A Primer on the Individual Mandate and Its Unfortunate Constitutionality

15 11 2011

The Supreme Court has granted certiorari to an appeal from the 11th Circuit Court of Appeals decision holding the individual mandate, Section 1501 of the Affordable Care Act, to be unconstitutional. The case, United States Department of Health and Human Services v. Florida, looks at a number of issues arising from the bill, most of which are not of general interest, such as whether the federal Anti-Injunction Act prohibits challenges to the Affordable Care Act (probably not).

The big constitutional question at issue is whether Congress’ Commerce Clause powers allow it to compel people, “as a condition of residency in the United States” to purchase monthly health insurance coverage. It’s a big important question, because it is an unprecedented exercise of power by Congress, not in scope, but in form: where Congress has tried to achieve similar things in the past, it has typically either regulated producers or used its taxing powers, which is nearly infinite.

So here’s a bit of a primer to help you argue with the blowhard Randite at your office who thinks the individual mandate is slavery, as well as with your Democratic partisan former college roommate who thinks it’s the greatest thing since the New Deal.

What the Commerce Clause Has To Do With It

Article I, Section 8 of the Constitution lays out Congress’ enumerated powers. Clause 3 specifies that Congress shall have power to “regulate commerce with foreign nations, and among the several States, and with the Indian tribes.” This is the “Commerce Clause,” and it is made up of two broad areas: the more obvious facial power, to regulate commerce between parties in different states, and the “dormant” power to prohibit states from passing their own laws that would, in effect, regulate such commerce. In other words, regulating commerce between states is the sole province of the U.S. Congress, and the U.S. Congress, unlike state legislatures, has only those powers granted by the Constitution, whereas states have a “general police power” [PDF] that Congress does not.

The Commerce Clause power has been steadily expanded since the ratifying of the Constitution. Decisions from Gibbons v. Ogden onward have given Congress more and more power to regulate Commerce. Without going into eye-rotting tedium of the cases that slowly and incrementally expanded the power, then slightly limited them, then expanded them explosively, then slightly limited them again, suffice it to say that in the aggregate the Supreme Court has greatly expanded the definition of “commerce” and “regulate” to increase Congress’ power to “regulate commerce…among the several States.”

Now, most of the federal laws you know and love and hate rest on Congress’ power to regulate commerce among the several States. The Civil Rights Act, Sherman Anti-Trust Act, National Labor Relations Act, Controlled Substances Act, Adam Walsh Child Protection Act, Mann Act, Brady Bill, and so many more, rely on Congress’ power to regulate commerce among the several States. Basically, unless it is a tax or having to do with treaties, currency, the judicial branch, the armed forces, the post office, or the seas, it is probably based on the Commerce Clause. So broad is the Commerce Clause power that people trying to invalidate statutes almost never even raise Commerce Clause questions.

The largest expansion of Congress’ power to regulate commerce among the several States (really enjoy typing that phrase) are the New Deal-era cases, including most notably NLRB v. Jones & Laughlin Steel and Wickard v. Filburn.

Here’s a quick and dirty summary of how the Supreme Court understands the phrase “Congress shall have the power to regulate commerce among the several States,” based on two hundred years of case law:

“Congress shall have the power to regulate, meaning prescribe or proscribe behavior, commerce, meaning the production, consumption, or distribution, of goods and services, among the several States, or to regulate economic activity within a state that directly and substantially affects interstate commerce, or to regulate non-economic activity that is essential to a broader regulatory scheme that regulates interstate commerce.”

This is based on a through-line of cases including (not exclusively), Jones & Laughlin Steel, Wickard, Heart of Atlanta Motel v. United States, Garcia v. San Antonio, U.S. v. Lopez, U.S. v. Morrison, and Gonzales v. Raich.

Let’s apply this. In Wickard, a farmer, Roscoe Filburn, was farming stuff, including wheat. Now, in 1938, Congress passed the Agricultural Adjustment Act, meant to keep prices up so that farming didn’t completely collapse. One of the regulations was that farmers could not thresh more than 11.1 acres of wheat (over-simplification of what the bill actually did, but good enough). Filburn wanted wheat for his family and his livestock, and didn’t want to buy it, so he threshed more than 11.1 acres, with no intent to sell it. He was fined, and appealed the fine. The Supreme Court did not buy his argument that in no way could “growing wheat for my own consumption” be called “commerce,” at all, much less “interstate commerce.”

