[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                TAX RAMIFICATIONS OF THE SUPREME COURT'S

                RULING ON THE DEMOCRATS' HEALTH CARE LAW

=======================================================================



                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 10, 2012

                               __________

                           Serial No. 112-27

                               __________

         Printed for the use of the Committee on Ways and Means





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20402-0001



                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York



        Jennifer M. Safavian, Staff Director and General Counsel

                   Janice Mays, Minority Chief Cousel


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 10, 2012 announcing the hearing.................     2

                               WITNESSES

Steven G. Bradbury, Partner, Dechert LLP, Testimony..............   147
Carrie Severino, Chief Counsel, Policy Director, Judicial Crisis 
  Network, Testimony.............................................   158
Lee A. Casey, Partner, Baker Hostetler, Testimony................   166
Walter Dellinger, Partner, O'Melveny & Myers LLP, Testimony......   176

                       SUBMISSIONS FOR THE RECORD

The Honorable Renee Ellmers......................................   226
Center for Fiscal Equity.........................................   228


                    TAX RAMIFICATIONS OF THE SUPREME



                    COURT'S RULING ON THE DEMOCRATS'



                            HEALTH CARE LAW

                              ----------                              


                         TUESDAY, JULY 10, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to call, at 10:35 a.m., in room 
1100, Longworth House Office Building, the Honorable Dave Camp 
(Chairman of the Committee) presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

               Chairman Camp Announces Hearing on the Tax

              Ramifications of the Supreme Court's Ruling

                   on the Democrats' Health Care Law

Tuesday, July 10, 2012

     House Ways and Means Committee Chairman Dave Camp (R-MI) today 
announced that the Committee on Ways and Means will hold a hearing to 
explore the implications of the Supreme Court's ruling that the 
individual mandate is constitutional, particularly as it relates to 
Congress's authority to lay and collect new taxes. The hearing will 
take place on Tuesday, July 10, 2012, in 1100 Longworth House Office 
Building, beginning at 10:30 A.M.
      
    In view of the limited time available to hear from witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of witnesses 
will follow.
      

BACKGROUND:

      
    President Obama and Congressional Democrats have long argued that 
the cornerstone of the ``Affordable Care Act'' (ACA) (P.L. 111-148 and 
111-152) is the requirement that Americans purchase government-approved 
health insurance or pay a new tax (the ``individual mandate''), and 
that the new law would not work without such a mandate. Many raised 
concerns that such a requirement was unconstitutional because it 
violated the Commerce Clause.
      
    On June 28, 2012, the Supreme Court ruled (5-4) that the individual 
mandate was constitutional. The Court rejected the Obama 
Administration's argument that such power is granted under the Commerce 
Clause. But the Court accepted a tertiary argument put forth by the 
Obama Administration that the individual mandate was a tax increase 
authorized under the Congress's taxing power (U.S. Const. art. I, 
Sec. 8, cl. 1). Under the Constitution's Origination Clause (art. I, 
Sec. 7, cl. 1), all revenue measures must originate in the U.S. House 
of Representatives, and the rules of the House grant jurisdiction over 
``[r]evenue measures generally'' to the Committee on Ways and Means 
(Rule X, cl. 1(t)(3)).
      
    In announcing the hearing, Chairman Camp stated, ``I strongly 
disagree with the Court's decision and its holding that Congress can 
tax Americans who choose not to purchase government-approved health 
insurance. This ruling sets a dangerous precedent with potentially 
enormous consequences. As the taxwriting Committee of the U.S. House of 
Representatives--where, under the Constitution, all revenue measures 
must originate--we have a responsibility to fully understand the 
Court's interpretation of Congress's taxing authority and what that 
means for potential actions taken by future Congresses, the future of 
our country and the relationship that the government has with the 
American people.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the implications of the Supreme Court's 
ruling that the individual mandate is constitutional on the grounds 
that it is a tax and that Congress has the broad power to levy taxes 
far beyond the historic scope of raising revenue.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Thursday, July 24, 2012. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman CAMP. Good morning.
    Writing for the majority in the Supreme Court decision 
handed down last month, Chief Justice John Roberts quoted the 
Lopez decision, writing, and I quote, ``At the very least we 
should pause to consider the implications of the government's 
arguments when confronted with such new conceptions of Federal 
power.''
    Whether or not one agrees or disagrees with the ruling of 
the Supreme Court or with the underlying law itself, the words 
of the Chief Justice have great meaning, particularly for the 
Congress and specifically for the House Committee on Ways and 
Means.
    On June 28th, 2012, the Supreme Court narrowly ruled that 
the Democrat health care law's individual mandate was 
constitutional. The Court rejected the Obama Administration's 
argument that such power is granted under the Commerce Clause 
or the Necessary and Proper Clause of the Constitution. But the 
Court accepted another argument put forth by the Obama 
Administration that the individual mandate is a tax increase 
authorized under the Congress' taxing power.
    This holding is especially important for this committee. 
Under the Constitution's origination clause, all revenue 
measures must originate in the U.S. House of Representatives, 
and the rules of the House grant jurisdiction over revenue 
measures generally to the Committee on Ways and Means.
    That is why we are here today, to focus on the implications 
of the Supreme Court's ruling that the individual mandate is 
constitutional on the grounds that it is a tax; and in light of 
the Court's ruling Congress now has the broad power to levy 
taxes far beyond the historic understanding of raising revenue.
    By all accounts, the discussion surrounding the individual 
mandate tax received only scant attention from the government's 
lawyers. They devoted just a mere 21 lines of the government's 
reply brief to the issue, and it was the subject of just 50 
lines in the oral arguments held in March.
    Yet in the majority opinion Justices Breyer, Ginsburg, 
Kagan, Sotomayor, and Chief Justice Roberts upheld the 
individual mandate as a tax. In doing so, they confirmed that 
the individual mandate which President Obama, Senate Majority 
Leader Reid, House Minority leader Pelosi, and the Obama 
Administration's lawyers called essential to its health care 
law more than 100 times in their legal briefs is a tax and must 
now be pursued solely under the Congress' taxing power.
    So as Chief Justice Roberts suggested, today we pause to 
consider the implications. As a result of the Court's opinion, 
the limits on the Congress' taxing power are now anything but 
clear.
    Some may argue that this ruling simply reaffirms a power 
that Congress has always had. However, until the Democrats 
enacted their health care law and until the individual mandate 
tax was determined to be an acceptable use of Congress' taxing 
power, the power to tax had never been used to coerce people 
who do not purchase a specific product or service. This is the 
first indirect tax on inactivity in American history. In the 
case of the Court's ruling that the individual mandate is a 
tax, both of those notions are reinforced: that absence of 
action is taxable and that the government can compel 
individuals to act.
    The purpose of the individual mandate tax is to force 
people to do what they otherwise may not freely choose to do. 
In this case, beginning in 2014, the Federal Government will 
force individuals to purchase government-approved health 
insurance. And how is this different than the government 
requiring Americans to purchase broccoli or pay a tax for not 
doing so? How is this different than the government requiring 
Americans to purchase low fat or low salt foods or pay a tax as 
a means to fight the obesity epidemic?
    After all, the case put forth by the Democrats and the 
President was that the individual mandate was necessary to 
improve the Nation's health. Under that premise, what is there 
to stop future Congresses from using this taxing authority to 
compel a similar ``it's good for the country'' outcome? If one 
refuses to purchase the goods and services the government 
thinks are best for the country, the act of not purchasing can 
now trigger a tax.
    Without a doubt the Supreme Court's ruling that the 
individual mandate is a tax reveals it can only be 
characterized as a brave new world. And, as such, its 
implications might be imagined but can not be entirely known.
    Chief Justice John Marshall said in the early days of the 
Republic, the power to tax is the power to destroy. As Congress 
examines this new taxing power, we must consider whether a 
future Congress will restrain itself from using the power to 
control individual lives and decisions or whether this is just 
a first step into that brave new world. Those are the issues we 
will explore today.
    I welcome our panel of witness and look forward to their 
testimony.
    I will now recognize Ranking Member Levin for the purpose 
of an opening statement.
    Mr. LEVIN. Thank you.
    Welcome to all of you coming--all of you on the panel.
    As everyone knows by now, the individual responsibility 
requirement, the so-called mandate or the free rider provision 
in the Affordable Care Act, was modeled after a similar 
provision in Governor Romney's health care law in 
Massachusetts. Obamacare is Romneycare.
    The Supreme Court found the individual mandate in Federal 
law to be constitutional. We are here today because Republicans 
want to discuss what it is called. So perhaps we should take 
linguistic lessons from Governor Mitt Romney.
    The Washington Post reported over the weekend, and I quote, 
``As the Massachusetts Governor and then as a Presidential 
candidate, Mr. Romney spent the next 6 years describing in a 
variety of different ways the possible punishments for ignoring 
the Massachusetts mandate as free rider surcharges, tax 
penalties, tax incentives, and sometimes just as penalties.''
    The bottom line is, whatever you call this, almost no one 
will have to pay. That is right. Almost no one will have to pay 
it.
    The Congressional Budget Office estimates that only 1.4 
percent of Americans will pay anything for refusing to purchase 
insurance. And that is just about identical to the percent of 
people in Massachusetts who have paid the penalty under 
Governor Romney's health care law, what Republicans like to 
call, I think very inappropriately, a brave new world.
    For most people, the penalty will be about the cost of a 
health insurance plan, and most people would rather have 
insurance. That is what Mitt Romney thought. Here is how he 
described the mandate in 2005. I quote:
    ``No more free riding, if you will, where an individual 
says, I'm not going to pay even though I can afford it. I'm not 
going to get insurance even though I can afford it. I'm instead 
going to just show up and make the taxpayers pay for me.
    ``It's the ultimate conservative idea''--Mr. Romney 
continued--``which is that people have responsibility for their 
own care and they don't look to government to take care of them 
if they can afford to take care of themselves.''
    That was in '05.
    In April, 2010, I quote: ``Right now, in lots of parts of 
the country, if individuals do not have insurance they can 
arrive at the hospital and be given free care paid for by 
government. Our current system is a big government system. A 
conservative approach is one that relies on individual 
responsibility. But in my view, and others are free to 
disagree, expecting people who can afford to buy insurance to 
do so is consistent with personal responsibility and that is a 
cornerstone of conservatism.''
    And it did not just start with Governor Romney. I would 
like to enter into the record the original Heritage Foundation 
report that introduced the concept of a mandate. I ask for----
    Chairman CAMP. Without objection.
    [The information follows: the Honorable Sander Levin]

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    Mr. LEVIN. Bills with an individual responsibility 
provision have been cosponsored by Republicans for decades. You 
all can run, but you can't hide. You are essentially trying to 
bloody the nose of something you were for before you were 
against it. And so you think you have found the right cudgel, 
the word ``tax,'' but it is a cudgel that is only going to 
impact 1.4 of Americans who are free riding off of our health 
care system and in order to stop that will pay a penalty.
    Republicans are also making another false claim that health 
care reform is a massive tax on the middle class. That is 
false. Seventy percent of the revenues come from three sources: 
industries who agree to the fees because they are benefiting 
from millions of new customers, free riders, and the top 3 
percent of taxpayers.
    What this week is all about is not taxes. It is about 
taking away extra protections against insurance company abuses. 
That is the Republican agenda this week: Repeal the preexisting 
conditions protection, repeal the removal of annual and 
lifetime limits on benefits for the very sick, repeal closing 
the prescription drug donut hole, repeal young adults staying 
on their parents' insurance, repeal the cap on premium 
increases.
    Middle-class families have enough to worry about these days 
as they struggle to recover from the worse recession in 
decades. Instead of making it harder for them by putting the 
insurance companies back in the driver's seat of our health 
care system, this committee should be focused, as a number of 
us have said so many times, on moving forward, on passing jobs 
legislation that we can all agree on, instead of blocking its 
arrival on the floor of the House of Representatives.
    Chairman CAMP. Today we are joined by a distinguished panel 
of constitutional scholars:
    Mr. Steven Bradbury is a partner with Dechert LLP, and he 
has served as the head of the Office of Legal Counsel in the 
Department of Justice.
    Ms. Carrie Severino is the Chief Counsel and Policy 
Director to the Judicial Crisis Network and has served as a law 
clerk for the U.S. Supreme Court and the Court of Appeals for 
the DC Circuit.
    Mr. Lee Casey is a partner with Baker Hostetler and has 
served in the Office of Legal Counsel and the Office of Legal 
Policy in the Department of Justice.
    And Mr. Walter Dellinger is a partner with O'Melveny & 
Myers. Mr. Dellinger has served as the Solicitor General of the 
United States.
    You will each have 5 minutes to present your oral 
testimony. We do have your written statements in advance. Thank 
you for those. Your entire written testimony will be made a 
part of the record.
    And, Mr. Bradbury, we will begin with you. You are now 
recognized for 5 minutes.

     STATEMENT OF STEVEN G. BRADBURY, PARTNER, DECHERT LLP 
                        (WASHINGTON, DC)

    Mr. BRADBURY. Thank you Chairman Camp, Ranking Member 
Levin, and distinguished Members of the Committee. It is an 
honor to appear before you today to share some observations 
about the Supreme Court's rulings on the Affordable Care Act.
    First, while I believe the Court's reasoning on the 
Commerce Clause is quite positive and historic, I am concerned 
the decision to uphold the minimum coverage provision as a tax 
has the potential to unleash the coercive power of the Federal 
Government in a different guise. When Congress enacted the 
Affordable Care Act, it plainly thought the individual mandate 
was necessary to make the law work. The mandate was intended to 
compel younger, healthier Americans to subsidize the insurance 
costs of others; and it was designed to counteract the moral 
hazard caused by the guaranteed issue and community rating 
regulations which Congress recognized create a strong incentive 
for people to forego buying insurance until they actually need 
it.
    Congress thought it could use its Commerce Clause power to 
command people to buy insurance, and that is how the individual 
mandate was primarily defended at the Court. But a majority of 
the Court rejected this argument and concluded that the mandate 
exceeded Congress' powers under the Commerce and Necessary and 
Proper Clauses of the Constitution. I believe that conclusion 
is a holding of the Court and will prove to be enormously 
consequential for generations to come.
    At the same time, though, the Court upheld the so-called 
shared responsibility payment as a tax. This ruling means the 
minimum coverage provision is no longer a direct legal mandate. 
As the Chief Justice explained, to uphold the provision under 
the taxing power, the Court had to read the mandate out of the 
statute. Instead of saying that all Americans shall maintain 
health insurance coverage, the law is now interpreted to say 
only that certain individuals must pay a tax increase if they 
don't have insurance. It is fair to ask how this ruling changes 
the law Congress thought it was enacting and how Congress might 
try to toughen the tax provision in the future to preserve the 
original purposes of the mandate.
    Back when the law was understood by everyone to include a 
legal mandate, the Congressional Budget Office projected that 
approximately 3.9 million Americans would opt to pay the 
penalty rather than comply with the mandate. It is logical to 
understand that this earlier CBO projection was based in part 
on the assumption that most Americans would naturally feel a 
strong moral imperative to comply with the law, even if it 
wasn't enforced with criminal sanctions.
    Now that the Supreme Court has announced to the whole world 
that the minimum coverage provision is not a legal mandate but 
only a tax assessment, it is equally logical to assume that the 
actual number of individuals who will choose to pay the tax 
rather than purchase insurance will be greater than originally 
projected. That result is likely because, for most people, the 
amount of the tax payment is currently going to be much less 
than the actual cost of an insurance policy.
    If the number of individuals who choose to forego insurance 
coverage turns out to be larger than Congress thought necessary 
to preserve the effectiveness of the insurance reforms, we can 
expect Congress would try to ratchet up the tax in a renewed 
effort to compel more Americans into the insurance market.
    Although the Court has said that a tax can't be punitive, 
the Constitution grants Congress wide latitude in setting the 
amount of the tax, even if the tax is so high that it coerces 
desired behavior or squelches undesired conduct. So, for 
example, Congress in the past has enacted prohibitively high 
tax assessments on certain things it wished to eradicate, such 
as marijuana sales or sawed-off shotguns. A future Congress 
might decide to do the same with the shared responsibility tax, 
and the constitutional limits on how high Congress could raise 
the tax are quite undefined.
    Congress could also introduce the usual tax enforcement 
measures such as criminal prosecution for failing to pay the 
tax and invasive audits by the IRS, and these two would make it 
more draconian for people to choose the tax option rather than 
purchasing insurance. In other words, just when the Court has 
reaffirmed so resoundingly the limited nature of the commerce 
power, I fear we could still find ourselves in a world where 
the government is effectively forcing people to buy something 
against their will.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Bradbury follows:]
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    Chairman CAMP. Thank you, Mr. Bradbury.
    Ms. Severino, you are recognized for 5 minutes.

