Guest blog by Tom Packer
Well I was wrong. I inclined to the belief that at least a part of Obamacare would be struck down and it was not. As I’ve explained in greater detail before there were two major legal challenges to it. These were the attempt to invalidate the mandate forcing individuals to purchase insurance and a challenge to the expansion of Medicaid the state run programme providing health insurance for the poor on the grounds it ‘coerced’ the state by taking away existing Medicaid funding if they did not expand the programme . Both legal challenges failed. This has understandably dominated consideration of the ruling and in the short term is the most important effect is that Obamacare stands. However there are a number of important provisos to this ‘big picture’ which nuance this effect.
Firstly the law was very nearly struck down. Four of the nine members of the Supreme Court voted to overturn both provisions – unexpectedly Chief Justice Roberts not justice Kennedy was the ‘defector’ from the conservative block. Moreover they also said that the whole law should be struck down as these key provisions were central to the law. There’s even some evidence that the four were very nearly five. The opinion of the four dissenters is filled with language that suggests they were initially the majority. For example they refer to ‘the’ dissent (see p 14 here). This suggests that Roberts may have switched because he didn’t want to strike down the whole law.
Roberts’ majority opinion does reject the notion that the power to regulate commerce gives the federal government the power to do so.. In other words the commerce clause can not regulate inactivity. Here Roberts was supported by the four dissenters but not by the four liberals who signed on to upholding the act. Moreover for the first time a federal-state programme is ruled impermissibly ‘coercive’ of the 50 states. That is because Obamacare uses the threat of losing existing Medicaid federal funding ( about 10% of state budgets) to get the state governments to pass laws expanding Medicaid massively. Since the threat was to 10% of existing state budgets this provides a new minimum for the amount that the federal government can threaten the states with in withdrawn funding if they don’t implement new programmes. I’m rather surprised by this. I’m even more surprised that Roberts was joined in this by six other judges-including liberals Kagan and Breyer.
However the provisions were nonetheless upheld on various grounds. Firstly Roberts said the mandate is a tax and so is legitimate (many of his fellow conservatives including the four dissenters demur for this for various reasons some of which are given by Professor Epstein here). Secondly he stated that the statute can and should be ‘read’ (one is tempted to say changed) to say that only the new Medicaid spending is conditional – i.e. states can keep the current relatively small version of Medicaid if they want they don’t have to expand it.
This has various implications for the law which I think have not got nearly enough attention in the general euphoria/ fury that the statute has been upheld.
Firstly this will probably affect public attitudes. The mandate was already unpopular. Now the Supreme Court has ruled it’s a tax as well. At the very least this can’t help its popularity. Secondly, having the law defined as a tax is also likely to play some role in increasing non compliance – because it suggests (contrary to the wording of the statute) that it’s optional. How many people who don’t smoke in bars because it’s illegal would pay a ‘smoking tax’ instead?
It makes resistance by the states a lot easier. Partly this is because as I said they can now refuse to cooperate with the transformation of Medicaid without losing their existing funding .Moreover the mandate is a federal tax not a federal regulation-so state regulations that seek to frustrate it’s effects won’t necessarily be unconstitutional in the they otherwise will be.
The Medicaid ruling is also likely as Avik Roy has pointed out to cause some states to cut back their existing Medicaid plans. They will now no longer lose their federal funding if they do so and other aspects of the law mean those dropped from the programme can join new federal ones. This is likely to add to the cost pressures on the law.
The ruling could also make attempts to strengthen the law or the federal role in healthcare much harder. The opinion makes a distinction between a tax and a ‘penalty’ which emphasises the existing position that in US Constitutional law a tax can be strong enough to become a penalty for example on p 35-36 where it states ‘It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the “prohibitory” financial punishment in Drexel Furniture.’ (an earlier case overturning a 1920’s tax as a disguised regulatory ban) .
There’s a decent case from a pro mandate perspective the mandate is not strong enough to ‘work’ (ie healthy people will just pay the fine/ tax). This ruling makes it much harder to tighten it or impose similar mandates with fines. Similarly the Medicaid ruling means it will be a lot harder from now on to push the states into pursuing the healthcare policies the federal government wants.
Also of course there are broader implications for the role of the federal government in American life. Chief Justice Roberts has sought to put (or restore) constitutional restrictions on the federal government while upholding Obamacare. So for example could new carbon regulations be implemented if the commerce clause continues to get more and more teeth? Could a state run nursery programme be introduced when new spending can’t be so ‘coercive’ ?
However at the very least it is important to note that while the Supreme Court has upheld Obamacare it has done so in a manner which leaves it significantly wounded.