Supreme Court and the Individual Health Insurance Mandate

[Torie]

I put up a post about what the justices are saying about severability here.

It looks like sbane and I have perhaps made the wrong call here. It appears that either the whole law, or a considerably larger portion of it, is on the chopping block.

And here I think is the single best article I have read regarding the expected half life of the mandate. Yes, Kennedy muses that health care might be a unique good, in that we all have to buy it and there are no substitutes, and that is the limiting principle, but on the other hand, then a Pandora's Box is opened, with down the road all sorts of special pleaders claiming their good is unique too - we are all unique in our own way.

And why open that Pandora's Box, when the government "ought to have been honest" as Kennedy put it as to the power it was using, and structured the mandate as a tax, to wit a tax credit with offsetting revenues - an easy fix that would have got Obamacare safely to port. But they chose to be dishonest. Thus, there is no compelling public policy reason to spring another leak in the federalism wall that leashes just what the feds can do with such an easy fix available with the same economic effects in order for the government to achieve its no doubt worthy objectives.  

The Torie finesse was always the Achilles heel in Obamacare. Absent that, I suspect Kennedy would vote to uphold. I put the odds at from about 3-2 to 2-1 that Kennedy will tank the mandate. The article speculates that Sotomayor may join him in a 6-3 decision FWIW. I tend to doubt it, but who knows of course.

[Torie]

On the medicaid issue, Roberts may be the key vote. The other four "conservative" justices seem to loathe it. Roberts mused that the states should hardly be surprised that once they started taking "boatloads" of federal money (boatloads was a term introduced by Kagan) to finance a big chunk of medicaid, they should hardly be surprised when the Feds started leveraging it to make them into puppets on a string. Good point.

[Torie]

I have some further thoughts on the Constitutionality of the health care mandate. I pretended that I was a Justice. I thought, and thought hard, about whether there was a limiting bright line principle that makes sense, without gutting the last vestiges of federalism (which I don't care about on a policy level, but that is not the role of a Justice).

Here's the thing. I think as a Justice as a tentative matter, I can get to the point that health care in one sense is unique because 1) you will enter the market for it at some point, and there are not real substitute goods to avoid that, 2) it is about life and death, and 3) there is a rather unique problem at the point of sale for this good - when you hit the wall without insurance, you will still be able to "purchase" the good (we don't let folks just run around very sick just because they can't pay for medical services, or at least we shouldn't), but without insurance the good will not be paid for when purchased, really disrupting the market.

So if the mandate were just about requiring folks to purchase the health care good in advance through insurance, so that they can "pay" for services received later, I think I see a clear limiting principle, which is a rather bright line, that will not end up eating the remnants of federalism alive. But the mandate is more than that. About 80% of the cost, at least for young people, which is where the action is here, is about their cross subsidizing older folks by vastly overcharging them for their insurance premiums  now. I see no clear limiting principle for that 80% of the mandate's cost. The government could just force one group of folks into commerce for a good in order to make it cheaper for other folks buying the good, by overcharging them, expanding the market or whatever.

So in the end to me the mandate issue is not really a close case. That 80% cross subsidy aspect is a fed intrusion, that will in effect in the end without a bright line limiting principle, largely shred whatever there is about federalism that limits federal power vis a vis the states. It should be struck.
Clement arguing against the mandate before SCOTUS mentioned the cross subsidy issue, but I don't think he tied it down quite a tightly as I think I did per the outline above.  

And that is how I think I would rule absent someone persuading me that I have not adequately thought this through, and there are other considerations that as a Constitutional jurisprudence matter I should have taken into account, or given more weight.

[Torie]

You guys I think are making a policy argument rather than a legal one. And SS is a tax.

[Torie]

You guys I think are making a policy argument rather than a legal one. And SS is a tax.

What's the legal principle behind the abhorrent-ness of the so-called cross-subsidy?

Yes SS is a tax, but why shouldn't the substantive similarity between this and that count when considering the question of whether this fundamentally changes the relationship between the individual and the government (or the states)?

There is no limiting principle to the reach of interstate commerce if it can force people into commerce with the purpose of cross subsidization. That applies to any good, and is not sui generis to health care.

The Feds have the power to tax (it's in the Constitution); they don't have the power to regulate commerce that is not interstate.

That's the law. What the public policy justifications are or lack thereof for all these distinctions is another issue, not relevant to the evaluation as to whether the mandate at the moment is in fact legal.

Now moving on the the medicaid expansion, I think it is clear that it is not Constitutionally impermissible  "undue coercion" of the States. For "undue coercion to be in play, the Feds must threaten to take away something from the states to which they are otherwise entitled, and States are not entitled to Federal funds. I suppose one could argue that if the feds enact a law that they will stop giving funds to the State for program X, unless the States do Y, with program Y being wholly unrelated to doing X (we will take away your medicaid dollars unless you enact capital punishment for certain kinds of murders), that there might be a problem still. SCOTUS however has rejected even that. It is only when the Feds tell States to X with no money, of they will suffer some penalty not involving the withdrawal of federal money, that there is a problem.

