The Supreme Court Decision: It hurts to be wrong — but it hurts more to be right and still wrong!

Now that we have all heard the decision by the Supreme Court on the Patient Protection and Affordable Care Act (Obamacare), perhaps it is time for some reflection.  I know as I read the decision Thursday morning, while I was waiting in the queue preparing for a radio interview on the issue, I felt both vindicated in my initial analysis, but also left wanting and inadequate for not seeing the sideways tax justification for its declared constitutionality.

Recap of the Ruling

There were four questions heard by the Supreme Court in this case.

  1. Does the Anti-Injunction Act bar the hearing of the suit by the court?
  2. Is the federal expansion of Medicaid at the state level a valid exercise of Congress’s spending power?
  3. Was the Insurance Mandate constitutional
    • under the commerce clause, or,
    • under the necessary and proper clause, or,
    • as an exercise of congressional taxing power?
  4. Was the mandate issue sever-able from the rest of the law?

Anti-Injunction Act

The majority found that the Anti-Injunction Act did not bar the Supreme Court from hearing the suit. The ruling is interesting because the Anti-injunction act is a law that prohibits courts from restraining the assessment and collection of a tax until someone has been assessed or paid the tax.  The majority found that the Anti-Injunction Act did not apply because, “…Congress did not intend the payment to be treated as a ‘tax’…”  This is interesting because, while the court held that congress’s intention was that this was not a tax for the benefit of this specific ruling, they later upheld the mandate provision under the decision that it is a constitutional tax. Like most, I felt that the court would uphold their authority to hear this suit, and I still feel, that while lower courts should be enjoined from preemptively disrupting the collection of taxes that the Supreme Court should itself be allowed this authority; as it is was the intention of the founders that the courts (judiciary) be a co-equal authority.  As such, it would be a serious diminution of their balancing authority should the Supreme Court not be able to establish the constitutionality of a rule of law on an equal and as timely basis as the branch that can create the law (congress) or the branch that implements the law (president).

The Medicaid issue

The majority ruled that the forced federal Medicaid expansion violates the constitution in that it threatens the states with the loss of existing Medicaid funds if they decline to comply with the expansion.  In a narrow ruling, the court held in effect that the Act can request States to expand their programs, but cannot withhold funding if the States choose not to comply. Opinions on this issue prior to the ruling were fairly split.  I felt that that the forced expansion was a violation of the separation of powers principal and as such I did not think it should be upheld. However, while I did not think it should be upheld pragmatically, I felt the court might rule politically and would uphold this clause to mollify the effect of the elimination of the mandate.

The Mandate Issue

Like many, I felt that the application of the commerce clause—long the prime instrument of federal intrusion into states’ rights and personal liberties—would be found to not be applicable in the case of the mandate and therefore the mandate would be deemed to be unconstitutional under this provision. The decision by the court was that the mandate was unconstitutional under the powers granted by the commerce clause.

Like almost everyone else, I largely ignored the second half of the question regarding the mandate, as posed by the states when they filed their request to the Supreme Court, because it was repeatedly stated by the federal government, the President, and congress during the creation of the law that this was not a tax, nor was it to be construed as a tax.  In fact, during the oral arguments there was little time and argument as to this question, and while there was discussion as to the power of congress to levy taxes and penalties, there was little review or argument presented as to whether or not if this was deemed a tax was the method of assessment, as enacted in the current law legal under the tax code. This issue, largely ignored, proved to be the lynchpin for the majority ruling. The majority ruled that, “… the individual mandate must be construed as imposing a tax on those who do not have health insurance…” The majority opinion adds, “… if such a construction is reasonable.”

Sever-ability Issue

Due to the courts finding on the constitutional authority of the mandate as a tax, I can find no majority ruling or opinion explicit in the syllabus on this issue.  But the effect of the ruling is that the lower court’s ruling, that the mandate is severable, is upheld. The minority opinion does address the issue as inseverable as expected.   Like most, I felt that the majority of the court would hold that it was in fact severable.  My argument was that given the scope of the other decisions that I felt the majority of the justices would render, they would find that it was not the intention of congress to hinge the standing of the law on this one clause.  I also felt, this was the most likely point for a political outcome.

Were the rulings correct?

The answer to this question, like everything else with this law, depends entirely on your point of view.  It also may depend on how one reads the Roberts’ opinion on the tax issue.  The issues of the Anti-Injunction Act and Severability, for most Americans, seem to be more “inside baseball” than something they feel has much effect on their day to day lives.  And most Americans are correct in this case. The decisions in this area are neither surprising nor do they have a real effect.  Like them or not, I think they are correct and from my perspective they conform to good practice and effective jurisprudence, leaning more to the prudence part of the term.

The Medicaid issue is a stickier one.  Medicaid was a schizophrenic statute from its inception.  Is it a state program or is it a federal program?  This Administration clearly wants it both ways.  When the federal government wants to obscure the costs of the program it is a state program, and when they want to be seen as giving something to the people for free it is a federal program.  If you read any of the materials from the last ten years of meetings of the state governors of the United States, you see that the majority of governors feel this is a federal program, and for the past few years an increasing number are trying to figure how they can opt out of this program and hand it back to the federal government.

