JURIST Guest Columnist Sallie Sanford of the University of Washington School of Law says that although challenges to the constitutionality of the Patient Protection and Affordable Care Act are valuable for inspiring dialogue within and outside the legal community, they are unlikely to succeed in the face of decades of Supreme Court case law....
If a court does reach the merits in these lawsuits, it will almost certainly uphold the constitutionality of the Patient Protection and Affordable Care Act. Under existing case law, Congress has appropriate authority under either its power to regulate interstate commerce or its power to tax and spend for the general welfare. To find otherwise would require a significant shift in Constitutional jurisprudence.
The Individual Mandate
The primary challenge in each of the lawsuits is to the "individual mandate" the requirement in the new law that most citizens have health insurance or pay a tax penalty. There are several statutory exemptions, including for religious objections, for financial hardship, and if the least expensive plan would cost more than 8% of household income.
Unless an exemption applies, however, each citizen will be required to have health insurance, either through Medicare, Medicaid, an employer-sponsored plan, or individual purchase; premium and cost-sharing subsidies will be available for those with incomes below 400% of the federal poverty level. People who are required to have insurance and do not will be taxed, with the tax rate ratcheting up over time to reach $695 per person or 2.5% of household income, whichever is greater.
Commerce Clause and Tax and Spend Authority
Under our system of government, Congress may exercise only those powers that are specified by the Constitution or that are "necessary and proper" for exercising those express powers. Among the express powers is the regulation of interstate commerce.
In the 1942 case of Wickard v. Filburn, the US Supreme Court considered a challenge to the federal government's authority to regulate, under a Depression-era price-stabilization law, wheat grown for a farmer's own personal use. The court concluded that this wheat production, though not for sale, did impact interstate commerce because it reduced the amount the farmer would buy and, considering the activities of similar-minded farmers, would impact the total amount grown.
Following this decision, a variety of federal laws have been upheld as authorized under this power to regulate activities that "arise out of or are connected with a commercial transaction, which viewed in the aggregate, substantially affects interstate commerce." In the Heart of Atlanta Motel case, for example, the Court held that a motel owner's decision not to allow black people to rent rooms impacts interstate commerce and thus could be prohibited by the Civil Rights Act of 1964. Even the federal Partial-Birth Abortion Ban was grounded in Congress' interstate commerce powers.
Health care constitutes a huge portion of our nation's economy, currently constituting more than 17% of the GDP. Both health care and health insurance indisputably impact interstate commerce.
Two modern cases have, on a 5-4 basis, overturned federal laws as beyond the scope of the Commerce Clause. In the 1995 case of United States v. Lopez, the Court struck down a law mandating a gun-free zone around public schools because it was "a criminal statute that by its terms had nothing to do with 'commerce' or any sort of economic enterprise." The court wrote that there must be a distinction between Congress' authority and the general police powers retained by the states, between "what is truly national and what is truly local." Utilizing a similar rationale, and also on a 5-4 basis, the Court's 2000 decision in United States v. Morrison invalidated part of the Violence Against Women Act.
In 2005, however, a 6-3 Supreme Court decision, Gonzales v. Raich, once again affirmed an expansive view of the Commerce Clause. The Court held that the federal government has the power to supersede state law, and to prohibit marijuana cultivation, even if grown at home for personal medical use and not for sale.
Writing for the majority, Justice John Paul Stevens wrote that: "We need not determine whether respondents' activities, taken in the aggregate, substantially affect interstate commerce in fact, but only whether a 'rational basis' exists for so concluding." Congress could rationally conclude that medical marijuana might find its way into interstate commerce, and, as with Farmer Filburn's wheat, that growing one's own could impact the overall market, particularly considering the cumulative impact of numerous growers.
Justices Anthony Kennedy and Antonin Scalia formed part of the Raich majority. Justice Scalia's concurrence explains that this case differed from Lopez and Morrison (in which both he and Kennedy had voted to limit Congress' authority) and that Congress may in the appropriate circumstance regulate non-economic intrastate activity.