Nope, said the Court. It doesn’t matter that your particular act in isolation doesn’t affect interstate commerce. That is not germane. The question is, the Court said, if your activity in the aggregate “substantially affects” interstate commerce. Clearly, they said, people growing their own wheat rather than buying substantially affects interstate commerce. It increases the supply and drives down costs. If we prohibit Congress from regulating this, the Court said, we are essentially keeping them from regulating interstate commerce in wheat.

This “substantially affects in the aggregate” standard stood more or less untouched for generations. It formed the backbone of Civil Rights era challenges to the Civil Rights Act. Congress made it illegal for a restaurant or hotel not to serve black customers. Hotel and restaurant owners sued to enjoin (verb form of injunction) enforcement. The Supreme Court, citing the New Deal cases (usually Wickard) laughed these challenges off. Segregation, they said, obviously substantially affects interstate commerce, because black consumers are way, way, less likely to visit places that segregate. Duh.

Then, the Rehnquist Court. The big one here was U.S. v. Lopez, a challenge to the Gun Free School Zones Act, which made it a federal crime for someone to carry a gun around a school. Congress based this on their Commerce Clause power. The Court didn’t buy it, and added the “direct” to “substantially affects,” and clarified the “essential to a broader regulatory scheme,” rule.

In Lopez the government argued (quite lamely, frankly) that carrying a gun near a school affected interstate commerce because guns often lead to violence, and violence can disrupt the learning process, and the learning process once disrupted impacts students negatively, and those students are likely to be less productive as adults, and less productive workers make a worse economy, and therefore we can regulate carrying guns near schools. This, the Court said, was “too attenuated” a link to interstate commerce, and required “piling inference upon inference.” The Court invalidated the Act, also citing the fact that Congress offered literally no findings (common element of statutes) justifying the connection, and, another big one–the regulation was not “essential to a larger regulatory scheme,” which would be necessary if the activity regulated was non-economic.

The New Deal cases hadn’t been overturned, but this was a big deal, because it put Congress on notice that it couldn’t take its Commerce Clause powers for granted.

This gets us to the present day.

That’s Nice. But it’s Not “Activity”

Real quick: Section 1501 of the Affordable Care Act requires everyone to prove that they have maintained “minimum coverage” for the previous 12 months when filing their tax returns. “Minimum coverage” is to be defined by the Secretary of the DHHS. There are very narrow exceptions for conscientious objectors (like Christian Scientists) and there are provisions for those who cannot afford to pay (i.e., getting them into public programs) and penalties for those who fail to do it. Congress’ rationale, according to the act itself, is to avoid the phenomenon of “adverse selection”; since Section 2704 forbids discriminating by insurers on the grounds of pre-existing conditions, and other sections require “community rating” for those with pre-existing conditions, the individual mandate is necessary so that people don’t wait until they’re sick to buy insurance and then drop it as soon as they get the care they need. This, Congress says, could lead to “market failure.” Okay.

Opponents of the individual mandate, including in the 11th Circuit, are not trying to overturn Wickard and other New Deal era cases, and thus undermine things like the minimum wage or the FDA. Instead, they’re arguing that Congress isn’t regulating any activity, much less “commerce.” Go back and read that judicial understanding of the Commerce Clause. See the word “activity” pop up? Now, it doesn’t appear in the Constitution itself, which is important. Only the word “commerce” appears. But in its interpretations the Court has always assumed that Congress was regulating some activity–in Wickard it was threshing wheat. In Civil Rights cases like Heart of Atlanta Motel, it was discriminating in how they sold their service/product.

In this case, opponents say, Congress is regulating “inactivity”–not buying insurance. You are being subject to Congress’ power for not doing something, merely because not purchasing a product will “substantially affect” interstate commerce (obviously–every time you don’t buy something, you affect interstate commerce, in a trivial sense). If Congress has power over inactivity, they say, then Congress has a general police power–something granted only to the States, see above–and there is no limit to the Commerce Clause.

Which, opponents will point out, is something else common to every Commerce Clause case: that that clause must, to be meaningful, have some limit.

