The Constitutionality of “ObamaCare”

by John A. Meyers

National Federation of Independent Business v. Sebelius; and Companion Cases 567 U.S._____(2012), June 28, 2012.

The Supreme Court held on June 28, 2012 that Patient Protection and Affordable Care Act (ACA) is constitutional in part, and unconstitutional in part. Bottom line: There is no immediate practical change in the Patient Protection and Accountable Care Act, as a result of this decision.

The decision itself is more than curious. It’s as if the smartest kid in the class, the Chief Justice who sees himself as an “umpire”, is asked to determine how the rules of volleyball define the front and side boundaries of the court. After deep study, the umpire comes back with many pages explaining why the same boundaries result from applying the rules of badminton rather than volleyball. He informs us that the rules of volleyball and the authority under which the rules are promulgated are really pretty bad. And, he says, the authority that promulgates the rules for badminton better fosters sports because that authority is based on mandatory dues rather than volleyball’s active membership criteria.

The part of the Act that is held constitutional is the requirement that an individual must obtain a minimum defined package of health care benefits from a private insurer or pay a penalty to the Federal government. The Chief Justice says this “mandate” fails under the Commerce Clause because the individual mandated to obtain insurance is not “active” in commerce; that is, he may not be seeking or want insurance at all. Thus, there is no commerce to regulate. Even though the individual will inevitably get sick enough to “actively” seek a doctor or other health care provider—at which time our formerly market inactive patient will probably be unable to pay for his care or insurance and probably try and stick the rest of us with his hospital bills—that activity is apparently too far in the future for the Chief Justice to be active enough to be commerce subject to regulation.

This is not an argument about “liberty” or the right of an individual to refuse coercion by government. All acknowledge that the state government can mandate auto insurance for those not actively driving, but who have a driver’s license and who might drive and all acknowledge that Massachusetts mandates the very same thing with regard to health care insurance. It is an argument related to the structure of our government. Although this point seems to escape further analysis given the perceived horrible that if the Federal government can tell you to buy health insurance when you are not involved in commerce, then the Federal government can mandate the purchase and eating of broccoli.

This line of thinking should remind lawyers of the discredited mining cases where the Court originally ruled that mineworker safety and pensions could not be Federally legislated because until the mined stuff was shipped, it was not yet in commerce. Or the exemption that sometimes implied that legal and medical “professions” were not engaged in commerce for reasons that now seem inexplicable. The power of the Federal government should not be confused with the wisdom of Federal action.

Today, says the Chief Justice, the Commerce Clause is of interest if you are growing marijuana for personal health use under prescription—even apparently if you are not actively inhaling or selling the weed in interstate commerce. But the Commerce Clause is not implicated if you are carrying guns next to schools, prosecuting hate crimes, nor if Congress intends to regulate the 17.6% of the national economy that is the health care industry. Oddly, all agree that health care goods and services, and health insurance, are subject to Federal regulation under the Commerce Clause. But without the mandate, regulation cannot effectively require community rating and prevent insurers from declining coverage on the basis of preexisting conditions. Even Justice Scalia concedes that the mandate is “necessary” to the regulation of insurance; but in the land of reductio ad absurdum, the clause does not “properly” apply, else we all may be forced to eat broccoli.

However, the Chief Justice finds an alternate source of Congressional power to enforce the mandate in the Constitutional grant of the Taxing Power to Congress. Small matter that the “penalty” that you pay if you don’t buy the insurance is not called a “tax” under the ACA. The penalty is collected and paid like your income taxes if you don’t purchase the mandated insurance package. The Chief Justice argues that regardless of what the ACA calls it, the penalty is a tax none-the-less for purposes of the Constitution. Thus, Congress has the power to compel the purchase of the health insurance package or the payment of the penalty—oops, tax.

However, for purposes of the Anti-Injunction Act, the penalty that is not called a tax, is indeed not a tax. If it were a tax, then like other taxes, the tax could only be challenged under the Anti-Injunction Act after the tax is paid and then by suing for refund. But then in that circumstance, this case wouldn’t be before any of us, and none of us would see the shuttlecock.

Indeed, the forced eating of broccoli that so troubled Justice Scalia at oral argument, could apparently be effected, not by mandating the purchase of broccoli, but by taxing all other foods, or perhaps by imposing a broccoli eaters exemption or deduction from a new level of taxation for health care services.

In the second issue of the case, the ACA expands eligibility and benefits under Medicaid (Medi-Cal in California). The ACA expands this health care program for the poor by about $100 billion per year—40% above current levels. The expansion is sustained under the Constitution’s Spending Clause as a valid exercise of Congressional power. However, the States claim that they are being “coerced” to adopt these changes since the Federal government can withhold all Medicaid grants if a State declines to adopt the expansion.

The Chief Justice anthropomorphizes this worry into a “gun to the head” of a State. The Chief is troubled because the Congress might say, “All of a State’s citizens are now eligible for Medicaid,” and the States would be left with an offer they couldn’t refuse because the Federal government would not otherwise fund Medicaid. In addition, that wouldn’t be a change in Medicaid but something altogether different than Medicaid—just because it’s big. The Chief thinks the nature of such a threat to our Federal system is grave. The solution that saves our system, according to the Chief Justice, requires invalidating the power of Congress to defund a program that it created and is reforming, if the state refuses to adopt this reform and the expansion. Under the Chief Justice’s reasoning, a state will be able to turn down Federal funding for an expanded program for the poor, without fear that a State will lose the Federal share of somewhere between 50-83% of the costs of covering a substantially lesser number of individuals under the current less beneficent program.

However, the Medicaid expansion under the ACA is 100% Federally funded until 2016. Federal funding then gradually decreases to 90% by 2020. It is ironic that this funded mandate responds to “unfunded” mandate complaints that states previously bemoaned as a threat to solvency as well as sovereignty. No one would contend that the compensation, stock options, and executive benefit health plans constitute a “gun pointed to the head” of a CEO that coerces her to labor thanklessly. Yet a State is deemed coerced when it is offered money to pay for the health care of less fortunate citizens that will be withdrawn if it does not accept even more money for more benefits for more of its less fortunate citizens. The only reason that a State would deny extending a program so richly funded by the Federal government to its such impacted citizens must be ideological. The Chief Justice harkens to a theory of central government like the European Union; when he says of these “united” States, that the “States are separate and independent sovereigns. Sometimes they have to act like it….” and refuse Federal “blandishments”—particularly blandishments that lavish health care on our poorest citizens by Federal “coercion” of state governments. Better to leave these blandishments to local hospitals operating under unfunded mandates and to the harried physicians whose accounts receivable will not threaten state sovereignty.