 STATEMENT OF CARRIE SEVERINO, CHIEF COUNSEL, POLICY DIRECTOR, 
            JUDICIAL CRISIS NETWORK (WASHINGTON, DC)

    Ms. SEVERINO. Thank you, Chairman Camp, Ranking Member 
Levin, and Members of the Committee. I am honored to testify 
before you today about the issues raised by the new taxing 
power recently described by the Supreme Court in NFIB v. 
Sebelius.
    The Supreme Court's decision upholding the Patient 
Protection and Affordable Care Act was surprising to Court 
watchers because it upheld the individual mandate based on a 
theory that no other Court had accepted and that the parties 
themselves gave short shrift in briefing and argument: that the 
mandate operates as a tax that individuals may choose to pay in 
lieu of purchasing health insurance.
    When a case as major as this one is decided on a novel 
theory that has been so minimally argued, there is a risk that 
the majority had not fully considered the ramifications of 
their decision. Unfortunately, the new tax authority described 
by the Court has implications that are nearly as pernicious for 
our constitutional structure as the Commerce Clause arguments 
that got all the attention before the decision.
    First, the majority's interpretation of the taxing power 
creates a previously unheard of form of tax that is triggered 
by mere inactivity.
    Taxes are primarily designed to raise revenue and only 
secondarily to influence behavior. With few exceptions, when 
Congress has deployed the taxing power to incentivize behavior, 
it has always been as a carrot and not as a stick. Thus, tax 
credits and deductions are given for such favored activities as 
raising children, purchasing a home, getting an education, or 
driving a hybrid car. And even where the Federal Government has 
used taxes as a stick to change behavior, such as taxing 
alcohol to reduce consumption, people have had to do some act 
in order for the tax to apply. But under the NFIB decision, for 
the first time Americans will have to act in order for the tax 
not to apply.
    During the pendency of this case, many courts and 
commentators noted the problems of extending a Commerce Clause 
to allowing regulation of inactivity; and under the 
Constitution's tax power the same distinction holds.
    The Constitution allows taxes on activities, such as the 
capital gains tax, which is triggered when you sell property as 
a gain. It also taxes on inactivity through direct or head 
taxes, but the Constitution itself strictly limits direct taxes 
by requiring that they be apportioned among the States. Indeed, 
the majority opinion clearly acknowledges that the mandate 
affects the States unevenly and therefore could not pass 
constitutional muster as a direct tax.
    Caught in this bind, the Court simply declared that the 
mandate operated as a never-before-seen tax, a tax on 
inactivity that nonetheless doesn't need to be apportioned. 
This move triggers the most damaging consequence of the NFIB 
decision, a massive expansion of the Federal tax power. As a 
result, we must again consider whether the Federal Government 
can require people to purchase broccoli. This time by another 
means.
    Allowing unrestricted taxes on inactivity will open the 
door to taxes the likes of which this country has never seen. 
For example, rather than leaving it to municipalities to 
incentivize recycling, the Federal Government could tax those 
who fail to do so. Because preventative services are now 
required to be covered by all health insurance plans without a 
co-pay, Congress might tax people who failed to take advantage 
of them.
    Legislators could even tax anyone who does not own a gun, 
citing studies that gun ownership reduces crime. And forget tax 
incentives for installing solar panels. Congress can now just 
impose a tax on Americans who refuse to buy them.
    Whether any of these proposals are good or bad public 
policy is beside the point. The point is that Congress can now 
levy any or all of these taxes in the wake of the NFIB 
decision.
    Finally, the new tax regime could dramatically erode 
democratic accountability.
    The great Chief Justice Marshall recognized what the 
Founders were keenly aware of, that an unlimited power to 
attack involves, necessarily, the power to destroy. As such, 
the Constitution's allocation of the taxing power to the House 
of Representatives was specifically designed to maximize the 
public accountability for this most dangerous power.
    It is practically undisputed that the health care law would 
have died in Congress if it were acknowledged by its backers to 
be a tax that hit heavily on the middle class. But in the wake 
of NFIB Congress now has the ability to pass massive tax 
increases of virtually any sort without ever having to utter 
the ``T word.'' If elected officials are allowed to represent 
one thing to the people--it is a penalty--and another to the 
courts--it is a tax--the democratic accountability envisioned 
by our Founders will have been lost.
    But even where Congress is acting with pure intentions, 
those intentions may not be respected by the courts, who may 
rewrite the statute in order to save it. That takes the tax 
power out of the branch of government that is most 
representative and puts it in the judicial branch, the one 
purposely insulated from ever having to answer to the American 
People.
    As we approach the point where there are no judicially 
enforceable limits on the enumerated powers of Congress, the 
most important limits on future legislators will be those they 
are willing to impose on themselves.
    Thank you.
    [The prepared statement of Ms. Severino follows:]
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    Chairman CAMP. Thank you very much.
    Mr. Casey, you have 5 minutes.

      STATEMENT OF LEE A. CASEY, PARTNER, BAKER HOSTETLER 
                        (WASHINGTON, DC)

    Mr. CASEY. Thank you, Mr. Chairman, Ranking Member Levin, 
and Members of the Committee. It is an honor to be here to 
discuss these very important issues this morning.
    In assessing the Supreme Court's ruling in National 
Federation of Independent Business v. Sebelius, it is important 
to note that the decision has articulated clear limits on both 
the Commerce Clause and the Necessary and Proper Clause, 
holding that neither of these provisions can form the basis of 
a general police power like that enjoyed by the States. In 
addition, the Court also made clear that its decision in South 
Dakota v. Dole does have teeth. Congress cannot use Federal 
spending as a means to coerce the States into adopting or 
implementing Federal programs. These aspects of the decision 
are enormously significant and positive.
    Nevertheless, in upholding the Affordable Care Act's 
individual mandate as a tax, the Supreme Court has fashioned a 
breathtaking new power for Congress. The Court held that 
Congress can tax not only property or income or commercial 
activity but also the mere failure to undertake some course of 
action.
    Congress' power to lay and collect taxes has, of course, 
long been interpreted broadly. But as is the case with respect 
to Congress' exercise of its commerce power, it is difficult to 
identify any precedent where a tax has been imposed on the 
simple failure to buy some good or service. Nor is it possible 
to articulate a neutral judicially enforceable limiting 
principle to keep this power from simply serving as the basis 
for a general Federal police power.
    Nevertheless, the decision having been made, the question 
becomes what limits the Supreme Court is prepared to enforce on 
Congress' power to lay and collect taxes. The Court continues 
to acknowledge that there are such limits, at least in theory. 
The Court restated its position that a tax which is a mere 
penalty will not be sustained under the taxing power, although 
it also declined to decide the precise point at which an 
exaction becomes so punitive that the taxing power does not 
authorize it.
    As a practical matter, therefore, the real-world viability 
of these limitations remains very much in doubt. This is 
especially the case because the NFIB Court also severely 
restricted application of another basic constitutional 
limitation on the taxing power, the requirement that direct 
taxes be apportioned among the States on the basis of 
population. The Court avoided holding the individual mandate 
unconstitutional as an unapportioned direct tax by narrowing 
the meaning of direct taxes to capitation or head taxes and 
taxes on real property.
    Moreover, in upholding the mandate as a tax, the Court 
suggested that the judiciary is not bound by Congress' own 
clear reliance on the commerce power in enacting that 
requirement. Here the Court relied on the long-standing rule 
that, in determining whether or not a particular exaction is a 
tax, it will disregard the label Congress may have used and 
view its substance and application. This, of course, is based 
on the obviously correct premise that Congress can neither 
expand nor contract its enumerated powers by simple labeling.
    Before this case was decided, however, that rule was never 
applied in a manner suggesting that Congress could not choose 
which of its enumerated powers to rely on in enacting 
legislation or that the courts were not bound by that choice 
once made and clearly expressed.
    Arguably, this choice was not clearly expressed in the 
Affordable Care Act. Although it identified the commerce power 
as support for the mandate, the statute admittedly did not 
specifically disclaim reliance on the taxing power.
    In the future, therefore, Congress can put some limitation 
on the taxing power, albeit a self-imposed one, by stating 
plainly when it is and when it is not invoking its power to lay 
and collect taxes. Such a truth-in-legislating requirement 
would also permit the citizenry at large to accurately assess 
responsibility for any particular exaction. This will help to 
preserve the accountability the Constitution sought to 
guarantee by granting Congress limited and enumerated, rather 
than general, legislative powers.
    Thank you.
    [The prepared statement of Mr. Casey follows:]
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    Chairman CAMP. Thank you, Mr. Casey.
    Mr. Dellinger, you are recognized for 5 minutes.

 STATEMENT OF WALTER DELLINGER, PARTNER, O'MELVENY & MYERS LLP 
                        (WASHINGTON, DC)

