ObamaCare at the Supreme Court

Beginning today the Supreme Court is hearing three days of arguments on the constitutionality of the Affordable Care Act. The first issue is whether the Court can even consider the law’s constitutionality now–a legalistic argument that in the words of a lawyer challenging the law is “a kind of practical joke that the court is playing on the public.” The 1867 Anti-Injunction Act requires that a tax can only be challenged after it has been paid. The ACA’s penalty–or is it a tax?–for failing to obtain health insurance does not go into effect until 2014 and would not be payable until federal tax returns are filed in 2015, which could mean the challenge must wait. It’s an argument only a lawyer could love, with the twist as to whether the payment imposed for failure to obtain health insurance is a tax. As the NYTimes explains:

In the health care law, Congress called the required payment a penalty rather than a tax. But the penalty is contained in the Internal Revenue Code, and the health care law says it is to be “assessed and collected in the same manner” as a tax.

Mr. Verrilli, representing the Obama administration, walks a fine line. He has told the court that the administration wants a prompt ruling on the health care law and that the 1867 law should not stand in the way. Yet the administration does not want to damage its ability to rely on the 1867 law in other cases.

There are other complications. Mr. Verrilli’s argument that the penalty is not a tax for purposes of the 1867 law is in potential tension with one he will make on Tuesday, that the mandate was authorized not only by Congress’s power under the commerce clause but also by its power to levy taxes.

Mr. Verrilli argues that the name that Congress gave the payment required for violating the mandate in the health care law — a penalty, not a tax — matters for purposes of the 1867 law but is irrelevant in connection with the constitutional taxing power, where “it is the practical operation of the provision, not its label, that controls.” (emphasis additional)

As I said, it’s an argument only a lawyer could love.

Judge Stays Order Invalidating the ACA

The Florida federal court judge who struck down the Affordable Care Act on January 31 has stayed his order enjoining enforcement of the law until the U.S. Supreme Court rules on its constitutionality.  Judge Vinson explains why he stayed his order :

I cannot say that the defendants do not have a likelihood of success on appeal. They do. And so do the plaintiffs. Although I strongly believe that expanding the commerce power to permit Congress to regulate and mandate mental decisions not to purchase health insurance (or any other product or service) would emasculate much of the rest of the Constitution and effectively remove all limitations on the power of the federal government, I recognize that others believe otherwise. The individual mandate has raised some novel issues regarding the Constitutional role of the federal government about which reasonable and intelligent people (and reasonable and intelligent jurists) can disagree. To be sure, members of Congress, law professors, and several federal district courts have already reached varying conclusions on whether the individual mandate is Constitutional. It is likely that the Courts of Appeal will also reach divergent results and that, as most court watchers predict, the Supreme Court may eventually be split on this issue as well. Despite what partisans for or against the individual mandate might suggest, this litigation presents a question with some strong and compelling arguments on both sides. Ultimately, I ruled the way I did, not only because I believe it was the right overall result, but because I believe that is the appropriate course for a lower court to take when presented with a (literally) unprecedented argument whose success depends on stretching existing Supreme Court precedent well beyond its current high water mark and further away from the “first principles” that underlie our entire federalist system. Under these circumstances, I must conclude that the defendants do have some (sufficient for this test only) likelihood of success on appeal.

Judge Vinson also concluded that it “would be extremely disruptive and cause significant uncertainty” to stay implementation of the Act pending appeal, and that other relevant support granting the stay.

Tribe on the ACA

This Op-Ed piece by Larry Tribe, constitutional law scholar and Harvard Law School professor, explains why “[t]here is every reason to believe that a strong, nonpartisan majority of justices will do their constitutional duty, set aside how they might have voted had they been members of Congress and treat this constitutional challenge for what it is — a political objection in legal garb”–in other words, why they will uphold the constitutionality of the Affordable Care Act.

Legal versus Political Issues

And here’s my response to a friend who asked if the Florida decision was a “clear case of judicial activism and over-reaching with a political agenda.”

