Wow, very interesting news out of the Eleventh Circuit today, which, in a 2-1 decision, struck down Obamacare’s health insurance mandate while leaving the rest of the statute intact. This affirmed and reversed in part the decision of Judge Vinson of the federal district court, which had held that mandate unconstitutional and struck down the entire statute as nonseverable.
The court’s opinion is 304 pages long. Yep, you read that right. There’s so much there that it’s going to take a few posts to get through it all. But it’s very interesting and I wanted to just get up some initial thoughts quickly.
1. Not a Tax.
The court declined to allow the federal government to use its taxing power as the constitutional authority for the mandate. Citing that fact that the United States Supreme Court had declined to equate a penalty with a tax, and the fact that, both in the statute itself and the legislative history of the statute, the consequences for failing to comply with the mandate were referred to as penalties, the court essentially said to the government: ”You chose your horse at the starting gate, ride it all the way to the end of the race.”
2. Differentiating Wickard v. Filburn
All of these Obamacare cases are going to have to deal in some way with the Supreme Court precedent of Wickard v. Filburn, in which the Supreme Court upheld Congress’ authority, under the Commerce Clause, to regulate wheat production intended solely for personal use. Here’s how the Eleventh Circuit’s majority opinion dealt with that case:
Wickard is striking not for its similarity to our present case, but in how different it is. Although Wickard represents the zenith of Congress’s powers under the Commerce Clause, the wheat regulation therein is remarkably less intrusive than the individual mandate.
Despite the fact that Filburn was a commercial farmer and thus far more amenable to Congress’s commerce power than an ordinary citizen, the legislative act did not require him to purchase more wheat. Instead, Filburn had any number of other options open to him. He could have decided to make do with the amount of wheat he was allowed to grow. He could have redirected his efforts to agricultural endeavors that required less wheat. He could have even ceased part of his farming operations. The wheat-acreage regulation imposed by Congress, even though it lies at the outer bounds of the commerce power, was a limitation—not a mandate—and left Filburn with a choice. The Act’s economic mandate to purchase insurance, on the contrary, leaves no choice and is more far-reaching.
Ultimately, the majority concluded that Wickard was only applicable in cases where the regulation itself was commercial in character. And the majority didn’t believe that a decision not to enter a commercial market could be deemed commercial in character without opening the whole field of human activity to congressional regulation:
The question before us is whether Congress may regulate individuals outside the stream of commerce, on the theory that those “economic and financial decisions” to avoid commerce themselves substantially affect interstate commerce. Applying aggregation principles to an individual’s decision not to purchase a product would expand the substantial effects doctrine to one of unlimited scope. . . . From a doctrinal standpoint, we see no way to cabin the government’s theory only to decisions not to purchase health insurance. If an individual’s mere decision not to purchase insurance were subject to Wickard’s aggregation principle, we are unable to conceive of any product whose purchase Congress could not mandate under this line of argument. Although any decision not to purchase a good or service entails commercial consequences, this does not warrant the facile conclusion that Congress may therefore regulate these decisions pursuant to the Commerce Clause.
Thus, even assuming that decisions not to buy insurance substantially affect interstate commerce, that fact alone hardly renders them a suitable subject for regulation. Instead, what matters is the regulated subject matter’s connection to interstate commerce. That nexus is lacking here. It is immaterial whether we perceive Congress to be regulating inactivity or a financial decision to forego insurance. Under any framing, the regulated conduct is defined by the absence of both commerce or even the “the production, distribution, and consumption of commodities”—the broad definition of economics in Raich. To connect this conduct to interstate commerce would require a “but-for causal chain” that the Supreme Court has rejected, as it would allow Congress to regulate anything.
3. Overinclusiveness Analysis in Commerce Clause Cases
One of the more odd things about the majority opinion — at least in my humble opinion — is its use of an overinclusiveness argument to support its decision. Over/underinclusiveness is a consideration in individual rights cases, but, in my opinion, has no role to play when it comes to evaluating a Congressional action under the Commerce Clause. The over/underinclusiveness analysis is designed to get at the sincerity of a legislature’s expressed motivations. For example, if a legislature regulates more broadly (or narrowly) than necessary to solve a particular problem, one might infer that it may be dislike for a certain group, rather than a desire to solve the stated problem, that motivates the legislature action. Here’s how the majority employed the overinclusiveness analysis:
The individual mandate’s attempt to reduce the number of the uninsured and correct the cost-shifting problem is woefully overinclusive. The language of the mandate is not tied to those who do not pay for a portion of their health care (i.e., the cost-shifters). It is not even tied to those who consume health care. Rather, the language of the mandate is unlimited, and covers even those who do not enter the health care market at all. Although overinclusiveness may not be fatal for constitutional purposes, the Supreme Court has indicated that it is a factor to be added to the constitutional equation.
