| There had been several challenges in federal courts to the Act, and 26 states had challenged the Act. The Supreme Court had taken this particular case up on review from the United States Court of Appeals for the Eleventh Circuit in Atlanta. That federal appeals court had held that the Act was unconstitutional under the Commerce Clause - simply, that Congress did not have the authority to compel people to purchase such insurance - and remarkably allowed the rest of the law to stand, including provisions concerning pre-existing conditions, Medicaid, and health insurance exchanges.
The question concerning the Anti-Injunction Act of 1867 had been ruled on by the Fourth Circuit Court of Appeals, which had said it did not have the authority to hear the case until it would be justiciable after the law went into effect in 2014.
TAX - NOT COMMERCE
From a legal perspective, today's ruling goes to the issues of Congress' power to tax and to the power of Congress to regulate commerce pursuant to the Commerce Clause of the Constitution. The scope of the Commerce Clause had been uncertain for some years, but today's ruling puts an end to that uncertainty for at least a generation: the Commerce Clause's reach has been curtailed.
The Commerce Clause states the following:
"[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes;"
-Article I, §8, cl. 3.
Notably, since the 1930s and the administration of Franklin Delano Roosevelt, the Commerce Clause aided causes ranging from FDR's New Deal programs to civil rights, and since the 1930s, the Supreme Court has given, almost without exception, an expansive reading of the Commerce Clause.
In Wickard v. Filburn, 317 U.S. 111 (1942), the Supreme Court upheld the constitutionality of the Agricultural Adjustment Act of 1938, as a valid exercise of congressional authority under the Commerce Clause; the 1938 law imposed penalties as a disincentive for excess wheat production in order to regulate surpluses and shortages. Katzenbach v. McClung, 379 U.S. 294 (1964) again upheld Congress' authority under the Commerce Clause to require hotels to serve patrons "without regard to their race or color" pursuant to the Civil Rights Act of 1964.
The arrival of former Chief Justice William Rehnquist to the Court, however, saw a renaissance of federalism and the beginning of the Supreme Court's scaling back of the reach of the Commerce Clause. In National League of Cities v. Usery, 426 U.S. 833 (1976), Rehnquist, writing for the Court, held that the Commerce Clause did not grant Congress the power to regulate how states pay their employees as this infringed on state sovereignty. Rehnquist struck at the Commerce Clause again in 1995 with his opinion in United States v. Lopez, 514 U.S. 549, striking down a federal law that had established gun-free school zones, and again with United States v. Morrison, 120 S.Ct. 1740 (2000), holding that Congress again exceeded its authority when it passed the Violence Against Women Act of 1994 which had offered a federal remedy for victims of gender-motivated violence. (Note: Chief Justice Roberts was some time ago the law clerk for Chief Justice Rehnquist at the Court, which might play into how the Court reasoned today).
That tension between the Commerce Clause and states' rights had loomed large, ultimately giving pause to the Obama administration and giving confidence to opponents of the Act, until today.
Adam Liptak of The New York Times, in a March 27, 2012 article, had framed the competing questions before the Court, thus:
•"May Congress decide, in fashioning a comprehensive response to a national crisis in the health care market, to regulate how people pay for the health care they will almost inevitably need?"
•"May the federal government...compel individuals not engaged in commerce to buy a product...health insurance...from private companies?"
Today's answer to those questions would be no.
However, Congress had the authority to pass this legislation under its taxing power. This is in the Constitution; it reads:
"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;"
-Article I, §8, cl. 1.
Proponents of the Act had made the case that the Act was necessary to "bend the curve" of rising health care costs (and thereby slow the rate of increase) and, specifically, the success of the Act hinged on the individual mandate. No other risk distribution mechanism could achieve the economies of scale necessary to make the Act a feasible solution. Those who didn't opt into the scheme would bear a tax, collected by the IRS and used to make up for the non-participation of some. In short, everyone pays into the scheme.
