2010. Shortly thereafter, the House and Senate adopted HCERA, through which the House made certain changes in the Senate bill. As a later-adopted statute, HCERA takes precedence over that of the PPACA, if there is a contradiction. Moreover, since the adoption of HCERA was necessary to secure House adoption of the Senate bill, it is doubly important that the provisions of HCERA be taken seriously. The House bill contained only a federal exchange. Section 1004 of HCERA adds to IRC section 36B, subsection 36B(f)(3) which requires both 1311 and 1321 exchanges to provide certain information regarding premium tax credits to the IRS and to taxpayers. Cannon and Adler admit the existence of this provision but simply say it is meaningless, as 1321 exchanges cannot authorize premium tax credits. This position, however, violates another canon of statutory construction–that every provision of a congressional enactment should be given effect.
It should be noted that several other sections of the ACA use the language on which Mr. Cannon relies–”an Exchange established by the State under section 1311.” One of them is section 2001, which prohibits states from reducing Medicaid eligibility until an exchange “Established by the State under section 1311 is operational.” If Mr. Cannon’s interpretation of the ACA is correct, states that decide not to establish a state exchange will be barred indefinitely from changing their Medicaid eligibility requirements. But this is not what the law means.
The Affordable Care Act’s Legislative History also establishes that Federal Exchanges can offer Premium Tax Credits
Mr. Cannon’s interpretation of the ACA is also refuted by the legislative history of the ACA. The Senate bill which became the ACA was derived from the S 1679,[2] the Senate Health, Education, Labor and Pensions Committee bill and S 1796[3] which emerged later from the Senate Finance Committee. Each of these bills included state and federal exchanges, which were called Gateways in the HELP bill.
The HELP bill (section 142, adding section 3104 of the Public Health Services Act) created an elaborate structure under which states could either establish exchanges themselves (“establishing states”), request the federal government to establish an exchange in the states (“participating states”), or fail to do either, in which case four years after the enactment of the statue the federal government would create a fallback exchange in the state. Premium tax credits were available in establishing and participating states, but would only be available through the federal fallback exchanges in states that complied with the employer responsibility provisions for state and local employees. In other words, the states were threatened with loss of premium tax credits, not for failing to establish exchanges but for not complying with the employer responsibility provisions for their employees.
The Finance Committee bill did not use this elaborate structure. In fact, the rules it creates are very similar to the final ACA. It creates section 2235 of the Social Security Act, which provides that states “shall” establish an exchange, and sets out the duties of the exchange. Section 2225(b) provides, in language very similar to current ACA section 1321, that HHS shall contract with a nongovernmental entity to operate an exchange in states that fail to “establish and operate” an exchange in states that fail to create one within 24 months. The Finance Committee Report[4] refers to these federally established exchanges as “state exchanges.” In a number of places, including the precursor of the current premium tax credit provision, the bill refers to exchanges “established by the state,” but nowhere does it provide, as did the HELP bill, that premium tax credits would not be available in the any of the exchanges created by the federal government.
The provisions of the current ACA addressing this issue are taken largely from the Finance Committee bill, which makes sense because the Finance Committee has jurisdiction over tax matters. The punitive provisions of the HELP bill were abandoned.
The Senate debated the ACA extensively during November and December 2009. The version of the Act they were considering included both state and federal Exchanges. Throughout the debate, Senators assumed that tax credits would be available in all 50 states. Thus Senator Bingaman stated on December 4, 2009, that the ACA “includes creation of a new health insurance exchange in each State which will provide Americans a centralized source of meaningful private insurance as well as refundable premium tax credits to ensure that coverage is affordable.”[5] Senator Johnson stated on December 17, “the legislation will also form health insurance exchanges in every State,” which will “provide tax credits to significantly reduce the cost of purchasing that [insurance] coverage.”[6]
If Congress had meant to limit premium subsidies to state-established exchanges, as an incentive to States, one would have expected the Finance Committee report on S. 1796 to have mentioned this, and for at least one Senator to have pointed this out during the debate in November and December 2009.
Most importantly, the Congressional Budget Office (together with the Joint Committee on Taxation) provided Congress on November 30, 2009, with an analysis of the impact of the legislation on premiums that assumed that premium tax credits would be available in all states, making no distinction between federal and state exchanges.[7] Over the next few days this analysis was discussed by Republican Senators Grassley,[8] Enzi,[9] and Coburn.[10] None raised what Cannon and Adler see as an obvious point–that the CBO analysis was flawed because it failed to recognize that premium tax credits would not be available though federally facilitated (sec. 1321) exchanges. In fact, the CBO repeatedly provided cost estimates of the ACA and HCERA in late 2009 and early 2010, but never suggested that premium tax credits might be reduced if states failed to establish exchanges. In their most recent report from two weeks ago updating ACA coverage estimates in the wake of the Supreme Court decision, the CBO and JCT reiterates again that premium tax credits will be available though state, federal, and partnership exchanges.[11] As Yale Professor Abbe Gluck notes in a recent blogpost[12] (and forthcoming article), Senators often don’t listen to each other, but they all listen to the CBO, which assumed that premium tax credits would be available to all Americans in all states.
Mr. Cannon claims, however, to have found a smoking gun, a colloquy between Senators Baucus and Ensign during the Finance Committee debate on the bill, in which, they claim, Senator Baucus admits that premium tax credits could not be made available through federal exchanges. In fact, the colloquy had nothing to do with federally facilitated exchanges, but rather with whether the Finance Committee or the Judiciary Committee had jurisdiction over malpractice reform legislation that Ensign wanted to attach to the bill. In fact, there is nothing in the legislative history of the ACA that supports the notion that premium tax credits will not be available through federal exchanges.
