Today was a victory for the Affordable Care Act. The first court decision to render a verdict on the constitutionality of the landmark health reform package upheld a key portion of law. Earlier today, Judge George Caram Steeh of the Eastern District of Michigan handed down a twenty page order dismissing a challenge to the Act’s minimum coverage provision on the merits:

“In assessing the scope of Congress’ authority under the Commerce Clause,” the court’s task “is a modest one.” The court need not itself determine whether the regulated activities, “taken in the aggregate, substantially affect interstate commerce in fact, but only whether a ‘rational basis’ exists for so concluding.”

There is a rational basis to conclude that, in the aggregate, decisions to forego insurance coverage in preference to attempting to pay for health care out of pocket drive up the cost of insurance. The costs of caring for the uninsured who prove unable to pay are shifted to health care providers, to the insured population in the form of higher premiums, to governments, and to taxpayers. The decision whether to purchase insurance or to attempt to pay for health care out of pocket, is plainly economic. These decisions, viewed in the aggregate, have clear and direct impacts on health care providers, taxpayers, and the insured population who ultimately pay for the care provided to those who go without insurance. These are the economic effects addressed by Congress in enacting the Act and the minimum coverage provision.

Although Judge Steeh is the second judge to dismiss a challenge to health reform — last August, a George W. Bush appointee dismissed a health care case on procedural grounds — he is the first judge to reach the merits of whether or not the law is constitutional. Interestingly, Steeh sided against the Obama Administration’s three procedural arguments that would have effectively delayed any litigation challenging the ACA until 2014, before completely rejecting the plaintiff’s claim that the law is unconstitutional.

This case is far from over, however. Judge Steeh’s decision will appeal to the notoriously right-wing Sixth Circuit, a Court which tried to manipulate federal election law to benefit the Ohio Republican Party in 2008 before being unanimously smacked down by the Supreme Court just three days later. If the Sixth Circuit reverses Judge Steeh, that decision is almost certain to be reviewed by the Supreme Court.

In the end, however, there is no question that Steeh reached the correct decision. Even ultra-conservative Justice Scalia agrees that Congress has sweeping power to regulate “economic activity,” and there is simply no question that health reform will have an enormous economic impact on the health insurance market. In other words, today’s decision will be the first of many affirming the Affordable Care Act.

Proponents of the health reform are starting to worry that if the Republicans can’t practically repeal the Affordable Care Act, they can do a lot of damage to the law by defunding it. Henry Aaron has a good piece in New England Journal of Medicine about what exactly the GOP can do:

Repeal of the ACA before 2013 is unlikely…A more serious possibility is that ACA opponents could deliver on another pledge: to cut off funding for implementation.3 Here is how such a process could work.

Customarily, substantive legislation “authorizes” spending, but the funds to be spent must be separately “appropriated.” The ACA contains 64 specific authorizations to spend up to $105.6 billion and 51 general authorizations to spend “such sums as are necessary” over the period between 2010 and 2019. None of these funds will flow, however, unless Congress enacts specific appropriation bills. In addition, section 1005 of the ACA appropriated $1 billion to support the cost of implementation in the Department of Health and Human Services (DHHS). This sum is a small fraction of the $5 billion to $10 billion that the Congressional Budget Office estimates the federal government will require between 2010 and 2019 to implement the ACA. The ACA appropriated nothing for the Internal Revenue Service, which must collect the information needed to compute subsidies and pay them. The ACA also provides unlimited funding for grants to states to support the creation of health insurance exchanges (section 1311). But states will also incur substantially increased administrative costs to enroll millions of newly eligible Medicaid beneficiaries. Without large additional appropriations, implementation will be crippled. [...]

[Republicans] could bar the use of staff time for designing rules for implementation or for paying subsidies to support the purchase of insurance. They could even bar the DHHS from writing or issuing regulations or engaging in any other federal activity related to the creation of health insurance exchanges, even though the ACA provides funds for the DHHS to make grants to the states to set up those exchanges.

In my interview with him on Tuesday, Tom Daschle suggested that defunding the law may be more difficult than it seems, since “a lot of what we did in health care reform has more of an entitlement than a discretionary funding base. So as an entitlement, they would really have to change the law rather than simply not fund in order for it to be effected. The entitlement sections of the legislation are going to be fairly immune from defunding,” he predicted. Indeed, the CBO estimates that there is “at least $50 billion in specified and estimated authorizations of discretionary spending that might be involved in implementing that legislation” and presumably that’s the spending they can most easily target.

