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Very Rough Transcript: UC Berkeley July 2, 2012 SCOTUS ACA Decision Panel

Corrections from anybody listening to the panel most welcome...

John Ellwood: Welcome everybody, welcome to our session on the Supreme Court ruling on the Affordable Care Act, or if you don’t like that "ObamaCare"…

Brad DeLong: RomneyCare!

John Ellwood: We are fair and balanced here at Berkeley.

Last and first, this session is sponsored by the Goldman School of Public Policy, which is footing the bill, and I thank my gracious dean; by the Robert Wood Johnson Post-Doctoral Program in Healthcare; and by the Berkeley Law School at Boalt Hall, which has kindly given us this room.

Last Thursday, obviously, the Supreme Court released its opinion on the Affordable Care Act. In my view, the decision represents another step in the what I would call the 100-year struggle between those I see on the left to provide as close to universal access to healthcare as possible, to control the costs of healthcare, and to improve the quality of healthcare. The purpose of today’s event is to begin a conversation about the case, and to continue the conversation on these issues: access, cost, and quality.

To me, the case is fascinating because it involves everything--it certainly involves major issues of constitutional law, which we’ll get to; it involves major issues in the economics of healthcare, and the incentives thereof; it involves major issues in the implementation of the complex law that is trying to change a major part of America, over 15% of the economy; and it is all about politics. I’m a political scientist by training--so the last, obviously, is where you start: it is a political event.

We put together a panel of experts who could speak on each of these points and issues. Our goal today is to begin the discussion. Each panelist will speak--hopefully for less than 10 minutes--and then we will open it for questions, discussion among the panel, or between the panel and you folks.

The panelists are, first, Professor Jesse Choper of Berkeley Law School at Boalt Hall. Professor Choper is the Earl Warren Professor of Public Law at the Law School here. He is a distinguished scholar of constitutional law. He obviously can speak to the the interpretation of the commerce clause and the other aspects of the decision.

Next to Professor Choper is Professor Steven Shortell, who is Dean of the School of Public Health here at Berkeley. He has a very nice title: The Blue Cross of California Distinguished Professor of Health Policy and Management. A major player, Blue Cross. Steve is here because he’s an expert on the implementation of healthcare and on healthcare reform. He has been a major actor in efforts to bring about healthcare reform. He knows an awful lot about the exchanges. He has been a major player on nationally--doing stuff to increase the quality of healthcare provision, and to measure quality.

Next to Steve is Professor Brad DeLong, who is an economist here. Like all economists, Brad can speak on everything, and will at the drop of a pin had. I was told by one of our alumis that the only thing that’s good at the Goldman School or at Berkeley is Brad DeLong’s weblog. That’s the only influence we have on Washington. So everybody knows Brad, and he’s a person of significant… opinions.

Then we have two experts on health laws.

The first in terms of the order is Ann O’Leary, who among her many activities is a Lecturer on Health Law here at the Berkeley Law School. Next to her is Ann Marie Marciarille. She has been a lecturer here at Berkeley. She is also a Visiting Assistant Professor at Hastings Law School. And she is about to accept an appointment at University of Missouri Kansas City Law School, where she will be an Associate Professor.

So those are the folks that will speak.

Professor Choper asked me to say something about the background. Having read all 194 pages of the opinions--which I recommend to you all--I will.

The case arises from an attempt on the part of the Congress of United States, a law passed by both houses and signed by the President, to achieve multiple goals. The biggest goal out there is to increase the percentage of Americans who have access to health insurance.

Along the way the law--the Affordable Care Act--also tries to control or constrain costs that people disagree about how effective they will be. It also has provisions, which the court really didn’t speak to, about improving quality--maybe Professor Shortell can speak to that. The two big features of the bill are: (i) To require everybody to have health insurance, and to mandate  that on an individual level. If you do not have health insurance through your job--which is how most Americans have their health insurance--and if you don’t have Medicare or Medicaid, you are going to have to get health insurance. (ii) To help you get that health insurance, the Affordable Care act has a whole series of provisions: to provide subsidies to people so that they can afford health insurance, to set up exchanges (think of where you will be able to go and quickly learn enough about various plans to choose the best plann for yourself. States are required to set these exchanges up. Professor Shortell can speak to that. If states fail to do so, the federal government will set up an exchange for them. Access is also increased through a dramatic expansion of Medicaid program. 

Those are the big provisions. Immediately, within a nanosecond of the Act's passage, those who did not like this, those who feel this is a dramatic intrusion into personal freedom, all went to court and challenged this law. The Medicaid-expansion part was challenged by lots of states. the rest was challenged by interest groups. The title of the case is: "National Federation of Independent Businesses vs. Sebelius". In most cases, at the appellate level, the ACA was found constitutional. Eventually the case got to the Supreme Court.

The court decided the following.

  • By a five-to-four vote, the court ruled that the individual mandate requirement is constitutional. However it is not constitutional the way the government thought it was constitutional--based on the commerce clause, the government's power to regulate commerce among the states. Rather, by five-to-four the justices said using the commerce clause is unconstitutional. Therefore Chief Justice Roberts, who wrote for the court, said that the government could impose the individual mandate relying on its power to tax. The four liberal justices would have upheld the individual mandate based on the commerce clause. Chief Justice said: “No, I cannot do that. But I can uphold based on the taxing power of government.”

  • The Chief Justice has to deal with the Anti-Injunction Act, which basically states that you cannot sue the government over a tax until after you have paid the tax. Through some logic, the Chief Justice says in his view the AIA does not apply.

  • Then the opinion turns to the Medicaid expansion. By a vote of seven-to-two, the court knocks down the requirement for the states must expand their Medicaid programs or else lose all their Medicaid funding on the grounds that the federal government is coercing the states unconstitutionally. Even though the federal government is going to pay the total cost of the Medicaid expansion for the first five years and then pay 90% of the costs afterwards, a majority of the court, including two of the liberals, Breyer and Kagan, say this is going too far, okay, in terms of that.

  • However, Chief Justice Roberts joined by the four liberals--Breyer, Kagan, Sotomayor, and Ginsburg--say that the unconstitutionality of the Medicaid expansion can be cured by simply making states lose their extra federal Medicaid funds rather than all their Medicaid funds if they do not expand Medicaid.

  • The four conservative justices--Alito, Scalia, Thomas, and Kennedy rejected the entire thing. They reject use of the commerce clause. They also reject use of the tax power. They reject the expansion of Medicaid. They say the unconstitutionality of the expansion of Medicaid cannot be cured in any way. And they say that this law is 900 pages with lots of wonderful things in it and is so entangled that when you eliminate the core, the individual mandate and the Medicaid expansion, everything else will collapse and should disappear.

That leads us to a bunch of questions. I want to thank them Professor Choper for insisting that we do this today rather than Friday. It allowed those of us who wanted to read all 194 pages of opinion, and also to listen to the talking heads out there--all whom have opinions on this--to do so. We know the following: the American people are basically split on support for the ACA. For those of you who are interested, all the good polling data on this is available online from the Kaiser Family Foundation, which has been doing very good polling. Support or opposition for ACA is highly partisan. Democrats love it. Republicans hate it. Independents are slightly negative--but then there is the question of the people who are negative because they want the law a little further to the left rather than further to right.

Basically, the country has split. Over the weekend the Republican Party and its candidate for the presidency again committed themselves to the repeat of the ACA. What will happen in election? Will they have the votes? Will they have the votes to overcome a Senate filibuster? Will they be able to use something called Reconciliation, which is only for budget procedures. in this case? So we go back into the arena of politics--which a lot of people think is where it should be in the first place.

Next question: How will the implementation of the ACA proceed to the state level? Some states like California have proceeded already--all my knowledge comes from NPR. This morning they had things from Mississippi and Texas where the Republican politicians announced no way are they going to expand Medicaid. How will that play? How will it play out in terms of the exchanges? Mississippi has an exchange in planning. Texas does not. What will the exchanges look like? Steve Shortell an expert on that, and we have the experts on health law over there. It will obviously be different in different states.

