Looking at Obamacare

Since its enactment in 2010, the Patient Protection and Affordable Care Act (aka ObamaCare) has been the subject of repeated efforts at repeal and of a number of serious legal challenges, the most recent being the case of King v. Burwell. The Act is enormously complex, and it’s legal and political history even more so, but we will attempt to simplify it as much as possible without going to the point of reductio ad absurdum. First of all, it should be noted that there is a very clear and parallel history between the efforts to establish universal health care in Massachusetts, and the efforts to do so nationally.

The Massachusetts Experience

In April of 1988 Michael Dukakis, then already a presidential candidate, signed a bill, a first in the nation effort to deal comprehensively with universal health care. The Commonwealth’s was not the first attempt; back in 1974, Hawaii had enacted the “Prepaid Health Care Act.” But Chapter 23 of the Acts of 1988 was the most comprehensive effort at health care reform. I know, because I was there.

I’d like to say that I was a player.
But I wasn’t a player.
I wasn’t even remotely a player.
But I was in the room.

And that room was #212 at the Massachusetts State House, the office of the Senate Ways & Means Committee, then chaired by Senator Patricia McGovern. This is where the bill was negotiated. I was a staff attorney to the Committee, and as a staff attorney I had a hand in drafting some portions of the bill. I honestly don’t remember which ones. But what I do remember is the number of people who were part of the negotiations. These included:

  • big business
  • small business
  • medium-sized business
  • the insurance industry
  • the trial lawyers
  • acute care hospitals (or what we generally call hospitals)
  • long term care facilities (or what we generally call nursing homes)
  • doctors
  • nurses
  • psychologists
  • psychiatrists
  • emergency medical technicians
  • alternative health practitioners, including chiropractors, homeopaths and naturopaths, among others
  • lots of other groups that I’ve long since forgotten.

All of them wanted something out of the bill. Some of them got something and some of them didn’t.

The centerpiece of the legislation was a requirement, to be phased in over several years, that all companies employing six or more people had to provide health insurance for those employees. Companies that did not comply would have to pay annually about $1,680 per employee into a state-administered insurance fund, from which uninsured people would have been able to buy insurance on a sliding scale. In addition, the legislation precipitated a financial crisis in Massachusetts — in part because Dukakis did not want to raise revenues during a Presidential election run — which in turn precipitated a financial crisis in 1989, which in turn precipitated the enactment of a 5% sales tax on the services of lawyers, accountants, and other professionals to help finance the plan.

Dukakis wasn’t elected President, thanks to Willie Horton, Lee Atwater, and Dukakis‘ own incompetence. Bill Weld was elected Governor in 1990, and the sales tax on services was repealed, along with most of the rest of the Health Security Act.

The enactment of RomneyCare

Sixteen years later, Massachusetts had another Governor (and future presidential candidate) in Mitt Romney. And another crack at universal health care legislation. In what eventually became known as “RomneyCare,” the Massachusetts General Court passed legislation originally proposed by Governor Romney, Chapter 58 of the Acts of 2006, entitled An Act Providing Access to Affordable, Quality, Accountable Health Care. The centerpiece of this legislation is what is now known as the “individual mandate.”

The individual mandate, as is by now well-established, was a creature of the Heritage Foundation and the conservative response to the Clinton Health Care initiative (see below). And, ironically, also partially a response to the Emergency Medical Treatment and Active Labor Act, signed by Ronald Reagan in 1986. That act required any hospital participating in Medicare to provide emergency care to anyone who needs it, including illegal immigrants, regardless of ability to pay. One of the unintended consequences of the Act was that a lot of poor people — not having a primary physician — would end up in hospital emergency rooms for their routine medical care. In fact, in Massachusetts, we had the descriptively named “Free Care/Bad Debt” pool to which all hospitals had to contribute, in order to defray the costs of urban hospitals such as Boston Medical Center or Lowell General Hospital, which ended up with the lion’s share of these cases. (The Free Care/Bad Debt Pool was eventually renamed to the much more bureaucratic sounding “Uncompensated Care Pool.”)

