Yeah, Scalia, Read the Damn Healthcare Bill

Antonin Scalia is a member of the Supreme Court, appointed by a Republican President.

Scalia recently asserted that the court couldn’t pick and choose which provisions of the Affordable Care Act are constitutional. It was either all or nothing.  “Mr. Kneedler, what happened to the Eighth Amendment?” Scalia asked. “You really want us to go through these 2,700 pages? Is this not totally unrealistic? That we are going through this enormous bill item by item, and decide each one?”

Described as a conservative voice and a son of New Jersey, in the oral argument over providing affordable healthcare to all Americans we also learned that Scalia does not know how to use his staff of brilliant clerks, and is too unconcerned to read the Healthcare bill before ruling on its constitutionality.

The  Healthcare Bill is long because it addresses complex issues, having about 470 sections, and was the subject of negotiation and compromise before it was approved by Congress and signed into law. In any mid-size law firm a staff of highly paid associates could digest a bill of its complexity in 48 hours. Each Justice on the Supreme Court has two brilliant clerks, a total of 18 skilled attorneys, and there are nine Justices. So, there are 27 lawyers, each of whom would have to read 100 pages of the 2,700 page bill. Yes, Scalia, I do expect you to read 100 pages. Let’s assume that the other Justices are as flippant as Scalia, and we only have 18 brilliant clerks, each of whom has to read 150 pages. Frankly, this could be done with ease over a long weekend. Scalia, it is unrealistic to not have the clerks read the bill. The clerks went to the best law schools in the country and excelled at every level. I would bet that many of them have already read the bill and have already summarized key provisions.

Scalia’s remarks are disingenuous to the point of deserving ridicule. Attorney Kneedler was circumspect enough not to point out to Scalia that the Justice Department has already parsed the bill and has already identified key aspects of the bill which can and should stand alone. And, the Justice Department didn’t do this work in secret, but filed pleadings with lower court federal judges. All of these pleadings were available to Scalia and his clerks.  And, no I don’t expect that Scalia will personally read the Bill, but if he wants to come to theJerseyShorein June, I will meet him in Manasquan and read the Healthcare Bill to him while he lounges on the beach.

Yes, Scalia, I do expect you to read the Healthcare Bill.

It is astonishing that Scalia would so baldly proclaim that he is not going to do a competent job, and his dereliction of his judicial duties undercuts public respect for the Supreme Court.

But, let us assume that Scalia’s remark about the length of the bill was no more than a rhetorical gesture, and not actually a reflection of his work ethic. Declaring the whole Bill unconstitutional would have the following effects.

Women will milk their breasts at their desks.

The Affordable Care Act “has approximately 450 separate pieces,” many of which are currently in effect. One lower court that ruled the ACA unconstitutional also recognized that “many provisions in the Act can stand independently without the individual mandate.”  For example, there is little doubt that the provision in the Act requiring employers to provide a ‘reasonable break time’ and separate room for nursing mothers to go and express breast milk [Act § 4207] can stand separately.

Small businesses will lose tax benefits.

The Affordable Care Act provides tax credits to eligible small businesses that offer insurance to their employees, offsetting up to 35 percent of employer premium costs beginning in tax year 2010. See ACA § 1421(a). If Scalia and the other radical republican judges have their way the federal government will immediately stop these tax credits  to  small businesses.

Scalia’s approach will injure the elderly and disabled and delay Medicare claims processing.

More than 20 sections of the ACA effected changes to Medicare payment ratesfor 2011, including extensions of a number of payment adjustments (such as add-on payments and exceptions to payment caps) that pre-date the ACA. These changes have already been incorporated through notice and comment rule making into Medicare payment regulations and implemented through edits to nearly every major Medicare claims processing system.

Scalia and his interventionist brethren will increase the Deficit.

To attempt at this juncture to devise an alternative, pre-ACA rate structure for  state-owned or operated Medicare providers  would impose staggering administrative burdens, and could cause major delays and errors in the payment of the roughly 100 million Medicare claims processed each month.

Scalia’s approach will cause more Medicaid Fraud

To prevent fraud and waste in the Medicaid program, the ACA required all states,to enter into contracts with auditors, to identify incorrectly paid claims and to recoup overpayments. See ACA § 6411. Moreover, the ACA requires states to suspend Medicaid payments to providers or suppliers when fraud is suspected. Declaring the entire bill to be unconstitutional is an invitation for more fraud.

Make the States challenging the law give back the taxpayer money they received and no longer want.

Twenty-five states (all but Alaska) were two-faced and while attacking affordable healthcare also applied for and were awarded federal grants to begin to take measures to ensure that their exchanges will be operational to carry out their grant agreements. These plaintiff states should return the more than $24 million already made available to them.

Kick Sick Americans Into the Gutter

Twelve plaintiff states contracted with HHS to run federally fundedhigh-risk insurance pools (Pre-existing Condition Insurance Plan, or PCIP, programs) established pursuant to the Affordable Care Act. See ACA § 1101. These pools provide coverage to eligible Americans who have been uninsured for more than 6 months because of a pre-existing condition.

Goodbye high risk pools. Goodbye insurance.

Your college student is about to become uninsured, and will be uninsurable if she has a pre-existing condition.

In their role as employers, most states sponsor their own group health plans. Thus, they are subject to ACA provisions already in effect that, for example, generally require insurers to offer parents the option to keep children on their plans until age 26, bar insurers from placing lifetime limits on the dollar value of coverage, and prohibit insurers from rescinding coverage unexpectedly after an illness or accident because of a mistake on a application.  Declaring the entire ACA unconstitutional will deprive millions of families and children in these plans of coverage and benefits

No insurance coverage for old and sick citizens who lose their jobs!

