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Governor Rick Scott expresses his disappointment about the Supreme Court’s decision concerning the healthcare bill at a news conference on Thursday, June 28, 2012, in Tallahassee, Florida. (AP Photo/Steve Cannon)
Nearly 1 million Floridians will be denied access to Medicaid they would have otherwise received under the Affordable Care Act if Governor Rick Scott gets his way. The Supreme Court ruling last week on the law made it easier for states to opt out of an expansion, and Sunday night the governor’s office e-mailed a statement from Scott that “since Florida is legally allowed to opt out, that’s the right decision for our citizens.”
According to the Kaiser Family Foundation the Medicaid expansion in Florida would have covered 951,622 people that currently don’t have insurance. The federal government would have picked up the entire tab for the first three years, and by 2020 would still be paying 90 percent. But Scott—a former CEO of a large hospital chain who rode to Tea Party stardom and the governor’s mansion by being a rabid opponent of “Obamacare”—apparently finds the political posturing more important.
Similarly in South Carolina, Governor Nikki Haley—another Tea Party darling elected along with Scott in 2010—said her state would opt out as well. “We’re not going to shove more South Carolinians into a broken system,” said a Haley spokesman. The expansion there would have provided coverage to 330,932 people.
These are no doubt worrying developments, but it’s important to note that this could amount to nothing but saber-rattling by politicians dedicated to the Tea Party cause. It’s not up to either Haley or Scott to reject the expansion—it must be done by the state legislatures, and while both are controlled by Republicans and the leadership of the governor matters, it’s far from a done deal. The Medicaid expansion won’t take place until 2014 and there are many factors that could keep the expansion on track in both states, and the others that are contemplating an opt-out.
Let’s start with the raw logic of participating in the expansion, which I will grant up front clearly has no place in the decision making of Scott and Haley, nor in the Tea Party–driven hysteria around the law. But here it goes anyway: if you’re interested in fiscal conservatism and maximizing value to taxpayers, it’s a good call to participate in the expansion.
According to the Urban Institute, in 2008 $10.6 billion in state and local dollars went to providing emergency healthcare for the uninsured. The ACA is projected to expand coverage to 33 million people by 2022, in large part through this Medicaid expansion, and so participation will ultimately help rein in state budget deficits over the long term. And the ultimate cost for participating is only a 2.8 percent increase in state Medicaid spending.
Also: taxpayers in South Carolina, Florida and elsewhere will be funding the Medicaid expansion through their federal taxes anyhow. It’s just a question of whether they will then be denied the benefit of those tax dollars—and then get screwed even further when state budget problems get worse because of the higher levels of uninsured, and vital services are cut.
But again, Scott and Haley clearly hold Tea Party rhetoric and positioning supreme and won’t engage with these facts. What might yet stop them, however, are powerful hospital lobbies.
As Abby Rapoport chronicles, when the administration was negotiating with the hospital industry to support the ACA it actually got them to agree to a cut in Medicare and Medicaid rates—and the reward was a Medicaid expansion. Charity care is a massive drain on the hospital industry and they want more people on the Medicaid rolls.
But now hospitals in South Carolina and Florida are looking at a rate reduction without the corresponding increase in Medicaid coverage.
Hospital lobbies are always powerful in state politics, and could yet convince state legislators to buck the ideological governors and support an expansion. Combine the big industry money with a powerful narrative about denying coverage to hundreds of thousands of people, plus the diminishing returns of rallying against Obamacare—particularly after the fall elections—and by 2014 it’s possible Florida, South Carolina and other states will end up participating. They’re just going to make a lot of noise first.
House Oversight and Government Reform Committee Chairman Representative Darrell Issa, R-CA, at the House Rules Committee, on Capitol Hill in Washington, Wednesday, June 27, 2012, to argue procedures as the House of Representatives prepared to vote on whether Attorney General Eric Holder is in contempt of Congress because he has refused to give the Oversight Committee all the documents it wants related to Operation Fast and Furious, the flawed gun-smuggling probe involving Mexican drug cartels. (AP Photo/J. Scott Applewhite)
Have you been ignoring the Fast and Furious scandal? It’s okay. I will confess that for probably too long, I tuned out the brouhaha as just another tempest in the News Corp. teapot and relegated it to the dimly lit area of my brain where Bill Ayers, Vince Foster, Solyndra and others reside.
But with the House of Representatives voting Thursday to hold US Attorney General Eric Holder in contempt—the first time in American history this has happened—the story can’t be ignored any longer.
Yet when one digs into the facts of the scandal—and a terrific piece of journalism in Fortune this week is a great help—it becomes clear that Fast and Furious has been blown completely out of proportion by Republican leaders, and a terrible yet all too common tragedy on the United States’ border with Mexico has been fashioned into an ugly political weapon.
Here’s a condensed version of what Republicans say happened. (I will do my very best here to be completely faithful to their telling; feel free to also check out the Fast and Furious page put together by the majority on the House Oversight and Government Reform Committee, which has led the charge against Holder).