Under RomneyCare, the Individual Mandate applies to every person who files a tax return in the Commonwealth of Massachusetts. If you file a tax return here, you have to prove that you have health care coverage. If you fail to prove that you have coverage, there is a tax penalty equal to 50% of an available premium cost for each month the individual was not adequately covered. In order to make it more possible for people who ordinarily cannot afford it to be able to purchase health insurance, the act created an agency known as the Commonwealth Health Connector Authority, which subsidizes health insurance premiums to a certain extent.

The insurance industry was in support of the 2006 bill for a particular reason: because the individual mandate forces healthy and young people — the very populations that ordinarily do not purchase health insurance — to become part of the health insurance market. It’s the premiums from the young and the healthy that provide the ballast for the old and the infirm, and allow the economics of health insurance to work.

The Federal Experience

The federal government experiments with universal health insurance parallel those of the Commonwealth of Massachusetts in unusual ways. Bill Clinton was, of course, elected President in 1992, succeeding George H.W. Bush, who had defeated Dukakis in 1988. In 1993, Clinton famously proposed his own universal health bill, named the Health Security Act (just like the bill that Dukakis had signed in Massachusetts), and put his wife in charge of fashioning it. Those of you who weren’t around then don’t remember the brouhaha this caused. To have the First Lady — normally in charge of things like advocating for literacy or fitness, or the mentally impaired — to take on something as enormous as universal health care, was completely unprecedented. (Hilary has, of course, since proven to be a heavy weight in her own right, as a mega-policy wonk, the Senator from New York, and the first Secretary of State in the Obama administration. And she may well end up as President.)

To say that the Clinton Health Initiative suffered the same ignoble fate as the Dukakis Health Security Act would be putting it kindly. The Dukakis Act was at least signed into law. Like the Spruce Goose, the gigantic Howard Hughes-built plane that never really got off the ground, the Clinton Health Initiative also never became airborne. A large reason for that was the implacable opposition of the health insurance industry, which famously ran the very effective “Harry and Louise” ads, a $20 million year-long television advertising campaign funded by the Health Insurance Association of America.

The Patient Protection and Affordable Care Act

Seventeen years later, in his second year in office — after having spent his first year dealing with the residue of the 2008 financial crisis that he inherited from George W. Bush — newly minted President Barack Obama managed to do what no President before him had managed, not even the über-talented Bill Clinton: he managed to get a universal health care bill enacted. Using the short window in time in which he had small majorities in both houses of the United State Congress, and without any Republican votes whatsoever, Obama and the Democratic Congress passed the Patient Protection and Affordable Care Act (“ObamaCare”). To say that the Affordable Care Act is a complicated piece of legislation, would be an enormous understatement. It’s beyond the scope of this article to try to detail it here. Besides, that’s what Wikipedia is for. But we can pull out some broad themes:

  • Like RomneyCare before it, the centerpiece of the Obama plan is also an “individual mandate” which works much like the mandate in the Romney plan. The individual mandate is what brought the support of the insurance industry, which allowed the plan to be enacted.
  • The Act prohibits insurers from denying coverage to consumers seeking to purchase or switch their health insurance based on pre-existing conditions.
  • It establishes certain minimum standards for health insurance plans, including a ban on the ability to drop policyholders if they become sick and a ban on price discrimination on the basis of pre-existing conditions or gender.
  • It allows young people to stay on their parent’s health insurance plan until they turn age 26.
  • It requires businesses that employ 50 or more people but do not offer health insurance to their full-time employees to pay a tax penalty if the government has subsidized a full-time employee’s healthcare through tax deductions or other means (the “employer mandate”).
  • It expands Medicaid eligibility to include individuals and families with incomes up to 133% of the federal poverty level, and it reforms Medicare by restructuring reimbursements from fee-for-service to bundled payments. (For those of you who don’t remember, Medicaid is the medical insurance for poor people, while Medicare is the medical insurance people for retired people or those otherwise eligible for Social Security.)

So, those are the broad outlines. It’s complicated legislation, and it has spawned a complicated response. Personally, I have mixed feelings about the act and the individual mandate, but I also recognize that this is probably the best that we were going to be able to do. It’s not like there was any possibility that a single-payer bill was going to pass. And some of you may remember that Ted Kennedy stated that the “biggest regret” of his political (not personal) life was not negotiating with Richard Nixon when the possibility of a universal health bill first presented itself back in 1971.