States can make you buy car insurance, but states have the police power–and also, you don’t have to buy car insurance unless you buy a car first. Farmer Filburn from Wickard wasn’t being forced to buy wheat until after he became a farmer, and then grew and threshed 11.1 acres of wheat. The owners of Heart of Atlanta Motel weren’t just being forced to serve blacks out of the blue; they had already financed, built, and operated hospitality services. In other words, all of these people had done something to subject themselves to the regulation. In this case, people are literally doing nothing. They are inactive. So Congress isn’t “regulating” commerce, it is creating it out of thin air!

What other markets, they ask, can Congress force me to enter? If not buying insurance is “essential to a broader regulatory scheme,” because my not buying it makes health care more expensive, then doesn’t my decision not to buy a gym membership, or eat healthy food, substantially affect health care costs? Can Congress force me to buy that membership, or buy healthy food?

The government reply has typically been that, first of all, there’s nothing in the Commerce clause that requires an activity. Secondly, they say, in this case, because health care is so unique (everybody uses it, whether they want to or not) if you don’t buy insurance you’re just shifting costs to other people. Also, Congress has forced people to buy things before! It forced young men to buy muskets!

The first argument isn’t persuasive because even if the Constitution is silent on it, an unbroken chain of precedent is not, and the Supreme Court is pretty touchy about taking an unbroken, two century chain of precedent as a coincidence. The second argument isn’t all that great either, because while uncompensated care cost $43 billion in 2008, obesity will cost $345 billion in 2015. That last argument, which I saw from a state attorney general, is ridiculous because that was not a Commerce Clause power, it was based on Congress’ power to raise a militia, a wholly distinct enumerated power of Congress.

The “slippery slope” argument of opponents is seductive. This time, Congress is saying health care is unique because everyone uses it, and fairly often people use it against their will. But…everyone eats food, breathes air, drinks water, transports themselves from place to place, and, hell, more people used the internet (240 million) last year than visited a doctor. Can Congress, based on a desire to “bring down cost” and “increase availability” constantly force people to buy products? Can they eliminate deferral of consumption or discretion in consumption? Is that even a market system any more?

What’s worse, since the executive branch is empowered to decide what constitutes “minimum coverage,” aren’t we just begging to let big powerful insurers make sure that only they and their buddies can “compete” for our dollars, since they can lobby for “minimum requirements” that small mom-and-pop insurers (as if that’s a thing anyway) could never offer with their small capitalization?

Fie! What have we wrought!?

That’s Nice, Except Yes It Is

Yeah, not buying insurance is totally an activity. It’s an activity called “self-insuring.” The Supreme Court recognized self-insuring as a thing in a case called Metropolitan Life Insurance v. Massachusetts. Federal statutes like the Employee Retirement Income Security Act (ERISA) applies to self-insurance program of employers. The reason not buying health insurance is actually “self-insuring” is because except for religious objectors, who are protected by the mighty First Amendment, and the admittedly reckless, who are protected by nothing because fuck them they’re reckless, people who are not buying insurance are not saying they don’t ever plan on seeing a doctor or going to the hospital or that they plan on grabbing the steering wheel away from the EMT driving their ambulance to the ER after a car accident.

No, they’re saying they’re putting aside some amount of money to make sure they can buy health care as they need it. They’re managing their own risk. They’re self-insuring.

If you’re a parent who hates Obama so hard that you’re not going to buy no stinkin’ health insurance under his Maoist individual mandate, and also you’re not saving money in case your kid needs emergency medical care, then you are an unfit and reckless parent, and, not only that, but insured people will eventually foot the bill if you take your kid in for care and then refuse to or can’t pay the bill or declare bankruptcy. So in this unique instance, the inactivity is in fact an active decision that does have a direct and substantial affect on interstate commerce. And all that is if you don’t buy the “self insuring” thing, which is, you must admit, at least a reasonable (and more charitable to the voluntarily uninsured) interpretation.

