The trap the Supreme Court set for Democrats’ best health care ideas

Long after Trump is gone, his legacy could leave millions uninsured.

President Donald Trump speaks in the Rose Garden of the White House White House in Washington, Monday, April 10, 2017, during a public swearing-in ceremony for Supreme Court Justice Neil Gorsuch. (AP Photo/Evan Vucci)
President Donald Trump speaks in the Rose Garden of the White House White House in Washington, Monday, April 10, 2017, during a public swearing-in ceremony for Supreme Court Justice Neil Gorsuch. (AP Photo/Evan Vucci)

Sen. Brian Schatz (D-HI), Vox’s Sarah Kliff and Jeff Stein report, has a smart new plan to improve America’s health care system: allowing ordinary health insurance consumers to buy into Medicaid.

The proposal combines many of the beneficial aspects of former President Barack Obama’s original proposal for a public health plan — a government backstop for people who can’t find good insurance on the private market, a benchmark plan that can potentially drive private insurers towards better practices through competition, a step toward universal single-payer — while improving on other parts of Obama’s proposal. Allowing relatively affluent Americans to buy into Medicaid would enable them to step into existing health programs, rather than requiring the government to build a new health plan from the ground up.

But Schatz’s idea also faces a serious obstacle: the Supreme Court of the United States.

At best, the proposal will need to be coupled with major changes to the existing Medicaid program or it will risk leaving people in many red states out in the cold. At worst, it could be struck down by conservative judges eager to find novel ways to thwart Democratic health proposals.

These roadblocks aren’t specific to Schatz’s legislation, either. These type of obstacles are likely to plague any proposal, whether it’s a full-on single payer plan or an incremental step in that direction, offered by progressive lawmakers hoping to expand health coverage to the millions still left without it after Obamacare.

There are some steps that Schatz and others can and should take to reduce the likelihood that the Supreme Court will blow up well-laid plans — but in the age of Neil Gorsuch, there are also few guarantees.

The Medicaid problem

In the early days of 2009, when Obama was a new president and liberals’ long-thwarted ambitions for health reform were about to become a reality, the idea that Obamacare could be vulnerable to a constitutional challenge was the furthest thing from Democratic lawmakers’ minds.

The constitutional battles over the New Deal and the Civil Rights Era ended in a widely embraced truce. No less a conservative icon than Justice Antonin Scalia was at peace with that truce, penning a 2005 opinion affirming Congress’ broad power to enact economic regulation. Even on the eve of oral arguments in the first Supreme Court challenge to the Affordable Care Act, an American Bar Association poll found that 85 percent of legal experts expected the Court to uphold the law.

The Obamacare litigation, however, proved to be anything but a cakewalk for health reform’s defenders. Though the bulk of the law was (barely) upheld, the Court took a big bite out of Obamacare, permitting states to opt out of the law’s Medicaid expansion and costing millions of Americans health coverage in the process. NFIB v. Sebelius, the case that nearly toppled the Affordable Care Act, now stands as a warning that the Supreme Court is a political institution that will not always honor settled doctrine in highly charged cases.

The Court’s decision to let states opt out of the Medicaid expansion — a decision joined by seven justices — was itself a very surprising development. In essence, NFIB took a largely academic doctrine with no practical world application and made it real.

Medicaid functions as a partnership between the federal government and the states, with the federal government funding the bulk of state-run health programs — so long as the state agrees to operate those programs in compliance with certain conditions. In its 1987 decision in South Dakota v. Dole, the Court did announce that a “financial inducement offered by Congress might be so coercive” upon the states “as to pass the point at which ‘pressure turns into compulsion,’” but the Supreme Court had never actually invoked this limit to strike down a federal grant program — until NFIB.

The most obvious implication of NFIB for Schatz’s proposal is that Congress most likely cannot require states to offer a Medicaid buy-in if they don’t want to. Like the Obamacare Medicaid expansion, Schatz’s buy-in must also be optional for states.

As Kliff and Stein report, Schatz isn’t even attempting to find a way around this problem. The senator’s bill “would give all states the option of opening up their Medicaid programs to uninsured Americans who wish to purchase coverage,” rather than attempting to make the new buy-in mandatory.

