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2012 Election

Supreme Irony

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As anyone who hasn’t been living under a rock knows, the Supreme Court has been hearing oral arguments on a challenge to the Patient Protection and Affordable Care Act (ACA), also known as Obamacare. The Court divided the hearings over three days: the first day to determine whether it was appropriate to rule on the constitutionality of the law before the provisions in question were enacted, the second to hear arguments on the subject of the individual mandate, and the third to decided whether the whole law should be repealed if the individual mandate failed the test.

Already we have had great political theater, as is appropriate in an election year. Justice Scalia’s disparaging comparison of the individual mandate with forcing everyone to buy broccoli; Justice Kennedy calling it the greatest challenge to liberty in decades. The media circus has been in full play, and both liberals and conservatives have been fairly slathering.

Unfortunately for our instant gratification society, we’ll have to wait a while for the results of the Court’s deliberations. Unlike politicians, the justices of the Court do spend some time weighing the arguments and sharing their opinions in these matters of substance. Sometimes there are even surprises, when a Justice revises an early impression after reading the preliminary opinions of their colleagues.

At First Blush

The initial impression from the grilling the Health Secretary was subjected to seems discouraging to supporters of the law. The attitude of the Justices seemed to split sharply along ideological lines. Justice Kennedy – often referred to as the “swing vote” on the bench – is nevertheless a conservative and has voted more often with Justices Roberts and Scalia than against. In two particularly momentous decisions, Bush v. Gore and Citizens United vs. FEC, Justice Kennedy voted with the conservative majority.

So it seems likely that the individual mandate is well on its way to being ruled unconstitutional. Should that happen, it still leaves open the question of whether the whole Affordable Care Act will be struck down as well. That part is not so clear. The Court has more often opted for allowing other parts of reviewed laws to stand once the unconstitutional portion has been removed. The question centers around whether the individual mandate is so central to the operation of ACA that the rest of the law cannot stand without it.

It would be difficult for the Court to make this argument. The individual mandate plays a vital role in making the universal coverage provisions of the law truly affordable, but there are many other important provisions in ACA that have no relation to the mandate and are still important.

  • The health care exchanges are the most popular measure contained in the law and a number of states (Rhode Island, ) have indicated that they will go ahead and implement them regardless of the Supreme Court’s decision. No relation to individual mandate;
  • The independent Patient-Centered Outcomes Research Institute, which came into effect upon enactment, is authorized to investigate the relative effectiveness of drugs, treatments and clinical outcomes. No relation to individual mandate;
  • The extension of dependent coverage until their 26th birthday. No relation to individual mandate;
  • The multiple extensions and modifications to Medicare/Medicaid (expansion into rural, impoverished areas, mandatory evaluation of chronically ill patients, drug rebates, closing Medicard Part D). No relation to individual mandate;
  • Modification of physician’s payments from a volume-basis to an outcome-basis. No relation to individual mandate;
  • The “Cadillac tax” on high cost employer health care plans and the excise tax on pharmaceutical and health insurance companies. No relation to individual mandate;

It would be difficult for the Supreme Court to make a case for striking down the entire law simply on the basis of the unconstitutionality of the individual mandate. Their only argument could be that without the individual mandate, the law is not effective in either extending health care coverage or reducing costs to the system. This is true, but irrelevant to the Court. The Supreme Court does not decide on the merits of a law, that is the exclusive privilege of Congress.

So if the Court limits itself to the role of deciding on the Constitutionality of the mandate, and those portions that are operative based on the existence of the mandate, and if it should decree the mandate unconstitutional, it would be justified in eliminating those portions of ACA that oblige insurers to extend coverage without an increase in premiums (which would have been compensated by the new business created by the individual mandate). These include:

  • The prohibition against exclusion of pre-existing conditions;
  • Prohibition against charging co-payments or deductibles for preventive care and screenings;
  • Restrictions on insurer annual spending caps;
  • Prohibition against discrimination or higher premiums for pre-existing conditions; and,
  • The penalty on individuals who have no subscribed to a health insurance policy by 2016.

Consequences, Shmonsequences

We don’t know what the impact of such a “partial” ruling would be. The Congressional Budget Office has not – yet – undertaken any studies on the budgetary impacts of a partial repeal, due to the uncertainty inherent in the Supreme Court’s decision and the provisions which might be affected.

An educated guess would be that the health care law would fizzle substantially.