In his Raich concurrence, Justice Scalia maintains that "the authority to enact laws necessary and proper for the regulation of interstate commerce is not limited to laws governing intrastate activities that substantially affect interstate commerce. Where necessary to make a regulation of interstate commerce effective, Congress may regulate even those intrastate activities that do not themselves substantially affect interstate commerce." Under the structure of the new health reform law, the requirement to have insurance is integral to Congress' overall approach to regulating insurance practices and attempting to stabilize the insurance market.
The Inactivity Argument
The plaintiffs in the pending lawsuits argue, however, that the individual mandate is different because it attempts to regulate inactivity. By definition, they maintain, a person who declines to purchase health insurance is not engaging in commerce at all.
A gamble to remain uninsured does, however, impose economic costs in at least two ways. The first is when an uninsured person seeks medical treatment. Because of a federal emergency care law, state legal requirements, hospital mission obligation, and actions rooted in medical ethics, that care is sometimes mandated and is often provided. Particularly when the patient comes in through the emergency room, as is not infrequently the case, costs are substantial and often go unpaid, either because of a decision at the outset to provide "charity care" or because the patient does not pay the bill.
Findings in the new law estimate the costs of providing uncompensated care at $43 billion in 2008. While many of these costs are ultimately borne by federal, state, and local governments (in the form of subsidies to hospitals and clinics), a substantial amount is shifted to insured patients. Findings in the new law estimate that $1,000 of the cost of an employer-provided family insurance premium (out of an average of about $13,000) is attributable to uncompensated care.
The second way that being uninsured imposes economic costs is by shifting the insured risk pool. Among the approximately one in seven United States citizens who lack insurance, a significant percentage is young and healthy. By not participating in the insurance market, by gambling that they will not need expensive health care (or that if they do, someone else will pick up the tab), they skew insurance pools towards an older and sicker population, raising the premium costs. Thus, this sort of inactivity or non-participation does have an economic impact, and certainly a far more substantial economic impact than the growing of marijuana for personal, medical use.
The plaintiffs also argue that unlike with state requirements to have car insurance, one cannot avoid the requirement by declining the activity. One can avoid a state's requirement to purchase car insurance by not driving. Unless an exemption applies, however, one cannot avoid the requirement to have health insurance, as it is attached simply to the condition of being a citizen.
There is no direct precedent for a federal law requiring purchase of a private product without the option to not engage in the triggering activity. Businesses can in theory avoid federal requirements to install (privately purchased) environmental or safety equipment by not engaging in the business. Those of us who did not want to buy a new television or sign up for cable service to maintain realistic access after the recent conversion could simply not watch television at home.
More to the point, though, the health reform law does offer a choice. Rather than purchasing health insurance (though an employer-sponsored plan or on the individual market) one can choose to pay the tax. The tax has been criticized by many, in fact, as being too low to act as an incentive. These critics raise the policy concern that some will choose to pay the tax until they get expensively sick or injured and then, based on other, inexorably linked provisions in the new law, insurance companies will be obligated to sell them a plan without pre-existing condition limits or cost adjustments.
The Supreme Court has long upheld the ability of the federal government to regulate behavior through taxation. In a 1937 case, the Court noted that "[e]very tax is in some measure regulatory. . . . But [it] is not any less a tax because it has a regulatory effect[.]" Congress' taxation power cannot burden a fundamental right, but there is no fundamental right to be uninsured. Some have argued that if this is not really a behavior-encouraging and revenue-raising tax but more of a pure penalty, then there needs to be a separate source of authority, such as the power to regulate interstate commerce.
The Current Court
Even if that is true, the Supreme Court, as described above, has recently reaffirmed a broad interpretation of the commerce clause. The two most recent justices to join the court replaced two dissenters, and thus if they change the calculus it would be to add support to the view that the law is constitutional. Justice Scalia, however, who concurred in the judgment in Raich, has long advocated an "originalist" or more limited view of federal power. It is conceivable that he might find that the health care reform's individual mandate goes beyond the reach of federal powers and into the state's police power domain.
That potentially leaves Justice Kennedy as the swing vote. And, of course, the author of the Raich opinion has just announced that he will retire at the end of the current term. The loss of Justice Steven's persuasive force might have an impact on the court's analysis.