If a state does not expand Medicare, what happens to the overall goal of achieving almost universal access? How close to universal access will we get? What will happen to the costs? Conservatives are expecting an explosion of costs. Will the ACA lead to an improvement in quality?

Those are simply a few of the questions that we might want to discuss.

So with that, I turn to Professor Choper.

Jesse Choper: Thank you very much. I’m certainly glad to participate in this Berkeley discussion. Since our time is limited, I better get right to the substance. Professor Ellwood gave a very helpful--particularly helpful to people who have only 10 minutes to talk--background. He covered a number of things that I was going to talk about. So let me talk first about the overall legal significance of this decision.

First, what was the significance in terms of legal doctrine? Is this the limit of progress in regulatory power, when they say you can’t regulate a person who is not buying insurance? Second, what does this tell us about the point of view, if you will the ideological orientation, of this court? The biggest surprise of the decision was not that it was five to four--although I think a lot of people thought that it wouldn’t be, because this decision had the enormous public attention, the most since tthe affirmative action cases in the mid-1970s or the efforts to overturn Roe vs. Wade.

My own prediction was wrong in the result. But I have a footnote that will save my ego. The biggest surprise was the role the Chief Justice played. Everyone thought: "well this is going to turn on the vote of Justice Anthony Kennedy". Since 2005, his has been the swing vote. I myself thought that he would join with the four liberals in upholding the healthcare law under the commerce clause. I thought that the Chief Justice would go along with them for two reasons. First, he is the least conservative-leaning of the five generally conservative justices after Justice Kennedy, although he’s plainly to the right of the center in the the majority of situations. He would join because he was Chief Justice, and it would be a better appearance if it were a 6 to 3 decision rather than the 5 to 4 decision which makes people believe "it’s all politics at the court".

Second, if he joined the liberals he would have the right as the senior justice in a majority to assign the opinion to whoever is to write it. Since he was the most conservative-leaning justice in the majority, he would assign the opinion to himself and be able to fashion an opinion that if the others would join, they had to join because they needed his vote. Damage control. That’s what happened, except it was a 5 to 4 instead of a 6 to 3.

How about the doctrinal significance of this? Congress's power under the commerce clause was limited. Congress couldn’t--this is the broccoli argument--Congress cannot force people to eat broccoli and if we all agree that they can’t do that and Congress can’t force them to buy health insurance either.

A lot of people, including me, thought that that was a rather formal and unrealistic distinction, but it prevailed. The individual mandate was held unconstitutional. But so what? I would say very little. This does not predict any great limitation on Congress's power to regulate generally. This was the first time--the court emphasized--in history, whether it’s true or not (there are couple of exceptions), the Congress has ever tried to regulate someone in the way that this did, to force an unwilling person to purchase something that they didn’t want to purchase.

That has been so unusual for the last 200 plus years. There is no reason to think it is going to blossom into all kinds of other laws in the future. So it really has very little significance.

Now the taxing power was the other significant part here. That’s really what saved the healthcare law. That was not a surprising interpretation of the taxing power. The contest was (i) between the four liberals and the Chief Justice who said the mandate could be accurately characterized as a tax; and (ii) the four Justices Kennedy, Scolia, Thomas and Alito who said that Congress could have done this is a tax but this is not a tax because Congress called it a regulation, a penalty. Well, I think this is true--but I think you know in the long run whether it is a tax or not is very much like beauty. Is is in the eyes of the beholder. You can fairly manipulate the existing rules as as to reach any result that you want. So no big deal on the taxing power, in terms of ongoing doctrinal significance, even though it was the key that holding that we got of the healthcare law.

More important was the Court's decision in respect to other constitutional issues. The first was over the scope of the necessary-and-proper clause. Everybody knows that it’s there, although we don’t talk about it very much. It says Congress has the power to make all the laws that are necessary and proper to carry out all of the previously listed powers. The government, trying to uphold the healthcare law, took the view that while maybe Congress doesn’t have any direct power under the commerce clause to regulate whether people buy insurance or not, Congress certainly has the power to regulate the insurance business, and the individual mandate is simply a necessary and proper way, an ancillary way, a method to do so. That has been the usual doctrine, to give congress enormous regulatory powers so long as they can tie the regulation to one of its specific delegated powers.

For the first time in hundreds or years, or nearly the first time, the Court put an important limitation on the necessary and proper clause. They said: "well, of course it’s true that the congress has the power to regulate interstate insurance, and it is that that this is one way of doing it, but it is not a permissible way. Why? Because, they said, if you want to use the necessary-and-proper clause, what you’ve got to do is to use something that comes within the delegated power, not simply derive it from the delegated power. That is what they said.

Now don't be surprised if you don’t know exactly what that means. You would not be alone. But they said it. I don’t make these laws, I’m just reporting it.

They said: "It’s one thing to say that congress has the power to put people in prison, and after they get out of prison and, it’s found that they are sex offenders, but you know no longer criminally liable, congress can create a civil restriction on these ex-prisoners"--which is the case they just upheld two years ago under necessary and proper clause. But the conservative justices at that point made the opinionquite narrow. This is putting teeth into what was suggested in that earlier opinion. It says: "Look, if you can’t do it directly under the commerce clause, then you can’t do it through the necessary and proper clause."

This is a limit on what had been unlimited congressional regulatory power between 1935 and 2000 in the United States. This law would have, as they say, have been upheld in a New York Minute in those times. But these are not these times.

Perhaps equally important is the Court's rationale under the spending power. As Professor Ellwood said, congress has the power to spend? And if it wants to give money to the states, it can impose conditions on the use of that money. It can say: "Here is a bunch of money; use it for the public schools; use it in this way". As the court has recognized, conditional spending on terms set by Washington has for years and years and years been part of many programs. The court has said that these conditions can be burdensome--conditions that induce a state to do things they would not otherwise do.

Indeed, the most recent decision involved a statute congress passed forcing states to [raise] the [drinking] age or we’re going to cut off 5% of your highway funds. The Court said: "Yeah, that’s just a condition, 5% of highway funds is not the end of the world". Here, however--and this is key to the healthcare act--was a provision that said that if you did not join in the expansion of Medicaid, if you don’t join us in this even though we’ll pay for the whole expansion until 2017, it won’t be that you won’t be able to have expanded Medicaid but we are going to cut off all your Medicaid funds. Now that was powerful medicine. The statistics show that was 10 to 15% of the average state budget. That is a lot of money

Have I used the 10 minutes?

John Ellwood: Yeah.

Jesse Choper: Okay. Then I’ll stop. Thank you.

John Ellwood: Okay thank you. For a fact: does anybody know the state that tried to hold out about the drinking age? Vermont, of all stupid states, held out for a year and then gave in. So this is very powerful stuff.

Jesse Choper: But it wasn’t "coercive".

John Ellwood: No.

Jesse Choper: That wasn’t coercive, they said. And they said this was. They said: we can’t exactly say when it is, but this is, it’s sort of the "you’ll know what you see it"--pretty stiff medicine.

John Ellwood: Okay, Steve. What I’m going to do at the end of 10 minutes is go like this--for everybody else to tell you when 10 minutes is up.

Go ahead.

Steve Shortell: A lot of us in the room are asking the question: what is next? John and Professor Choper have indicated the legal significance and some of the implications going forward in terms of the Court. But in terms of people in this country getting healthcare, and how this act is now going to be implemented, I want to address my comments to those questions. And I would like you to keep in mind three words of what we can expect: lobbying, calculating and planning.

