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80–439 2013

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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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

TOM REED, New York 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Cousel 


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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 


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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:] 


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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, § 8, cl. 1). Under the Constitution’s Origination Clause (art. I, § 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 


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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

f 

/. 

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 


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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. 


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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 hosVerDate Mar 15 2010 00:29 May 29, 2013 Jkt 080439 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80439.XXX GPO1 PsN: 80439

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pital 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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f 

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 


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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 


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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 


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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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f 

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 deVerDate Mar 15 2010 00:29 May 29, 2013 Jkt 080439 PO 00000 Frm 00163 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80439.XXX GPO1 PsN: 80439

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ductions 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 penVerDate Mar 15 2010 00:29 May 29, 2013 Jkt 080439 PO 00000 Frm 00164 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80439.XXX GPO1 PsN: 80439

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alty—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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f 

Chairman CAMP. Thank you very much. 

Mr. Casey, you have 5 minutes. 


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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. 


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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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f 

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. 


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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 


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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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f 

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 

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vidual 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. 


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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 


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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. 


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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 

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try. 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. 


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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 


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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 


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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] 


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f 

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 


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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? 


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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 

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ate. 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. 


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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 


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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 


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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? 


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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 higherpriced 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 


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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 inVerDate Mar 15 2010 00:29 May 29, 2013 Jkt 080439 PO 00000 Frm 00203 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80439.XXX GPO1 PsN: 80439

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surance 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. 


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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 


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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. 


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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. 


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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? 


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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. 


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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 


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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 


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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 


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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 


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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. 


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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, 


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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. 


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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] 


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f 

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 


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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 


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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 

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dent 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 


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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 


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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. 


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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 


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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? 


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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. 


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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.] 


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[Submissions for the Record follow:] 

The Honorable Renee Ellmers 


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