Medicaid Expansion and Insurance Exchanges
The Florida Attorney General's lawsuit, which a dozen other attorneys general have joined, also contends that the new law encroaches on state sovereignty by creating state-based insurance exchanges and by expanding Medicaid eligibility. Both of these provisions, they argue, will impose on the states increased costs and expanded administrative burdens and, generally, will "commandeer" them into the service of the federal government.
These arguments have even less of a chance of success than do those related to the individual mandate. The states are not required to set up the exchanges. Under the terms of the law, if a state does not do so, the federal government will. To encourage states to use their regulatory and administrative powers to set up these exchanges, the law offers some funding.
Similarly, states are legally free to drop out of the Medicaid program and to forego the matching dollars that accompany it. Medicaid is a joint federal-state program in which the federal government sends financial support to state programs that, in compliance with federal guidelines, provide health care to low-income people. Wealthier states have a baseline 50/50 match, meaning that for every dollar they spend, the federal government contributes at least a dollar. The less well-off states have at least a 25/75 match.
It is true that, as a practical matter, states are heavily reliant on the matching Medicaid dollars to care for their poorest citizens and to support key safety-net health care providers. It is also true that Medicaid funding is a significant part of most states' beleaguered budgets. The new law expands eligibility by opening the program up to all citizens and legal residents with incomes below 133% of the federal poverty level. This will have the effect of adding many adults to the program. Initially, the federal government will cover all of the costs of providing care to the newly eligible, though this coverage will ratchet down to 90% over a few years.
The Supreme Court has upheld similar conditional-spending arrangements as valid exercises of Congress' tax and spend authority. In South Dakota v. Dole, for example, the Court upheld a federal law that withheld 5% of highway funds from any state that did not raise its legal drinking age to 21. The Court did recognize in Dole that "in some circumstances the financial inducement offered by Congress might be so coercive as to pass the point at which 'pressure turns into compulsion.'" To date, the Court has not identified such a circumstance.
It is hard to reasonably argue that the new law's Medicaid expansion inducement reaches the point of compulsion. Congress has changed Medicaid conditions numerous times over the years and, with this new eligibility expansion, the federal government will initially assume most of the costs of the newly eligible. The exchanges present even less of a case for compulsion as they do not yet exist, and the new law provides some administrative funds for their establishment.
The plaintiffs also face significant hurdles before a court would get to the merits of their claims. One hurdle is ripeness. The challenged provisions do not go into effect for several years. In general, a claim is not ripe for adjudication if it rests upon contingent future events that might not occur; an exception might be made for a purely legal challenge to a law, such as this one, that will require significant advance groundwork. However, with Republican calls to "repeal and replace," it is not far-fetched to wonder if the challenged provisions will survive. Such was the fate of the Medicare Catastrophic Coverage Act, which, in the late 1980s, was repealed before it went into effect.
Another procedural hurdle is standing. In general, only those who are being, or imminently will be harmed by a law can challenge its constitutionality. The individual mandate, if it were in effect, would certainly harm some individuals. Its harm to the states is less clear, and it is on the states' behalf that the plaintiffs in the Florida case have filed their complaint.
In a 2007 case, the Supreme Court did grant states standing to challenge the EPA's inaction on greenhouse gas regulation, finding sufficient injury on the theory that the states were impacted by potential changes to their coastlines and to overall environmental wellbeing. Drawing on this 5-4 decision, perhaps the states could make a not-yet-articulated argument having to do with diverted state tax revenue and population wellbeing, but this seems a stretch. The separate complaint filed by the Virginia attorney general is based on that state's recent enactment of a law purporting to nullify the individual mandate as to Virginia residents, and the defense of that law perhaps provides a toe-hold into standing. The Thomas More Law Center plaintiffs do include four individual citizens. And of course, if the other complaints survive the ripeness and other challenges, individuals might join as plaintiffs.
Nonetheless, based on decades of Supreme Court case law, the substantive challenges to the constitutionality of the Patient Protection and Affordable Care Act are unlikely to succeed. They are likely, though, to continue to inspire discussions within the legal community and within the general public about the role of government, the nature of health care, and the obligations of citizens. Perhaps that, in itself, is a valuable outcome.
Sallie Sanford is an Assistant Professor of Law at the University of Washington.