Three Key Exchanges in the Obamacare Oral Argument

Updated:
Posted in: Constitutional Law

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.

  • 6-3 to Uphold.

  • Batman

    The Constitution provides its own  limitation on the power under section 9 of article I. See:

    http://tinyurl.com/3lnsahy

  • Warren Dew

    I think mandatory evacuation cuts the opposite way from how you think it does:  I think it’s fairly clear that enforcement of a truly mandatory evacuation would violate the due process clause.

    It was quite clear that many justices would support a legitimate taxing power argument, even without Sotomayor’s comment.  The problem there is that the lawsuit then likely becomes premature because lawsuits about taxes can’t be pursued until after the taxes are paid.

  • ” 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.”

    That requires a severe simplification of what is being argued. The lawyers aren’t ignorant of nor ignoring the legality of things like the draft. Such mandates are literally the exceptions that prove the rule. The few recognized mandates are accepted as flowing from specifically enumerated powers and permit the government to carry out its basic duties.

    Requiring all individuals to purchase something does not spring from the Commerce Clause, as easy as that would make any economic regulation. It springs from the legislative scheme which creates a problem and then seeks to solve it in a way otherwise broadly recognized as impermissible (at least I hope most legal minds think the Commerce Clause disallows such dictates on their own). The exception that proves the rule argument is sometimes of no avail (see St. Luke Evangelical Lutheran Church v. Smith, 318 Md. 337 (1990)) but does have some logical value.

    I’m not sure what to make of your example about the accidental release of a deadly disease. It evokes fear and a moral imperative, a sense that no matter what the law says, the government better be allowed to force us to get inoculations. Are you arguing that the Constitution does grant the federal government a general authority to impose mandates (even when not part of a broader legislative scheme)?

    If the government intentionally released a deadly disease in order to assert legal authority to inoculate us (or impose martial law, suspend habeus corpus, suspend the 4th Amendment, or whatever else it might want), then the argument starts to becomes more comparable to the healthcare mandate in a principled sense, where the creation of the problem is intentional – and that is what is being argued. It’s not just that the problem can be traced back to the federal government.

    What you dismiss as formalism strikes me as careful reasoning. While the lawyers may have given lackluster responses (apparently both sides suffered from that), the real danger is turning constitutional interpretation into a search for functional equivalents. If regulation X might accomplish the a policy goal in a concededly constitutional way, why not uphold regulation Y? It requires a sloppiness, where facts and principles get twisted almost to the point where the end justifes the means.

    We heard that in oral arguments when Justice Breyer said:

    “Is this commerce? Well, it seems to me
    more commerce than marijuana. I mean, is it, in fact, a regulation?
    Well, why not? If creating a bank is, why isn’t this?
    “And then you say, ah, but one thing here out of all those things is different, and that is you’re  making somebody do something.
    “I say, hey, can’t Congress make people drive faster than 45 — 40
    miles an hour on a road? Didn’t they make that man growing his own wheat
    go into the market and buy other wheat for his — for his cows? Didn’t
    they make Mrs. — if she married somebody who had marijuana in her
    basement, wouldn’t she have to go and get rid of it? Affirmative action?”That’s extraordinarily sloppy logic. It apparently didn’t matter that half the cases he  referenced were not based on the Commerce Clause and that none imposed an affirmative duty on individuals. Even Farmer Filburn was not required to buy wheat and his neighbors were not required to grow it. The critique of that approach is not mere formalism, it’s a principle that we should apply the relevant parts of the Constitution and not rationalize expansions of power by reference to arguably other expansive grants of power.

  • Angela Okey

    Thank you very much for your analysis, you are spot on correct and cudos to Justice Sotomayer for summing things up neatly!  This should wrap up the argument – take your pick, the individual mandate is legal under interstate commerce and under tax law.  I can’t imagine the Justices having any other sound conclusion than to uphold the constitutionality of the PPACA now that this testimony is on the record.

  • Harva10

    So we can agree, Obama lied when he “categorically” denied it was a tax.

  • Anonymous

    So, the autor believes the ggovernment has the absolute right to “innoculate anyone and everyone’ against whatever the governmanet may claim poses a threat to the individual and /or the general population. The author is most obviously neither a strict constitutionalist nor a even a tepid believer. With analyst such as he, no wonder the government believes they can do anything with impunity and the individual has zero natural rights, and only those rights which the government may decide to grant them. I wonder if the author believes he has the freedom to write or verbally express his opinion, as he has in this piece. I wonder if, maybe he asked the government for permission, before he wrote this article, if so, it is no wonder they gave him permission, as he is most definitely a fan of a totalitarian/fascist type governments.

