Bill of Health Interview with Einer Elhauge on Health Care Reform

As you have already heard a few times on this blog, Professor Einer Elhauge, the Petrie-Flom Center’s Founding Faculty Director and Petrie Professor of Law at Harvard Law School, has a new book out on health care reform called Obamacare on Trial.  The book collects various essays that Prof. Elhauge published in popular media outlets, along with several postscripts, and it has received all sorts of glowing praise.

Prof. Elhauge has graciously agreed to answer some questions for us in the first ever Bill of Health e-interview.  Check it out:

Bill of Health: So, first things first, did the Supreme Court get it right in NFIB v. Sebelius?

Prof. Elhauge: The Supreme Court got the tax issue right, and I think the Medicaid expansion as well, but I think the Supreme Court got the commerce clause issue totally wrong.  Worse, the way they got it wrong portends trouble for the future.

Bill of Health: What were you most surprised by in the SCOTUS decision?

Prof. Elhauge: The fact that a majority of the Supreme Court was willing to use a methodology that clearly expanded judicial discretion to overrule the political branches, and that no one really ever called them on it either on the Supreme Court or in the briefing.

Bill of Health: You’ve noted that you didn’t originally take the constitutional challenges to the Affordable Care Act seriously.  Why do you think they were able to gain such traction?

Prof. Elhauge: I think the big problem was that the government never directly rebutted either the claim that purchase mandates were unprecedented or the dreaded broccoli hypothetical.  Instead they tried to evade the question, I guess because they thought it was unfavorable to them, but the iron rule of litigation is that if you don’t discuss your problematic issues, then you leave your opponents to be the only one that discusses them, and they are sure to frame them in the way most unfavorable to you. The government’s unwillingness to engage this issue left the Supreme Court with the entirely false impression that Obamacare fundamentally changed the relationship between the individual and government, and that thus the government faced a heavy burden to justify the health insurance mandate.  I think the government should’ve directly argued that in fact federal purchase mandates were not at all unprecedented, but rather that health insurance mandates went all the way back to the framers, who adopted two health insurance mandates in the 1790s in Congresses that had many framers on them.  The government should’ve also pointed out that the argument that courts can, in the name of “limiting principles”, create brand-new restrictions on congressional power that have no basis in the Constitution in order to restrain the possibility that Congress might exercise a power in a silly way, like adopting a broccoli mandate, amounts to a remarkable usurpation of political power by the judicial branches.  One could equally say that because Congress might pass silly laws like a law prohibiting the purchase of broccoli, the federal courts should impose a new constitutional limit that prevents Congress from ever restricting commerce. Or because Congress might tax 100% of our income to buy broccoli or go to war to get more broccoli, the Supreme Court should invalidate Congress’s power to tax or declare war.  The “limiting principles” argument that was employed here ironically has no limiting principle and looks benign but is actually a wolf in sheep’s clothing.

Bill of Health: In your book, you’ve included several of your essays pointing out that the Constitutional framers themselves had approved purchase mandates, including mandates to buy firearms and health insurance.  Do you think this historical point is the strongest argument in favor of the ACA’s constitutionality?  Isn’t requiring seamen to buy insurance different from requiring that everyone purchase insurance?  And why do you think these examples weren’t raised before the Court?

Prof. Elhauge: I think the stronger point is actually that nothing in the text, legislative history, or legal precedent supported a ban on federal purchase mandates, and the challenger argument that one can infer a constitutional ban from the fact that something is unprecedented in practice amounts to adding an anti-innovation clause to the Constitution, even though such an anti-innovation clause itself has no basis the Constitution. However, because the challenger’s entire case rested on the claim that they could infer a constitutional ban on federal purchase mandates from the premise that they were in practice unprecedented, I thought the fact that congresses with many framers on them in fact had in practice imposed health insurance mandates was the point most devastating to how the challengers framed their entire case. I don’t think requiring seamen to buy health insurance is different from requiring people with significant taxable income to buy health insurance, which is what Obamacare does. In both cases, Congress provided that those who were engaged in one form of commerce could be mandated to buy health insurance, even though the form of commerce they were engaged in had nothing to do with healthcare or health insurance.

