20 January 2011

Reading the Tea Leaves: the PPACA and SCOTUS

As the PPACA wends its way through federal court, there have been conflicting opinions on its constitutionality issued by varying federal judges. When the lawsuits were first filed against the health care reform law, they were given little chance of succeeding by legal experts. The reason for this is that the key challenge to the law is based on an interpretation of the Commerce Clause which runs contrary to settled law for the last 60 years. The commerce clause has been something of a political football, historically. In the late nineteenth century and early twentieth century, judges used the commerce clause to restrict the power of the federal government, and then in the New Deal era, the Supreme Court changed its view and used the commerce clause to expand the scope of the federal government. The modern conservative court has begun to incrementally restrict the scope of the Commerce Clause, but the current Supreme Court seemed to set a limit of how far they would restrict the use of this power in a 2005 case upholding the authority of the federal government to criminalize marijuana which is grown, sold and consumed within a single state. Kennedy and Scalia concurred in this decision, and Scalia's separate concurring opinion reads in part:

"Where Congress has authority to enact a regulation of interstate commerce, it possesses every power needed to make that regulation effective. ... The power to enact laws enabling effective regulation of interstate commerce can only be exercised in conjunction with congressional regulation of an interstate market, and it extends only to those measures necessary to make the interstate regulation effective. As Lopez itself states, and the Court affirms today, Congress may regulate noneconomic intrastate activities only where the failure to do so “could … undercut” its regulation of interstate commerce."

More recently, a majority including Chief Justice Roberts wrote, “determining whether the Necessary and Proper Clause grants Congress the legislative authority to enact a particular federal statute, we look to see whether the statute constitutes a means that is rationally related to the implementation of a constitutionally enumerated power.” The healthcare market is inarguably interstate and thus a fit area for government regulation, and since the individual mandate is not only "rationally related" to the regulation of this market, but integral to its regulation, it seems that it fits quite clearly into the framework established by the Court as a constitutional exercise of the government's power.

So it was (and remains) reasonable for observers to expect the Supreme Court to stand by its own longstanding and recently upheld precedents to uphold the law. Indeed, a recent group of 100 law professors signed a joint statement (PDF) in support of the constitutionality of the law. But unfortunately 100 law professors are not worth one Scalia or half a Kennedy, and what the Court will ultimately do is not clear. Opponents of the law have an interesting if logically tortured argument that PPACA attempts to regulate economic "inactivity." It has been noted that the 1942 Wickard case justified regulation of economic inactivity, so even that would seem to fail the precedents set by the Court. What we really cannot guess boils down to three things: 1.) How political is this Court, and 2.) How activist is this Court and 3.) What will Kennedy do? While we like to think of the Court as nominally apolitical, the 2000 Gore v Bush case revealed how readily the justices can at times discard principle to accomplish a politically desired outcome. The stakes in this decision are just as high, and the partisan fervor no less intense than in a presidential election. It would not surprise me in the least to see Scalia switch sides in order to stick a finger in the eye of democrats. The Roberts court already has a shocking track record of judicial activism (which I say as an observation, not a criticism; I've never thought the idea of a neutral arbiter of law was possible or desirable.) and they may well leap at an opportunity to further restrict the power, size, and scope of the federal government. However, this may be a bridge too far for them, particularly for Kennedy, since a decision restricting the Commerce Clause to this degree could invalidate a whole host of federal laws and regulations far beyond this limited case. I'm not sure Kennedy is willing to endorse such a radical restructuring of the US government, and I'm also not sure he wants to be on the "wrong side of history" in invalidating such a monumental legislative accomplishment.

This is all just speculation and guesswork. It'll likely be years before we know anything on this case. But since we are engaging in idle speculation, it might be interesting to wonder what might happen if the Court does agree that the individual mandate does violate the Commerce Clause?

First of all, it's likely that conservatives will be disappointed that "ObamaCare" will probably not be struck down in toto. While it is true that Congress did not include a specific severability clause, it's a fact that the court has also held many times that legislation can still stand if just a single element of it is invalidated. More distressingly for opponents of the legislation, the conservative judge who did rule the PPACA unconstitutional did just that: severed section 1501 (the mandate) while leaving the rest of the law in force.

This is pretty key. It means that even if we lose at the Supreme Court, it is highly likely that the rest of PPACA stands. The subsidies, the medicaid expansion, the insurance regulations and exchanges, the independent payment advisory board -- all of it. Only the mandate goes.