    Sorry, I am not a buyer of this propaganda.

    • Tim

      “…no
      wonder the government believes they can do anything with impunity and the
      individual has zero natural rights…”

      One mustn’t
      forget that during the summer of 2011, Mr. Obama made 7 speeches in which he appeared
      to quote from the Preamble to The Constitution. The first two times he
      misquoted/paraphrased it as, “… We hold these
      truths to be self-evident, that all men are created equal, endowed with certain
      inalienable [sic] rights: life and liberty and the pursuit of happiness.”

      After this paraphrase, which diminished the import these rights endow as he eliminated the source of the
      rights (and therefore the authority which makes them unalienable), was repeated
      for a second time in a subsequent speech, the President was alerted to his error in the omission.
      In the next five reiterations of this speech, he continued to eliminate the Creator
      as the authority. What the Creator has given, no man could justify taking away.
      However…

      http://www.thenewamerican.com/opinion/957-gary-benoit/4653-obama-speech-dropping-qendowed-by-their-creatorq

  • Shiv

    Your “accidental” release of a virus example doesn’t fly. The requirement by the goverent for insurers to provide coverage isn’t accidental.

  • Jhoranlaw

    A federally imposed mandatory inoculation is a seizure banned by the Fourth amendment and a violation under the right of privacy under the Ninth amendment. As the federal government has no general police powers, Justice Breyer’s hypothetical is unconstitutional.

    I suppose Justice Breyer would cite the Koramatsu case as precedent. I suppose the ends justifies the means. For Justice Breyer if it is necessary it is proper.

    Prior to the Sixteenth Amendment taxes on income were unconstitutuional because the were not excise taxes and were considered to be direct taxes. The classic direct tax is a property tax on your house or car. A tax for not having a certain class of property would be direct as well. Direct taxes are typically based on the value of the thing taxed, hence the name direct.

    A tax credit for solar panels is a reduction in the income tax that you would otherwise owe. The solar panel itself is not being taxed.

  • Jonah Feldman

    it seems to me that you’re suggestion that the individual mandate could be upheld under the taxing power effectively means the congress could impose a penalty on the decision not to purchase any good or service. there is nothing unique about the structure of the healthcare or insurance industry that would limit congress’ authority under the taxing power to mandate purchases, or penalizes failure to purchase. in that case, the congress could penalize people for not purchasing a cell phone, burial insurance, broccoli, or any other good. that is not a power that a body of enumerated powers has. tax subsidies are different from “tax penalties” even if the end result may be the same. tax credits for solar panels is far different than imposing a penalty on the failure to purchase a solar panel. if the court accepts the constitutionality of the individual mandate, they will do so using the commerce clause, not the taxing power. 

  • Pauliswood

    True, child and solar panel tax credits have the EFFECT of acting as a tax on inactivity, but they are not an actual tax on said inactivity.

    Would not a tax named “the childless adult tax” levied upon you-know-who be an impermisable direct tax De Jure while the child tax credit acts acts as such De Facto?

  • bean cube

    So insurers’ power to stop affiliates to treat patients dropped by their policy is more constitutional than any courts as well, right? Good, we can use the private insurance industry to destroy the public court system then.

  • First, regarding the comparisons to the impact of burial costs on society vs healthcare costs. The cost of a burial can be fixed, we are having this discussion because the cost of healthcare cannot and it’s the impact of those variable costs that hurts all of us.
    But, there is a more compelling reason to pause and re-examine what is being proposed. Recall General Colin Powell’s comment about our Country’s invasion of Iraq. “If you break it, you have to be prepared to fix it”.  Adding millions to the healthcare roles without some mechanism to help the system absorb them could be a disaster. Physicians are already burdened with regulations and dealing with an insurance industry that, because of profit motivations, looks to deny care.Want a system that works? Roll back the clocks and make insurers of healthcare mutual benefit companies again. Their weighty management has done little to contain costs. “The Blues” used to return .97C of every dollar back to care. It’s much less now. For profit health insurance has not contained costs or improved care.Help physicians re-focus on healthcare by simplifying the payment structure for providing service. When managed care came into being, I saw my colleagues struggle to practice the way they had for years. No one taught them how to be in the new paradigm . Many still don’t know. As a result, your physician spends much less time with you than either of you want , in order to satisfy the constraints of a system that purports to improve your care. Wether you are an allied health professional or a physician, it’s tough running a practice and providing care,. If this isn’t thought through on the provider end, the combined pressures of increased patient demand and  convoluted compensation for services will crush the system. I for one am in favor of a well conceived universal health care system.

