On June 28, 2012, the Supreme Court published its decision in the case of National Federation of Independent Business, et al v Sebelius, Secretary of Health and Human Services, et al in which the plaintiffs challenged the constitutionality of the 2010 Patient Protection and Affordable Care Act (“ACA”). After oral arguments at the end of March, many people (including yours truly) speculated that it seemed likely that the “individual mandate” or even the Act in its entirety might be struck down. Thus, those of us who supported the ACA breathed a sigh of relief when we learned that the Court upheld the individual mandate and the majority of the Act.
This was basically a 5-4 ruling with the Chief Justice casting the deciding vote, joining the four liberal Justices (Ginsburg, Sotomayor, Kagan and Breyer) who were presumed to support the ACA’s constitutionality. JJ Scalia, Alito, Thomas and Kennedy dissented: if it were up to them, they would have invalidated the entire Act.
What follows is a summary of what the opinion actually says.
Wickard v Filburn
All of the Justices who wrote opinions in this case (leaving aside Thomas’ brief dissenting opinion) began by treating the reader to their own lesson on the history of Supreme Court jurisprudence on the commerce clause (viz. the power granted to Congress under Article I, section 8 of the Constitution to regulate interstate commerce). I attempted my only little synopsis in my previous post on this case, but one key decision I failed to mention-- referenced several times by the Justices in Sebelius-- is Wickard v Filburn (1942), sometimes called the “homegrown wheat case.”
The facts of the case involved a wheat farmer named Filburn who participated in the system set up under the Agricultural Adjustment Act under which farmers could grow only a set amount of their crop, and, in return, they would receive government subsidies (under the 1938 law participation was effectively mandatory). Filburn grew wheat in excess of his quota, but rather than selling the extra wheat he fed it to his livestock. When he was fined for exceeding his quota, Filburn brought suit claiming that Congress’ power to regulate interstate commerce did not extend to his cultivating wheat on his farm and feeding it to animals located on the same farm. The Supreme Court disagreed: if Filburn hadn’t grown the extra wheat he would have needed to buy it on the market (or, more likely, sell less of the wheat he grew himself). If every farmer in Filburn’s position decided to grow some wheat on the side to feed his livestock this would have a serious impact on the system regulating supply and demand which Congress put in place in order to control the price of agricultural commodities.
As Chief Justice Roberts points out-- citing US v Lopez-- Filburn represents “perhaps the most far reaching example of Commerce Clause authority over intrastate activity.”
Chief Justice Roberts’ Opinion
The Chief Justice drafted what is in effect the Court’s ruling. One should note, however, that JJ Ginsburg, Sotomayor, Kagan and Breyer joined in only part of Roberts’ opinion.
The Individual Mandate and the Commerce Clause
In regards to the ACA’s individual mandate (requiring all citizens not exempt to purchase and maintain an active health insurance policy), the Chief Justice states that this is not supported by Congress’ power to regulate interstate commerce. Roberts repeats the assertion made by the challengers’ attorney during oral arguments that, by constraining previously uninsured citizens to purchase insurance policies, Congress is not regulating commerce but rather creating new commerce by forcing people into the marketplace. Roberts draws a distinction between economic activity and “inactivity” and argues that an individual who does not buy an insurance policy is passive. He also claims that the Constitutions’ Framers understood this distinction between regulating something already in existence and creating something new, pointing to other clauses in section 8 which use words such as “establish,” “constitute,” “raise and support,” and “provide and maintain.”
If-- the Chief Justice argues-- Congress is allowed to regulate inactivity, this would open up a whole host of new areas to federal legislation. In response to the argument that all citizens are active participants in the healthcare market given that we are going to find ourselves in the hospital or the doctor’s office sooner or later (moreover we’re not sure when this will be and medical emergencies occur unexpectedly), Roberts counters that someone who purchased a car two years ago and will one day buy another car would not be called an active participant in the automobile market.