    Mr. DELLINGER. Thank you, Chairman Camp, Ranking Member 
Levin, and Members of the Committee.
    You have my written statement, so I would like to begin by 
responding to the comments made by this very thoughtful group 
of colleagues I have with me here today.
    First of all, I want to respond to the notion that this 
was--the provision in question, 5000A, was a heavy tax increase 
on the middle class. I think that is clearly incorrect. As 
Ranking Member Levin noted, this provision only applies to 
somewhere between 1 and 2 percent of the public. It is a modest 
financial incentive that is imposed--that is $95 first year and 
never exceeds 2 and a half percent of income. It is imposed 
only on that very small part of the population that chooses to 
go without insurance and thereby to impose the risk of the cost 
of illness or injury on fellow citizens.
    Obviously, it does not apply to anyone who is on Medicare 
or over 65, it doesn't apply to anyone who has insurance 
through their employment, it doesn't apply to those who have 
insurance through the Medicaid program, it doesn't apply to 
those who have insurance through their college, it doesn't 
apply to those who have individual policies, but only to those 
who choose not to do so. That is a very small percent. And in 
upholding it the Court said it leaves people with a real 
choice.
    There is no mandate here. You pay a modest financial 
penalty, never to exceed the cost of insurance and never to 
exceed 2 and a half percent if you choose not to have 
insurance.
    And what role does it play? Think how critical it is to 
what this bill does accomplish. This is legislation which 
guarantees to 100 million Americans that they will never have 
to worry about lifetime caps on their insurance. That tells 5 
million young people that they can stay on their parents' 
insurance policy until they are 26. It tells more than 5 
million senior citizens that they do not have to worry about 
higher cost of prescription drugs in the donut hole and that 
expands coverage to perhaps as many as 30 million people who 
will be able to see a doctor when they are sick or can go to 
see a doctor when they have a child who is ill.
    Finally, and most critically, it says no one can be turned 
down for health insurance because they have a preexisting 
condition, which could have been asthma, it could have been 
birth by cesarean. No one will have to face an extraordinary 
jump in their premiums because they have a child born with a 
birth defect.
    But if you do that, if you guarantee people the right to 
have insurance when they need it, you have to have an incentive 
for those people to buy insurance before they need to. And that 
is why the Massachusetts model was used here, to give a 
financial incentive through a tax penalty on those who fail to 
have insurance.
    I think it is completely unremarkable--and I for one at 
least expressed the thought that Chief Justice Roberts might 
uphold this under the tax power--a completely unremarkable 
application of settled precedent about the authority of 
Congress to exercise its power under the clause, giving it the 
right to raise revenues through taxes, excises imposed, and 
through other revenue devices.
    It was, to me, unremarkable that the Court upheld this. And 
indeed any other decision, in my view, would have serious 
implications for the self-government of the American People 
through their elected representatives.
    As the Chief Justice noted, the tax power is subject to all 
the constraints of the Bill of Rights. You can't tax one party 
or one religion more than another. And if you actually have 
something which coerces people into activities that they would 
choose not to, it is so punitive an amount the Court will 
police the outer boundaries of that.
    But to have the Court second-guess the Congress on whether 
an incentive is too great an incentive I think substitutes the 
judgment of five people who have never been elected for the 
judgment of the elected representatives of the people.
    And for the Court to say we are going to leave to the 
Congress of the United States the determination within these 
constitutional boundaries of how and whether to encourage 
people or discourage people from engaging in activities through 
the revenue raising powers, when they say we are going to defer 
to the judgment of Congress, that means we are going have 
government of the people, by the people, and for the people and 
not government by judiciary.
    [The prepared statement of Mr. Dellinger follows:]
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    Chairman CAMP. Well, thank you, Mr. Dellinger.
    Thank you all for your testimony.
    The Constitution requires that tax measures originate in 
the House of Representatives, and this Committee is the only 
House Committee authorized to consider such measures. At the 
outset, I think it is critical for us to understand what kind 
of tax is the individual mandate tax. And the Constitution 
contemplates only two forms of taxation: direct taxes, such as 
capitation and property taxes, which are subject to 
apportionment requirements, as well as income taxes authorized 
under the 16th amendment, and indirect taxes, such as duties 
imposed and excises. And based on that power and the Court's 
opinion I would like to ask each one of our panel of experts 
just what kind of tax is this.
    Mr. Bradbury, I will start with you.
    Mr. BRADBURY. Well, before the Supreme Court's ruling, I 
would have said it is a direct tax. It doesn't fall into any of 
the other categories we are used to seeing. Even though it is 
paid on an income tax return, it is not an income tax. It is a 
specified surcharge. The Court said it is not a direct tax.
    I would like to have seen a lot more briefing on that 
question. I think that is a very hard question, at a minimum.
    Chairman CAMP. All right. Ms. Severino.
    Ms. SEVERINO. Yes, the dissent in this case points out that 
this is a difficult constitutional question.
    The first impression, this is a tax that doesn't look 
exactly like the other direct taxes we have seen. The Chief 
Justice is correct in that point. But it also looks nothing 
like indirect taxes we have seen before. It is clearly not an 
income tax. It is not an excise. It is not a duty. And the 
question is, is it more is it like a direct tax or indirect 
tax?
    I think, given the fact that it is operating on inactivity, 
it seems much more like a direct tax to me than it does an 
indirect tax. Unfortunately, the Court I think went on with the 
dissent called a lick and a promise and just said, close 
enough, it doesn't look like the direct taxes we have seen 
before; we'll call it indirect.
    But I think the problem is it doesn't look like anything we 
have seen before in terms of a tax. So we could use a lot more 
discussion on that question.
    Chairman CAMP. Mr. Casey.
    Mr. CASEY. I agree with that.
    To the extent that this provision ever looked like a tax 
before the Court decided that that is what it was, it was a 
direct tax that had not been apportioned, or at least that is 
what it looked like. The Court has now said it is not a direct 
tax. That was necessary to upholding it. Because, otherwise, 
the tax would have been invalid as not being apportioned. So 
the Court has told us that it is an indirect tax.
    Chairman CAMP. Mr. Dellinger.
    Mr. DELLINGER. Well, the face of the statute says it is a 
penalty enforceable under the Tax Code. The taxing power 
includes the authority to have penalties for failure to pay in 
a timely fashion. There are a range of things that can be done 
under the tax power. In this case, it is measured in part by 
income. It is on the face of an amendment to the Internal 
Revenue Code.
    It provides that you pay an additional $95 that increases 
to 2 and a half percent if you don't maintain adequate 
insurance coverage. That to me seems no different than the fact 
that your tax bill is higher if you engage in the 
``inactivity'' of not putting aside funds for your children's 
education.
    It operates no differently than the tax incentives in the 
law of which there are many and of this Committee is well 
familiar. The amount you pay to the government goes up or down 
depending upon a number of matters, like whether you can take 
deductions for a home mortgage. If you simply do nothing, if 
you don't get a home mortgage, your tax is higher. If you don't 
put aside money for your children's education or for your own 
professional development, you pay a higher amount to the 
Federal Government. I think it is in fact no different from 
that and unremarkable in that respect.
    Chairman CAMP. So is it direct or indirect, in your 
opinion?
    Mr. DELLINGER. Well, it is not a direct tax because the 
Court--the Court has never held anything to be a direct tax for 
a very good reason. This was done to protect the slave States 
by making sure that the property and slaves could not be taxed 
in a way that was disproportionate. And what the Court has 
held, that direct taxes consist of taxes on capitation, that is 
on every single person like a poll tax or taxes on property or 
the proceeds from property, this is none of those. So it does 
not have to be apportioned.
    Chairman CAMP. It is an indirect tax then, in your opinion?
    Mr. DELLINGER. I am not--the nomenclature battle about 
whether you call this a tax or a tax penalty or a penalty 
strikes me as completely unfruitful. It is like asking whether 
a Member who goes fishing is a Congressman or a fisherman. The 
law says it is a penalty paid under the tax power as part of 
your income tax. It says exactly what it is for on the face the 
bill and exactly what the conditions are and exactly what the 
amount is.
    Chairman CAMP. Thank you.
    Both the original House version as well as the original 
Senate Finance Committee version of the Democrats' health care 
law would have allowed the IRS to assess fines, file liens, 
levies, pursue criminal prosecution, and even impose jail time 
for failure to buy government-approved health insurance or pay 
this new tax. These enforcement measures were eventually 
limited in the Senate version of the legislation by the 
addition of subsection G which prohibits the IRS from using 
these specific tools to enforce the individual mandate tax.
    Mr. Bradbury, could a future Congress strip subsection G of 
the individual mandate just as easily as it was put in place? 
If this were done, would the IRS then be empowered to fine 
individuals who do not buy government-approved health 
insurance, seize property, and even put them in jail if they 
don't pay the new individual mandate tax?
    Mr. BRADBURY. Yes. If it is a constitutional tax as the 
Court has said, Congress can use all of its enforcement powers.
    Chairman CAMP. And there would be nothing to bind a future 
Congress from removing that subsection if they so chose?
    Mr. BRADBURY. Absolutely not.
    Chairman CAMP. Following the Supreme Court's ruling, the 
Obama administration and congressional Democrats have argued 
that only 4 million Americans will be forced to pay the 
individual mandate, as if this were somehow a trivial number. 
But it is actually a larger number than this. The Congressional 
Budget Office has predicted that an additional 16 million 
Americans who would not have otherwise purchased health 
insurance would do so because they are forced to because of the 
mandate in the law. And this figure is quite a bit higher than 
we have seen from the administration.
    This brings the total number of people who are directly 
affected by the individual mandate to about 20 million 
Americans, which is greater than the population of all but two 
States, California and Texas, and I think hardly an 
insignificant number.
    There are also hundreds of millions of Americans who are 
indirectly affected by the mandate. As I recall, there are only 
a few people who are free of the new mandate tax, including 
illegal aliens.
    Mr. Bradbury, aren't the overwhelming majority of Americans 
subject to the individual mandate one way or another?
    Mr. BRADBURY. Yes, many of us, hundreds of millions, will 
need to check a box on our tax returns certifying that we have 
had the insurance required for each month of the tax year. And 
that covers not just the tax filers but all their spouses and 
dependents. So that affects our economic choices. If we choose 
to drop the insurance we currently have, we will subject 
ourselves to tax. So, potentially, hundreds of millions of 
people are subject to the tax.
    And the point I was trying to make is that I think the 
CBO's $16 million figure suggests if there isn't a legal 
requirement, a direct legal mandate, a lot more people will 
choose to pay the tax than buy insurance, thereby undercutting 
the purpose for the mandate that Congress had in mind and 
leading I believe to a strong impulse in Congress to try to 
raise the level of the tax and the penalties that apply to 
enforce it.
    Chairman CAMP. So, as I inquired, not only could the 
imposition of penalties be changed by a future Congress but 
certainly, since it is a tax now, the level of the tax could be 
changed by a future Congress as well, as you point out.
    Mr. BRADBURY. Yes. And the Constitution is very unclear as 
to how high that can go.
    Chairman CAMP. Even under the current law as written, the 
IRS will have certain tools available to it to make sure that 
there is compliance. What would some of those be, for example?
    Mr. BRADBURY. Well, they are limited under the current 
strategies--so they cannot use the full panoply of its criminal 
enforcement and other powers, but others may know better than I 
under the current law what specific tools IRS can use to 
encourage payment of the tax.
    Chairman CAMP. Is there anyone--Ms. Severino, do you know?
    Mr. DELLINGER. I think, Mr. Chairman, that----
    Chairman CAMP [continuing]. Could still audit, right?
    Mr. DELLINGER [continuing). Under present law, I believe 
the only tool that is available is to withhold parts of a 
refund.
    Chairman CAMP. And certainly auditing a return to make sure 
that you have checked the correct box and that you actually 
have, quote, unquote, government-approved insurance, wouldn't 
that be a tool that still would be available to the IRS?
    Mr. DELLINGER. Yes.
    Chairman CAMP. Thank you.
    Mr. Levin.
    Mr. DELLINGER. Could I answer your--you asked two very good 
questions: Aren't those directly affected considerably more 
than the 4 million who will choose to pay the penalty? Isn't 
the estimate that an additional 15 million people will purchase 
insurance because of the incentive of this tax penalty and 
doesn't that affect hundreds of millions?
    I just want to briefly say, to me, I think the theory of 
the law is and what Congress passed is it is a good thing that 
15 million additional people will obtain health insurance, and 
that does have a very significant effect on the rest of the 
country because the rest of the country has been on the hook 
for those people's medical bills. And we have a very 
inefficient system for people who don't have health insurance. 
They wind up in emergency rooms, and the costs get paid in 
other people's premiums.
    So it is estimated that other Americans' insurance premiums 
will go down precisely because there will be 15 million more 
Americans who have health insurance because of the incentives 
created by this law. And the judgment of Congress would say 
that is a good thing, not a bad thing.
    Chairman CAMP. I think the issue there would be at what 
cost, but we are not really getting into that now.
    I yield to Mr. Levin at this point to inquire.
    Mr. LEVIN. Well, thank you for coming. I think all of us 
have a lot of respect for your talents, and I don't suggest 
this is why you are here.
    I think that it is important that no one be able to scare 
the American people by suggesting the sky is falling or that 
some wolf will be at their door. The law restricts what can be 
done to implement it. There can't be jail and all of that. And 
to suggest that Congress is going to use this authority to run 
wild I think sells short the abilities and the talents and the 
judgment of this institution.
    We have been wrestling with the issue of health insurance 
for over 70 years--for over 70 years, even longer--and this 
Congress by a majority vote decided to chart a course where 
more and more people would be covered, now 50 million who are 
not. That was with a small D, a democratic decision. We did not 
spend endless hours deciding whether it was the Commerce Clause 
or the taxing authority. We thought we had the authority to 
respond to the needs of the American people.
    So I know you are not here to scare us or scare the 
American people, and I hope you won't let anybody force you 
into that position. It is possible, I suppose, to come up with 
legal theories as to what might happen. You know, Social 
Security, everybody has to pay taxes, everybody. There is a 
small exception I think in terms of a religious view. So 
anybody who works pays taxes.
    And you can talk about this in terms of activity or 
inactivity. Everybody wants to earn a living and wants to work; 
and if they do, they pay FICA taxes.
    And I haven't gone back and looked at Supreme Court 
decisions--how many years ago now--70, 80 years ago. I am sure 
there was an issue as to whether this institution had the power 
to say to everybody, you work, you pay. And essentially what we 
have said here was, you are all part of a health structure in 
this country. And if you go--you are going to go at some point 
in most every instance and receive health care. So you should 
participate, and you should not be free riders.
    That is what was said by Mitt Romney in Massachusetts. Mr. 
Neal is shaking his head. He said, no free riders, and you pay 
a penalty if you don't have insurance under the taxing 
authority. That is what the Supreme Court said.
    So I very much respect your talents, your integrity. I just 
hope this hearing doesn't turn into essentially saying the sky 
is falling when it isn't. Essentially what we decided to do is 
to place some kind of a floor under health insurance so that 
more and more people would receive it and that people would not 
be penalized because of preexisting conditions or because there 
were caps on how much they could receive, et cetera.
    Thank you.
    Chairman CAMP. Thank you.
    Mr. Herger is recognized for 5 minutes.
    Mr. HERGER. Ms. Severino, did President Obama's Solicitor 
General Verrilli in his briefs and at oral arguments ask the 
Supreme Court to consider the individual mandate as a tax?
    Ms. SEVERINO. Yes, they have made that argument since the 
district court level.
    Mr. HERGER. So the Obama administration argued before the 
Supreme Court that the individual mandate was a tax. This 
highlights a concern I have. The President and congressional 
Democrats clearly went out of their way during the legislative 
debate to hide the fact that this is a tax. The President 
himself said it was ``absolutely not a tax increase.'' Next, 
they asked the Court to consider it a tax; and now they are 
telling the American people it is not a tax. What does this do 
to the system of checks and balances and, more broadly, what 
does this do to government accountability by hiding the ball 
from the American people?
    Ms. SEVERINO. Yes, I agree, Representative Herger. This is 
what I was trying to talk about when I was looking at the 
accountability problem. We have a system where the tax power 
has been interpreted very broadly by the Supreme Court in part 
because there is a strong democratic check on the tax power. 
Because no one likes to see their Representatives raising their 
taxes, and so we assume the American people will be holding 
Representatives accountable.
    This is why the Founders purposely put the taxing power in 
the House of Representatives where individuals represent the 
people proportionately and where everyone is subject to more 
frequent elections. So you have to answer at least every 2 
years to the people if you raise taxes.
    That system of accountability only works if we actually can 
trust what our Members of Congress are telling us. If they tell 
us, we are raising taxes, here is what we need to do it, you 
have listed lots of good policy reasons you might want to 
impose a tax to enforce this kind of health care law, that is 
one thing. But it undermines the accountability of our system 
to say it is not a tax and you are passing it and when the 
American people are holding their people accountable to it and 
then afterward to say, now it is a tax. Or, as the President is 
doing, to say it is not stated in Court and to go back the next 
day in the press and say it is not.
    Mr. HERGER. Mr. Bradbury, the President has repeatedly 
stated that he would not raise taxes for individuals earning 
less than $200,000 and married couples earning less than 
$250,000. However, there are more than a dozen tax increases 
contained in Obamacare that would hit the same individuals that 
the President claimed he would protect.
    According to the Congressional Budget Office, roughly 75 
percent of those expected to pay the individual mandate tax 
would be individuals earning less than $59,000 per year or 
families of four earning less than $120,000 per year. Doesn't 
this break the President's pledge?
    Mr. BRADBURY. Well, Congressman Herger, I think I will beg 
off from commenting on the President's pledge directly. But I 
will say that it is clear that, under the terms of the statute, 
the shared responsibility tax has to be paid by any taxpayer 
for whom the price of the average policy is less than 8 percent 
of their income; and that is a lot of people below the levels 
that you described. And as the CBO said, it is expected that 
millions of people in those income categories for their own 
independent economic decisions will choose to pay the tax 
rather than purchase insurance. So it will apply to them.
    And I will say that there are other provisions in the law--
taxes and other cost increases through the regulations--that 
are likely to cause, as I understand it, employer-sponsored 
health plans to get more expensive.
    And now that there is no direct legal mandate that requires 
everyone to have insurance, additional people may choose to 
drop their employer-sponsored health policies because they are 
getting too expensive and choose to pay this tax instead. So 
the numbers could be greater. And I think that is reflected in 
the 16 million additional people who can be expected, according 
to CBO, to drop their insurance and pay the tax instead. I have 
to think that that could even be greater.
    Mr. HERGER. Thank you.
    Chairman CAMP. Thank you.
    Mr. Rangel is recognized.
    Mr. RANGEL. Thank you, Mr. Chairman.
    I couldn't believe I was listening to Mr. Herger complain 
about the President's or the administration's ambiguity about 
the penalty tax or both. I have to tell you as one politician 
to the other I find the position we find ourselves in as 
Democrats a hell of a lot easier to deal with than the one Mr. 
Romney is presenting. But after you conclude one way or another 
whether the administration has made up its mind whether it is 
penalty or tax, I hope you come with me and help me figure out 
where Mr. Romney is on that very same question.
    In any event, I think we did make a lot of mistakes as 
Democrats in not really being able to sell the benefits of this 
program.
    I also believe that inherently people are not excited about 
help that they don't really need. I think the fact that most 
all Americans are fortunate enough to have health insurance is 
a little difficult when you are talking about a tax or penalty 
to get excited about someone who doesn't have it. But I think 
the administration has not made the case that uninsured people 
get health care.
    Mr. Dellinger, I wish you could share the fact that, 
notwithstanding the fact that we have 30, 40 million people 
that don't have health insurance, that it doesn't mean they are 
not getting health care and that this health care that they get 
is not free. It has to be paid for. And that once we find some 
way to take this burden off of the existing policyholders and 
other people, it is actually a reduction in the cost for almost 
all Americans.
    Could you make that argument, that this is a reduction in 
costs for the millions of Americans and 98 percent--that only 
40 million people who are getting free health care will have to 
pay for this? Could you share that view?
    Mr. DELLINGER. Mr. Rangel, you are exactly right. Our 
present health care system is quite dysfunctional, and there is 
a strong conservative case to be made for supporting this kind 
of health care reform.
    Here is what happens with the 30, 40 million Americans or 
more who are uninsured. First of all, they go without care and 
treatment for themselves and their children in many instances. 
In other instances, they show up in the emergency room, which 
is a highly inefficient way to do it. Third, they get health 
care far too late. It is much cheaper to pay for mammograms 
than it is to deal with metastasized breast cancer. And fourth, 
what happens is the cost is shifted to other people, and it is 
reflected in other Americans' premium.
    That is why if we do succeed in expanding coverage to tens 
of millions of more Americans, then the average premium goes 
down for Americans by a $1,000 or so. So there, it does have 
that effect of making it a more effective system.
    And unlike the single payer plan favored by many Democrats, 
this is the option that gives people an incentive to have 
private health insurance.
    Mr. Levin was correct in reminding us that Social Security 
was challenged very much in the same way in 1937. The 
challenger said if you can set the retirement age at 65, 
Congress can set it at 25. They set a minimum wage of $5 an 
hour, it could be increased to a minimum wage of $5,000 an 
hour, but the court rejected that kind of second guessing and 
left those decisions to Congress, as I think it did at the end 
of the day with this provision.
    Also, Mr. Herger, if I can respond to your very good 
question about whether this is--there is some bait and switch 
going on. This tax or penalty or tax penalty or whatever you 
want to call it, this provision was right on the face of the 
statute. It says, on April 15, as an amendment to the Internal 
Revenue Code, when you calculate your Federal income, if you 
don't have insurance, you have to pay an additional $95. That 
goes up. There was never any doubt about that. And the 
Solicitor General made that argument clear.
    But the reason that Governor Romney and President Reagan--I 
am sorry--Governor Romney and President Obama, both were said 
to have increased taxes. Both of them said we didn't increase 
taxes, because not a single person in Massachusetts or America 
has to pay 1 cent more in taxes if you will just have adequate 
health insurance and not put that cost on others. In that 
sense, it was not a tax increase in Massachusetts, and it is 
not an increase in the United States.
    Chairman CAMP. Thank you. Time has expired.
    Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    I would like to ask all of you really, have we ever in the 
history of our country had a tax imposed on an individual for 
failing to engage in an activity? A simple yes or no.
    Mr. BRADBURY. Not that I know of, no.
    Ms. SEVERINO. I am not aware of any.
    Mr. CASEY. I don't believe so.
    Mr. DELLINGER. I think the answer is yes, we have in the 
form of higher tax bills, higher tax bills if you don't engage 
in certain activity like putting money aside for retirement, 
for college education, for home stuff. I don't know of any 
instance where it is not done by a tax deduction or a tax 
incentive, but I don't think it is----
    Mr. JOHNSON. Okay. It is not a deduction. As Chief Justice 
John Marshall once said, the power to tax involves the power to 
destroy. Doesn't this ruling in effect destroy the individual 
freedom to abstain from government-mandated activities, say to 
buy an electric vehicle or install energy-efficient windows or 
eat broccoli? Yes or no. Just the first three of you, please. 
Yes or no, please.
    Mr. CASEY. I think that is correct.
    Ms. SEVERINO. I agree.
    Mr. JOHNSON. Mr. Bradbury, in your testimony, you say, in 
addition to raising the amount of the tax itself, Congress has 
a host of coercive tax enforcement mechanisms that it could 
also introduce to ensure greater compliance with the tax 
requirement. Would that include the IRS seizing American homes 
and bank accounts?
    Mr. BRADBURY. Yes.
    Mr. JOHNSON. Thank you.
    Mr. Bradbury, I am holding a copy of the handwritten note 
from the chief of staff of the Joint Committee on Taxation, Mr. 
Barthold, and I ask unanimous consent that it be entered into 
the record.
    Chairman CAMP. Without objection.
    [The information follows: The Honorable Sam Johnson]
    [GRAPHIC] [TIFF OMITTED] 80439.171
    