Mr. Cannon argues that Congress prohibited the federal exchanges from offering premium tax credits as a way of encouraging the states to adopt exchanges. It is in fact clear that Congress favored state exchanges, and offered generous grants to the states–which to date have totaled nearly $850 million dollars with more on the way.[13] States that fail to establish exchanges will also lose some control of their insurance markets. But Congress did not try to “coerce” states to create state exchanges by threatening their citizens with loss of billions of dollars of premium tax credits. Indeed, under the Supreme Court’s recent Medicaid decision, such coercion might have been suspect.
The Structure of the Affordable Care Act Makes it Clear that Federal Exchanges may Offer Premium Tax Credits
Moreover, not only do a number of provisions of the ACA, already described, refer explicitly to federal and state exchanges performing functions relating to premium tax credits, but the entire structure of the ACA’s insurance reforms are based on the availability of premium tax credits in all states. The ACA’s guaranteed issue and community rating requirements apply to insurers in all states, regardless of whether they have federal or state exchanges. So do the ACA’s risk mitigation programs. So does the ACA’s individual mandate. The premium tax credits are intended to bring millions of new participants into insurance markets, and if they are not available in many states, the nature of insurance markets will change dramatically, increasing the risk of insurers and decreasing availability to middle-income Americans. If this was the intent of Congress, it surely would have made it far more evident.
The ACA is admittedly not a model of clear drafting. It contains three sections with the same number (1563) and amends an existing provision of the Public Health Services Act inconsistently twice within the scope of a few pages. The Senate bill was not supposed to be the final law. Only the Senate election in Massachusetts in early 2010 made a conference committee bill that would have reconciled the House and Senate versions and cleaned up the current bill impossible. The courts are unlikely to find the “established by the state” language a “scrivener’s error.” But the courts will interpret the ambiguous language in the context of the ACA’s structure and purpose, in light of the ACA’s legislative history, and putting great weight on the HCERA amendment, and find that federally facilitated exchanges can in fact issue premium tax credits.
The Department of the Treasury is Authorized to Interpret Section 36B and the Courts will Defer to its Interpretation
Finally, the courts are likely to grant great deference to the IRS premium tax credit regulation. Section 36B explicitly grants authority to the IRS to interpret the section. A recent CRS Legal Analysis of this issue states clearly that under the ruling “Chevron doctrine,” derived from the case of Chevron v. NRDC,[14] courts will defer to the interpretation of the IRS of section 36B unless they conclude that “Congress has spoken to the precise question at issue.” As should by now be amply clear, Congress has not clearly said that federal exchanges cannot grant premium tax credits. If a court finds the issue ambiguous, however, “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” In this situation, “legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” As noted above, the interpretation of the ACA by the IRS is completely consistent with rather than “manifestly contrary” to the statute, and thus will be granted judicial deference.
Conclusion
In 2014, millions of your constituents will gain access to private health insurance coverage with assistance with premium tax credits. It was the hope of Congress and remains the hope of the federal agencies implementing the ACA that they will receive these premium tax credits through state exchanges. But the ACA also created fallback federal exchanges, which will be available in states represented by other members of this Committee to ensure that all Americans get access to affordable health insurance. The Department of the Treasury has correctly determined based on the language and history of the ACA that premium tax credits will be available through all exchanges, state and federally facilitated. None of your constituents will be denied the tax credits made available through the ACA to ensure them access to affordable health insurance. I thank you for the opportunity to address this important issue.
References
[1] Jonathan Adler and Michael Cannon, Taxation without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA (2012), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2106789
[2] S 1679, http://www.govtrack.us/congress/bills/111/s1679/text
[3] S 1796, http://thomas.loc.gov/cgi-bin/query/z?c111:S.1796:/
[4] Senate Report 111-89
[5] 155 Cong. Rec. S12358.
[6] 155 Cong. Rec. S13375.
[7] CBO, An Analysis of Health Insurance Premiums Under the Affordable Care Act, http://www.cbo.gov/publication/41792
[8] 155 Cong. Rec. S12107, 12/2/09
[9] 155 Cong. Rec. S12378, 12/4/09
[10] 155 Cong. Rec. S13687
[11] http://www.cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf at n. 14.
[12] http://balkin.blogspot.com/2012/07/cbo-canon-and-debate-over-tax-credits.html,
[13] http://statehealthfacts.kff.org/comparetable.jsp?ind=954&cat=17
[14] 467 U.S. 837 (1984).
Electronic CDS Prescriptions Proposed in New Jersey
More than two years ago, the Federal Drug Enforcement Administration (DEA) issued interim final regulations permitting practitioners to issue and pharmacists to fill electronic prescriptions for controlled dangerous substances (“CDS”) (see, e.g., 21 C.F.R. § 1306.08). Regulations of the New Jersey State Board of Medical Examiners (N.J.A.C. § 13:35-7.4A(g)-(h)) and Board of Pharmacy (N.J.A.C. § 13:39-7.11(h)-(i)) similarly permit electronic CDS prescriptions, subject to certain requirements. But the State’s CDS regulations do not currently permit electronic CDS prescriptions (N.J.A.C. § 13:45H-7.8).
