There are approximately 50 million Americans uninsured for healthcare. The Patient Protection and Affordable Care Act (“ACA”) seeks to have about 30-35 million of those covered by private and public health insurance. About half of those will be covered under the “Individual Mandate” that each individual, subject to certain exceptions, purchase health insurance or pay a “penalty”. This half will also consist of persons who become insured as a result of the mandate that “large” employers provide certain coverage or pay a penalty. The other approximate half was to consist of those individuals newly covered under an expansion of Medicaid. The United States Supreme Court addressed the constitutionality of the “Individual Mandate” and the Medicaid Expansion.
Before the Court could address the merits of the challenge to the Individual Mandate, the Court had to determine whether jurisdiction was precluded by the Anti-Injunction Act, which provides that the court lacks jurisdiction of suits to restrain the assessment or collection of “any tax.” Noting that ACA required the penalty to be assessed and collected “in the same manner as taxes,” Chief Justice Roberts concluded that this language made little sense if the assessable penalties were themselves taxes for purposes of the Anti-injunction Act. Thus, the Court had jurisdiction.
Chief Justice Roberts then found ACA to be constitutional in part and unconstitutional in part. Joined by Justices Scalia, Kennedy, Thomas and Alito, the Chief Justice found that the Individual Mandate was unconstitutional under the Commerce Clause. To permit Congress to regulate individuals because they chose not to become active in commerce by purchasing a product would open a new and potentially vast domain of unauthorized Congressional authority. However, noting that there could be no criminal penalty and no government lien for nonpayment of the “penalty,” Chief Justice Roberts determined the Individual Mandate could be upheld under the Taxing Clause because the “penalty” could reasonably be construed as a tax on those with a certain level of income who chose to go without health insurance. Justices Ginsburg, Breyer, Sotomayor, and Kagan joined this determination.
Joined by all other Justices besides Ginsburg and Sotomayor, Chief Justice Roberts found the portion of ACA that permitted the Secretary of Health and Human Services to withhold all Medicaid funding from states that refused to accept the Medicaid expansion as unconstitutional coercion. However, rather than strike down the Medicaid expansion, Chief Justice Roberts, joined by Justices Ginsburg, Breyer, Sotomayor and Kagan, ruled that this portion of ACA was not enforceable. Thus, states are free to accept or reject the Medicaid expansion.
Justice Ginsburg, joined by Justices Sotomayor, Breyer, and Kagan, called Justice Roberts’ Opinion on the Commerce Clause “stunningly retrogressive,” “crabbed,” and a “rigid reading” that made “scant sense.” Conceding that Congress “had to use some new tools” with the Individual Mandate, she wrote that Chief Justice Roberts relied on a “newly minted constitutional doctrine” that the Commerce Clause does not permit Congress to compel individuals to become active in commerce. She found that the large number of healthcare uninsured created a crisis in healthcare cost (both for the premium-paying insured and the taxpayer) and availability that had a national dimension beyond the capacity of the states separately to handle. The Individual Mandate was well within the power of Congress to define the terms of payment for an interstate good, namely medical care, that all will eventually need. She noted that Congress could have established a single payer system, but elected to leave a “robust role” for private enterprise insurers and the states. She found the Individual Mandate to be entirely consistent with earlier Supreme Court precedent that Congressional prohibition on wheat cultivation for personal consumption was a lawful exercise of Congress authority under the Commerce clause to regulate the interstate wheat market. The refusal of person to buy insurance, when aggregated, likewise has a substantial impact on the healthcare market. She concludes that since Chief Justice Roberts concluded that the Individual Mandate could be upheld under the Taxing Clause, the Chief Justice did not need to address its constitutionality under the Commerce Clause.
Justice Ginsburg found that it was not beyond Congress’s spending power for Congress to require states to accept the Medicaid expansion or lose all federal funding. Congress can prescribe the conditions for receipt of federal funds and amend those conditions. Here, there can be no tenable claim of lack of notice that the conditions for receipt of federal money could change. She concludes, however, that Chief Justice Roberts’ decision not to throw out the Medicaid expansion altogether was a practical solution.
Dissenting Justices Scalia, Kennedy, Thomas and Alito noted the case presented two issues of first impression: (1) Whether a failure to engage in economic activity is subject to regulation under the Commerce Clause, and (2) Does the tax and spending power permit the conditioning of a State’s continued receipt of federal funds under a massive state-administered federal welfare program upon its acceptance of an expansion of that program. Regarding the first, by analogy, to go beyond the wheat-for-personal- consumption precedent and hold that the failure to grow wheat affects commerce “is to make breathing in and out the basis for federal proscription and to extend federal power to virtually all human activity.” The dissenters noted that young healthy people are far removed from the interstate market and that to require them to buy insurance “converts the Commerce Clause into a general authority to direct the economy.” The dissenters noted that a surcharge upon those who had not purchased health insurance when they did enter the system, or a denial of a full tax credit to those who did not buy insurance, could be lawful, “But to go beyond that, and to say that the failure to grow wheat or the refusal to make loans affects commerce, so that growing and lending can be federally compelled, is to extend federal power to virtually everything.”
The dissenters would stop with the holding that the Individual Mandate violates the Commerce Clause. The holding of the Court that the Individual Mandate could be upheld under the Taxing power cannot be sustained because the question is not whether Congress had the power to frame the “penalty” as a tax, but whether it did so. Congress clearly described and intended the “penalty” to be a penalty. “[W}e have never held–never—that a penalty imposed for violation of the law was to trivial as to be in effect a tax.” Nor has the Court ever classified as a tax an exaction imposed for a violation of the law. “We have no doubt that congress knew precisely what it was doing when it rejected an earlier version of this legislation that imposed a tax instead of a requirement-with-penalty…Imposing a tax through judicial legislation inverts the constitutional scheme, and places the power to tax in the branch of government least accountable to the citizenry.”
Regarding the Anti-injunction Act, “what the government would have us believe in these cases is that the very same textual indications that show this is not a tax under the Anti-Injunction Act show that it is a tax under the Constitution. That carries verbal wizardry too far, deep into the forbidden land of the sophists.”
The dissenters note that seven members of the Court agree that the Medicaid Expansion is unconstitutional. They decry that the entire expansion was not thrown out, since it will mean that states that elect not to expand will have to pay huge sums to the federal fisc for the sole benefit of expanding Medicaid in other states. The dissenters state that this is an unabashed judicial rewriting of the Medicaid expansion provisions of ACA.
Finding the major provisions of ACA inextricably interlinked to operate in the manner Congress intended, and finding that there was no evidence that Congress would have enacted any of the ACA’s other provisions in the absence of the other provisions, the dissenters would have held the entire law unconstitutional.
We note that five members of Court found the Individual Mandate violated the Commerce Clause, but a different five members found that it was constitutional because four found it did not violate the Commerce Clause and could be upheld under the Taxing Power and one who found it violated the Commerce Clause concluded it could be upheld as a tax. Justice Kennedy in oral argument described the Individual Mandate as a fundamental change in the relationship between the federal government and the individual. Given that there can be no criminal penalty and no lien for failure to pay the “penalty,” the Individual Mandate may in fact be more of a “nudge” than an actual penalty, but if the dissenters are correct that a new worrisome federal power has been established, we should hope that this “nudge” is not from the nose of the camel under the tent.
By Daniel O. Jamison & Robert W. Pendergrass