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How Much Is Truly at Stake in the Legal Battle Over Obamacare?

The most closely watched case of the Supreme Court term that begins on Monday of next week is not yet on the Court’s docket, but will likely arrive there soon.  Court watchers widely expect the Justices to agree to hear one or more of the pending challenges to the individual mandate of the Patient Protection and Affordable Care Act (PPACA or “Obamacare” to its critics).  After all, the federal appeals courts have reached different conclusions about the mandate’s validity.  And, the Court typically grants review when there is such a “circuit split” on what Supreme Court Rule 10 calls an “important matter.”

Although the legal issue presented in the PPACA litigation qualifies as important in the technical sense, how important is it more broadly?  In this column, I argue that this litigation actually presents a relatively unimportant constitutional question.  The real significance of the case lies, instead, in the realms of politics and policy.

The Constitutional Challenge to the Individual Mandate

The PPACA contains a smorgasbord of rules and standards regarding health insurance and health care in the United States, but the constitutional litigation has zeroed in on one particular provision: the requirement that most persons who do not have employer-based or government-provided health insurance must obtain such insurance in the private market.  The law contains a variety of mechanisms to assist people in purchasing such health insurance but, at the end of the day, it does mandate that such purchases be made.

The government argues that the mandate falls within either or both of two powers of Congress: (1) the power to collect taxes; and (2) the power to regulate interstate commerce.  The challengers argue that it falls within neither power, and is thus unconstitutional.

Under the PPACA, persons who are required to purchase health insurance, but fail to do so, must pay a penalty along with their federal income tax.  The penalty is not designated as a “tax” and in some ways, it functions differently from the way most taxes function.  Thus, the challengers to the law have argued that the mandate cannot be sustained as an exercise of the congressional power to tax.

Most, but not all, judges who have confronted the issue have agreed with this argument.

The government, by contrast, argues that Congress has wide latitude to impose taxes in various ways, and that the constitutionality of a law should not depend on what Congress happens to call the law.  In other words, they see the mandate as merely a new and perfectly constitutional kind of tax.

Alternatively, the government argues that the mandate can be sustained under the congressional power to regulate interstate commerce, because there is a multi-billion-dollar interstate market for health care and health insurance.

The challengers respond, however, that requiring people to purchase health insurance does not regulate existing commerce or, to use a phrase from the leading Supreme Court cases, existing “economic activity.”  Rather, they say, the mandate regulates inactivity—in the form of the decision of many Americans not to voluntarily purchase health insurance for themselves.

The government then responds in two ways:  (1) It denies that Congress is forbidden from regulating inactivity; and (2) it contends that the challengers focus on too narrow a slice of time. Just about everybody eventually uses medical services, the government points out, and so the mandate simply regulates the undoubtedly economic choice of how to fund health care.  The government therefore urges that even if the commerce power does not reach inactivity, the mandate is constitutional as a regulation of economic activity.

The lower courts have split roughly evenly over the validity of the mandate when it is justified under the commerce power, as opposed to the power to tax.

The Low Constitutional Stakes of the Fight Over the Individual Mandate

Whether the mandate falls within the power of Congress under either the taxing or the commerce power is an interesting question of constitutional law, but in the end, not a very important one.  To see the relative unimportance of the mandate’s constitutionality, it will help to return to the basics.

The Tenth Amendment states that Congress only has those powers given to it by the Constitution, with all other powers reserved to the states.  Since early in the nineteenth century, however, the powers of Congress have been construed quite broadly.  A few Supreme Court cases in the last couple of decades have insisted that Congress does not have unlimited power, but those cases do little more than mark an extreme outer bound.  Even after what some observers described as a “federalism revolution” under the late Chief Justice Rehnquist, Congress can still do almost anything it wants, with only a tiny area of authority reserved to the states as a matter of constitutional law.

Accordingly, the legal battle likely to reach the Court this coming term raises the question whether the mandate falls within the broad powers of Congress or the tiny area reserved to the states.  It will not fundamentally alter that balance.

To see why, first imagine that the Supreme Court were to uphold the mandate under either the taxing power or the commerce power.  Such a ruling would only confirm the breadth of congressional power.

