A Happy Day: Supreme Court upholds health care reform law granting broad access through mostly free-market mechanisms, and I am $1 richer


This morning, the United States Supreme Court made its landmark decision to uphold the health care reform law.  I am very happy about it for a number of reasons:

  1. I won a $1 bet.  As I described in a previous post, I bet my brother-in-law, an attorney from Chicago, that the law will be upheld.  I will be driving to Chicago this weekend to attend my father’s 75th birthday.  I’ll see my brother in law there.  He’s a trustworthy guy, so I’m confident he’ll pay up.
  2. I was right about the majority argument.  Like my brother-in-law and most of the pundits, I was originally focused on the question of whether the individual mandate provisions of the reform law represented an unconstitutional expansion of the federal government’s power to regulate interstate commerce.  My first blog post on the subject explored that issue.  But, then I read an interesting piece in the Atlantic by Jack Balkin, a constitutional law professor from Yale.  As I explained in my second blog post on the subject, Balkin argued that the penalties associated with the controversial individual mandate should be considered a tax, and are therefore a constitutional exercise of the federal government’s taxing powers.  I found the argument convincing. But I never heard anything more about that line of reasoning until this morning, when we learned that this argument is exactly the one that Chief Justice Roberts made in his majority opinion.
  3. The law was upheld with a minimum of expansion of federal power.  I shared my brother-in-law’s concern that if the law was upheld based on an expansive view of the interstate commerce clause, it would have the effect of dramatically expanding the power of Congress to dictate how we all live our lives, without being constrained by the political unpopularity of raising taxes to pay for it.  But Chief Justice Roberts called a spade a spade. Despite the terminology of the law itself, and despite the repeated assertion by President Obama that the law does not raise taxes, Roberts declared at least the individual mandate penalty to be a tax.  I do still think that the reform bill has the effect of expanding expectations about the role of the federal government in our lives, and so I still have some concern about that.  But, of all the arguments that could be made to uphold the reform law, I think the one Roberts selected is the least bad in terms of expanding government powers.
  4. We can continue the journey toward a more civilized and compassionate health care system.  Almost nobody is asserting that the health care reform law is perfect.  But, in my opinion, it is a step in the right direction.  It is better than creating a government-run monopoly.  It is better than waiting forever for each of 50 states to exercise their authority to compel people to buy health insurance.  It helps millions of Americans have a sense of security. And, it underscores that our strong tradition of individualism is balanced against our sense of duty to one another as Americans and humans.
  5. I am energized to continue health care improvement.  Over the last few years, our field has built up some momentum in transforming health care.  Health care leaders were feeling a sense of urgency to increase their capabilities in population management, analytics, lean process improvement, clinical integration and health information technology.  I feared that if the health care reform law was struck down, it could lead those leaders to relax for a few years to wait and see what comes next.  I am excited by the prospect that our field can continue to build momentum that spills beyond the limited confines of the reform law itself to allow us to make more fundamental progress in the care delivery system itself.
  6. Oh, and did I mention I won a $1 bet?
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If the mandate is a tax, it becomes constitutional. The politically inconvenient argument could provide a way out for the Supreme Court.

In a recent blog post, I attempted to summarize the legal arguments behind the debate about the constitutionality of the health care reform law — as well as I can without the benefit of having any legal education.

Reading the transcript of the testimony to the Supreme Court, and reading some of the news coverage of that testimony, I focused on what appeared to be the main issue: whether the mandate that people buy health insurance represented a violation of the constitutional limits on the enumerated powers of the federal government to regulate interstate commerce.

That focus is grounded on the assumption that this mandate is a type of a penalty, rather than a tax.  This seemed obvious to me for a number of reasons.  First, on the face of it, it seems that its primary purpose is to change behavior, rather than to generate revenue.  Second, the law itself uses the word “penalty” rather than the word “tax.”  Third, President Obama, himself a constitutional law professor and someone who wants his signature achievement to be upheld, repeatedly and explicitly said it was not a tax.  And, finally, all those smart lawyers on both sides of the Supreme Court bench seemed to be taking it for granted that it was not a tax.

But, this week I read an interesting commentary in the Atlantic by another constitutional law professor, Jack Balkin, from Yale.  He argues that the mandate is a tax, and therefore the health care reform law is constitutional.  He joined others making the same argument in one of the zillions of amicus briefs filed in the case.

Balkin argued that, even if the primary purpose of a tax is to regulate behavior, it can still be considered to be a tax.  He pointed out that taxes on polluters are in that category.  In 1950, the Court ruled on this issue in the context of a law taxing marijuana.  That law was designed to keep people from buying or selling the drug. The Court explained that “a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. The principle applies even though the revenue obtained is obviously negligible . . . or the revenue purpose of the tax may be secondary.”

So, why would all those smart lawyers not focus on the tax argument?

Balkin provided a number of answers.  First, the political optics.  Democrats may have been OK with the idea of taxing rich people to pay for decent health insurance for all.  But, Democrats are getting hammered by Republicans for high taxes and large deficits.  Democrats knew they could not pass health care reform if they admitted it would increase taxes.  So, they took the low road that both Democrats and Republicans seem to prefer.  They purposely designed the law to avoid having to admit they raised taxes.  And, once the health care reform law passed, the Republican opponents of the law did not want to argue it was a tax because that would be admitting that the law was constitutional.