I’m not sure why the government didn’t raise these arguments. There are many possibilities. (1) One possibility is that they thought they were better off ducking the issues rather than directly confronting them. If so, I think that is just poor litigation strategy. (2) Another possibility is that political constraints prevented them from pursuing their best litigation strategy.  (3) Maybe they just didn’t see the point that because the Obamacare mandate imposes no penalties on those who do not buy health insurance unless they have significant taxable income, that the Obamacare mandate was in fact conditioned on engaging in commerce, which makes all these precedents analogous.  (4) Maybe they never saw the analytical flaw with the broccoli argument, or at least never figured out a way to powerfully reframe that argument as a matter of judicial usurpation of political power.  (5) Or maybe they shared the mistaken view, which Justice Scalia has stated since the opinion, that the early seamen health insurance statutes reflected Congress’s special maritime power.  The problem with that claim is that it is both non-textual and ahistorical.   It is non-textual because the Constitutional list of congressional powers nowhere includes a maritime power.  It is ahistorical because for the first hundred years the courts held that what gave Congress the power to regulate maritime activities was the commerce clause.  What happened was that 100 years later courts held that because the Constitution does have a clause that gives judges the power to adjudicate maritime cases, then Congress should have the power to regulate maritime law under the necessary and proper clause.  But not only was that ahistorical in assessing the 1790s precedent on seamen health insurance, but it rests on the sort of expansive use of the necessary and proper clause that the majority itself rejected in the Obamacare case.

Bill of Health: Why do you think the arguments on the ACA’s constitutionality focused so much on the commerce power instead of the tax power? Could this really all have been avoided if the penalty for failing to satisfy the individual mandate had been referred to as a tax?  And do you agree that the penalty can be a tax for some purposes (i.e., constitutionality) but not others (the Anti-Injunction Act)?

Prof. Elhauge: I think they did so because that is one natural way to read the statute, and it would have avoided the issue of addressing various limitations on the taxing power. Yes, the challengers themselves conceded that if Congress had used the language of taxes and tax credits, then Congress could have functionally imposed precisely the same obligation to pay for health insurance with precisely the same monetary penalty for failing to do so. That is another reason why I think this case was never about a fundamental change in the relationship between the individual and government: the challenger argument really amounted to the claim that Obamacare just used the wrong words, which obviously does not prevent the same power from being exercised if Congress uses the right words.

Yes, although it sounds counterintuitive, I do think something can be a tax for some purposes but not others. On the issue of constitutional power, the legal precedent is quite clear that whether something is a tax or not turns on function, not labels. This doctrine exists for a very good reason. If determinations of power turned on mere labels, then Congress could exercise a power it lacks simply by calling something a tax when it isn’t, or could escape the constitutional limits on the taxing power by calling something a nontax when it is one.  In contrast, on the issue of the Anti-Injunction Act, that is a statute under which the only question is whether Congress intended to prevent injunctions.  Because the issue turns on Congress’s intent, it makes perfect sense to focus on the labels that Congress itself uses, because those labels signal whether Congress wanted to trigger this anti-injunction act or not. Because the scope of Congress’s  taxing power, on the other hand, does not turn on Congress’s intent, its labels should be ignored on that issue.

Bill of Health: With this outcome from SCOTUS, can Congress make us all buy broccoli now?

Prof. Elhauge: Yes, it just has to call it a broccoli tax.  Indeed that is the irony with the opinion — no matter how it came out, Congress would have the power to make us all buy broccoli because the challenger argument in the end simply attacked the language, not the functional reality.

Bill of Health: How about a few words on the Medicaid expansion component of the ACA.  How did this constitutional issue fly mostly under the radar, save from some prescient commentary by our own Glenn Cohen and a few others?  Were you surprised by the Court’s conclusion, and the breakdown of the Justices?

Prof. Elhauge: No, I think the Medicaid expansion decision was correct, and actually nicely tracks my own theory of contract duress and limits on midstream contract renegotiation, which my contracts students may recall.  I hope to write an article about this soon.

Bill of Health: How do you think this case has impacted Americans’ and legal academics’ views of the Supreme Court?

Prof. Elhauge: I think it has made both regard the Supreme Court as more political than they had thought previously.

Bill of Health: Was this outcome really a victory for President Obama, or do you think it might have solidified political opposition from those who stand against the individual mandate or other aspects of the law?

Prof. Elhauge: I think the outcome was a clear victory for President Obama, but the fact that the Supreme Court’s reasoning made the continuation of Obamacare a near-death experience continues to fuel an opposition that is partly based on the notion that Obamacare is at least constitutionally suspect and thus illegitimate even though technically legal.  This false sense of illegitimacy may continue to stoke opposition by the House Republicans, who can undermine Obamacare by denying appropriations necessary to implement it, which is one reason that I think is still worth addressing.

Bill of Health: Mitt Romney has suggested on several occasions that Obamacare is different from Romneycare in Massachusetts primarily because this is a matter that should be left to the states.  Do you think it all really boils down to a question of federalism?