According to Republicans, in fall 2009 the Bureau of Alcohol, Tobacco, and Firearms began a dangerous effort to stop the flow of guns into Mexico under the auspices of Operation Fast and Furious. The ATF officers used a method of investigation called gun-walking, in which they recruited straw buyers in Arizona to purchase and transmit guns south of the border in order to build a stronger case against the bad guys. Officers logged the purchases and gun serial numbers, applied for wiretaps, but never tried to intercept the weapons.
This allowed drug cartels to obtain potentially hundreds of dangerous weapons under the direct eye of federal authorities, a bad idea that turned tragic in December 2010 when US Border Patrol Brian Terry was murdered by bandits wielding a gun that was walked under Fast and Furious.
So the thrust of the GOP storyline is overzealous gun-grabbers at Obama’s ATF took risks that led directly to the murder of a Border Patrol agent.
But the piece in Fortune, in which reporter Katherine Eban interviewed many of the agents involved for the first time ever, completely demolishes this version of events. (It’s worth a full read).
Eban reveals that the ATF never intentionally walked the guns, save one important exception that we’ll get to momentarily. Instead, they were unable to obtain warrants to arrest the purchasers. Prosecutors were extremely wary of arresting straw buyers, either for fear of retribution from the NRA—who hammered ATF in 2005 for seizing guns from a straw buyer—or because they were gun aficionados themselves. One local prosecutor was reportedly seen behind a table at a gun show and was philosophically opposed to those arrests.
So, unable to arrest the buyers, the agent running Fast and Furious resigned his unit to simply tracking the purchases in hopes of using the evidence later. This is a world away from purposefully letting the guns go, and Eban chronicles numerous efforts by the ATF agents to overcome bureaucratic and legal obstacles and arrest the buyers—they just weren’t able to do it.
The one exception is agent John Dodson, who used $2,500 in taxpayer money to buy six guns from a local dealer, passed them to a trafficker, and then took a long vacation. This is the only proven instance of gun-walking under Fast and Furious—and Dodson, incredibly, was the “brave whistleblower” who exposed the entire operation.
Eban reports that Dodson hated his boss Dave Voth because Voth supposedly “treated him like shit.” Dodson disobeyed a direct order from Voth not to walk guns in this manner—and then, a few months later, went to CBS News with allegations that the ATF “ordered” him to walk guns and that in fact it was a common practice there.
CBS News never fully checked out his story, and never talked to Voth—and still hasn’t retracted the piece. Yet neither Dodson nor anyone else has ever proven there were orders to perform gun-walking, nor proven any other episode other that Dodson’s own. (Voth was deeply shocked by Dodson’s actions—a “blow he couldn’t fathom,” according to Eban, who added that he began losing weight and sleep. “There would be no way,” Voth is quoted as saying, “to foreshadow this.”)
What made things worse for the administration—and what made it a target of the House investigation—is that after saying there was no gun-walking at ATF, it flipped, admitted there was, and apologized. There was good reason to initially claim there was no gun-walking, since Eban documents how nobody high up at ATF knew about it, much less people at the Department or Justice or the White House. (Obama has said he learned about Fast and Furious on the news).
But when confronted with the evidence of Dodson’s own gun-walking, the administration appears to have panicked. (See also Jones, Van and Sherrod, Shirley). High-ranking officials resigned and apologies were made.
The documents that Issa is now after focus on that period in 2011 between when the administration said there was no gun-walking and then changed its mind. The express implication is that there was a cover-up—that Holder and possibly the White House knew about gun-walking all along (maybe even encouraged it) and only admitted the practice when forced.
Representative Darrell Issa’s committee has pushed and pushed for documents relating to that period, receiving almost 7,000 pages—none of which contain any evidence of a cover-up.
The committee pushed until they finally hit the bottom of the barrel, requesting documents that the administration says are privileged and can’t be released. This relies on a perhaps overly broad interpretation of executive privilege that should trouble advocates of transparent government—but also a well-established one Issa knew would be invoked.
Holder has directly accused Issa of deliberately “provok[ing] an avoidable conflict between Congress and the Executive Branch,” and it’s easy to see why Republicans would be motivated to hold an Obama official in historic contempt only months before elections. Republicans already harbor a deep antipathy towards Holder anyhow, for everything from DOJ’s failure to defend DOMA to strong action to combat voter ID laws.
It now seems unlikely this will go anywhere—following the contempt vote, the US Attorney for the District of Columbia will consider whether to prosecute, but it’s hard to imagine much of a case here. In addition, Republican leaders seem wary to go very far with Issa’s crusade for fear it makes them look petty. House Speaker John Boehner and his leadership team initially didn’t want a contempt vote, and when they finally scheduled one, it was buried only hours after the biggest Supreme Court decision in years.
On Wednesday, conservative pundit Charles Krauthammer appeared on Fox News and tried to temper the network’s flogging of the story, saying it made Republicans look bad and predicting leaders would “get off this train as soon as they can.” The public doesn’t seem to be on board either—a Fox News poll with some very suggestive language still only found 38 percent of voters think there’s a White House cover-up. Despite what Issa thinks, Watergate this ain’t.
