Tag Archives: Senate Judiciary Committee

Five Factors That Could Interfere with Graham-Cassidy’s State Health Care Waivers

Some conservative writers—including others who write for this publication—have opined that the legislation written by Sens. Lindsay Graham (R-SC) and Bill Cassidy (R-LA) offers states the ability to innovate and reform their health care systems. Most conservatives, including this one, consider state flexibility an admirable goal.

Certainly reforming Medicaid—through a block grant or per capita cap, coupled with additional flexibility to allow states to manage their programs more freely—would go a long way towards improving care, and reducing health care costs.

But does Graham-Cassidy as written deliver on its promise regarding Obamacare insurance regulations? On the two critical questions surrounding the legislation—will it lower insurance premiums, and will it generate a system that works for states?—a textual analysis of the bill yields significant doubts. At least five issues could hinder the results its sponsors have promised, and which all conservatives hope for.

1. Subsidizing Moral Hazard

The language on the top of page 15 explicitly links waivers to funding from the new system of block grants the bill creates. Any waiver will only apply to 1) coverage provided by an insurer receiving block grant funding and 2) coverage “provided to an individual who is receiving a direct benefit (including reduced premium costs or reduced out-of-pocket costs)” under the block grant.

This requirement that each and every person subjected to a non-Obamacare-compliant plan must receive a “direct benefit” subsidized by federal taxpayers has several potential perverse consequences. By definition, it encourages moral hazard. Because individuals will know that if they are subjected to health underwriting, or an otherwise noncompliant plan, they must receive federal subsidies, it will encourage them not to buy health insurance until they need it.

It means that either states will have to extend taxpayer-subsidized benefits to highly affluent individuals (allowing them to buy noncompliant plans), or have to permit only low- and middle-income families to buy noncompliant plans (to restrict the subsidies to low-income families). Both scenarios seem politically problematic to the point of being untenable.

If states try to provide a de minimis direct benefit—say, a $1 monthly premium subsidy—to some enrollees to minimize the two problems described above, they would face high overhead costs, and a complex system to administer.

When considering the two considerations above—will the bill lower premiums, and will it work?—this provision alone seems destined to preclude either from occurring. The moral hazard could increase premiums, not lower them, driving more healthy people out of the marketplace by telling them they will receive subsidies if and when they become sick and need coverage. The requirement that every person subjected to a waiver must receive subsidized benefits appears potentially destabilizing to insurance markets, while also creating political problems and administrative complexity.

2. Encouraging Lawsuits

The provision on page 12 requiring states applying for waivers to describe “how the state intends to maintain access to adequate and affordable health insurance coverage for individuals with pre-existing conditions” presents two concerns. First, a future Democratic administration could use rulemaking to define “adequate and affordable health insurance coverage” so narrowly—prohibiting co-payments or cost-sharing of more than $5, for instance—that no state could maintain access to “adequate and affordable” coverage, thereby eliminating their ability to apply for and receive a waiver.

Second, courts have ruled that Medicaid waiver applications are subject to judicial review, a standard that would presumably apply to the Graham-Cassidy waivers as well. While a Congressional Research Service report notes that courts have traditionally given deference to the Centers for Medicare and Medicaid Services (CMS) on waiver applications, the Ninth Circuit Court of Appeals in 1994 did in fact strike down a California waiver application that CMS had previously approved.

If a state receives a waiver, it seems highly likely that individuals affected, with the strong encouragement of liberal activists, will seek relief in court, and point to the page 12 language to argue that the court should strike down the waiver for not providing “adequate and affordable coverage” to people with pre-existing conditions. At minimum, the ensuing legal uncertainty could place states’ waiver programs in limbo for months or even years. And only one judge, or one circuit court, that views the pre-existing condition language as applying to more than states’ waiver application could undermine the program.

Congress could theoretically include language in Graham-Cassidy precluding judicial review of administrative decisions regarding waivers, as Democrats did 13 separate times in Obamacare. But on this particular bill, such a provision likely would not pass muster with the “Byrd rule” that applies to budget reconciliation measures.

Specifically, language prohibiting judicial review would have no (or a minimal) budgetary impact, and would represent matter outside the committees with jurisdiction over the reconciliation bill (Senate Judiciary versus Senate Finance and HELP Committees), both points of order that would see the provision stricken absent 60 Senate votes (which the bill does not have) to retain it.