On August 20, 2012, Eric T. Kanefsky, the Acting Director of New Jersey’s Department of Consumer Affairs (“DCA”), proposed regulations to resolve this regulatory inconsistency. DCA would add a new rule, N.J.A.C. § 13:45H-7.20, which would permit “[a]n individual practitioner [to] issue, and a pharmacist [to] accept for dispensing, an electronic prescription for a controlled dangerous substance, consistent with the requirements of this chapter and Federal law.” This proposed rule would define “electronic prescription” as “a prescription that is transmitted by a computer device in a secure manner, including computer-to-computer and computer-to-facsimile transmissions.” DCA also proposes to amend N.J.A.C. § 13:45H-7.8 to expressly permit an electronic prescription for Schedule II narcotics “[i]f permitted by Federal law, and in accordance with Federal requirements.”
These Federal requirements, set forth in 21 C.F.R. Parts 1300, 1304, 1306, and 1311, include provisions intended to balance the desire to permit the use of modern technology while “maintaining the closed system of controls on controlled substances dispensing” (75 Fed. Reg. 16236). Thus, if DCA ultimately adopts these rules, New Jersey prescribers and pharmacists seeking to exercise their option to issue or fill electronic prescriptions will need to ensure that they comply with all Federal rules, including, as DCA’s proposed rule reminds, a requirement for a third-party audit by a DEA-approved certification organization to verify that the technology used satisfies DEA security standards (see 21 C.F.R. § 1311.300).
In addition to “eliminating any confusion that may exist with respect to filling electronic prescriptions for controlled dangerous substances,” DCA also believes that “[e]lectronic prescriptions are more efficient and less susceptible to errors.” With proper controls and checks, electronic prescriptions can make it more difficult for patients to try to fill fraudulent prescriptions by, for example, forging doctor’s signatures on stolen prescription blanks or altering the dosage that the doctor prescribed. Electronic prescriptions also support other health care reform initiatives, including increasing the use of electronic medical records, which can facilitate improved care coordination.
The public may comment on DCA’s proposal until October 19, 2012. But given the potential advantages of electronic prescriptions and the strong controls required by Federal law to prevent their abuse, I would expect the comment to be light and these regulations to be adopted.
Reinhardt in the Times on Socialized Medicine
In case you missed it, in the wake of the opening ceremony to the Olympics which featured a tribute to Great Britain’s National Health Services, Uwe E. Reinhardt, an Economics Professor at Princeton, had an interesting piece in The New York Times regarding the negative attitudes of Americans towards “socialized medicine” in general, G.B.’s NHS in particular, and at least one American anomaly in practice. Reinhardt writes:
I have found that one effective way I can stop N.H.S.-bashing dead in its track is to ask bashers this simple question: “Why don’t you like my son?” I posed that question to a congressman who had berated “socialized medicine” during a hearing on health insurance reform at which I testified.
In response to the stunned look this question invariably elicits, I go on: “You see, our son is a retired captain of the U.S. Marine Corps. He is an American veteran. Remarkably, Americans of all political stripes have long reserved for our veterans the purest form of socialized medicine, the vast health system operated by the U.S. Department of Veterans Affairs (generally known as the V.A. health system). If socialized medicine is as bad as so many on this side of the Atlantic claim, why have both political parties ruling this land deemed socialized medicine the best health system for military veterans? Or do they just not care about them?”
You can read the rest here, and it’s well worth it–even if only for the Steven Hawkins story.
The New Medicaid Donut Hole: Turning Down Medicaid 2.0
Now that Medicaid 2.0 is optional, what are the effects of a state’s accepting or rejecting the Affordable Care Act’s Medicaid expansion? Much of the commentary, naturally, has discussed how many potential new Medicaid enrollees a state could add — or not — depending on whether it accepted “Medicaid 2.0,” and how much it would cost a state to embrace the full expansion. But states opting out of Medicaid expansion may be buying into a problem they haven’t considered: the Medicaid donut hole. That new donut hole, created by the Court’s approval of private health insurance reform but mixed review of Medicaid expansion, could leave millions of single, very low income people out in the cold.
Many states are suggesting that they may turn down Medicaid 2.0 for budgetary reasons, even though the ACA places the lion’s share of the cost on the feds through 2022. Surely, some states are making a calculation that they’d rather turn down the feds’ offer to pick up about 93% of the expansion’s cost through 2022, because the remaining state costs in this economy are significant, and there remains uncertainty in the out years.
But wait — the Supreme Court upheld Title I of the ACA (the private insurance reforms); aren’t the folks excluded from Medicaid at least eligible for subsidies (made up of federal funds) through the exchanges? Put another way, could a Medicaid-expansion-refusing state off-load to the feds the subsidy costs of their poorest single adults? No. That’s where the Medicaid donut hole comes in.
As Kevin Outterson has observed at The Incidental Economist, a state refusing Medicaid 2.0 could be creating a group of very poor residents unexpectedly excluded from any access to health insurance. How is that possible? Don’t the subsidies available through exchanges support private market insurance for low-income people? Not if they’re very poor. The simple fact is that people not covered by Medicaid 1.0 with income below 100% of the FPL are out of luck in states that reject Medicaid 2.0.
The reform provides insurance subsidies through tax credits. The credits are calculated on a sliding scale, according to household level, for people with income up to 400% of FPL — subsidizing more generously someone earning 200% of FPL, for example, than someone earning 350% of FPL. But, under 26 USC 36B(c)(1), credits will not be distributed to those with incomes below 100% of the FPL. Why? Because Congress assumed states would take up the Medicaid expansion, obviating the need for exchange-based subsidies for the very poor.