  • With individual mandate and the new insurer requirements, an estimated 32 million out of the 50 million Americans without health care would receive it. Without these provisions, this situation would likely remain unchanged;
  • Much of the budgetary impact was derived from the expansion in Medicare/Medicaid services (negative impact) and the new excise taxes on the Cadillac plans, Big Pharma and the insurers (positive impact). The penalties against individuals not complying with the insurance requirement are not an important driver of revenues. Therefore the budgetary impact of the Court’s decision would probably be neutral;
  • The impact to citizens in terms of their health care premiums can only be neutral or negative, depending on how many of the insurer requirement provisions the Court strikes down. Any legally mandated provision which is not compensated by new, low-cost, customers means higher cost to the insurers, which they will pass on to customers through higher premiums.

Pundits are also divided on the political consequences for the election

  • Court rules in favor of ACA. Pundits argue that this will inflame the Republican base and reignite the health care issue. It is difficult to believe that the Republican base can be much more fired up on this issue than they already are, while uncommitted voters are likely to have accepted the fait accompli and will be thinking more about the economy and jobs come October.If the Court rules in favor of ACA, the health care debate will be over and done with for most voters; 
  • Court overturns any part or all of ACA. . A different set of pundits argue that a decision against ACA will mobilize the liberal base in a way the Democrats have not been able to achieve since 2008, and more of ACA that is overturned, the greater the boost to the President. Others argue that such a ruling would vindicate the Republicans and thus give them ammunition against Mr. Obama. I feel that the former is more likely true.The fact is that Republicans have no plan for fixing health care. Paul Ryan’s proposal in his “Path to Prosperity” alternate budget proposal is nothing more than a gradual abandonment of Medicare and Medicaid. Unfortunately for the Republicans, the vast majority of Americans like both programs.

Common Sense believes that whatever the Court rules, it will tend to favor the Democrats electorally. The main reason is that Mitt Romney has nothing to say on health care. He is the father of Massachusetts’ own Romneycare, and as the intellectual father of Obamacare. He has been quoted on video as saying “I like mandates.” (Yes, Romneycare includes an individual mandate). If anything gives Mitt bad dreams it is that moment in the upcoming Presidential debates when he is inevitably asked the difference between the two laws and he has to admit that he is naked and that the dog ate his homework. The Obama team salivates when they talk about this issue.

A Silver Lining

While it would be better to keep the existing legislation in place (“a bird in the hand…”), Common Sense sees the silver lining of repeal too. If the Court does overturn ACA, and President Obama is reelected, we can hope that the only alternative to the ruinous health care system we have would then be the single-payer system.

I’ve never been a big fan of the individual mandate. It is packaging tape on a broken system. Common Sense believes that the single payer system is far superior to any attempt to “fix” American health care in its current form. A comparison with nations that have a single payer system shows that:

  • Single payer is more efficient. The US spends far more wealth (16% of GDP) on health care vs. single payer systems like Canada (10.1%) or the United Kingdom (8.4%) (1)

 

  • Single payer delivers better results. Life expectancy is lower and infant mortality rates are higher in the US than in either Canada or United Kingdom. The percentage of obese children and adults in the US is also 50% greater than in either comparative country. Number of primary care visits is also lower in the US. We pay far more for our health care than any other advanced economy, yet on average we get less for it. That doesn’t sound like a very good bargain to me.

 

  • Single payer could save Uncle Sam $200 billion to $350 billion per year in health care spending. (3)(4) The CBO has not fully explored the savings from a single payer system, but estimates based on the cost structure, medical loss ratios and administrative efficiencies of other single payer markets lead to large savings assumptions. These arise mainly from the elimination of profit margins and executive salaries priced into private insurer premiums, greater efficiency in claims processing, greater negotiating power with health care providers and pharmaceutical companies, lower administrative costs, and an expanded risk pool to dilute losses.

 

Let’s hope we don’t have to go through the whole health care song-and-dance a second time. But it would be a sort of poetic justice if the conservative Court led directly to the conservative boogeyman of a single payer National Health Care system.

Sources and Notes:

(1) OECD Health Data. November 2009.
(2) OECD Health Data. November 2009.
(3) Schoen, Davis, Guterman and Stremikis, “Fork in the Road: Alternative Paths to a High Performance US Health System”, The Commonwealth Fund, June 2009.
(4) “PNHP – Single Payer National Health Insurance”, Physicians for a National Health Program, 2008.

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Discussion

One Response to “Supreme Irony”

  1. Fernando: Although I am in favor of Obama’s attempt to extend the reach of health care, as a lawyer I always thought that the individual mandate was constitutionally flawed. Therefore for once I find myself agreeing with the conservatives on the Court on that point. You make a good analysis of the likely outcome, and I agree that the Court will probably uphold part of the law. I don’t share your hope that we will get a single payer system soon, however. Our only hope for a Canadian type of system would be to turn out an overwhelmingly Democratic and progressive Congress, which I am afraid will not happen.

    Posted by Thomas Pauly | April 11, 2012, 17:51

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