But the Republican response to the Affordable Care Act has very little to do with its merits and almost everything to do with its author. They are incensed that it was this President, this Democratic, mixed-race President who was able to succeed where none had succeeded before him. As a consequence they’ve tried to repeal the Affordable Care Act something like 54 times. Some of that is obviously just political: as long as Obama is in office, he has the veto pen to thwart any repeal of his signature law. But the Republicans have been extremely successful in spreading all kinds of disinformation about the Affordable Care Act, disinformation which helped them to win back the Senate in 2014. (The lopsided retirement of Democratic Senators also helped in that effort.)

During the 2012 Presidential election campaign, former Massachusetts Governor Mitt Romney essentially threw his own health care plan “under the bus.” Romney claimed that the first thing he would do if elected President would be to repeal ObamaCare, notwithstanding that the core of it is modeled completely on his legisation. In order to get from here to there, he tried to distinguish things like the size of his bill (72 pages) compared to Obamacare (over 1000) and claimed that the difference was a matter of state’s rights. The solution that fits for Massachusetts doesn’t fit for the country as a whole.

Now, there’s no question that the way federal legislation is drafted is often not helpful. The federal statutory writers love to use paragraphing and subparagraphing in such a way that sometimes, when reading a federal statute, it’s impossible to tell where in the statute you are. That critique is not reserved to ObamaCare however. It’s a problem for the entirety of the federal code. And ObamaCare certainly does a lot more than RomneyCare did, although RomneyCare’s provisions are at its core.

But more to the point, Romney’s “state’s rights” argument is like arguing that every state should have its own version of social security. Why? Has social security not worked as a national solution? On the contrary, I would argue that it would be chaotic to have separate and differently-administed social security systems in every state. The same thing is true for universal health.

Both Factcheck and Politifact have done a nice job of cataloging all the myths about the Affordable Care Act that have been perpetrated by the Republicans. These include:

  • That the Act rations care, like systems in Canada and Great Britain.
  • That the Act is a “job killer.”
  • That the Act includes “death panels” who will decide on care for the elderly.
  • That the IRS is going to be in charge of a huge national database on health care for individual Americans.
  • That Congress is exempt from the Act.
  • That people who have a doctor they’ve been seeing for years won’t be able to keep going to that same doctor.
  • That the health care law is a “government takeover” of health care.
  • That non-US citizens, illegal or not, will be provided with free health care services.
  • That the Act is the largest tax increase in the history of the world.

Some of the charge has gone out of the debate, and a number of Americans are starting to accept the Act as reasonable as some of the provisions have kicked in. Things like being able to keep your kids on insurance until age 25 and not being denied insurance because of pre-existing conditions are already popular. And the law is working. Slowly. And with a number of stumbles and missteps, like the disastrous initial roll-out of the plan. Still, many more people who were uninsured before are now receiving insurance.

Legal Challenges to the Act

If the political challenges to the Act are receding a little bit, the legal challenges are not. Right from the beginning there were a number of challenges to the law in the federal courts, several of which eventually made their way to the Supreme Court. These are:

1. National Federation of Independent Business v. Sebelius

This case, decided in 2012, represented a challenge to the question of whether or not Congress was empowered to enact the individual mandate. Without getting too technical — if that’s possible — the question revolved around whether the mandate was a legitimate exercise of Congressional power under the Commerce Clause. Their was a secondary question that had to with Medicaid expansion (see below).

So, let’s back up for a moment, and observe the following: the way the United States Constitution is structured, the federal government has only those powers that are explicitly assigned to it; the remaining powers are assigned to the states. For this reason there was never a constitutional question about whether the Commonwealth of Massachusetts could impose the individual mandate. It could. But the federal government has to have a “trigger” to impose its powers, and for many of the things the federal government does, it’s the Commerce Clause. Article I, Section 8, Clause 3 of the Constitution establishes that Congress has the power to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” This simple clause, establishing the power to regulate interstate commerce, authorized Congress to enact the legislation that became the “New Deal” under Franklin Roosevelt — although, to be fair, not before the President threatened to pack an expanded court after it had initially thwarted some of his legislation.

