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The New ObamaCare Decision Is Good

The insurance mandate is unconstitutional and we don't have to eat peas.

by
Dan Miller

Bio

August 15, 2011 - 2:40 pm

The U.S. Court of Appeals for the Eleventh Circuit issued its 301 page decision on ObamaCare on August 11. The majority (Chief Judge Dubina and Judge Hull) opinion consists of 207 pages, the dissent (Judge Marcus) of 94. The majority affirmed the decision of Judge Vinson holding the medical insurance mandate unconstitutional as beyond the limits of the Commerce Clause. However, it overruled his holding that ObamaCare must therefore fall in its entirety. Judge Marcus’ dissent opined that the individual mandate was within the power of Congress under the Commerce Clause. The three judges had been designated to hear the case on May 3 and I provided a bit of information about them here. The White House of course expressed displeasure with the ruling.

The majority opinion is rather less acerbic than was Judge Vinson’s. If the Supreme Court agrees with it, there might be enough wiggle room to permit Congress to enact major amendments to get around some of the problems. The court noted in its conclusion,

The power that Congress has wielded via the Commerce Clause for the life of this country remains undiminished. Congress may regulate commercial actors. It may forbid certain commercial activity. It may enact hundreds of new laws and federally-funded programs, as it has elected to do in this massive 975-page Act. But what Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.

The present Congress is unlikely to try to patch ObamaCare and, for now at least, it seems that the next Congress will be even less likely.

The court tried to analyze whether the failure to purchase insurance constitutes “economic activity.”  It said that while a decision not to buy “insurance and to self-insure for health care is a financial decision” whether it amounts to economic activity is less than clear.

Nor do we find this sort of categorical thinking particularly helpful in assessing the constitutionality of such an unprecedented congressional action. After all, in choosing not to purchase health insurance, the individuals regulated by the individual mandate are hardly involved in the “production, distribution, and consumption of commodities” . . . .  Rather, to the extent the uninsured can be said to be “active,” their activity consists of the absence of such behavior, at least with respect to health insurance. Simply put, the individual mandate cannot be neatly classified under either the “economic activity” or “noneconomic activity” headings. (Except as noted, cases, footnotes and internal citations omitted, emphasis in original)

The court then examined three basic factors: (1) the unprecedented nature of the mandate, (2) whether there were any limits to what the Congress could do and (3) the “far-reaching” implications for our federalist structure.

Finding no precedent supporting the individual mandate because there is none, the court also found the scope of the mandate too broad:

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. . . .

. . . .

The individual mandate sweeps too broadly in another way. Because the Supreme Court’s prior Commerce Clause cases all deal with already-existing activity—not the mere possibility of activity (in this case, health care consumption) that could implicate interstate commerce—the Court never had to address any temporal aspects of congressional regulation. However, the premise of the government’s position—that most people will, at some point in the future consume health care—reveals that the individual mandate is even further removed from traditional exercises of Congress’s commerce power.

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Don’t want to buy peas, a Chevy Volt or an I Love Obama t-shirt? The feds can’t force you — even if some day you might need to do it anyway.

The plaintiffs acknowledged, “when the uninsured actually enter the stream of commerce and consume health care, Congress may regulate their activity at the point of consumption.”  However, that’s not what the mandate does.

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 essential thrust of the government’s argument that health care can and must be regulated because it is unique could apply to anything; everything is in some way unique. It was disposed of by the court as follows:

Were we to adopt the “limiting principles” proffered by the government, courts would sit in judgment over every economic mandate issued by Congress, determining whether the level of participation in the underlying market, the amount of cost-shifting, the unpredictability of need, or the strength of the moral imperative were enough to justify the mandate.

But the commerce power does not admit such limitations; rather it “is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the constitution.” If Congress may compel individuals to purchase health insurance from a private company, it may similarly compel the purchase of other products from private industry, regardless of the “unique conditions” the government cites as warrant for Congress’s regulation here.

Moreover, the government’s insistence that we defer to Congress’s fact findings underscores the lack of any judicially enforceable stopping point to the government’s “uniqueness” argument. Presumably, a future Congress similarly would be able to articulate a unique problem requiring a legislative fix that entailed compelling Americans to purchase a certain product from a private company. The government apparently seeks to set the terms of the limiting principles courts should apply, and then asks that we defer to Congress’s judgment about whether those conditions have been met. The Supreme Court has firmly rejected such calls for judicial abdication in the Commerce Clause realm. See Lopez,  (“[W]hether particular operations affect interstate commerce sufficiently to come under the constitutional power of Congress to regulate them is ultimately a judicial rather than a legislative question, and can be settled finally only by this Court.”

