Texas vs. Us

By Mike Koetting August 22, 2019

Okay. Technically the name of this litigation is Texas v U.S., but it sure seems like Texas v Us.

Texas v U.S., as some of you probably know, is the most recent Republican-inspired attempt to scuttle the Affordable Care Act (ACA).

The plaintiffs are asking the court to strike down the entire ACA. The brief version of their argument is that when Congress, as part of the tax law in 2017, removed any penalty for failing to comply with the “universal mandate”, they effectively nullified the mandate. Plaintiffs then argue that the “universal mandate” was so essential to the law’s working, that the entire law should be struck down. (A somewhat more detailed, but still readable, summary of the entire situation can be found on the Health Affairs blog.)

The case was originally filed by governors or attorneys-general from 20 different states, but two have subsequently dropped out. There is no surprise in which states are involved.

The Trump administration has directed the Department of Justice to make no attempt to defend the ACA. Consequently, a coalition of 16 Attorneys-General from predominately Democratic states and the District of Columbia have intervened and, along with the Democratic-controlled Congress, are now providing the defense for the ACA. Again, no surprise which states.

What Is at Stake?

It is hard to overstate the consequences if this suit were to succeed. To start with, it would wipe out provisions that require protections for individuals with pre-existing conditions and coverage for dependents to the age of 26. It would eliminate the Health Insurance Exchanges, which currently provide coverage for more than 10 million people. It would roll back the expansion of Medicaid, currently covering care for 13 million people. It would reverse the trend of closing the “doughnut hole” that exposes Medicare beneficiaries to paying a greater share of drug costs if they are sick. It would eliminate a number of other regulations and programs. And, of course, it rolls back some taxes, which are primarily paid by the top bracket tax payers.

In short, eliminating the ACA would have profound impacts throughout every aspect of the healthcare sector, which is now about one-fifth the economy. In the understated view of one Kaiser Health official “It would be very disruptive.”

What Is the Current Status?

The case was initially heard in Texas and the federal district court ruled in favor of the plaintiffs, then moved to stay enforcement of the decision. The defendants, which do not include the Justice Department, appealed the case and it was heard by a three judge panel in New Orleans earlier this summer. Based on the historic speed of cases through this circuit, they will rule sometime this fall. Their ruling could go in a variety of directions:

• They could dismiss the case on a variety of technical grounds. Among other things, the question of who has standing in this suit has become complicated. If they dismissed, they would have to decide whether to vacate the district court’s opinion or let it stand.
• They could reverse the district court on all or some of the issues. That is, they could uphold the ACA in its entirety, strike down only the individual mandate, or strike down the mandate and “related” provisions”.
• They could affirm the district court’s ruling, in which case they would probably stay the decision pending appeal.

What will happen after the ruling is hard to foresee. If the appeals court affirms, the intervening states seem certain to appeal to the Supreme Court. With other outcomes, a reasonable presumption is that the plaintiffs would likewise appeal to the Supreme Court. But one can imagine scenarios where they would let the suit die.

The general assessment is that the suit is not likely to succeed. Still, until the case is actually settled, there is reason to be concerned about how this might play out.

Why This Suit?

This is surprisingly difficult to answer.

While there are all kind of legitimate concerns with the ACA, attempting to completely undo it— ten years after passage—is not an obvious course of action. The ACA has substantially reduced the number of uninsured and would reduce even more if the states in this suit actually expanded Medicaid.

It has not created adverse disruption such as rampant healthcare inflation or major retreats in employer coverage. In fact, there is solid evidence it has stabilized the distribution of healthcare costs by reducing the burden on the private sector of funding the uninsured and is broadly supported by business. It has provided healthcare coverage that helps relieve specific pressure points in the current system—such as coverage for opioid treatments, filling gaps in mental health care, and getting coverage for people transitioning out of incarceration. (For instance, Urban Institute researchers have found markedly less treatment availability for opioid abusers in states that did not expand Medicaid, which includes some of the states hit worse.)

Nor is there an obvious political advantage. In most states, the entire ACA polls reasonably well, particularly certain provisions such as coverage for pre-existing conditions and Medicaid expansion. In fact, voter initiatives supporting Medicaid expansion passed last November in two of the plaintiff states, as well as in Idaho, a state that supported Trump. An earlier voter initiative passed in Maine, which was one of the initial plaintiffs. Subsequently the governor, who had refused to recognize the result of the initiative, lost his bid for re-election, leading to Maine’s withdrawal from the suit. Four of the other plaintiff states have already expanded Medicaid, and a couple more appear to be thinking about it seriously.

Viewing the politics from a national perspective sheds less light. Surely the plaintiffs understood that there was no way this suit could be won without it playing out in the middle of the presidential campaign. Maybe they thought this would rally some base. But after the 2018 midterms, you’d think Republicans would have lost some appetite for continually assaulting the ACA. Frankly, having this in the Supreme Court next spring would a gift to Democrats.

One argument that might be made is that the plaintiff states are unhappy sending money to the federal government to pay for the ACA benefits in other states. To some extent there is obviously an issue here. However, to the extent this is a problem, it is exacerbated by the fact these states have chosen not to expand Medicaid.

Moreover, in a broader context, one can’t help observing that as a group the plaintiff states are already on the receiving end of a favorable balance between what they pay in federal taxes and the amount of investment the federal government sends back to the state. In fact, the plaintiffs include three of the five states with the most favorable balance over what they pay in federal taxes and what they get back. This is in marked contrast to the states defending the ACA; seven of the defendant states are among the eight states with the worse ratios.

The best reason I can come up with for this suit is a perceived need by Republican officeholders in these states to continue flailing away at the ACA to fend off primary challenges from their right flank. That, in turn, reflects a need in portions of the red states to continue communicating how much they resent the intrusion of the rest of the country into the way they run their affairs.

Never mind that the suit does not have a great chance of success, that if successful it would create chaos in the country’s healthcare system and that its broader political merits are dubious, particularly if it were successful. It seems that, whereas actual secession has become impractical, these states are determined to carry on the fight symbolically.

Apparently, for a material element of the country, their “identity” is so important, it trumps assessment of what would seem to be in their interest. In fact, for this group, “identity” is apparently the only “interest” that matters.