One thing that has not been an issue for a long time is the Congressional power to tax. That was established initially in the Constitution, and then abetted by the Sixteenth Amendment, which gave the Congress the authority to levy a national income tax. But for political reasons, the Obama administration did not want the individual mandate to be characterized as a tax; that would feed into the Republican position that the Act included a huge tax increase. The Obama administration took the position that, like the New Deal, the individual mandate was an exercise of its commerce clause powers.

The court’s decision, published on June 28, 2012, was authored by Chief Justice John Roberts. Which was a bit of a surprise. But Roberts was the deciding vote in finding that the individual mandate passed constitutional muster, although not on the theory that the Obama administration was hoping for.

Now, we’re about to take a short but necessary excursion into the details of the Court’s opinion. This is the part of this article where your eyes may glaze over — if they haven’t already — but it’s included for those policy wonks among you who actually care about the detail. In any case, here goes: initially, Chief Justice Roberts concluded that the individual mandate is not a valid exercise of Congress’s power under the Commerce Clause because that clause is intended to regulate “existing” commercial activity, and the requirements of the individual mandate instead compels taxpayers to “become active in commerce” by purchasing a product. He continues by observing that construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would “open a new and potentially vast domain to congressional authority.” Congress already possesses expansive power to regulate what people do; upholding the Affordable Care Act under the Commerce Clause would give Congress the same license to regulate what people do not do. Instead, Roberts concluded that the individual mandate must be construed as imposing a tax on those who do not have health insurance. And the Congressional power to levy taxes, has already been well established.

In addition, the opinion also dealt with a challenge to the requirements of Medicaid expansion that were included in the Act. (Medicaid is one of those “carrot on a stick” programs under which the federal government ways to the states, you don’t have to have a Medicaid program in your state, but if you choose to have one, it has to meet the requirements that we’ve set up for you. And, we’ll give you a boatload of money. Few states can pass up that kind of incentive, where the federal government often provides half or more of the funding.) Under the Affordable Care Act, states were required to provide Medicaid coverage by 2014 to adults with incomes up to 133% of the federal poverty level, whereas many States now cover adults with children only if their income is considerably lower, and do not cover childless adults at all.

The court decided that Medicaid expansion violated the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion. While the “Spending Clause” empowers Congress to establish cooperative state-federal programs, their legitimacy depends on whether a State voluntarily and knowingly accepted the terms of such a program. But the State decision to participate has to be voluntary. Here, where the threatened loss of all Medicaid funding — which in many states amounts to over 10% of a State’s overall budget — leaves the States with no real option but to acquiesce in the Medicaid expansion. The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible because Congress reserved the “right to alter, amend, or repeal any provision” of Medicaid. The court disagreed, noting that the expansion accomplishes a “shift in kind,” not merely a matter of degree. The original program was designed to cover medical services for particular categories of vulnerable individuals. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133% of the poverty level.

In the end, the Obama administration both won and lost. Politically, Obama lost, and some of that was reflected in the 2014 mid-term elections. But legally, he won. The individual mandate remained intact. And yeah, he lost on Medicaid expansion, but really, who even remembers that?

2. King v. Burwell.

The second major challenge to the Affordable Care Act is a case known as King v. Burwell. This case essentially was the result of a drafting error where, in a particular section of the bill, the text referred only to a state exchange instead of a federal exchange, leading to the claim that the federal tax credits were only to be available in those states that had created their own exchanges. This is a tortured reading of the act as a whole, but in this environment, where enemies of ObamaCare are plentiful and relentless, it led to a federal lawsuit by opponents of the act.

This drafting error would have been easily resolvable — and similar drafting errors have been resolved hundreds of times before in the federal Congress — if the Republicans were not so hell bent on destroying ObamaCare. With majorities in both the federal House of Representatives and the federal Senate, their cooperation would have been absolutely necessary to fix a single sentence. But in the current political environment, there really is no hope for that.

