March 16, 2012

Obamacare’s main event: the constitutionality of the Individual Mandate

By Obamacare’s main event: the constitutionality of the Individual Mandate

The primary argument in the Obamacare cases is about the Individual Mandate: does Congress have the constitutional authority to force you to buy health insurance? The Administration points to the Commerce Clause, which allows Congress to “regulate commerce…among the several states.” Is the Mandate a regulation of commerce?

The Administration’s first argument is that the Mandate is a regulation because it is part of a comprehensive overhaul of the nation’s insurance industry. So long as the Mandate is “an integral part of the regulatory program and…the regulatory scheme when considered as a whole is within the commerce power,” it’s constitutional under existing Commerce Clause precedents. Of course, we well know that existing precedents have expanded the Commerce power so broadly that most cases do support the Administration’s position. But, the plaintiffs argue, no previous case has involved forcing people to do something they didn’t voluntarily do. Instead, those cases involved regulations that told people how to do something they chose to do. That difference is important, and it’s rooted in the Constitution’s language: the word “commerce” means commercial traffic—it doesn’t refer to inactivity, or the failure to buy something—and the word “regulate” does not mean “compelling”; it means “prescribing rules for carrying it on.”

So far, the plaintiffs have a pretty strong case. But things get more complicated when we move to the Necessary And Proper Clause, which allows Congress to pass laws that are necessary and proper for effectuating its other powers. Of course, there’s remarkably little precedent on what “necessary and proper” means. The most famous is M’Culloch v. Maryland, the 1819 case upholding the constitutionality of the National Bank. But in 2010, the Supreme Court also decided the Comstock case, upholding a federal law dealing with prisoners, and provided some further discussion over what “necessary and proper” means.

So is the Mandate necessary and proper for regulating commerce? The plaintiffs argue, first, that Congress may regulate conduct that isn’t itself commerce only when that conduct “functions as a barrier or stimulant that interferes with Congress’ preferred conditions in, or regulation of, interstate commerce”—it can’t control conduct that isn’t commerce simply on the grounds that that regulation might foster interstate commerce. In other words, the federal government only has power over acts or omissions that have effects on the economic world—it cannot implement a rule by arguing that the rule, when implemented, will itself have economic consequences.

Non-economic activity is just outside Congress’ reach. It doesn’t have a commercial character. Allowing Congress power over “noneconomic activities that lack any commercial character whatsoever” simply because they have some effect on commerce in the long run “would eviscerate all textual limits in the Commerce Clause.” To hold that Congress can compel such behavior because not buying insurance has an effect on the economy “simply shows that the legislation beneficially affects commerce,” and that theory would mean that “Congress could mandate any product’s purchase, because refusals to purchase will always affect the product’s seller.” The bottom line question is, if Congress can mandate this, what can it not mandate?

In response to these arguments, the Administration argues that the Mandate does not really compel behavior at all—it simply requires that a person pay up front for the health care that he or she will eventually seek.The health care market is just different from other markets. “Congress had far more than a rational basis for concluding that the practices of ‘forego[ing] health insurance’ and ‘attempt[ing] to self-insure’ has a substantial and deleterious effect on interstate commerce.” Insurance is the most common method of payment in the market for health care services, and “[t]hat market, unlike others with essentially universal participation (like the markets for food and housing), involves needs that cannot reasonably be anticipated or budgeted for.” And since the health care market differs from other kinds of markets, we need not fear that upholding the Mandate will set a dangerous precedent in the future.

The plaintiffs answer that this is just a “factual distinction[]” that “provide[s] no principled constitutional basis for limiting a federal mandatory-purchase power to the health-insurance context.” And despite the Administration’s claims, the Mandate is not simply designed to ensure that people pay for their health care before obtaining it, because the Mandate doesn’t apply to precisely those people most likely to seek care without payment—the poor and illegal immigrants. They’re exempt from the Mandate. And the people who are subject to the Mandate are “mostly not responsible for any uncompensated care.” Instead, “[h]aving compelled insurers to contract at any time with less-healthy people at below-cost premiums, Congress preemptively compelled more-healthy people to contract with insurers at above-cost premiums, thereby offsetting the various costs of its ‘nondiscrimination’ policy.” Thus the Mandate is not “necessary” as far as the Necessary and Proper Clause is concerned.

Nor, they conclude, is it “proper.” Although in M’Culloch the Court upheld the bank “because a corporation was a ‘usual’ ‘means for carrying into execution the great powers vested in government,’” and in Comstock upheld a law that “was ‘a modest addition’ to, and a ‘reasonabl[e] exten[sion]’ of, [a] ‘longstanding…system,’” the Individual Mandate is far from being ‘ordinary,’ ‘usual,’ ‘common,’ ‘modest,’ or otherwise ‘incidental or implied.’” Instead, it’s an “awesome” expansion of federal power.”

The Administration counters this by arguing that insurance is “the ‘ordinary’ means of paying for health care, and insurance requirements are an ‘ordinary’ means of market regulation” in cases where a person’s lack of insurance imposes costs on another person. Massachusetts, for example, adopted an individual mandate for these reasons, and typically the requirement that drivers obtain car insurance is imposed because people driving without insurance impose costs on their fellow drivers when they get in car accidents. Of course, that doesn’t quite answer the plaintiffs’ point, since they are not arguing that insurance requirements are un-ordinary—they argue that federal insurance mandates aren’t ordinary. But in 1819, federal-run banks were a relative novelty, too.

But the Administration also has another argument for upholding the Individual Mandate—the power to “lay and collect taxes.” We’ll look at that next.

Bottom line: does Congress have power under the Commerce and/or Necessary and Proper Clauses to require people to buy insurance, on the theory that failure to do so has significant effects on the national economy?

Arguments set for: Tuesday, March 27

What to listen for:

Will the Court be interested in the “activity/inactivity distinction” that other courts have largely rejected?

What exactly is a mandate? If the Court strikes down this Mandate, will other lawsuits be filed where the courts will have to decide that some things are mandates and unconstitutional while other things are regulations and therefore okay?

What effect will Justice Scalia’s separate opinion in Raich v. Gonzales have?

What principled limit on federal power will the Administration offer the justices? Or will it rest on the theory that the health care market is “just different”?

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