Aaron is probably right about the GOP’s strategy, although I’m struck by the fact that if they successfully defund the law, they could then be blamed for the health care crisis that that creates (perpetuates). Could they not be made to own the status quo?

Last week, Republicans jumped on the news that McDonald’s and other retailers who offer mini-med insurance plans would stop providing health insurance coverage if they were required to spend 80% to 85% of premiums, citing the claims as proof that the law overburdens businesses, undermines existing coverage, and should be repealed. Several days ago, in an effort to prevent these companies from dropping their insurance plans, HHS announced that it would exempt certain firms that offer these plans from meeting the minimum coverage requirements for at least a year (and has promised flexibility with the MLR regulations, once they are finalized). But the GOP is still not satisfied.

During an interview this afternoon with WIBC’S Greg Garrison, Rep. Mike Pence (R-IN) first criticized the law for over-regulating employers, noting that the announcements about businesses dropping coverage are part of “the early shock waves of Obamacare,” but also attacked the administration from loosening the regulations to prevent coverage erosion:

PENCE: Greg, it’s perfectly predictable that you’re going to see [sic] once a government exercises a takeover of any area of the economy, then they get to pick winners and losers on the basis of political decisions of bureaucrats. That’s the exertion of power. I wasn’t surprised at all to see McDonald’s say they were thinking about canceling their health insurance plan. I think you’re going to see millions of American businesses do that in a couple of years if we don’t get this thing repealed. But the carve out also wasn’t surprising, Greg. That’s why you don’t want a government takeover of health care, because all of the sudden you have bureaucrats with political power are going to be deciding, that company…

Listen:

Pence pretends that the government selects companies on the basis of size or political consideration, but in reality businesses apply for waivers if they feel like their plans are structured in such a way as to make it impossible to meet the new requirements. And so far, HHS (aware that these enrollees will really have nowhere to go) has been fairly anxious to avoid unsightly coverage drops. Since employees won’t have new coverage options until the exchanges become operational in 2014, the agency is trying to provide a level of flexibility to employers so that they can gradually meet the requirements of the new reforms and transition from subprime insurance that has low annual limits and all kinds of coverage exemptions and into comprehensive basic coverage. These waivers are good for a year, but could be extended until 2014, if employees continue to face a coverage cliff.

Later in the radio interview, Pence reiterated the GOP’s pledge to repeal reform “lock, stock, and barrel” and said Republicans will “use the power of the purse to prevent implementation of Obamacare.” “We’re going to do our level best to prevent implementation of that so that if we have take it to the American people in 2012 in a referendum on health care, we can.” He also didn’t rule out completely repealing the law in the new Congress. “[If] we send decisive majorities for the Republican party to the House and Senate, there is an outside chance that we might have a veto-proof bipartisan majority.”

Virginia Politics’ Rosalind Helderman notes that Gov. Bob McDonnell is still accepting funding from the Affordable Care Act that he claims is unconstitutional. Yesterday, McDonnell announced that the state will receive “$2 million in federal funding to improve care for elderly and disabled residents” — without mentioning that the money is part of a $68 million grant program in the new law:

Gov. Bob McDonnell (R) announced Wednesday that Virginia has snagged $2 million in federal funding to improve care for elderly and disabled residents. [...]

In a statement, McDonnell said the new money would be of “enormous aid in helping Virginians keep their loved ones in their home as long as possible and provide greater options for both aging adults and adults with disabilities.”

What the statement does not mention is that the grant was approved by Congress as part of the new federal health care law. The White House distributed a parallel press release Wednesday announcing the $68 million grant program and touting it as one of the benefits of the new law.

When pressed by the blog about this inconsistency, McDonnell explained that he’s accepting this money because it helps seniors with disabilities in his state and extends an existing program:

This money merely continues existing senior programs in Virginia that have consistently received federal funding. Some, but not all, of the funding in question this time around was included in the larger health care bill that contained the administration’s health care reform provisions. The governor opposed federal health care reform, and still does. But he’s not going to stop funding important programs for seniors and people with disabilities just to prevent Democrats from playing politics. That’s the difference between Richmond and Washington. Down here, we actually are focused on getting things done.

By this logic, McDonnell should expand the existing Medicaid program to cover lower income residents and implement other provisions of the bill which would directly help the one million or so Virginians who are uninsured. After all, Virginia has already accepted planning grants to help establish the exchanges and funds to review insurance premiums — both of which don’t continue existing programs.