                                 

    Mr. JOHNSON. Mr. Barthold wrote in this note to then-
Senator John Ensign during the Senate Finance Committee markup 
of the health care law in late September 2009--at the time, the 
Senate bill included the enforcement mechanisms associated with 
income tax. Senator Ensign and some others began asking if 
Americans could be thrown in jail for refusing to purchase 
health insurance.
    Dear Senator Ensign, Section 7203 of the Code provides that 
if there is a wilful failure to file, pay, maintain, 
appropriate records and the like, that the taxpayer may be 
charged with a misdemeanor with a penalty of up to $25,000 and 
not more than 1 year in jail. Felony tax evasion provides for 
restitution and a fine up to $100,000 for an individual and up 
to 5 years in jail. Sincerely, Thomas Barthold.
    The enforcement mechanisms mentioned by Mr. Barthold that 
could be used against individuals who refuse to purchase health 
insurance were later removed from the bill, but given that they 
are in fact mechanisms to enforce a tax, not a penalty, the 
ruling of the court allows these to be put back in if Congress 
chooses to do so.
    Mr. Bradbury, would you comment on that?
    Mr. BRADBURY. As you indicate, Congressman, it would 
require an amendment in the statute. But given Congress' broad 
authority to enforce constitutional taxes, a future Congress 
could amend the statute to include those kinds of enforcement 
mechanisms.
    Mr. JOHNSON. So the bottom line is that a future Congress 
can change the law to send Americans who fail to buy insurance 
to jail, true or false?
    Mr. BRADBURY. Who fail to buy insurance and fail to pay the 
tax. They can set the tax very high to try to force them to buy 
the insurance, but if they choose not to buy the insurance and 
fail to pay the tax, Congress could add criminal enforcement 
mechanisms to the statute for those who attempt to avoid paying 
the tax.
    Mr. JOHNSON. Thank you, sir.
    I yield back.
    Chairman CAMP. Thank you.
    Mr. Stark is recognized.
    Mr. STARK. Thank you, Mr. Chairman, and I thank the 
witnesses for their participation.
    I just wanted to check with Ms. Severino, I think in the 
past, once or twice you have indicated that the only recourse 
that you would have here is, if you didn't like this program, 
would be to move to another country, and I wonder if you know 
of any other country that you could move to that did not have 
universal health coverage paid by the taxpayers.
    Ms. SEVERINO. I certainly don't think that the United 
States is the only country in the world that does not have 
that.
    Mr. STARK. If you could find one, I would probably take up 
a collection to get you a one-way ticket there. But I would be 
interested in knowing where that might be.
    Mr. Chairman, I would like to yield the balance of my time 
to Mr. Doggett.
    Mr. DOGGETT. Ms. Severino, do you have health insurance 
yourself?
    Ms. SEVERINO. Yes, I do.
    Mr. DOGGETT. And Mr. Casey, are you covered by a group 
health insurance policy.
    Mr. CASEY. I am sorry by?
    Mr. DOGGETT. By a group health insurance policy?
    Mr. CASEY. Yes, I am.
    Mr. DOGGETT. And Mr. Bradbury, are you also covered by 
group health insurance?
    Mr. BRADBURY. Yes, sir.
    Mr. DOGGETT. I would like to put a chart up and ask Mr. 
Dellinger, are you covered by health insurance, sir?
    Mr. DELLINGER. Mr. Doggett, I am eligible for Medicare, 
thank you. I think I was----
    Mr. DOGGETT. I am impressed by that as I am by all of your 
testimony, and you really made the point of this chart. But I 
wanted to demonstrate it graphically because all three of the 
experts who have offered insight this morning that were 
summoned here at the request of our Republican colleagues are 
in the same situation as 98.8 percent of the American people in 
that they will not have to pay the tax of which they complain.
    And you have just pointed out again a really big segment of 
our population, Mr. Dellinger, who, like yourself, there is not 
a single person who is on Medicare or about to come on Medicare 
by the time that this act becomes fully effective who would be 
subject to this tax, right.
    Mr. DELLINGER. That is correct.
    Mr. DOGGETT. And anyone who is covered by a group health 
insurance policy, whether public or private employer, they 
won't be affected by this tax.
    Mr. DELLINGER. I have always been struck by the notion that 
this relatively modest incentive to have insurance coverage was 
seen as the sort of end of liberty as we know it. If you go to 
work in the economy and you earn $18,000 a year and are subject 
to Federal income taxes and FICA taxes, you are told you have 
to pay 7.5 percent for Social Security for your old-age 
sustenance. You are told you have another percentage to pay for 
Medicare for your health care after age 65, and if you don't 
have insurance coverage, you are going to have to pay up to 2.5 
percent as an additional sum to be paid. Why would anybody look 
at that and say, well, the 7.5 percent for Social Security is 
fine, the percentage for Medicare is fine, but this last 
percentage I would have to pay is the end of liberty as we know 
it. And I would have to move to another country.
    I welcome your presence, let me say for myself, in the 
United States, and I hope that you remain engaged in these 
debates.
    Mr. DOGGETT. Well, Mr. Dellinger, your point is so 
significant, and you have made it previously that while the 
names may have changed on the groups, this same crowd, the same 
thinking that opposed Social Security, that opposed Medicare, 
is the same crowd that is out there opposing the Affordable 
Health Care Act, even though less than 2 percent of the 
American people would be directly affected by what Justice 
Roberts, President Bush's appointee to the Supreme Court, said 
was a tax rather than a penalty.
    Now, with reference to that tax, I understand Mr. 
Bradbury's testimony to be that even for the less than 2 
percent of the people that are covered, the tax is so low, so 
modest, that Congress may choose to raise it in the future. Is 
it overall--it is I believe in the first year, your testimony, 
$95 is the total amount of the tax if you are among the 2 
percent who choose not to buy insurance, even though you have 
the capacity to afford it and prefer to shift your health care 
costs to somebody else?
    Mr. DELLINGER. That is--that is correct.
    Mr. DOGGETT. And with reference to the estimate, of course, 
of 1.2 percent, that was done by the independent Congressional 
Budget Office on the final bill as it became law after it 
passed the Senate. So perhaps it goes up or goes down a little 
bit. It is only an estimate, but is a very small number of 
people that are affected.
    And I yield back.
    Chairman CAMP. Thank you.
    Mr. Ryan is recognized.
    All right.
    Mr. Tiberi is recognized.
    Mr. TIBERI. Thank you, Mr. Chairman.
    Let us follow up on Mr. Doggett's point about the 2 
percent.
    Ms. Severino, let's set the record straight. I wasn't going 
to go there, but let's go there. Two percent, that is just a 
guess. Because tomorrow when this--or next year, when this goes 
into effect, your employer could be determined not to be in 
compliance by some Federal bureaucrat with the insurance 
coverage that your employer is giving you, and thus, a married 
couple who has insurance today could end up being forced to pay 
this tax penalty because they don't comply, their insurance 
doesn't comply, with what the Federal Government determines is 
appropriate; isn't that correct?
    Ms. SEVERINO. Yes, and actually, given some of the 
religious freedom concerns that are involved in the mandatory 
coverage as well, we may be facing that situation----
    Mr. TIBERI. So this is potentially much bigger, depending 
on what the Federal Government determines what is an 
appropriate level of coverage; not just this 2 percent, could 
apply to people who have insurance today and are happy with 
that insurance.
    Ms. SEVERINO. That is correct.
    Mr. TIBERI. Mr. Dellinger, I have got to go there, too.
    Let's just assume that I have a gas-guzzling SUV and you 
have an electric-powered wonderful automobile, and a future 
Congress determines, you know what, I am a bad guy because I am 
contributing to a very poor environment with my gas-guzzling 
SUV, and society is paying for that, while you, I determine as 
a future Congress, are complying and are paying for my sin.
    Couldn't I, as a Congress, under this provision--I would 
love to hear what others have to say--say, you know what, we 
are going to penalize Mr. Tiberi for driving a gas-guzzling 
SUV. And we are going to install a penalty of--we will make it 
low at first, $10,000, to buy an SUV. Isn't that true under 
this proposal, under this ruling?
    Mr. DELLINGER. Sure.
    Mr. TIBERI. Sure?
    Mr. DELLINGER. Well, not under this ruling.
    Mr. TIBERI. No, under the Chief Justice's ruling.
    Mr. DELLINGER. I understand that. But it is true that that 
is correct under the Chief Justice's ruling.
    Mr. TIBERI. Thank you.
    Mr. DELLINGER. But it would have also been correct before 
the Chief Justice's ruling.
    Mr. TIBERI. I would like.
    Mr. DELLINGER. If I may answer the question. Congress may 
make my tax bill----
    Mr. TIBERI. He answered it. He answered it. I only have a 
limited amount of time.
    Chairman CAMP. Mr. Tiberi has the time.
    Mr. TIBERI. I would like the other three to comment as 
well. Yes or no answers.
    Mr. CASEY. Ah, yes.
    Ms. SEVERINO. Yes they do.
    Mr. BRADBURY. Yes.
    Mr. TIBERI. Mr. Levin mentioned earlier about Social 
Security, and we are all forced to pay Social Security, and 
that is not true. There are police officers, firefighters, city 
workers, township trustees, township workers, State workers, 
library workers, public university workers, bus drivers in Ohio 
that do not pay into Social Security. They pay into a public 
employee retirement system.
    Mr. LEVIN. Because they have an alternative system. They 
have to pay into a system.
    Mr. JOHNSON. Order.
    Chairman CAMP. Mr. Tiberi has the time.
    Mr. TIBERI. Mr. Levin, I was just saying, you said all 
Americans pay into Social Security. The State of Ohio has a 
different system, and it just came to me as he was saying that, 
and I don't know, Mr. Bradbury, if you are familiar with that 
system or not in Ohio, maybe Mr. Casey is, since he works for 
an Ohio law firm, would this, Mr. Casey, have, would it, would 
it make it easier for us on the Ways and Means Committee to 
compel those I would argue or have the ability to do it, but 
would this make it easier under the Chief Justice's ruling to 
allow for us to force those people who are now outside of 
Social Security to be put into Social Security?
    Mr. CASEY. Well, I think it certainly, you could certainly 
conceive of circumstances where that could happen but the fact 
is, the way the Chief Justice read the law suggests that if 
Congress wanted to achieve something like that and didn't 
really necessarily want to have it obvious that that was going 
on, that indeed you could do that and the courts would indeed 
uphold it.
    Mr. TIBERI. Mr. Bradbury, under this ruling, the IRS 
obviously is going to be tasked with the charge of making sure 
we all comply as Americans to this ruling. They clearly don't 
have the ability to offer civil penalties today. They can only 
do it, as Mr. Dellinger said, through a refund. How likely is 
it that a future Congress under this ruling could impose 
criminal penalties through the IRS, further auditing abilities 
or other impositions through the Internal Revenue Code?
    Mr. BRADBURY. Well, it would simply take a majority of 
Congress to do that, and the point of my testimony was the 
original CBO estimates of how many will choose to pay the tax I 
think are now off kilter, given the court's ruling that there 
isn't in fact a direct mandate, and that I think it is logical 
to assume that more people under the current low level of tax 
assessment in the law will choose, will make a rational 
economic decision not to purchase insurance and instead to pay 
the tax.
    Chairman CAMP. Time has expired.
    Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Mr. Dellinger, I think this is sort of an interesting 
hearing because it is the first time I have ever heard the 
Republican Party argue for irresponsibility and flagrant 
throwing irresponsibility off on somebody else. The party of 
individual responsibility is saying here that people should not 
be forced, even though we know they are going to get sick, they 
should not be forced, and they should be allowed to do whatever 
they want.
    Have you ever heard before that argument made in any case? 
And I would like you to answer Mr. Tiberi, he cut you off 
because I think we have, we had that power before the Chief 
Justice made the ruling. So please.
    Mr. DELLINGER. Right, I think with all due respect to Mr. 
Tiberi's question is a good one. Does Congress have the power 
to create incentives through its tax against spending power 
favoring one kind of automobile over the other? The answer is, 
of course, they have always had that power. Whether they do it 
in forms of a tax credit for people who buy one kind of vehicle 
or a tax penalty on those who don't; economists will tell you 
there is no difference. And the government has weighed in 
heavily both the Federal Government and the States by taxing 
gasoline, by taxing cigarettes.
    We have always, the Supreme Court, as I said, even in 1903, 
upheld a higher tax on yellow oleo margarine. Those are 
decisions entrusted to the Congress, and we may disagree with 
those. And the question of whether Congress may use its powers 
to enforce the revenue laws in various ways in the future is, 
of course, a matter generally entrusted to Congress within the 
outer boundaries. What surprises me even more than the argument 
that it is a good thing that people not have insurance knowing 
that other people have to pay their, their medical costs, what 
is even more surprising is the undertone of the hearing that we 
should, that Members of Congress want the court to engage in a 
much more active second guessing of what Congress does with 
respect to this in the future.
    Of course, the answer to these questions is Congress could, 
if Congress can set a minimum wage of $5 an hour, it can set a 
minimum wage of $5,000 an hour. The courts will police the 
outer boundaries of that, but the idea that you should expect 
or want the courts to get involved in second guessing the 
intricacies of the legislation and the incentive system, it 
does surprise me to hear so much of that coming from the branch 
that is actually entrusted under the Constitution with 
principal responsibilities for making those decisions.
    Mr. MCDERMOTT. Do you, the charge that the President said, 
I will never raise taxes, and could you talk a little bit about 
that? Because I, it is a pretty serious charge. The President 
said we are not going to raise taxes, and now he has gone out 
and done it. They never argued it in the court; they slipped it 
by. It was kind of like a slider or a screwball in the court.
    Mr. DELLINGER. As I said, it was on the face of the statute 
exactly who has to pay what and when, as noted very 
effectively, a very small portion of the population will ever 
have to pay it.
    The President was asked whether it was a tax increase, just 
as Governor Romney was asked whether it was a tax increase in 
Massachusetts when he had a similar penalty for people who 
didn't have coverage. I think both of them are getting a bum 
rap, both Governor Romney and President Obama. Because what 
they are really saying is, this is like the requirement that 
you have automobile insurance if you drive a car. No one says 
that when you add that it is a tax increase on the middle class 
or anybody else. It is expected that Americans will have, will 
choose to have insurance coverage or pay a modest penalty, and 
I think to characterize that as a sort of particularly a tax 
increase on the middle class is, is unfair both to Governor 
Romney and to President Obama, each of whom solved this.
    And in Massachusetts, it has been successful. It is a very 
effective way to expand coverage so that we have a much more 
rational system for paying for health care, one in which people 
take responsibility for their own, paying their own health care 
bills through their own insurance.
    Mr. MCDERMOTT. Does this have anything, any ramification 
for State legislatures? I was just thinking as I got in my car 
this morning and I put on my seatbelt. I was avoiding a tax. A 
cop caught me down at the corner without my seatbelt on it is 
$125.
    Mr. DELLINGER. States have the same authority in this tax 
realm as Congress does, and we have trusted to the elected 
representatives at the State level to make these judgements as 
well.
    Chairman CAMP. All right. Time has expired.
    You did pose a question to the panel, Mr. Dellinger, that I 
feel compelled to answer. I do think it is a real concern of 
this Committee when we see the Congress assuming Federal police 
