Three days of oral arguments before the Supreme Court have left many pundits and Court watchers more or less where they have been since states and private plaintiffs brought legal challenges to the Patient Protection and Affordable Care Act (“the PPACA”) in 2010: wondering what five Justices will do.
Tuesday was the crucial day, as Solicitor General Donald Verrilli, Jr. did battle with (former Solicitor General) Paul Clement (representing the state plaintiffs) and Michael Carvin (representing the National Federation of Independent Business) over the constitutionality of the so-called “individual mandate” of the PPACA.
Based on the tone and substance of the Justices’ questions and comments, it appears that the relatively liberal Justices—Ginsburg, Breyer, Sotomayor, and Kagan—will vote to uphold the mandate; Justices Scalia, Thomas, and Alito will vote to strike it down; and Chief Justice Roberts and Justice Kennedy may still be wrestling with their decisions. (Per his custom, Justice Thomas did not speak during the oral argument, but his vote is easy to predict based on his past votes.)
Nonetheless, to paraphrase Yogi Berra, it’s tough to make predictions, especially about the future. Accordingly, rather than attempt to read tea leaves, in this column I will discuss three critical sets of exchanges over hypothetical examples that should help to illuminate the central questions. Judges and lawyers often use hypothetical examples as a means of testing the soundness and scope of proposed legal principles, and Tuesday’s argument contained a particularly rich and imaginative set of such examples.
Examples Testing the Limiting Principle: Burial, Mobile Phones, and Cars
At the heart of the plaintiffs’ case lies the claim that the power of Congress to regulate interstate Commerce is a power to regulate economic activity, not to require persons who are not currently engaged in economic activity to so engage. By requiring people who lack health insurance to purchase such insurance, the plaintiffs say, the PPACA’s mandate crosses that line.
Various commentators, including yours truly, have argued that the Court should reject the proposed distinction between activity and inactivity as unsound in principle. Justice Breyer said more or less the same thing at oral argument.
But the Solicitor General, both in his main brief and during the oral argument, took a somewhat more modest position. He appeared to accept the plaintiffs’ contention that Congress may not generally use the Commerce Clause to require passive persons to engage in economic activity. However, he argued that because nearly everybody will eventually need medical care, everybody is already engaged in the economic activity of deciding how to finance their medical care—and that the PPACA mandate simply regulates how and when the otherwise-uninsured must go about performing that economic activity.
Moreover, the Solicitor General said, Congress had good reason to require the uninsured to obtain health insurance. One important (and popular) feature of the PPACA is its “guaranteed issue” rule, forbidding health insurers from denying or dropping individuals’ coverage for pre-existing conditions. But experience under similar state laws shows that it would be dangerous to institute that rule alone, without the mandate, because that rule on its own would create dangerous incentives: If a young, healthy person knows that he can obtain health insurance whenever he becomes sick, then he has an incentive to act as a “free rider,” thereby shrinking the risk pool and undermining the actuarial soundness of the insurance. The individual mandate ensures that healthy people, as well as sick ones, will buy insurance—because they must.
Several Justices and the plaintiffs’ lawyers pushed back hard with hypothetical examples. Almost right out of the box, Justice Alito asked Solicitor General Verrilli whether, using the same logic, Congress could require everyone to obtain burial insurance on the ground that everyone dies, and failure to obtain burial insurance shifts the cost of burial to the public (who will not simply let dead bodies rot where they fall, but will put them, at the minimum, in a pauper’s grave or the like). In a similar vein, Chief Justice Roberts asked whether Congress could require everyone to purchase a mobile phone to dial 911, on the ground that everyone is susceptible to needing emergency services at some time or another in their lives. And attorney Clement argued that if the mandate were upheld, the government could even go so far as to require everyone to buy an American car, on the ground that failure to do so imposes costs on the workers who manufacture those cars.
Solicitor General Verrilli attempted to distinguish each of these examples. How successful he was in doing so may well decide the outcome of the case, because the two Justices whose votes are arguably in play—the Chief Justice and Justice Kennedy—were searching for a limiting principle that would enable them to uphold the PPACA mandate without thereby upholding every possible mandate that Congress might, in the future, enact.
An Example Illustrating the Problems With the No-Mandate Rule: Inoculation
Whereas Solicitor General Verrilli needed to give examples of mandates that Congress cannot enact under his account of the Commerce Clause, the plaintiffs’ lawyers had the opposite task: They needed to explain why the Constitution absolutely forbids Congress from imposing a mandate under the Commerce Clause. And that is arguably a difficult task. Even one example of a vital mandate that everyone agrees Congress would have the power to enact, should suffice to expose the folly of the plaintiffs’ proposed absolute prohibition.
