our panel. i'll turn it over to robert alt. before i do that, please join me in thanking the attorney general and karen. [ applause ] >> panel, come on up.

>> thank you all for joining me here today. as mentioned i'm robert alt. director of rule of law programs here at the heritage foundation. and i have both a difficult and an easy job today. difficult job because i'm following such a distinguished panel and easy job because i'm here to talk about legal elements and i had one former attorney general and one current attorney general describe all of the legal issues so i think my job is easy on this panel. i also am playing moderator today. let me begin before i give my presentation by giving a brief introduction of the other heritage colleagues who will be

joining me on this panel. after i speak, we'll have a presentation by nina owcharenko. she oversees health care reform on the federal and state level and medicare and medicaid, children's health and prescription drugs here at the heritage. she came here after spending a decade on capitol hill as legislative director to then representative jim demint and as an aide to representative sue mirak and began her career on the staff of the late jesse helms. she'll be talking about the implications of obama care being upheld. next on the panel will be jennifer marshall, heritage's director of domestic policy study and who also serves as head of our richard and helen

devoss center for religion and family society where they look at what role they play in society in public policy. she also oversees fami familyfacts.org. she will be speaking on the challenges to the rights of conscious which arise from obama care and in particular looking at hhs mandate and the impact of obama care being upheld on that particular policy. turning to my presentation, i would like to begin by saying i agree with attorney general abbott that yesterday's decision has certain silver linings. i fear they surround a dark cloud. let's start with the positive at least.

first of all, the commerce clause. we received five votes from the court limiting congress's authority under the commerce clause. this has to be viewed as a victory. this certainly beat the expectations of the academy and the pundits coming at least prior to oral arguments when everyone suggested that there was no there even though a week before oral arguments you had linda greenhouse explaining this was a frivolous argument and in fact obviously that was not true. additionally, there is some fairly strong language as to what sort of limits there are on congress's authority here. throughout the course for those of you who haven't been tortured by undergraduate or law school com law may not have heard about it before the case but you were beaten with it at some point during the conversation. the famous case of whether or

not congress could regulate a farmer growing wheat for personal consumption on his farm. wheat that wasn't going into the market. in the 1942 case, the supreme court case yes they could under the doctrine it would affect the market. that is the high water mark with regard to congressional authority. we'll let them go that far but no farther. and that alone is a substantial victory in terms of providing at least some measure of limitation on the authority of congress with regard to the commerce clause. the argument that had been put forward in obama care that somehow we would be permitted to drag in individuals whose sole defining characteristic was they had not purchased a product into commerce so they could be regulated would have removed any conceivable limitation to

congress's authority under the commerce clause. and so the rejection of that theory is a source of cause for celebration. the second silver lining in the case was the court's ruling on the spending clause. this in fact was probably the greatest advancement in terms of constitutional law. new law genuinely was created. with regard to the commerce clause, they simply made clear this far and no farther it sort of held ground with regard to the spending clause i think you could say that they actually developed some new law and that we may see additional challenges arising from it. and it's also interesting to note that on a question where i think before the court ruled the expectation is that you would perhaps see as many as one vote in favor of the position that there are some limitations on congress's authority under the

spending clause. you saw seven votes. this is something that transcended the traditional lines on the court finding in this particular case the court rewrote the law to prevent coercion which could occur if states had to forfeit all of the medicaid funds if they did not agree to every part of the new requirements and regulations implemented by obama care. so the next silver lining is one that starts to bleed perhaps into the darkness of the cloud and that is that they twisted the statute more than they twisted the constitution. in this particular case i think it's fair to say they flipped the penalty provision on its head in order to declare it a tax rather than -- so in this case rather than taxing in support of the general welfare which is how the constitution

describes the authority to tax, the decision uses the tax to justify a regulation. the majority in this case should have had some sense that they were on shaky ground when as they searched for analogies to include in the opinion and fact the analogies that included were ones that were excise taxes that showed how congress could use its taxing authority to regulate conduct. but, you know, there's something interesting about excise taxes. they are taxes on purchases. that's how they're defined. the constitution specifically talks about excise taxes. it's a tax made in order to force you to purchase. and so again it's sort of an odd situation which turns that authority on its head.