The federal government had argued that the Commerce Clause bestowed upon Congress the authority to legislate the individual mandate. They had further argued that even if it was not permitted under the Commerce Clause, it was nonetheless authorized by Congress' power to levy taxes, as persons who did not purchase health insurance would have to pay a tax for the year in which they did not purchase insurance; this would be reportable as part of their self-assessed income tax return and payable to the Internal Revenue Service.
Opponents of the Act argued that the Act regulated inactivity and forced people into the marketplace; rather than a practical argument, they made a principled one - that the Act affronted "limited and enumerated federal powers that respect individual liberty, accountability, and the residual dignity and sovereignty of the states." Lofty language, but it provided no solution to a problem that the Constitution explicitly gives the legislative and executive branches the authority to address. Opponents also countered that there was no tax; rather, the individual mandate simply imposed a penalty dressed up as a tax, something which, they argued, Congress was powerless to do.
HIGH STAKES FOR TEXAS
Texas arguably had the most to gain - or most to lose - from this morning's decision. For starters, nearly a quarter of the state is uninsured, giving Texas the highest rate of uninsured citizens in the country. With the Act, that figure could shrink to less than 8 or 9% of all Texans by 2014.
An article last week from Kaiser Health News highlights the problems currently plaguing Texas. According to the piece, in Houston alone, nearly one in three residents doesn't have health insurance. What about federally-backed programs like Medicaid?
"With its fiscally conservative philosophy and cash-strapped state budget, Texas does not offer Medicaid coverage to childless adults unless they are pregnant, disabled or elderly. Parents of children covered by welfare are eligible for the state-federal health program only if they make no more than $188 a month for a family of three."
The article goes on to cite the fact that many workers in Texas are working full-time or hours exceeding a full-time position; however, they are, in fact, cobbling together multiple positions, and none of those individual jobs offers employer-sponsored health-care; moreover, the percentage of Texans with employer-sponsored insurance is ten percentage points lower than the national average of 61 percent, according to the Kaiser article.
This results in less care for patients in Texas. See also this policy paper.
The provisions in the Act that set out the Medicaid coverage expansion, individual mandate, federal subsidies, and state-by-state health exchanges also make health care more accessible in terms of purchase and qualification.
Texas has the most stringent requirements for Medicaid in the nation. It's extremely hard to qualify. A single adult has to be exceptionally impoverished to qualify for Medicaid in Texas. Realistically, it almost never happens. Essentially, to qualify for Medicaid in Texas, a person has to be on disability, be pregnant, or be an infant.
The Act changes that. It states that every state must allow people to qualify for Medicaid who are at or below 133% of the poverty level according to federal guidelines, and the federal government will increase its role in coverage of those who qualify.
Moreover, even if someone doesn't qualify for Medicaid under the new regime, they would still qualify for federal subsidies on a sliding scale if they are between 133% and 400% of the poverty level according to federal guidelines.
Further, people who were afraid of the entire law being struck down included those with pre-existing conditions and those with massive medical bills. Some portions of the law had already gone into effect; insurance companies could no longer deny coverage to persons with pre-existing conditions. Striking down the entire law would have meant disaster for that segment of the population. Additionally, annual coverage limits had already been eliminated and limits on lifetime coverage were being phased out year-on-year. How big would the effect be? For a graphic illustration, see this graphic.
A NATIONAL PROBLEM
The problems in American health care are well-documented, with problems across the nation echoing those here in Texas. According to the March 27 Liptak article in The New York Times, $43 billion of health care is used in this country, but is not paid for.
In a June 10, 2012, article in the Houston Chronicle, Elena Marks, a scholar at the James A. Baker III Institute for Public Policy at Rice University cited a related statistic: the United States is first in the world in health care expenditures, but ranks number 37 in health status. In short, we don't get a lot of bang for our buck. More pointedly, those who have decried the Affordable Care Act as a socialist attack on the virtues of free market efficiencies have failed to marshal any credible evidence from the current system to bolster this point.
