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Thursday, June 28th 2012

What The Mandate Survival Means, What The Limits On Medicaid Expansion Means

I prematurely declared the death of the individual mandate, the provision of Obama’s reform efforts that requires the vast majority of individuals to procure health insurance or pay a yearly penalty, after the Supreme Court heard oral arguments in March.

It was hard not to what with a conservative court and the Justices appearing so hostile over three days to a struggling Verrilli. Many others saw it the same way. Intrade had it at 70-75% that the mandate would be struck down, in the 24 hours leading up to the announcement of the decision.

Well, today the Supreme Court upheld nearly all of the Patient Protection and Affordable Care Act [PDF] including the individual mandate.

This despite some initial confusion over what exactly the Supreme Court was ruling.

The court basically had to review whether any powers given to Congress could justify the “mandate.” The four liberal leaning justices – Ginsburg, Sotomayor, Kagan and Breyer – thought that the Commerce Clause broadly justified the mandate. Such was the most ‘liberal’ and broadest reading of Congress’ power that could’ve been given down. However, the other five justices disagreed with that interpretation. Five of the justices also could not reconcile the individual mandate as being constitutional under the Necessary and Proper Clause. However, the five conservative justices were not so coherent when it came to the argument that “shared responsibility payment”/individual mandate was actually constitutional as part of Congress’ power to levy taxes.

In a surprise, Chief Justice John Robert sided with the four liberal justices in arguing that the mandate was constitutional if you argued it as a tax.

Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. This is sufficient to sustain it.

No doubt the individual mandate was the biggest prize but challenges against other provisions of the ACA had been made during this term and the court ruled on those as well. SCOTUS found that even if individual states refuse to participate in the expansion of Medicaid dictated under the ACA, that the federal government cannot penalize them by taking away existing Medicaid dollars.

The real question in this latter ruling is, without the stick making them expand, what happens if states refuse the Medicaid expansion? Specifically what happens to low income people in states who were supposed to be covered by Medicaid under the ACA but now aren’t? They don’t appear to qualify for large enough subsidies to afford private insurance, specifically because that wasn’t laid out or budgeted as they’re suppose to qualify for Medicaid, but they obviously will not be able to afford the penalty.

Anyway, that is for the bureaucrats at the HHS and CMS to figure out. I imagine in the end, in the unlikely chance any state refuses to expand Medicaid, the premium subsidizes will be generous enough to bring these poor individuals into the private market.

For the entirety of what the health care ruling means SCOTUSBlog summarized it best and earliest,

The Affordable Care Act, including its individual mandate that virtually all Americans buy health insurance, is constitutional. There were not five votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, five Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters. Because the mandate survives, the Court did not need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they didn’t comply with the new requirements, rather than all of their funding.

For physicians, hospitals and insurers the ruling at least provides an end to uncertainty. Hospital stocks rose today as the ruling came down. They, more than other providers, have the most to benefit from expanded coverage as they have shouldered most of the cost of unreimbursed care in this country over the past decades. The law, and its constitutionality, are more of a mixed bag for insurers and pharma. Obviously the individual mandate provision is a boon in the sense of new business but if the entire law had fell so would have costly provisions and regulations. The same is true to a lesser extent for the pharmaceutical and medical device industry.

The ruling is “negative because the costs are rather high and the industry may not recoup that much in new revenue once the uninsured come into the system in 2014. The fees were $2.5 billion last year and will be $2.8 billion this year. These figures are per the actual ACA law. In addition, the drug industry is also ‘paying’ for the ACA in the form of higher rebates and discounts,” Michael Levesque, a senior vp at Moody’s Investor Services, tell us.

For physicians, at least in terms of the bottom line, the Affordable Care Act has always been a little bit of bad and good. Expanded coverage is obviously a blessing in some ways, but considering how many of the proposed newly insured will be covered under the notoriously difficult Medicaid that may be a mixed blessing. Although the IPAB and the provisions for novel payment reform from CMS were not under argument in front of the court, if Justices Kennedy, Scalia, Alito and Thomas had had their way the entire law, including the provisions of the ACA aimed at reigning in the cost of health care provided by physicians would’ve gone down. So the effort to reign in physician reimbursement remain. In general, long term, the Affordable Care Act is likely to have a slowly negative impact on overall physician earnings I imagine. The ruling doesn’t change that, it just solidifies it is coming.