The Individual Mandate and Taxation Power
The Chief Justice then goes on to state that the individual mandate is supported by Congress’ Article I power “to lay and collect taxes.” Although the most straightforward way of looking at the provision is that it imposes a mandate on citizens and hits those who fail to comply with a penalty or fine (the Act calls it a “shared responsibility payment”), another reasonable interpretation is that the Act imposes an additional tax on individuals which can be avoided if they acquire health insurance. One factor supporting this interpretation is the fact that the Act provides that the penalty be collected by the IRS in the same manner as other taxes.
Roberts’ states that the Court should treat acts duly passed by the elected branches of government with deference, and, whenever there exists a reasonable interpretation of the law which would support its constitutionality, the Court is obligated to adopt said interpretation and uphold the law.
Another provision of the ACA-- arguably just as important as the individual mandate although it received much less attention-- would greatly expand Medicaid. Medicaid is the government program which provides health insurance benefits to low-income single parents and families with children. Although it was created by an Act of Congress, the law delegates implementation and management of the system to the individual States while providing them with federal dollars to help fund the program.
Under the ACA, the roll of individuals eligible for Medicaid benefits would swell to include members of all households whose income puts them at or below 133% of the Federal Poverty Level. This would, for the first time, make childless adults eligible for Medicaid (under the 2012 guidelines 133% of the Federal Poverty Level amounts to $14,856 for a one person household). Basically, under the ACA anyone who is exempt from purchasing health insurance due to low earnings would be covered by Medicaid.
State participation in the expanded Medicaid program is voluntary. In order entice States to sign up, the federal government will initially fund 100% of the new costs; funding will then be incrementally decreased, down to 90% in 2019. As for States who decide not to sign on, the Act threatens to withdraw all Medicaid funding including that which the State would otherwise receive under the current system.
Spending Power and State Coercion
Implicit in Congress’ power to levy taxes and duties is its power to spend the money it thereby collects. With very few restrictions, Congress can basically choose to spend the money in the US treasury anyway it chooses. This includes the power to use the promise of federal dollars to influence the behavior of citizens and even the actions of the individual States. Thus, in South Dakota v Dole (1987), the Supreme Court upheld an Act of Congress that would withhold 5% of federal highway funding from States that did not raise the minimum drinking age to 21.
On the other hand, Congress is not allowed to coerce the individual States into acting according to its wishes. Thus, in Printz v. United States (1997), the Court struck down a provision of the Brady Act which required State law enforcement officers to carry out background checks on would-be handgun purchasers-- ruling that this amounted to the federal government commandeering State officials. This was disallowed due to the fact that it infringed on the State sovereignty preserved under our federal system and also because it might confuse citizens as to which government is ultimately responsible for the actions being taken.
Several States brought suit against the US government claiming that the ACA’s Medicaid provision coerces States into signing on to the expanded program. Chief Justice Roberts agreed, and 7 of the 9 justices essentially concurred with this part of his opinion. Federal Medicaid funding typically comprised 10% of a State’s budget (in his dissenting opinion, Scalia notes that “Arizona… commits 12% of its State expenditures to Medicaid, and relies on the Federal Government to provide the rest: $5.6 billion, equaling roughly one-third of Arizona’s annual State expenditures of $17 billion”). Thus State governments have grown reliant on this support, and threatening to withdraw federal Medicaid funds entirely unless a State agrees to join the new system does not afford them a true choice. Roberts claims that it is tantamount to holding a gun to their head.
The Supreme Court ruling thus struck down the ACA provision allowing the federal government to withdraw Medicaid funding from States that do not agree to the Act’s expanded coverage as unconstitutionally coercive. This leaves Congress free to withhold additional funding to States but not to reduce funding under the preexisting program. Arguably, this ruling by Chief Justice Roberts required some judicial rewriting of the Act’s Medicare provision.
Justice Ginsburg’s Opinion
Justice Ginsburg wrote a concurring opinion in Sebelius, joining in part in the Chief Justice’s opinion and in the ruling and dissenting in part. In essence, Ginsburg agrees with Roberts’ reasoning that the individual mandate is supported by Congress’ tax power and his decision to uphold the mandate and the majority of the ACA. However, Ginsburg also believes that the individual mandate is allowable under Congress’ power to regulate commerce, and she disagrees with the decision to invalidate the part of the Act regarding Medicaid funding. Justice Sotomayor joins in the entirety of Ginsburg’s opinion and JJ Breyer and Kagan join with regards to the individual mandate and the commerce clause while agreeing with the Chief Justice when it comes to the Medicaid funding provision.
