Monday, December 13, 2010

The Constitution Vindicated (so far).

"Adhere to the Constitution."

"Eat your Wheaties (and buy over-priced health insurance)."

Judge Henry Hudson of the Eastern District of Virginia has struck down a portion of the recent Health Care Reform Act that would have required individuals to purchase over-priced health insurance. His opinion is here.

In so doing, Judge Hudson rejected the administration's claim that Congress may coercively compel all individuals to purchase health insurance because: (1) such individuals will, at some unspecified time in the future, need medical care, with the result that failure to purchase such insurance now will have an impact of some sort on the health care market and (2) failure by some individuals to purchase health insurance will undermine Congress's effort to pool risks, by allowing some individuals to avoid participating in the risk pool and subsidzing individuals who pose higher risks, by paying premiums higher than those that are actuarially justified. (Apparently the first argument by the United States assumes that individuals who decline to purchase health insurance now will not have such insurance when they need medical care in the future or will not be able to pay for such care at that time "out of pocket."). It should also be noted that, actuarial considerations to one side, the insurance Congress hopes to force individuals to purchase will be over-priced, because Congress failed to take numerous steps that would have lowered the cost of medical care and also lowered the price of insurance. Such steps would have included preempting state certificate of need laws, allowing additional immigration of physicians, and repealing the McCarran-Ferguson Act, thereby reinstating the Federal ban on collusion between health insurance providers and eliminating otherwise unconstitutional state-created barriers to entry by out-of-state health insurance providers. Put another way, by failing to enact other, perfectly vaild federal legislation, Congress has itself helped to create the very economic conditions that supposedly justify additional (and unconstitutional) legislation.

According to Judge Hudson:

"This broad definition of the economic activity subject to congressional regulation lacks logical limitation and is unsupported by commerce clause jurisprudence." (See page 23).


"Of course, the same reasoning [by the United States] could apply to transportation, housing or nutritional decisions." (See page 23).


"Neither the Supreme Court nor any federal circuit court of appeals has extended commerce clause powers to compell an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market." (See page 24).

In other words, if courts accept the rationale for federal intervention offered by the government here, Congress would also have to power to compel individuals to purchase and eat more nutritional foods, to take vitamins, to purchase a treadmill and use it three times a week, and to get more sleep, all because an individual's failure to engage in such activities would have an impact on their future health care expenditures and thus, for this reason alone, be appropriate objects of Congressional regulation. As Judge Hudson rightly noted, no American appellate court has ever sustained national legislation on such a theory. Doing so would even further erode the boundaries that constrain what the founders and ratifiers meant to be a national government of limited powers.

As Judge Hudson himself put it:

"The unchecked expansion of Congressional Power to the limits [necessary to sustain the coverage mandate] would invite unbridled exercise of federal police powers.” (See page 37).

Judge Hudson also rejected the government's claim that the fine imposed for non-compliance with the mandate to purchase insurance was merely a revenue-raising tax, and not a penalty. If the fine is a tax, then it would be constitutional so long as it furthers the general welfare. According to Judge Hudson, "the notion that the generation of revenue was a significant legislative objective was a transparent afterthought." (See page 32). Moreover, he concluded that "the use of the term 'tax' appears to be a tactic to achieve enlarged regulatory license." (See page 33). Finally, after a careful review of the statute, he concluded that numerous features of the Act itself confirm that, unlike the actual taxes explicitly imposed by the law, the penalty imposed for non-compliance is not a tax. (See pages 33-36). In other words, Congress and the President now realize that the coercive mandate exceeded Congress's power under the Commerce Clause and have thus sought to recharacterize what had been conceived of as a penalty, inducing purchase of insurance, as a tax.

Of course, the United States will appeal Judge Hudson's ruling to the Fourth Circuit Court of Appeals and then, if necessary, to the U.S. Supreme Court. Hopefully the appellate judges who hear the case will keep in mind the following excerpt from the majority opinion of Chief Justice Charles Evans Hughes (pictured above), joined by, inter alia, Justice Brandeis, in Schechter Poultry v. United States, 295 U.S. 495 (1935).

"It is not the province of the Court to consider the economic advantages or disadvantage of such a centralized system. It is sufficient to say that the Federal Constitution does not provide for it. Our growth and development have called for wide use of the commerce power of the federal government in its control over the expanded activities of interstate commerce, and in protecting that commerce from burdens, interferences, and conspiracies to restrain and monopolize it. But the authority of the federal government may not be pushed to such an extreme as to destroy the distinction, which the commerce clause itself establishes, between commerce "among the several States" and the internal concerns of a State."