Secondly, the Democrats wanted a quick ruling by the Supreme Court.  The Obama administration was worried that states would delay their preparations for implementation of the law until the constitutional questions were settled.  But, if the mandate was considered to be a tax, then the Tax Anti-Injunction Act would apply.  That Act says that people cannot ask the courts for an injunction against taxes, but must instead pay the tax and then sue the government for a refund.  The law is designed to protect the federal government from being starved of revenue while lots of court cases are pending.  So, if the mandate was a tax, the Supreme court may not be able to take up the case until 2014, when the mandate kicks in. Balkin argues that the Court could assert that the Tax Anti-Injunction Act is merely a protection, but should not be considered as a bar to their jurisdiction.

Balkin seemed to be selling the Supreme Court justices on the idea that upholding the reform law on the grounds that it is a tax would be a good way to avoid the appearance of politicizing the Court through a party-line decision to strike down the law.  And, upholding the law as a tax would also avoid setting a precedent for expanded government powers under the commerce clause.  And, ironically, it could even establish a precedent that Congress would be forced to admit when things are really taxes and face the consequences with voters, thereby serving the interest of limiting the size of government.

An interesting scenario.  We’ll know within a couple of months whether it plays out that way.

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Health care reform with its foot on a banana peel

I enjoy a good wager.  But, my maximum bet, no matter how consequential the topic, is $1.  This weekend, I bet my attorney brother-in-law my maximum bet that the Supreme Court would uphold the health care reform law.

He argued that it was clearly unconstitutional, and reminded me of high school civics lessons about federalism.  The federal government is constitutionally designed to have clearly enumerated, limited powers.  Those powers include the ability to levy taxes.  And, they include the power to regulate inter-state commerce.  But, explained my brother-in-law, they don’t include the power to compel commerce.   So, they can’t make people buy health insurance.   All other powers are retained by the states and by the people.  According to this view, the constitution would allow a state to pass a law mandating that people buy health insurance, as was done in Massachusetts.  And, Congress could have passed a law that created a government-run health program and levied taxes to pay for it, as was done with Medicare.    And, Congress could have passed a law that levied taxes to pay for subsidies for insurance companies to compensate for the losses they would experience from being forced to issue insurance to everyone, regardless of prior medical conditions.  But, the authors of the health care reform legislation apparently felt that increasing taxes was politically infeasible, particularly given growing concerns about unsustainable government deficit spending.

The Supreme Court held three days of oral arguments for the case this week.  The meat of the issue was discussed on day 2, Tuesday, March 22nd.  One hundred and eleven double-spaced pages of discussion that was an interesting read.  Justice Kennedy, the one thought to be the likely swing vote needed to join the more liberal justices in upholding the health care reform law, described the government as being “dishonest” in doing something that required the use of its power to levy taxes without admitting that it was a tax or framing it as a tax.  Kennedy found the health care reform law to be “disturbing” in that it “required the individual to do an affirmative act” in purchasing insurance and entering the market for health care insurance.  He noted that this is against our longstanding legal principles, and pointed out that the law does not even obligate people to save a blind person that they see walking in front of a car (unless they have certain types of relationships with the blind person).  Kennedy argued that the law “changes the relationship of the Federal Government to the individual in a very fundamental way,” and therefore the government should have a “heavy burden of justification.”  Not exactly inspiring confidence that Justice Kennedy intends to be that cross-over vote to uphold the law.

The government’s defense of the reform law was delivered by Solicitor General Donald Verrilli, who delivered amazingly incoherent testimony.  The Justices were grilling Verrilli to explain a “limiting principle” — some concept that applies to this law, but not to other situations so as to prevent this law from establishing a precedent that broadly expands federal government power.  Verrilli argued that, although the law is about health care insurance, insurance only serves the purpose of “financing” health care itself.  So, receiving health care and purchasing health care insurance are tied together.  The government argued that everyone is likely to require health care at some point.  Somehow, from those two points, the government argues that everyone is already in the health insurance market, even before they buy health insurance. So, the law is therefore not compelling someone to enter the health insurance market.  Verrilli argued that the health care market (the one that is inextricably tied to the health insurance market) is distinguished from all other markets in that “people cannot generally control when they enter that market or what they need when they enter that market.”  One after another, the Justices questioned this reasoning and offered many examples of other markets that have the same characteristics, such as the market for burial services.

The liberal Justices tried to come to Verrilli’s rescue.  Justice Ginsberg coached Verrilli that his main argument for the uniqueness of health care was that it is a market where, “even though you have every intent in the world to self-insure, to save for it, when disaster strikes, you may not have the money.  Then, when you need health care, you have no choice whether or not to buy the product.”  Other’s emphasized that the longstanding tradition in our culture is that health care services are delivered without regard to the ability of the sick person to pay. Therefore, one person’s decision to not buy health insurance affects other people.  However, the Justices pointed out that this was true in virtually all markets — if I decide to not buy a car, that affects the economic well-being of the people that work for car companies.

I went into the week confident that the constitutional challenge to the health care reform law was just a bump in the road.  Just a desperate Hail Mary pass by those against health care reform.  But, I’m taking a dollar bill out of my wallet and setting it aside, ready to pay my brother-in-law in case he wins the bet.

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