Further impetus for the Act stemmed from widespread concerns of a decentralized, too lightly regulated health care system, where competition does not, as expected, reduce costs, but rather, drives them ever higher - making health care unique, and thus susceptible to the power of Congress to regulate under the Commerce Clause.
Concerns for the poor and the elderly, for instance, cannot be gainsaid. During the election of 2008, the number of uninsured in this country approximated 47 million. That figure did not account for the underinsured or the battle by even the insured to force their insurers to pay for what they have contractually agreed to pay. An adverse ruling by the Supremes would leave tens of millions still uninsured. And, arguing in favor of big business, insurers and other stakeholders in the debate have so many billions of dollars in sunk costs already invested in the changes under the Act, that a ruling striking down part or all of the Act will be a financial disaster for them, hedged bets or otherwise.
Opponents had argued that the Act was going to drive up costs. However, many private insurance companies were still going the way of the insurance law regardless. They were trying to make it easier and more accessible for people to get preventative care; they knew the risks that accompanied untreated conditions - briefly, would an insurance company rather pay for treating stage 1 cancer that is manageable, or stage 4 cancer that is harshly expensive?
Further, the greatest number of uninsured are the young and healthy. As a result, they are going to widen the number of people across whom the risk is distributed, and so lower costs per capita, while increasing contributions per capita; however, they are not going to be proportionally increasing the burden as they will not be availing themselves of the services at the same rate. In short, the marginal benefit of adding them to the pool greatly outweighs the marginal cost of such.
Matt Glazer, Executive Director of Progress Texas, offered this way forward:
"No matter the ruling, 6 million Texans are uninsured. We're either going to follow President Obama, who has a solution, or Rick Perry, who does not."
It appears that the federal legislature followed the President, and today our judicial branch acknowledged their authority to serve the people.
The court's opinion today may be viewed here.
UPDATED 10:55 a.m.
As expected, today's ruling was split into several parts.
As we noted earlier, the federal appeals court in Atlanta had stricken the individual mandate, upheld the Medicaid expansion, and left the rest of the health care law intact. Today, the Supreme Court turned all of that on its head.
We now know that the individual mandate was upheld. Why it survived is another matter entirely. Many speculated that it would live or die under the Commerce Clause. I did. We were wrong. Sort of.
REHNQUIST IS DEAD; LONG LIVE REHNQUIST
The Court did rule on Congress' authority to pass the individual mandate. With Chief Justice John Roberts writing for the majority, the Court held that the Commerce Clause was an insupportable basis for Congress to pass the mandate. The Court wrote that, pursuant to the Commerce Clause, Congress may regulate existing commerce; however, it may not compel people to participate in commerce. The Court openly expressed fear that they would be sliding down a very slippery slope and that no activity would be safe from the reach of Congress if they upheld the individual mandate under the Commerce Clause.
The Court further held that the individual mandate could not stand pursuant to the Necessary and Proper Clause. The administration had argued that the mandate was necessary to the implementation of the Act. The Necessary and Proper Clause states:
"The Congress shall have Power - To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof."
-Article I, §8, cl. 18.
Had the Court relied on the Necessary and Proper Clause, it felt it would have been engaging in an exercise of bootstrapping. To restate, Congress can't pass a law and then argue that they have the authority to pass that law because without that law they otherwise wouldn't have the authority to pass that law.
THE LAW WHO LIVED
Further writing for the Court, Chief Justice Roberts held that the individual mandate survives as a tax. For a nation that cannot overcome its self-loathing about providing social welfare programs and relentlessly manipulates the tax code's incentives to accommodate these neuroses, perhaps this shouldn't come as much of a shock.
As we stated earlier, Congress has the authority to lay and collect taxes:
"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;"
-Article I, §8, cl. 1.