What would that mean for reform overall? That's less clear. For sure, coverage would be less universal. There will still be millions of uninsured even under PPACA as it is, but surely more people would opt out of buying insurance, diminishing the risk pools and creating adverse selection problems for insurers, who will still be bound by regulations requiring them to live with medical loss ratios of 80-85%. In that case I can easily see the insurance industry coming back to Congress and demanding a fix for the situation. If nothing else happens, the prediction is pretty grim from a cost perspective: health care economist Jonathan Gruber estimates that removing the mandate only would result in individual premiums being 27% higher than they would under the act with the mandate, and that only 7 million more people would have insurance, compared to the 32 million newly insured under the PPACA.

So the mandates are pretty critical to achieving the goal of near-universal healthcare coverage. It would be pretty bad for reform if that were struck down. But it wouldn't be the end of the world, and it wouldn't even necessarily be the end of reform. If the partisan furor over this bill ever dies down in a few years, once the insurance exchanges and other regulations have been accepted as part of the political landscape, it is possible and even likely that a future Congress might be able to come together to amend the law to make it work better. Maybe I'm just dreaming on that point. But it is instructive to look back on the Medicare program, which was about as controversial and bitter a fight as this when it began, and after only a few years it was accepted and expanded in a bipartisan manner to be the program it is today.


  1. I'll be anxiously waiting to see what comes of these lawsuits. Hopefully, the activist judges will not play dirty, as we have come to expect them to do.

  2. Hopefully more than just the mandate will be struck down. Then we can contol cost by removing one of the chief cost of medical, the salaries and benefits of the doctors and top administrators at the hospitals and other care facilities. Just as the auto industry has been ruined by high union wages, so has healthcare with the high wages demanded by doctors. Lower the wages, or tax them at 75% or more and return that pool of money into the system. That alone should offset the needed cost of the mandate.

  3. Doctor income is about 10% of all healthcare costs. Cut their income 50% and you have only saved 5% of the cost and had all the doctors who are financially secure retire or young enough to do something else leave and go do something else. Harr to have healtcare with no doctors to provv it.

  4. Any comments on the Texas law, and its effects, that limited medical malpractice fines & legal judgements?

    Supposedly, that cut the medical costs there something on the order of 40 percent as doctors stopped taking unnecessary, costly, tests to cover themselves from possible future malpractice suits.

    Doctors I know have cited medical malpractice risk & insurance for years as a significant cost burden. And, if the anecdotal info I'm aware of is correct, addressing that pays big.

    Also, since you're so entranced with fiscal/financial analysis, how does the recent trend among employers, especially smaller employers (50 or fewer employees) to opt for the tax/fine over paying for coverage? Figures I've heard go something like, 'why spend $17,000 per employee for health care when I can shift the cost to the govt via a $2500-ish fine?

    ...and...to what extent did the government's cost projections anticipate this perverse [using that term in the economist sense] response by the public?

    My understanding is that the government assumed no such shifting would occur. That's a big impact on actual cost trends as the vast majority of businesses are small.

  5. I read your medical blog entries and am impressed, positively.

    Then you go off on political rants on subject for which you have no expertise -- making inflammator statements such as Justice Scalia being activist, etc.

    IF you read the law and the precedents--a task that takes hours to be thorough--you'll see they don't do this. They have a perspective & a methodology--as does everybody--and they follow it methodically.

    You present a particular familiar pattern. Here's a reference, written by a very accomplished MD Psychiatrist on a topic a MD Psychiatrist is qualified to address: www.libertymind.com

    For $10 you can download his book, "The Liberal Mind; The Psychological Causes of Political Madness"

    As a doctor yourself, you've got more credibility to counter the psychiatrist's rationale & conclusions than you do selectively parroting sources on subjects for which you have no expertise.

    I'd love to read your rebuttals to the psychiatrist.

  6. DOC: In an earlier response you remarked something to the effect that Medicare (or Medicaid) was efficient, citing a 3 percent figure. That was the gist, sorry to garble it here.

    Regardless, Bah Humbug on the general sentiment expressed.

    The government run medical programs are rife with billions--BILLIONS--of dollars of undetected fraud. Medicare/aid may seem efficiently managed--but a whopping proportion of the funds expended are to fraud.