power either under the Commerce Clause or under the taxing 
power. That is why we do believe there should have been court 
review of this, and you had sort of inquired in a puzzled sort 
of way why is the Committee or why are we now suggesting this.
    But I will yield now to Mr. Ryan for 5 minutes.
    Mr. RYAN. Ms. Severino, I am looking at your testimony, and 
the Anti-Injunction Act is what I want to kind of get into 
here.
    So the court did not use the labels used in the legislation 
on constitutionality, but they did use the labels in the 
legislation for the Anti-Injunction Act. Help me reconcile 
this.
    Ms. SEVERINO. Well, it is true that for a law like the 
Anti-Injunction Act Congress can define the word ``tax'' to 
mean what it wants. It can define the word ``penalty'' to mean 
what it wants in that context. That is true. And what Chief 
Justice Roberts says, correctly, is that is a Constitutional 
matter; we can't just say Congress can call anything whatever 
they want and then we will treat it as that. That will just be 
ceding the authority of Congress to define its own powers, 
which I am puzzled to hear Mr. Dellinger suggesting that we 
perhaps should do; just defer to Congress on what it is allowed 
to do. No, we need someone other than the foxes guarding the 
henhouse, and that is what the court is there for.
    The curious thing here is that we found something for both 
constitutional purposes that it was a penalty in the analysis 
in the Commerce Clause, for example, and that it was 
functioning as a tax for constitutional purposes. So that is a 
new beast. We would--normally taxes and penalties are seen as 
opposed things and the Chief Justice's opinion recognizes that.
    Mr. RYAN. That is what I am trying to get at. So we have 
this body of rulings of precedents where we have had all of 
these delineations between what are penalties and what are 
taxes. We have a rich history of that. This is a new bridge 
that has been built, correct, on the definition with respect to 
core precedents with respect to differences between taxes and 
penalties?
    Ms. SEVERINO. Yes, there have been cases where the court it 
seemed to try and slip in a penalty as a tax, but the court 
said, no, no, no, no, Congress can't do that, but it is a 
unique case to say this is actually a penalty and it is a tax 
for constitutional purposes.
    Mr. RYAN. Right. So that is new territory so now that this 
is within the taxing power and we seem to be testing limits 
here and we don't really know where they are, you know from a 
behavioral economic standpoint and the drafters of this bill 
really believe in behavioral economics by virtue of the way 
they designed this bill, if this is now to be seen as just an 
option or a tax, not sort of a social stigma of breaking the 
law, you are obviously just going to make a rational economic 
decision. You will pay the $695 instead of the more expensive 
premiums.
    Now, what that means to us--and I think the drafters 
probably saw this. And in the Senate Finance Committee, they 
had an amendment to lower those penalties because those 
penalties were originally set at areas where actuaries said 
were necessary to prevent what they called death spiralling, 
would prevent only sick people going into the insurance markets 
and the insurance subsidies and the healthy people staying out 
of it because it is a cheaper thing to do. So they had 
penalties set at such high levels.
    Well, that is bad politics. So an amendment came in the 
Senate Finance Committee to lower that penalty to where it is 
now. Now that it is not even a social stigma, it is just some 
optional choice, we can't help but conclude this pool will get 
filled with sick people. Rates will go up, and therefore, the 
subsidies will go up from that, an we believe CBO will probably 
take a look at that.
    What that means for us here is we will have a choice: Do we 
just keep absorbing these much higher Federal outlays for these 
higher-priced subsidies because they are a sicker profile of 
people, or do we raise the penalty to try and prevent that and 
bring in more revenue? That is the choice that this Congress if 
this law stays in place will be faced with.
    Let me get your take on it, Mr. Bradbury. I see you shaking 
your head on this. Does this not, in your view, change the feel 
and look of this law as more of just an option than an actual 
penalty or violation of the law?
    Mr. BRADBURY. I agree with you entirely, Congressman. I was 
nodding. That was the point I was trying to make. The Supreme 
Court has now made it clear to the whole world that it is not a 
direct legal mandate. There is no moral imperative to comply. 
It is totally optional. It is just a pure economic decision, 
and look, the rate of the tax assessment was set, as you 
suggest, at a purposely very low level. So, as for most people, 
the cost of insurance is going to be well higher than this tax 
penalty. They will make a rational decision not to purchase 
insurance and instead to pay the penalty. And under the 
guaranteed issue and community rating regulations of the law, 
as Congress recognized, the law itself creates a very strong 
incentive for people to defer getting insurance and not to get 
insurance until they are actually sick, and they need it.
    And so you combine those factors together, and you see that 
the 1.2 percent could be much higher, and that was the point I 
was trying to make. And I would say there is a very big 
difference between this what the court has now said what the 
Federal law is and the Massachusetts law, where, of course, 
with the police power in Massachusetts, the legal mandate is a 
real legal mandate, and the tax penalty is a penalty, an 
enforcement provision to a moral imperative, a legal, a legal 
mandate. So that is because of the police power nature of the 
State authority versus the Federal Government.
    Mr. RYAN. Thank you.
    Chairman CAMP. Thank you.
    Mr. Doggett is recognized.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    You will recall, Mr. Dellinger, the famous writing of 
Supreme Court Justice Louis Brandeis in his dissent in the New 
Ice case back in 1932. We hear it referred to often paraphrased 
about the States being a laboratory of democracy. He referred 
in his writing to one courageous State. Indeed, in the instant 
situation, don't we have one courageous State, that being 
Massachusetts, that was the laboratory for democracy, after 
which the Affordable Care Act was modeled with reference to 
individual responsibility?
    Mr. DELLINGER. It is, and the Massachusetts experience is 
instructive in another way as well.
    Mr. Doggett, if I may, because Mr. Ryan's questions to Mr. 
Bradbury raise the point that Mr. Bradbury's testimony that I 
actually think is a point that is well taken. What Mr. Bradbury 
says, and I think what Congressman Ryan was following up on, is 
that there may be fewer people who will sign up for insurance 
once the Supreme Court has said that the provision saying that 
every individual shall have coverage is not constitutionally 
enforceable; it is a legal obligation. So that people will then 
be looking at the tax penalty, and they will perhaps as 
rational economic actors be weighing the cost and benefits. I 
think that is a good point.
    We don't know to what extent fewer people will get coverage 
because they are told that the, that the exhortation sentence 
is no longer possible. But in Massachusetts, they did something 
very effective. They had a very effective campaign under 
Governor Romney's administration to persuade people that they 
should sign up for health insurance, that it was the right 
thing to do. They had members of the Boston Red Sox and lots of 
other people in Massachusetts saying, I signed up, I signed up, 
I have got it. And members of the Boston Red Sox said, 
everybody should have health insurance, so that, you know, I 
think if we would try to be more positive about this and tell 
people yeah, you could make a rational economic decision, that 
you are better off paying the penalty than you are getting 
health insurance, but, a, you know you wouldn't have health 
insurance, you get less effective treatment if you do it, and 
when you do get treatment and if you are hit by a bus, other 
taxpayers are going to have to, and other patients are going to 
have to pay for your health care costs. So, yeah, if you want 
to do that, you can do that. You can make a rationale decision. 
It basically makes other people the insurers of your medical 
care.
    But I think we ought to be telling those people, look, 
everybody, this whole system will work better if everybody 
should get coverage who can afford it. There are hardship 
exemptions for those who can't. Those people ought to get 
coverage, and there is no reason to--and that makes it work, 
that is what makes it work to tell insurance companies they 
can't turn down people because of pre-existing conditions.
    Mr. DOGGETT. I couldn't agree with you more. And when 
people stop hearing that the sky is falling and realize the 
immense benefits of this, perhaps we will have the same 
experience with this tax that in fact this laboratory of 
democracy in Massachusetts has had, where as I understand it, 
less than 1 percent of the people have actually been faced with 
paying any kind of tax or penalty because most have been 
responsible in the very positive, optimistic way that you have 
viewed it. And the Massachusetts Affordable Care Act has also 
been or the Massachusetts law has been the model for the 
Affordable Care Act enforcement mechanism also; has it not?
    Mr. DELLINGER. That is correct.
    Mr. DOGGETT. I yield 1 minute to Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you, Mr. Doggett.
    I just wanted to follow up on my friend, Mr. Tiberi's point 
about, well, couldn't Congress impose a gas guzzler tax. Well, 
actually, the Congress has already imposed a gas guzzler tax. 
And when you contrast that with our treatment of electric 
vehicles, which pays no Federal gasoline tax, and in addition 
gets a tax credit, there is a massive support that this 
Congress and the previous administrations, Republican and 
Democratic alike, have done. So it is a very significant 
adjustment. And if you compare what some poor sole who is 
driving a 12-mile-per-gallon beater, because that is all he or 
she can afford, versus how they are treated with subsidies for 
electric vehicles, it pales in comparison to this modest 
penalty that we are talking about here.
    I appreciate the gentleman's courtesy for permitting me to 
make that point. We already do it, which you were trying to say 
to Mr. Tiberi.
    Chairman CAMP. Thank you.
    I think the difference is, Mr. Blumenauer, that if you buy 
a gas guzzler, you pay a tax, and what this would say under 
this ruling is, unless you buy a low-mileage vehicle, you will 
pay a tax, which is a different, different approach to this 
taxing issue.
    But Mr. Davis is recognized for 5 minutes.
    Mr. DAVIS. Thank you, Mr. Chairman. I would like to follow-
up on that point as someone who has driven an F-250 Ford pickup 
truck for the last 15 years, and there is no electric car that 
can haul or carry the things that I carry in my vehicle in 
Kentucky in the heartland.
    One perspective I would like to explore comes back to this 
issue with the policing power and the role of the Federal 
Government. Chief Justice Roberts' opinion noted that the 
enumerated powers to tax and regulate interstate commerce, 
quote, must be read carefully to avoid creating a general 
Federal authority akin to the police power. This issue of 
taxing inactivity, to Chairman Camp and Chairman Tiberi's 
point, is of great concern to me because of the issues that are 
raised on a much broader perspective and from our Federal 
system. And it also echoes the goals of the Founding Fathers, 
who during the early debate over the Constitution's meaning 
sought to limit, quote, ``the power of levying taxes,'' closed 
quote, from becoming, quote, ``a distinct power,'' closed 
quote, rather than one limited by other powers in the words of 
Roger Sherman.
    The author of the Constitution, James Madison, echoed the 
same point that the taxing power was limited to the enumerated 
powers described in the rest of Article I, Section 8. There has 
been a lot of discussion among legal scholars since the Supreme 
Court's ruling as to whether this limitation stands and the 
degree to which there is any limitation on the taxing power.
    I would like to invite the witnesses to provide their 
thoughts on this matter, but before going into that, since 
there has been so much talk about the automotive industry and 
the purchase of cars, you know, we saw a very interesting 
overturning of 100 years of commercial law with preferred 
creditors with the Chrysler and General Motors bailouts. I 
happen to live in a State where Ford and Toyota did not 
participate in that and have come out on the side of this very 
successfully.
    The bigger question here is, couldn't we in fact impose a 
penalty under these powers that would mandate the purchase of 
certain vehicles to benefit constituencies that help the 
executive branch, help a particular political party, can drive 
the economic debate in a way that removes the freedom of choice 
of the American people with these compulsions through increased 
or punitive taxation or what in effect is a form of police 
power.
    But I would like to have you comment if you would on what 
this means to the future of jurisprudence. I see this as a 
great hinge and turning point and what the Constitution is 
going to mean in the next 100 years. Mr. Casey?
    Mr. CASEY. Yeah. I think you raised very important issues. 
And I think it is important to make clear that the reason this 
decision is scary has nothing to do with health care. It has 
nothing to do with the amount of tax that people may or may not 
pay. The fact of the matter is this law was not passed as a 
tax; on the face of the law, it is not a tax. It does not use 
the language of tax. Congress, God knows, knows how to raise a 
tax when it wants to. There is a page and a half of findings in 
the law referencing the Commerce Clause.
    In order to uphold the law because the court agreed that 
passing this under the Commerce Clause would indeed involve the 
creation of Federal police power, which is impermissible, the 
court rewrote the law to create a tax, and that is what is so 
scary, first of all, because that is not what Congress meant to 
do, and second of all, because in doing so, it suggested that 
the kinds of taxes Congress can pass are far broader than we 
ever thought before.
    Mr. DAVIS. Ms. Severino, you made a comment about alluding 
to religious discrimination. I think of the Catholic health 
care system right now under these powers as being compelled to 
support practices that fly in the face of the biblical 
principles that they choose to uphold under their First 
amendment rights. Would you care to comment on this issue?
    Ms. SEVERINO. Certainly. I think it is just another 
category of people and organizations that may be forced into 
paying these taxes and not just having their employees paying 
the individual mandate penalty perhaps but also the employer 
penalties because of a heretofore unseen expansion into 
religious freedom. Even the Clinton health care bill had an 
exemption for religious freedom far broader than the very 
cramped narrow reading of the exemptions we see in the current 
law. And it is unfortunate to see that implication.
    And if I can comment one other point on the Federal versus 
the State powers, we are not just sitting here talking about 
wolves at the door, as Ranking Member Levin called it, because 
our concern is that, not to, not to, I guess, call the Members 
of Congress wolves, but effectively what this has done is 
remove the door. We have a Constitution as a barrier preventing 
the government from overtaking more power than it was designed 
to have. The Founders were concerned about that. Our concern is 
that, that the court has effectively removed the door should 
wolves come, should a government that decides to expand its 
power beyond an appropriate reach come, now we no longer have 
those constitutional boundaries.
    Mr. DAVIS. Well, for example, on that point and coming back 
to this issue of police powers of the State, there is an 
interesting case in New Mexico right now that has been 
prosecuted against the----
    Chairman CAMP. I am afraid time has expired.
    Mr. DAVIS. Okay. I will yield back.
    Chairman CAMP. All right.
    Mr. Thompson is recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    Mr. Dellinger, during the course of the debate on the 
Affordable Care Act, I met with a number of people from my 
district who were hurt by the fact that they had lifetime caps 
on their insurance, people with pre-existing conditions who 
couldn't get insurance, parents of little kids who their kids 
had very serious medical conditions, and they have run up 
against the lifetime cap, and they are just 100 percent exposed 
with no help.
    I met with a young man after passage of the bill who was a 
hemophiliac, and he is now--the lifetime cap is not a problem 