The challenge to the ACA raises serious constitutional law questions.  The results have been politicized, but the issue goes to the heart of the Constitution’s allocation of power among the states, the federal government, and the people.  Legal analysis requires putting aside agreement with the ends of health care reform and asking this question:  if I disagreed with the operation of the law, would I still believe it was within Congress’s power to pass it?  If Congress decided national defense and public safety required every competent non-felon adult in the U.S. to own a handgun, would it be within Congress’s power under the commerce clause? (There may be other constitutional flaws to this hypothetical but I’m making this up on the fly to frame the question.) The courts that have considered these challenges have so far split on partisan lines, but it ignores the legitimacy of the constitutional issues to assume nothing more than party affiliation drives the outcome.

Pro-ACA Argument

The constitutionality of the Affordable Care Act is a lively topic at morning coffee.  Today a friend sent a link to a pro-ACA argument.  Here’s a copy of my response.

This argument has intellectual appeal–I keep expressing it in the shorthand “not to decide is to decide,” meaning inactivity also has consequences–and it’s a concept that the law recognizes in some contexts. In some states, a seller of residential property has a common-law (meaning, judge-imposed as opposed to statutorily-imposed) duty to disclose information about the property that would not be readily apparent or easily discoverable through typical buyer’s diligence. The duty arises just by virtue of the seller’s superior knowledge, whether or not the buyer asks a question that would trigger disclosure, and the seller can be liable for any economic harm the buyer suffers from the seller’s failure to disclose. The legal question, though, is not whether the argument has intellectual appeal. It’s whether regulating inactivity is within Congress’s power under the commerce clause. Answering that question requires looking at prior commerce clause cases to see how the Court has defined the scope of commerce clause power. This author frames the question this way:

the Commerce Clause empowers the federal government to regulate interstate commerce; the American health care system is interstate commerce; and the Affordable Care Act regulates the health care system

That law is not that simple. In 1995 in US v Lopez the Court ruled the Gun Free School Zone Act was beyond Congress’s commerce clause power. The government argued (among other things) that guns are sold in interstate commerce, that guns are often used in connection with the drug trade, which is in interstate commerce, that the presence of guns in schools has a deleterious effect on education, turning out students less able to reach their potential as economic actors, affecting interstate commerce. The Court disagreed, saying there was insufficient nexus between the activity regulated–guns in schools–and Congress’s commerce clause power. If the law were as simple as the writer suggests the Lopez case would have come out the other way, because “guns are in interstate commerce; and the Gun Free School Zone Act regulates gun possession.”

My aim is only to explain the legal context of the ACA challenge. It’s easy to talk about as pure politics, and if the Court eventually strikes down the law in a 5-4 decision I have no doubt the common wisdom will be that it was decided on pure politics.  I think the legal discussion is more interesting and intellectually challenging than the binary left/right, democrat/republican, pro-Obama/anti-Obama discussions.  It involves fundamental issues about natural rights and individual liberty, as the founding fathers understood them, and the Constitution’s limits on federal government power.

Florida Court Strikes Down ACA

A federal court in Florida ruled today that the Affordable Care Act’s individual mandate violated the Commerce Clause and, because the court found the individual mandate could not be severed from the rest of the Act, declared the whole law unconstitutional.  I’ve not carefully read the court’s 78-page opinion, but I’ve read enough to see it relies on activity argument noted in prior posts on this subject:

It would be a radical departure from existing case law to hold that Congress can regulate inactivity under the Commerce Clause. If it has the power to compel an otherwise passive individual into a commercial transaction with a third party merely by asserting — as was done in the Act — that compelling the actual transaction is itself “commercial and economic in nature, and substantially affects interstate commerce” [see Act § 1501(a)(1)], it is not hyperbolizing to suggest that Congress could do almost anything it wanted. It is difficult to imagine that a nation  which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place.

