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

Posted in: Constitutional Law

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.