Watchful waiting: Obamacare's day in court

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  • The #Obama Administration argues that the mandate is an exercise of the federal government's power to regulate commerce

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  • Watchful waiting is the purist/prudent course for the opponents/skeptics charged with implementing #Obamacare

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  • By choosing to watch and wait, these states are playing right into the hands of the #Obama Administration.

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Physicians call it "watchful waiting." Because many medical interventions carry known risks and uncertain benefits - and because many diseases will go away on their own or at least not get worse - doctors often wait and see if the patient gets better without the intervention. If so, they will have saved everybody time, money and aggravation; if not, they go into action and save the patient.

This is the approach many in the health care trenches are taking as the legal challenge to ObamaCare finally gets its day in court - actually, three days in the Supreme Court - this week. The challenge centers on the individual mandate: can the federal government force the uninsured into the market, with subsidies for lower-income households and a nifty new Health Insurance Exchange for signing up? Can it extract a financial penalty from the refuseniks?

The Obama Administration argues that the mandate is an exercise of the federal government's power to regulate commerce, which all us who inhabit a mortal body inevitably in need of medical care will engage in, sooner or later. The opposition simply argues that the federal government does not have that power. For all the complexity of ObamaCare, the legal standoff is that simple. There is no objectively right-or-wrong answer; this is a purely ideological debate, freighted with far more than the constitutionality of the health care law, and steeped in the thorniest philosophical questions that define (and increasingly divide) the American polity. This is why two federal appeals courts upheld the mandate, one struck it down, and a fourth kicked it down the road. Even the attorney representing those challenging the law admits that prior Supreme Court rulings indicate the outcome is a toss-up.

"There's no case directly on point," Paul Clement told the Wall Street Journal last week, acknowledging "two precedents on each side that point in a different way."

These precedents echo the near perfect split in public opinion: according to a meta-analysis of polls by RealClearPolitics, the percentage of Americans who oppose ObamaCare is 50.5 percent - up only one tenth of one point since its passage two years ago. The persistence of this deadlock proves that public opinion is nearly unrelated to any actual realities associated with the plan - little of which has gone into effect - and everything to do with a perennial, fundamental ideological disagreement in America over the nature of medical care. Is it a "basic human right," as the left believes; or, as the right counters, is it a market good?

Watchful waiting may seem like the purist/prudent course for the plan's opponents/skeptics charged with implementing the colossal law. But even if the patient is not getting sicker, the clock is ticking, most of health care is still managed like a market good, and the health insurance, provider, and capital markets are all moving well ahead of the law. Participants in these markets who watch-and-wait for a Supreme Court decision to make their bad dream go away do so at great peril to their own businesses.

The critical strategic question for those in implementation roles is purely pragmatic: regardless of how the Court's coin-toss goes, what will happen to the rest of ObamaCare? The challengers argue the whole contraption falls apart without the individual mandate and penalties because of its economic dynamism; the Administration argues the rest of the law stands - aside from the major insurance market reforms that are indeed economically interwoven with the mandate. Irrespective of the Court's decision on this matter, they are both functionally correct. Under the full plan, insurers cease their two most objectionable business practices - they start taking all comers regardless of medical history, and keep paying their medical bills forever - and for this they get an estimated 30 million new customers, most of them healthy, many with subsidized coverage. Insurers were dragged into their Faustian bargain with the Administration based on precisely this economic dynamism.

The Court may strike down the mandate, but it may not strike down the rest of the law. If so, the Court's decision will have turned the insurers into victims of the greatest bait-and-switch in modern business history. The likely results? A new round of lawsuits, panic in the health insurance market, highly contentious attempts at federal legislation to make the insurers whole - and more watchful waiting by everyone.

But even if this part of the decision were left purely to chance - the seeming outcome for many litigants on both ends of judicial reckoning - there is only a one-in-three chance the entire law will be struck down. This leaves a two-in-three chance that most of the law will need to be implemented. Either way, we will not hear from the Court until late June, just in time for summer vacation season - perfect for large organizations scrambling to implement a colossal new project.

In the meantime, health care and capital markets continue to move, and therein lies the rub for the watchfully waiting. Many - but not all - major hospitals, physician practices and insurers are tooling up in anticipation of ObamaCare's implementation. There has been a large increase in the number of vertical and horizontal mergers among all three, enabled by capital flows also moving ahead of health reform. Most illustrative is the river of cash exiting the health insurance business for obvious reasons - leading inevitably to greater concentration of insurance markets and no capital for innovation within them. Those who choose to watch and wait are ceding first-mover advantage to those preparing for reform - especially as many of those preparations are pointed where the private health care market is moving anyway.

Those in state government who also choose to watch and wait may be falling into a dangerous political trap. Many states are deliberately not proceeding with building the Health Insurance Exchanges (HIXs) necessary to implement the health care law, despite ample funding from the feds to do so. Fifteen states have shot down legislation to begin the process and 22 have not moved forward, about half of which (the red ones) look pre-disposed not to - likely totaling to yet another 50/50 split.

When a state engages in such watchful waiting - health reform's supporters call it "stonewalling" - this complex task defaults to the feds. If a state waits long enough, it will be too late to create its own HIX in time to meet the program's start date; small businesses and individuals living in the state will then purchase their mandated (or not mandated) coverage through the federal HIX - exactly what a red state wants least to happen.

By choosing to watch and wait, these states are playing right into the hands of the Obama Administration. In their resentment of federal power, their foot-dragging will help, paradoxically, to galvanize that power. Watching and waiting will result in handing the sick patient that is the U.S. health care system over to the federal government's doctor - who will be all too happy to unleash the interventions.

J.D. Kleinke is a Resident Fellow at the American Enterprise Institute. He is a medical economist, a former healthcare executive, and the author of three books about healthcare and medicine. 

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