First, the lobbying has already begun. To get the act passed, the president cut some deals with the hospital industry, with the pharmaceutical industry, with the medical device industry, etcetera. They agreed to give up billions of dollars in payments in return for the fact that more Americans would have health insurance coverage, so that hospitals wouldn’t have to give as much charity care. People would come to the emergency room, but they would be covered for their care. In exchange for that, they agreed to some of these payment cuts. They said it should be done over time. They recognized that in parts of the country safety-net institutions are inadequate. They recognized the fact that undocumented immigrants are not covered. It wouldn’t totally relieve hospitals of the challenges of caring for the uninsured, but it would help.

The Medicaid-expansion part of the ACA now has been made optional. It remains would be seen what states will and will not expand their programs. The hospital industry is already in there saying: "OK. The Supreme Court broke the deal. So we want to renegotiate how much these cuts are going to be." The medical device industry will be in there, and others as well. You will see this play out over coming months. Remember: a lot of the administrative rules and regulations for implementing this law are still to be worked on. That is where a lot of this lobbying will occur.

Second, calculation. A lot of calculation is going to be going on in a very dollar sense. I the individual market people will have a choice between buying insurance or paying the tax penalty--it is pay or play at the individual level. The insurance companies and others are trying to figure out how many people are going to get the coverage on the exchange, some of it at least somewhat subsidized, versus paying the penalty. Who will these people be? How healthy will they be? What kinds of insurance products will they desire to have on the exchange? They are just beginning to run the numbers on some of these very important questions. Some estimates are that the number of people buying their own plans will probably increase nationwide by about 70%.

Blue Shield has began to do in some modeling of what this means for them. Their analysis suggests that only about 24% of the invincibles--those with the lowest expected medical cost, in other words the healthy ones--will buy health insurance. Of those with the highest risks based in their current health history, 99% will buy the insurance. These are some of the concern that insurance companies will have.

Nationwide, the CBO estimates that about four million will end up paying the tax penalty. I don’t know how firm that number is. Let’s bring it here to California. John referenced the California health benefits exchange. It’s a five member board. We are the first state to get out the gate. We have been doing a lot of planning on this. It is estimated here in California that we will add two to three million Medicaid patients under the expansion. We will go ahead. We are going to expand Medicaid here in California. Of the five million uninsured in the state who are not eligible for Medicare and cannot buy the coverage, three million of these are eligible for subsidies. So three million of the five million will have their insurance subsidized, on a sliding scale between 130% and about 400% of the federal poverty level.

The two big issues facing the California benefits exchange are (i), the issue of enrollment outreach--or as you know in extremely diverse states how to communicate to the five million and how to make sure they understand what the enrollment periods are, what’s on the exchange--is going to be a big challenge.

The second big challenge is how to make it user-friendly in terms of the cost and quality data that’s going to be out there. We will see how that plays out. We will have a seminar series here in the fall and spring on implementing the law here in California.

What I want to emphasize is the following: It is terrific. It is great. I’m sure all of us in this room agree that we have now more Americans covered with health insurance. We are the last western or industrialized country in the world, and we still don’t have 100%, but we are getting a little bit closer.

The question that you and I face and all of us is: will the extended coverage is going to be affordable in the long run? That is the central question: how is it going to be affordable in the long run? So you’ll hear this phrase "bending the cost curve"?

This legislation will not in my judgment reduce the rate of increase in costs. It will not reduce costs absolutely. That’s just not going to happen. We have an aging population with new technology, etcetera. What we are trying to do is reduce the rate of increase in costs, because for almost every year except one or two in this country, the rate of increase in our health expenditures has been more than the rate of increase in our gross domestic product. We spend 18% of our GDP--about twice as much as other countries that have better health statistics than we do you00you probably know this figures. So for this to occur, there are some provisions in the legislation to try to bend the cost curve, and to try to maintain and enhance quality as well.

CMS, the Center for Medicare and Medicaid Services, is charged with conducting a number of programs that are going to try to encourage what’s called "accountable care". They have come up with an idea around what’s called "Accountable Care Organizations". They have provided funds in two buckets for these organizations. One is called the Insurance Savings Program, where providers, physician groups along with hospitals, if they can provide their care for less than a predetermined expenditure target they share in the savings. There's a second program called the Pioneer Program. This are for organizations that are more advanced in their ability to manage care. And in these programs they go at risk for the downside--for the loss. In the other program, they're protected initially from the loss, but in the Pioneer Program they have the budget upfront and they can manage the population. They can decide how they are going to split the residual earnings, but if they can’t manage the population they are at risk for the downside as well.

A lot of action is is in the private sector, where there’s probably a couple hundred developing accountable care organizations. We are doing some work at Berkeley on those, in conjunction with other colleagues. Here in California there are probably at least 20 if not more active accountable care organizations.

One way to think about this is in terms of incentives and capabilities. The incentives are to change physician and hospital behavior. Get them to do those things that we really need to keep us healthy, and repair our health when we need it. But how do these organizations develop the capabilities to respond to those incentives? Let me just indicate some of the things that I think are going to occur, that give a chance of slowly bending the cost curve over time and preserve the coverage expansion that we’ve talked about.

The big one: Change payment systems. Get rid of fee-for-service medicine. It’s toxic. It leads to a lot of unnecessary care This has been documented in a lot of studies. Move towards capitated payment--so much per member per month. Move towards what’s called bundle payment for certain conditions--you have a lump sum for both the hospitals and the physicians, and they now have a common incentive to work together to reduce readmissions which is going to eat into their revenue but also benefits you and I if we don’t need to be back in there. Keep me out of the hospital, okay? Let’s reduce the hospital infection rates and so forth.

Changing the payment system is important big time.

Tiered insurance premiums giving you and I an incentive to choose the high-quality low-cost providers. Give us a discount on our premiums if we choose more cost effective providers--that’s called tiering and that information will potentially be made available. Transparency in terms of cost and quality. Data big time. Administrative simplification. If you're a physician practicing in California now, dealing with these seven different insurance companies and Medicare--I’m down to one minute, so I’ll wrap up. You know you’ve got to fill up a lot of different forms. It’s crazy. Why can’t we agree on just some basic standardization?

Expanding the accountable care organizations. Reorganizing the delivery system. Electronic health records. About 34% of physicians’ practices in United States have some form of electronic record capability. But when you look at what they use it for essential functions that drops to about 13%. The electronic health records at the doctor’s office can’t communicate with the hospital Greater investments in primary care are certainly needed. There is the creation of something called the Patient-Centered Outcome Research Institute, PCORI, that’s going to do studies in the cost effective interventions that promote health and then dispense that information to providers and insurers.

Insurers aren’t required to cover certain procedures that are more cost effective, but at least that information will be available to them.

Finally, what we have to begin doing is reducing the burden of illness on the healthcare system to begin with. And that’s when you are talking about the underlying physical social determinants of our health. You tell me where you live or where you lived in your developing years, and I can be pretty accurate in predicting your current and future health status and your life expectancy. You live in Hunter Point in San Francisco: your life expectancy is 10 years less than in other parts of the city. You live in certain part of Oakland versus the Hills: 10 to 12 years difference in life expectancy. Same in Richmond, depending on where you live in Richmond.

There is $10 billion in the affordable care act for disease prevention and health promotion and it’s going to be a hell of a fight to keep it there. The Republicans din congress iare going to fight to chop that, and use it for other purposes.

So I will wind up with that. I look forward to our discussion.

John Ellwood: And they're going to have a whole series of panels next year talking about this various issues, right?

Steve Shortell: Yes. If I can say just a word about, just a quick one. It will be a five part series next year, sponsored by the School of Public Health and School of Public Policy. We’ll have it with the Johnson Scholars Program, on implementing health reform in California. Our first speaker is going to be Peter Lee, the director of the California Health Benefit Exchange. So we’ll give the information out on that, and throughout the year, on what it is going to mean for us here in California.

John Ellwood: Okay. Alright our next speaker is Brad DeLong, professor of economics you're on.

