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Much has been written this past week about the Virginia federal court decision about the constitutionality of the Affordable Care Act. While many have described the decision as politically motivated and delved into the politics of the various judges who have ruled or are about to rule on the Affordable Care Act, the more interesting question is: What is likely to happen at the Supreme Court level and what could happen to the Affordable Care Act based on that likely outcome?

Jason Mazzone had an interesting opinion piece in the New York Times interpreting the Virginia court’s decision. In his December 17 piece, he comments on the distinction between Congress regulating activity vs. inactivity, and asserts that the Virginia court made a credible case for its decision. I am not an attorney and can’t comment on the merits of his argument. But he certainly believes that this opinion could well be upheld by the Supreme Court.

Linda Greenhouse, the Supreme Court reporter for the New York Times, gives a much more attenuated interpretation of Judge Henry Hudson’s decision in her December 16 opinion piece. Regardless of the merits of his reasoning, if his opinion holds, what will that do to the law?

Well, first and foremost, the Virginia decision was actually more narrowly constructed than some media reports would lead one to believe – in two ways: first it only challenged the part of the law that deals with the individual mandate. Even though Congress did not include a severability provision with regard to this part of the law, the court decision was limited to the provision that requires people to carry health coverage or pay a fine. The Virginia court ruled that this provision both went beyond the Commerce Clause and that the fine was not a tax but rather, a penalty. The decision did not, however, invalidate any other parts of the law and it did not grant a stay of implementation of the law (in large part because the provision that would be invalidated by this ruling doesn’t go into effect until 2014). So, based on this ruling, the implementation of the Affordable Care Act will proceed apace while the ruling is appealed in the courts.

But, what would this decision mean for the law should it ultimately be upheld by the Supreme Court?  That is a complex question. The problem with invalidating the individual mandate is that there are many other provisions – let stand by the Virginia court – that are popular and integrally tied to the mandate. These include prohibitions on exclusions for pre-existing conditions, requirements for guaranteed issue, prohibitions on rescissions, and requirements to enable children up to 26 to stay on parents’ policies. Adverse selection is a serious problem with these parts of the law if they are not tied to some provision that ensures all (or, at least, most) people have health insurance.

So, what could Congress do that preserves these insurance-related provisions of the Affordable Care Act in the absence of an individual mandate?  Those who advocate for a single payer system will correctly note that this problem would have been avoided had Congress passed and the President signed a bill that worked entirely through the tax system, similar to the Canadian health system. But, the reality is that the votes were never there for this system and they are less there now with the change in Congress.

So, if there is a negative ruling in the Supreme Court, is there a feasible political alternative?   There might well be – one that was proposed during the original reform debate. In that debate, some advocated that instead of a mandate there should be a market based incentive system designed somewhat akin to Medicare Part B: a graduated rate depending on how early you get in. That is, health insurance would be cheaper if you signed up when you are relatively young and healthy than if you waited until you were older or sick. Among other economists, Mark Pauley recommended that approach (along with some other features) in his February 2010 perspective in the New England Journal of Medicine. And, that concept is one that is more likely to appeal to the new Congress – at least after much of the hardnosed “repeal and replace” rhetoric has passed. And, it is an approach that would save the fundamental principles of health reform through a different avenue. The mandate may ultimately prevail in the courts. But, if it doesn’t, it is well to keep in mind that all may not be lost.