The Obama administration, during oral arguments had twisted itself in knots trying to argue that the individual mandate was a tax, but not a tax; a penalty, but not a penalty. The Supreme Court today accommodated this exercise in semantics and hairsplitting. Citing Hooper v. California, 155 U. S. 648, 657 and Crowell v. Benson, 285 U. S. 22, 62, the Court turned to a reasonable construction that would support the survival of the mandate, and evinced a judge's preference for substance over formalism. The Obama administration may have called the tax a penalty, but on further scrutiny, the Court held that even a tax by any other name is still a tax.
In its analysis, the Court found that, to be sure, the tax was an incentive. It was not, however, so high as to be sufficiently coercive to be a penalty. Therefore, it passed muster, and the mandate survives.
MEDICAID AND FEDERALISM
With Medicaid, the old tension between federal power and states' rights under federalism again came into play. At issue was the expansion of the Medicaid program. The core question had been - is this a new program that states are forced to join, or is this an expansion of a pre-existing program such that states must play by the new rules set out by Congress? Today's answer, naturally, was both.
The Court held that the program could be expanded, and that the federal government could increase federal Medicaid funding to the states. The Court even acknowledged that the federal government could refuse to allocate new funds to states based on whether they participate in federal programs. The Court did, however, draw a line at withholding funds already allocated to states, for their refusal to participate in the Medicaid expansion. For them, that was a change to the Medicaid program in both type and degree and, therefore, unconstitutional. However, the Court did here what the federal court in Atlanta did to the individual mandate - severed the offending provision while preserving the balance of the scheme.
UPDATED 12:22 p.m. with VOTE TALLIES and Tax Analysis
HOW DID THEY VOTE?
| Justice | Appointed By | Individual Mandate |
| Roberts, C.J. | Bush, G.W. | Uphold Mandate |
| Scalia, J. | Reagan | Dissent |
| Thomas, J. | Bush, G.H.W. | Dissent |
| Alito, J. | Bush, G.W. | Dissent |
| Kennedy, J. | Reagan | Dissent |
| Breyer, J. | Clinton | Uphold Mandate |
| Ginsburg, J. | Clinton | Uphold Mandate |
| Sotomayor, J. | Obama | Uphold Mandate |
| Kagan, J. | Obama | Uphold Mandate |
THE MANDATE AS TAX
It is important that there were five votes. The case that the Court had taken up had stricken the mandate. To overturn a federal appeals court's ruling, five votes were necessary. Roberts provided that fifth vote. Interestingly, however, the Court upheld the Eleventh Circuit's determination that the Commerce Clause did not permit the mandate, but nonetheless supplied five votes that the mandate could survive as a tax.
The penalty, or "exaction", as the Court called it, for not purchasing insurance is much like a tax.
The "shared responsibility payment" is paid by taxpayers when they file their tax returns. If a person does have to pay income tax because their income is too low, then they are not required to pay the exaction for not purchasing health insurance. The provision is codified in the Internal Revenue Code, and is affected by factors such as income, dependents, filing status, and the like.
The court disregarded the label of penalty in the Act, and instead chose substance and application over formalistic labels, as courts are wont to do, even citing cases where Congress has labeled a particular charge as a tax, but where further inquiry had revealed that it was not. The Court looked to the fact that the tax was not an exceedingly heavy burden, did not have a scienter requirement (loosely, an "intent" requirement), and was enforced not by another agency, but by the taxing authority of the United States - the Internal Revenue Service. Further, the court disregarded the consideration that the purpose of the tax was to expand health care coverage, and noted that influencing taxes are an age-old tradition in American law.
A footnote: the Court stated that Congress' power to tax is greater than its power to regulate commerce, the Commerce Clause being the chief constitutional driver behind much of FDR's New Deal programs. Today, the heirs to FDR's legacy saw that power struck down in a victory for legislation that FDR surely would have embraced. The New Deal is dead; Long Live the New Deal. |
