question. assume that there is a substantial probability that the 350 billion plus 350 billion equals 7 is going to be cut in half if the individual mandate is stricken, assume there is a significant possibility of that, is it within that proper exercise of this court's function to impose that kind of risk? can we say that the congress would have intended that there be that kind of risk? >> we don't think it's in the court's place to look at the budget ary implications. >> isn't that the point that we assume it is not severable? if we lack the competence to assess the risk then isn't this an awesome exercise of judicial power to say we are doing

something and not telling you what the consequences might be. >> i don't think so. when you are talking about monetary consequences you are looking through the act. the court's function is to look at the text and structure of the act and what the provisions of the act themselves mean. >> can you give us a prior case that resembles this one in which we are asked to strike down what the other side says is the heart of the act? and yet leave in as you request leave in effect the rest of it? most of our severability cases involve one little aspect of the act and the question is whether the rest. when have we ever really struck down what was the main purpose of the act and left the rest in effect. >> booker is the best example of that. in booker the mandatory

sentencing provisions were central to the act but the court said congress would have preferred a statute without the mandatory provision in the act and the court struck that. the rest of the sentencing guide lines remained. >> i think the reason the majority said that was that they didn't think that what was essential to the act was what had been stricken down and that is the ability of the judge to say on his own what the punishment would be. i don't think that is a case where we excised the heart of the statute. you have another one? >> there is no example. >> there is no example -- >> that we have found that suggests the contrary. >> really a case of first impression. another case where we have been confronted with this decision. can you take out the heart of the act and leave everything else?

>> i'd like to go to the heart of the act point in a moment. i would like to say this is a huge act with many provisions that are completely unrelated to market reforms and operate in different ways. we think it would be extraordinary in this extraordinary act to strike it down. >> i think it's not uncommon that congress passes an act and there are many different tite and some titles have nothing to do with the other things. my question is because i hear mr. clement saying something not too different from what you say. he talks about things at the periphery. we can't reject or accept an argument on severability because it is a lot of work for us. that's beside the point. but do you think it is possible for you and mr. clement to get

together and agree on a list of things that are in both your opinions peripheral? then you would focus on those areas where one of you thinks it's peripheral and one of you thinks it is not peripheral. at that point it might turn out to be far fewer than we are currently imagining at which point we can hold an argument or figure out some way or somebody hold an argument to try to get those done. is that a pipe dream? >> i don't think that is realistic. the court would be doing it without the parties -- >> a conference committee report afterwards, maybe. >> yes. it is not something that a court would ordinarily do. >> can we get back to the argument of the heart? striking down the heart? do we want half a loaf? >> i would like to strike it

again in terms of the text and structure of the act. we have very important indications from the structure of this act that the whole thing is not supposed to fall. the most basic is the notion that congress would have intended the whole act to fall is refuted by the fact that there are many, many provisions of the act already in effect without a minimum coverage provisions. people have gotten insurance by one of the insurance requirements. $3.2 billion. >> anticipation of the minimum coverage. that's going to bankrupt the insurance companies if not the states unless this minimum coverage provision comes into effect. >> there is no reason to think it is going to bankrupt anyone. the costs will be set to cover those amounts. >> i thought that the 26 year olds were saying they were healthy and didn't need insurance yesterday.

>> 2.5 million people would be thrown off the insurance roles if the court were to say that. congress made many changes to medicare rates that have gone into effect for the court to have to unwind millions of medicare reimbursement rates. medicare has covered 32 million preventive care visits by patients as a result of this act. >> all of that was based on the assumption that the mandate was constitutional. if that certainly doesn't stop us from reaching our own determination. >> i'm saying it's a question of legislative intent. we have a fundamental indication of legislative intent that the congress did not mean the whole act to fall without the minimum coverage provision because we have many provisions that are operating now without that. but there is a further indication about why the line should be drawn where i suggest it which is the package of these

particular provisions. all of the other provisions of the act would continue to advance congress's goal as the test was articulated in booker and other cases. you look to whether the other provisions can continue to advance the purposes of the act. here they can. the broad public health purposes of the act that are unrelated to minimum coverage provision and other provisions designed to enhance access to affordable care, the employer responsibility provision, the credit for small businesses which was always in effect, by the way, and effecting many small businesses. >> many people in congress might not have voted for those provisions if the central part of this statute was not adopted. i mean, to say that we're we're