The drama surrounding the ruling was something else. Neoconservative hyperbole abounded after it became clear that Obama had scored a victory. The Republican candidate for governor in Indiana likened the ruling to the September 11th disaster. On Twitter a trend amongst conservatives seemed to be to threaten to move to Canada over the ruling; which would seem to make little to no sense. The bizarre blog To Be Right had this little conspiracy theory,

Later this afternoon, it’s going to come out that Roberts was coerced. A Secret Service agent overheard Obama and Axelrod discussing the Roberts blackmail. He managed to get them on tape discussing it. Later this afternoon, the whole story will come out, Roberts will issue his REAL opinion, and Obama and Axelrod will be taken away in handcuffs.

And then went on to muse that,

I was worried before, now more than ever. I really think the country as we know it is over. We’re no longer the land of the free.


I think this is the day America died.

And the sky is falling.

I will admit the votes themselves were interesting. As interesting as the humorous, hyperbolic statements streaming from Fox News and the internet was the way the decision came down. I’m not sure many saw the decision coming 5-4 with Justice Kennedy on the right and the Chief Justice on the left. I really think Chief Justice Roberts is lining up to be one of the most studied Justices of all time, say sixty years from now. How he came to his conclusions and the machinations in the Supreme Court building would be fascinating to be known, even if they fall short of the blackmail imagined above.

I’m not going to deny Justice Roberts as a conservative or imagine him as a traitor to the conservative cause. I think, as Jonathan Chait puts it, Justice Roberts saw a crisis of faith arising in the Supreme Court and decided a partisan vote against healthcare reform was too much.

Roberts will do it by a process of slow constriction, carefully building case upon case to produce a result that over time will, if he prevails, rewrite the shape of American law. What he is not willing to do is to impose his vision in one sudden and transparently partisan attack. Roberts is playing a long game.

But it would be unfair to attribute his hesitance solely to strategy. Roberts peered into the abyss of a world in which he and his colleagues are little more than Senators with lifetime appointments, and he recoiled. The long-term war over the shape of the state goes on, but the crisis of legitimacy has been averted. I have rarely felt so relieved.

I think he did such despite his initial “conservative” inkling to swipe the law away. The most interesting things I’ve read about the law all day concern the dissent from Scalia. From Ramesh Ponnuru and David Bernstein at the great blog The Volokh Conspiracy and the Legal Theory Blog comes analysis of the phrasing and style of the dissent. They provide some evidence that Scalia’s dissent may originally have started as a majority opinion.

The reference to the dissent and “we” strongly suggests that the “we” was a majority of the Court. This suggests that Justice Roberts switched his vote. There are other conceiveable explanations, but in my opinion, this evidence is very strong indeed.

I don’t think Chief Justice Roberts was massaged into changing his decision and I certainly don’t think he was blackmailed. I really think, whatever forced him into this view, his decision had as much to do with history and the legitimacy of the court than his personal philosophy concerning the constitution. That merely based on what is publicly known of his personality and the fact it appears he changed his mind and nothing more. I can’t imagine this informed his decision, but this was an interesting observation made before the decision came down,

Chief Justice John Roberts has suffered two seizures for unexplained reasons. If he didn’t have federal health benefits, he would be uninsurable on the private market without the law’s requirement for coverage of people with pre-existing conditions. At 57, he would not yet qualify for Medicare.

Of course Chief Justice Roberts, if he were to step down, could name his next job and health benefits in virtually any private company in the world. Just kind of a cute observation.

Whatever went on behind the closed doors of the SCOTUS would certainly be interesting to know; maybe someday.

I’ve heard some analysis that the ruling may help Governor Romney but I personally doubt such. It did motivate the Republican base. In the four hours after the ruling Romney’s campaign website took in more than a million dollars in donations; a good haul. But fire-brand opponents of the law are already Romney voters that will turn out on election day. He gained few if any new votes by this ruling. It is true the health care law remains unpopular and will likely continue to remain unpopular through the November election. Eventually as the provisions come online the attitude towards the law will change dramatically. Late in 2014 and into 2015 you will see huge portions of the population in favor of the law. Until then however it remains a liability for Obama I imagine. The Supreme Court ruling validates it somewhat. I might not go as far as this,

“I think it’s a big win for Obama if they handle it right,” Mr. Kessler said. “What they need to be saying is to declare that the fight is now over. It’s been decided by Congress. It’s been decided by the courts. This is now over. It’s in the past.”

but I would say that while it is, in sum, still a negative around his neck the ruling makes the ACA a little bit less burdensome for Obama on the campaign trail. And of course it preserves a domestic achievement that the President deeply believed in and that will, for better or worse, likely preserve his place in history, even if he serves a single term.

As for my personal views, I’ve always opposed the mandate as an infringement on individual liberty which I hold more important than just about anything, even improved access to health care. I’m upset at the ruling, but I certainly don’t think the country is crashing down around us or that Chief Justice Roberts or President Obama represent the antichrist. Let us keep all such things in perspective.