and unfortunately here's where i think we get into the darker sections of the cloud that i describe. it's not clear that there's any limiting principle here necessarily other than perhaps a political check and here the court greatly weakened the political check by saying it didn't matter how much the president and congress outright lied with regard to what they were doing calling it a penalty, calling it a responsibility payment. we're still going to treat it as a tax. so we permit congress to pass what functionally we're going to say operates as a tax in a way that reduces the initial political responsibility but then they're going to get the constitutional benefit of the authority of it being a tax. but how could this operate? we ended up getting a bit of a hint from the chief justice. the hint was one that should give everyone in the room pause. he said, well, sure, we could have a tax operate in this way.

imagine, for instance, if congress wanted to force you to buy energy efficient windows. they could go ahead and do that. if you had a certain income and you failed to make the purchase, they could go ahead and enforce that purchase with a tax. in fact, this generally isn't how we've done business. normally congress actually has done things in quite the reverse way. because of the limitations on congress's power, they do things in a relatively inefficient way. they want you to buy a more efficient vehicle, they do the cash for clunkers program. they give you a financial inducement in order to get you to behave in a certain way. if they wanted you to get an energy efficient window, this he would give you a tax credit in order to do so. now what you have is a claim they can have regulation backed up with a tax. and so what we see in this particular case with regard to the concept of limited

government is that what the court gave with one hand with regard to the commerce clause, they took away with the other with regard to the taxing authority. and so the taxing power may indeed be a new font of regulation into areas traditionally beyond regulatory authority of congress. you'll note when i began that i suggested that in this particular case the court twisted the statute more than the constitution. so far you might say what they've done sounds like a c contortion of the statute. the court did less than capable work on its description of what sort of tax this was. they seemed to assumed that it fell into the general category of income tax because the irs

was administrating it. while that may be good enough for government work, that's not quite good enough for constitutional purposes. in this particular case, i think it may more apply describe it as a tax to every individual with exceptions written into the statute which probably make it unconstitution unconstitutional. cap taxes are direct taxes that have to be apportioned evenly among the states. by having so many exceptions in the statute, it potentially would make that tax unconstituti unconstitutional. you may ask why do i know something about this obscure topic? let me suggest to you as you look for analysis of the court's decision yesterday, i can recommend one single best publication on it.

interestingly enough, it's not something that came out yesterday by any of the commentators in response to it. it's actually a publication of the heritage foundation from 2009. heritage's original legal memorandum on constitutionality into obama care goes into depth on the question of whether or not the mandate is a tax. you'll find it's probably still the best -- it's been widely hailed as being something of the road map for legal arguments made before the court. on this new question that seems to have arisen in the court's interpretation, it's one of the best sources you can find in analyzing it. what will we see after this case? clearly there's going to be more litigation and i think you're going to hear about that from jennifer a little bit later on

the panel. but ultimately i think general abbott was correct as well what the decision makes clear is that the decision with regard to obama care is one which at this point has been delegated back to the proper source of power that is to the american people and that this is a question that we'll hear quite a bit about in the next several months. with that, i'll turn it over to nina to talk about the policy implications. thank you. >> well, as we've been listening to this, my position has been kind of regardless of the constitutionality of this health care law, the law itself is bad health care policy. that's really what's at the core of the problems with this law moving forward after yesterday. this law remains unworkable and unaffordable for the country. even one of the president's own goals that he purported during passage of the law, which is we want to reduce the number of uninsured. that's why we're doing this

health care law. it's actually continuing to be weakened and it's crumbling as we see this law come into place and i would argue that the decision itself makes that argument even weaker. which raises the question if the goal is to reduce the number of uninsured as what this health care law was promised to the american people, what is its purpose if we're not reaching the goal of the $2 trillion health care spending bill? i'm going to look at the implications of the now individual mandate tax as well as now the voluntary medicaid expansion and try to kind of sort out what does this mean for that goal and for the goals of what the president has argued? as was already noted, the decision changed the individual mandate from a penalty to a tax. starting in 2014, the tax will now be the greater -- you'll either pay the greater of a flat dollar amount starting at $95 in 2014 going to $325 in 2015 and

then reaching $695 in 2016. or a percent of your income. 1% starting in 2014 and going up to 2.6% of your income in 2016, whichever is the greater of those two is what the penalty is. it will be capped at 300% of the flat dollar amount for that year but we'll learn more and more about how this tax is going to be implemented once the irs moves on its regulations relating to this new tax. it is certainly a tax on the middle class from not buying as i like to point out government approved health insurance. it's not just whatever you deem is approved as health insurance. it is what the government is going to approve as health insurance under this new health care law. not what is existing law or prior to obama care. and this is how i think the challenge of the administration is going to have moving forward.