Brad DeLong: I’ll say three points.

First, a footnote to Professor Choper’s presentation--something he knows much better than I do. The ACA said: expand Medicare to federal specifications, and we the feds will keep paying our old share of Medicaid plus 100% of the cost of the expansion for the first five years and 85% thereafter; or alternatively drop out of Medicaid entirely. Take it or leave it.

The justices by 7 to 2 said this take expanded Medicaid or leave the whole Medicaid program offer for the states not to refuse was unduly coercive.

This holding is remarkable, in the context of the 7 to 2 decision in South Dakota vs. Dole holding that the federal government can reach into states' core powers to regulate alcohol--powers which are specifically reserved to the state by the 21st amendment--and tell the states to raise the drinking age or lose their federal highway funds.

The relationship between the drinking age and highway funds is much much more tenuous than the relationship between old Medicare and the Medicare expansion.

For one take-it-or-leave-it offer to be found unduly coercive by seven to two, and the other found not coercive by seven to two is quite remarkable. It is an indication of how much the law is changing--of how large this constitutional moment is.

Second point: With respect to last Thursday: One piece of background is all-important in assessing the decision: ObamaCare is RomneyCare.

The health-care reform plan that Mitt Romney proposed when he was Governor of Massachusetts is the health-care reform plan that Barack Obama proposed. RomneyCare made it through the Massachusetts legislature with only two dissenting votes. No office-holding Republican complained that RomneyCare was bad policy, or would destroy the economy, or would be unconstitutional, or whatnot--for it was the signature policy initiative of a Republican governor. The mandate that was at its core? That was the conservative Personal Responsibility principle. And remember the centerpiece of the Bush administration's Social Security privatization proposals: it was an individual mandate to regulate "inactivity": to require that people who had not established their own private individual retirement accounts do so.

Had the issue of "inactivity" reached the justices in the form of a challenge to a Republican mandate to purchase retirement accounts rather than a Democratic mandate to purchase health insurance, the Republican justices would have voted the other way.

But when the same Republican policy became the signature policy initiative of a Democratic president, every single Republican in office changed their mind. When a state government requires people to buy insurance, they said, that is an assertion of the Conservative Principle of Personal Responsibility. But when a federal government requires that people to buy insurance, they said, that is Bad Big Government, the Liberal Nanny State, and unconstitutional.

Go figure.

Akhil Reed Amar of Yale said a couple of weeks ago that if the Court did not uphold the ACA under the Commerce Clause that his career had been a waste--that he ought to have been doing constitutional law not as an autonomous discipline but as a subbranch of political science.

Amar really ought to have taken as his model not doctrinal analysts like Alex Bickel but legal realists like Fred Rodell.

But even that ultimate legal realist Fred Rodell would have been surprised by last Thursday. In past Constitutional Moments--Miranda, Brown, Jones and Laughlin, Lochner, Dred Scott--the stakes had been partisan, yes, but they also had been moral, and properly political: decisions on deep questions about what kind of country America is going to become. The last time the Supreme Court was this polarized was back in the New Deal era. But when the original Four Horsemen--never mind that McReynolds, van Devanter, Butler, and Sullivan begged Herbert Hoover not to appoint Cardozo because Brandeis was already one kike too many on the court--struck down New Deal legislation, it was because they thought America should not become a social-democratic country.

This time our New Four Horsemen--who claim to be market-oriented Republican justices--struck at an approach supported by the market-oriented Republican presidents who appointed them, thought up by market-oriented Republican ideologues to be the market-oriented Republican approach to keeping the market-oriented health insurance system from collapse. Fred Rodell understood that supreme court justices are for the most part moral and political actors first and text- and precedent-oriented legal technicians second.

Fred Rodell would have been astonished by judges who are for the most part neither precedent- and text-oriented legal technicians nor moral and political actors, but mere partisan weathervanes.

Go figure.

With respect to the future: One piece of background is all-important in assessing healthcare reform: ObamaCare is RomneyCare.

It thus has RomneyCare's weaknesses. It does not allow us to see if people would find a Medicare-like public option better than bargaining with private insurance companies. It hands market power to near-monopoly insurance companies in thinly-populated states. It requires state-level bureaucracies be functional and effective when politicians have laid down political markers that the reforms will fail. It assumes that Medicaid can grow by 2/3, maintain its sub-market reimbursement rates, and still attract doctors and nurses and technicians.

And the ACA's critically important long-run efficiency-increasing provisions rely on six largely untested bets:

  1. That Congress will allow the tax on high-cost health plans--which is, over the next two generation, a slow repeal of the much-loved tax preference for employer-sponsored health benefits.

  2. That Congress will allow the IPAB to recover the reimbursement system for doctors from the groups of specialist who have currently captured it.

  3. That the bet on evidence-based medicine and comparative-effectiveness and electronic medical records will bring cost and quality in the U.S. as a whole within shouting distance of best-practice found in the Mayo Clinic.

  4. That large for-profit providers and sociological groups of practitioners will not find additional ways to game the system and profit from large amounts of unconstrained market power.

  5. That demand will create its own supply--that we can double the amount of health care currently received by our 40 million presently-uninsured without demand for care outstripping the ability of our doctors, nurses, and technicians to provide it.

6.That the exchanges will function as benefits departments for those who do not work for large bureaucracies, and deliver high-quality insurance options at an affordable price.

Bets (1) and (2) are bets on us: on what kind of future congresses we are going to elect. The preliminary evidence from RomneyCare in Massachusetts on (3) through (6) is very hopeful--but the dive is less difficult in Massachusetts, and the success of RomneyCare in Massachusetts is only preliminary.

I am hopeful but worried.

John Ellwood: Okay.

Ann O’Leary: Thank you. It is wonderful to listen to my colleagues. I wanted to bring it back to the basics. I’m going to talk about Medicaid expansion. I want to remind people about why we passed this law, and give you some of the implications about Medicaid expansion.

We passed this law to increase access to health insurance in this country, and to try to bend the cost curve.

Steve Shortell talked a little bit about bending the cost curve. I am going to talk about trying to increase access.

Right now in this country we have 50 million people who are uninsured. Through all of the changes and innovations in the ACA--providing health insurance through these exchanges, providing subsidies so people can afford insurance, providing help to small businesses, and by expanding Medicaid--we would be able to cover 32 million of those 50 million.

So we were not covering everybody who is uninsured. A lot of these people, for example, are in this country illegally. But were going to cover 32 million of the uninsured. Of those 32 million, 17 million of those come through the Medicaid expansion. More than half of the people that we were intending to cover were through the Medicaid expansion. John mentioned his NPR news story this morning that Texas and Mississippi have said that they are not going to participate, and Florida has also said that. So two of our largest states--Florida and Texas--have said they’re not to going to participate in the Medicaid expansion.

I want to give you a little reminder about what Medicaid is. Then I want to talk about the implications for the states that opt out, and the implications for the states that stay in. Brad just mentioned that we have some serious problems in Medicaid--we offer below-market reimbursement rates to the doctors who do participate. I want to talk about that. And then I’m just going to mention what the congressional reaction could be to some of these issues. I will tell you a little bit about what the opinion said, and what Ginsberg said in her opinion.

People often get Medicare and Medicaid confused. Remember: Medicare is a national federal program covered entirely by federal government funding. Medicaid is a cooperative federal-state program paid in part by the federal government and in part by states. Here in California, for example, about 60% of our Medicaid program is covered by federal dollars and about 40% is covered by state dollars. In California, like many states, it used to be that our biggest spending dollars at the state level were in education. Our now biggest spending dollars in our state are in healthcare. In California about 19% of our state budget is as a result of Medicaid. That’s really important to remember as we go forward.