Prof. Elhauge: No, I don’t.  For one thing, Mitt Romney himself back then said the federal government should follow the Massachusetts model.  I also think the real political impetus was based on libertarian ideology rather than federalism principles.  Another issue that never got addressed in the briefing was that a federalism basis for a constitutional ban on Congress adopting a health insurance mandate cannot be squared with other well-established Supreme Court precedent, which clearly allows Congress to prohibit states from imposing health insurance mandates.  This other precedent holds that federal ERISA law preempts any state law that requires certain insurance coverage if a firm is self-insured, which means states cannot mandate employer-provided health coverage.  The combination of this precedent with any holding striking down the Obamacare mandate would have meant that the Court was interpreting the Constitution to mean that Congress cannot impose an insurance mandate but can prohibit the states from imposing insurance mandates.  It would have been impossible to square that combination with any consistent federalism view of deferring to states.  It could only be squared with a liberty claim of disfavoring mandates, a claim that cannot be found in the Constitution.

Bill of Health:  Why did you oppose the mandate on policy grounds back in 2008?  What do you think of it today, constitutionality aside?  And what do you favor as the best approach to health care reform?

Prof. Elhauge: I did oppose the mandate in 2008, as did President Obama himself when he was campaigning against Hillary Clinton.  I think think there are three problems with the mandate as a matter of policy.  (1) Although the government is certainly right that maintaining an insurance pool requires inducing healthy people to buy insurance before they get sick, there are two ways to accomplish this goal: carrots and sticks, that is, subsidies or mandates.  Subsidies would be fairer because they come from general tax revenue, which is not perfect but at least tries to base obligations to pay taxes somewhat on the ability to pay them.  Mandates on the other hand are more regressive, and in this context disproportionately tax the young who have less income and less need for health insurance. (2) Mandates are much more politically unpopular than subsidies, which has proved to be the case here, and almost sunk Obamacare entirely and nearly ended the presidency.  (3) Before mandating or subsidizing the purchase of something, I think the government should have done more to make it efficient, and the fact is that our current healthcare system is quite inefficient.

On the other hand, I recognize that I as an academic have the luxury of being able to advocate whatever policy I think is best, whereas a President has to choose the option that he thinks is best out of the politically feasible set. It may well be that funding subsidies from tax revenue or imposing more serious cost containment were both political nonstarters, and thus never part of the available set of options. I also see various possibilities for exercising the regulatory powers under Obamacare to restructure healthcare in a way that may dramatically increase quality and decrease prices, as I will be writing about in an article soon. If those powers are exercised, then serious cost containment may occur.

Bill of Health: And finally, how about some conjecture.  Now that President Obama has won the election, are the states that were banking on not having to implement the Act going to be able to comply – and what if they don’t?  What sort of additional litigation might we expect, if any?  When will this whole matter ultimately be settled?

Prof. Elhauge: I think the states will ultimately comply because otherwise the federal government will impose an insurance exchange on them.  I think the states also will all ultimately accept the Medicaid expansion, because the federal government is funding 90% to 100% of the cost, so it is too sweet a deal to pass up.  Though it may take some states 5 to 10 years to finally fall into line.

I can anticipate at least three types of litigation.  (1) Because Obamacare was sustained only under the taxing power, an origination clause challenge has already been filed, alleging that Obamacare was a revenue provision that had to originate in the House but did not properly do so because the Senate replaced the entire House bill, which was about a different tax issue, with the Obamacare bill.  I don’t think this is likely to go anywhere because the origination clause does provide that the Senate can amend House revenue bills, and the courts have not really constrained that amendment power.  Indeed, striking down Obamacare on these grounds would also require striking down the Reagan tax cuts, which were enacted using precisely the same sort of procedure, and I do not think the Supreme Court would want to create the massive uncertainty entailed by doing that and throwing into doubt all the other tax provisions that have been enacted in the same way.  (2) There is this technical argument that if a state does not adopt an exchange, the federal government cannot provide tax credits in that state, but I think that technical argument actually conflicts with the statutory text, as well as making no functional sense, so I expect it to be defeated.  (3) If the House Republicans continue to be strongly opposed to Obamacare, we may see them deny appropriations necessary to implement it, which I think would provoke a round of litigation about the extent to which one house of Congress can effectively repeal a statute by failing to appropriate money to implement it, even when it lacks the support in the other house and presidency to enact an actual repeal.

Bill of Health:  Thanks so much for taking the time to e-talk with us.  Readers, make sure to check out Prof. Elhauge’s book, as well as his recent panel discussion on health care reform.  

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