The Affordable Care Act didn’t survive entirely as passed—somewhat lost amidst the intense focus on the individual mandate was a ruling that part of the law’s Medicaid expansion was unconstitutional. The Supreme Court’s modification of the law probably won’t have a fundamental, long-term impact, but does make it easier for rogue Republican governors to exempt their states from participating in the expansion—and could cost millions of low-income, uninsured Americans a chance at government health care.
First, a brief refresher on what the ACA did to Medicaid: as you may know, the program is run jointly by the states and the federal government to provide health care to (very) low-income Americans. States set up their Medicaid system according to federal regulations and get most of the money from the feds, while funding some of the program themselves. Healthcare reform aimed to expand coverage, in part, by expanding Medicaid to cover people up to 133 percent above the poverty line (as compared to 63 percent now)—that is, at or below income of $30,700 for a family of four. This expansion would extend coverage to 16 million additional people by 2019.
To facilitate this expansion, the law offered states 90 percent of the cost, coupled with severe penalties if they chose not to participate—states would lose almost all existing federal grants for the program. This made it extremely unlikely that any governor or legislature, no matter how red, would essentially trash Medicaid in their state by opting out of an expansion.
Twenty-six states then challenged that part of the law, arguing that it unconstitutionally coerced them to join a federal program.
What the Court ruled, after much internal maneuvering, was that while the federal government could offer incentives for states to expand Medicaid, the penalties for not doing so were indeed unconstitutionally coercive.
The invaluable SCOTUSblog chronicles the horse-trading that took place. Liberal justices Sotomayor and Ginsburg believed the entire expansion was constitutional and should be upheld in full. On the other hand, Justices Scalia, Alito, Thomas and Kennedy believed the entire expansion should be struck down—this is consistent with their opinion that the law should be invalidated in full. Meanwhile, Chief Justice Roberts, joined by Justices Kagan and Breyer, believed that withholding the money was unconstitutional, but offering the incentives to expand was not.
The logjam was broken when Sotomayor and Ginsburg technically joined the Roberts group—they voted that if indeed withholding federal funds was unconstitutional, then only that part of the law should be struck down. Hence the result—states will get almost full funding for a Medicaid expansion if they join, but will see no penalty for not doing so.
Long-term, this is unlikely to have any effect—what state would turn down a Medicaid expansion where the federal government pays for 90 percent of it? A decade from now, it’s incredibly hard to imagine that happening.
But the question is whether in the short-term, red-state governors will slide through the crack opened by the Supreme Court to pull out of the expansion, as the Republican Party still finds it politically valuable to fulminate and rebel against the dreaded Obamacare.
The stakes here are not small. A ProPublica analysis of an Urban Institute study found the twenty-six states that sued the federal government contain 8.5 million uninsured people who would be covered under the expansion—more than half of the total number expected to benefit.
The decision is only hours old, and as yet, no Republican governor has announced that he or she will reject the Medicaid expansion. But if anyone does it will have real impacts on many uninsured in that state—in Texas, for example, Rick Perry could yank Medicaid away from 1.8 million people who would get it under an expansion. The biggest question for healthcare reformers and the uninsured going forward is whether Perry and his cohorts will actually pull the trigger.
Read more of The Nation's coverage of the ruling on the Affordable Care Act:
David Cole on how and why Chief Justice John Roberts held up the individual mandate.
Ben Adler on the Republicans' renewed attacks on Obamacare.
John Nichols on the ongoing push for Medicare-for-all.
Representative Keith Ellison, left, smiles as Democrats hold a press conference outside the Supreme Court on Thursday. Photo by George Zornick
The deeply hated “Obamacare” survived almost entirely intact, and—once they finally understood what happened, after furiously refreshing their smartphones or participating in a wonky game of telephone—the assembled Tea Partiers outside the Supreme Court appeared shellshocked. The group prayers and chants of “Freedom forever, tyranny never!” briefly fell silent.
Soon, their elected leaders appeared to tell them how angry they ought to be. Tea Party star Representative Steve King, who has previously warned that the Affordable Care Act was an attempt to “nationalize our soul,” said that “What I’m seeing is making me sick to my stomach.” Representative Jeff Landry called it a “tragic day for our republic.” Representative Louie Gohmert—who believes that healthcare reform “is going to absolutely kill senior citizens” and will “put them on lists and force them to die early”—made a thinly veiled call to impeach Obama, members of Congress who support the reforms, and even Supreme Court justices--and he made that call explicit moments later, away from the microphones. (Representative Phil Gingrey spoke next and quickly disavowed any push to remove Supreme Court justices.) Michele Bachmann called the decision incomprehensible and sad.
The crowd quickly came back to life, with loud proclamations that they would not obey the now-constitutional mandate. This energy and anti-Obamacare fervor was crucial to the Republican takeover of the House in 2010, and the Republicans outside the Supreme Court were eager to rev it right back up again.
Accordingly, House majority leader Eric Cantor quickly announced that the House will hold a vote on a full repeal of healthcare reform on July 11. This was the Republican plan regardless of what happened—repeal anything left standing—and this vote would have proceeded unless the Court rendered it unnecessary by striking down the entire law (which, notably, four justices advocated in their dissent).
Mitt Romney, speaking nearby—after his campaign announced it had already raised $200,000 in the brief period after the ruling, a sign that their strategy could be working—pledged to push for a full repeal if elected president.