Medicaid started in 1965 it was intended to cover what categories of certain poor people. It covered the blind, the disabled, the elderly poor. It later was expanded to cover pregnant women and to cover children. One of the debates in the opinion was whether or not the expansion was a new category of coverage or whether it was entirely new program. If you look at the reality of how this has been implemented--it’s a new category. What we are now doing is we’re not only covering those specific categories of people, we’re saying that if you’re not covered by one of those categories but your income is 133% of the poverty line or lower, we’re going to add your category to Medicaid cover you through Medicaid.

For a single adult that’s somebody who is making about $14,000 a year. That is really quite poor. This is really important particularly to single men: it’s poor single men who are not able to get covered in our country right now. So what was happening in this opinion?

Professor Choper started by stating that the debate was whether or not the expansion to Medicaid was coercive. Remember: in the existing program there is a range of how much the federal government pays, but it pays anywhere between 50 and 83%. Under the new program for anybody who is newly eligible the federal government said it would pay 100% of that bill for the first five years, and then they going to ramp it down to 90%. The question in the minds of some is whether congress will continue that commitment at 90% thereafter That’s one of the bets that people are thinking about as they move forward.

The Chief Justice, who was joined, interestingly, by Justices Breyer and Kagan--two liberal members of the court--said that you can put conditions on spending at the federal level, but you cannot be this coercive. And the reason this was too coercive is that the law says is that if you don’t do this expansion, if you don’t cover this new category of the population, we’re going to take away all of your Medicaid money.

There were three assumptions that the Chief Justice made. One is that this isn’t really an expansion of Medicaid this rather an entirely new program. He is saying that Congress cannot say: "if you don’t adopt this new program then we’re going to take money away from an old program"--that that is coercive and problematic. Second, he said that this expansion was not foreseeable by the states--even though states know when they accept federal money that the federal government has the power to alter, amend or repeal Medicaid. Roberts said that despite this, Congress's action is not something that was anticipated. Third, he said that the amount of this funding is so large that states really have no choice but to accept it, so therefore it’s coercive.

Justice Ginsberg and her dissenters tried to rebut some of these concerns. They said: listen, this is really not a new program but only a new category of cover. This program was always intended to cover the needy poor. This is really and truly an amendment to that program. It’s an expansion. It’s something that you can understand as following the original program's logic. That’s where the crux of the argument was.

The more conservative justices said that as a result of this finding of unconstitutional coercion you would have had to throw out the entire Medicaid expansion. The way that the Chief Justice saved the program is he said: well, there is what they call a separability clause in this provision, and so what that means is that if you find one part of it separable you can save the rest. He found the part that was separable is the penalty.

The debate now is whether or not states will do the Medicaid expansion, because there will be no penalty if they don’t.

Let me talk about three different scenarios.

There are the states who are saying they are not going to do the expansion--these include some really large states, we are taking about Florida and Texas. The law was written did assume, unfortunately, that all states would accept this.

All states will still have an exchange, on which people will be able to get subsidies to help in purchasing insurance. But the way the exchange provision was written, you don’t get the subsidies if your income is less than 133% of the federal poverty line--you are supposed to be on Medicaid. So for those people who are kind of on the more wealthy edge of the poor, which is you’re 133% of federal poverty, you now will actually be able to go into the exchange in your states without subsidies if your states don’t expand Medicare. But those who are truly poor--100% or below--and don’t fit into one of the existing Medicaid categories are out of luck in their states. That’s a very serious policy problem that we have in our hands. I want to have people realize that.

Now let’s talk about California. California is one of the states that will indeed accept the gift of the federal government giving us 100% of the money to expand our Medicaid population. But that doesn’t mean we don’t have problems down the road. I want us all to recognize a real issue: we already have tremendous strains in our Medicare program. There was another Supreme Court decision that got much less attention this year, Douglass vs. Independent Living Center of Southern California--regarding the fact that the state government reduced the provide the reimbursements in California when you get Medicaid by 10%. The question in that case was about whether the people suing have the right to sue. It’s important to remember that there is this ongoing debate in California about the stress and strain on our state budget through Medicaid. Even though we will be getting 100% financial coverage and then down to 90% on the Medicaid expansion, that is not something to sneeze at.

The final point I will make is that we have to think then what is the congressional reaction. What are the constitutional possibilities? One of the things that Ginsberg pointed out is that expanded Medicaid would have been constitutional if Congress had just repealed all of Medicaid, and said: "let’s make a brand-new Medicaid 2.0."

Is that a possibility? Maybe if we had a Democratic congress that went along with it. She also said: "Listen. Medicare is constitutional. You could just make Medicaid a federal program." That’s a possibility as well. The questions are whether there is the political will to make those possibilities a reality.

John Ellwood: Thank you. Ann Marie you’re on.

Ann Marie Marciarille: Today’s topic, as presented to me, was: "The Supreme Court’s decision on the ACA: what next for healthcare reform?"

So I’ll try and honor that subject.

I always tell my students: "follow the call of the question!"

But first let me wallow for a minute before I become forward looking. How wrong was I in my prediction of what the Supreme Court would do? Very wrong. I was wrong on the individual mandate. More importantly, and more significantly, I was wrong on Medicaid expansion. I thought it would be upheld without a doubt? In its entirety. And the fact that it wasn’t is the most significant piece.

I want to talk about that.I want to talk about the exchanges. And I want to talk about broccoli.

What’s wrong with being very wrong? What’s good about being wrong? There are good things about being wrong. It depends on whether you embrace the optimistic or pessimistic model of wrongness, doesn’t it? Does insight spring from error, or is error the death of insight?

I’m thinking John Roberts lost some sleep over this as well. So I’m not alone.

This decision has given many of us the chance to linger for a while inside the normally elusive and ephemeral experience of being wrong? I shout out to Catherine Schultz for her wonderful book: Being Wrong: Adventures on the Margin of Error.

My most interesting error was not anticipating the limits on Medicaid expansion. What does this mean for the ACA? What does this mean for California? And what happens next? I will try and interweave these: there are downsides and benefits of batting clean-up. The downside is: wow I don’t know what’s left to say. The upside is: I can comment on what's been said before.

Why did the Court take a whack at Medicaid in this opinion? Because it’s always easy to take a whack at Medicaid, just as your faces went blank when Ann began to talk about it. Medicaid is a program for needy, poor people. Historically, we’ve had absolutely no problem segregating them--creating what is a segregated system of finance and delivery, and taking a whack at it periodically. Why is it significant that the ACA even attempted to expand Medicaid to poor single men? Because they are not in the classical sense the "worthy poor". You knew that.

This is really old stuff. I teach the Poor Laws at this point in my course. That’s how far back it goes. It can be ugly. We still see the resonance of that, in how we talk about healthcare for poor people.

What’s even more significant than the attempt at--and at this point I guess the success or moderate success in--extending healthcare to poor single men is that those single men are poor why? Behavior and mental health challenges. The ACA has as part of its minimum benefits behavioral and mental healthcare. That is a revolution. So not only do we bring you in, but we say that we actually have some idea about what ails you--and are interested in addressing it.

Flexing Medicaid under the ACA. What’s a Medicaid opt-in option? Well it turns Medicaid has a long history of opt-in o[tions. In its it didn’t have the scope it now has. Pregnant women are a later addition. The family and children are a later addition. We add to Medicaid on our own agenda and our own reasons relentlessly. The federal government regularly sweetens the pot to try and entice the states to participate in whatever the Medicaid opt-in option of the year is. Those percentages the feds pay can vary. Historically they have varied, depending on how much we wanted to urge or coerce the states to come forward and participate.

So in some ways Chief Justice Roberts is a genius. He is taking what was supposed to be a program that was essentially mandatory, and turning it into another opt-in. Well, those of us who speak Medicaid-speak know all about how those work. States opt-in and opt-out all the time, at different percentages. It will be hard for them to argue that it was unduly coercive because they do pick and choose among these options all the time. In California we have a in flush times a relatively rich Medicaid program. What did we offer that’s not core Medicaid? Dental. Right those of you who read the newspaper knows California retrenched on Medicaid dental with the economic downturn.

