Tuesday, February 1, 2011

Federalism Survives (So Far)!

Praised Limits on Congressional Power

Earlier this week Judge Vinson, of the Northern District of Florida, struck down the health insurance reform legislation that Congress passed in 2009. In particular, Judge Vinson held that the so-called “individual mandate,” which coercively requires all Americans to purchase health insurance, exceeds the power of Congress under Article I, Section 8 of the Constitution. In particular, he held that the mandate exceeds the authority of Congress to regulate commerce "among the several states" and that the law is not “necessary and proper” to carrying into execution the health reform law. As Judge Vinson recognized (and as this blog has previously pointed out) the government's rationale for treating the coercive individual mandate as constitutional would eliminate any meaningful limits on federal power, contrary to the plain language of the Constitution and even the Supreme Court's own decisions, which have repeatedly emphasized that the national government is one of enumerated powers, thereby leaving certain powers exclusively to the states. Thus, as Chief Justice John Marshall, pictured above, put it in Gibbons v. Ogden, 22 U.S. 1 (1824) "[t]he genius and character of the whole government" rested upon a limitation in the powers of Congress and resulting allocation to states of the remaining powers. More recently, in United States v. Morrison, 529 U.S. 598 (2000) the Supreme Court reiterated, quite properly, that:

"The Constitution requires a distinction between what is truly national and what is truly local. In recognizing this fact we preserve one of the few principles that has been consistent since the [Commerce] Clause was adopted."

As Judge Vinson put it:

"[Under the Obama Administration's argument] Congress could require that everyone above a certain income threshold buy a General Motors automobile—now partially government-owned—because those who do not buy GM cars (or those who buy foreign cars) are adversely impacting commerce and a taxpayer-subsidized business."

Of course, Judge Vinson is not the first judge to find that the coercive individual mandate exceeds the authority of Congress. This blog has previously praised Judge Henry Hudson’s similar ruling that the individual mandate exceeds the authority of Congress under the Commerce and Necessary and Proper Clauses. However, Judge Vinson went one considerable step further than Judge Hudson. Judge Hudson merely voided the individual mandate itself, holding that the rest of the law could still stand. That is, Judge Hudson held that the rest of the law was "severable" from the unconstitutional individual mandate. By contrast, Judge Vinson found that the unconstitutional provision was not severable and thereby voided the entire law.

While some have found Judge Vinson's decision to void more than the mandate itself surprising, this blogger was not surprised, for two reasons.

First, federal statutes routinely contain so-called severability clause, declaring that, if a portion of the law is deemed unconstitutional by the courts, Congress intends that the rest of the law should nonetheless remain in effect. While the presence of such a clause does not absolutely settle the question of severability, such a clause does militate against voiding an entire law simply because a portion is unconstitutional. However, the health care reform legislation contains no such clause, thereby giving rise to a possible inference that Congress meant the law to stand or fall in its entirety, i.e., for the entire law to become void if any portion of it is unconstitutional.

Second, the Obama Administration has repeatedly argued that the individual mandate is a critical portion of the overall scheme created by the statute. Indeed, in a recent Op-Ed, Attorney General Holder and Secretary of Health and Human Services Sebelius argued that, if the coercive individual mandate is struck down, there would be "devastating consequences for everyone with health insurance." Why? As Richard Epstein explains in this Op-Ed, the individual mandate is simply a covert tax on individuals who otherwise would not choose to purchase health insurance. That is to say, and as previously discussed on this blog, the law --- like previous "reform" in Massachusetts --- prevents insurance companies from denying coverage to individuals because of "pre-existing conditions." Under this "community rating" approach, insurance companies must generally provide such insurance on equal terms, including price, to all customers. As a result, individuals who are healthy, because of youth, good fortune, good habits or a combination of all three will pay more for such "insurance" than the expected cost of their care, while other individuals will pay less. (By analogy, imagine a law that required life insurance companies to charge the same premimums for term insurance without regard to the age or health of the insured.) Not surprisingly, many individuals with lower than average expected medical expenses would respond to such community rating by choosing to self-insure, that is, declining to purchase "community rated" insurance and paying whatever health care expenses they might incur "out of pocket." The individual mandate targets these individuals --- forcing them to purchase such insurance, at inflated premia, thereby subsidizing the purchase of insurance by others. Without this coercive requirement and the revenue that it generates, less healthy individuals who do choose to purchase insurance will pay higher prices than they would otherwise pay, though of course these premia that more closely approximate the actual cost of health care they will incur over the life of the policy.

Of course, there are provisions of the law that can function perfectly even without the individual mandate, e.g., provisions encouraging the study of best health care practices. However, the mere fact that part of a law can continue to function despite the invalidation of a different part cannot by itself require a court to sever the offending portion. If it did, then Congress could ensure severability simply by inserting a minor and unproblematic provision in each bill, perhaps even a provision identical to similar provisions in prior bills.

These considerations highlight a dilemma for the current Administration as it seeks to defend the law, with its unprecedented requirement that Americans who do not wish to engage in commerce must do so anyway, by purchasing health insurance they do not want or need. On the one hand, the Administration attempts to convince courts (and the public) that this unprecedented mandate plays a critical role in the health reform legislation it supported, sometimes even seeming to imply that, without the mandate, Congress would have to go back to "square one" and design a diferent system of reform. (Though, it should be noted that "absolute necessity" is not required for the mandate to be sustained under the Necessary and Proper Clause, as John Marshall explained in McCulloch v. Maryland, 17 U.S. 316 (1819).) On the other hand, to argue that the provision is severable, the Administration must contend that the law can continue to function despite the absence of the individual mandate. There is, to say the least, a tension between these two claims.

Note, however, that there may have been a "third way." Professor Michael Dorf, at Cornell Law School, has suggested in this post that Judge Vinson could have struck down the mandate and other provisions of the law intertwined with it, e.g., the insurance exchanges the law creates, without also invalidating those provisions that are wholly unrelated to the mandate, e.g., a provision that prevents discrimination against health care providers that decline to provide assisted suicide services.