The Opening for a Fresh ObamaCare Challenge

David Rivkin and Lee Casey @ WSJ:

ObamaCare is being implemented, having been upheld as constitutional by the Supreme Court in June in a series of cases now known as National Federation of Independent Business v. HHS. It is becoming increasingly clear, however, that the court took a law that was flawed but potentially workable and transformed it into one that is almost certainly unworkable. More important, the justices also may have created new and fatal constitutional problems.

ObamaCare, or the Affordable Care Act, was conceived as a complex statutory scheme designed to provide Americans with near-universal health-care coverage and to effectively federalize the nation’s health-care system. The law’s core provision was an individual health-insurance purchase mandate, adopted by Congress as a “regulation” of interstate commerce. The provision required most Americans to buy federally determined minimum health-care insurance, or to pay a penalty more or less equivalent to the cost of that coverage.

Equally important were provisions requiring creation of state-run health-care insurance exchanges (where middle-income earners could obtain the prescribed coverage) and an expanded Medicaid program (also administered by the states) to cover people with incomes up to 133% (later upped to 138%) of the federal poverty level. An income of up to $31,809 for a family of four would qualify for Medicaid. States that failed to join in the Medicaid expansion were threatened with the loss of all federal Medicaid dollars, nearly a quarter of all state expenditures.

In the ObamaCare ruling, the Supreme Court correctly held that Congress could not impose the individual mandate as a constitutional regulation of interstate commerce and that Congress could not constitutionally use its spending power to coerce the states to expand Medicaid. Rather than strike down the law, however, the court construed the insurance-purchase mandate and its penalty as a “tax” on the failure to have health insurance. The justices also interpreted the Medicaid-expansion requirements as optional—permitting states to opt out of these provisions while staying within the traditional Medicaid program. Given that interpretation, the court’s majority upheld the statute as constitutional.

The court’s determination to preserve ObamaCare through “interpretation” has exacerbated the law’s original flaws to the point that it has become palpably unworkable. By transforming the penalties for failing to comply with the law’s requirements into a “tax,” the court has given the public a green light to ignore ObamaCare’s requirements when it is economically beneficial. Law-abiding individuals, who might otherwise have complied with the law’s expensive purchase mandate to avoid being subjected to financial penalties, can simply now choose to pay a tax and not sign up for coverage. There is certainly no stigma attached to simply paying a tax, and noncompliance with the law’s other requirements—such as those imposed on employers—is arguably made more attractive on the same basis. This effect fundamentally undercuts Congress’s original purpose, which was to expand health-care coverage to the greatest number of people, not to improve federal revenues.

Similarly, having reviewed the likely costs and benefits, states are now taking advantage of the court-granted flexibility. Seven states, including Texas, Mississippi and Georgia, have so far opted out of the Medicaid-expansion provisions, and eight (with more certain to come) are refusing to create the insurance exchanges, leaving this to a federal bureaucracy unequipped to handle these new administrative burdens. As a result, a growing number of low-income Americans will be unable to obtain the free or cost-effective insurance that Congress originally meant them to have, although they remain subject to the mandate-tax.

Policy problems aside, by transforming the mandate into a tax to avoid one set of constitutional problems (Congress having exceeded its constitutionally enumerated powers), the court has created another problem. If the mandate is an indirect tax, as the Supreme Court held, then the Constitution’s “Uniformity Clause” (Article I, Section 8, Clause 1) requires the tax to “be uniform throughout the United States.” The Framers adopted this provision so that a group of dominant states could not shift the federal tax burden to the others. It was yet another constitutional device that was simultaneously designed to protect federalism and safeguard individual liberty.

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