This is one of the things I love about California: we did this completely publicly and non-apologetically. We have to balance the budget! Time to take dental out of Medicaid! Even more: California said: We have to balance the budget! Time to make it harder to get onto Medicaid even for those who are eligible! How do we do that? We make the application procedure oneorous, shaming, difficult for people with dependents or responsibilities for others. We require a lot of documentation. Keeping that lid down so that the people who are eligible do not come forward and claim it because we say you have got to update your information at really speedy intervals--like every 30 days. Finish the whole drill and then do it all over again.

That’s how we do it. We do it unapologetically. We read it in-line in the budget. We are California citizens here, most of us: I think we need to know that we do this.

The thing about this decision is that it might be what will get people talking about Medicaid, and what we do to it. It’s not a pretty story, but this manipulation oof Medicaid is something we are it turns out experts at.

How is the expanded Medicaid opt-in that we have different from the expanded Medicaid that Congress won't? Well, it will be optional. If you go to 20,000 feet, you can see that this was a decision about federalism. Medicaid is a cooperative program ointly funded okay through the states and the federal government. Will it feel any different? That depends on where you live. Every state under existing Medicaid determines eligibility levels. I’m here five minutes into an appointment at the University of Missouri. In the state of Missouri you have to be less than 19% of the federal poverty level to qualify for Medicaid.

You heard me.


Pretty strict, right?

That’s a good way also to contain enrollment.

I call the Medicaid expansion the ice-cream cone: "Hey! Would you like the free ice-cream cone?" Who wouldn’t? The federal government will pay 100% of the cost of covering those newly eligible for Medicaid as a result of the expansion. But what about all the people who were already eligible for original Medicaid who are also going to come forward--not just the people who are newly eligible--because they hear that you now can get government-sponsored health insurance? You understand that the federal government is not going to pick up 100% of the cost for those individuals who were previously eligible but had not enrolled, right?

That’s why Florida is talking out of both sides of its mouth. I heard the Florida governor in the day of the announcement say: "No, no, no!" The next day he says: "We’re thinking about it". Why? Two opinions in two days. In Pride and Prejudice Elizabeth Bennett is right when she says: "In such things it is unpardonable to have a good memory."

She’s right. In talking about healthcare and talking about Medicaid it’s unpardonable to have a good memory.

Another reason is that Florida is filled with snow birds. You know that tipping feeling you're feeling right now? It is everybody on the eastern seaboard who moves to Florida to get to warm weather as they age? It strains the Medicaid budget of that state unbelievably--especially if they had to take some form of institutional living and institutional care. Florida is going to think about it.

What else can I tell you?

I made you a really nice PowerPoint--but I can’t show it to you, so I will tell you. I was going to show you three flavors of ice-cream cones, which is how I’ve been explaining the exchanges to people over the past few days. You can have a chocolate ice cream cone--the state can design its exchange itself. You can have vanilla--the feds are going to give everybody who doesn't design their own exchange vanilla, as it steps in and creates the exchange if the state refuses. Or you can have a twist--Fosters or whatever--because you can also make a hybrid option. I actually suspect a lot of the hanging-back states will take this option. The federal government will perform many of the functions: the exchange it isn’t just a marketplace, it’s also going to be a place where appeal decisions are made about eligibility. A lot is going to happen there. It’s a significant infrastructure.

Suppose I’m a state where the politicians really do not want to have an exchange because they do not want all those people coming forward who were eligible under the original Medicaid program. From my perspective, the feds are not really offering an ice-cream cone but are are me broccoli. I don’t want it and I don’t like it. But I suspect that at the end of the day it will be hard for states that even perceive the exchange and the Medicaid expansion as broccoli will not refuse it--the deal is so sweet, and if we look at past we see we have a long history of these kinds of offers very hard to decline.

But it’s possible that it could be refused. What will that mean? That will mean just as you might imagine: 1,000 flowers will bloom, and we will see very different kinds of Medicaid coverage in very different states--possibly contiguous states. That will lead to what? I believe ainn arbitrage. I’m thinking people are going to get up and move.

It won’t surprise you to know that the most interesting question that nobody has answered yet is: are people moving to Massachusetts to get health insurance?

You might get that sinking feeling in your stomach if the answer is yes, and you should start getting your basement ready for rental.

My PowerPoint has a wonderful interactive map on exchange development. There are about 14 different possible positions. See where the states are.

Last, what does it mean to leave Medicaid’s parameters to each state? Well, Medicaid is already very much left in its parameters to each state. Once we understand that, we understand that that is how it has worked up for now. It’s just going to make for some even more interesting sort of demographics going forward.

I have to show you this last slide. I thought: yyou know, at the end of the day this Medicaid expansion and exchanges for the states: it might not be ice cream--hey you want a free ice cream cone!--and it might not be broccoli, it might be broccoli ice cream.

Thank you.


John Ellwood: Okay, I am going to open for questions….

Q: I don’t think I have heard anyone address the aspect of the current law impacting unemployment and small business.

Ann Marie Marciarile: Small business is divided, even though they were the named plaintiff on this. As you know, it was death by amicus brief in this litigation. But some people from small businesses, instead of saying "this will kill us" said, instead: "this is what I am missing, we desperately want to offer health insurance to our long-term employees because we cannot keep them otherwise", and said: "I am a small business owner and I would love to have some health insurance for myself too". It was pretty powerful. We have this war within small business. And there are some significant tax breaks to small businesses who are thus--I hate the word--incentivized to offer health insurance.

I think a fair number may choose to participate in the exchange. That may well be the economically-rational alternative. I don’t think that’s a bad outcome.

How will it work?I think we are probably going to see more small business people able to offer health insurance than we have had for a long time, to insure themselves and their families.

In the past, people have had to go out of business because they needed to go get a job where they could get health insurance for themselves and their families, because medical debt is the leading cause of personal bankruptcy in this country. It used to be divorce. Today divorce is chump change in comparison to medical debt in bankruptcy filings. Even if we don’t know it here, people in those situation, they know it.

Steve Shortell: Ann Marie has given a great example here of the "calculation" part. People are going to calculate exactly which way to go. The experience here in our backyard--in terms of Healthy San Francisco--is actually a fairly positive one. Small business employers worried about what they were going to contribute, that they wouldn't be able hire people, this and that and the other thing, and the only evidence is that did not occur. But I would be careful about generalizing from Healthy San Francisco to the rest of the United States.

Ann O’Leary: On the unemployedL I think it’s important to recognize that right now if you become unemployed you can continue health insurance through Cobra, but it’s tremendously expensive and so many people don’t do it. Ken Jacobs is here from the UC Berkeley labor Center. He has been doing a lot of work on making sure that people who are unemployed will be able to get into the health exchange and get subsidies or qualify for Medical. That would be a really important piece of this--to make sure that people have the opportunity to get the help they need, so that they can remain insured when they are unemployed.

Q: What about savings? I thought the idea was that people would not use emergency rooms as much and that that would be a source of reduced cost. I guess my question is: who pays now for those high cost emergency room visits that will presumably not be so necessary?

Steve Shortell: Who pays now is all of us. We pay through our higher health insurance premiums. The hospitals eat some of it, but if they can’t get reimbursed from the Medical program or the Medicare program, they go to the private sector side--it depends on the market power they have as they deal with the insurers. We are paying now. That will change when those who show up in emergency rooms have insurance. The idea of these incentives that I talked about earlier is to change how we pay hospitals and doctors and give them incentive for cost-effective care using evidence-based medicine. All these wonderful things depend on how fast we can roll out and get implemented across the 50 states or even within our state here in California. And to the extent those kick in and we start looking at delivering health care differently, we are going to see our costs grow less rapidly.