for him any more. Matter of fact, he started his own business 
and has hired employees. I have commercial fishermen in my 
district, the north coast of California, who since 1981 have 
been denied access to health care because of some port 
hospital, port physician issues. They have had to go out into 
the private sector and buy their insurance, and quite honestly 
can't. They are over the top on passage of this bill that 
finally after all of these years they are going to be able to 
get coverage.
    In my district, we had an uncompensated care cost of $50 
million last year, and I am told that that, that works out to 
be about $1,000 per person who buys insurance that they have to 
pay more. You could call it a tax, I guess, on the people who 
already have insurance.
    Those three groups of people that I mentioned, do you think 
they are home right now fretting over whether or not this is a 
tax?
    Mr. DELLINGER. Well, I think, Mr. Thompson, that is, that 
is such a well-taken point because it is really astounding to 
me how few people understand the enormous benefits of this 
legislation, all of which would have been taken down had the 
court ruled as dissenting Members, where the entire law would 
have been gone. The freedom from caps for your hemophiliac 
constituent, the ability to be covered by your parents' policy, 
the right to get insurance even though you have had asthma or 
some other pre-existing condition; all of that would have gone 
down.
    And when I say I think the concern about, about what 
Congress may do with its tax powers, I understand Ms. 
Severino's point about the importance of judicial review. We 
have used it to protect religious minorities. We have used it 
to protect freedom of speech. But the courts have been really 
hesitant of second-guessing the area of budgeting and finance 
and taxing and spending and instead have thought within large 
boundaries those judgments need to be left to the people that 
are out there every day talking to their constituents. You know 
things and your colleagues on the other side know things that 
Justices don't know sitting in the Supreme Court about how hard 
it has been for people who could not afford to see a doctor and 
who couldn't get health care for their child when they were 
sick. You understand those things in a way that the court does 
not, and that is why I think it is appropriate for the court to 
defer to you in making these kinds of judgements.
    Mr. THOMPSON. Thank you.
    I mentioned the $50 million in uncompensated care in my 
district and translates out to $1,000 per person who buys 
insurance. The national number is $100 billion in uncompensated 
care. So I would assume that if you extrapolate, that is $1,000 
per every person who has insurance. So if you are going to 
argue the tax stuff, I think it is probably only fair to point 
out that is a $100 billion worth of tax cuts that, that 
appropriate health care coverage will provide the American 
people.
    And our colleague, Mr. Doggett, pointed out that it is 
about time we get away from ``the sky is falling'' on health 
care and start figuring out how to, how to rub off some of the 
warts that are on the bill and make it an even better bill. 
This is, this is so important to so many people, and yet we are 
spending time ad nauseam trying to pick it apart, piece by 
piece. I think this week we are going to have our 31st or 32nd 
vote on the repeal of either all or part of the health care 
reform legislation. We need to get away from this. We need to 
make sure that we all remember why it started.
    This was in response to a national crisis, a national 
crisis. Businesses, individuals who couldn't afford the health 
care costs. The ever-rising costs of health care. And the many 
millions of people who couldn't get health care and were 
suffering as a result of that, of that national crisis. We 
stepped up. We did something about it. I think everybody will 
admit that it is a work in progress. There is more that we need 
to do, and we ought to get on with doing that part of it rather 
than having this little pick-it-apart session such as the one 
we are having today.
    I yield back.
    Chairman CAMP. Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Here we go again discussing another false statement that 
was told to the American people in order to sell the health 
care law. First, they said if you like your health care plan, 
you can keep it. Well, we know that is no longer true. And last 
week, the statement that was made that the mandate is a penalty 
and not a tax was overruled by the Supreme Court.
    And so, Mr. Dellinger, I would like to just comment on a 
couple of statements you made.
    First, the answer to the is it a tax or an indirect tax or 
indirect tax or a penalty.
    The Congressman going fishing or the fisherman who is the 
Congressman fishing, the bottom fact here is the line is in the 
water. The government can call it a tax or a penalty, but the 
American people I don't think are fretting whether or not it is 
called a tax or a penalty. All they know is that the Federal 
Government has its hand in their pocket, and I don't think they 
are too happy about that. They want jobs.
    And the point that this is, this is a 2,700-page bill plus. 
I don't think we are picking it apart. We are just trying to 
learn a little bit more about it, trying to find out what is in 
it. We are kind of doing what Nancy Pelosi told us to do; read 
the bill, find out what is in, it after it was passed, 
unfortunately.
    So, Mr. Dellinger also made a comment that this 1 percent 
of this tax doesn't affect Medicare, Medicare Advantage, but in 
fact, really Medicare, Medicare Advantage are taking a $523 
billion cut; $200 billion just to Medicare Advantage. Where are 
those seniors going to go? They have got to go to a personal 
policy. Well, the personal policy after 2013 will no longer, by 
this law, allow people to enroll in new policies. They are also 
going to be limited on the amount of insurance they can have 
added to that policy. So where are they going to be finally 
driven out of the personal insurance policy?
    And you also mentioned it is not going to impact the 
employer insurance providers. Well, they have already been 
impacted. They are not providing insurance to some of their 
employees because they have discovered it is too expensive.
    So I think all of those facts lead to the bottom line, and 
that is there are going to be more than 1 percent of Americans 
affected by this tax, which of course then leads you to all of 
the next things that will happen. Costs will go up; that is a 
yes. Democrats in Congress will seek to force these people to 
buy health coverage, yes, because they will need that money to 
pay for the rest of the health care bill. Could this include 
significantly increasing the individual mandate tax? Yes. Then 
you can't take this and just talk about this tax.
    But let us just talk about all of the other taxes. There is 
a--there is a 3.8 percent tax on employers. There is a 2.3 
percent tax on medical devices. There is a tax on the 1099 form 
that fortunately we were able to get the Democrats to agree 
with that was removed from the law. There is a 40 percent tax 
on Cadillac, so-called Cadillac health care plans. There is a 
$2,000 penalty on employers if they don't provide insurance. 
There is another $3,000 tax penalty on employers who provide a 
plan that is deemed to be too good or too expensive. The list 
goes on and on and on.
    Maybe what we should do is tax AARP because in this plan 
that they helped write, AARP stands to gain $1 billion in 
revenue over the next 10 years. Maybe they need to be taxed 
instead of the American people.
    One of the questions I have is, you know, as we look at the 
penalties applied here, would there be a penalty applied if 
someone who is filling out their IRS form checks the box, yes, 
I have had insurance the entire year, and they haven't?
    Mr. BRADBURY. Yes. I mean, under current law, 18 USC 1001, 
a knowing misrepresentation to the Federal Government is a 
felony.
    Mr. REICHERT. Lying to the IRS. That is current law. They 
check the box. They don't have insurance. I am sure there will 
be some people that do that. The penalty for that, would you 
happen to know what the penalty for lying to the IRS? It varies 
I know.
    Mr. BRADBURY. Well, I believe it is the general 1001 
criminal penalty. It is a felony so it is subject to a high 
financial penalty and also prison time.
    Mr. REICHERT. What happens if they don't check the box at 
all?
    Mr. BRADBURY. Well----
    Mr. REICHERT. Who is going to follow up on that? Where do 
the IRS agents come from? How much is that going to cost? I 
know you can't answer those questions.
    And Mr. Chairman, I yield back.
    Chairman CAMP. All right. Thank you.
    Mr. Blumenauer is recognized.
    All right.
    Mr. Lewis.
    Mr. LEWIS. Thank you, Mr. Chairman.
    Mr. Chairman, I have been listening to the discussion 
today, and I tell you, it seems that we have lost focus on what 
really matters, whether it is a tax or a penalty on people who 
fail to take individual responsibility doesn't matter. Every 
American who can afford to buy health insurance must buy 
insurance, and if you can't afford it, the Affordable Care Act 
will pay, will help you pay for it. That is amazing progress on 
a country that has been trying to provide health care to all 
Americans.
    We should not lose sight on the fact there are people 
suffering in our country. Over 12 million people still looking 
for jobs, wondering if they will lose their homes, whether they 
will be able to put food on their tables.
    We also have over 50 million people who do not have health 
insurance. Some of them are unemployed, but the vast majority 
of them are working hard each and every day and simply can't 
afford health insurance. They, too, are worrying whether they 
are one illness away from disaster.
    I believe that this Congress and the President of the 
United States, President Barack Obama, took a historic step to 
expand health coverage by passing the Affordable Care Act. 
Working together, we can assure every American--we cannot 
afford to turn the clock back on the progress that was made. 
The Affordable Care Act has already made unbelievable progress.
    Mr. Chairman, I must say, in all honesty, that I believe 
that this hearing today is a political stunt just like 
tomorrow's repeal vote. Repealing the Affordable Care Act would 
mean 17 million children with pre-existing conditions who will 
be denied coverage by insurance company. I want to know right 
now whether any member of this panel support allowing insurance 
companies to once again deny health insurance to children who 
are unlucky enough to get sick.
    Ms. DELLINGER. Mr. Lewis, could I comment on that?
    Mr. LEWIS. Yes, Ms. Dellinger.
    Ms. DELLINGER. To me, this is I think one of the four great 
pieces of social legislation enacted in the past century. It 
completes the set of Social Security, Medicare, Medicaid, and 
the Affordable Care Act. And when I sat in the Supreme Court 
and listened to the arguments at the end of March, I was struck 
by the fact that every Justice, every law clerk, every one of 
the State attorneys general, everyone arguing on both sides and 
everyone in that courtroom not only had health insurance, they 
wouldn't dream of going without it. And it seemed incredibly 
strange to me to hear people talking about this new liberty in 
not having health insurance when there is not a single person 
in the room debating those issues who would dream of going 
without health insurance.
    Mr. LEWIS. Other Members of the panel.
    Mr. CASEY. Well, I would say that the question, again, the 
question you raise is a good one, which is should Congress 
attempt to provide for those who cannot afford health insurance 
for themselves? And there are good arguments that it should. 
The question is how. And the question is how your power is 
exercised and the question is how the court will permit you to 
exercise your power.
    And this decision takes that, the balance created by the 
Constitution and the Framers and it unbalances it, and that is 
the problem with it, not the question of who should be covered 
and not.
    Ms. SEVERINO. Yes, I agree, with respect, Representative 
Lewis, I think this is an important question, and it is not, as 
Mr. Dellinger called it, a nomenclature battle that is 
ultimately unfruitful. It is--the Constitution's limits on our 
government are very important. We don't have a Federal 
Government that just has the mandate to go and do good but that 
there are enumerated powers, and just as it is very important 
the nomenclature of whether something is speech and therefore 
is protected by the First amendment or whether protection is 
actually equal and therefore permitted under the 14th 
Amendment, it is very important whether our constitutional 
limits are being respected here and whether this is actually a 
tax and what the taxing power means.
    Mr. BRADBURY. Congressman Lewis, the problem that Congress 
faced, and it recognized it when it passed the law, was that 
to, to require guaranteed issue and community rating in all of 
the insurance policies in order to achieve greater access to 
insurance coverage, Congress recognized that was inevitably 
going to cause the cost of insurance to go up. And it was going 
to incentivize more people to drop insurance. And so that was 
really the dilemma that Congress faced, and that is why the 
mandate was added to try to force people to buy insurance in 
order to lower the costs of insurance for others and to avoid 
the moral hazard of causing more and more people to go without 
insurance. So it was a real attempt at a balance.
    And the problem we now face is that the court has said, you 
can't mandate it directly. It is really a tax. And the question 
is will it work.
    Chairman CAMP. Time has expired.
    Mr. Marchant is recognized for 5 minutes.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    I would like to discuss the part of the argument that we 
have not discussed yet this morning and that was the 
interpretation of the Supreme Court of the States' 
responsibility in the mandate as it related to the expansion of 
the Medicaid and the Medicare because when we all go back home 
now, our State legislators and our Governors are most 
interested in the mandates that were placed on those 
governments because, in fact, although part of the--the bill, 
part of the law was declared a tax, the expansion of Medicaid 
to the States is always going to have been a tax because the 
States were going to have to come up with hundreds of millions 
of dollars to, in their matching amounts, to match the 
expansion. And the only way those States could pay for that 
would be to absorb that cost and pass that down to their 
taxpayers.
    So, in many ways, Obamacare, has always been a tax on many 
States.
    The court chose to address the personal mandate and said it 
is not a personnel mandate. It is in fact a tax. But then they 
went on to discuss the responsibility or the mandate on the 
States. So I would like to have your view of the ramifications 
of that constitutional change or that interpretation, Mr. 
Bradbury.
    Mr. BRADBURY. Thank you. Yeah, I think it is a very 
significant ruling. Seven Members of the court recognized that 
there really is teeth to the idea that under the spending 
power, Congress cannot go so far as to coerce States into 
agreeing to regulations that Congress is imposing through its 
cooperative spending programs. And here what the court held is 
can't force States to accept the expansion of Medicaid at the 
peril of losing all of the pre-existing Medicaid funding that 
the States enjoyed. That could be very significant. The States 
now understand, each Governor now understands that the opting 
in to the Medicaid expansion is truly an option that States 
have, and I think we saw yesterday that another Governor of a 
major State has announced that that State, Texas, is not going 
to opt in to the Medicaid expansion. So that is a very 
significant ruling, raises a lot of interesting questions about 
where are the lines that you draw as to what is coercive for 
States, and States may have arguments that other aspects of the 
Medicaid program or other cooperative Federal State programs 
have crossed that line or might cross that line in the future. 
So I think it is going to be a rich vein if you will of new 
litigation and constitutional development in the court.
    The mandate has a lot of implications for State costs, too, 
because I think as the States that were in the Supreme Court 
made clear, the mandate, if it were a legal mandate that 
applied to everybody, not just the people who can afford to buy 
insurance and will have to pay the tax, but lower-income people 
as well, it was going to cause a lot more people who are 
eligible for Medicaid to opt in to actually choose to subject 
themselves to Medicaid or become a patient under Medicaid, and 
that was going to increase the costs to States very greatly. 
They recognized that. Unclear now whether that is going to 