Now suppose, instead, that the Court were to strike down the mandate on the ground that it is authorized by neither the taxing power nor the commerce power.  Still, congressional power would be substantially unaffected, as we can understand by imagining how easy such a ruling would be to circumvent.

If the Court were to say that the mandate is not within the taxing power because it is not structured as a tax, then Congress could simply re-label and re-structure the mandate as a tax.  All persons earning more than the threshold at which the mandate applies would be required to pay income tax to support a fund for covering health care costs of uninsured Americans, but anyone who purchased or otherwise received health insurance would be entitled to a tax credit equal to the tax.  The result would clearly be a tax that accomplished exactly what the present law accomplishes.

Alternatively, Congress could get around a ruling that the mandate falls outside congressional power to regulate interstate commerce by invoking the spending power.  The Court’s precedents permit Congress to attach conditions when federal funds go to the states, so long as those conditions are related to the purpose of the funds and not unduly coercive.  The Court’s precedents do not make entirely clear when “conditional spending” becomes coercive, but the test appears to be very deferential to Congress.  The leading case, South Dakota v. Dole, upheld a federal requirement that states set their drinking age at 21 or else forfeit a portion of the federal highway funds to which they would otherwise be entitled.

Likewise, Congress could require that states impose the individual mandate or forfeit a portion of the Medicaid funds to which they would otherwise be entitled.  Such conditional spending is a well-recognized and powerful tool that Congress could utilize in virtually any circumstance in which the proposed constitutional rule would forbid Congress to impose a mandate directly.

Indeed, Congress could probably impose a mandate under the Commerce Clause itself, so long as it structured the relevant law carefully.  In Wickard v. Filburn, a New Deal-era case that the recent Supreme Court decisions have expressly reaffirmed, the high Court permitted Congress to impose a wheat quota that was designed (the Court said) for the purpose of inducing farmers to purchase wheat on the market.

Likewise here, Congress could replace the mandate with a rule forbidding people from purchasing health care or even food (which, after all, is necessary to human health) without first either obtaining health insurance or paying a penalty.  Even seen in narrow focus, that would be a regulation of economic activity—as it would affect purchases of health care or food—and thus, would fall within the Commerce Clause under the view advanced by the challengers to the mandate.

Make no mistake:  In my view, the ability of Congress to accomplish the functional equivalent of the mandate under its undisputed powers shows why the challenges to the law are misguided.  These challenges rest on the empty formalisms of labels and for that reason, they should be rejected.  Still, the examples I have just developed also show why, so far as constitutional doctrine is concerned, the case is unimportant.

The Political Stakes

Even a casual observer of American politics knows, however, that Congress is not about to circumvent a ruling invalidating the mandate in any of the ways I have discussed here.  That is, of course, because the Republican-controlled House of Representatives favors repeal of the PPACA. Lacking the votes to affect such a repeal, Republicans would be delighted to let the law die if the Supreme Court were to declare it unconstitutional—even though any constitutional flaw in the law could be easily remedied if Congress so chose.

Thus, despite the low stakes these challenges present for constitutional law, the challenges to the PPACA present an issue of enormous political importance.  In that sense, the case is more similar to Bush v. Gore than to any other case in recent memory.

Bush v. Gore has had no visible impact on constitutional doctrine:  The Supreme Court has not cited the decision at all in the nearly eleven years since it was decided.  Yet, of course, the case had an incalculable impact on the entire American political system.  Among other things, it could be said to have resulted in the eight-year Presidency of George W. Bush.

A Supreme Court decision invalidating or sustaining the PPACA’s individual mandate would not directly decide a Presidential election, but it could nonetheless play an important role in the 2012 election.  Rightly or wrongly, many Americans equate the Supreme Court’s decisions on constitutional issues with sound policy and justice.  Thus, a decision by the Court invalidating the mandate would be used by Republicans to argue that the PPACA itself was an overreach, a “government takeover” of health care in the common ideological argot.

Conversely, a decision from the Supreme Court upholding the individual mandate would be described by Democrats as the vindication of the underlying policy.

For these reasons, both the challengers to, and the defenders of, the mandate, understand that the political stakes here are very high.