For many governors, Medicaid is breaking their budgets and bankrupting their states.  Lately, the federal government has become an increasingly unreliable partner, and a demanding panderer placing the liability and the burden of their federal largess more and more on the backs of the state legislatures to cover the programs increasing costs.

One thing clear in this part of the Supreme Court ruling is that the court is putting on the brakes to the increasing amount of control that the feds have tried to assert over the states portion of this expensive law.  This may give rise to more clarity at the state level on how some may opt out of the federal Medicare system.  If nothing else it opens the door for the states to show more determination as to what their part of Medicare provides and may offer some new avenues for states to adjust programs to lower costs.

Now for the big one, the insurance mandate. As stated before, most, if not all of America was shocked by this ruling. There has already been as much hate and discontent expressed over the ruling as there was during Obamacare’s creation. But a sober and cogent thorough review of the ruling shows that despite how one feels about the initial, and apparent, outcome it is likely correct.  Let us take the decision in its three parts.

  1. The ruling related to the constitutionality of the insurance mandate under the commerce clause is definitively correct.  In fact this ruling is strategically a huge victory for conservatives.  Along with both United States v. Lopez and United States v. Morrison, this ruling continues to unwind the damage done by the Wickard v. Filburn ruling in 1942—perhaps the worst Supreme Court decision of all time relative to state and individual liberties. This ruling continues the courts restrictions on the use of the commerce clause by the federal government to justify any usurpation of states or individual rights by the federal government and may offer yet more avenues for future cases to further unwind Wickard’s negative effects on individual liberties and states’ rights. Overall, this is a big win for conservatives regardless of how the Affordable Care Act’s insurance mandate turned out.
  2. The ruling on the mandate under the Necessary and Proper Clause of the Constitution also was correctly found.  The majority found that the mandate could not be supported as constitutional under the Necessary and Proper Clause because, in the words of the court, “Even if the individual mandate is “necessary” to the Affordable Care Act’s other reforms, such an expansion of federal power is not a “proper” means for making those reforms effective.”
  3. Finally, to one of the more apparently controversial rulings of our lifetimes the majority of the court, and Chief Justice Roberts, found that Congress does have the constitutional prerogative to levy and collect taxes.  In Chief Justice Roberts’ words, “…the individual mandate must be construed as imposing a tax on those who do not have health insurance, if such a construction is reasonable.” Further in the majority ruling he finds that as a result of the ruling in Hopper v. California, that “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality,” therefore the court must consider that this is effectively a tax.  Further the majority opinion reviews in part whether or not the assessed penalty is a legal tax and asserts that it is.  It is important to note that there was scant argument on the tax issue before the court in this case, and none as to whether or not the mechanism as described in the Act is a legal tax.

This will likely be a key area for analysis as like the mandate argument, which held strong influence, that congress could not regulate a non-action, I can find no example where a tax is levied on a non-action.  Taxes are levied on purchases or earning.  I can’t find an example, nor can I think of one, where a tax is levied on a non-purchase or non-earning. If this tenant is held valid then it could be a worse ruling that Wickard in expanding federal ability to take from one group to grant to another.

Regardless of how any of us feel about the Affordable Care Act, or Obamacare, the court ruled correctly.  Related to the commerce clause argument—and the Necessary and Proper Clause issue, individual liberties and states’ rights were further returned to the people and likely have laid another stone to unwind Wickard.

As to the rulings of the Anti-Injunction Act, while we can complain that on the one hand they argue it is not a tax to find the justification to make the ruling and on the other hand rule it is a tax to uphold the mandate, ascribing a personal goal as the reason for this incongruity is not valid.  Courts are driven by precedent and in this case followed such to make this seemingly incongruous argument.  Still, it is a valid decision.

Related to the Severability argument, it is a toss-up and mostly a gut call.  Clearly congress specifically chose to not insert a severability clause into the Act and by this action they showed intent that if one section fell it should all fall.  On the other hand, it would be a very broad and potentially damaging call for the court to have struck the entire law on a technical argument when the effect could have wide reaching and potentially negative ramifications across a large section of the population.  One cannot cry judicial activism on one side and forgive on another simply based on ideological beliefs.  As such, I think the court made a balanced call. It should be up to congress to deal with the remainder, not the court.

Is the mandate a tax?

On the tax issue, we now have a hard choice to make.  On its face, it is easy to find the ruling either good or bad, again based on ideology.  But there is less specificity in the language of this ruling than one would initially suspect.  In the majority opinion where they decide that the mandate must be construed as a tax, Chief Justice Roberts includes the phrase, “if such a construction is reasonable.”  Reading the detail of the opinion, the issue of whether or not the mandate, and its underlying mechanism, is a legal tax is an issue not thoroughly adjudicated.  If one listens to the oral arguments on the issue as presented to the court, or reads the transcripts, you will find that the discussion of the mandate as a tax was in most respect cursory, and nowhere was the actual mechanism of its assessment and collection adjudicated.  Therefore, it may be a reasonable point of investigation for those still seeking to attack the mandate to pursue a ruling in this area.