Given the ongoing political controversy surrounding pre-existing conditions, some moderates may view the inclusion of this phrase as critical to their support for the bill. But its inclusion could ultimately undermine the entire waiver process and one of conservatives’ prime goals from the “repeal-and-replace” process, namely relief from Washington-imposed regulatory burdens.

3. Encourages Activist Judges and Bureaucrats

Language on page 13 of the bill includes language limiting any regulatory waiver: “A health insurance issuer may not vary premium rates based on an individual’s sex or membership in a protected class under the Constitution of the United States.” Here again, a future Democratic administration, or activist judges, could easily take an expansive view of “protected class” to include age, family status, gender identity, etc., in ways that undermine the waivers’ supposed regulatory relief.

4. Allows States to Waive Only Some Regulations

While states may waive some Obamacare regulations, they can’t waive others, an internal inconsistency that belies the promise of “flexibility.” For instance, states cannot waive the under-26 mandate if they so choose. Moreover, language on page 15 prohibiting a waiver of “any requirement under a federal statute enacted before January 1, 2009” precludes states from waiving regulations that preceded Obamacare, such as those related to mental health parity.

If the sponsors believe in state flexibility, they should allow states to waive all federal insurance regulations, even ones, such as the under-26 mandate or mental health parity, they may personally support. Or better yet, they should move to repeal the regulations entirely, and let states decide which ones they want to re-enact on the state level.

5. No Funding Equals No Waivers

Because the bill explicitly ties waivers to federal funding, as noted above, the “cliff” whereby block grant funding ends in 2027 effectively ends waiver programs then as well. Such a scenario would put conservative policy-makers in the perverse position of asking Washington to increase federal spending, because any regulatory relief under Obamacare would otherwise cease.

Meaning of Federalism

The potential concerns above demonstrate how Graham-Cassidy may not provide full flexibility to states. Whether through cumbersome administrative requirements, a future Democratic administration, court rulings, or key omissions, states could find that as written, the bill’s promise of flexibility might turn into a mirage.

Given that, it’s worth remembering the true definition of federalism in the first place. Federalism should not represent states getting permission from Washington to take certain actions (and only certain actions). It should represent the people delegating some authority to the federal government, and some to the states. A bill that looked to do that—to remove the Obamacare regulatory apparatus entirely, and allow states to decide whether and what portions of the law they wish to reimpose—would help to restore the principles of federalism, and a true balance between Washington and the states.

This post was originally published at The Federalist.

Elena Kagan and the Individual Mandate

Solicitor General Kagan responded to a series of questions posed by Sen. Sessions and all Judiciary Committee Republicans yesterday, writing a letter in which she states that she did not have a role in formulating the Administration’s response to the lawsuits challenging the health care law.  On a related note, the New York Times has an editorial this morning on the Kagan nomination that criticizes Republicans for raising the issue of the individual mandate, and the seemingly infinite power granted to Congress under the commerce clause should it be found constitutional, during her confirmation hearings.  The editorial alleged Republicans are making “a huge ideological fuss” about the issue, evidenced by the fact that Sen. Coburn raised the “seemingly silly hypothetical” about Congress’ constitutional ability to order individuals to eat three fruits and three vegetables a day. (Video of that exchange can be found here.)

However, the real point of the exchange was that such an “eat your vegetables” law, while silly, would NOT be a hypothetical if the Supreme Court asserts that not buying health insurance constitutes economic activity – thereby granting Congress the power to force individuals to perform all sorts of “seemingly silly” tasks so long as they have some form of economic impact.  Congress has never required individuals affirmatively to purchase a good or product, and requiring all individuals to purchase health insurance on the grounds that NOT doing so constitutes “economic activity” raises legitimate questions about the other ways in which Congress can intrude on individuals’ lives.  Even noted liberals like Jonathan Turley have acknowledged that challenges to the individual mandate “should not be dismissed as baseless political maneuvering,” due to the expansive authority such a mandate, if deemed constitutional, would grant to the federal government.