The Policy Stakes:  How a Supreme Court PPACA Decision Could Affect American Health

A decision invalidating the mandate could also have an important impact on the health of millions of Americans.  The government has argued that the mandate is central to the PPACA’s entire effort to provide insurance for currently-uninsured Americans.  Without the requirement that everyone must have health insurance, many of the healthy uninsured would not purchase health insurance until they became sick, thus dramatically reducing the pool of premiums being paid into the system to support it.  The mandate backstops the prohibition on insurers’ denying coverage for pre-existing conditions.

Accordingly, a decision invalidating the mandate could have the practical effect of killing the very core of the PPACA.  That, in turn, would mean that Americans would be sicker, and would suffer numerous preventable deaths.  How can we know that?  The empirical evidence says so.  Although there is little evidence of health benefits from shifting from one health insurance plan to another, health economists have found that going from no health insurance to health insurance makes a measurable difference in health outcomes.

It is impossible to say exactly how many lives would be saved or improved by the enforcement of the PPACA, but the answer is certainly not zero.  Thus, in a real sense, the stakes of the PPACA litigation are incalculable.  Not to put too fine a point on it, but the case turns out to be a matter of life and death.

Michael C. DorfMichael C. Dorf, a Justia columnist, is the Robert S. Stevens Professor of Law at Cornell University Law School and the principal author of The Oxford Introductions to U.S. Law: Constitutional Law. He blogs at DorfonLaw.org.
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  • Anonymous

    “Easy” for Congress to relable the mandate a tax? What alternate universe was this written in? This would only happen if one of two things occur: 1) rational thinking returns to the Republican Party, or 2) full majorities of Democrats who support it get elected to both houses of Congress and the Whitehouse for the next 12 years. Both equally improbable in today’s Loony Tunes political climate.

    Even in the impossible event Congress was able to make that label change under a reelected Obama, any future President from the Republican (or Libertarian) Parties will work to remove or gut the mandate. The new system will have to be in place long enough to be *clearly* perceived by enough citizens as a true benefit and thus as untoucheable as Medicare for the GOP. If they can wreck it within the next 10 years, nobody can ever be convinced it would have worked to their benefit.

    • Joe

      Not so  its actually two years the next congress can do anything it wants about anything including treatment of any federal deficit or debt or previous legislation of any sort.  Bills can specify longer terms of applicability but its not necessarily binding on future terms of Congress!

    • eric.j.feldkamp

      Ah. I see what this is really about:
      “Accordingly, a
      decision invalidating the mandate could have the practical effect of
      killing the very core of the PPACA. That, in turn, would mean that
      Americans would be sicker, and would suffer numerous preventable deaths.

      Translated: Striking it down would be pointless,
      except that it would kill people. So no matter what the actual decision
      ought to be, the only “right” decision is to declare Obamacare to be
      constitutional.

    • Foo

      There was zero chance of even the democrats in 2008-2010 passing the law as a tax.
      Even if they were returned with the same majorities, they still wouldn’t pass it as a tax.

      What bugs me about this article is the presumption towards then end that the health benefits are as simple as “research article says people with insurance have better health outcomes”.  Under the current system, and on marginal increment, sure.  That is wholly inapplicable when implementing a ‘health care revolution’, as both baby and bathwater have been directly thrown out.

      The best that can be predicted is: we’ll see what happens.

  • Eric J Dirga, PA

    It was my understanding that there was no severance clause.  If the IM is struck down would not the entire law be struck and a new amended bill have to pass through congress?

  • Crispian

    Like so much in the law, it depends on how we frame the question. If the sole question for determining constitutional significance is whether the law could be effectuated another way, then I’d largely agree with your analysis.

    If however we look to the prospective effects of upholding the mandate, it is clear that is paves a significant new way of federal regulation that removes all kinds of political and legal burdens – and that is constitutionally significant.

    Instead of Congress transparently imposing a significant new tax that disproportionately hurts the middle class via its taxing power, Congress calls it a penalty based on interstate economic behavior. If one thinks the differences between Congress’s taxing and commerce powers are significant, then a ruling on the mandate would be significant. Even the political aspect strikes me as constitutionally significant as all kinds of otherwise politically unpopular actions would be made easier by a certain reading of the Contsitution.
     