unrealistic. who knows which was desired by congress on their own. >> the question for the court is congress having passed the law by whatever majority there might be in one house or the other, if congress hadn't passed the law what is the legislative intent embodied in the law congress has passed. >> the problem is straight from the title we have two complimentary purposes, patient protection and affordable care. and you can't look at something and say this promotes affordable care therefore it is consistent with congress's intent because congress had a balanced intent. you can't look at another provision and say this promotes balanced protection without asking if it is affordable. if you look at the purpose it is an inquiry that you can't carry out. >> with respect i disagree because i think it is evident that congress's purpose was to expand access to affordable

care. it did it in discrete ways. it did it by the penalty on employers that don't offer suitable care and offering tax credits to small employers. all of those are a variety of ways to continue to further the goal. most of all medicaid which is unrelated to the private insurance market all together. and in adopting those other provisions governing employers, congress built on its prior experience of using the tax code which for a long period of time congress is subsidizing. >> never about the employers. you are saying congress mandated employers to buy something that congress itself has not contemplated? i don't understand that. >> employer coverage, 150 million people in this country already get their insurance through their employers. what congress did seeking to

augment that was to add a provision base -- >> based on the assumption that the cost of those policies would be lowered by certain provisions which are by hypothesis. we are not sure by hypothesis or in doubt. >> i think any cost assumptions, there is no indication that congress made cost assumptions, but there is no reason to think that the individual market which is where the minimum coverage provision is directed would effect that. i pointed out why the other things would advance congress's goal. the point here is the package of three things would run contrary to congress's goal if you took out the minimum coverage provision and here is why and this is reflected in the findings. if you take out minimum coverage but leave in the guaranteed issue and community rating you

will make matters worse. rates will go up and there will be fewer people covered in the n individual market. >> what is the difference between guaranteed issue and community rating provisions on the one hand and other provisions that increase costs substantially for insurance companies, for example the tax on high cost health plans which the economists said will cost $217 billion over ten years? >> what congress -- congress di balancing insurance companies. insurance companies are participants in the market for medicare and other things. >> you are saying we have the expertise to make the inquiry you want us to make, guaranteed issue but not the expertise that the question suggests we must make. >> that's because i think this structure and n is to look at

legislative history in the law that congress enacted and not a financial balance sheet which doesn't appear anywhere in the law. >> you are relying on congress's quite explicitly tying these three things together. >> we do. it's not just the text of the act but the background of the act, the experience in the states, the testimony the national association of insurance commissioners mptd that's the problem congress was addressing. there was a shifting of present risks in that market that congress wanted to correct. if you took the minimum coverage provision out and left the other two provisions in they would be laid on top of the existing shifting of present risks an additional one because the uninsured would know that they would have guaranteed access to insurance whenever they became sick. it would make the adverse

selection in that market problem even worse. and so in congress trying to come up with a market based solution to control rates in that market has adopted something that would work to control costs by guaranteed issue and community rating. if you take out the minimum coverage that won't work. that was congress's assumption shown by the text and legislative history of this provision. that's why we think those things rise or fall in the package because they cut against what congress was trying to do. all of the other provisions would increase access to affordable care and would have advantageous effects on price. congress was invoking the traditional use of the tax code and used that to impose a tax penalty on employers to give tax credits. this is traditional stuff that congress has done. and the other thing that

congress has done, those preexisting laws had their own protections for guaranteed issue and community rating within the large employer plans. they can't discrimnate among people. what congress was doing was doing that in the other market. if it can't that is all that should be struck from the act. >> thank you, mr. needler. mr. farr. >> at the outset i would like to say that the government's position in this case, that the community rating and guarantee issue provision ought to be struck down is an example of the best driving out the good. even without the minimum coverage provision those two provisions, guaranteed issue and community rating, will still

open insurance markets to millions of people that were excluded under the prior system and for millions of people will lower prices which were raised high under the old system because of their poor health. even though the system is not going to work precisely as congress wanted it would serve central goals that congress had of expanding coverage of people who were unable to get coverage or unable to get it at affordable prices. >> the points that mr. needler made was that the price won't be affordable because he spoke of the adverse selection problem, so fewer people in them insurance companies are going to have to raise the premiums so it's nice that congress made it possible for more people to be covered. but the reality is they won't