Bottom line: states rejecting Medicaid 2.0 will not only forego about 93% federal funding for the program between 2014 and 2022, but they could also be depriving the poorest of the uninsured from any shot at coverage — potentially affecting millions nation-wide. And with DSH funding decreasing, hospitals may have concerns if states voluntarily opt out of coverage for those likely to impose uncompensated care costs. States, then, won’t be pushing costs to the feds– they’ll be denying available coverage to their own residents and making life difficult for their hospitals.
A Marbury for our time
[Ed. Note: If you haven't read this piece from Professor Joondeph first published on the day of the Supreme Court's decision in the aca litigation blog-- you should; it makes great sense that a version of it is posted now at Scotusblog.]
(Note: a revised version of this essay is now posted here at SCOTUSblog.)
Chief Justice Roberts’s opinion held that the minimum coverage provision falls within Congress’s power to impose a tax, and thus is constitutional. At the same time, he concluded that the mandate exceeded Congress’s power to regulate interstate commerce. Moreover, he (along with two Democratic appointees, Justices Breyer and Kagan) also held that the Act’s dramatic expansion of the Medicaid program is unconstitutional insofar as it jeopardizes the states’ preexisting Medicaid dollars. In short, the Chief Justice upheld the entirety of the ACA, but with some important caveats.
The end product was-not to put too fine a point on it-brilliant. It is brilliant act of judicial statesmanship in a way that parallels another landmark decision, Marbruy v. Madison.
Marbury is best known for its statement in defense of judicial review, the authority of the Court to declare acts of Congress (and the executive branch) unconstitutional. But to really understand Marbury, one has to place the Great Chief Justice’s decision in its political context. In February of 1803, Chief Justice Marshall knew that the Jefferson administration would have completely ignored the Court’s decision in Marbury had the justices ordered Madison to grant Marbury his judicial commission. (Indeed, the administration did not even dignify the proceedings by appearing. Only one side argued at the Court.) Thus, Marshall reached the Court’s conclusions-that the Jefferson administration had acted unlawfully, and that the Court had the authority to say so-while ultimately holding that the Court lacked jurisdiction, forcing it to dismiss the case. Marshall asserted the Court’s authority in a muscular fashion, delineating the constitutional constraints on Congress and the President, but without actually challenging the other branches’ powers. Marshall set down important constitutional markers while reaching an immediate result that favored the incumbent President, shielding the Court from any significant political danger or threat of retribution.
In the Health Care Cases, the immediate danger to the Court was not so grave or immediate. There was no chance that the President would simply ignore or disobey the Court’s judgment. Indeed, a sizable majority of Americans would have supported the conclusion that the individual mandate was unconstitutional.
Yet there was a real longer-term danger to the Court: it risked staining itself with the appearance of partisanship. This risk was especially acute given some other recent decisions (most prominently, Bush v. Gore and Citizens United) and some others headed the Court’s way (such as those involving the constitutionality of affirmative action and the Voting Rights Act). A steady string of 5-4 decisions on a range of controversial issues, cleaving perfectly along partisan lines, would present a real threat to the Court’s diffuse support–support that depends on the public’s faith that the Court stands above partisan politics, that it renders its decisions based on legal and constitutional principles.
The Chief Justice’s opinion today can rightly claim the mantle of bipartisanship and judicial modesty, and in this highest of high-profile cases. “We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation’s elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions.” The Chief’s paens to the limited role of the judiciary in our constitutional framework, stated eloquently during his Senate confirmation hearings, suddenly ring much more true.
Further, the opinion’s power to lift the Court above the polarized, partisan fray is apt to prove enormously valuable to its long-term institutional standing. Today’s decision largely immunizes the Court, at least for some time, from Democratic attacks that the five Republican appointees are “conservative judicial activists,” partisan hacks in judicial robes. If the Court declares that all governmental affirmative action programs violate the Equal Protection Clause next spring in Fisher, for instance, liberals will have a much harder time making the predictable accusations of partisanship stick. Today’s Case of the Century will stand as a salient counter-example.
At the same time, the Chief Justice established some important, conservative doctrinal beachheads. Specifically, he reaffirmed or established (depending on your perspective) some potentially important limits on Congress’s powers under the Commerce Clause, the Necessary and Proper Clause, and the General Welfare Clause. In fine, Congress cannot use the Commerce Clause to regulate commerce in a manner that compels people into commerce; it can only regulate existing commerce. Further, such regulation, even if “necessary,” can never be “proper,” no matter its importance to a broader regulatory scheme. And the General Welfare Clause does not permit Congress to use the states’ dependence on an existing conditional spending program as a means to forcing them to accept significant, qualitative changes to that program; rather, states must be given the choice to accept or deny the funds associated only with the program’s modifications–at least when the program is huge like Medicaid.
We can debate the significance of these limits. And whatever we think today, what will really matter is how future Court majorities interpret today’s opinion. But regardless, the Chief Justice stated clearly that the Obama administration’s principal defense of the Act–as a regulation of interstate commerce–amounted to a regulatory overreach. He embraced the essence of the conservative constitutional argument–that Congress cannot uses its commerce power to regulate “inactivity.” And in wrapping the Court in bipartisanship, he has made it much more difficult for liberals to attack the Court’s conservative decisions going forward.
Further, it is important to keep in mind an important difference in these controversies. Today’s decision merely held that the ACA is permissible; a Republican Congress and President could repeal the Act in toto in January. By contrast, decisions like Citizens United–or potential decisions declaring affirmative action or Section 5 of the Voting Rights Act unconstitutional–could only be undone via constitutional amendment (or a subsequent overruling).