    And instead of relying on the federal government’s spending power, the federal government could bypass the states (and whatever modicum of uncertainty would attend it) by simply telling individuals what to do. Again, that is a significant shift in the balance of power between states and the federal government. On this count, at least, it could be argued that there may not a significant practical difference, but you are arguing about constitutional significance.

    Your third solution – having the federal government forbid “people from purchasing health care or even food” accentuates how significant the ruling on the mandate would be. That you presume such a law would be Constitutional because of Wickard shows the folly of such a limited analysis of constitutional significance.

    Underlying all of this are assumptions about the nature of a Supreme Court decision upholding or striking down the mandate. There is also the presumption that such a tax would be constitutional (ie not be subject to the apportionment requirement) and that imposing a personal mandate under the spending clause would not itself inspire further elucidation on the outer limits of the spending power.

    The reading of an expansive power to mandate behavior is constitutionally significant, just as if it were written into the Constitution in its own right along with the spending, taxing, and commerce clauses. You would read such a power as easily falling within the Commerce Clause, but imagine it does not. That is significant.

    I agree it would be politically significant in the short term (and for the long term reasons noted above). And I certainly don’t disagree that having more people insured would yield good results. There are also many reasons to be concerned about how the PPACA could harm American healthcare, basic questions about the lack of funding for its provisions, and how Americans can afford the ever-projected increasing costs of insurance when they are pushed into the market. The PPACA is not an unmitigated good.

  • http://www.facebook.com/mzaremski Miles Zaremski

    The author’s conclusion is the most telling part, viz, that without the mandate, insurers will still have to pay for the benefits provided by ACA, but it would then have to come from their (insurers) bottom line.  Remember that the mandate was a compromise position foisted upon Obama by the insurance industry and their Republican allies; Obama wanted the public option.  Ironic as it then would be—what insurers wanted to make more profits fails but it still would have to cover benefits like pre-existing conditions—heaven help us all if the mandate is found unconstitutional.  Then, health care in this country will fall further into the abyss than it is already now since insurers would then pass along what the mandate was intended to cover financially to consumers who cannot NOW pay for health insurance premiums.  Perhaps we should remember FDR’s proposed “Second Bill of Rights” that he set forth in 1943—declaring that ‘freedom from want’ to be among the four essential liberties necessary for human security.  This included “the right to adequate medical care and the opportunity to achieve and enjoy good health care.”  Incidentally, this “right” (upon which I have also written-see Huffington Post articles) was subsequently crafted into the U.N.’s Universal Declaration of Human Rights (Art. 25, 1948).  Maybe five of the Supreme Court justices will keep this thought in mind as the Court grapples with the issue when it comes to it.

  • Anonymous

    “Congress can still do almost anything it wants, with only a tiny area of
    authority reserved to the states as a matter of constitutional law.”

    That isn’t a matter of constitutional law but a matter of constitutional fraud.

    Likewise, we can continue pretending the commerce clause is something it isn’t.

    • Crispian

      That was a loaded assertion. And as the basis of this piece makes this an exercise in circular reasoning.

      Given how much latitude the federal government has been permitted under modern jurisprudence, I accepted that it kind of made sense even if it was an overstatement. But you’re right that this assertion deserves greater scrutiny.

      Would the framers agree with that assertion? Would the current Supreme Court? If we do not accept that “Congress can do almost anything it wants” (it might seem that way sometimes) nor that state authority is not very “tiny” then most of the argument falls apart. Instead of assuming the answer, we are compelled to investigate how upholding/striking down the mandate does make a difference, as I strove to do.

    • Crispian

      That was a loaded assertion. And as the basis of this piece makes this an exercise in circular reasoning.

      Given how much latitude the federal government has been permitted under modern jurisprudence, I accepted that it kind of made sense even if it was an overstatement. But you’re right that this assertion deserves greater scrutiny.

      Would the framers agree with that assertion? Would the current Supreme Court? If we do not accept that “Congress can do almost anything it wants” (it might seem that way sometimes) nor that state authority is not very “tiny” then most of the argument falls apart. Instead of assuming the answer, we are compelled to investigate how upholding/striking down the mandate does make a difference, as I strove to do.