Meanwhile, Democrats celebrated. The Congressional Progressive Caucus was joined by Senators Tom Harkin and Chris Coons for a press conference on the steps of the Court that was upbeat but somewhat restrained, and in a fitting parable for how the entire healthcare debate played out, was almost completely drowned out by Bachmann shrieking into a megaphone a few yards away.
The Democratic message was clear: this is a big victory, but there’s still work to be done on healthcare reform. “This law is a critical step in the right direction; I have likened it to a starter home, suitable for improvement,” said Harkin in a statement. “I look forward to working with my colleagues to make sensible changes as we continue to implement the law.” Representative Keith Ellison, co-chair of the Progressive Caucus, heralded the final enshrinement of a healthcare reform after presidents from Franklin Roosevelt to Bill Clinton tried and failed to enact it—yet promised that the CPC would continue to push Congress “forward, never backward.”
We don’t know much about how the US Chamber of Commerce funds its political campaigns. In fact, that’s the essential feature of its operations—as a 501(c)(6) trade organization, the chamber has no obligation to disclose who funds its electioneering campaigns, and so corporations can give massive amounts of money to the chamber without having any fingerprints on the resulting attack ads that hammer Democrats and push for industry deregulation.
But it’s a funny thing—every time we get a glimpse into how the chamber operates, there are whiffs of impropriety.
For years, good-government groups have been raising red flags about potential tax fraud that the chamber may have committed in 2003 and 2004, in which it may have used $18 million illegally funneled through charitable groups to support a campaign to roll back the Sarbanes-Oxley financial regulation, “reform” tort laws, and defeat Democrats in the federal elections. Now, New York Attorney General Eric Schneiderman has taken up the cause, and issued wide-ranging subpoenas Wednesday targeting those transactions. The New York Times aptly calls this the “first significant [investigation] in years into the rapidly growing use of tax-exempt groups to move money into politics.”
There are three players in this alleged scheme—the US Chamber of Commerce itself and these two organizations:
The Starr Foundation. This is a 501(c)(3) charitable group that, during the period in question, was headed by AIG chairman Maurice Greenberg. In the mid-aughts—before he was forced to resign from AIG amidst an investigation by another New York attorney general, Eliot Spitzer—Greenberg was a vocal opponent of financial regulation and Sarbanes-Oxley in particular, saying the law had a “chilling effect on the economy” and would discourage financial firms from “risk-taking.” He also vowed to wage “all-out war” to push for tort reform that limited class-action lawsuits. (As an insurer, AIG had good reason to hate big lawsuits, and in 2003, AIG lost $1.8 billion and blamed “egregious jury awards and settlements for litigation.”)
The National Chamber Foundation. This is also a 501(c)(3) charitable organization, affiliated with the US Chamber of Commerce, that bills itself as a think tank that “drives the policy debate on key topics and provides a forum where leaders advance cutting-edge issues facing the US business community.” Interestingly, however, 86 percent of the NCF’s assets are outstanding loans to the chamber itself.
As 501(c)(3) organizations, the Starr Foundation and NCF are strictly prohibited from engaging in political activities. But an exhaustive analysis of the two groups’ public filings by the good-government group US Chamber Watch revealed a very intriguing flow of money in 2003 and 2004.
First, the Starr Foundation gave over $18 million to the NCF in a series of grants over those two years. At the same time, NCF gave the Chamber $18,137,127 in loans.
While receiving this money, the chamber was launching a massive lobbying and advertising campaign that quite notably dovetailed with many of Greenberg and AIG’s political priorities, including rolling back Sarbanes-Oxley and creating nationwide tort reform.
US Chamber Watch alleged a clear pattern of misconduct. Its theory was that the Starr Foundation, run by the head of AIG, funneled $18 million of "charitable" money to the US Chamber to advance AIG’s political goals, using the NCF as a go-between to disguise the intent. It is expressly illegal for charitable money from 501(c)(3)s to be used for political goals, but that may be what happened.
(While it’s clear why the Starr Foundation would want to hide the potentially illegal political giving, it’s not yet clear to me why Greenberg couldn’t just have AIG give the money directly to the chamber, which alas would have been totally legal. If the theories are true, perhaps Greenberg had additional money parked at the Starr Foundation that he thought would augment the money AIG was already likely giving the chamber, and in his zeal to fight financial regulation, pushed it through these transactions).
This whole theory might fall apart if the chamber repaid the $18 million in loans to NCF—that could mean the chamber ultimately used its own money for the political campaigns. But in 2010 a chamber spokesperson admitted to the New York Times that the money was “listed…as a loan only in the most technical sense” and “was never intended to be paid back.” The chamber paid no interest on the loan until 2005 and didn’t start paying back principal until after US Chamber Watch started filing complaints with the IRS.
Schneiderman’s office is looking into how the $18 million was accounted for by the chamber and if it was a legitimate loan. He has issued an array of subpoenas targeting e-mails, bank records and other documents.
The ramifications could be huge if the US Chamber of Commerce, easily the biggest lobbying force in Washington, is found to have been engaged in tax fraud. The NCF could have its tax-exempt status retroactively revoked and could ultimately be shut down.