The majority cites to Supreme Court decisions — especially relying on United States v. Lopez — in which the Court suggested that use of language designed to make the law only applicable in clearly interstate, economic cases would ensure constitutionality. But I don’t believe that the language from Lopez, or any other case, imposes any requirement, under the Commerce Clause, that a statute be “tailored” such that it eliminates over and underinclusiveness — though, to be fair, it’s been a while since I’ve read these cases. Still, I wouldn’t even go so far to say, as the majority suggests, that overinclusiveness is even a factor that should be considered when determining whether a Congressional action is authorized by Article I. The Article I inquiry is supposed to be rational basis review, and, at this point in the majority’s opinion, it starts to look very much like the majority is subjecting Obamacare to strict scrutiny.
The dissent went further than I’m willing to go here, and (though a bit timidly) hinted at its opinion that the majority, at the request of the plaintiffs, had actually covertly converted this case into a liberty/economic substantive due process case reminiscent of decision like those prevelant during the Supreme Court’s so-called “Lochner” era:
At the trial court, the plaintiffs squarely raised a Fifth Amendment substantive due process challenge to the individual mandate, which the district court flatly rejected. And while the plaintiffs also challenged the individual mandate on Tenth Amendment grounds, the district court addressed this challenge only implicitly in ruling that the mandate exceeded Congress’ commerce power.
On appeal, the plaintiffs have expressly disclaimed any substantive due process challenge to the individual mandate, although they appear still to advance a Tenth Amendment challenge. Nevertheless, it is clear that individual liberty concerns lurk just beneath the surface, inflecting the plaintiffs’ argument throughout, although largely dressed up in Commerce Clause and Necessary and Proper Clause terms. For example, the state plaintiffs go so far as to say that the individual mandate is “one of the Act’s principal threats to individual liberty,” and that upholding it would “sound the death knell for our constitutional structure and individual liberties.” Similarly, the private plaintiffs claim that the individual mandate “exemplifies the threat to individual liberty when Congress exceeds its enumerated powers and attempts to wield a plenary police power.” Sounding almost entirely in economic substantive due process, the private plaintiffs also assert that “[a]mong the most longstanding and fundamental rights of Americans is their freedom from being forced to give their property to, or contract with, other private parties.”
“The substantive component [of the Due Process Clause] protects fundamental rights that are so implicit in the concept of ordered liberty that neither liberty nor justice would exist if they were sacrificed.” This narrow band of fundamental rights is largely protected from governmental action, regardless of the procedures employed. And any law, whether federal or state, that infringes upon these rights will undergo strict scrutiny review, which means that the law must be “narrowly tailored to serve a compelling state interest.” Today, substantive due process protects only a small class of fundamental rights, including “the rights to marry, to have children, to direct the education and upbringing of one’s children, to marital privacy, to use contraception, to bodily integrity, and to abortion” — a list the Supreme Court has been “very reluctant to expand.”
In a bygone period known as “the Lochner era,” however, substantive due process was more broadly interpreted as also encompassing and protecting the right, liberty, or freedom of contract. Through this interpretation of the Due Process Clause, the Supreme Court struck down many federal and state laws that sought to regulate business and industrial conditions.
However, the Supreme Court has long since abandoned the sweeping protection of economic rights through substantive due process. Today, economic regulations are presumed constitutional, and are subject only to rational basis review.
. . .
Here, Congress rationally found that the individual mandate would address the powerful economic problems associated with cost shifting from the uninsured to the insured and to health care providers, and with the inability of millions of uninsured individuals to obtain health insurance. Thus, to the extent the plaintiffs’ individual liberty concerns are rooted in the Fifth Amendment’s Due Process Clause, they must fail.
4. Cost-Shifting, Health Care Needs, and Point of Consumption Regulation
One of the federal government’s primary arguments for the constitutionality of Obamacare was that health care is unique among services, given that (virtually) everyone needs access to health care at some point in their life. Because of this uniqueness, goes the argument, you can be certain that an individual’s decision to remain uninsured will, over the course of time, have commercial consequences. In other words, it is rational to assume that, at some point, every person will enter the market for health care, even if it’s not rational to assume that about other goods or services. The majority responded to this argument by claiming, essentially, that it puts the cart before the horse — if and when an uninsured individual needs care, and therefore enters the health care market, the law could regulate them at that point, but not before. From the majority opinion:
But the individual mandate does not regulate behavior at the point of consumption. Indeed, the language of the individual mandate does not truly regulate “how and when health care is paid for.” It does not even require those who consume health care to pay for it with insurance when doing so. Instead, the language of the individual mandate in fact regulates a related, but different, subject matter: “when health insurance is purchased.” If an individual’s participation in the health care market is uncertain, their participation in the insurance market is even more so.