The Individual Mandate and the Commerce Clause
First off, Ginsburg questions why the Chief Justice addressed the question of whether the commerce clause provided a constitutional basis to support the individual mandate at all given that he went on to uphold the provision on other grounds. In other words, that whole section of Roberts’ opinion is obiter dictum. Ginsburg states that, up until now, the test for whether a law fell within Congress’ commerce clause power was whether the activity being regulated had a substantial impact on interstate commerce. Moreover, the two recent cases where the Court found that Congress exceeded its power both dealt with fields which were traditionally left open to state regulation (criminal law and perhaps education). Justice Ginsburg accuses Roberts of departing from Court precedent and introducing a new criterion with his distinction between “activity” and “inactivity.” She also argues that this distinction is not as straightforward as it might seem and that it is somewhat subjective allowing the same set of facts to be construed as either activity or inactivity. It can be said of uninsured individuals that they are refraining from entering the insurance market and thus remaining inactive, but one can also characterize their behavior as an “active” decision to self-insure. Ginzburg argues that even Filburn’s actions (growing wheat to feed to his livestock) could be seen as economic inactivity (abstaining from the purchase of wheat on the open market). In short, Ginsburg and the liberal justices reject Roberts’ activity/inactivity distinction and believe that the individual mandate is supported by the commerce clause given that the problem of uninsured individuals has a substantial impact on the healthcare market.
Necessary & Proper Clause
J Ginsburg also argues that the individual mandate should find support under the “necessary and proper clause” of Article I, section 8 (“Congress shall have Power - To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers”). Given that the remainder of the ACA is allowed under the commerce clause and that the individual mandate is necessary in order to enact the comprehensive system envisioned by Congress, it too should be allowed. Since the Constitution’s formulation, jurists have debated whether this clause adds anything to Congress’ other enumerated powers; I found this to be the least persuasive section of Ginsburg’s opinion
The “Broccoli Horrible”
In the most amusing part of her opinion, J Ginsburg also addresses the claim made during oral arguments that, if Congress could force citizens to buy insurance policies in order to reduce healthcare costs, then what is to stop Congress passing a law requiring everyone to buy broccoli. Ginsburg dubs this nightmare scenario the “broccoli horrible.” She rightly points out how the connection between buying broccoli and the healthcare market is much more tenuous than that between uninsured individuals and the price of healthcare and thus how stupid and unlikely such a law would be (indeed I failed to mention it in my prior post, preferring to cite Scalia’s less ridiculous claim that Congress could require individuals to purchase gym memberships). In order for the broccoli law to have its desired effect people would have to eat their broccoli rather than giving or throwing it away, moreover they would have to prepare it in a healthy way (e.g. steamed rather than deep fried). And of course the health benefits of eating broccoli would be negligible if they were not accompanied by an otherwise healthy diet and exercise routine.
Ginsburg attacks the validity of this type of rhetorical device (which I want to refer to as “if you tolerate this then your children will be next”), pointing out that Congress already inarguably has the power to pass all sorts of outrageous laws. It could, for instance, outlaw the sale of meat and livestock thus effectively forcing Americans to all become vegetarians. Furthermore, the individual States-- which do have plenary power to pass mandates-- have chosen to use this power sparingly, no doubt reasoning that voters do not like laws requiring them to do things against their will.
As for the ACA’s provision allowing Congress to withdraw all Medicaid funds to States that do not voluntarily agree to the program’s expansion, J Ginsburg likens this case to Dole (where Congress made continued receipt of federal funding conditional on State action) rather than Printz (where Congress commandeered State personnel), and she states that the Court has never found an exercise of Congress’ spending power to constitute coercion. She also points out that-- without question-- Congress could repeal Medicaid and then pass a new law (“Medicaid II”) with the same expanded coverage and conditional funding outlined in the ACA. Thus, it is unclear why Congress cannot accomplish the same outcome here.