But here we don't even have an X versus a Y. It's all X. When the Feds are merely restructuring a program for which they are already handing out funds, just changing the rules to get the funds, no, clearly, that is not undue coercion. If it were, once the Feds start handing out money for something to the states, they would be hard pressed to ever restructure it in a way that would cause the states to bear more of the burden.

This issue isn't even close.

[Torie]

The good in question isn't health care, per se. It's health insurance. Some form of cross subsidy is inevitable in insurance. That's the whole concept; some people will come out winners, others losers, but the value added is derived from the reduction in risk at a lower cost than if everyone simply saved on their own. The concept is inherently tied up in the nature of the good being offered. Hence it's fundamentally different from all other markets where the absence of cross subsidy does not prevent the market from operating.

There is no limiting principle there. That is true with any good. Just force folks into the market to get the price down and cross subsidize with price fixing.

I can understand why defenders of the mandate want to revert to policy, rather than focus on the law, the Constitutional law. Yes, it is clear via taxation that the government can get to the same place economically. But with one you are doing it with carrots (a tax credit), offset by taxes on everyone, and in the other you are forcing folks into commerce. They are supposed to buy health insurance and break the law if they don't, and get fined. Allowing the government to force people into commerce to make goods cheaper or for cross subsidization purposes effectively renders the concept of limitations of government power vis a vis the states a dead letter.

Anyway, absent a clear limiting principle on the cross subsidy, I think the odds are almost certain that Kennedy will strike it down. There is no limiting principle, and he wants one. And the cross subsidy is not random. The program deliberately makes the young as an age group pay a lot more than they otherwise would, and the old less, so there is age discrimination. There may also be a subsidy for the uninsured or the insured who pay high premiums because they got insurance when they were sick which is paid by everyone less sick in some proportion. But it doesn't matter, the principle is the same.

What the Constitution demands as interpreted is not always the same thing as good public policy. As I have said, to me good public policy is to do away with the concept that the states can do things the feds cannot entirely.

[Torie]

On to severability.  I am also quite certain that SCOTUS is just going to get rid of the mandate, and the waiver of pre-existing conditions, and the risk pool, as suggested by the government. The balance of the law will work just as badly without those three elements as it did before. Nobody argued for more going down than just those three, except for those arguing that the whole thing should go down. I did not hear one reason why the whole thing should go down, other than otherwise the court has to read the whole law and figure it out for themselves. Garbage. Sure maybe other portions should, but if not brought to the court's attention as to what they are and why, they certainly must not be very compelling. Call it a waiver if they are out there.

Does anyone think that forcing insurers to keep kids on the policy until 26 has anything to do with the mandate?  Of course not. The concept of just throwing out the whole law is ludicrous.

Beet, one more time. Yes the free rider issue is unique, but you can't bootstrap off that to then say OK we make people buy insurance to deal with the free rider because its unique, and a unique problem because of the inability to pay, and since we can do that, well we will make them cross subsidize too! The sky is the limit now baby.  No, you just allow the exception of forcing folks into commerce to and only to the extent it addresses what is unique, rather than with that leak in the dam, then the feds can do whatever they want that is not unique now that folks have been forced into commerce just to make sure they won't be deadbeats, disrupting the system.

Anyway, whether you agree or not, Kennedy is never going to buy it. If he does, I will be shocked.

Oh, I never argued age is "unique."  Where did that come from? I just said that when the government forces healthy people into the system, and makes them pay more than they would in an open market, that is a cross subsidy. Most of those people are young, and the schedule for what they have to pay the most onerous, as compared to healthy older people. They are going to get soaked. Someone should tell them before the election about that, or tell them just how 'lucky" they are that the mandate was tanked.

Finally nobody thinks requiring folks to go into commerce and fining them if they do not as law breakers is the same as a tax legally. Well next to nobody, including all 9 justices who don't think it is a tax. Congress doesn't think it is a tax either. By the way, would you argue it is a tax if the penalty is execution, or is it just a tax when the penalty is a fine?  Anyway if forcing folks into commerce via fines because they are taxes, then federalism is indeed totally dead.

You boys are stubborn!  What am I going to do with you? 

[Torie]

Without cross subsidies, you can't deal with the free rider problem?  Really?  You must make them buy insurance to deal with the free rider (not cross subsidies), and if they can't afford it, you subsidize the purchase with a tax credit. Where do you get the money for the tax credit? From taxing the rich more of course!  Isn't that what you guys think is the best public policy anyway, rather than overcharging healthy people for health insurance, mostly younger people? 