The court concludes that failure to purchase health insurance is not an activity.  The court rejects the argument that the “three unique elements of the health care market” (no one can opt out, hospitals arerequired to provide care regardless of ability to pay, and unpaid costs are shifted to third parties) relied on by the government are “constitutionally significant.”

What if only one of the three factors identified by the defendants is present? After all, there are lots of markets — especially if defined broadly enough — that people cannot “opt out” of. For example, everyone must participate in the food market. Instead of attempting to control wheat supply by regulating the acreage and amount of wheat a farmer could grow as in Wickard, under this logic, Congress could more directly raise too-low wheat prices merely by increasing demand through mandating that every adult purchase and consume wheat bread daily, rationalized on the grounds that because everyone must participate in the market for food, non-consumers of wheat bread adversely affect prices in the wheat market. Or, as was discussed during oral argument, Congress could require that people buy and consume broccoli at regular intervals, not only because the required purchases will positively impact interstate commerce, but also because people who eat healthier tend to be healthier, and are thus more productive and put less of a strain on the health care system.

Upholding the individual mandate would require piling “inference upon inference” to support an attenuated link between “what is being regulated and its effect on interstate commerce.”

Regarding the argument that the decision to forgo the purchase of health-care insurance is an activity, the court states-

There is quite literally no decision that, in the natural course of events, does not have an economic impact of some sort. The decisions of whether and when (or not) to buy a house, a car, a television, a dinner, or even a morning cup of coffee also have a financial impact that — when aggregated with similar economic decisions — affect the price of that particular product or service and have a substantial effect on interstate commerce. To be sure, it is not difficult to identify an economic decision that has a cumulatively substantial effect on interstate commerce; rather, the difficult task is to find a decision that does not.

This is significant because “‘economic decisions’ are a much broader and far-reaching category than are ‘activities that substantially affect interstate commerce.'”  The court ends the Commerce Clause analysis with this paragraph:

Because I find both the “uniqueness” and “economic decision” arguments unpersuasive, I conclude that the individual mandate seeks to regulate economic inactivity, which is the very opposite of economic activity. And because activity is required under the Commerce Clause, the individual mandate exceeds Congress’ commerce power, as it is understood, defined, and applied in the existing Supreme Court case law.

Constitutionality of the Health Care Reform Act

Between discussions of the holiday plans, the Patriots, and the weather my morning coffee buddies have recently discussed the constitutional challenges to the Affordable Care Act.  For my friends I read and summarized the court decisions in two the challenges as follows.

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The Executive Summary (with my spin):

  • CON–The decision not to purchase health insurance, like any decision about how to live one’s life, is an aspect of individual liberty. It’s my choice whether to drink, smoke cigarettes, exercise, and purchase health insurance. Congress’s Commerce Clause power may be expansive, but it does not authorize the federal government to tell me what I must buy. If Congress can require me to purchase health insurance, where does its power end? Can it require that I join a health club? Eat more broccoli and fewer french fries? Listen to NPR?
    • I think of this as the So what’s it to you if I’m passive/aggressive? argument.
  • PRO–If you are not part of the solution you are part of the problem. Not to decide is to decide. One’s decision not to purchase health insurance has economic consequences that are not limited to the individual. When you don’t purchase health insurance, or when you purchase it only on the day you get sick, your shift the cost of your care to health care providers, insurance companies, and third parties like me. This cost-shifting has a substantial economic effect and is therefore within Congress’s Commerce Clause power.
    • This is the No Man is an Island argument.

The Details:

Two federal district court judges in Michigan and Virginia have upheld the Affordable Care Act; another federal district court judge in Virginia struck it down. I’ve read the Michigan and latter Virginia decisions, which deal with the same issue–whether the provision (effective in 2014) requiring all Americans (with limited exceptions) to purchase defined minimum health insurance or pay a penalty is beyond Congress’s power under the Commerce Clause. The issue can be defined simply, but its resolution rests on one’s conception of individual liberty and the relationship between individual actions and societal consequences.