The court then considered the actual amount of cost-shifting sought to be prevented by the mandate and concluded that it was insufficient to have a substantial impact on interstate commerce. It observed that according to the data in the record, the “cost-shifters” were not all that significant. Summarizing: illegal aliens account for $8.1 billion of the claimed $43 billion in cost-shifting (18.9%); low income persons account for $15 billion (34.8%); and the already insured who do not pay their co-pay amounts account for $3.3 billion (7.6%).  These groups, in the aggregate, account for $26.4 billion or 61.3 percent of the $43 billion total.  The main culprits are not covered by the mandate. Rather, “healthy individuals who forego purchasing insurance” are.

To help private insurers, the congressional findings acknowledge that the individual mandate seeks to “broaden the health insurance risk pool to include healthy individuals,” to “minimize adverse selection,” to increase “the size of purchasing pools,” and to promote “economies of scale.” The individual mandate forces healthy and voluntarily uninsured individuals to purchase insurance from private insurers and pay premiums now in order to subsidize the private insurers’ costs in covering more unhealthy individuals under the Act’s reforms. Congress sought to mitigate its reforms’ regulatory costs on private insurers by compelling healthy Americans outside the insurance market to enter the private insurance market and buy the insurers’ products. This starkly evinces how the Act is forcing market entry by those outside the market.

Nevertheless, we need not, and do not, rely on the factual disparity between the persons regulated by the individual mandate and the cost-shifting problem. After all, courts “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.” The government would have this be the end of the constitutional inquiry.

But the government skips important analytical steps. Rational basis review is not triggered by the mere fact of Congress’s invocation of Article I power; rather, the Supreme Court has applied rational basis review to a more specific question under the Commerce Clause: whether Congress has a “rational basis” for concluding that the regulated “activities, when taken in the aggregate, substantially affect interstate commerce.”

Having decided that the Congress lacked a rational basis, the court next addressed the basic and perhaps most important issue, that of federalism. It acknowledged an argument (specious in my view) that if a state can issue an insurance mandate, so can the federal government. It also acknowledged that some states have done so.

But if anything, this gives us greater constitutional concern, not less. Indeed, if the federal government possesses the asserted power to compel individuals to purchase insurance from a private company forever, it may impose such a mandate on individuals in states that have elected not to employ their police power in this manner.  . . . [And], when Congress actually operates within its enumerated commerce power, Congress . . . may ultimately supplant the states. When this occurs, a state is no longer permitted to tailor its policy making goals to the specific needs of its citizenry. This is precisely why it is critical that courts preserve constitutional boundaries and ensure that Congress only operates within the proper scope of its enumerated commerce power.

. . . [T]he individual mandate cannot be sustained as a valid exercise of Congress’s power to regulate activities that substantially affect interstate commerce.

Although the court acknowledged that deference to the Congress,

demands that we invalidate a congressional enactment only upon a plain showing that Congress has “exceeded its constitutional bounds” . . . we believe a compelling showing has been made here, and “the federal balance is too essential a part of our constitutional structure and plays too vital a role in securing freedom for us to admit inability to intervene when one or the “other level of Government has tipped the scales too far.”

Showing further deference and restraint, the court disagreed with Judge Vinson’s determination that the insurance mandate cannot be severed from the rest of ObamaCare and must therefore fall along with it. It is interesting that Judge Marcus’ dissent from the invalidation of the individual mandate placed great reliance on its necessity to the overall scheme of ObamaCare.  For example, “Congress determined that the individual mandate was essential to the effective implementation of the Act’s insurer regulations,” arguing therefore that as “an essential part of a larger regulation of economic activity” it was necessary and proper to effectuate that larger regulation.  This however did not lead Judge Marcus to conclude that the mandate could not be severed and that, with it stricken, ObamaCare itself must generally fall.

Dan Miller graduated from Yale University in 1963 and from the University of Virginia School of Law in 1966. He retired from the practice of law in Washington, D.C., in 1996 and has lived in a rural area in Panama since 2002.
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