Justice Breyer offered what looks like a potent example that cuts in favor of the PPACA’s constitutionality. Suppose, he said, that a disease threatens to infect 40 million Americans and that 10 million of them will die. Could the federal government require that the 40 million be inoculated against the disease, for their protection and the protection of those they might otherwise infect?
Justice Breyer first posed this hypothetical example to Mr. Clement, but because it was part of a broader question, Clement never directly addressed it. Justice Breyer then asked the question again during Mr. Carvin’s argument. Carvin, realizing that he could not concede that federal power existed in the inoculation case without thereby conceding that Congress has the power to impose mandates under the Commerce Clause, bit the bullet. He answered “No,” Congress could not require inoculation.
That, however, is an arresting limitation on the power of Congress to respond to a national emergency. Perhaps unhappy with Mr. Carvin’s answer, Justice Alito responded to Justice Breyer’s example by noting that Congress itself created the supposed need for the healthcare mandate by imposing the guaranteed-issue rule on insurers, whereas Congress did not create the hypothetical disease. Justice Alito thus implied that the PPACA engages in unfair bootstrapping, by citing a problem of its own creation as a basis for giving Congress additional power.
But that distinction does not do the work that Justice Alito thinks it does. Suppose that in Justice Breyer’s example, the government itself had created the problem, by accidentally releasing a virus from the laboratory. Would Justice Alito want to say that, in that case, Congress could not order inoculation? Presumably not.
This example and others—including jury duty, the draft, and evacuation orders—show that there is no general prohibition on federally-imposed affirmative duties. And even though some such duties may be imposed under powers other than those granted by the Commerce Clause, the plaintiffs have offered no satisfactory explanation for why their proposed activity/inactivity distinction is limited to the Commerce Clause alone.
The Taxing Power: Form Over Substance?
In his effort to undermine the government’s argument that the mandate is necessary to backstop the PPACA’s guaranteed-issue rule, Mr. Clement offered an alternative: Congress could have simply subsidized insurers that are required to accept an assigned risk pool, compensating them for taking on that risk pool by drawing from general tax revenues. But in making that suggestion, Clement opened himself up to a powerful response by Justice Sotomayor.
Could Congress raise tax revenue for the subsidy in that way, Justice Sotomayor asked, but then give an exemption from the tax for anyone who has health insurance, and thus does not contribute to the shortfall? And if so, she asked, then how is that different in substance from what Congress in fact enacted in the PPACA?
Clement saw where Justice Sotomayor’s logic was taking him and tried to get off the train. He said that what Justice Sotomayor proposed would be “a disguised impermissible direct tax.” That was a bold—but almost certainly wrong—answer.
The Constitution provides that “direct taxes” must be apportioned among the states according to their populations. But aside from a few decisions that were repudiated by the Sixteenth Amendment and later doctrine, Supreme Court case law narrowly construes the category of “direct” taxes. As Justice Sotomayor noted, the Internal Revenue Code is chock-full of tax credits and deductions that are economically equivalent to payments for engaging in certain behavior or—depending on the baseline—penalties for failure to engage in that behavior.
If the exemption in Justice Sotomayor’s hypothetical example violates the apportionment requirement, then it is hard to see why most tax credits and deductions do not. Federal law provides a tax credit for thirty percent of the cost of solar panels. That is economically equivalent to taxing the inactivity of not purchasing solar panels. Likewise, federal law provides tax deductions for dependent children. That is equivalent to taxing the inactivity of not having children (or not having more children). Indeed, just about any deduction or credit for an activity can be characterized as a tax on the complementary inactivity. Under Mr. Clement’s approach, all of these credits and deductions would be unconstitutional because they were not apportioned among the states, as the Constitution demands direct taxes must be.
Accordingly, when it was Mr. Carvin’s turn, he did not attempt to defend Mr. Clement’s extraordinarily expansive view of the apportionment requirement. But Carvin offered an equally unpersuasive answer to Justice Sotomayor’s question. He said that the mandate is not like a five-dollar tax on cigarette packages; it’s more like a prohibition on cigarettes coupled with a five-dollar penalty for violating the prohibition.
That distinction—between a price and a penalty—may be important in the criminal law, or in certain theoretical accounts of the nature of legal obligation. But there is no reason to suppose—and no basis in the Court’s recent case law for the conclusion—that the scope of Congress’s power to tax should depend on whether the exercise of that power happens to be labeled a tax or a penalty.
Therefore, at the end of the day, the government’s best hope may be that the Justices who are worried about the limiting principles under the Commerce Clause come to see that the mandate can be readily sustained under Congress’s taxing power. If so, Justice Sotomayor’s question will have played a crucial role in exposing the formalism of the plaintiffs’ position.