Liberals should be extremely excited by today’s decision. The bottom line is that the most significant piece of social welfare legislation since the 1960s survived the exacting review of a conservative Supreme Court. As a matter of policy, in an age of growing economic inequality, the Court has validated the biggest effort at redistribution since the end of the Great Society. But liberals should not forget that, in the long run, it was the views of the Federalists–and Chief Justice Marshall in particular–that ultimately shaped the Nation. By cultivating the Supreme Court’s institutional legitimacy, Marshall was able to pursue his nationalist visions, even while conceding momentary defeats to the Jeffersonians. Marshall saw that, as the Court’s prestige grew, so, too, did the influence of the Chief Justice over the growing Nation.
Today’s real winner was the Court–and by extension the Chief Justice. It was a stroke of judicial genius. A Marbury for our time.
A Weak Mandate That’s Strong Enough?
In Chief Justice John Roberts’ decision in National Federation of Independent Business v. Sebelius, he explains that, in arguing that the individual mandate should be “upheld as within Congress’s enumerated power to “lay and collect Taxes[,]” the Government did not claim that the taxing power allows it to mandate that individuals purchase insurance. Rather, the Chief Justice explains, the Government contended that “the mandate is not a legal command to buy insurance.” Under this argument, “going without insurance [is] just another thing the Government taxes, like buying gasoline or earning income.”
As Nathan Cortez highlighted, Chief Justice Roberts’ conclusion that the “shared responsibility payment” that individuals who do not secure health insurance will owe is a tax hinged in part on the fact that “for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more.” The Chief Justice emphasized that “[i]t may often be a reasonable financial decision to make the payment rather than purchase insurance…” The shared responsibility payment is more tax than penalty because it lacks a scienter requirement and because it “is collected solely by the IRS through the normal means of taxation–except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution.”
That “[t]he individual mandate survives as a tax” is for sure a victory for those who support the Patient Protection and Affordable Care Act. Yet, as Dave Hoffman points out here, victory in a broader sense will hinge on the Act’s success. And the very fact that the individual mandate is weak enough to be characterized, fairly, as not a mandate at all, raises the spectre of, as Professor Hoffman puts it, “disastrously bad adverse selection problems, coupled with a talking point (taxes & costs going up) to hammer liberals with for the next decade.”
The possibility that relatively healthy individuals and small employers with relatively healthy employees will opt out of purchasing health insurance — at all or through the Act’s health insurance exchanges — causing health insurance premiums to rise, the market to contract, and the exchanges to be destabilized is not a new concern. In March of this year, for example, Avik Roy argued at his blog at Forbes that “[b]ecause the mandate is weakly enforced, small in size, and gradually put into place, whereas the pre-existing condition mandate takes effect immediately, Obamacare creates the recipe for an adverse selection death spiral.” Now that the Supreme Court has upheld the Act, these concerns will take on a new urgency for federal and state regulators, insurers, and others.
In fact, just hours after the Court handed down its decision, John Reichard and Rebecca Adams at CQ HealthBeat were reporting that Cigna is planning a lobbying campaign with the goal of convincing lawmakers to strengthen the mandate. Reichard and Adams report that
“Cigna also plans to lobby state governors, state legislatures, the Obama administration and Congress to require waiting periods of up to six months if a health care plan enrollee decides to drop out of a plan and then decides he or she wants to get back in, said Tom Richards, president of Cigna’s individual and family plan division. Efforts in Congress likely won’t occur until next year, he said.
In other words, a person who dropped out of a plan could come back into it during the next open enrollment period but would have to wait for some specified period — perhaps six months — before they would be covered for a pre-existing medical condition. That would keep people from dropping coverage and then re-enrolling quickly if they got sick so they could be covered for that illness.”
Reichard and Adams quote Ron Pollack, the Executive Director of Families USA, who noted that instead of or in addition to pre-existing condition waiting periods, those who wait to purchase health insurance could be charged a higher rate, as is the case with Medicare Part B.
The individual mandate is not the only arrow in the Affordable Care Act’s quiver, however, and it remains to be seen whether these additional measures are necessary. The Act’s premium subsidies, for example, will provide a strong incentive to individuals to participate in the health insurance market. The “3 Rs” — the reinsurance, risk corridor, and risk adjustment programs — are also important, as they are designed to, as Timothy Jost explains here, ease the transition to the exchanges and to a market without medical underwriting and with premium tax credits. The final “R,” risk adjustment, will provide a mechanism to reduce problematic concentration of risk in the exchanges on an ongoing basis.
“The reinsurance program will [ease the transition] by collecting assessments from insured and self-insured group health plans and paying out funds to individual plans that cover high-risk individuals. The risk corridor program will collect funds from issuers of qualified health plans (primarily but not exclusively plans in the exchanges) that have lower-than-expected claims costs and pay out those funds to issuers of qualified health plans with higher-than-expected costs. It will thus stabilize the experience of these plans over the first three years when insurers will have a difficult time predicting exactly how to set their premiums.
Finally, the third ‘R’ program, risk adjustment, will on a permanent basis move funds from issuers in the nongroup and small group market (other than grandfathered plans) with lower-than-average-risk populations to those with higher-risk populations; this will discourage risk selection and compensate insurers that cover sicker enrollees.”
If the 3 Rs, and, in particular, the risk adjustment program, work as intended, a weak individual mandate may be strong enough.
The Umpire Throws a Curveball
During his Senate confirmation hearings, John Roberts famously said that he would “call balls and strikes,” and not “pitch or bat.” It was a memorable promise of judicial modesty, but one that sometimes rang hollow after decisions like Citizens United. On Thursday, in a remarkable opinion that surprised almost everyone, Chief Justice Roberts joined the four liberal justices to uphold the individual mandate as a constitutional tax. Was this the modest umpire he promised us? Did he break ranks to preserve the Court’s reputation? (Note, Justices Breyer and Kagan also broke ranks on the Medicaid expansion question.) Was this Marburian or Machiavellian?
