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Health-reform advocates have little to fear from judge's ruling

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Dec. 13 (Bloomberg) -- Senator Benjamin Cardin, a Maryland Democrat, talks about U.S. District Judge Henry Hudson's ruling that the Obama administration's requirement that most citizens maintain minimum health coverage is unconstitutional. Cardin, speaking with Peter Cook on Bloomberg Television's "Bottom Line," also discusses tax policy and the "Don't Ask, Don't Tell" policy. (Source: Bloomberg)

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By Ezra Klein
Washington Post Staff Writer
Monday, December 13, 2010; 10:46 PM

U.S. District Judge Henry E. Hudson, a George W. Bush appointee (and part-owner of a Republican campaign-consulting firm that fought the health-care overhaul legislation), has, as expected, ruled the individual mandate unconstitutional. So why are reform advocates so unexpectedly pleased?

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There are two reasons, but first, let's put this into context. Hudson's ruling is the third from a district court so far. Previously, Judge Norman Moon found the mandate constitutional, and so did Judge George Steeh. Steeh and Norman were Clinton appointees, which is to say that the rulings have been proceeding along predictably partisan lines.

Hudson ruled against the government, but he didn't stop it. He refused the plaintiff's request for an injunction against the legislation's continued implementation.

That means the government can carry on setting up the legislation even as the legal process continues to work itself out. And, second, he refused to overrule anything but the individual mandate.

The real danger to health-care overhaul is not that the courts will strike down the individual mandate. That would be a problem, but there are a variety of ways to restructure the individual mandate such that it doesn't penalize anyone for deciding not to do something (which is the core of the conservatives' legal argument against the provision).

Paul Starr, who worked on Bill Clinton's effort to reform the health-care system, has proposed giving people the right to opt out of the mandate if they agree to be ineligible for the subsidies or insurance protections for five years. This policy problem, like most policy problems, can be worked out.

The danger was that, in striking down the individual mandate, the court would also strike down the rest of the bill. That's exactly what the plaintiff had asked Hudson to do. But the judge pointedly refused, noting: "The Court will sever only Section 1501 [the individual mandate] and directly-dependent provisions which make specific reference to 1501."

That last clause has made a lot of pro-reform legal analysts very happy. Go to the text of the health-care law and run a search for "1501." It appears exactly twice in the bill: In the table of contents and in the title of the section. There do not appear to be other sections that make "specific reference" to the provision, even if you could argue that they are "directly dependent" on the provision. The attachment of the "specific reference" language appears to sharply limit the scope of the court's action.

Another interpretation says that Section 1501 relies on Section 5000A of the Internal Revenue Code, which contains the mandate's enforcement mechanism, and so that was the part Judge Hudson meant to identify. But 5000A isn't mentioned in the insurance regulations, which are the only pieces of the bill that plausibly rely on the mandate for their effectiveness. So pretty much any other part of the bill you can think of fails either the "directly dependent" or the "specific reference" test.

Hudson will not have the last word on this. Anthony Kennedy will. The disagreements between the various courts virtually ensure that the Supreme Court will eventually take up the case. But right now, the range of opinions stretch from "the law is fine" to "the individual mandate is not fine, but the rest of the law is." That could create problems for the legislation if the mandate is repealed and Republicans block any attempts at a fix, but it's a far cry from a world in which the Supreme Court strikes down the whole of the health-care law.

It might, however, be a worse world for Republicans. The individual mandate began life as a Republican idea. Its earliest appearances in legislation were in the Republican alternatives to the Clinton health-care bill, where it was co-sponsored by such GOP stalwarts as Bob Dole, Orrin G. Hatch and Charles E. Grassley. Later on, it was the centerpiece of then-Gov. Mitt Romney's health-reform plan in Massachusetts, and then it was included in the Wyden-Bennett bill, which many Republicans signed on to.

It was only when the individual mandate appeared in President Obama's legislation that it became so polarizing on the right. The political logic was clear enough: The individual mandate was the most unpopular piece of the bill (you might remember that Obama's 2008 campaign plan omitted it, and he frequently attacked Hillary Clinton for endorsing it in her proposal). But as a policy choice, it might prove disastrous.

The individual mandate was created by conservatives who realized that it was the only way to get universal coverage into the private market. Otherwise, insurers turn away the sick, public anger rises, and, eventually, you get some kind of government-run, single-payer system, much as they did in Europe, and much as we have with Medicare.

If Republicans succeed in taking it off the table, they may sign the death warrant for private insurers in America: Eventually, rising cost pressures will force more aggressive reforms than even Obama has proposed, and if conservative judges have made the private market unfixable by removing the most effective way to deal with adverse selection problems, the only alternative will be the very constitutional, but decidedly non-conservative, single-payer path.


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