The potential solutions

If Democrats manage to take back Congress and the White House, there’s no reason they need to concede that a Medicaid buy-in, or even the Medicaid expansion, must be done on a state-by-state basis.

One possibility is simply to nationalize Medicaid — transforming it into a fully federal program like Medicare that is both operated by the national government and funded entirely through federal taxes.

At least on the surface, such a reform would be expensive. Currently, states pay a share of Medicaid expenses, although the federal government picks up the bulk of the costs. So federalizing Medicaid would increase federal spending by forcing the national government to pick up the state’s share of these costs.

As a practical matter, however, these costs would likely balance out. Yes, federalizing Medicaid would require the federal government to spend more money (and, to collect more taxes to cover those costs), but it would also relieve the states of their share of the Medicaid burden (and permit them to lower taxes).

Another solution would be to model Schatz’s Medicaid buy-in (and, potentially, Obamacare’s Medicaid expansion), after the Obamacare exchanges.

Under the Affordable Care Act, states have the option to set up and operate an exchange where individuals can buy health insurance. Should a state elect not to do so, however, the federal government steps in and sets up an exchange for that state’s residents. Thus, the federal government acts as a backstop against states that do not want to participate in the Obamacare exchanges, ensuring that no one loses out on health care due to state-level resistance to the law.

Schatz could incorporate a similar mechanism into his Medicaid buy-in proposal — or his bill could amend Obamacare to create such a federal backstop for the Medicaid buy-in. Such a backstop would not only protect individuals from governors and state lawmakers with ideological objections to expanding Medicaid, but also help insulate Schatz’s proposals from a challenge in the Supreme Court.

It is well established that Congress may set up a federally run health care program. Indeed, it would be difficult to justify a court decision striking down a federal backstop for Schatz’s Medicaid buy-in without also striking down longstanding federal health programs such as Medicare.

As a general matter, liberal lawmakers could try to mitigate the likelihood their work will be struck down by the Court for frivolous reasons by passing laws that closely resemble other legislation that at least one conservative justice is likely to be reluctant to disturb.

The genius of the plaintiffs’ arguments in NFIB is that it successfully convinced the Court’s conservative wing that Obamacare is “unprecedented” (libertarian law professor Josh Blackman even wrote a book with that title chronicling the conservative effort to take out the law). The plaintiffs’ lawyers in NFIB effectively told the justices that this case was a freebie: If Obamacare was unlike all other laws, that meant the justices could find a way to strike it down without risking harm to other, well-entrenched and popular legislation.

If lawmakers like Schatz want to prevent their work from experiencing a similar fate, they should try to reduce opportunities to label their bills “unprecedented.”

The chaos factor

If Schatz or other lawmakers are looking for ways to expand health care to more people, these paths forward represent the good news. The bad news, however, stems from the hard lesson Obamacare supporters learned after NFIB.

Very few people took that lawsuit seriously because there was very little in existing doctrine that suggested it should be taken seriously. But that ultimately didn’t matter. The case nearly took out once of the most transformative laws since the Great Society.

The fact that existing doctrines do not permit the Supreme Court to strike down a new health care law will not necessarily prevent the Supreme Court from striking down a new health care law, especially if Donald Trump gets to appoint more people like Neil Gorsuch to the Court.

Should Trump get to make more appointments to the Supreme Court, there may not be anything that can save legislation that is strongly opposed by Republican partisans.

Consider King v. Burwell, a 2015 lawsuit arguing that the Obamacare exchanges’ federal backstop should effectively be dismantled because of a provision of the law which, if read out of context, seemed to suggest that the law was written to sabotage itself. It was a ridiculous argument, made all the more absurd by the fact that the King plaintiffs argued — largely without evidence — that the Obamacare exchanges were intentionally designed to have a self-destruct button that could be pressed by Republican governors and state lawmakers who hated the law.

Nevertheless, three justices — Justices Antonin Scalia, Clarence Thomas, and Samuel Alito — signed onto the plaintiffs’ legal argument in King. It’s a warning that Thomas and Alito may be willing to embrace any theory that undermines a health law hated by conservatives.

Meanwhile, Gorsuch, who now occupies Scalia’s seat, is well to Scalia’s right. If Trump gets to replace two more justices, and if these justices are in the mold of Gorsuch, it is unclear that any major legislation signed by a Democratic president would survive a veto by the Supreme Court.