Either way, the Court’s opinions are full of curveballs. So I’d like to add to the chorus (cacophony?) of law professor post-game analysis and try to make sense of some of the fault lines and themes.
Death and taxes: The mandate as a tax snuck up on most of us. My favorite internet meme from yesterday was Admiral Ackbar’s warning: “It’s a tax!” Judge Posner on Slate.com astutely observed that legislators rarely call revenue provisions or anything else “taxes” anymore, because it has become a dirty word. President Obama still refused to say “tax” when addressing the Court’s decision. (Admiral Ackbar is not a cabinet member.) The Roberts majority held that the mandate was not a tax under the Anti-Injunction Act, but was a tax for constitutional purposes. The label Congress gave to the mandate (calling it a “penalty” rather than a “tax” in the Affordable Care Act) was helpful to the former but not the latter. Tax scholars, good luck with this one.
Inactivity: As many of us predicted, the Commerce Clause argument would rise or fall based on whether Kennedy Roberts bought into the action/inaction distinction, something that well-respected conservative jurists like Judge Silberman and Judge Sutton didn’t. In fact, Roberts bought the Congress-is-creating-not-regulating-commerce argument whole cloth (pp. 18-23). He and the conservative justices wrote about the uninsured like they exist in some sort of Precambrian pre-commerce period where they face zero risk of getting sick or injured and don’t free ride on the rest of us.
Justice Ginsburg’s opinion could not have been better on this point–her opinion is a realist tour de force on how health insurance really works. In the real world. She doesn’t bother with silly analogies. She even identifies some limiting principles: the free rider problem is significantly worse in health insurance than in other markets; the free rider problem is directly related to interstate commerce, and is not at all attenuated; there’s no problem with proximity. She obliterates the broccoli analogy (pp. 28-29 of her dissent). So much so that she even quotes Robert Bork (“Judges and lawyers live on the slippery slope of analogies; they are not supposed to ski to the bottom.”). It would take a remarkable (and probably imaginary) string of events and causal links for Congress to ever justify a vegetable mandate (luckily, my wife and I are not constrained by the Commerce Clause at home with our children).
What disappoints me about the joint dissent (by Alito, Kennedy, Scalia, and Thomas) is that it doesn’t seem to appreciate why health insurance is a unique problem of unique scale that requires unique solutions like mandates. How do you pretend that the uninsured are pre-commerce? How do you pretend a $2.5 trillion industry doesn’t exist? (Roberts at pp. 18-19). Is health care like Kaiser Soze? The uninsured cost each insured family about $1,000 per year in additional premiums. The uninsured consume $100 billion in health care each year. Over 60% of the uninsured visit a doctor or the ER every year. If this is what Precambrian pre-commerce looks like, it would be like single-celled creatures riding motorcycles and talking on cell phones. Luckily for the humans impacted by the Affordable Care Act, inaction shields us only from the Commerce Clause, not the Tax Clause. (Roberts, at p. 41).
Congress can create choices, but not coerce: It struck me that both the mandate and Medicaid expansion essentially boiled down to whether Congress is forcing individuals and states to do something or merely giving them choices. First, the mandate survived as a tax rather than a penalty because Roberts found that the amounts charged in section 5000A for going uninsured (the “shared responsibility payment”) were proportionate and weren’t coercive. On page 35 of his opinion, he notes that “for most Americans the amount due will be far less than the price of insurance, and by statute, it can never be more.” In footnote 8, he then notes that someone making $35,000 a year in 2016 would owe the IRS only $60 per month for going uninsured, which is less than the $400 a month it would cost to buy insurance. That’s a real choice and it’s not coercive. That little passage may have saved the entire Affordable Care Act, characterizing the mandate as a tax and not a penalty.
Likewise, Medicaid expansion boils down to the same issue– Is Congress coercing states and thus abusing its spending power, or do states have a real choice? The threat to withhold all Medicaid funding if states don’t expand along with the Affordable Care Act is coercive; but withholding new funds and preserving existing federal Medicaid funding isn’t– it’s “a genuine choice.” (Roberts, at p. 58). In the coming weeks, I look forward to discussing with colleagues what this means for all the joint federal-state programs we have. Does it mean Congress can giveth but not taketh away? Will this decision open the floodgates to litigation challenging federal spending conditions? Will Congress, as Justice Ginsburg argues, avoid amending these sprawling statutes and instead decide to repeal and reenact huge programs like Medicaid to avoid this issue? (Ginsburg, at p. 38) For my money, the conditional spending decision will affect many more ongoing and future laws than the Commerce Clause holding.
Weak dissent: Finally, Judge Posner also remarked on the surprisingly weak joint dissent by the conservative justices, which also struck me when I read it. We didn’t get Scalia’s customary fire-breathing screed. Indeed, Justice Ginsburg’s opinion reads like a genuine dissent, which might be a sign that Roberts changed his vote, as many are speculating.
In any case, the 193-page document will give law nerds like me a lot to chew on in the coming weeks, months, and years. The umpire certainly threw us a few curveballs.
Silver Linings for the Losers in the PPACA Rulings
There are many excellent commentaries on the Supreme Court’s rulings today. Pam Karlan offers a great summary of the opinions:
There were two issues– two big issues and then two minor issues– before the court . . . . The two big issues were: was the individual mandate constitutional, and was the expansion of Medicaid to cover a great deal many more people who are near the poverty line constitutional?