  • Mark D

    I am most comfortable agreeing with you on your first point: that the distinction between activity and inactivity is unsound. I can most easily understand this issue as being that the power to “regulate” includes the power to compel participation in commercial activity. (I’m not as comfortable with the last point about comparing penalties to taxes.) I am inclined to say I think the Court should uphold.
    However I’ll add that, in all the years I’ve thought about judicial review and the controversies that have so often arisen from it, I developed my own theory that, out of the two mistakes that the Court could make when exercising review of legislation, the mistake of upholding a law that should be struck down or the mistake of striking down a law that should be upheld, the latter is a far worse mistake. I infer that theory from the rhetoric of Justice Iredell in the classic Calder v. Bull over 200 years ago, and other sources.
    If Roberts and Kennedy do vote with Scalia, Thomas, and Alito to strike down, I’m going to read the opinion — or at least some highlights of it — very carefully. I’m most likely not going to like it if Kennedy writes it. I fundamentally do not trust that man. I have disliked his opinions. Jeffrey Rosen claims that Kennedy’s “only visible personal vice appears to be a weakness for innocent pomp.” To me, Kennedy’s rhetoric is worse than just pompous; it’s pretentious, hypocritical, and NOT “innocent” but deceitful. I think there have been times when he has outright lied. I am especially distrustful of Romer v. Evans and Lawrence v. Texas.

  • Jack Morton

    I would concede that the government could require immunization if the government had, as you posited, “accidentally” released the virus.  But, I would not concede that the government could require immunization if it had “intentionally” released the virus as a pretext to requiring immunization.

  • Lorenzo Oyle

    All the fancy legal rhetoric aside, this case is probably THE most crucial one in recent times with respect to limiting the Federal Government’s over-reaching power to invade an individual’s personal life.  By simple logic, if the Government can force its citizens to purchase “health insurance” why not burial insurance (mentioned in the argument) or a particular car (the Chevy Volt that Obama was so enthusiastic about, but which no one wanted to buy!) .  If the Obama-care mandate by the Government is upheld by the SC then the camel will have successfully poked its nose into the tent and by the decision of the SC is now standing inside said tent!  Obama-care is not about health insurance…it is about collectivism and the elimination of individual freedom and liberty! Of course, the Liberal Democrats on the SC are in favor of the mandate! 

  • I am troubled by a 2700 page bill, that nobody has read, nobody fully understands and costs that are far beyond what was told, with major costs in this bill not going for health care.

    So if there is a reason to throw it out, I would be inclined to toss it, and let congress start over.

    Now I am troubled by Obozo, our clown in chief, trying to tell the Supreme Court that in his humble arrogance and knowledge the bill is constitutional, as if he, President, King and Ego in chief was made emperor of this land.

    If I was sitting in the court, and heard this clown attacking me, and telling me the law, I would want a 9-0 against him just to put him in his place, but that is just me.

  • The argument that regulating activity as opposed to regulating NON Activity is ludicrous.
    What, under the non exclusive rule would be EXEMPT from regulation? Could everybody be forced to buy a FIRST AID KIT? Could everybody be forced to bake their own bread?

  • Gerald McNally

    The problem with all these arguments is that they suppose a fact not inevidence, that all Americans subscribe to the same health care beliefs.  1billion Chiese use herbs and acupuncture.  Millions of Americans use herbs, chiropractic and Christian Science healing methods.  Most of the rest of the world uses herbs.  One American church even believes that psychiatry is a pseudo-science, and its practice is a religious activity.  Is Congress arrogant enough to force ALL americans in their straight-jacket mode of “must use, operations, drugs and other methods which a substantial number of americans reject, particularly for systems issues,for which traditional medicine has only palliataives and no cures.

    It’s only been 18 years since Congress tried this and was rejected by the American people, who voted enough of the perpetrators out of office to give control of Congress to the Republican party.

    The Scupreme Court should invent another right, analogous to the right of privacy:  the right to choose one’s own health care. 

  • Shannon853

    does in fact congress have the power to take form one family and force them to provide for another? can in fact congress force one family to buy a car or anything else for another family? if obama care is upheld, congress can then force all wages to go into one pool and the money collected be divided anoung all citizens (that is what they do not earmark for their own gain). if this is allowed to be upheld, there is no limit to the grabing of individual wealth by acts of congress!

  • j

    In case of emergency break glass. When a tsunami is on it’s way the government can force citizens to act. But they can’t force them just because they don’t like the price of something. Ie the government thinks cheetos are great, but they cost too much for everyone to get them at the store. So they say everyone must buy a dozen cheetos so we can all have them. But I don’t want cheetoes. See the problem?