    The US Governent has proven incapable of addressing this. In fact, the facts show it is blissfully unaware of even being able to detect when its pockets are being picked.

    And picked they are; check out the fraud statistics at:


    Some 80 percent of Federal False Claim Act (Qui Tam, or, "whistleblower") cases that make it to court & get a settlement are linked to medical frauds in which the government--that's those of us who are taxpayers--get bilked.

    Defense programs are notoriously poorly managed...but are smothered relative to medical fraud.

    Instead, Govt depends on whistleblowers who are motivated by honesty...and to a lesser extent (per the lawyers that pursue Qui Tam suits) the financial rewards that average something like 17 percent of recovered funds (25% is the max).

    Maybe in your selective view of the world ignorance is bliss. But factor in the known fraud costs & things look differently.

  7. Ken, Justice Scalia is an activist if ever there was an activist. The Heller decision is the Roe v. Wade of gun control.

    I believe in a living constitution and have no problem with the Court reading into Second Amendment a right of self defense that is not in the words. Just like I have no problem finding a right of privacy that was not in the words.

    The same is true in finding corporations to enjoy free speech rights. Corporations are persons for some purposes, but not all. (E.g., they can't hold office or serve time in prison, but can enter into contracts and file anti-discrimination law suits.) Justice Scalia voted with the majority to create a brand new right for corporations.

    The Rehnquist Court struck down as much legislation as the Warren Court did. Scalia was a member of the former.

    Now, if by activist judge, you just mean a bad judge, then that's fine you can say Scalia is not a bad judge. But if you mean a judge willing to overrule the majority of the people as expressed through their elected legislators or if you mean a judge willing to read rights into the constitution that are not written there, then you have to admit Scalia is an "activist" judge.

    It may be he is an activist for your causes, but that doesn't make him not an activist.

  8. Ken,

    The TX med mal law may have cut malpractice insurance rates by 40% (I'd heard less but it's quite possible) but I highly doubt that it's cut healthcare costs at all. The best rigorous estimate I have seen is that malpractice contributes about 3% to the healthcare bill. Defensive medicine probably costs more, but I doubt that the tort reform changed practice patterns enough to save much. Not that I'm not in favor of tort reform -- I am -- but it's just not a panacea.

    Regarding employers dumping patients into the individual market, yes that is built into the model. The ones who will do that are not yet doing to because of the PPACA, since the employer requirement is not yet in effect nor are the insurance exchanges operational. Yes, some will go on the individual market in 2014 when these things become operational, but the fine is calibrated by people smarter than me to discourage too much of it.

  9. From what I understand, the mandate is worded in the form of a tax, and thereby exempt from the provisions of the Commerce Act. Condor at the Shearlings Got Ploughed blog had a good explanation of this. (Sorry no link, reading on a phone.)

  10. REGARDING: “The reason for this is that the key challenge to the law is based on an interpretation of the Commerce Clause which runs contrary to settled law for the last 60 years.”

    FALSE – That grossly misrepresents, by bizarre oversimplification, the depth & breadth of the facts of the various factors underlying & intertwined in the decision (Cuccinelli vs. Sebelius rendered by Judge Hudson). Here's the applicable legal doctrines:

    - General Welfare Clause;
    - Necessary & Proper Clause;
    - Commerce Clause;
    - and, the limits on Congress to tax versus penalize an activity--or in this can an inactivity.

    UNLESS one examines ALL the above, and ALL the legal precedents as they are evaluated to be relevant and limited, one cannot appreciate the legal decision. So far, this blog (its author & those commenting) haven't even come close to conveying even a simplistic understanding of the elements underlying the decision much less the content of those elements.

    It appears nobody writing here (other than me) has actually read (never mind studied) the actual decision & associated case law.

  11. AS FOR THE SECOND Part of the statement (“runs contrary to settled law”) let’s review some quotes from the decision:

    "...regulatory powers [of Congress] are triggered by some type of self-initiated action. Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market. In doing so, enactment of the Minimum Essential Coverage Provision exceeds the Commerce Clause powers vesting in Congress under Article I." (page 24 of the decision)

    Footnote #13, page 36 of the decision: "If allowed to stand as a tax, the Minimum Essential Coverage Provision would be the only tax in U.S. history to be levied directly on individuals for their failure to affirmatively engaged in activity mandated by the government not specifically delineated in the Constitution."

