Texas Fold'em Goes to SCOTUS

So, the idiotic, asinine and otherwise absurd GOP-brought, Trump-supported lawsuit to strike down the Patient Protection & Affordable Care Act finally had its (presumably final) day in court today...the United States Supreme Court, that is.

Here's my live-tweeting of the proceedings. I missed the first ten minutes of it and didn't tweet out everything, but this captures most of the Q&A.

Defending the ACA were California Solicitor General Michael Mongan and Donald Verrilli, who is the former U.S. Solicitor General, and who was working on behalf of the House Democrats, I believe. For the plaintiffs, you had the Texas Solicitor General, Kyle Hawkins and Acting U.S. Solicitor General Jeffrey Wall (note the "acting" descriptor...Trump has tons of unconfirmed appointees...)

Remember, there are three main questions for the SCOTUS to consider about the lawsuit:

  • First, do the plaintiffs even have any standing to bring the case? That is, how have they actually been harmed by the ACA's individual mandate penalty being changed from $695 to $0?
  • Second, assuming they can prove standing, does the case itself have any merit? That is, did changing the penalty from $695 to $0 somehow make the ACA no longer Constitutional?
  • Third, assuming they can prove the second claim, is the mandate itself severable? That is, why not simply strike down the mandate language and leave the rest of the ACA intact?

As law professor & ACA expert Nicholas Bagley has repeatedly pointed out, the plaintiffs are extremely weak on all three of the above counts. The case should have never made it past the first judge in Texas who heard the case almost two years ago...and yet somehow, here we are.

The good news is that for the most part the oral arguments seemed to go pretty well for the defense and pretty badly for the plaintiffs. Not only did the three liberals on the court seem to dismiss the case as being pretty stupid, even several of the six conservatives grilled the plaintiffs pretty hard as to why they're even wasting their time. It wasn't much of a surprise that Chief Justice Roberts, who has saved the ACA's bacon twice before (in 2012 with the NFIB v. Sebelious case and in 2015 with King v. Burwell) didn't sound too thrilled with them, but even Trump appointees like Kavanaugh and Gorsuch didn't sound too convinced.

Kavanaugh, in particular, stated point-blank a couple of times that the mandate should indeed be fully severable from the rest of the law. Neil Gorsuch agreed with Sonia Sotomayor that if they granted standing to the plaintiffs in this case (the individuals, not the state AGs), it would open up a massive floodgate wherein anyone who didn't like some tiny aspect of a major omnibus bill would have "standing" to sue over it. Even

One of the major points brought up by the defense was one I've made many times: The plaintiffs whole case rests on the idea that because the Obama Administration insisted the mandate penalty was "critical" to the ACA working back in 2010-2012, therefore it must still be "critical" today...except that the situation has changed dramatically since 2012.

At the time, the ACA was a Scary New World. The insurance carriers had no way of knowing how many people would actually sign up for the exchange policies and wanted some assurance that they wouldn't be left holding the bag if it went south, so they insisted that there be some sort of "stick" to go along with the "carrot" of financial subsidies. If there hadn't been a mandate penalty included, most of the carriers would never have participated in the first place, guaranteeing a failed law.

By 2017, however (when the GOP Congress zeroed out the penalty), it was a whole different situation. The ACA markets had been roiled and there'd been a lot of ugliness along the way, but they had mostly stabilized. Killing the penalty at that point did cause some damage in the form of causing 2019 premiums to increase by a good $580 per year per enrollee...but that was much less than the CBO had projected and even then, most ACA exchange enrollees are subsidized anyway. Both of these factors greatly mitigated the damage, and the ACA continued to chug along.

In other words, the GOP may have chopped off the one of the 3 legs of the stool...but the leg was immediately replaced with the World's Most Expensive Shim® in the form of over $5 billion/year in additional federal subsidies to cancel out the premium increases for subsidized enrollees.

UPDATE: I completely forgot this: Even die-hard conservative Justice Sam Alito, who hates the ACA and has ruled against it twice before, made a similar point during the proceedings, saying:

At the time of the first case, there was strong reason to believe that the individual mandate was like a part in an airplane that was  essential to keep the plane flying so that if that part was taken out, the plane would crash. But now the part has been taken out and the plane has not crashed.

The plaintiffs also kept insisting that a tax of $0 doesn't count as a tax--that is, if a tax doesn't generate any revenue, it isn't a tax, which is ludicrous on the face of it.

If I file my taxes and it turns out that my refund is exactly the same as the amount I owe, I still have to file my return to the IRS. For that matter, as was pointed out by several of the Justices, there are any number of federal or state taxes which don't generate revenue some years. Any time there's a "gas tax holiday", that doesn't magically make the gas tax disappear. In fact, the ACA itself has had several taxes which never generated any revenue because they kept being delayed, like the infamous Cadillac Tax on high-end employer policies which was eventually repealed altogether.

The general consensus among most of the healthcare/legal wonks I'm familiar with is that the odds of the ACA being struck down by the Supreme Court next spring are pretty slim. HOWEVER..."pretty slim" isn't the same thing as "no chance at all", and a lot of extremely unlikely things have happened over the past few years, to put it mildly.

In addition:

Cautious reminder that you can't always read what SCOTUS will do based on oral arguments.

— julie rovner (@jrovner) November 10, 2020

Over at the Huffington Post, Jonathan Cohn has a pretty good take:

A challenge to the Affordable Care Act got a relatively hostile reaction at a virtual Supreme Court hearing on Tuesday, offering hope for the millions of people who depend upon the law for their health care.

In oral arguments, both Chief Justice John Roberts and Associate Justice Brett Kavanaugh expressed skepticism about a key argument in the lawsuit ― specifically, that if one part of the Obamacare law is unconstitutional, then the entire law has to come off the books.

...“It does seem fairly clear that the proper remedy would be to sever the mandate provision and leave the rest of the act in place,” Kavanaugh said to Kyle Hawkins, the Texas solicitor general arguing to strike the law down.

Questions from the justices don’t always indicate how they will later vote, in part because justices sometimes change their minds.

But legal analysts from across the political spectrum thought the statements were hints at how Roberts and Kavanaugh would likely vote. And that could save the remainder of the Affordable Care Act, given that the three Democratic appointees on the bench are also expected to vote to uphold the rest of the law, even if the mandate itself comes off the books.

If this proves accurate, the odds are that either the case would be thrown out entirely or, at most, the mandate itself would be stricken out without touching the rest of the ACA, which would amount to the same thing in practice.

Personally, while I'd prefer to see the penalty reset to its original amount or even higher (but only after killing the subsidy cliff and beefing up the subsidy formula first), I could live with them simply cutting out the mandate itself and leaving the rest. This would have virtually no impact on the law other than preventing Congress from raising the penalty back up again...which I guarantee they would never do anyway (beyond possibly bumping it up to a nominal $1 for the sole purpose of rendering the entire lawsuit moot).

Several states have since imposed their own state-level mandate penalty instead, I should note: California, New Jersey, Rhode Island and the District of Columbia have all mirrored the ACA's original $695/2.5% of income penalty, and Massachusetts simply dusted off their own mandate penalty (which uses a different formula). Combined, that's around 15% of the U.S. population which still has an individual mandate on record without any legal problems.

Again, though, there's no way of knowing what will transpire between now and next April - June, which is the timeframe in which the SCOTUS is expected to issue their ruling...and there's still a chance that at least five of the nine SCOTUS Justices will indeed strike down the entire law, which would be catastrophic in multiple ways.