because they won't be able to afford the premium. >> first of all, when we talk about premiums becoming less affordable it's very important to keep in mind different groups of people because it is not something that applies accurately to everybody. for people who were not able to get insurance before obviously their insurance beforehand was the price was essentially infinite. they were not able to get it at any price. they will now be able to get it at a price that they can afford. for people who are unhealthy and were able to get insurance but perhaps not for the things that they were most concerned about or only at high rates their rates will be lowered under the system even without minimum coverage provision. you have a large number of people who under the act -- >> why do you say i didn't follow that? why? >> because --

>> why would the rates be lower? >> they were lower than they were under the prior system because they are going into a pool of people rather than -- some of whom are healthy rather than having the rate set at individual health characteristics. >> it is that they are going to a pool of people that will gradually get older and unhealthier. that's the way the thing works once you say the insurance companies have to cover all the sick people and all the old people, the rates climb more and more to young people and healthy people say why should we participate. we can get it later when we get sick. they leave the market. more people leave the market and the whole system crashes and burns, becomes unsustainable. this is not what i think. what do i know? it is what is reflected in congress's findings. it looks at some states and says this system crashed and burned.

it looked at another state with the minimum coverage provision and said this one seems to work so we'll package the minimum coverage provision with the nondiscrimination provisions. >> in a moment i would like to talk about the findings. if i could postpone that for a second and talk about adverse selection i think one of the misconceptions is that congress having seen the experience of the states in the 90s with community rating and guaranteed issue simply imposed the minimum coverage provision as a possible way of dealing with that and if you don't have the minimum coverage provision then essentially adverse selection runs rampant. congress included at least half a dozen other provisions to deal with adverse selection caused by bringing in people who were less healthy into the act. there are to begin with the act

authorizes annually enrollment periods so people can't just show up at the hospital. if they don't sign up at the right time they have to at least wait until the time next year. with respect to the subsidies there are three different things that make this important. first of all, the subsidies are very generous for people below 200% of the federal poverty line the subsidy will cover 80% on average of the premium which makes it attractive to them to join. the structure of the subsidies because their income, they create a floor for based on the income of the person getting the insurance and then the government covers everything over that. this is important in adverse selection because if you do have a change in the mix of people and average premiums start to

rise the government picks up the increase in the premium, the amount that the person who is is getting insured contributes remains constant at a percentage of his or her income, and the third thing -- >> there's nothing about federal support that is unsustainable. right? that is infinite. >> well -- i mean, that's a fair point, justice scalia, although one of the things that happens, if you take the mandate out, while it is true that the subsidies that the government provides to any individual will increase and they will be less efficient. i'm not disputing that point. actually, the overall amount of the subsidies that the government will provide will decline as the government notes itself in its brief, because there will are fewer people getting it. some people will opt out of the system even though they're getting subsidies. but i would just like to go back one more second to the point about how the subsidies are part of what congress was using, because the other thing is that

for people below 250% of the federal poverty line, congress also picks up and subsidizes the out of pocket costs, raising the actuarial value. so you have all of that, and then you have congress, also, unlike the states, establishing precisely, almost all the states, establishing an age differential of up to 3-1. so an insurance company, for example is selling a 25-year-old a policy for $4,000 can charge a 60-year-old $12,000 for exactly the same coverage. the states typically in the '90s, when they were instituting these programs, they either had pure community rating, where everybody is charged the same

premium -- everybody regardless of their age is charged the same premium. some states had varies of 1.5-1. massachusetts, effects, their age was 2-1. so when congress is enacting this act, it's not just simply looking at the states and thinking, well, that didn't go very well. why don't we put in a minimum coverage provision and that will solve the problem? congress did a lot of different things to try to combat the adverse selection. now if i could turn to the finding, because i think this is the crux of the government's position, and then the plaintiffs pick up on that and then move from that to the rest of the act. it seems to me quite honestly it's an important part, because that is textual. in this whole quest for what we're trying to figure out, the finding seems to stand out as something that the court can rely on and say, here's