In any case, the King v. Burwell decision was published on June 25, 2015, and you can read it here. This decision, like the Sebelius decision before it, was authored by Chief Justice Roberts.

As the Supreme Court’s own syllabus explains, the Patient Protection and Affordable Care Act grew out of a “long history of failed health insurance reform.” The court writes that in the 1990s, several States sought to expand access to coverage by imposing a pair of insurance market regulations — a “guaranteed issue” requirement, which barred insurers from denying coverage to any person because of their health, and a “community rating” requirement, which barred insurers from charging a person higher premiums for the same reason. The reforms achieved the goal of expanding access to coverage, but they also encouraged people to wait until they got sick to buy insurance, resulting in an economic “death spiral” where premiums rose, the number of people buying insurance declined, and several insurers left the market entirely. Massachusetts solved these problems with its 2006 enactment of RomneyCare, by requiring individuals to buy insurance and providing tax credits to certain individuals to make insurance more affordable. The Affordable Care Act adopts a version of the three key reforms that made the Massachusetts system successful: the guaranteed issue and community rating requirements, the requirement of individuals to maintain health insurance coverage or make a payment to the IRS (unless the cost of buying insurance would exceed 8% of that individual’s income), and tax credits to individuals with household incomes between 100% and 400% of the federal poverty line.

In addition to those three reforms, the Act requires the creation of an “exchange” in each State — basically, a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own exchange, but provides that the federal government will establish an exchange if the State does not do it. Furthermore, the Act provides that tax credits “shall be allowed” for any “applicable taxpayer,” but only if the taxpayer has enrolled in an insurance plan through “an exchange established by the State.” An IRS regulation interprets that language as making tax credits available regardless of whether the exchange is established and operated by a or by the federal government.

Petitioners were four individuals who live in Virginia, which has a federal exchange. They do not wish to purchase health insurance. In their view, Virginia’s exchange does not qualify as “an exchange established by the state” so they should not receive any tax credits. That would make the cost of buying insurance more than 8% of petitioners’ income, exempting them from the Act’s coverage requirement. Petitioners challenged the interpretation of the IRS that it doesn’t matter whether the exchange is state or federally-created, and that the tax penalty kicks in regardless.

In its holding, the court notes that the tax credits are one of the Act’s key reforms and whether they are available on Federal exchanges is a question of deep “economic and political significance.” If the statutory language is plain, the Court must enforce it according to its terms; but the court must also read the words “in their context and with a view to their place in the overall statutory scheme.” The court conceded that the Affordable Care Act contains “more than a few examples of inartful drafting,” the court noted that the structure of the act requires that all three legs of the stool — the guaranteed issue and community rating requirements, the individual mandate and the tax credits — are required to make the act work, and that this is clear from the structure of the act as a whole. The court concludes that the tax credits are necessary for the federal exchanges to function like their state exchange counterparts, and to avoid the type of “calamitous result” that Congress “plainly meant to avoid.”

In Conclusion

The Affordable Care Act has now beaten back two judicial challenges to its legitimacy at the Supreme Court. My guess is that there are a number of Republican legislators who are secretly relieved. Because, aside from the over-heated rhetoric, if they had succeeded in euthanizing the Affordable Care Act, they would have had a major problem: what to replace it with? Conservatives have already shot off their wad, so to speak, by coming up with the idea of the individual mandate. They have nothing in reserve. The only solution they have left is to return to the magic of the marketplace, and we already know how that would work out: millions of Americans uninsured, getting their basic health care in hospital emergency rooms, filing for personal bankruptcy as a result of massive health care bills they cannot afford.

Trust me, there are a number of Republicans breathing a big sigh of relief right now.

But we, the voters of America, should not let them off the hook for their hypocrisy. The Republican party has been drinking their own Kool Aid for far too long. It’s not working out well. Personally, I would love to see the Republicans return to the reasonably responsible fiscal conservatism and social liberalism of John Lindsay, Frank Sargent or Bill Weld. Those are guys who, even if you disagreed with them — and I did — at least you could respect. Not so much with the gang we currently have in Congress. Or running for President of the United States.

5 Responses to Looking at Obamacare

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