happen or to what extent that will happen because we now know 
it is not a mandate that applies to those people. It is just a 
tax that applies to people with a little bit higher income who 
can afford to buy.
    Mr. MARCHANT. So one of the major premises of the 
Affordable Health Care Act was that it would force many more, 
millions more people into the system, which would create a 
larger pool, which would in effect create a smaller premium or 
a savings in premium. But, in fact, as a result of both of 
these rulings, it is probably going to have a result of a 
significant, millions less people participating. And so the 
premise that this Affordable Care Act would lower premiums is 
probably going to be erased. And the Federal Government in fact 
may be building on what Chairman Ryan said, what will probably 
happen is that since there is no savings, it will, the system 
will create significant deficits to be implemented.
    Mr. MARCHANT. And those deficits will have to be covered by 
cutting spending or raising taxes, and that responsibility will 
fall completely on the Congress. And, Mr. Dellinger, do you 
agree that this will complicate this, the whole theory of more 
people participating.
    Chairman CAMP. Answer quickly, because time has expired.
    Mr. DELLINGER. I do believe it will complicate it, 
particularly if Governors take what to me would be an 
extraordinary step of declining the expanded Medicaid funding 
which will help the working poor afford insurance. If they are 
unable in States that actually turn down the expanded Medicaid 
support, I think it will have adverse affects on what the 
anticipations were.
    Chairman CAMP. All right. Thank you.
    Mr. Crowley is recognized.
    Mr. CROWLEY. I thank the chairman very much.
    I have heard references made of the Congress as wolves and 
foxes. I have been called worse in my district, quite frankly, 
so I appreciate the----
    What I would suggest, though, is the possibility the 
Constitution and the Bill of Rights was put in place to prevent 
a dictatorship. And this is the people's House. And I think 
when the House and the Senate come to an agreement on 
legislation that has passed and has been signed by the 
President, I think this is the way the Founders of our country 
envisioned our government would work.
    Despite the fact that my colleagues on the other side gave 
no vote in favor of this, the majority of the people of the 
House of Representatives did, and they were elected by the 
people. And, subsequent to that, we have had elections, and 
they have made themselves known once again, and they will have 
an opportunity once again this fall to do so. And I anticipate 
they will also let their feelings be known collectively in that 
election.
    What I find really interesting about this discussion 
today--and I appreciate having this hearing. I hope we have 
many, many more hearings like this at some point. Because I 
think the more we talk about the legislation the more we 
understand it. I think that is very accurate. One of my 
colleagues on this side--I think Mr. Reichert said that. That 
is true. But I do think it is also frustrating to the American 
people.
    I just came from a trip to Montana, where my in-laws are 
from, hard-working ranching family from Billings, Montana, 
struggling. My kids are out there. We call it Camp Montana. 
They get to ride horses and help bring the cattle in. 
Unfortunately, this year they had to bring the cattle in a 
little early because the market has dropped out for the cattle 
industry in Montana.
    So my kids have a great time, but my in-laws who are 
brutally struggling every day to make ends meet, it is not as 
much fun for them. And they are wondering what is the Congress 
doing to help them today.
    And my constituents back home in Woodside, Queens, and in 
Pelham and the Bronx, they are asking the exact same question: 
What, Congress, are you doing to help fix this economy? What 
are you doing to create jobs in America?
    And, instead--and I hope we have more of those hearings; I 
think it is wonderful--we are discussing a bill that became 
law, was passed by the President, enacted, and the judicial 
review is done, and they have found this law to be 
constitutional. Yet we still continue to talk about it and to 
berate Obamacare.
    By the way, I don't call it Obamacare. I think that is a 
pejorative. It is President Obamacare. I think what the 
President has done here is something that has perplexed our 
country for over a century and Presidents before him who have 
tried to fix or help this problem. He should be credited for 
the advancements that we have made.
    Now I have heard the reference made to two particular 
points, fishing licenses or the right to fish or the ability to 
fish and the other is to own a car or the requirement to own a 
car. Now can each and every one of you tell me, is there a 
requirement that any American by State law or the Federal law 
are required to own a car? Yes or no?
    Mr. BRADBURY. No.
    Ms. SEVERINO. No.
    Mr. CASEY. No.
    Mr. DELLINGER. No.
    Mr. CROWLEY. Is any American required to own a fishing 
license?
    Mr. BRADBURY. No.
    Ms. SEVERINO. No.
    Mr. CASEY. No.
    Mr. DELLINGER. No.
    Mr. CROWLEY. My understanding is that that doesn't exist.
    Now will every American at some point become ill?
    Ms. SEVERINO. Not necessarily but very likely.
    Mr. CROWLEY. Not necessarily, but for the most part would 
you say yes? Likelihood?
    Ms. SEVERINO. Certainly.
    Mr. CROWLEY. Certainly. Would you all agree?
    [Nonverbal response.]
    Mr. CROWLEY. So--would you all agree? Yes, sir?
    So here we are--nuance. No one requires anyone to get a 
fishing license. No one requires anyone to buy a car.
    Is there a requirement involved in getting sick? How does 
that happen? How do people get sick? Does anyone know?
    Mr. CASEY. Um----
    Mr. CROWLEY. Who does this to us? Does the State do it 
medically? Does the Federal Government require people to become 
ill?
    Mr. CASEY. No.
    Mr. CROWLEY. Do they require them to become ill?
    Mr. CASEY. No.
    Mr. CROWLEY. So the reality is, whether we like it or not, 
unless you live in a remote part of Alaska by yourself and 
chose to do so and you live in a log cabin that you have built 
and you kill what you eat and you wear what you kill and you 
live somewhere where no one will ever know you exist, in all 
likelihood you will need some type of health care.
    That is the nuance here. That is what I don't think people 
understand. Getting sick is not an option. You get sick. It is 
not like you get an option to buy a car. If you want to do it, 
you can do it. But no one requires you. That is the nuance here 
the American people don't understand. We are talking about 
something that will happen.
    And I think, once again, we are not talking turkey enough 
to the American People. We are talking in the abstract. The 
reality is they will get sick, and if they do get sick and they 
go to the hospital and they don't pay for it, we pay for it.
    My wife says, why do we get insurance? Why don't we just go 
to the hospital and have someone else pay for our insurance?
    Because it is not individually responsible. That is why. 
That is why we don't do it. It is not--it is a lack of 
individual responsibility.
    Mr. BRADY [presiding]. The gentleman's time has expired.
    Mrs. BLACK.
    Mrs. BLACK. Thank you, Mr. Chairman.
    It has been a very good discussion today, and I appreciate 
the fact that our chairman brought us together to discuss these 
very important issues.
    As a nurse for over 30--over 40 years--boy, I am really 
starting to know those years now--there is no doubt that we 
have the best health care in this world. And I know that 
because I have done medical mission work in other places like 
Haiti and Guatemala where, yes, they are said to have care. 
That it is care you can get. But, believe me, when you go into 
those hospitals, that is not the kind of care we want here.
    So our system is broken because we have difficulty with 
everybody having access to it. But there are alternatives 
beside the alternative that we got in this 2,700 page document. 
And having been, as I say, in this field for a long time, I 
think things like strengthening our health departments, which 
have deteriorated over the years because of various things that 
have happened--I won't go into those--but removing the barriers 
of purchasing health insurance across State lines, giving 
people more opportunity, more tools, more competition, those 
are various things that can be done beyond what was done in 
this 2,700 page document.
    So I am going to just put that aside for a moment. Because 
over this past week I did read the entire ruling, and it did 
concern me. I am not an attorney, but, as I read, what really 
concerned me, especially in the dissenting opinion, was the 
fact that we are now taxing an inactivity.
    And I think out of everything that I read in that document 
that was the thing that scared me the very most, is that, as 
has already been said in here, there have been incentives to be 
given to people to encourage their behavior, such as maybe a 
tax incentive to buy a certain kind of car or other such 
things, but it has always been as a result of something that 
you actually did, an activity.
    So this inactivity now, to be able to tax inactivity, what 
I would like for each of you to tell me is has there ever been 
in our law a precedent such as this where you tax inactivity? 
And from what I read according to the dissenting opinion that 
is no, but I do want to hear that from each of you.
    Second to that, from your opinion, where do you see this 
going? Does this really create Federal policing power? Is there 
a limit? Where is the limit?
    Because I think we have only seen the beginning of that. 
Whereas, as already has been said, if you didn't eat just what 
the government thinks you should eat because that will make a 
better society that we have a right now to tax that.
    So two things there. Is there anything else you can think 
of that is an inactivity that we already tax; and, second to 
that, where is the limit?
    Mr. Bradbury, let's begin with you.
    Mr. BRADBURY. Thank you, Congresswoman.
    I can't think of another example. So I do think it is 
unprecedented, as far as I know, anyway.
    And, second, as to the what the limit is, well, first of 
all, there is a political accountability limit when Congress is 
passing a tax. But if Congress can pass something and say, oh, 
this is not a tax and then have the Court later uphold it as a 
tax, well, then that undercuts that limit.
    And the Court previously has not been clear as to the 
constitutional limits of the taxing power. It is very broad. 
Clearly, it is. So, at a minimum, we have to say it is very 
unclear, it is ill-defined, and perhaps the sky is the limit.
    And so it is just limited by the creativity of Congress, I 
think.
    Mrs. BLACK. Ms. Severino.
    Ms. SEVERINO. I agree. This is an unprecedented tax on 
inactivity. I think that is what makes it a little bit 
different from what Representative Crowley was talking about. 
The car and fishing license examples aren't perfect analogies. 
Because in those cases you are engaging in some activity. This 
is a tax on not engaging in activity.
    And as philosophers going back to Aristotle I believe could 
tell you, there is a difference--despite how an economist may 
analyze things, there is a difference between taking action and 
failing to take action as a philosophical matter. So I, too, am 
concerned about the fact that this eliminates some of the 
limits on our government.
    Mrs. BLACK. Mr. Casey.
    Mr. CASEY. Yeah, I am unaware of any precedent that is like 
this one.
    I will say where it goes I don't think any of us actually 
know, but it could go very far. For example, Mr. Crowley 
mentioned a moment ago that his relatives or friends in Montana 
are in the cattle industry, and it is down. Well, one way 
Congress could fix that problem is require us all to all buy a 
certain amount of beef or pay a tax. We never thought that 
Congress could do that before, but now that you know you can, 
that is scary.
    Mrs. BLACK. Mr. Dellinger.
    Mr. DELLINGER. I am not afraid, Mrs. Black, because 
Congress has always had the power, at least for the last 
century or more, to influence what people buy and don't buy by 
use of the taxing power. State and Federal Governments have 
encouraged or discouraged purchases by use of the tax power. 
The Court in 1903 could have decided it was going to try to 
police that from the judiciary, and they decided to leave that 
to Congress, and I think that is where it ought to be left.
    Chairman CAMP [presiding]. Thank you.
    Mr. Neal is recognized for 5 minutes.
    Mr. NEAL. Thank you, Mr. Chairman.
    Mr. Chairman, one of the points I would like to raise here, 
as Mr. Dellinger has noted, Social Security was a compromise. 
Essentially, Roosevelt began by looking for something grander, 
and Republicans or nothing, and the compromise was the payroll 
tax.
    And Medicare wasn't quite what Johnson wanted. He wanted it 
to be--President Johnson wanted it to be more extended--having 
just finished the fourth volume of the Caro series--to note how 
that was done.
    But the practical side of this bears noting. In the State 
of Massachusetts, 64 percent of the voters are either 
Republicans or Independents; and the health care plan in 
Massachusetts polls north of 70 percent in terms of customer 
satisfaction. It was negotiated between business and labor and 
arguably the best hospitals in the world. And now the next step 
in this deliberation is on to a global payment system which his 
State is about to adopt.
    The magnificence of the picture of the photograph, the day 
that Mitt Romney signed the legislation has Ted Kennedy 
standing behind him. To the right, of course, is the American 
flag; and in front of the American flag a Member of the 
Heritage Foundation, who, as Senator Chafee and Senator Dole 
both argued, that was the Republican answer to Clintoncare. And 
all of a sudden it can't be the answer to Obamacare.
    The point is that the plan has worked. I don't know anybody 
in Massachusetts who doesn't think perhaps you have to sand the 
edges here and there, but I don't know anybody who is talking 
about repealing the legislation.
    And we have this conversation here that the country, 
frankly, has moved beyond about tax versus penalty. Most of us 
who have been elected here we understand the trim line. That 
argument is over. That was taken care of. So it is nice to have 
witnesses come in and espouse esoteric views interpreting what 
the Chief Justice said or what the minority Members of the 
Court said, but the truth is we have moved on from that.
    Mr. Dellinger, you appear anxious to comment on that. Would 
you do so?
    Mr. DELLINGER. Your remarks, Mr. Neal, make me reflect on 
the extraordinary process by which this legislation was 
demonized. I understand very much the liberty concerns that no 
one should be forced into a commercial transaction with a 
private company. That is why I have always thought it important 
to see this as a mere financial incentive to do so. And where 
the Court said the reason we think it is constitutionally valid 
is it really affords people a perfectly reasonable choice. If 
you want to make a payment to the government instead of having 
private insurance, you can choose to do so, if that is where 
you are going to go.
    But what is extraordinary is when Massachusetts adopted 
this system which, as you say, is very popular in 
Massachusetts, it expanded coverage--health insurance coverage 
to record levels. The hospitals are extremely pleased with it. 
The Boston Red Sox supported it.
    What is interesting is that none of the people that are 
saying that, quote, Obamacare is the end of liberty as we know 
it rushed to Massachusetts or became excited that one of our 
States had gone totally rogue and adopted some unthinkable 
program. When Massachusetts did this, it was generally approved 
of and thought well of.
    If one of our States had really done something that was the 
end of liberty as we know it, you would think it would have 
caused more of a ruckus than it did. In fact, it was widely 
approved; and Governor Romney himself said, rightly, I think, 
that it should be a model for where we need to go as a nation. 
If we want to afford more private choice rather than have a 
single-payer system, that is the way to go.
    I have always thought that the demonization of it was quite 
striking in light of the comments you make about how relatively 
well it worked in Massachusetts.
    Mr. NEAL. If I could, Mr. Chairman, without objection, I 
would like to enter into the record an article entitled 
Massachusetts Web Site Calls Mitt Romney's Health Care Mandate 
a Tax Penalty, a copy of the Massachusetts official Web site, 
and the Massachusetts session laws signed by Mitt Romney 
setting forth the tax penalty.
    Chairman CAMP. Without objection.
    [The information follows: The Honorable Richard Neal]
    [GRAPHIC] [TIFF OMITTED] 80439.180
    
