Politics & Policy

The New and Even Worse Obamacare

The Court’s rewriting of the law strengthens the case for repealing it.

The political case for repealing Obamacare, which has always been the most significant and relevant case, is stronger than ever after today’s decision. Left alone, the law will spend well over a trillion dollars in the coming decade on yet another health-care entitlement program and on the expansion of existing entitlements, micromanage the insurance industry in ways likely to make it even less efficient, employ even heavier price controls of the sort that have always failed in Medicare, and raise half a trillion dollars in taxes on employment, investment, and medical research. And now we know that its tax bill will be even higher than we thought, and that its reduction of the uninsured even smaller. Today’s decision just means that President Obama must now embrace this monstrosity even tighter, and that the case for replacing him has grown even clearer and more powerful.

The great legal scholars at NRO and elsewhere will surely be offering their sharp analyses of the Court’s decision in the coming hours and days, and I very much look forward to learning from them. Until then, a few thoughts about the Court’s arguments from this amateur observer, and a few (perhaps slightly more informed) thoughts about the health-care implications.

Reading the opinion of the Chief Justice, it is hard to avoid the conclusion that he was working very hard to find arguments that might enable him to walk a precarious tightrope, and that at the end of the day he just had to pretend those arguments existed. In the months leading up to this decision, many of us thought the Court faced a choice between throwing out a major act of legislation and throwing out any limits on the Commerce Clause. My sense from this opinion is that Roberts desperately sought a way to do neither: He wanted to avoid striking down the law (and four of his colleagues evidently concluded that the whole law would have to go if the mandate did), but he wanted to avoid extending even further the meaning of the Commerce Clause.

#ad#This is a thoroughly understandable desire. He pursued it in the end by treating the individual mandate as a tax. The Court’s opinion thus accepts more or less in their entirety the arguments of the conservative legal scholars who said that the Commerce Clause could not be read to permit Congress to regulate inactivity or to compel commercial activity, and rejects more or less in their entirety the frantic, shallow tantrums of countless liberal legal types who insisted that such an objection was tantamount to lunacy. In its effects on our understanding of the Commerce Clause alone, this decision does much of what conservatives hoped it might. But it then treats the mandate as a tax and so concludes that the law can stand with just that alteration in our understanding of its meaning.

The Chief’s argument for this interpretation seems to me exceedingly weak, and the critique of this argument offered up by the dissenting justices is devastating. But Roberts seemed to be after what might be considered a minimalist (or restrained) ruling in terms of both its constitutional implications and its practical ones — he wanted to leave the law alone but reject its champions’ limitless interpretation of the Commerce Clause. He did that at the expense of a coherent case for the Court’s ruling. His desire is not hard to understand, though his actual legal reasoning is.

And the nature of the action he has taken, as a matter of the Court’s disposition toward laws brought before it in disputes, is strikingly micro-managerial. Roberts has rewritten the law in several crucial respects rather than rule it unconstitutional. It’s not clear how his own theory of the Court’s role (even as articulated in this opinion) justifies doing this, but it seems his concern for the Court’s standing justified it in his eyes. This rewriting of the law — the fact that Obamacare was not simply upheld today — has several significant practical implications.

#page#First, the Court ruled that the individual mandate would have been constitutional if, rather than being crafted as a legal requirement with a penalty for non-compliance, it had been crafted as a tax from which those who were insured were exempted and that, rather than be overturned, the mandate should be treated as though that was indeed how it was crafted. The Chief Justice’s opinion argues that the mandate should now be understood as essentially an optional tax — people have the choice of buying insurance approved by the federal government or paying that tax.

Decades of academic studies of the question of driving insurance coverage with penalties and incentives have found that a mandate crafted this way would have a significantly smaller effect than a mandate that was structured as a legal requirement with a penalty. (The Congressional Budget Office discussed some of that literature in this paper from 2010.) The basic reason appears to be that a lot of compliance with legal requirements is driven by people’s inclination to do what they are required to do by law, quite apart from the cost of breaking the law. When the imperative to buy insurance is instead presented as a choice between two options, more people will be likely to choose the cheaper option (which, for almost everyone, will be paying the tax rather than buying the coverage). If Obamacare is not repealed by 2014, the behavioral economics of insurance decisions suggests, today’s Court opinion sets up the Obamacare system for an insurance death spiral — less expressly than an outright striking of the mandate while leaving the rest of the law intact, of course, but pretty expressly.

#ad#Second, the Medicaid portion of the decision is very important, and (to me) rather surprising. The Court essentially ruled that the Medicaid expansion in Obamacare is optional for the states. Obamacare as originally written would have required states to participate in the huge expansion of the (unreformed, and very badly designed) program, and states that did not participate would have lost all of their federal Medicaid dollars. That expansion accounted for about half of the overall reduction in the uninsured scored by CBO. The Court now says that states choosing not to participate in the expansion must be able to remain in essentially today’s Medicaid program — they would not get the new federal money that Obamacare allocates for the expansion, but they would not lose the funding arrangements they have with Congress now. Here again, the Court simply rewrites a portion of the law to answer a constitutional objection rather than ruling that portion unconstitutional.

Expanding Medicaid coverage could cost the states a great deal of money over time. If Obamacare is not repealed, I think, many states will choose not to expand their Medicaid programs, and as a result far fewer uninsured people will be covered under Obamcare than would have been otherwise. Moreover, in states that do this, a gap will open up between the lowest income level eligible to receive subsidies in the Obamacare exchanges and the highest income level eligible for Medicaid, and it is far from clear what the federal government or the states will do about that.

#page#Combined, these two rather arbitrary acts of revision mean that if the CBO reassesses the law’s effect on the number of Americans without insurance (which it certainly will do) using the same methods it used originally, it is likely to find a much smaller reduction in the uninsured.

The scope of its projected reduction of the uninsured and the (already false at the time) assertion that it did not raise taxes on the middle class were of course essential to the bare and narrow passage of Obamacare. The law as the Supreme Court has rewritten it today would not have passed. It contains all of the many grave flaws that have made Obamacare so unpopular, and fewer of the elements that finally persuaded some wavering Democrats to hold their noses and vote for it.

#ad#The case for repealing the law is thus stronger than ever. And it would be made stronger still if it could be reinforced with a clear set of alternatives offered up by the Republican nominee for president. The shape of such reforms is perfectly clear — Mitt Romney has laid it out in general, and others have done it in far greater detail. It consists of a series of reforms (of our entitlement programs, of the tax treatment of insurance, of the individual-coverage market, and of insurance regulations) that would enable a real market in insurance, and enable all Americans to participate in it. Such a transformation of American health care need not be pursued in one fell swoop, and should not be pursued in one massive piece of legislation. But in this election season, conservative office-seekers and officeholders should make clear to the public that they have in mind a clear, achievable path to a health-care system that works for everyone.

The disaster of Obamacare has created an opportunity for such conservative reformers. It is after all perfectly easy to show that we can do better. And today’s decision only makes it easier to show voters why this law needs to go, and how that could be done. 

There is only one way. “Members of this Court are vested with the authority to interpret the law,” Chief Justice Roberts wrote in today’s opinion. “We possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them.” They can be, and they should be. Now let us see to it that they will be.

Yuval Levin is the Hertog Fellow at the Ethics and Public Policy Center and the editor of National Affairs

Yuval Levin is the director of social, cultural, and constitutional studies at the American Enterprise Institute and the editor of National Affairs.

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