The investigation also dovetails into larger questions of political activities by tax-exempt organizations. The Obama campaign recently filed an FEC complaint about electioneering by Karl Rove’s nonprofit Crossroads GPS, and for years good-government groups have been filing similar complaints with the IRS.
Screwing over young voters is not a particularly wise idea, and much less so with only four months until a presidential election. (It should go without saying that it’s also terrible policy).
Accordingly, Republicans and Democrats in the Senate are approaching a deal to keep federal subsidized student loans—in which the government pays students’ interest while they are still in school—from seeing a 100 percent interest rate increase on Sunday, from the current 3.4 percent to 6.8 percent.
The crucial context here is that Republicans really don’t think the government should subsidize student loans at all, but have been brought along by political realities.
During the debt ceiling showdown last summer, House majority leader Eric Cantor proposed that the government should stop paying loan interest rates while students are in school, and that the burden should fall to students themselves. That would effectively end the Stafford subsidized program at issue now. The conservative Club for Growth is still advocating an end to the program, and will be scoring the vote.
House Republican leaders initially said they would try to prevent the rate increase, but were pushed forward when Democrats started beating them up—and when even Mitt Romney said he supported an extension of the low rate.
Accordingly, House Speaker John Boehner whipped up a bill that would extend the low rate and pay for it by raiding preventive care programs created by the healthcare reform, which Republicans derisively refer to as an “Obamacare slush fund.” Thirty House Republicans still voted against that proposal, but it passed.
Last month in the Senate, Harry Reid matched the partisan pay-for with one of his own: he proposed a bill that extended the low rate and paid for it by ending a loophole that allowed very wealthy Americans to hide their income and pay less payroll taxes.
The stalemate stood here for weeks, and slowly evolved towards a compromise. Republicans dropped the idea of raiding preventive care money, Democrats dropped the proposal to close the tax loophole, and now we’re looking at pay-fors involving pension funding and tinkering with the post-graduation interest accrual for students. A vote could come as early as today in the Senate.
That’s welcome news, but I can’t help but wonder if Democrats gave in to easy in the name of getting a deal done. They had two winning political issues on their side—helping students and taxing the wealthy. Would Republicans have dared to sacrifice help for students, particularly on the altar of less funding for preventive healthcare? We’ll never know.
The push to remove JPMorgan Chase CEO Jamie Dimon and other financial-sector executives from the Federal Reserve Boards of Governors came inside the walls of the Fed on Monday, as noted economist Simon Johnson presented officials there with a petition and urged them to change the structure of the important boards.
At the twelve regional Federal Reserve banks, there are nine-member boards of directors. Six of the seats are selected by banks from the region—three directors to represent their interests, and then three directors, picked by the banks, that will allegedly represent “the public’s interest.”
Dimon sits on the Federal Reserve Bank of New York and has become a poster boy for activists seeking to keep bankers off the Boards of Governors. The petition that Johnson, a professor at the Massachusetts Institute of Technology, presented to Federal Reserve staffers has nearly 38,000 signatures, and asks that he resign or be removed.
The essential conflict of interest is that the Federal Reserve is charged with maintaining the safety and soundness of Wall Street banks, and executives at those institutions often resist such changes in the name of riskier gambles and bigger profits. Moreover, in recent years the Fed has handed out over $4 trillion in zero-interest loans to many of those banks. (JPMorgan Chase received $390 billion in emergency funds during the bailouts, and $29 billion to buy Bear Stearns).
“Frankly, I think Jamie Dimon should have resigned in the spring of 2008 when JPMorgan Chase acquired Bear Stearns with financing provided in part by the Federal Reserve,” Johnson said on a conference call shortly after his meeting. “I think to any outsider, anyone with knowledge of how corporate governance operates in general in the United States, or best practices around the world, this looks like a related-party transaction, and typically you would step down from the board of directors when something like this was in the works.
“It is surprising and very uncomfortable to many people, including many people who are close to the Federal Reserve system, that Jamie Dimon has continued in this position.”
But while Johnson was happy that Federal Reserve staffers, including General Counsel Scott Alvarez, met with him, he wasn’t necessarily encouraged by the discussion.
“I have not felt optimistic about either Jamie Dimon resigning or the Federal Reserve, both at the New York level or the Board of Governors level—changing its policies in a substantial way, in a way that would help to restore confidence in the integrity of the system,” Johnson said. “I’ve not felt that optimistic for quite some time, and there’s nothing that happened today, unfortunately, that changed my lack of optimism.”
What should be done if the Supreme Court strikes down the Affordable Care Act’s individual mandate?
If the Court does anything—which, of course, it should not—it would likely only remove the mandate and possibly the associated insurance company regulations and subsidies for purchasing insurance. Striking down the entire law would be a dramatic and unlikely step, even for this conservative bench.
So where would the law stand if the mandate disappears, and what could be done to patch it?
Many Democrats and their political allies have been publicly and privately talking up the benefits of the Affordable Care Act outside the mandate—like the Medicaid expansion, the ongoing creation of state exchanges for buying health insurance, the various cost-control measures in the bill—and downplaying the severity of losing it.