as health insurance premiums continue to rise, which we suspect they will. they have yet to go down as the president has promised, there will be more people paying taxes. why is that? as the premiums rise, the individual is going to make a calculation. is it cheaper for me to just pay the penalty, the new tax, or do i need to continue to carry the weight of this health insurance plan that will be more expensive. the end result is going to break one of the president's promises on the uninsured. he wants to reduce the number of uninsured. if the tax is less expensive than the premiums that they will have to buy for health insurance, it will be easier for them just to pay the penalty and stay uninsured. this will be a huge shift now to more and more people in particular young adults and people that are healthy instead of paying the higher premium to actually just stay uninsured and pay the tax. so even those people who may be eligible for a subsidy, i know the administration will say

we're handing out lavish subsidies so people don't have to worry about health insurance being affordable. even with subsidies, there will be people who remaining amount they have to pay will be too expensive for them and they'll opt instead to pay the tax. so that in itself raises the question again. if the goal is to reduce the number of uninsured, is this law -- what is the purpose of this law if we're not reaching that goal. now the voluntary medicaid expansion. it's been described nicely but under the law in its current form, states were required to expand medicaid coverage to all citizens up to 138% of poverty or lose not just the medicaid expansion, the new federal dollars, but all federal medicaid collars. in essence the decision makes that an option now to the states. they can choose not to expand the medicaid program up to 138% of poverty and they would just forego the lavish federal bribe that is done in the health care law and simply keep their medicaid program in its current

form and continue to receive the federal dollars. but it's important to note that -- i think the attorney general noted this. the medicare programs were already strained in the current form without the expansion and straining state budgets and crowding out other state priorities. education, transportation, all of those things are being squished away by medicaid programs that is taking up more and more of the medicaid dollars. so the logical thought would be for a state let's look at our economic situation and decide do we want to expand up the income scale or stay where we are. it was great to note that governor walker's peers decided not to expand. let's look at the explanation for this president's health care law. if a state chooses not to expand two things with good reason, there are two things that will happen. individuals that would have been eligible for the medicaid expansion, those above 100% of poverty, will now be eligible for the federal subsidy that is

being run through the exchange program. those subsidies because they are very low income populations that would have been otherwise on medicaid will now be eligible for the most generous of the subsidies through the exchanges as well as additional subsidies to offset any cost sharing they may have. you can see how while the states may make an economic choice for their own state to keep costs down, it is actually going to blow maybe the cost at the federal level for federal taxpayers in order to support the subsidy scheme that was in place. and ironically those at the lowest end of the poverty level below 100% of poverty, the subsidies do not apply. so now we'll actually have those below 100% of poverty remaining uninsured. so again if the president's claim is he wants to reduce the number of uninsured and always showcases the most vulnerable in society, those below 100% of poverty under this new scenario

would now remain uninsured and be under the health care law. the one exception which i just would like to point out i find very interesting and it shows how this law was so hard wired together is the one exception for people that would now be eligible for the subsidy below 100% of poverty are actually legal immigrants. so those populations would actually be eligible for the subsidy, the generous subsidy, if states opt not to expand the coverage but citizens in those states would not be eligible. this just again raises more question about how unworkable this law is and how it moves forward the wheels continue to come off. it really questions what the president again may be good to remind ourselves what did the president promise the american people and what is actually happening. he said already it was noted by the attorney general that he would not raise taxes on families making less than $250,000 a year while the

individual mandate is now obviously joining all of the new taxes that will impact maybe indirectly but will impact middle class families. the next point is if you like your health insurance plan, you can keep it. i think karen did a good job of noting not only that insurance plans now are having to change their health benefits in order to comply with future regulations and benefit mandates at the federal level, but also i think employers facing growing uncertainty of the future cost of the health care law are going to continue to opt to say i rather pay the penalty and drop health insurance for my employees. that too is moving forward. it won't add to the deficit. only if you believe in washington accounting gimmicks which is what this health care law was based on. we can have cbo look through a tunnel and forget the forest around it but only washington budget gimmicks get us to not adding to the deficit. it would protect medicare. this is not just about the

individual mandate, this health care law. there's 2,000 some odd pages of health care policy that's changing. the president promised he would protect medicare. ironically, they take over $500 billion in medicare savings to offset the cost for covering the uninsured. again, seems like a broken promise to me. and he said it would cut premiums by $2,500 for every average american family. those provisions going into effect today as they roll out little by little seem to be adding to the cost of premiums and not reducing them. one in particular i raise is the idea of free preventive health care services. that sounds great. there's no free lunch. the more benefits that have to be covered higher the premiums are that the insurance plan gives to the american people. so we have more people, more americans facing higher health care costs. what's on the horizon because i do think there is more to come.