The Commerce Clause’s language is not helpful. It states The Congress shall have power . . . to regulate commerce with foreign nations, and among the several states, and with the Indian tribes. The Supreme Court has interpreted the Clause to grant Congress three broad categories of power, including the power to regulate “activities that substantially effect interstate commerce,” The issue is whether an individual’s decision not to purchase health insurance is an activity that substantially effects interstate commerce. The Court has never decided whether inactivity meets the substantial economic effect requirement. Its cases that are closest to on point (all cited by the Michigan court) deal with affirmative acts: growing more wheat than permitted under a New Deal wheat quota, thereby disrupting Congress’s legislative scheme to support wheat prices; growing marijuana for private medical consumption, thereby disrupting Congress’s regulation of marijuana trafficking; and refusing to rent motel accommodations to blacks, thereby raising barriers to the flow of interstate commerce. Virginia, opposing the ACA, argued that “a decision not to purchase a product, such as health insurance, is not an economic activity.” It distinguished–

what was deemed to be “economic activity” in Wickard and Gonzales, namely a voluntary decision to grow wheat or cultivate marijuana, from the involuntary act of purchasing health insurance as required by the Provision. In Wickard and Gonzales, individuals made a conscious decision to grow wheat or cultivate marijuana, and consequently, voluntarily placed themselves within the stream of interstate commerce. Conversely, the Commonwealth maintains that the Minimum Essential Coverage Provision compels an unwilling person to perform an involuntary act and, as a result, submit to Commerce Clause regulation.

The judge agreed. He concluded that Congress’s regulatory powers “are triggered by some type of self-initiated action.” Because there is no federal court precedent that extends Commerce Clause power “to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market” he held that the minimum coverage provision exceeds Congress’s power.

The judge in the Michigan case reached the opposite conclusion on the same issue. (Ain’t law great?!) His opinion cites Congress’s legislative findings regarding the minimum coverage provision:

Congress determined that the Individual Mandate “is an essential part of this larger regulation of economic activity,” and that its absence “would undercut Federal regulation of the health insurance market.” Congress found that without the Individual Mandate, the reforms in the Act, such as the ban on denying coverage based on pre-existing conditions, would increase the existing incentives for individuals to “wait to purchase health insurance until they needed care,” which in turn would shift even greater costs onto third parties. Conversely, Congress found that by “significantly reducing the number of the uninsured, the requirement, together with the other provisions of this Act, will lower health insurance premiums.” Congress concluded that the Individual Mandate “is essential to creating effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold.”

After reviewing the cases noted above the judge concluded that an individual’s decision not to purchase health insurance has a substantial effect on interstate commerce and that the minimum coverage provision is essential to implementing the ACA’s objectives. He states that the “phenomenon of cost-shifting is what makes the health care market unique.”

The health care market is unlike other markets. No one can guarantee his or her health, or ensure that he or she will never participate in the health care market. Indeed, the opposite is nearly always true. The question is how participants in the health care market pay for medical expenses – through insurance, or through an attempt to pay out of pocket with a backstop of uncompensated care funded by third parties.

Here’s the money quote:

The plaintiffs have not opted out of the health care services market because, as living, breathing beings, who do not oppose medical services on religious grounds, they cannot opt out of this market. As inseparable and integral members of the health care services market, plaintiffs have made a choice regarding the method of payment for the services they expect to receive. The government makes the apropos analogy of paying by credit card rather than by check. How participants in the health care services market pay for such services has a documented impact on interstate commerce. Obviously, this market reality forms the rational basis for Congressional action designed to reduce the number of uninsureds.

I agree with the Michigan judge that the economic consequences of an individual’s decision not to purchase health insurance extend beyond the individual and come within existing interpretations of the Commerce Clause. If the Supreme Court reaches the same conclusion I hope it explicitly limits the scope of its ruling to the health care act, because inviting Congress to require us to do whatever it thinks is good for us is scary.