“There’s been entirely too much attention paid to the mandate, and not enough attention paid to what the law will do and the ways that it’s already benefiting millions and millions of Americans,” Ethan Rome, executive director of the progressive coalition Health Care for America Now, which was instrumental in getting the law passed, told me in a phone interview. “The sport of speculation about what the Court will do is in overdrive, and as part of that, people are overthinking how to make the law work if one thing or another about it is changed.”
But there’s no doubt that if the Supreme Court indeed guts the mandate, it would create a political opportunity for more reform of the healthcare system. Seventy-seven percent of Americans want another reform attempt even if part of the law is struck down, and President Obama has been privately telling donors his administration would probably make another run at improving it. House minority leader Nancy Pelosi is on board too. And who really thinks that, even if it remains untouched, the Affordable Care Act represents the pinnacle of health reform?
Here’s a quick look at some policy options to move the ball forward on healthcare reform if the mandate is struck down:
Helping the uninsured to buy coverage. The idea behind a mandate was that by increasing the number of people buying insurance, it would lower the costs for everyone else—both by broadening the base of premium payments, and reducing the external costs of the uninsured seeking treatment in emergency rooms. More urgently, since the ACA required insurance companies to provide coverage to people with pre-existing conditions, it had to have a mechanism to ensure that people wouldn’t just wait until they got sick and then purchase insurance.
But if the mandate is gone and you can’t force people to buy coverage, there are several ways you might be able to entice them to do so:
Subsidies. In the House version of the Affordable Care Act, a surcharge on the wealthy would help fund subsidization of health insurance for people who couldn’t afford it. Annual household income in excess of $350,000 but less than $500,000 would be have a 1 percent surcharge attached; annual household income in excess of $500,000 and less than $1 million would have a 1.5 percent surcharge; and annual household income in excess of $1 million would have a 5.4 percent surcharge. Thursday on Capitol Hill, House minority leader Nancy Pelosi said that in the event the mandate is struck down, “there could be something passed in the Congress, similar to what we had originally in the House bill, which was a surcharge on the wealthy to pay for aspects of [coverage].”
Employer auto-enrollment. Under the ACA as it stands now, large employers (with 200 or more employees) must automatically enroll workers in a health insurance plan, though the workers can opt out if they want to. By making enrollment the default position, we can catch more young and healthy people who might decline to select a plan in the name of a bigger paycheck. One idea for further expanding coverage without a mandate is to extend auto-enrollment to smaller employers, and possibly even ones that don’t offer health insurance. In the words of the Government Accountability Office, this might further “overcome individuals’ inertia in choosing a plan.” If an employer doesn’t offer coverage, it would be forced to help an employee enroll in a plan through the state exchange markets. While it would no doubt help patch some holes left by the absence of a mandate, there’s an obvious problem to this solution—it affects only people with a job, and most people without health insurance are unemployed.
Age rating. The government could entice young and healthy people to buy coverage by allowing health insurers to charge them less, which is known as age rating. The ACA allows insurance companies to charge the elderly only a maximum of three times more than the young, but if that ratio were revised upward, it could make health insurance more attractive to the healthy. But the flipside is that it would necessarily make coverage for the elderly even more expensive, and as Ezra Klein notes, age rating hasn’t done much for affordability of coverage in New Jersey, where it’s been in place since 2008.
Penalties for not buying coverage. Aside from helping people buy coverage, you can penalize them for not doing so. That’s what the individual mandate does, instituting penalties ranging from $695 for poor Americans to $12,500 for wealthy ones for not obtaining health insurance. You can create penalties in other, smaller ways without a mandate—though we should note that these aren’t particularly progressive options. If you think of the uninsured as being all free-riders, then penalties make sense. But again, a majority of the uninsured are either too poor to afford insurance or don’t have a job that offers it, and are often both. So penalizing them further isn’t terribly helpful.
State-level mandates. If the Supreme Court rules that the federal government cannot mandate health insurance coverage, it doesn’t mean that individual states can’t do it. Many probably would, especially if the pre-existing condition regulations remain in place. Even Governor Scott Walker—a rabid opponent of “Obamacare”—said recently that he would explore “guaranteed issue” of health insurance in Wisconsin. “Certainly not a federal mandate,” Walker. “[But] I think those are debates people can have at the state level.”
Tax penalties for uncompensated care. If the federal government wasn’t allowed to institute a broad set of penalties for not buying coverage, it could create new taxes for going to an emergency room and receiving charity coverage without insurance. The GAO outlines a few ways to do this: by instituting the tax on everyone, but waiving it when an individual presents proof of insurance, or by taxing the uncompensated care directly. This would indeed make free-riders more likely to buy insurance, to avoid heavy tax penalties, but if you consider someone who lost their job and thus their health insurance, laying extra taxes on them after a heart attack really isn’t a wonderful policy.
