Why the Right Has New Legal Ammunition in Its Quest to End Medicare, Social Security and Our Entire Social Safety Net

If you think the right wing would have been content with killing the healthcare reform law that is the centerpiece of President Obama's agenda, think again. With a new strategy in hand, they're coming for it all: Medicaid, Social Security and welfare programs -- in addition to the Affordable Care Act.

Launching a legal crusade takes time, and theories challenging established law usually get worked out first in the laboratories of law schools and think-tanks. In the case of the challenges to constitutionality of the Affordable Care Act, and the coming challenges to other social programs, conservatives first decided on a political strategy and then reverse-engineered a legal strategy to get them to their political goals.

That's where Jonathan Adler and Michael Cannon come in.

A paper authored by Adler of Case Western Reserve University and Cannon of the Cato Institute floats the likely next set of legal theories that will be used to challenge the Affordable Care Act. Adler and Cannon argue that the federal exchanges -- the entities through which people without health insurance can purchase it -- cannot legally give people subsidies to help pay for coverage, and that the IRS rule that enables those federal exchanges to administer subsidies is unjustifiable. Those subsidies are critical to making insurance affordable for all.

In a provision known as the individual mandate, the Affordable Care Act requires almost everyone purchase insurance coverage beginning in 2014. In order to make that coverage affordable, the act provides for refundable tax credits, or subsidies, on a sliding scale of those with up to four times the federal policy level. Those subsidies are supposed to be administered by new insurance marketplaces, called exchanges, to be set up in each state.

But so far only 15 states have set up exchanges. Most of the other states are governed by Republicans with a pathological opposition to the Affordable Care Act. Should those states refuse to set up those exchanges by January 2014, the law calls for the federal Department of Health and Human Services to establish a state-based exchange for them.

In the case decided by the Supreme Court in June, the right-wingers who brought the case argued that the individual mandate was unconstitutional. Having failed in that claim, conservatives are now arguing that unless the subsidies are administered by exchanges created by the states, they are forbidden by the language of the ACA. If the federal government comes in and sets up an exchange because a recalcitrant state refuses to participate, those exchanges, Adler and Cannon argue, cannot offer subsidies for insurance coverage -- leaving no means of affordable coverage in most of the red states for those who need it most.

Should such an argument pass muster before the court, people lacking means would be stuck with a penalty and no healthcare coverage, increasing support for a repeal of the law.

But it doesn’t end with healthcare reform. If the court should ultimately rule that states have the power to challenge federal subsidies for health care in this fashion, it opens the door to similar challenges in other cooperatively run programs such as family planning assistance, special education, affordable housing, and nearly every bit of social welfare legislation that is grounded in a partnership where states administer federal dollars.

Such a ruling would also encourage governors like Rick Perry in Texas and Jan Brewer in Arizona to refuse to abide by the kind of cooperative spending dictates that keep Planned Parenthood in the funding stream for family planning dollars.

Exchange Hate

According to Adler and Cannon, Congress intended federally run exchanges to function as a backstop for states that fail to create their own exchanges, not as an equivalent to the state exchange. Only the states, Adler and Cannon argue, have the authority from the ACA to administer subsidy dollars to help expand coverage. The federal government, they say, does not.

Furthermore, they argue, Congress wanted to limit the power of the federal government when enacting healthcare reform by offering up those subsidy dollars specifically to the states as an "enticement" to get them to participate in the exchanges. They argue that Congress purposefully did not give the federal exchanges the power to administer subsidies because the federal subsidy dollars provided by the law were meant as an inducement for the states to join in the plan and create their own exchanges. The subsidy, Adler and Cannon posit, is designed to be all carrot and no stick.

As such claims were bandied about by Republicans in the wake of the law’s passage, the IRS published a rule last May that specifically said both federal and state exchanges can administer the subsidies. Usually that would settle the matter.

But that rule, Adler and Cannon contend, is illegal. "It is not authorized by the text of the [Patient Protection and Affordable Care Act], nor can it be justified on other grounds,”  they write. If Congress, the authors argue, made a drafting mistake by using language that Adler and Cannon contend limits the administration of subsidy dollars to the states, the government cannot get the IRS to fix it in the rules implementing the reform.

That's not as much a legal argument as it's a political one.

Justice Roberts Sets the Stage

In fact, the Adler and Cannon paper doesn't introduce a new theory to challenge the law; it embraces a partisan strategic attack designed to wedge popular resentment against the law. That is something different altogether.

But because of their academic affiliations and ties to the Cato Institute, Adler and Cannon bring intellectual weight to conservatives' growing crusade against nearly all New Deal and New Deal-inspired social spending.

Chief Justice John Roberts teed up the issue perfectly in his opinion in NFIB v. Sebelius, the Supreme Court case decided in June that sanctioned the Affordable Care Act’s individual mandate (through Congress’ taxation power). There Roberts expressly endorsed a political theory that congressional spending in support of the social safety net is antithetical to the democratic vision of the Framers of our Constitution.

Part of the Affordable Care Act expands the Medicaid program -- the federally subsidized health insurance program for low-income people -- as one means of providing health care for all. Roberts’ opinion leaves open the possibility of cutting off federal safety-net spending under the Commerce Clause by ruling the Medicaid expansion unconstitutional.  

Part of Roberts’ reasoning rests on what is known as the “coercion theory” -- the notion that, in order to protect the "sovereign interests" of the states, the federal government cannot offer states "too good a deal" as a way to coerce them into participating in a federal program.  Until the challenge to the Affordable Care Act, the coercion theory was widely dismissed as an extremist reading of the division of powers between the federal government and the states.

But now, even the liberal wing of the court seemed to agree that, in some cases, the federal government's power to control the dollars it doles out to the states or in support of its programs should be curbed by the sovereign interests of the states.

In a very real sense, then, the fate of not just the healthcare law, but all of the social safety net, could depend on who gets to pick the next new justice on the Supreme Court.