  • http://twitter.com/PrometheeFeu PrometheeFeu

    “Although there is little evidence of health benefits from shifting from one health insurance plan to another, health economists have found that going from no health insurance to health insurance makes a measurable difference in health outcomes.”

    How do you control for correlation between income and having health insurance? Maybe what correlates with health is with healthcare. If that is the case and you are worried about poor people not having access to health insurance, the proper response is to provide them with health insurance, not force everyone to have health insurance. After all, there could be alternative ways to pay for healthcare.

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  • Anonymous

    You say:

    Although there is little evidence of health benefits from shifting from one health insurance plan to another, health economists have found that going from no health insurance to health insurance makes a measurable difference in health outcomes.

    But economists have also found that carrying health insurance causes folks to buy less of those things that some value far more, making the insurance mandate quite negative for them.

  • Fourier

    PPACA is unlikely to save or improve any lives. In fact, it is likely to make a lot of lives worse, and possibly end up killing people, due to the strictures it imposes on the practice of medicine. Claims to the contrary mostly rest on the assertion that people without health insurance have a higher mortality rate. This was first put forth by the Institute of Medicine. It has since been shown that the Institute virtually made it up using a study that produced statistically insignificant results from a sample based on an absurd assumption.

    It is also false to say that PPACA is warranted because at some point everyone uses medical care. A lot of people use medical care but they do not use insurance to pay for it. They use cash. PPACA requires people to buy insurance policies that are richer than existing corporate policies. Unfortunately, insurance is the most expensive way to purchase medical care because one must pay overhead and profit as well as the price of the service. As a result, PPACA is requiring many people to pay for their medical care in the most expensive way possible. This does no one any good. The subsidy programs merely mimic already available programs as shown by the dismal response to the pre-existing condition coverage.

    Based on some of the false assertions underlying this argument, you arguments in the future might be improved by spending some time reading the research results underlying the opposition to PPACA.

  • Anonymous

    You miss out a key reason that the Democratic congress chose to impose a mandate rather than a tax: optics. One of the goals of the PPACA’s drafters was to “score” the bill to be as small as possible, ideally under a trillion dollars over ten years. A mandate accomplishes this goal, because those who comply with it do not count towards government spending. A tax-and-refund method, while having the same net effect, makes the bill look much bigger, as it would now include a tax on almost every American, and a wealth of offsetting spending. Tax-and-refund likewise arguably would break President Obama’s promise not to raise taxes on anyone earning less than $250K.

    In short, while you argue that a tax-and-refund bill is unlikely to pass now, you ignore the fact that it was unlikely ever to pass in the first place. This is actually one good reason to strike down the law: it discourages Congress from writing laws that hide their true costs.

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  • Danzhutch

    MICHAEL, you do a great disservice to Cornell.  Your rambling column is neither informative nor cogently constructed to make legal sense.  Please resign before you corrupt more minds.  
    I am certain that you you have not read the OBAMACARE bill like many others in congress.
    “Pass it to know what is in it.”  You have stepped way over the bounds of your expertise.

  • Ron Barker

    The legal and constitutional arguments made are interesting, but the conclusion is erroneous on its face. Overturning Obamacare does not mean health care will  necessarily be worse, and keeping the law does not mean it will necessarily improve for the country as a whole.  Even opponents agree that it must be replaced with another law, one stressing market choices and removing barriers between patients and doctors. So if the law is overturned, as I hope it will be, it will not be the end of the discussion. Conversely, if it is upheld, the health delivery system we have known will be effectively dissolved through an enormous amount of bureaucratic regulation.  Doctors will leave their practices in droves; many already have. It will be harder to obtain actual treatment, not easier, especially for Medicare and Medicaid patients.  While the health of some may improve by having the health care of others redistributed to them, others in the system will lose. This, after all, was the intent: to take from one group (the majority of have coverage today) and “level the playing field” by giving to the uninsured. Actually, giving is a misnomer, since even the poor will be forced to pay something for their coverage. Allegedly, those of modest incomes will receive government help — again, tax dollars supplied by others — to make up the cost.  It is clear the majority of Americans don’t want a health insurance industry like this, or the Republicans would not have won the 2010 elections in the landslide fashion they did.  It is also going to cost the president in 2012, regardless of how the court rules. 

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