I will be concrete. We have a group here called the Berkeley Forum on reforming California's healthcare delivery system. If you look at what we are going to have to do in this state to bring our expenditure in health care cost growth down to simply match California’s domestic product growth, we are going to have to reduce our healthcare expenditures about three billion dollars a year relative to baseline each year between now and 2020. So we have to change behavior. It’s not just about avoiding unnecessary hospital admissions or readmissions, it’s about like doing away with doctor visits. A lot of doctor visits are totally unnecessary. Let’s blow up the whole care model.

Kaiser Permanente has this strategic priority that reduces physician office visits. With chronic illness we have to take care of ourselves mostly, with guidance from physician and nurses and so forth. We have modern technology with cell phones, home monitoring devices, etcetera, etcetera. We need to think radically differently how health care is delivered in the 21st century. In many respects we have a 19th century delivery system. We skipped the industrial revolution in healthcare delivery. Now we are in the knowledge information economy and we are trying to play catch up.

Q: After the decision was announced, I heard people who advocate for a single-payer system coming out on both sides. I heard people saying this is a terrible setback for what we want to accomplish, and other people saying this is a great stepping stone toward getting actual universal coverage. What the law really does is provide more customers for insurance companies. So I am wondering if anybody on the panel has an opinion about which of those people I heard might be correct.

Ann O’Leary: I am happy to take the first crack at that. The ironic thing is that a single-payer system is clearly constitutional. Medicare, for example: the federal government has the power to set up a program that everybody can participate in. That is one of the ideas on the table in terms of single-payer was to expand Medicare for all, not just for the elderly population but for everybody.

One of the things that everyone was thinking about when they were looking at this case was: why didn’t they just do it? So I think it’s really a political question--John, our political scientist, may be able to answer this better. But I think the question really is, is there a political appetite for this? There could be more of a political appetite for it depending on the behavior of the private market and what’s happening vis-a-vis the exchanges. I think it’s more of a question of how implementation occurs.

John Ellwood: It won’t happen. In 1974 I was a congressional fellow working in the first year of the Congressional Budget Office. Health care expenditures in the United States had become unsustainable because we reached 7% of GDP. Why can’t we do 30? And remember, you are talking about people who in the health care business who are very wealthy compared to what they would be in other societies. Take a doctor, take a nurse, take a person who runs the machine, gives you a pill--take the equivalent person in any European country and the US person makes a lot more. They are in a fight to the death to keep those resources for themselves. So I think we’re willing to put up with all the inefficiencies that Steve and others can talk about because it’s the American way, and because we have a lot people who are doing very well out of it.

Ann Marie: Even implementing the ACA will be very difficult in California. California most prepared. California most challenged. We have the strongest, strictest restrictions on scope of practice by physicians in the United States. How do you think we are going to provide services to all those newly insured with that kind of legal and regulatory structure?

Q: Why there isn’t more of an effort in the ACA to increase the supply of medical practitioners? My understanding is that yovernment involvement in medical education is really limited. You have this whole group of people who have this great sense of entitlement for their training sacrifices. In California, my understanding is that it actually is more effective in implementing business practice reform in medicine in the Bay Area because of the relative oversupply of people that want to practice here and having their contracts not renewed by the HMOs if they overprescribe; and also that the ACOs are more effective among the older doctors who already have theirs and who aren’t trying to pay back bills. Why isn’t there more of an effort to increase the medical availability?

Brad DeLong: Well, Massachusetts has been fairly successful that in vacuuming up nurses and doctors from the rest of the Northeast, from Puerto Rico, and from the Philippines…

Steve Shortell: This is a huge problem to expand primary care. It’s not just primary care physicians. It’s nurse practitioners. It’s pharmacists. It’s social workers. It’s nutritionists. It’s community health workers. Ann Marie put her finger on one of the things that we have to address in the states: scope of practice laws. There are some people who want to approach that again for maybe the 21st time. and others think that it’s a non-starter still, but that remains to be seen.

When we talk about bending the cost curve and removing the relative resources going to the medical and health care sector, the other side of that those are people’s incomes. And it’s not just wealthy physicians. But at some point I think we are going to reach the tipping point in this country, and I don’t know if it’s 18% or we’ve got to go to 25%, we’ve got to look at it the other way. What are we getting for the investment? We are not a very healthy nation, and you can’t hang all of that on the medical healthcare delivery system. A lot of that is around the communities we live in, and it has to do with transportation and housing and education and the investment we need to make in that. So we don’t even need to put this burden on this sort of malfunctioning delivery system. The problem with that argument is that it's long run, and we don’t live for the long run. It’s immediate gratification. "This prevention stuff isn’t going to save costs tomorrow or make me better tomorrow, then I am not going to invest in it"--you know kind of thing.

So we need to think more creatively about incentives to change that around as well. And a lot is beginning to occur. Some of the foundations in this state are stepping up. Some of the other groups in the state are stepping up. But it’s a matter of getting to the tipping point, and we may not be there yet. Perhaps there is more pain before we are going to get there. But at some point I really do believe we are going to begin to make some decisions very, very differently. We will extend the scope of practice law in this state, for example. We will have various programs to create more community health workers who can do a lot of different stuff.

Ken Jacobs: Question for Professor Choper. You started going this on the other aspects then got cut off at the end, but what are the implications for other areas of law and policy of the Medicaid ruling? I think about environmental regulation which is widely done through congressional purse strings. Are we going to see some implications go way beyond health care from that piece of the ruling?

Jesse Choper: The court under Chief Justice Rehnquist and now Chief Justice Roberts, with a growing intensity on the conservative wing of the Court--they may be market oriented just as a personal matter, but their major approach in terms of interpreting the constitution is to strengthen the notion that the national government is a government of limited powers: state’s rights if you will. They cut back some even before this case. I think this case does very little as I indicated in cutting back the scope of the commerce clause. The major source of federal power that would appeared to give the federal government continuing virtually unlimited power was the spending power. What you couldn’t demand you could buy, and you could make the cost of what you are buying so attractive that, as they said in this case, the states couldn’t turn it down.

I am amazed to hear--it really takes a deep political philosophy to be in Texas and Florida and to turn down free Medicaid expansion for the next five or six years. I can’t believe it. But there are lots of things I can’t believe. That’s just contrary to all human nature. Now they’ve said there is a limit to this, and the limit as I say is "coercion". It's undefined. Professor DeLong doesn’t see a difference between 5% of highway funds. I just find that coercive itself--as you point out one state held out for a while and then they collapsed for 5% of their highway funds. But this was no 5%; this was 10 to 15% of the annual budget of the state. That was powerful medicine. This is just the beginning, and they may continue to do that and cut back on the spending power.

Ann O’Leary: It’s very important that we distinguish what happened with the four dissenters and what happened with Chief Justice Roberts. The four dissenters said that they would have held all of the Medicaid expansion to be unconstitutional. They made a very big deal about how much money this was, and so Justice Ginsberg called them out on this and said: so are you saying to me that as you give more money to the states that just giving them money in itself is coercive? That’s what the four dissenters are essentially saying. It’s very good that Chief Justice didn’t go along with it this time. But I think that that may be part of the conversation going forward--how much does it matter that the money is so large that who would possibly turn that down.

Well at least we actually have some examples now that there are some who are actually turning it down. I think, Ken, you are right that we have a lot to look at not just in health law but in the environment, in education (for example we have title six and title nine where we put our civil rights requirements), we put gender requirements on our institutions--so lots and lots of things to look at as we go forward.

John Ellwood: Bbudgeting is my area. Health care expenditures is the huge PacPerson eating up every public sector budget in the United States. If the federal government has a problem on the expenditure side, it’s not social security, its healthcare. Since the end of World War II--pictures of elephants running wild through the jungle stomping down everything at 3% real spending growth per year. Health care expenditures as a society is not a public verses private thing--it's just increasing faster than the economy, and no one in the United States is willing to do what’s necessary to stop that for a variety of reasons that people have touched on.