It’s also worth pointing out – as this space has done previously, and the Times’ own Robert Pear noted over the weekend – that the Administration has now decided to invoke the taxation power as one way to justify the individual mandate, contradicting the President’s own strenuous assertions last September “absolutely reject[ing]” that the individual mandate represents a new tax on the middle class.  The fact that even liberals have acknowledged the expansive powers lurking behind the individual mandate, and that the Obama Administration felt compelled to engage in a significant flip-flop over whether the mandate is a tax to defend its legitimacy, suggests that this issue should not be treated as glibly as the Times would believe – and that there are legitimate questions surrounding both the lawsuits and Republican questions of Ms. Kagan regarding her involvement in them.

An Individual Mandate — To Eat Your Vegetables???

During their questioning of Elena Kagan yesterday afternoon, Sens. Cornyn and Coburn both touched on the Commerce Clause issues surrounding the individual health insurance mandate and the limits (or lack thereof) on federal power.  In response to Sen. Cornyn’s questioning about the scope of the Commerce Clause, Ms. Kagan said that “the current state of the law is to grant broad deference to Congress in this area, to assume that Congress knows what’s necessary in terms of the regulation of the country’s economy, but to have some limits.”  However, the limits she went on to describe were centered around “activity…not itself economic in nature.”  Left unstated in this exchange was whether NOT buying health insurance constitutes economic activity, as the health care law, and the Justice Department’s defense of it, assert.

Dr. Coburn followed up on this point, asking whether Congress could pass a law forcing individuals to eat three fruits and three vegetables every day.  Ms. Kagan replied that such a measure would be a “dumb law,” but did not answer as to whether or not the Constitution gives Congress power to create and enforce such a mandate.  In fact, she implied that Congress MAY have such a power, noting that “We can come up with, sort of, you know, just ridiculous sounding laws, and the – and the – and the principal protector against bad laws is the political branches themselves.”

Dr. Coburn went on, pointing out Ms. Kagan that a finding that “eating three fruits and three vegetables a day would cut health care costs 20 percent, now – now we’re into commerce.  And since the government pays 65 percent of all the health care costs, why – why isn’t that constitutional?”  Once again, Ms. Kagan declined to say a law would be unconstitutional, and instead asserted that “deference should be provided to Congress with respect to matters affecting interstate commerce.”

It’s worth asking: If Ms. Kagan is unwilling to admit that Congress cannot regulate the diet of all Americans, is there any area where she believes the federal government CANNOT invoke the Commerce Clause to intrude upon every facet of Americans’ daily lives?

Elena Kagan and the Individual Mandate

As the questioning of Elena Kagan gets underway this morning in the Senate Judiciary Committee, many commentators have focused on the constitutionality of the individual mandate in the health care law – a critical policy issue in its own right, and also a window into Ms. Kagan’s views on the limits (or lack thereof) of federal power.  A Wall Street Journal editorial yesterday pointed out that if Ms. Kagan believes individuals can be forced to buy health insurance – and a specific type of “government-approved” health insurance at that – there is little the federal government cannot compel individuals to do.  George Will made a similar point in his Sunday column, when he raised some hypothetical questions for Ms. Kagan that could logically follow from an individual mandate to purchase health insurance:

– If Congress decides that interstate commerce is substantially affected by the costs of obesity, may Congress require obese people to purchase participation in programs such as Weight Watchers? If not, why not?

– The government having decided that Chrysler’s survival is an urgent national necessity, could it decide that “Cash for Clunkers” is too indirect a subsidy and instead mandate that people buy Chrysler products?

– If Congress concludes that ignorance has a substantial impact on interstate commerce, can it constitutionally require students to do three hours of homework nightly? If not, why not?

– Can you name a human endeavor that Congress cannot regulate on the pretense that the endeavor affects interstate commerce? If courts reflexively defer to that congressional pretense, in what sense do we have limited government?

Conversely, a Politico op-ed this morning claims that if the Court strikes down the individual mandate, future courts could use that decision to invalidate existing civil rights legislation or other acts of Congress.  However, this claim is simply not convincing.  The civil rights laws all involve entering into commerce –businesses that choose to enter into commerce must comply with the laws and may not discriminate by refusing to serve certain customers.  Conversely, the individual mandate claims the federal government’s authority to force individuals into commerce to begin with.   In short, the individual mandate is a claim for unprecedented federal power – which the non-partisan Congressional Research Service acknowledged by stating the individual mandate raises a “novel issue whether Congress may use the [commerce] clause to require an individual to purchase a good or service.”  Because the individual mandate presents a “novel” case, the Court could strike it down without disturbing any of the precedents on which the civil rights and other previous federal laws rest.