something congress has actually told us. but i think the real problem with the finding is that the context in which congress made it, it's quite clear that, if the court wants to look, the findings on page 42 -- 43a, excuse me, of the solicitor general's severability brief in the appendix. but the finding is made specifically in the context of interstate commerce. that is why the findings are in the act at all. congress wanted to indicate to the court knowing that the minimum coverage provision was going to be challenged, wanted to indicate to the court the basis on which it believed it had the power under the commerce clause to enact this law. why does that make a difference with respect to finding i, which is the one the government is rely on, in particular the last sentence which says this environment is essential to creating effective health

insurance markets in which guaranteed issue and pre-existing illness can be covered. the reason is because the word essential in the commerce clause context doesn't have the colloquial meaning. in the commerce clause context, essential effectively means useful. so that when one says, in lopez, when the court says, section 922q is not an essential part of the larger regulatory scheme of economic activity, it goes on to say, in which the regulatory scheme would be undercut if we didn't have this provision. well if that's all congress means, i agree with that. the system will be undercut somewhat, if you don't have the minimum coverage provision. it's like the word necessary and the necessary and proper clause. it doesn't mean as the court has said on numerous other cases absolutely necessary. it means conducive, useful if advancing the objectives, advancing the aims.

and it's easy to see, i think that -- >> any dictionary that gives that definition of essential. it's very imaginative. just give me one dictionary. >> well, but i think my point, justice scalia is that they're not using it in the true dictionary sense. >> how do we know that? when people speak i assume they're speaking english. >> well i think that there are several reasons that i would suggest that we would know that from. the first is, as i say, the findings themselves, congress says, at the very beginning, the head of it is, congress makes the following findings, and they're talking about the interstate -- you know, b is headed, effects on the national economy and interstate commerce. so we know the context that congress is talking about. it is more or less quoting from the court's commerce clause statement, but if one looks at the very preceding finding,

which is finding h, which is on 42 over on to 43, congress at that point also uses the word essential in the second sentence. it says, this requirement, and again we're talking about the minimum coverage provision, is an essential part of the-of this larger regulation of the economic activity, by the way, an exact quote from lopez. in which the absolute requirement would undercut federal legislation, also an exact quote from lopez, but what it's referring to is essential, an essential part of orissa, the national health service act, and the affordable care. it can't possibly be even the plaintiffs haven't argued that those acts would all fall in their entirety if you took out the minimum coverage provision. and as a second example of the same usage by congress, the

statute that was before the court in raisch, section 801 of title 21, the court said that, the regulation of intrastate drug activity, drug traffic, was essential to the regulation of interstate drug activity. again, it is simply not conceivable that congress was saying one is so indispensable to the other, the way the united states uses the term here. so indispensable, that if we can't regulate the intrastate traffic, we don't want to regulate the interstate traffic either. the whole law, criminalizing drug traffic would fall. so i think once you look at the finding for what i believe it says, which is, we believe this is useful part of our regulatory scheme, which congress would think in its own approach would be sufficient -- >> counsel, the problem i have

is that you're ignoring the congressional findings and all of the evidence congress had before it, that community ratings and guaranteed issuance would be a death spiral. i think that was the word that was used, without minimum coverage. those are all of the materials that are part of the legislative record here. so even if it might not be, because of the structure of the act, that's post-talk evidence. why should we be looking at that as opposed to what congress had before it? and use essential in its plain meaning? we can't have minimum coverage without what the sg is arguing, community ratings and guaranteed issuance.

you can't have those two without minimum coverage. >> well, i think that's a fair question, but the idea that all the information before congress only led to the idea that if -- that you would have death spirals seems to me to be contradicted a little bit, at least, by the cbo report in november of 2009 which is about four months before the act passed. where the cbo talks about adverse selection. now, i want to be clear. this is at a time when the minimum coverage provision, it was in the statute. and i'm not suggesting that this is a discussion without that in it. but nonetheless, the cbo goes through and talks about adverse selection, and points out the different provisions in the act. the once i've mentioned. plus one other, actually, where in the first three years of the operation at the exchanges of those insurance companies that get sort of a worse selection of consumers will be given essentially credit from insurance companies that get