All plaintiff states that challenged the ACA currently participate in the ACA’s Early Retiree Reinsurance Program (“ERRP”). Early retirees are often ineligible for coverage from their former employers, but are too young to qualify for Medicare and too old, or too ill, to obtain coverage in the individual market. To encourage employers to continue coverage to early retirees and their families, the Act provides for $5 billion in ERRP subsidies through 2013. These subsidies reimburse 80 percent of the costs of certain medical claims of early retirees and their family members.

If Scalia bothered to read the ACA he might discover that this provision can stand alone.

Scalia encourages abuse to women by denying coverage.

All 50 states have applied for and received funding under the ACA’s Maternal, Infant, and Early Childhood Home Visiting Program, which appropriates $1.5 billion in funding over five years for states to deliver health care and other social services — such as prenatal care and domestic violence prevention — to families in at-risk communities who lack other resources. This funding will be halted by activist Republican justices. States have continued access to grants under this program to help families at great risk of health and developmental problems, child maltreatment, and domestic violence.

Ending Support for Consumers.

Thirteen plaintiff states were awarded over $11.1 million in grants pursuant to the Act’s Consumer Assistance Program, which authorizes and appropriates funding for states to help consumers navigate the health care market by, for example, facilitating enrollment in health plans and assisting with complaints and appeals against insurers.

Conclusion

 Justice Scalia plans to review and determine the constitutionality of an important piece of legislation that he has not read because it is too long. Scalia’s public statement is disrespectful of the Supreme Court and the rule of law. He should apologize. Scalia’s buddies on the Third Circuit Court of Appeals should stop defending the indefensible.

Mitt Romney’s detractors accuse him of destroying jobs or creating low paying jobs. Mitt’s defenders argue that he brought free market discipline to the companies that he and Bain Capital purchased and that by restructuring these companies he saved jobs and created new ones.

Lost in the political jousting is a discussion of the complex business of restructuring and refinancing failing businesses. Business begin to fail because they mistime investments, deploy capital unwisely, misjudge markets, fail to adapt to changing markets and demand and because they are undercapitalized. Management is too often inadequate and too frequently overpaid. Structural costs weigh down profit potential.

Every job in a failing business is at risk if the business cannot be turned around.

Mitt was and is a turnaround expert, skilled in analyzing whether distressed companies can be saved. He brought management savvy and fresh capital needed for essential investments, like technology needed to make companies efficient and competitive.

Of course, underperforming and redundant employees were fired because their very presence made the company unprofitable.  Other employees got clearly defined job responsibilities and a chance to prosper as the reorganized business prospered. So, some were fired and others were hired. Big deal. Anyone running a small business knows the drill.

Mitt’s critics conveniently ignore that he and his partners at Bain Capital provided new risk capital to rescue and restructure the businesses that they purchased. By providing essential capital that preserved the jobs worth preserving they created the opportunity for new jobs filled by new employees with appropriate skills. It is perhaps understandable that politicians used to filling jobs with unqualified cronies and family members are stupiefied by Mitt’s business like approach to job creation.

Restructure or Die

A financially distressed business that is unable to change or obtain adequate working capital in the financial markets has few choices: restructure in an out of court workout; restructure by swapping debt for equity or new debt; and restructure in Chapter 11. None of the restructuring options are viable without new capital, and none work without drastic changes to how the business has been run. Companies that do not restructure are liquidated.

Management changes, union concessions, revisions of contracts always take place in a restructuring—just look at the chapter 11 cases of GM and Chrysler. Mitt criticized and still criticizes the secured loans to GM and Chrysler on philosophical grounds because the loans were made by theUSA. As a distressed debt guy, Mitt may feel a tad jealous that he and his private equity friends did not have enough capital to make the $100 billion of profitable secured loans to GM and Chrysler that got priority in repayment in the bankruptcy court proceeding. In predicting the failure of the government loan package, Mitt missed the business point which was that GM and Chrysler (and their employees) were able to change and that they could be reorganized with the right lender. And, Mitt missed the point that hundreds of thousands of decent jobs inAmerica’s heartland were at stake.

By sticking to his guns during his campaign, Mitt appears to lack concern for workers in America’s core manufacturing industries.

 

Mitt also argues that using the bankruptcy courts was inappropriate and that the holders of the bonds (many his friends in the world of private equity and restructuring) were treated unfairly. Mitt is naïve. His finance friends surely know that in every Chapter 11 case the lender making a dominant secured loan that has a first priority lien on all the assets of a Chapter 11 company like GM, has considerable influence and control on how the company is reorganized and who and how creditors are paid. GM’s sophisticated bondholders knew the bankruptcy strategies; this time they were outmaneuvered, so they should stop Mitt from his surrogate whining about the result. Putting aside the legal jargon and jockeying for priority, bankruptcy laws are a framework for settlement of disputes, and Mitt’s insistence on some non-existent principle of bankruptcy law makes him look inexperienced. If Mitt and his advisors can’t understand the bankruptcy laws, how will they possibly be able to lead the country in the next decade in solving far more complex matters of finance and social conscience?

It is time for Mitt to admit that his abstract principles were worth formulating, but that he was wrong about the practical merits of lending money to Chrysler and GM.

 

Conclusion

As a restructuring expert Mitt had to be smart, intuitive and decisive, and he had to make hard decisions. As a leader at Bain he needed to be well-informed and forward thinking. Our next President will be restructuring the military, restructuring Social Security and trying to reorganize Congress so that our elected officials stop acting like packs of snarling wolves. Maybe the country needs a restructuring expert like Mitt?