The two minor issues were: could the court hear the case at all at this point, and if there was any provision of the act that was unconstitutional, what happened to the rest of the act?
The bottom line was that the individual mandate is constitutional and the expansion of Medicaid to cover more people is constitutional, but–and this is an important but–states cannot have their existing Medicaid funds cut off if they decline to participate in the expansion of Medicaid to millions of additional people.
Here are some counterintuitive perspectives on those results, focusing on the “silver linings” for today’s losers:
1) Silver Linings for Mandate Opponents
Reviewing Roberts’ ruling, Gerard Magliocca has said, “The Chief Justice gave a pretty speech about federalism, but ultimately he did nothing about it.” Other commentators worry that the long term implications are more menacing for federal initiatives. Ezra Klein calls Roberts a “political genius:”
[T]he legal reasoning in his decision went far beyond the role of umpire. He made it a point to affirm the once-radical arguments that animated the conservative challenge to the legislation. But then he upheld it on a technicality. It’s as if an umpire tweaked the rules to favor his team in the future, but obscured the changes by calling a particular contest for the other side. “John Roberts is playing at a different game than the rest of us,” wrote Red State’s Erick Erickson. “We’re on poker. He’s on chess.”
On the other hand, games of chess may not come up very often in the future. Is a Democratic syzygy like that of 2008 likely to happen again in the next decade or so? If not, we’re unlikely to see another piece of social legislation with the scope and ambition of the ACA. As I mentioned to my health care finance class back in 2009-2010, legislative environments like that one were only around in the mid-1930s and mid-1960s (and perhaps evident in Nixon-era environmental lawmaking). Post-Citizens United, we may never see one again (barring constitution-level upheaval). But prediction need not be that portentous. As Tim Jost states:
Chief Justice Roberts’ ruling on the Commerce Clause argument is clear and decisive and entirely adopts the argument of the states and of legal scholars who have opposed the ACA. It lays down a principle that Congress cannot compel Americans to engage in commerce against their will. Millions of Americans will go to bed tonight safe in the knowledge that Congress will never make them eat broccoli. But it is hard to think of any other examples where Congress would ever assert its Commerce clause authority to require the purchase of a private product. This is really a unique situation.
So the mandate’s opponents have achieved a new “gestalt,” but it’s unclear where the energy generated by such a shift will be directed.
2) Silver Linings for Medicaid Expanders
Andrew Koppelman is worried that red states will effectively cut off their nose to spite their face by turning down Medicaid expansion money:
From 2014 to 2016, the federal government will pay 100 percent of the costs. Then its share decreases, to 90 percent after 2020. Because the ACA also gives states assistance with their new administrative costs, overall state spending will actually be lowered. In the litigation, however, 26 states claimed — and Roberts agreed — that this conditional spending unconstitutionally coerced them. But let’s be clear: This is not about the states wanting to conserve their own money. It is about the states refusing to spend federal money, to help people that they do not want to help. (Paul Clement, the attorney for the challenging states, declared in oral argument that his position would not change if the federal government permanently paid 100 percent of the costs.)
It is likely that many of these 26 states . . . will now accept Roberts’ invitation to refuse the additional Medicaid funds. The people in those states who do all the menial jobs on which everyone else depends won’t get the medical care they need after all, because the temptation to trash Obamacare will be irresistible.
I’ve had a few reporters ask me about that possibility today, and the complementary worry that only insurance purchases at state exchanges (which are unlikely to be set up by red states) can be supported by premium tax credits. It’s possible that double-whammy will leave many of the uninsured just as badly off as they were before the ACA. But other commentators disagree about how red states will respond when the rubber hits the road. One of the leading national experts on health care federalism, Nicole Huberfeld, has said that she “would be surprised if many, if any, states opt out.” Tim Greaney offers these insights:
Should those states calling most loudly for repeal/overrule of the ACA now be true to their convictions and walk away from Medicaid expansion? To do so would be a remarkable triumph of ideology over their constituents’ public interest and economic interest. They would be abandoning a large segment of their most needy citizens AND leaving a lot of money on the table . . . All in all its a nice way of putting the ball in the court of the critics and framing the issue pretty starkly: do you want to participate in the shared national responsibility to take care of the less fortunate or is your State willing to leave a sizable segment of its citizens exposed to the dire consequences of being uninsured?
Astonishingly enough, it appears that four justices are committed to exactly that cruel course. But for today at least, the “rhetoric of reaction” did not carry the day.
originally posted on Concurring Opinions; photo credit, Kjetil Ree.
ACA Upheld as Tax
1) A good rundown of “what it means for you” is here.
2) A critical part of the Roberts opinion:
The Federal Government does not have the power to order people to buy health insurance. Section 5000A would therefore be unconstitutional if read as a command. The Federal Government does have the power to impose atax on those without health insurance. Section 5000A is therefore constitutional, because it can reasonably be read as a tax.
n. 11: Of course, individuals do not have a lawful choice not to pay a tax due, and may sometimes face prosecution for failing to do so (although not for declining to make the shared responsibility payment, see 26 U. S. C. §5000A(g)(2)). But that does not show that the tax restricts the lawful choice whether to undertake or forgo the activity on which the taxis predicated. Those subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing they may not lawfully do is not buy health insurance and not pay the resulting tax.
3) Sara Rosenbaum of GW predicts “overwhelming number of states” to adopt the Medicaid expansion.