Everybody says well, there has to be a stopping point, but we don’t know what that is. 100%.

Q: I am connected with a union that represents journalist. The media industry is changing. A lot of people are losing their jobs. They are not so much becoming unemployed but underemployed as they become freelancers. So do you have any comment about how are these persons going to become eligible for healthcare? Is there something that might incentivize employers to not fully cut people loose when they do a reduction if force? Do you guys have any thoughts on freelancers? What are we going to do? And the impact on collective bargain as well.

Brad DeLong: Well, the two big problems if you are a freelancer or even if you are a small business owner have always been, first, that actually shopping for a health care plan and then providing the insurance company with the documentation it wants is burdensome and time consuming. You don’t have a benefits department; I as a Berkeley professor have a benefits department. There are how many floors of people over in University Hall doing benefits?

Steve Shortell: Too many.

Brad DeLong: Floors of people in university hall who simply do nothing but run interference for all the rest of us vis-a-vis the health insurance companies. And there is no way that a small business or a single proprietor can afford to effectively comparison shop let alone appeal a denial of coverage.

What the exchanges are supposed to do is they are going to say: You don’t have a benefits department on your own because you don't work in a bureaucracy, or you don’t like the benefits department you have? Come to the exchange--the exchange will be your benefits department. And so that will get rid of one of the huge obstacles to freelancers getting insurance.

The second big obstacle is that if you are a large bureaucracy you are a statistical universe. The health insurance company can turn it actuaries loose on your population, churn through, and say: alright, as long as the bureaucracy is paying at least 50% off the top of the healthcare cost, everyone will sign up and so we can figure out what the cost of covering these people will be. Because we are an insurance company, we are happy to accept the residual risk: here is a price for the insurance, an open option to all of your employees to sign up for our particular HMO or PPO or fee for service plan or whatever.

Occasionally it does work badly that huge numbers of sick people sign up for one plan rather than another when they are given the option at open enrollment--because the sick people want the higher coverage--but most of the time it works.

That doesn’t work if you are a single proprietor or a small business. You go to the insurance company. The insurance company says; Why do you want insurance? Are you sick? We are going to charge you an outrageous price.

Suppose you come back and say: Well, yes, I want insurance even though you are charging me an outrageous price.

The insurance company then says: My God!! You must be really, really sick!!! You must be incredibly expensive!!!! We are going to charge you an extraordinarily outrageous price because we know the fact that you were willing to pay the outrageous price means it was a bad deal for us to offer you an even outrageous price, and so we are charging you much more.

At one point my mother as a healthy, single psychotherapist in Cabin John Maryland was paying more for her catastrophic health insurance program than the four of us were paying for our family plan, even when you add in all the money Berkeley was paying on our behalf--precisely because they wouldn’t believe that she wanted health insurance simply because she was an anxious middle-aged person who didn't want her house at risk in medical roulette.

The ACA is supposed to get rid of that. The reason is that it includes the Personal Responsibility Principle, this rock-ribbed foundation of conservative Republican orthodoxy in America, Mitt Romney’s proudest crown jewel of his substancive policy making. The reason that this individual mandate, personal responsibility, 100% Republican right-wing Mitt Romney thing is in the ACA is precisely to make sure that once the exchanges get up and running that they can properly present themselves to insurance companies as calculable statistical universe. Then insurance companies won’t charge the exchanges higher prices than they charge bureaucracies like UC human resources.

John Ellwood: I should also add where you are, in the income range there are subsidies. Yeah, you should not—you know that will vary from year to year. I don’t know exactly how that works. But if you have a journalist who gets fired, is trying to get through as a freelance, probably they don’t make a great deal of money and so the ACA does has significant subsidies for those for those folks to afford insurance.

Ann O’Leary: Yeah it’s up to 400% of poverty so it is—it does you know, get higher.

Brad DeLong: Which is 70,000 a year in California at least.

John Ellwood: More than any journalist makes in the United States [1:45:33] [crosstalk].

Ann Marie Marciarille: I will just make the addendum that the idea that somehow we should look back and expect for additional obligations to be based on employers who then become former employers--to ask them to continue coverage. I really think that the ACA looked at broadly is a capitulation to the detachment of health insurance from the workplace. More and more people moving to the exchange, more and more people working in what you described as a new economy job, right, uncertainty?

Q: Right.

Ann Marie Marciarille: Uncertainty. Eat what you kill. More and more people are in those kinds of jobs and therefore more and more people will be in the exchange. This connects to the person longing for a single pair in a very incrementalist way. Those people get there and the 40% of them who believe there is going to be a government sponsored health insurance option in the exchange don’t find one. You may have your moments.

Brad DeLong: The alternative universe, in this Star Trek Alternative Universe in which Spock has a beard and Mitt Romney is president and the ACA went through as RomneyCare in 2010 rather than as ObamaCare in 2010. Right now every single Republican at the Heritage Foundation, at the Cato Institute], at the American Enterprise Institute, is now storming the country saying that because of the exchange, people who want to be entrepreneurial are no longer locked into their jobs because they don’t dare leave their bureaucracy to follow their dream because they will be eaten alive by their individual-market health insurance.

They are saying that if you want a system that is friendly to freelancers, it’s precisely one that divorces gaining social insurance benefits from your attachment to a large bureaucracy--which was the system that Henry Kaiser landed us in back in 1943, when he was desperate to find a way to pay his workers more that the War Labor Board wouldn’t come down on him and whom him for.

Q: I was wondering if you could explain what the 2012 election might mean in terms of the impact of the ACA, not to make anybody have to predict the future but really what are the options with a difference in the political landscape?

John Ellwood: It’s my field, so I’ll give you an answer. Let’s assume Romney is president, let’s assume the Republicans maintain control of the House and have a majority in the Senate but not 60 votes. In that case everything depends on how you interpret a technique called Reconciliation, which is a technique which was used to get the Bush tax cuts through. That only affects those things that relate to the budget. But in that case if you use the budgetary mechanism through Reconciliation you can pass your budget with a simple majority vote--not a super majority vote. That then gets to the question what parts do you want to undo. Romney wants to undo all of the ACA.

Different parts of the ACA are under different budgetary rules. Some of it is is what we call mandatory spending--that part will require reconciliation. But there are other parts that require the annual appropriation, and a lot of the Republicans are saying they want to starve the beast to death. It’s easier for them to do that because it’s harder to get something past than it is to stop it. So there are some of them that are simply talking about not funding the bureaucrats that will have to fill out the forms for the exchange.

If Republicans don’t control all three units there and not have a simple majority in the senate, then it’s going to be very messy over time and it’s going to be sort of a long campaign on the part of conservatives to slowly strangle it. As they do that they will make it much more inefficient.

Ann O’Leary: And can I just add to that John, so I worked in the Clinton administration, the final two years of the Clinton administration and did a number of regulations that as soon as the Bush administration came in, they suspended them and then ultimately overturned many of them. I think that’s a really important point you know certainly if you look at administrative law and what’s going on here. I look at Ken Jacobs, who knows that the amount of time and energy that those who are health experts are spending on these regulations to make sure that they get them right so that they can be as pro-increasing access as possible. What I think you will see is they are going to immediately be looking at all of the regulations that have been put into effect. They’re going to be putting out notices and proposed rule making which is to say that they are going to start rewriting those regulations quite quickly to make them restrictive. I think that’s going to be the first battle, which is the battle of the administrative lawyers, and those who will see very severe restrictions in how they define the health exchanges, what they do in terms of the subsidies

John Ellwood: Okay. I want to thank you all. We have used up our time, this has been great and I appreciate it very much and I appreciate the Law School for giving us the room here. I thank the Goldman School for sponsoring us and I thank the RWJ program in Health Policy Research for sponsoring. Thank you very much.