In sum, the individual mandate is breathtaking in its expansive scope. It regulates those who have not entered the health care market at all. It regulates those who have entered the health care market, but have not entered the insurance market (and have no intention of doing so). It is overinclusive in when it regulates: it conflates those who presently consume health care with those who will not consume health care for many years into the future. The government’s position amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life. This theory affords no limiting principles in which to confine Congress’s enumerated power. (emphasis added)
The language emphasized in the quotation above really constitutes what I view as the core of the majority’s opinion, and its quite a strong one. But the dissent responded quite forcefully to it, in a vein that reminded me a bit of Judge Sutton’s concurrence to the Sixth Circuit’s recent opinion upholding Obamacare:
The plaintiffs and the majority would view the uninsured in a freeze-framed still, captured, like a photograph, in a single moment in time. They contend that Congress cannot constitutionally regulate the uninsured as a class at that single moment, because at that moment any particular uninsured individual may be healthy, may be sitting in his living room, or may be doing nothing at all. The only way the plaintiffs and the majority can round even the first base of their argument against the mandate is by excluding from Congress’ purview, for no principled reason that I can discern, the cost-shifting problems that arise in the health care services market.
This blinkered approach cannot readily be squared with the well-settled principle that, in reviewing whether Congress has acted within its enumerated powers, courts must look at the nature of the problem Congress sought to address, based on economic and practical realities.
When the individual mandate is viewed through a more pragmatic and less stilted lens, it is clear that Congress has addressed a substantial economic problem: the uninsured get sick or injured, seek health care services they cannot afford, and shift these unpaid costs onto others.
. . .
Thus, all of the parties agree that, at the time of health care consumption, Congress may lawfully cut across a distinct market and impose a financial penalty designed to compel the uninsured to obtain health insurance. And Congress may do so even where the uninsured would otherwise voluntarily choose to finance the consumption of health care services out of pocket, without buying insurance.
If the plaintiffs had argued that Congress cannot constitutionally force anyone to buy health insurance at any time as a means of paying for health care, they at least would have evinced the virtue of consistency. But instead, the plaintiffs’ concession undermines their claim that Congress has exceeded its rule- making power by regulating in one industry to address a problem found in another, at least where the two industries are so closely bound together. After all, even at the point of consuming health care services, individuals may wish to remain “inactive” in the health insurance market. But the plaintiffs and the majority concede that Congress may nevertheless compel individuals at that point to purchase a private insurance product.
. . .
The plaintiffs and the majority would have Congress wait at the water’s edge until the uninsured literally enter the emergency room. In other words, they say, Congress may not legislate prophylactically, but instead must wait until the cost-shifting problem has boiled over, causing huge increases in costs for those who have health care insurance (through increased premiums), and for those who provide health care services.
At bottom, the plaintiffs’ argument seems to boil down only to a temporal question: can Congress, under the Commerce Clause, regulate how and when health care services are paid for by requiring individuals — virtually all of whom will consume health care services and most of whom have done so already — to pay now for those services through the mechanism of health insurance? As I see it, the answer to whether Congress can make this temporal jump under its Commerce Clause power is yes.
There is no doctrinal basis for requiring Congress to wait until the cost- shifting problem materializes for each uninsured person before it may regulate the uninsured as a class. The majority’s imposition of a strict temporal requirement that congressional regulation only apply to individuals who first engage in specific market transactions in the health care services market is at war with the idea that Congress may adopt “reasonable preventive measures” to avoid future disruptions of interstate commerce.
. . .
What’s more, and even more basic, here the disruption of interstate commerce is already occurring. The majority inexplicably claims that the individual mandate regulates “the mere possibility of future activity,” but as we speak, the uninsured are consuming health care services in large numbers and shifting costs onto others. By ignoring the close relationship between the health insurance and health care services markets, the plaintiffs and the majority seek to avoid the hard fact that the uninsured as a class are actively consuming substantial quantities of health care services now — not just next week, next month, or next year.
. . .
I am unable to draw a relevant constitutional distinction between the virtual inevitability of health care consumption and the absolute, 100% inevitability of health care consumption. There is less of a chance that an individual will go through his entire life without ever consuming health care services than there is that he will win the Irish Sweepstakes at the very moment he is struck by lightning.
This was, to me, the oddest part of the Court’s opinion. As I’ve stated before, there are good arguments on both sides of the Commerce Clause issue. But I never thought there was really much of a question that if the individual mandate was struck down the other key components of Obamacare would fall as well.
The majority hedged on this a bit, and seemed clearly uncomfortable with its decision, but ultimately upheld all the other pieces of Obamacare, including the provisions prohibiting denial of coverage for pre-existing conditions on the ground that it was not “evident” to them that those that provision would not have been enacted without the mandate.
I don’t know what else to say about this then I think it’s quite clearly wrong. And I’m not sure that the survival of Obamacare’s other provisions makes anyone happy. But in the event the Supreme Court strikes down the individual mandate, it will probably decline to sever the other key provisions. And, even if it goes the route of the Eleventh Circuit, Congress will act quickly to repeal the remaining inconsistent provisions. So, not much harm done, really.
I’ll have more to come on this decision in the future, but, for now, this has gone on long enough.