    [GRAPHIC] [TIFF OMITTED] 80439.181
    
    [GRAPHIC] [TIFF OMITTED] 80439.182
    

                                 

    Mr. NEAL. Last, Mr. Dellinger, do you agree that Romneycare 
and Obamacare have the same enforcement mechanism? And if one 
is a tax, are they both?
    Mr. DELLINGER. I think that is fair enough.
    Mr. NEAL. Thank you, Mr. Chairman.
    Chairman CAMP. I would just say, Mr. Dellinger, there is a 
difference between the States and the Federal Government in 
terms of police power. So the analogy between what 
Massachusetts did and there was not this outcry and what the 
Federal Government may have done and there is an outcry is 
because of the limited enumerated powers of the Federal 
Government. Our Founders were concerned about a too powerful 
Federal Government. So I just think it is important to make 
that point.
    Mr. Berg is recognized for 5 minutes.
    Mr. BERG. Thank you, Mr. Chairman. Thank you for holding 
this.
    And thank you to the panelists. It is a long morning here 
but appreciate your being here. It has been a good debate.
    Obviously, as we talked, the Supreme Court ruled the 
individual mandate is constitutional. It is interesting and it 
is not through the Commerce Clause and makes sense from a tax 
standpoint.
    I just want to kind of get back full circle back to Mr. 
Bradbury. When we talk about the people that will be affected, 
can you sum that up again? I know we have been over it several 
times, but----
    Mr. BRADBURY. Congressman, as I understand it, about 160 
million income tax forms are filed that will be subject to the 
declaration: Did you have insurance for yourself, your spouse, 
and all of your dependents for each month during the year? So 
it is going to affect all of those people in the sense that if 
they wish to make an independent economic decision to drop 
whatever insurance they have they will be subject to the 
penalty, and they are certainly subject to the requirement to 
check this certification.
    Then you can focus on the people who are currently 
projected under the law that was originally enacted will not 
have insurance and will be subject to the tax penalty. That is 
the 4 million people.
    But the point I am trying to make is now that we understand 
from the court's decision that it is not a legal mandate that 
thou shalt have insurance as a matter of Federal law, instead, 
it is an economic choice, and the penalty provision or the tax 
as now we understand it is lower for most people than the cost 
of insurance policy, more people could be expected to make a 
rational decision to pay the penalty and not to purchase 
insurance or perhaps to drop the insurance that they have if it 
turns out that it is going to up in cost.
    So we don't know what those numbers are. CBO will take a 
new look at it, I am sure. I cannot assess. I am not a 
government accountant. But it is logical to assume that the 
number of people who will actually pay the tax and not buy 
insurance will be higher than was originally assessed by CBO.
    Mr. BERG. I would like to drill into that a little bit. 
Because I think most of the taxes that we have done are an 
incentive. We affected behavior by taxation, but it has kind of 
lowered that cost for an alternative. We have never kind of 
taxed inactivity.
    And I just sit here and I struggle with unless someone's 
tax is equal to their health care costs there is almost a 
question of whether or not they will move more toward the 
penalty, as you said, Mr. Bradbury, versus paying health care. 
Because, clearly, there is a dramatic difference on those 
people whose income would be much lower with the 2 and a half 
percent tax.
    I just see this, and I don't know if it has been talked 
about or thought through, but I just see a lot of people 
saying, you know what? I will never be denied health care, so I 
will pay the tax. You know what? I am not even going to pay the 
tax. Because I am not withholding much income or income tax. 
And maybe I have a job, maybe I am in an environment where I am 
not withholding, and then when I get sick I am going to go 
online and I am going to sign up for the insurance.
    I think to some degree that discourages people from getting 
regular health care as well, and there may be a bigger--I don't 
know--a bigger cost that people aren't anticipating just 
because of the dynamics. The trade-off--there is too much 
disparity there.
    Would you like to comment on that at all?
    Mr. BRADBURY. I think that is absolutely right. That is the 
point I tried to make in the testimony.
    I think what we have to understand is underlying that is 
the other regulations in the legislation that were passed--
perhaps for very meritorious policy reasons; I am not 
questioning--but those other regulations are going to cause--as 
Congress recognizes, are going to cause the cost of health 
insurance to go up and will create incentives for more people 
to drop insurance because they can wait until they get sick and 
they are guaranteed a reasonably priced policy relative to what 
they would otherwise expect.
    So it is that incentive and those higher costs that the 
mandate was intended to address by forcing everybody in to 
purchase insurance to try to subsidize the cost for others and 
also to avoid this adverse selection or moral hazard of people 
dropping insurance.
    Now if Congress sees that that is not working and the cost 
problems that the regulations are going to create are causing 
this death spiral as people have suggested, then the obvious 
recourse Congress could adopt under the Supreme Court's 
decision is to raise the tax, is to make it more coercive to 
force people to do what Congress said was important to force 
them to do, which is to go out into the market and buy health 
insurance.
    So the tax could go well above the cost of the health 
insurance policy. There is nothing that says as a 
constitutional matter it has to be capped by the average cost 
of insurance policy. It could be set way higher in order to 
force people economically into the market. So the result could 
end up being the same if Congress were to go down that road.
    Mr. BERG. Thank you. I yield back the balance of my time.
    Chairman CAMP. Mr. Becerra is recognized.
    Mr. BECERRA. Thank you, Mr. Chairman; and thank you to all 
of you for your patience and indulgence in these questions that 
we have been asking. It has been an interesting hearing more 
because of the types of questions. They are not ``what is'' 
kind of questions which we typically engage in about what is 
the consequence of this, what has happened as a result of what 
was done. It is ``what if.'' It is all speculative, things that 
may never occur, but you are being asked to tell us what might 
happen if the sun doesn't rise tomorrow.
    But be that as it may, we had the hearing. And while I wish 
we would have focused the hearing on jobs, which is what 
Americans really care most about, and certainly for this tax 
writing Committee that is an important thing. We could have 
tackled the whole question about whether or not we should be 
providing tax incentives to companies that ship jobs overseas 
and thereby deny Americans the chance to stay at work.
    But we are where we are, and we are relitigating once again 
what we passed in 2010, what the executive branch and the 
President signed into law in 2010, and which just recently now 
the Supreme Court has affirmed as a sound law, but we are where 
we are.
    This penalty for free riders who are looking for a free 
lunch, let me ask a question--and, Ms. Severino, let me ask you 
this question. You mentioned you have insurance. I have 
insurance. Every one of my colleagues at the dais has 
insurance. I am fortunate I can afford it. I guess you are 
fortunate enough to be able to afford it as well.
    If I decide that substantial amount of money I put into my 
insurance for myself and for my family I would rather save that 
money for something else. So I say I am going to drop my 
insurance for myself and for my family. And so by some chance I 
end up in the emergency room because of someone hitting me, 
broadsiding me, and I am now in the hospital, but I don't have 
insurance. Is it right for me to ask you to cover the cost of 
my health care bill?
    Ms. SEVERINO. Well, unfortunately, the law I believe, 
without the mandate function, does exactly that.
    Mr. BECERRA. I asked would it be right for me to ask you to 
cover my insurance--or the cost of my health care?
    Ms. SEVERINO. I think it is fair for you to ask me. I don't 
think it is right of you to force me.
    Mr. BECERRA. So you wouldn't want to have to pay for my 
medical bills at that hospital, would you?
    Ms. SEVERINO. I might not. But as a matter of charity I 
think we do support a lot of people that--so I may choose as a 
charitable endeavor to pay for yours or another needy 
person's----
    Mr. BECERRA. If I told you it would cost you about a $1,000 
to cover my health care bills because I chose not to have 
health insurance that I could afford, would you still be 
willing to pay that $1,000?
    Ms. SEVERINO. It probably depends on the circumstances. 
But, you know, there are cases I might.
    Mr. BECERRA. You are a very generous person.
    Ms. SEVERINO. No, if you were my father-in-law who wouldn't 
be able to afford his health insurance, I think I would pony up 
the $1,000 for you. Even if I felt like it was a bad choice at 
the time.
    Mr. BECERRA. I understand that, and I think your father-in-
law probably is enjoying the answer you just gave. I don't 
happen to be your father-in-law. I assume then you are either 
extremely generous or you are unlike most persons who probably 
feel like they could use $1,000 to help to take care of their 
own family.
    Ms. SEVERINO. There are many cases where I might not pay 
the $1,000, yeah.
    Mr. BECERRA. I think that is probably the case for a lot of 
American families who would say, if I have got health insurance 
for my family and I am paying several thousand dollars for it 
and if you can afford to do the same thing but you are not 
willing to, I can't find any reason why I should be asked to 
pay for your health care when you can afford it.
    The chart that we have up that we have seen before 
essentially shows part of this. We have virtually 99 percent of 
Americans who, in some way or another as a result of this 
landmark health law, are going to have health insurance; and 
that small little sliver of white that you can barely see are 
those Americans, 1 percent of so of Americans, who may choose 
not to have health insurance, even though they can afford it. 
So, essentially, that 1 percent sliver would be saying to the 
99 percent of Americans who will have health insurance you are 
going have to help pay for some of the costs of my health care, 
even though I can afford it.
    We are not talking about folks who need charity. We are not 
talking about folks who really have no way to access health 
care. We are talking about folks who have chosen not to have 
health insurance coverage even though they can afford it, that 
1 percent; and, as a result, they can impose costs on us.
    When I mentioned $1,000, that wasn't just a number I pulled 
out of a hat. Most American families that have health insurance 
coverage pay, on average, about $1,000 in their health care 
insurance premiums to pay for the cost not of their health care 
or their family's health care but the health care for someone 
else who doesn't have health insurance. So it is a matter of 
trying to ensure that we don't have free riders who are 
charging us for their care because they chose not to be 
responsible.
    Let me ask you all a question. Would you agree with this 
quote by then Governor Romney: No more free riding, if you 
will, where an individual says, I am not going to pay, even 
though I can afford it. I am not going to get insurance, even 
though I can afford it. I am instead going to show up and make 
the taxpayers pay for me. It's the ultimate conservative idea, 
which is that people have the responsibility for their own 
care, and they don't look to government to take care of them if 
they can afford to take care of themselves.
    Does anyone disagree with what Governor Romney said? 
Disagree.
    Ms. SEVERINO. I would like to disagree with the fact that 
the government is forcing----
    Mr. BECERRA. Well, let me ask because my time is expired. 
If you could just tell me if you disagree with what Governor 
Romney has said. Anyone?
    Mr. HERGER [presiding]. The witness may respond by written 
letter.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Mr. HERGER. The gentleman, Mr. Smith, is recognized.
    Mr. SMITH. Thank you, Mr. Chairman, and thank you to our 
witnesses for the civilized discussion that we have had today. 
I think it is helpful. I certainly appreciate the insight that 
each of you bring to the Committee.
    Mr. Dellinger, can you conceive of any taxing power that 
now that we know that it is a taxing power, that would not be 
within the constraints of the Constitution?
    Mr. DELLINGER. Yes, they are legion.
    First of all, they are all of those who would run afoul of 
any other provision of the Constitution, obviously, affecting 
people's religion or speech rights or rights of intimate 
association. Those kind of taxes would be--exercising the 
taxing power would be invalid.
    And the Court said, in an opinion by Chief Justice Roberts, 
it reminded us, as Justice Holmes said, the power to tax is not 
the power to destroy as long as this Court sits. So if you had 
a tax that actually forced people into an activity, it didn't 
really give them a choice or stigmatized them as being 
criminal, the Court stands ready to invalidate a tax that 
exceeds that limit. But to give this Congress pretty wide range 
to do things that are actually silly and stupid if you want to 
enact them, the Court is not going to save you from all of 
those.
    Mr. SMITH. So if someone was compelled to purchase health 
insurance against their own religious convictions, would they 
be exempt?
    Mr. DELLINGER. Yes. I think the Court would find that to be 
unconstitutional. In fact, the Court suggests that if anyone 
were compelled to purchase insurers it might be invalid. That 
if the tax were so high that it became punitive, like the tax 
in the child labor tax case was 10 percent of your total income 
if you hired an underage person for 1 day, that they said was 
actually a prohibition and coercion. This actually gives people 
a choice to pay an amount that is not unreasonable in light 
of--in fact, it is said to be too reasonable, by Mr. Bradbury 
and others, for it to be effective.
    Mr. SMITH. So there is the concern that employers may just 
wish to pay the penalty for not providing insurance for their 
employees, is that accurate?
    Mr. DELLINGER. Correct.
    A very good point that Mr. Bradbury made is that if the tax 
penalty, financial incentive, whatever you want to call it, if 
it remains as low as it is now, won't people make the rational 
choice and say I am just not going to have insurance?
    I just do want to note that under Governor Romney's plan in 
Massachusetts no one's tax penalty could exceed 50 percent of 
the cost of what they call a credible insurance premium for 
credible coverage. So even though it was rational to pay half 
of what you would have to pay, in fact, it worked; and people 
found that to be incentive enough to buy insurance, that we did 
have widespread coverage.
    Mr. SMITH. Now in terms of uninsured now having insurance--
but one point of clarification. You mentioned that there are 
100 million people that will see benefits from no lifetime cap?
    Mr. DELLINGER. I think that is right. That is the figure I 
have seen, Mr. Smith. I wish that I could give you----
    Mr. SMITH. Is there 100 million people currently up against 
their cap?
    Mr. DELLINGER. No, I said that we will never have to worry 
about a lifetime cap being imposed.
    It may be virtually everyone. I saw the figure of 100 
million. I don't know why it is not 300 million. The fact is 
everybody now is guaranteed insurance no matter what kind of 
disease you may have that has really chronic, long-term, high 
costs. You will never have your insurance company announce we 
have now put a lifetime cap on what you may have in terms of 
payments.
    Mr. SMITH. Now if someone is left without insurance, 
perhaps because their employer opted out of the mandate, so to 
speak, and just paid the penalty, do we know if that person 
would be more likely to pursue private health insurance or go 
on Medicaid?
    Mr. DELLINGER. I don't know the answer to that. I do know 
that there are substantial additional subsidies for people now 
who are employed or working but can't afford private health 
insurance. There are now substantial new subsidies as well as 
the expansion of Medicaid in those States that accept it.
    Mr. SMITH. But can we expect the Medicaid rolls to 
increase?
    Mr. DELLINGER. We certainly hope so. We hope that more 
people who are not now covered will be covered.
    Mr. SMITH. But we will expect the Medicaid rolls to expand?
    Mr. DELLINGER. I think that is right. The whole point of 
the legislation was to increase Medicaid eligibility to people 
who are employed but whose income still makes it difficult for 
them to purchase health insurance.
    Mr. SMITH. And how does the reimbursement of Medicaid 
compare to private insurance reimbursement?
    Chairman CAMP [presiding]. And if you could answer quickly, 
because time----
    Mr. DELLINGER. I can't, because I don't know.
    Chairman CAMP. Thank you.
    Ms. Jenkins is recognized.
    Ms. JENKINS. Thank you, Mr. Chairman; and thank you all for 
being here today.
    Mr. Bradbury, the Democrats have said the individual 
mandate is needed to stop cost shifting and making people pay 
for their own health care. Now Amicus Review participated and 
states, ``The problem with this story is that it is untrue.'' 
Could you just explain why the cost shifting argument doesn't 
paint an accurate picture of the purpose of the individual 
mandate?
    Mr. BRADBURY. I would be happy to.
    Congress in its findings supporting the law explained why 
the mandate was necessary, and two points come out clearly. 
One, because of guaranteed issue and community rating, the cost 
of insurance is going to go up; and we need to bring into the 
market more of the healthier, younger people whose health care 
costs, medical costs are going to be a lot less than the cost 
of insurance. So that the amount they pay in to the system is 
greater than the amount they take out, in order to lower the 
average cost for everybody across the system, to try to control 
what would otherwise be runaway cost increases for insurance 
premiums.
    Number two, the guaranteed issue and community rating 
provisions were going to cause people, Congress recognized very 
clearly--and this was the experience of some States--to drop 
the insurance or defer getting insurance because they know they 
would be guaranteed insurance if they get sick and they will 
wait. That is a rational decision. And so you actually have 
lower numbers of people insured in the country, not higher 
numbers. So it was necessary to mandate that everybody go into 
the market and buy insurance in order to counteract that what I 
call moral hazard.
    I think, as Justice Alito pointed out at oral argument, the 
average cost of insurance policy in 2016 is expected to be 
$5,600, an individual insurance policy. And the average cost in 
health care that a young, healthy American incurs per year is 
about $850. And so it is very clear that the purpose of the 
mandate was to require more people to pay the greater amount 
into the system than they would be taking out.
    And I just want to point out that the $1,000 figure that is 
often bandied about is not--I don't really think there is good 
substance behind that figure. This is the assumption or 
assertion that the average cost of insurance is $1,000 higher 
for the typical American family because of cost shifting from 
uninsured.
    As I understand it, the way that number was derived I think 
is not terribly reliable. I think it is taking the $43 billion 
that has been estimated in uncompensated health care generally 
in the country and assuming that every dollar--dollar for 
dollar of that $43 billion flows through to the bottom line of 
insurance costs for everybody else. And they simply divide that 
number into the total amount of insurance premiums people pay 
and come up with $1,000 and say, oh, it must account for $1,000 
of each average policy's cost.
    But it is really not a well-taken assumption. Because a lot 
of people who choose to go without insurance the statistics 
show actually pay for the health care they incur and that a lot 
of that uncompensated care is provided to lower income folks 
and actually gets absorbed by hospitals and other health care 
providers and not passed along to insurance companies. There 
are a lot of reasons for that, but it is not a safe assumption 
that, dollar for dollar, uncompensated care gets passed along 
to the insurance--bottom line insurance premium of others.
    Ms. JENKINS. Okay, that is helpful.
    Thank you, Mr. Chairman. I yield back.
    Chairman CAMP. Thank you.
    Last, but not least, Mr. Reed.
    Mr. REED. I always appreciate going last, because all the 
good questions are gone.
    Just some commentary. I have been listening to this 
argument before I had to leave and then come back and the 
taxing versus the penalty--and from my perspective as a new 
Member of Congress, freshman Member of Congress, it is time to 
be honest with the American people.
    And what this was is the Supreme Court release came back 
and said, you know, we have an expansion of government to deal 
with the health care situation. We are going to raise taxes 
under Congress' act to pay for it.
    If that is what the people want, and when I read the Chief 
Justice's decision--I read it five times--essentially saying, 
if that is what the people want, so be it, and it is up to the 
people to decide where we go.
    That being said, I am concerned where we are going to go in 
the future with the congressional power that has been granted 
to us now under the taxing power of the Supreme Court decision 
as I interpret it and as I read it. One of the things that is 
being kicked around is a lot of people think the political 
pressure of tax increases will be enough check on the system. 
Do you all agree with that? Does anyone disagree with that?
    Mr. CASEY. I do not think that the political pressures will 
be sufficient.
    Mr. REED. So that being the case--and that is exactly where 
I wanted to go, Mr. Casey--is what would be a mechanism that we 
can do in Congress in your opinion to restrain or to delineate 
where that power now lies?
    Mr. CASEY. I think one thing you can do--and it is not 
clear entirely what the Supreme Court might do, but one thing 
you can do is make very clear when you are raising a tax and 
when you are not exercising your authority to raise and collect 
taxes. That is, after all, your decision. The Court, while some 
of its language might suggest, I do not believe the Supreme 
Court would hold that Congress can't chose which of its 
enumerated powers to exercise, and you could do that.
    Mr. REED. See, and I appreciate that comment, because I 
have been wrestling with this. Because there are some proposals 
that are now floating out that we should adopt statutory 
language that say clearly in our legislation going forward what 
power we rely on. Is it a tax or is it a penalty? And I couple 
that with my reading of the decision where they took the anti-
injunction statute and they said, essentially for purposes of 
statutory compliance, we are going to say whatever Congress 
says it is, that is what we are going to interpret it to be for 
statutory tax. But for constitutionality we are going to go 
beyond that, and we are going to say whatever constitutional 
power is out there, and we are going to hold it on that.
    And that concerns me. Because if we have that requirement--
a statutory requirement to put in for statutory purposes we are 
going declare the power that we are exercising, could not 
Congress in that theoretical situation say for statutory 
purposes we are exercising this power? That would then comply 
with the statute, but for constitutionality purposes the Court 
could go wherever it wants to go. And that is the concern.
    Do you see the concern? Is my logic working?
    Mr. CASEY. Sure, your logic is perfect. Because, of course, 
in many ways it is impossible to draft a statute that is judge 
proof.
    But what you can do is make it so clear that we are not in 
this instance exercising our power to tax, or in another 
instance we are, that the Court will not be able to pretend 
that it is somehow interpreting the law you actually passed and 
transform it into a tax when it wasn't.
    Mr. REED. I appreciate that.
    Does Mr. Bradbury or any other----
    Mr. DELLINGER. Well, in terms of the Tax Injunction Act it 
is quite simple for Congress to say that the provisions of this 
Act shall not apply--or the Anti-Injunction Act shall not apply 
to this particular provision of law and then can proceed.
    I think one of the reasons why I thought the Tax Injunction 
Act argument was quite good, that this is a bar to this 
litigation--I think one of the reasons the Court may have 
leaned a little against that is that I think if they had held 
that this lawsuit was barred as a pre-enforcement lawsuit by 
the Tax Injunction Act that Chairman Camp and his colleague, 
the Ranking Member and their colleagues would have immediately 
passed a one-sentence law saying the provisions of the Anti-
Injunction Act shall not apply to challenges on the Affordable 
Care Act, and the Court would have heard this again in October.
    And I don't think anybody could have voted against that, 
Mr. Chairman. They would have said, yes, we don't want our law 
to block this. One sentence will remove that barrier.
    I think that is really what would have happened.
    Mr. REED. Interesting dynamics.
    I go back to the point I am going to be honest with the 
American People. When we stand for legislation here, if we are 
going to expand government and raise taxes to pay for it, then 
that is what it is. Let the people decide. And hopefully we can 
move forward to that debate in November.
    With that, I yield back, Mr. Chairman. I thank the panel 
for your participation.
    Chairman CAMP. Well, thank you very much, Mr. Reed.
    I also want to thank the entire panel for a very long 
morning and for all of your testimony. It was very helpful.
    And, with that, this hearing is hereby adjourned.
    [Whereupon, at 1:17 p.m., the Committee was adjourned.]

    [Submissions for the Record follow:]

                      The Honorable Renee Ellmers
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