Is the anger towards Chief Justice Roberts justified?

The vitriol, and in some cases hatred, now being expressed towards Chief Justice Roberts, is just as wrong and off-putting as that which has been expressed towards the President in this matter since the whole debate over healthcare divided further an already divided nation.  Regardless of how any of us may feel over the outcome of the decision, I find the invectives now so casually cast at Chief Justice Roberts both offensive and incorrect.  I realize that most of us are not disposed to read the decision and prefer to rely on the press for instruction on what we should think about the matter.  While this is understandable, it is also sad.  And it illustrates that one should not cast stones at someone else based on second hand knowledge or opinion.

I can find nothing in Chief Justice Roberts’s opinion that does not illustrate careful and pragmatic deliberation of each and every issue.  Just because the rest of us, lawyers and non-lawyers alike, chose to ignore the depth of the tax question legally posed, if perhaps incompletely adjudicated, does not mean that Chief Roberts erred in its consideration.  In fact, I think the nuanced wording of his opinion shows that he carefully regarded this issue and perhaps, faced with upholding his duty as the nation’s chief, and impartial jurist, crafted a response that could illuminate the path for additional legal challenge.  But, since I am a mere citizen not a lawyer, I may be completely wrong.

In the end, I neither feel the anger towards Chief Justice John Roberts is neither justified nor do I think it reflects well on us as a people, republican or democrat.

What will be the effects of the rulings?

On the Affordable Care Act

The effect of the rulings on the Affordable Care Act, are to keep the current law in place and largely intact and eliminating one large roadblock to its implementation.

On the election

The effect on the upcoming election will be to energize the bases of both sides for sure, but in these cases there will be no change in the alignment of those voters.  The effect on the middle of the electorate, roughly 40% of the population, is where this ruling will have some effect.

While some pundits say this is a wash, I am not so fast to make this determination.  Looking at polls of the individual parts of the legislation many of the benefits enumerated in the Act find majority approval, this is to be expected anytime the government give you something you perceive as apparently free.  But when the polls look at the mandate and the overall act, they show that the majority, about 60% in both cases, felt the mandate should be overturned and the act itself needed to be modified.

It is possible that there will be a shift in this middle 40% toward the republican candidate because of their position on the act and the mandate.  If the middle is the most objective and uniform segment in the population then the 60% leaning would apply most evenly here and as such there should be a shift in the conservative direction of about 6 to 7%.  In the next few polls we may see this trend away from the president develop as a result of the ruling.  It will be interesting to see if this theory is correct.

On Healthcare in America

The effect on improving healthcare in America, as I said in my last article, Obamacare Supreme Court Ruling Likely Tomorrow: What will it mean to me? will be nothing.  The current bill, despite some populist provisions, does little to actually address the issues wrong with our healthcare system. As such, upholding, or overturning this act accomplishes not much towards our goal of achieving an effective, efficient, and economic health care system.  This is not something the government can “give” us.  It is something we have to develop and provide for ourselves.  You would think this current debacle would be teaching us the lessons we need to learn to realize this, but alas we continue on our self-absorbed ostrich odyssey racing headlong toward national collapse, bankruptcy and Romanesque oblivion.

How do we proceed?

We need to put the partisanship behind us, and drop both additional constitutional challenge of the law and its implementation.  No one believes we have a good law, and none believe it will provide effective, efficient, and affordable care.  We are only pursuing this so vigorously because the battle lines were drawn and now we are all on a side.

We should suspend the implementation of this law and empanel a national health care congress composed of representatives from every segment of the health care supply chain, from raw material and refinement, development and discovery, devices and pharmaceuticals, practice and implementation, distribution and facilities, providers (doctors, nurses, pharmacists, therapists, sociologists, every level of professional), sponsors, private insurers, corporate self-insurers, patients and facilitators, faith-based, non-governmental and governmental organizations, volunteer, philanthropic, non-profit and for-profit, and last but not least patients. They should be selected from within the health care industry by industry segment, demographic, geographic region.  They should be empaneled for a year and beginning with and entirely clean slate devoid of allegiance to any ideology, practice or regulation.  And, at the end of the year, their goal should be to have described a new, integrated and reorganized healthcare supply chain system, providing both choice and an effective safety net for the helpless, with adequate controls to limit fraud, duplication of services, and double dipping.  The system should ensure full coordination of care and benefits across all available sources and provide for a central point of administration across all needs, sources and uses. Finally the Health Care Congress should re-examine, reassign, and re-prioritize the roles of all professional providers to assure that the most efficient and cost effective solution can be provided across all needs.

Only if we take such an approach will we ever actually solve our health care issues.  Our current non-system is too engrained in our laws, our society and our mythical belief systems to ever be wrested from the self-pandering political and social process we have developed for our own gains.

(Tom Loker served as the Chief Operating Officer of Ramsell Holding Corporation. Prior to joining Ramsell, Mr. Loker was the founder and senior partner of Wild Tiger Holding Company and Thomas Loker Consulting. Visit his website at www.loker.com and his blog at tloker.wordpress.com.)