Now, we can quibble about that, and that is fair. But it’s also kind of the point. You could classify most things as “inactivity” because it’s a really imprecise word. And the Supreme Court isn’t going to declare a brand new rule, that the Commerce Clause excludes “inactivity” which is defined as…what exactly? If you think about it, as much as you hate the big govern-a-mint with its socialism and whatnots, and git yer government hands off my Medicare, do you really want individuals and corporations to be able to exempt themselves from regulation by calling something they’re doing “inactivity”? Ask yourself: when an investment house declines to sell stock despite a negative report, is that economic inactivity or activity? If your employer automatically enrolls you in health insurance or a 401(k), is it inactivity or activity to maintain it? Or to decline it?

Also, No Mandatory Gym Memberships or Broccoli

Also, ironically, the test from U.S. v. Lopez protects against the nightmare scenarios–probably. Remember, Lopez added the “direct” requirement. Buying a gym membership requires “piling inference upon inference” to connect it to interstate commerce; the individual mandate doesn’t require that I use my insurance, only that I buy it. You can buy a “minimum coverage” gym membership and never use it, or use it rarely, or use it inadequately, or use it all the time and then deep fry your daily Twinkie Pizza for breakfast. In other words, to see how buying a gym membership is connected to health care costs, you have to “pile inference upon inference”–you need to assume people will use it, use it appropriately, and also eat well, etc. The same way the Gun Free School Zones Act required all those inferences about the effect on education.

Ignoring this, there is a pretty good case that the federal government can’t force you to do things like see a doctor, eat broccoli, or go to the gym; the doctrine of “bodily integrity” that underlies cases like Planned Parenthood v. Casey or Cruzan v. Missouri Dept. of Public Health precludes the government from this kind of intrusion. Given this, it’d be hard for Congress to show how a requirement to buy a gym membership, absent a constitutionally defensible requirement to use it, would somehow limit the effect of obesity on health care costs.

So Why Is It Unfortunate?

The opponents do have a case. Their case just isn’t particularly strong. The weakness in it is that “activity/inactivity” is not by itself a good standard that we can use, particularly in this case, where the inactivity is quite clearly, in all but reckless cases, an activity known as “self-insuring” that is recognized by the Supreme Court.

The problem with the individual mandate isn’t that it is unconstitutional, it is that it is really goddamn stupid. Congress could have achieved this goal through its taxing power with absolutely no problem.

There is no “free rider” or “adverse selection” problem with transportation for example, because we all pay for it, in the form of gasoline taxes, property and sales taxes, and fares. Instead, Congress did something that the Congressional Budget Office in 1994 described as “unprecedented.” It regulated consumers as a class to protect corporate profits. Remember, there is no requirement that insurers lower their premiums; it is just assumed that will happen. But why? Now insurers have a captive market, and the lobbying strength to define minimum coverage.

A Supreme Court decision upholding the individual mandate will have one direct and substantial affect of its own: it will encourage Congress to find demand-side, rather than supply-side, solutions. It will direct consumer behavior rather than regulate business, because as we all know, when we regulate business the Ayn Rand Memorial Free Market Unicorn Brought to you By Palmolive cries. True, the ACA regulates insurers, but the trade off the government made was enormous and unnecessary.

Oh, that’s the other thing. It wasn’t necessary. It wasn’t necessary for a few reasons, among them that adverse selection isn’t always a thing, at least according to some econometric studies, and also more importantly because enrollment windows, or maintaining coverage requirements (i.e., once you buy it you have to keep it), or a tax surcharge to pay for an automatic public option would have accomplished the same thing. Instead, a Democratic Congress and President chose to create a powerful precedent that if you want to “control costs,” or “increase availability” you prescribe behavior rather than proscribe it (i.e., price controls). You put the onus on the consumer rather than the business. Any regulation of business must be attended by a broad and clumsy regulation of consumer behavior.

If you’re answer is, “Well, they couldn’t have gotten that through the Senate,” my answer is, “Well, they didn’t try.” If your answer is, “People would’ve gone apeshit if Congress had tried to create a tax or public option,” my answer is, “More apeshit than 26 attorneys general filing a lawsuit to invalidate the act?”

Congress and the Court continue to incorporate free market logic into our legal system to a dangerous degree. The same thinking that went into designing this Rube Goldberg Statute went into the Kelo v. New London decision, specifically, that capital operating with freely is a necessary condition for the public good. How many more international crises capital has to cause before we’re free of this fallacy is currently unknown.