as the american people learn more or learn just as much as they did about the individual mandate, i think more opposed they will be on this health care law. what do we see between now and the end of the year or now and early next year? one, i think the legal cases that jennifer will talk about on hhs mandate but it also bleeds into this issue of the essential benefit package. that hhs mandate on covering contraceptions and other benefits actually was just the first glimmer of what this administration is going to have to do through regulation and explaining to all of the american people what is considered a government approved health care plan. so we will be probably watching to see what we will have come out of that. it is going to raise a large issue for this administration in particular coming up to the election because one of two things happens when you have this challenge. if they continue and add more

special interest benefits to the health care package, guess what happens? the premiums increase. if premiums increase, everything else, the cost of the health care law increases, premiums increase on the american family, subsidy scheme that is underneath the health care law is also increased. so if they turn down the dial on the benefits and say, you know what? maybe we can't do as much. let's keep it under cost. guess what? you have many people that were anticipating this administration providing benefits of every make and color to all american people. you can drive the cadillac with the sunroof and the power windows and heated seats. all of those people will come out of the woodwork putting additional pressure on the administration to actually make the benefits more generous. we are in a constant struggle with that or not us the administration will be in a constant struggle with that. and then the last point on the horizon is actually the 2013 tax hikes that are in the health

care law. let's not forget again this is not just about the individual mandate. there are over $500 billion in new penalties and taxes included in this health care law. and in addition to the expiring bush tax cuts that will be happening at the end of the year, we now face new obama care taxes. in particular i'm going to focus on a new medicare payroll tax increase. today the medicare payroll tax is 3.9%. starting in 2013, that will increase to 3.8% and it will expand not just for wages, it will also now apply to investment income. now, on the surface people will say but that's a tax that was for those earning over $200,000 a year. that doesn't apply to the president's promise. that's not a middle class tax hike. that's for the wealthy. ironically, in the health care law, they wrote it so that the tax is not indexed.

what does that mean? it's similar to what we have with amt tax today. as time goes by more and more people will face this new tax over time. there's plenty for the american people to be worried about beyond what the court decision that came out yesterday. we must continue to educate the american people about that. this law remains on an unsustainable path and it is doomed for a collapse. the question is how fast will it be before we get there? i think as i said, it's time for the american people to refresh themselves about what's in the 2,700 pages of the health care law and regulations that are to come and as robert gave a plug on their paper, i would just recommend people coming to the heritage foundation in reading our case against obama care where we identified about 13 of the major kind of cornerstone problematic policy provisions in the health care law.

with that i'll turn it over to jennifer. >> thanks, nina. thank you all for being here. we're in the midst of what's being called the ft. night for freedom. we are celebrating our first freedom in the midst of this and calling threats to religious liberty in the midst of these two weeks. it's fitting then that the obama care decision has come down because it represents a challenge to religious liberty. after yesterday's decision, liberty is every bit at risk as it was before. we see the decision telling full speed ahead on two competing fronts. those fronts on the one hand are continuing legal challenges that are going forward. and the second is the implementation of this massive law. let me talk about those two points in turn. yesterday's action did nothing to stop the legal challenges coming against obama care. there are 23 federal lawsuits

against obama care's hhs mandate, health and human services mandate and these now take on added urgency. it's completely different than the cases that were considered by the supreme court yesterday so they will proceed. they represent 56 plaintiffs so far and they now become the next legal battleground for obama care. second, yesterday's action gives the greenlight to implementation and this is grave. the hhs mandate should alert all americans to what we face down the road toward increasingly centralized health care policy. now that the supreme court has allowed obama care to proceed, the weight of the massive law will begin to be felt on our constitutional order. as the hhs mandate lawsuits show, one of the first places that implementation will be felt is on our relig