international analysis and commentary

The meaning of Obamacare

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After hearing oral arguments in an animated three-day session, the US Supreme Court now moves to determine the fate of the Patient Protection and Affordable Care Act – better known as “Obamacare”. The nine justices have already cast preliminary votes, but their final decision will be announced in June. In the meantime, they will be writing opinions that will make judicial history.

It is a watershed moment, one in which a conservative-majority Court is called to rule on the landmark legislative achievement of a Democratic president. Whichever way the justices choose to go – and there are a number of scenarios – the outcome is likely to generate ripples across America’s legal, political and economic sectors.

Before Solicitor General Donald Verrilli and lawyer Paul Clement argued in front of the Court (respectively defending the Affordable Care Act on behalf of the government and representing the 26 state attorneys general that brought the original lawsuit against Obamacare), the consensus was that the justices would uphold the law. But the questioning turned out to be particularly tough on Verilli, highlighting several justices’ skepticism of the reform and suggesting that they might end up striking down at least parts, if not the law in its entirety.

“I never try to predict the justices’ decisions,” says Georgetown Law Professor Randy Barnett. “But I’m one of the lawyers for the National Federation of Independent Businesses (one of the plaintiffs in the lawsuit) and I think the arguments went well for us.” Barnett is a libertarian-leaning scholar and is widely considered the legal mind behind the challenge against the Affordable Care Act.

There is little doubt that the Court is faced with an important choice. “The vast majority of legal experts from across the ideological spectrum, even conservatives, have said that if you apply existing precedents the law is constitutional,” says Marc Steinberg, Deputy Director for Health Policy at Families USA, an organization that supports the Affordable Care Act. “I think particularly Chief Justice John Roberts and Justice Anthony Kennedy (the Court’s swing vote), who care about how the Court is perceived, are really going to think twice before overturning existing precedents and pushing a clearly ideologically motivated case.”

President Barack Obama has said that he is confident the Court will uphold the Affordable Care Act because not doing so would amount to an “unprecedented, extraordinary step” by the justices.

There are various ways in which the Court could rule. It could uphold or strike down the whole law or discriminate between provisions. Justice Ruth Bader Ginsburg described it as choosing between a “wrecking operation and a salvage job.”

The part of the law that is most likely to go is the so-called “individual mandate”, ironically the brainchild of conservative scholars at the Heritage Foundation in the eighties and nineties. It requires that all Americans purchase a health insurance policy or pay a fine. This provision, which President Obama originally opposed, was included in the law in order to compel insurance companies to cover all citizens regardless of their health status, even those who suffer from pre-existing conditions. Without forcing healthy Americans to buy coverage, it was thought that only sick people would flock to the new system, skewing the patient pool and causing premiums to skyrocket.

Many experts believe that the law can still work, even if the mandate is scrapped, although maybe not as smoothly. “The impact of the mandate has been overestimated; it is actually a very weak provision because Congress did not provide enforcement powers,” says Princeton University Professor Paul Starr. “There are a variety of administrative mechanisms that can be used to minimize the adverse effects of losing the mandate.”

According to Steinberg of Families USA, many of the initiatives included in the Affordable Care Act are fully independent of the mandate and can stand without it. For example the planned expansion of Medicaid (the healthcare program for the poor, on which the justices will rule separately), the tax credits to help people afford coverage, and the insurance exchanges (state-regulated insurance markets that must be setup by 2014, in which citizens will be able purchase policies eligible for federal subsidies independently of their employers – as of today the more typical avenue for Americans to get covered).

Secondly, there are other mechanisms to protect even the extension of healthcare access to people with pre-existing conditions, one of the most popular provisions of the current law but the most dependent on the mandate.

The penalty for those who refuse to buy coverage could be turned into a tax (the Constitution already allows Congress to levy federal taxes). The government could then establish tax credits for citizens who do buy insurance, at a level sufficient to offset the initial tax. It is, effectively, just a mirror image of what is now in the Affordable Care Act and whether the current penalty should already be considered a tax is one of the biggest points of contention for the justices to decide on. Alternatively, the federal government could give out tax credits only to Americans who buy insurance early and quickly, penalizing those who wait. One way or another, the trick is to find incentives to motivate healthy people to purchase coverage even if they are no longer mandated to by the government. Finally, nobody can prevent other states from going the way of Massachusetts and imposing individual mandates of their own.

“There are options,” says Steinberg. “Although none of them is as elegant and simple as what’s in the law today.”

Things would be much more complicated for supporters of healthcare reform if the justices decided to do away with the entire Affordable Care Act. “If the Court really were to take such an extreme step, first I think you’d have chaos since so much of the law is already in place,” Steinberg adds. “You’ve got hospitals and doctors that have built relationships, signed contracts and incorporated themselves on the assumption that they are going to be paid a certain way and if you take that away it’s hard to imagine what it would all look like.”

Additionally, the fast-paced growth of healthcare costs, which many experts worry might bankrupt the federal government in coming years, has begun to slow down in the last couple of years. Supporters of the law are convinced that the Affordable Care Act has something to do with this and that overturning it would only help make this particular problem worse.

For MIT Professor Jon Gruber, a renowned economist who specializes in healthcare systems and is the thinker behind both the Massachusetts law and the Affordable Care Act, “there is a future for healthcare reform,” beyond the upcoming Supreme Court ruling. “We will continue to see small changes around the edges,” he says, “but nothing as bold as this law.”

In the meantime, both parties are bracing for the immediate political fallout from the Court’s decision in what is a hotly contested presidential election year.

If the law is upheld, President Obama can claim a huge personal victory while Democrats see their dream of healthcare reform recognized. But such a bruising defeat for the Republicans could push them to come out in droves on November 6th, to elect a president and a Congress that can repeal the Affordable Care Act via legislative means.

On the other hand, if parts or the whole of the law were to be struck down, conservatives would rightfully cheer, but they would simultaneously lose the one issue that has unified them in the last four years and which spurred their sweeping takeover of the House in 2010. At the same time, President Obama and the Democrats, reeling from a truly devastating loss, would perhaps be forced to rally again, united against the judicial activism of the Court and behind renewed calls for a different approach to healthcare reform (not unlike what happened to President Franklin D. Roosevelt and the New Deal in the 1930s). The optimists go as far as saying that, by taking the individual mandate off the table and causing healthcare costs to burgeon again, a negative decision by the Supreme Court could pave the way for a European-style government-run healthcare system in America.

Although there is a silver lining for everyone, the stakes are clear. In a lawsuit brought by Republican attorneys general against a sitting Democratic president, whoever manages to convince the Supreme Court of the validity of their argument for or against the Affordable Care Act will come out gloating, and suddenly gifted with new political capital to spend for the remainder of the 2012 election season.