Anyway, I'm done and rest my case. I think I have addressed everything at this point, and some more than once, twice, and maybe even three times now.

[Torie]

You must be logged in to read this quote.

Uhhh okay... I don't see the difference between this and what ACA actually does, but I'm just a stupid layman.

The difference is the price of the premiums, and it is a huge difference - to fund the cross subsidy as well as pay your own way, and not be a free rider.

Anyway, it's been fun. Thanks for listening.

[Torie]

I believe that the Fed carrot for employer plans doing what the Feds want, is that the benefits are not treated as income to the employees even thought the cost to the employer is deductible. Again it is done through the tax code. Yes I appreciate folks don't like the distinction between coercion through taxation, and coercion through regulation under the interstate commerce clause.  But there is a method to the madness and the reason heretofore Congress structured their laws they way they did - except this time with the mandate.

[Torie]

Isn't the issue as to serverability, to ask just what portions of the bill depend on the revenues generated by mandatory health insurance one way or the other (to wit, those provisions which almost certainly would not be in the Bill absent mandatory health insurance)?  That certainly is the question I would be asking.

[Torie]

Isn't the issue as to severability, to ask just what portions of the bill depend on the revenues generated by mandatory health insurance one way or the other (to wit, those provisions which almost certainly would not be in the Bill absent mandatory health insurance)?  That certainly is the question I would be asking.

Unless there is some subsidy being provided out of the tax imposed for not having health insurance, then there is no direct linkage of funds.  If the desirability of the private economic impact that severing (or not severing) other provisions from the mandate is cause for determining whether they are severable, then that would give the judicial branch carte blanche to subjectively filet any law with an unconstitutional provision, and subjective decisions should ideally be left to the legislative branch to make.

One would need to look at the legislative history to get a better handle on how the parts work together. Oh wait, maybe there isn't much of any legislative history on this Bill, since nobody read it before it passed.

Anyway, even the government (solicitor general) admits that the rule requiring insurers to take insured with pre-existing conditions will have to go, since the quid pro quo was to get a host of healthy youngs who would pay excessive insurance premiums to subsidize the olds and the sicks. As to how the penalty payments penciled into the bevy of largely cooked up numbers, I don't have a clue. 

[Torie]

Beet is vindicated. The mandate is a tax!  Who knew?    Yes, it is not appealing to put something into a different box for a lawyer when the economics is exactly the same. In this case, Roberts stripped away the label to get to the substance. SOCTUS did however surprisingly toss out the Act's stick that states lose all their medicaid subsidies if they don't expand their programs, presumably because it was viewed as unduly coercive. That sounds rather fuzzy to me.  

[Torie]

I thought that the Supreme Court wasn't allowed to rule on whether a tax is constitutional until it takes effect? If the mandate is a tax than shouldn't the suit have been dismissed and need to be reargued in a couple years?

That is a procedural hurdle which Roberts ignored. I don't blame him.

[Torie]

What was the problem with the Medicaid provisions, again?

I don't know, but Kennedy was yipping about undue coercion of the states. I am amazed that Roberts bought into that.

[Torie]

Good luck with the above anvi. It will be interesting to see how you respond. 

[Torie]

Well anvi, that was a most interesting discussion of mandatory cross subsidies (although your bit that you might not be invited to drink again if you don't drink and are the cross subsidizer, seemed a bit peculiar, since the idea is that the teetotaler must always go to drinking soirees precisely to cross subsidize, but I digress), and the cost and personnel to administer them. Good job with your handling of that last sentence from your interlocutor. That one really through me for a loop, because it seemed to have been dropped there from outer space from a contextual perspective.

[Torie]

Torie, I didn't address cross-subsidization in my response above just because I couldn't find anything in t_host1's post about it, although maybe I missed it. I thought it had drifted into a more general debate about taxes, so that's what I was focusing on.   I do think the cross-subsidization issue you've raised for a while is a legit one, and one way or another it will have to be rectified.  My interest in ACA as a matter of law before SCOTUS was that I wanted to see a mandate, or something that functions like one, survive constitutional challenges, and that not for the sake of Obamacare itself, but for the sake of implementing a viable framework for near-univeral coverage in our country at some point. 

Well, if you put in $20 bucks for booze, and then don't drink, that to me is a subsidy. But the fun of course was trying to parse a text written in code. You manned up and made a good faith effort. I read the text, and reached for my bong.

As to the mandate, of course the problem is that it is too small, and not enforced, so "everybody" is going to drop their insurance ASAP who is healthy, since now they get insurance any time they want it when they get sick. That is what happens when you troll for votes desperately at the last moment. You end up with a Godzilla-like monster that will be wrecking havoc throughout the land if not brought down.