Justice Scalia’s Opinion
Justice Scalia filed a dissenting opinion, joined by JJ Alito, Thomas and Kennedy. The dissenting Justices agree with Roberts that the ACA’s individual mandate is not supported by Congress’ commerce clause power and also that the Medicaid provision amounts to unconstitutional coercion. However they dissent in regards to the majority’s ruling that the individual mandate falls under Congress’ taxation power and Roberts’ opinion that the Court should interpret the mandate’s penalty as a tax in order to avoid invalidating the Act of Congress. Moreover, Scalia and the other dissenting Justices believe that the ACA could not stand without the individual mandate and the Medicaid provision and thus they disagree with the Court’s judgment upholding the Act.
In his opinion, Justice Scalia outlines the interdependent system of shared responsibilities devised under the Act. Businesses with 50 or more employees must offer full-time employees adequate health insurance benefits or else pay a $2,000 penalty per employee. All non-exempt individuals must procure health insurance, either through their employer or through an exchange set up for the sale and purchase of individual policies-- or else pay an annual penalty. Health insurance companies are prohibited from denying individuals coverage due to preexisting conditions or placing a cap on benefits. Nor can they charge individuals seeking coverage higher premiums based on the current state of their health because the price of policies purchased through the exchanges will be based on a “community rating.” Individuals who are deemed to earn too little to be required to purchase health insurance (at or below 133% of the Federal Poverty Level) should be covered by the expanded Medicaid program. The Federal government will fund the expanded Medicaid coverage-- first at 100% then down to 90% by 2019; it was also subsidize the health insurance exchanges. On the other hand, Congress will reduce the support it pays to State hospitals (which, in theory, should now encounter almost no patients without health insurance coverage). Health insurers, pharmaceutical and medical device companies will also pay more in taxes (but they will presumably benefit from the influx of newly insured individuals). Individual States will eventually have to bear some of the expense stemming from expanded Medicaid coverage, but they too ought to benefit from reduced cost of healthcare services and insurance premiums and less uncollectable debts for State hospitals.
The dissent argues that if a piece of this interconnected web were removed the whole program would become untenable. Thus, J Scalia maintains that one could not sever the individual mandate and the Medicaid provision and uphold the remainder of the Act.
Scalia also makes clear the level of uncertainty inherent in the system: Congress calculates that under the ACA the price of healthcare services and health insurance should fall (or at least be contained) and that, in the long run, the US government (i.e. taxpayers) will save money compared with the current system-- in which Medicaid and Medicare funding, together with Social Security, consume one of the largest chunks of the federal budget. But it’s not hard to imagine things might turn out differently: a miscalculation or unexpected problem with one cog in the machine might throw the whole delicate balance off kilter, thus resulting in higher costs for individuals, unexpected hardships for businesses, an unprofitable market for health insurers, a substantial burden on State budgets, and-- most likely of all-- higher expenditure for the US government which is essentially guaranteeing and subsidizing the entire system.
In his discussion of the Medicaid provision, J Scalia notes that despite Ginsburg’s characterization of the expansion as an exceedingly generous gift to the States, 26 of the 50 States have brought suit challenging the ACA. In addition to the fact that by 2019 participating States will be paying 10% of the cost of expanded coverage, he points to other hidden costs (by 2015 the States will have to pay 50% of the program’s administrative expenses) as well as the real possibility that Congress might decide to further cut federal funding in the future. On the other hand-- and this goes to the question of whether States will voluntarily participate in the program now that the gun has been removed from their head-- Scalia notes that citizens of States who opt out will be paying increased federal taxes in order to subsidize/fund the expanded Medicaid program implemented in other States. The Court would not label this coercion, but it would seem to provide a strong incentive for States to sign up (and Scalia notes that Congress was more or less counting on 100% state participation). Nevertheless, I can imagine obstinate State governors and States legislatures controlled by tea party conservatives rejecting the Act’s “generous gift”-- even though this means their citizens would share in the cost without enjoying the benefits-- if only to spite the President and Congressional Democrats or to make a showing to their constituents of refusing big government money from Washington.
Photo of 5th Cir Ct App in New Orleans, Louisiana taken by Meeg on April 13, 2012