This is a rush transcript from "On the Record," July 4, 2012. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: Penalty or tax? Now, the Supreme Court and the White House disagree on what to call the health care law's individual mandate, the justices ruling it's a tax, but the White House insists it's a penalty. So do other Democrats agree?
We asked Maryland Congressman Chris Van Hollen.
VAN SUSTEREN: Nice to see you, sir.
REP. CHRIS VAN HOLLEN, D-MD.: Good to see you.
VAN SUSTEREN: I know that you have always said that the mandate was constitutional. In the Supreme Court's recent decision with the issue that it was a legitimate taxing power of Capitol (ph) -- were you surprised that the decision went that direction?
VAN HOLLEN: Well, I wasn't sure which direction or on what basis the decision would be made, but I'm happy with the result because the result means that millions more Americans will get more affordable health care.
VAN SUSTEREN: All right. Is it a tax?
VAN HOLLEN: You can call it whatever you want, Greta. What I can tell you is it's designed exactly like Mitt Romney designed the program up in Massachusetts.
And the idea behind it is that everybody should pay something for health care because everybody is using the health care system. Mitt Romney understood at that time that if some people don't pay, it means everybody else pays more when they get sick.
VAN SUSTEREN: Were they taxed in Maryland? I mean, not Maryland, Massachusetts -- were they taxed in Massachusetts?
VAN HOLLEN: Yes. Absolutely. That was the method they used for making sure everybody ultimately participated. And as Governor Romney said at the time, if some people don't pay something, everybody else has to pay more -- higher premiums, higher uncompensated care at hospitals. Hospitals don't eat that money. Taxpayers help provide the funds to the hospitals.
And so the idea is -- the irony here is that all of a sudden, Republicans are arguing in favor of the people who want to freeload and free ride on the system and on everybody else.
VAN SUSTEREN: Well, I think, though, that if you look at the chief justice's opinion, though, what he talked about really is sort of the commerce clause and what he specifically said was that we have a -- we have a federalist system of government. We have the states and the federal government. He wasn't denying that a state has a right to do that within its confines, but he said specifically that having the federal government do it for the states, that's where it crossed the line, when the federal government was ordering the states.
VAN HOLLEN: Well, what the chief justice said along with the majority is that the federal government can use this power just like Mitt Romney used that power in Massachusetts. Again, the methodology...
VAN SUSTEREN: The taxing -- I mean -- I mean, but it's all sort of -- it's unusual, though. I mean, everyone is sort of hung up on the fact that the politicians naturally didn't want to call it a tax when it was passed. The lawyers, when they got to court, sure wanted to call it a tax because they realized that that was a better legal argument.
VAN HOLLEN: My point is, whatever you want to call it, the device is the same in the Massachusetts law that Governor Romney passed as it is in the federal law. And the idea behind both of them is that everybody should participate in paying something into the health care system because everybody has some interaction. Otherwise, if you get sick and you haven't paid for your health insurance, we end up paying the price. Everybody else's premiums go up.
VAN SUSTEREN: Well, I think...
VAN HOLLEN: That's the whole idea of getting everybody into the -- into the pool.
VAN SUSTEREN: With the fact that the Medicaid expansion aspect was shut down, there -- if a state elects not to be part of the Medicaid expansion, there is a group of people who won't have health insurance. You agree?
VAN HOLLEN: Well, that's a possibility. The reason I think that's a very unlikely event is that right now, every state participates in the Medicaid program, even though under the current Medicaid program, the match is $6 of federal money to $4 of state money, whereas under the new Affordable Care Act provisions, the match is 100 percent federal money for five years, and then it phases down to $9 of federal money for every dollar of state money.
VAN SUSTEREN: Which -- which seems like -- I mean, doesn't seem very costly until you actually look at the number of people and the money. Then it does get to be huge numbers for these states. Now, I don't know what's going to happen five years from now. I don't know the state of the economy (INAUDIBLE) different states. But if you -- if you -- if you -- if you frame it as you did, it doesn't seem significant. If you actually look at the dollars and the number of people that would participate, it's a significant amount of money for the states. Do you agree?
VAN HOLLEN: Yes, but the alternative, of course, is if those people are not covered at all, they show up in the hospitals, and state and federal taxpayers end up paying a lot for them anyway.
VAN SUSTEREN: How is that different? I mean, if we're going to end up paying or it -- which is always sort of curious to me. If everyone's going end up paying for these people anyway, whether we pay through Medicaid expansion or we pay through increased premiums because they show up at hospitals and hospitals raise the prices -- I mean, it's -- we all -- we seem to be paying for it no matter what. Am I wrong?
VAN HOLLEN: Well, there is no free lunch, and that's part of the reason the Affordable Care Act says everybody should put something in because otherwise, you have freeloaders and free riders on the system. But there's no doubt that there's -- this is not a cost-free system now.
It is a much more rational approach to say that you get health insurance up front so that you can go see your doctor when you get sick, rather than not being able to see the doctor and waiting until you get a lot sicker and have to show up at the hospital to take care of something.
VAN SUSTEREN: All right...
VAN HOLLEN: Because that's a -- that is a broken system, and that's not the best use of taxpayer dollars or resources.
VAN SUSTEREN: Why can't we have a national exchange? Why (INAUDIBLE) just spend all this money on these -- what's the practical reason we have to have all these different state exchanges. Why can't there be one exchange?
VAN HOLLEN: Well, actually, the law does create an opportunity to try and create a more national exchange, and that may be possible to move toward that. I think the thinking was originally that we should establish these exchanges at the state level. But there are provisions in the law that would allow that to be expanded.
VAN SUSTEREN: What -- that seems to me to be cheaper. I mean, more efficient if we had one, rather than everyone sort of redesigning his own or designing his own.
VAN HOLLEN: Well, I think the other side of the argument is, administratively and the concern was, you know, you have a big bureaucracy potentially dealing with the entire health exchange. So that's the other side of that argument. Let's...
VAN SUSTEREN: Got it.
VAN HOLLEN: Let's start at the state level.