Also, Congrats to Jack Balkin for authoring “The Health-Care Mandate Is Clearly a Tax–and Therefore Constitutional,” back in May. From his lips to Justice Roberts’s ears.
I would also like to congratulate “individuals exposed to asbestos from a mine in Libby, Montana,” for keeping the Medicare coverage PPACA granted them. The joint dissent would have stripped that away, along with other parts of the Act they deem “minor provisions,” in a blanket repeal of PPACA they would characterize as “caution” and “minimalism.” I’m sure the tens of millions of Americans who will now enjoy insurance define “caution” quite differently.
Finally, a tip of the hat to Tim Jost, who has carefully and comprehensively blogged about key steps toward PPACA implementation, even with the “constitution in exile’s” Sword of Damocles hanging over it. If you want to learn more about the “Premium Tax Credit Final Rule,” essential health benefits, or minimum loss ratios, he’s the go-to person.
This post originally appeared, variously, on Balkinization and on Concurring Opinions.
ACA Upheld!
Via the Scotus Live Blog, reading from the Opinion: http://www.scotusblog.com/cover-it-live/
The individual mandate survives as a tax. 
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| 10:21 | Tom: We do not have the opinion. |
| 10:21 | Amy Howe: On the Medicaid issue, a majority of the Court holds that the Medicaid expansion is constitutional but that it w/b unconstitutional for the federal government to withhold Medicaid funds for non-compliance with the expansion provisions. |
| 10:22 | Lyle: The key comment on salvaging the Medicaid expansion is this (from Roberts): “Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.” (p. 55) |
| 10:22 | Amy Howe: To be clear, what we are typing here are excerpts from the opinion or paraphrasing thereof. Not predictions anymore. |
Professor Frank Pasquale in CBS News, Washington, D.C., on the Potential Impact of the Repeal of the ACA
In anticipation of the Health Reform decision by the U.S. Supreme Court, Professor Frank Pasquale (Editor-in-Chief of HRW) appeared in CBS News, Washington, D.C., on the potential impact of the repeal of the ACA in its entirety.
CBS writes:
Thursday’s decision could effectively reverse significant portions of the health care law, after it initially passed in March 2010. In addition to the individual mandate, a Medicaid expansion, employer mandate and a health benefits exchange program could all be repealed.
What would it mean for Americans, if the Supreme Court decided to cancel some — or all — of the provisions on the proverbial chopping block?
CBS further notes:
“If the whole law is repealed, there will be a lot more suffering and death, particularly among the [United States'] most vulnerable citizens, due to [lack of insurance] or under-insurance,” Frank A. Pasquale, Schering-Plough Professor in Health Care Regulation and Enforcement at Seton Hall Law School, told CBSDC. “Employer-based insurance is getting harder and harder to find, and PPACA … was the major U.S. initiative to make the individual insurance market fair and affordable.”
Read the full CBS article, “Expert: Overturning Health Care Law Would Cause ‘Humpty Dumpty Problem‘”
Facial vs. Applied in the Supreme Court Health Care Reform Cases
In addressing the constitutionality of statutes, courts create and develop constitutional doctrine. Sometimes that doctrine works in a way that tests the constitutionality of a statutory provision in all of its applications, deciding either that it is unconstitutional “on its face,” so that it cannot be applied in any circumstances, or that it is constitutional in all of its applications. But frequently that doctrine instead tests the constitutionality of a statutory provision “as applied,” sorting between constitutional and unconstitutional applications of the statute, thereby allowing the statute to be applied to the extent it is constitutional, but only to that extent. The first approach calls for an all-or-nothing up-or-down decision; the second allows a statutory provision to be used in some, but not all, situations. The first approach raises the stakes; the second approach lowers them. The second approach also takes advantage of what courts are especially well-designed to do (and that legislatures are especially ill-equipped to do): focus on the particular – the particular applications of particular statutory provision in particular cases.
One of the issues lurking in the health care cases to be decided next week that has not received much press attention is which of these two ways the Court will address the constitutionality of the individual mandate. Everyone — including the parties — seems to seek and expect an up-or-down determination regarding the constitutional validity of the individual mandate. There are many reasons to think that the Supreme Court will oblige. Existing Commerce Clause doctrine dating back to at least Wickard (the wheat case) is shaped in a way that discourages as-applied challenges; prior successful challenges under the Commerce Clause such (Lopez, the Gun-Free School Zones case, and Morrison, the Violence Against Women case) have been facial challenges; and the as-applied challenge in Raich (the medical marijuana case) was soundly rejected.
In light of all this, odds are that the Supreme Court will either find the individual mandate constitutional on its face, following cases like Wickard and Raich, and foreclosing the possibility of as-applied challenges, or unconstitutional on its face, following cases like Lopez and Morrison, and foreclosing the possibility that it could be constitutionally applied in some instances.
But not necessarily. Judge Sutton, a Circuit Judge who was appointed by President Bush and had clerked for Justice Scalia, concluded that the right approach was to sort between the constitutional and unconstitutional applications of the individual mandate, not to declare that it is unconstitutional on its face and cannot be applied in any circumstance, and not to declare that it could be constitutionally applied in all circumstances. Because the Court is being asked to articulate a principle for the first time, it is freer to capitalize on its comparative competence, follow the path illuminated by Judge Sutton, and render a decision that lowers the stakes rather than raises them.
[Ed. Note: Professor Hartnett's paper on the subject, Facial and As-Applied Challenges to the Individual Mandate of the Patient Protection and the Affordable Care Act, originally published in the University of Richmond Law Review, can be found here, the abstract can be found here.]
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