  12. The misrepresentation in this item is brilliant, given the brevity. Consider the following erroneous assertions:

    QUOTE: "Opponents of the law have an interesting if logically tortured argument that PPACA attempts to regulate economic "inactivity.""

    IF Wickard & Gonzales actually did address "inactivity" as asserted here (& presumably by the 100 profs referenced) THEN the fact of the case would have needed to have been that Wickard & Gonzales chose not to engage in growing & consuming their relative crops at which point the Fed'l Govt. would have had to intervene and mandate either that they consume such crops or pay a fine/tax. Of course, the facts are the Fed's didn't intervene until AFTER those individuals entered the market.

    THE INDIVDUAL MANDATE IS NEW & UNPRECEDENTED. The CBO noted this over a decade ago in an earlier attempt to do the same thing:


    So much for the assertion that it takes a "logically tortured argument" to find it unconstitutional.

    As for the assertion that "a decision restricting the Commerce Clause to this degree could invalidate a whole host of federal laws and regulations far beyond this limited case" -- THAT is really really interesting .... given that the 'health reform law' is the ONLY such Federal law to do such a thing. A fact reiterated by the FL Justice that yesterday found it unconstitutional for much the same reasons as in VA (the FL Order Granting Summary Judgement, 3:10-cv-RV/EMT) is 78 double-spaced pages...given the obvious oversight to actually read the almost 42 double-spaced pages of the VA decision, makes we wonder if this blogger will read the FL decision and assess its implications).

  13. If you really think an interpretation of the law such that the Federal Government can impose a mandate on its citizens to buy a product or service that it (the Fed'l Govt) heavily regulates, or even provides.

    Consider: IF it can to that for health care, what couldn't it do?

    And Consider: If the authorities later in control apply that new power to other matters, what are the possible implications??

    Bear in mind that those later authorities WILL be people of a temperment & disposition with which you disagree vehemently. Ditto for the nature of the mandates they would impose.

    THAT is the issue. It's not health care, its the erosion/eviceration of the checks on government.

    History shows, and the founder of the USA recognized and tried to address in the Constitution & Bill of Rights, that people in power tend to abuse that power (e.g. "power corrupts & absolute power corrupts absolutely").

    Benevolent dictatorships are rare and short-lived.

    Read the VA & FL decisions closely--and with a mindset that the authority that is asserted to the Fed'l Govt. happens to be an Administration you hate. Do that & you'll start to see which side of the debate is "activist" -- the one espousing what amounts to expanded governmental powers or the one that wants to keep limits on the govt's power.

    Someday, that government WILL be one that we all hate. Best not to set things up to give it too much control. History says, over & over.

  14. If this POS legislation is so great and the administration believes in it so much why has over 500 waivers to companies been made.

  15. Anon,

    The waivers are necessary because many of the insurance regulations went into effect now, but the individual mandate is not effective till 2014. (I agree that was a bad political game the dems played there, BTW) But without the mandate to ensure near-universal participation, the insurance companies are running into adverse selection problems -- so they are seeking and getting waivers, quite reasonably IMHO.

    Now if the waivers were to continue past 2014, that would indeed indicate a serious problem.

  16. I don't think you are going to have to wait until the SCOTUS gets the case. Once the Repubs control both houses of Congress and the Presidency, this thing will thankfully be gone.

    Dumb libs keep saying "universal coverage," yet who is going to care for them? Underpaid physicians? Noone is going to take any of the plans in the exchanges except for ER docs and a few community health centers. Need a hip replacement? - good luck finding an Orthopedist. Got cancer? - good luck finding an Oncologist.

    BTW, the waivers were provided because companies could not meet minimal MLR ratio's established in this bill and therefore would have been fined unless they changed to a much more costly health plan for their employees. 1000 waivers and counting...there is no denying that without these, this bill kills businesses, otherwise they wouldn't be needed. (Noone ever said that liberals used logic). Once the waivers go away next year, watch the health plans get dumped in favor of paying much cheaper fines or businesses will close.

    As an individual, it is going to be much cheaper to pay the extra tax come April 15 than it will be to sign up for any insurance in the exchange. If I need hospitalization, I'll just sign up for an insurance plan at that time - they can't deny me for my preexisting condition. This is a no win situation for insurance companies and ultimately the government, because everyone knows that this bill is designed to lead right to a single payer system. Removing the denial of preexisting conditions is only going to cost everyone more money. Again, foresight has never been a characteristic of liberals.


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