Open enrollment periods. If you receive coverage through your employer, you’re probably familiar with these. Health insurance companies and employers will join together to offer periodic and finite enrollment periods for insurance of varying cost and coverage—the idea is to prevent people from picking the cheapest plan and then bumping up their coverage if they get sick. One approach to creating a soft mandate is to expand open enrollment periods—the ACA already institutes annual open enrollment, but some proposals advocate making open enrollment happen only every two years or even every five years to create even stronger incentives to get insurance. One could still buy coverage after open enrollment, but would face financial penalties for doing so. (Such proposals have exemptions for people with “qualifying life events,” i.e., becoming an adult, giving birth, changing jobs or getting a divorce).
Making health coverage part of your credit rating. This is contained in a GAO report outlining several post-mandate policy options dreamed up by a variety of experts, academics and industry officials. I’m only including it here to point out what an awful idea it is. The proposal is to essentially lower your credit score if you don’t have health insurance. Yes, it would probably bring some free riders into the insurance pools, but destroying the credit of unemployed people with no health insurance is terrible public policy. Another idea in the GAO report is to make possession of health insurance a condition for receiving certain government benefits, such as a federal college loan. This is terrible for the same reason.
Thinking progressively and outside the box. After considering how regressive penalties for not buying insurance can be, you might realize a dirty little Democratic secret, if you haven’t already: the individual mandate isn’t all that progressive. Yes, it makes the Affordable Care Act work better, and should be preserved. Yes, the Supreme Court would unmistakably enter into a new period of activist overreach if it strikes it down. But remember this was originally a Republican idea.
So what are some truly progressive alternatives to the mandate?
An obvious answer is single-payer health insurance. Former Labor Secretary Robert Reich wrote in March that if the Supreme Court strikes down the individual mandate but leaves the pre-existing condition requirement in place, “Obama and the Democrats should say they’re willing to remove that requirement—but only if Medicare is available to all, financed by payroll taxes.”
The political will for a single-payer system almost certainly doesn’t exist right now, however. (Though Democrats could start nudging towards it, for example by lowering the Medicare eligibility rate to 55).
In the meantime, the public option might be the best viable option for a progressive improvement of the healthcare system—and one that would seem much more attractive if the Supreme Court guts all or part of the ACA. More so than any of the aforementioned incentives, and more so than a punitive individual mandate, the public option would be extremely compelling for the uninsured, offering a lower cost and more protections than most private insurance plans.
In 2010, when it was clear the public option was dead in the Senate, President Obama promised progressives he would return to fight for it later on down the road. He should be held to that promise, particularly if a key part of his bill is struck down—and frankly, even if it isn’t.
As the House Financial Services Committee hearing into recent failures at JPMorgan waned, bank CEO Jamie Dimon finally said what had already been obvious to everyone—he didn’t want to be there. “These are complex things that should be done the right way, in my opinion in closed rooms,” Dimon said. “I don’t think you make a lot of progress in an open hearing like this.” In the closed room, Dimon said, everyone would be “talking about what works, what doesn’t work, and collaborating with the business that has to conduct it.”
Dimon is indeed quite effective in closed rooms. He’s received personal audiences with Treasury Secretary Timothy Geithner to push back against a strong Volcker rule, and his staff has enjoyed several more. The closed rooms at JPMorgan are populated by throngs of former Congressional staffers and even former members. The bank has plied current members with millions in donations, including over $522,000 to the Senate Banking Committee, where Dimon testified last week, and $168,000 to members of the House Financial Services Committee just this year.
This works well for Dimon and his allies. The financial services industry was unable to defeat the Dodd-Frank legislation in public view because overwhelming numbers of Americans supported the bill—it was arguably the only popular piece of regulatory legislation in the Obama era—but Wall Street has operated in closed rooms over the past two years to delay and weaken the rules. Before the London Whale catastrophe, Dimon was on the brink of achieving a weak Volcker Rule that would allow a wide variety of risky proprietary trading.
Dimon admitted during today’s hearing that the moment he realized how large the losses at the bank were, he knew he’d end up in front of Congressional committees and that the Volcker Rule would become a hot topic of conversation. He presumably knew how serious of a problem this would be: a public flogging could revive popular opposition to weak Wall Street rules and draw unwanted attention to the backroom dealings.
This is why last week’s love-fest in the Senate was so troublesome—it was a valuable missed opportunity for Democrats in particular to focus and mobilize public attention towards stronger regulation of the financial sector.
Unfortunately for Dimon, Wednesday’s panel of House members wasn’t nearly as friendly. And though the questioning was somewhat rambling and occasionally misinformed, there were several instances of righteous populist anger focused at Dimon.
Before Dimon even appeared, during a panel of regulatory chiefs, Commodity Futures Trading Commission head Gary Gensler put the problem in easy-to-understand terms.
“The swap market lacks necessary street lamps,” he said. “I think the American public still isn’t safe on these roads until we get the rules of the road in place. I think the America public was bystanders to taking on excessive risk in 2008, and we still have been.”
There was a big headline from the interrogation of the regulators. Each one—from the Securities and Exchange Commission, the CFTC, the Federal Deposit Insurance Corporation, the Office of the Comptroller of Currency, and the Federal Reserve Board of Governors—admitted that they didn’t learn about the losses at JPMorgan Chase until they read about it in the paper. This should focus the attention of the public on the still-inadequate staffing levels and deeper pro-industry philosophies at our top agencies. Journalists were writing about the London Whale positions before it even went bad—why couldn’t the OCC, which has inspectors at the bank, see the same?
