The Supreme Court Decision

Most of my reading today involved the Supreme Court and the Affordable Care Act.  Here are some of my thoughts as well as some of the things I read:

Summary of the Supreme Court Decision

1. We don’t have to wait until 2014 to decide this case.  While you can only sue to restrain collection of a tax after it’s been collected (not prospectively), the “shared responsibility payment” (the fine if you don’t buy insurance) is a penalty (not a tax) for purposes of the law (Anti-Injunction Act) that prohibits prospective lawsuits.  So, the Anti-Injunction Act does not preclude the Court deciding this case.  Interestingly, this “fine” is not considered a tax under this law, but the Court did construe the penalty as a tax for different purposes (see below).

2. The Commerce Clause cannot be applied here to allow the individual mandate.  Everyone expected this case to be decided under the Constitution’s Commerce Clause.  The Commerce Clause gives Congress the power to regulate commerce (meaning that commerce has to exist in order to be regulated).  The individual mandate does not regulate existing commercial activity.  Rather, it compels individuals to become active in commerce by purchasing a product (because the failure to purchase the product affects interstate commerce).   The individual mandate cannot be upheld under the Commerce clause because this would effectively be saying that Congress has the power to regulate people “because they are doing nothing” (rather than regulating what people do).  The Court did not want to enforce such a broad reading of the Commerce Clause.

3. The individual mandate can be construed as a tax and this is something Congress can enact (thus, the individual mandate is upheld).  The individual mandate must be construed as a tax if such construction is reasonable.  Regardless of the fact that the ACA calls the payment a “penalty”, it is possible to construe this as a tax on people who don’t buy insurance.  The Court decided that it looked like a tax because (A) it was not so high that it coerced people to buy insurance (such that no one would pay this tax); (B) it’s not like a penalty for willful acts (so it’s different than a penalty for an unlawful act); and (C) the payment is collected through the IRS.

4. The expansion of Medicaid was done improperly (the Court struck this down as unconstitutional).  The expansion of Medicaid (to give healthcare access to people with incomes at higher levels than previously the case) violates the Constitution because the ACA threatened to take away existing Medicaid funding if states don’t comply with the new ACA guidelines.  It effectively denied the states any real choice.  (This will be re-worked.)

Other Thoughts

A comment about the Supreme Court.  Ignore the outcome for a moment (and whether you hate or love the decision) – this is a comment about the process.  Regardless of whether the ACA was upheld or invalidated, it was good that this wasn’t decided solely along party lines.  Chief Justice Roberts sided with the more liberal justices to form a majority.  Whether a conservative justice (such as Chief Justice Roberts) sided with the more liberal justices (to uphold the law) or whether a liberal justice had switched sides and sided with the conservative justices (and overturned the ACA), any break in “party lines” was better for a sense of fairness (rather than a 5-4 decision along party lines).

This is why we appoint federal judges and give them lifetime tenure.  Throughout the appeals process, there was a Clinton appointee who ruled that the ACA was unconstitutional and several Bush and Reagan appointees who held that it was constitutional.

The markets were wrong.  Before the oral arguments (in March), Intrade (an online betting market) reflected only a 35% chance that the individual mandate would be overturned.  Within two days after the arguments, it reflected a 60% chance that the mandate would be overturned.  This week, it reflected a 75% chance.

Hospital stocks surged.  Some hospital stocks increased 8%.  The idea is that they’re going to have much more revenue.  Insurers saw their stock drop a few percent.

Several insurers had already agreed that they would make some changes (before the decision was announced).  Prior to the decision, several insurers (including UnitedHealthcare, Aetna and Humana) had committed to upholding some of the ACA provisions, regardless of how the decision turned out.  They committed to allowing children to stay on parents’ insurance until age 26 and eliminating copayments for some preventive health services.  They did not promise to cover people with pre-existing conditions.

The political ramifications will be interesting.  This ruling may galvanize Republicans.  It’s very possible that President Obama would have been better off politically if the law had been overturned.  Senior citizens (a big voting block) would have lost some benefits that help cover Medicare’s prescription drug coverage gap.  They may have blamed Republicans.  The flip side of all this is that the Supreme Court’s ruling might make moderates feel like it’s okay to support the ACA.

Did Governor Romney play this wrong?  After the Supreme Court ruling was announced, Governor Romney vowed to work to repeal the ACA if he is elected.  My opinion is that he could have played this differently and done better with the undecided moderates.  He already has the vote of many citizens who want to repeal the law.  The election is about the moderates in the middle.  I think that he would have done much better with the moderates if his argument had been, “we all want to see people have access to health care – look at what I implemented in Massachusetts.  But, this is a state issue, not a federal program issue.  The Supreme Court recognized this by invalidating the coercive action of the federal government in trying to force the states to expand Medicaid.”  I think that would have been a more attractive argument to moderates.

Irony.  When President Obama was Senator Obama, he voted against the confirmation of Chief Justice Roberts.

More irony.  The White House had argued for the past two years that this was not a tax.  But, the idea that this could be construed as a tax is what allowed the ACA to be upheld.

Dewey defeats Truman!  Florida goes for Gore!  I was watching CNN when the Court announced its decision.  CNN announced that the Court had struck down the individual mandate.  That’s what happens when you’re trying to be the first with the news and the Court releases a 193 page opinion.  (CNN did announce that Florida went for Gore in 2000.)

Have a great weekend.

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