Don’t Panic, But Kinda Panic

Here’s the thing. The Supreme Court is a naturally conservative (in the plain meaning sense) body. Its members are appointed for life, and the principal of stare decisis–essentially, compelling respect for previous decisions–makes major changes difficult and rare. And to be fair, that’s more or less a good thing. We don’t want drastic changes in the law every few years, because then nobody will know it, and not knowing it nobody will obey it, and not obeying makes it inoperative. That’s a lawless state. The development of Commerce Clause powers shouldn’t worry you, whether you’re a progressive or a conservative (leftists and libertarians have more abstract, ideological problems with it). The reason is that if you track it, the development of Commerce Clause powers makes sense given the changes in the economy.

Between the foundational case Gibbons v. Ogden and the passage and affirmation of the first anti-trust act in 1890, the number of Americans working as wage laborers grew from 75,000 to to tens of millions. In other words, commerce changed.

Today, whatever your job is, you probably engage in interstate commerce every day. Your company buys computers from other states, uses servers located in other states, sells products or services in other states, is insured by a company from out of state, invests in retirement funds located in other states, accepts federal funds generated from all 50 states, and is probably incorporated in another state, etc. If you’re a Starbucks barrista, you have tourist clients, you use coffee from out of the country that is imported from out of state, your paycheck comes from out of state, your supplies come from out of state. Interstate commerce undergirds your work every day. The Framers plainly wanted the Commerce Clause to empower Congress to regulate commerce. If “commerce” is different today than it was back then, then we should calibrate it to allow Congress to regulate what commerce is today.

Think about it–shouldn’t the invention of the railroad have changed in substance Congress’ regulations of commerce? And flight? And the telephone? And the Internet? I communicate with a resident of a different state literally dozens of times a day, and I do business with one almost daily, often multiple times a day.

The Framers anticipated changes in social relationships and industry–one of the few elements of the Constitution I remember being hammered home in middle school civics was the “Elastic Clause,” more properly the “Necessary and Proper Clause,” which says “The Congress shall have Power to make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers…” It was precisely the rapid evolution of social and commercial relationships that the Constitutional Convention contemplated in drafting this. The Federalist Papers specifically point out that the Constitution would be a dead document without this clause, and that in any case all it did was allow Congress to adapt to changing social conditions, it didn’t allow Congress new powers–they can still only execute “the foregoing Powers.”

The Commerce Clause, in other words, is not a threat to your liberty as a power of Congress, unless your personal affirmative rights are construed weakly. Whatever powers Congress has, when they conflict with your rights, Congress loses. If the ACA had not had an exception for conscientious objectors, it would have been invalidated as it applied to them. If it required you to go for a jog every day, they’d be violating your right to privacy or bodily integrity. The Congress can’t even require your kids to say the Pledge of Allegiance at school. Our rights–due process rights, privacy rights, speech and religious rights, assembly rights, rights to juries and habeas corpus and so on–are the real battleground.

The Other Things

The Court is also considering some other elements:

(1) Whether the individual mandate, one element of a huge bill, can be invalidated without invalidating the rest of the stuff along with it. Probably it can, but maybe not, since Congress intended all elements to operate together, expressly saying that the reforms wouldn’t work without it.

(2) Whether the Anti-Injunction Act forbids any judicial action. This is because the Anti-Injunction Act forbids any court from barring the collection of a tax. Is the penalty for not buying insurance a tax, or a penalty? Well, Congress calls it a penalty, so it’s probably a penalty, even though you pay it with your taxes.

(3) Also, is the Medicaid expansion is Constitutional? Opponents argue that the government’s reimbursement rate is so generous that Medicaid is no longer voluntary, but coercive. Congress’ taxing and spending powers don’t allow it to force the states to conform to a federal statute; they can only pressure it to do so. But Congress’ taxing power is indeed very broad–one of its most sacrosanct powers–and the test for invalidating a law for exceeding it is very hard to meet. The fact that Congress is so generously funding Medicaid reimbursement is probably not enough to meet the test.

Hope this helps. For more on the Constitution, see here.


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16 11 2011
Obamacare and the Privatized Social Safety Net « Same Subject, Continued

[…] my piece on the constitutionality of the individual mandate, I argued that the Affordable Care Act created a […]

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