Once Dimon appeared, he was battered with populist anger. Representative Gary Ackerman (D-NY) had perhaps the best monologue, about the unnecessary nature of the propriety trading Dimon seeks to protect. He delivered it to an extremely huffy Dimon:
I used to think that all of Wall Street was on the level, that it facilitated investing, that it allowed people and institutions to put their money into something that they believed in and believed would be helpful and beneficial and grow and make money and especially help the economy and on the side create a lot of jobs and be good for our country and good for America.
Now a lot of what we’re doing with this hedging—and you can call it protecting your investment or whatever, but it is basically gambling—you’re just betting that you might have been wrong. It doesn’t help anything succeed anymore, doesn’t encourage anything anymore. It creates the possibility that people say, ‘Do these guys really know what they’re doing if they’re now betting against their initial bet and if you go and hedge against your hedge?—which means you’re betting against your bet against your first bet—it seems to me you’re throwing darts at a dartboard and putting a lot of money at risk just in case you were wrong the first time. I don’t see how that creates one job in America.
It wasn’t just Democrats, either—Republican after Republican filleted Dimon with tough questions about recklessness at his bank and on Wall Street. (The very notable exception was committee chairman Representative Spencer Bachus, who has received more money from JPMorgan Chase than any other donor except one over his career and consistently interrupted even members of his own party when they went too hard on Dimon).
Dimon was asked repeatedly about the dangers of proprietary trading (which he continued to broadly over-over-over define, even saying at one point that “Every time we make a loan, it’s proprietary.”) He was asked why his bank didn’t lend more to small businesses, why he believed his bank wasn’t too-big-to-fail, if his pay would be clawed back because of the big losses, even about why he paid janitors in Houston only $8.35 per hour when he made over $19 million last year. Representative Brad Miller repeatedly pressed Dimon on his oversight of the losses and subsequent statements to investors, which if he answered in the wrong way would put Dimon in danger of prosecution under Sarbanes-Oxley. (He’s theoretically in danger already anyhow).
I think the questioning could have been a little more focused, hitting repeatedly and simply on the issue of proprietary trading. With so many disparate lines of questioning, Dimon was able to use the five-minute time limit and filibuster into the next questioner.
But just as Mitt Romney prefers income inequality be discussed in “quiet rooms,” Dimon would have certainly preferred that this happen in a closed room. He understood the dangers. But it didn’t.
The question is, What comes next? Will reformers inside and outside Congress keep public attention focused on the dangers of proprietary trading by federally backed banks, and on the ongoing weakening of the Volcker rule? I’m not naïve enough to think one tough hearing changed the landscape, but it at least presents a roadmap forward for advocates of tougher regulation—take the conversation out of the shadows and into the light.
Our post–Citizens United campaign finance system isn’t perfect—one might say, horrifically corrupted—but it would work a lot better if regulatory agencies enforced existing rules. The Federal Elections Commission, for example, has not issued a single rule related to Super PACs, and is refusing to take action on a wide variety of apparent infractions, like coordination between campaigns and the outside money groups. As Senator Sheldon Whitehouse told Talking Points Memo this morning, “Some of the referees have taken themselves off the field on this and that’s allowing the special interests to rule-break with relative impunity.”
The FEC remains inert in large part because it’s evenly split between Democrats and Republicans, and they can’t agree on anything. President Obama should have been able to make several appointments by now, thus breaking the deadlock, Senate gridlock has thwarted any attempt to do so—and actually, the only attempt the White House made to fill an FEC seat was blocked by Senators Russ Feingold and John McCain because they felt the pick supported only the status quo.*
We noted earlier this year that good-government groups have been pushing the White House to force new commissioners onto the FEC, either through recess appointments or by aggressively trying to move the Senate. The groups launched a petition on the White House website, which reached the necessary 25,000 signatures that demand an administration response.
That response came yesterday, and it wasn’t very encouraging. It basically just said, “we’ll tell you when we tell you”:
“While the Administration doesn't comment publicly about the President's personnel decisions before he makes them, the Obama Administration is committed to nominating highly qualified individuals to lead the FEC,” Special assistant to the president for justice and regulatory policy Tonya Robinson said. “The agency, and the system of open and fair elections that the FEC is charged with protecting, deserve no less.”
The response then went on to blame Congress for not enacting stronger campaign finance laws, which it appears unable to do. (That’s what Whitehouse was lamenting to TPM this morning). That’s certainly fair, but that doesn't excuse the White House from taking action.
"There are so many problems with our current campaign finance system that the least President Obama could do is make sure the agency overseeing it is in working condition," said Adam Smith of Public Campaign. "Appointing new commissioners to the FEC is something he could easily do right now."
Recall that when the Obama campaign announced it would be embracing the use of a Super PAC, it claimed to be doing so reluctantly and that it would simultaneously push for a better campaign finance system. FEC reform would have been a good way to prove it was serious.
NOTE: An earlier version of this story said Republicans in the Senate blocked Obama's nominee, not McCain and Feingold. Thanks to Sean Parnell for the correction.