A Supreme Decision on Health Reform

The decision is finally out; the Supreme Court ruled that the Patient Protection and Affordable Care Act, including the individual mandate requiring all Americans to obtain health insurance, is constitutional. In making their decision, the justices in the majority concluded that the penalty for not carrying insurance is actually a tax and therefore falls within Congress’ power of taxation.

As many commentators have noted, the original decision to frame the cost of opting out of coverage as a “penalty” under the Commerce Act vs. a “tax” justified by Congress’s power to raise revenue almost backfired on the Obama administration. Of course, when the bill was being formulated two years ago, the climate of anti-tax fervor was at its height with the vast majority of Republican elected officials signing Grover Norquist’s anti-tax oath. (“Read My Lips: There Will Be No New Taxes” is an enduring mantra.) The administration took a gamble and went with the concept of  a “penalty” to enforce the insurance mandate.

When the Supreme Court arguments were underway at the end of March, the National Review (and other conservative outlets) derided Donald Verrilli, the solicitor general, for flip-flopping on whether the mandate was a tax or a penalty. Avik Roy wrote: “The highlight of the session was when President Obama’s solicitor general, Donald Verrilli, got up to articulate the administration’s position, which was that the mandate wasn’t a tax, for the purposes of the Anti-Injunction Act, and yet also that ‘the minimum-coverage provision of the Affordable Care Act is an exercise of Congress’ taxing power.’”

Roy quotes Justice Alito: “General Verrilli, today you are arguing that the penalty is not a tax,” Alito said. “Tomorrow you are going to be back, and you will be arguing that the penalty is a tax. Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?”

“No, Justice Alito,” replied Verrilli.

Despite the confusion (and derision from conservatives who concluded that Verrilli had badly bungled the Obama administration’s defense) Justice Roberts, for one, saw clear to the reality that the individual mandate really was a tax—and that Congress has a right to collect taxes. Perhaps this “bungle” was actually a stroke of genius?

So the question remains: What happens next? Most importantly, health reform implementation can now proceed without the specter of imminent demise. This enormous experiment whose ultimate goal is to re-design our dysfunctional health care system and offer affordable, comprehensive coverage to the majority of Americans, can begin to play out—warts and all. It’s like making the decision to get married after a couple has lived together a couple of years—there’s no guarantee of success but at least the threat of an uncomplicated break-up is gone.

There are huge questions about implementation, the most compelling of which involve how reform will play out in the states. Will states maintain their Medicaid programs in the run up to the ACA-mandated expansion now that the Supreme Court has ruled that they no longer have to? Or will some states opt out of the Medicaid expansion altogether; refusing an expected infusion of billions of federal dollars and leaving hundreds of thousands (if not millions) of their poorer residents without benefits? How will states that have so far refused to set up health insurance exchanges carry out their required duties?

Now that the mandate has been upheld, ironically questions arise about how well it will function to prevent healthy people from “gaming the system;” staying out of the health insurance pool and making coverage more expensive for the rest of us.

As Ezra Klein wrote in Washington Monthly at the start of the Supreme Court arguments; “Perhaps the best deal in the bill is to pay the mandate penalty [which maxes out in 2016 at $695 per adult and $2,085 or 2% of income for families] year after year and only purchase insurance once you get sick. To knowingly free ride, in other words. In that world, the mandate acts as an option to purchase insurance at a low price when you need it. For that reason, when health-policy experts worry about the mandate, they don’t worry that it is too coercive. They worry it isn’t coercive enough.”

More on that in another post, as well as a discussion of how this ruling will affect just how affordable—and comprehensive—private insurance, including employer-sponsored plans, will really be.

In the end, there is much to cheer in today’s decision; not least of which is a show of support for the signature legislation of Obama’s administration. Of course there will be ongoing debate as to whether this decision will provide a needed “bump” in the President’s approval ratings and second-term aspirations or whether it will energize his opponents who remain set on a strategy of “repeal and defund.”  There’s a good argument to be made that a Republican presidency and/or political shifts in Congress could be more devastating to the implementation of health reform than the Supreme Court decision would have ever been.

As the SCOTUS decision is carefully read, dissected, analyzed and spun over the next few weeks, there will no doubt be fodder for many more blog posts. But today, I am going to sit back for just a few hours, breathe a sigh of relief and offer my thanks to Chief Justice Roberts and this unlikely turn of events.