Thursday, June 28, 2012

Obamacare and Federalism Both Survive

The Supreme Court has narrowly upheld most of the Affordable Care Act, including the so-called "individual mandate." 

At the same time, the Court has rejected the Obama Administration's claim that Congress had the power to impose the mandate under the Commerce Clause or the Necessary and Proper Clause.  According to five Justices (Chief Justice Roberts, and Justices Scalia, Kennedy, Thomas and Alito), the Commerce Clause does not empower Congress to force individuals, under penalty of law, to engage in commerce.  As Chief Justice Roberts put it:

"The power to regulate commerce presupposes the existence of commercial activity to be regulated." 

Moreover, the Chief Justice also rejected the unprecedented argument, made by the Obama Administration and adopted by Justice Ginsburg in dissent, that the power to regulate includes the power to "direct" an individual to engage in commerce in the first place.  If accepted, this argument would have empowered the National Government to  As the Chief Justice explained, and as previously explained on this blog, the power to "regulate" consists solely of the power to "prescribe the rule by which commerce is to be governed."  

The individual mandate, the Chief Justice said, did not constitute a regulation of pre-existing commerce and therefore exceeded Congress's commerce clause power:.  As the Chief Justice explained:

"The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Every day individuals do not do an infinite number of things. In some cases they decide not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation bypointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and—under the Government’s theory—empower Congress to make those decisions for him."

The Chief Justice also explained that adoption of the government's theory would justify a variety of intrusive and unprecedented regulation.  For instance, and as previously explained on this blog, individuals' failure to adopt a balanced diet can impose significant costs on the health care system.  Indeed, the Chief Justice asserted that poor dietary choices impose greater costs on the health care system than the costs imposed by uninsured Americans.  Thus, the government's theory of the Commerce Clause (and, I should note, the theory endorsed by numerous pundits and legal scholars), would grant the national government breathtaking new powers:

"Under the Government’s theory, Congress could address the diet problem by ordering everyone to buy vegetables. . . . Accepting the Government’s theory would give Congress the . . . license to regulate what we do not do, fundamentally changing the relation between the citizen and the Federal Government."

Justices Scalia, Alito, Kennedy and Thomas issued their own opinion, agreeing with Chief Justice Roberts that the mandate exceeded Congress power under the Commerce Clause and Necessary and Proper Clause.  Like Chief Justice Roberts, these Justices explained that, if accepted, the government's theory would grant Congress unprecedented authority to compel individuals to engage in commerce against their will, under penalty of criminal sanctions.  Responding to Justice Ginsburg's dissenting attempt to distinguish a mandate to purchase broccoli from a mandate to purchase health insurance, these four members of the majority on the Commerce Clause question said:

"Of course one day the failure of some of the public to purchase American cars may endanger the existence of domestic automobile manufacturers; or the failure of some to eat broccoli may be found to deprive them of a newly discovered cancer fighting chemical which only that food contains, producing health care costs that are a burden on the rest of us—in which case, under the theory of Justice Ginsburg's dissent, moving against those inactivities will also come within the Federal Government’s unenumerated problemsolving powers."

At the same time, Chief Justice Roberts joined Justices Ginsburg, Breyer, Kagan and Sotomayor in holding that the penalty imposed on those who choose not to purchase health insurance is a "tax" and thus not a civil penalty imposed for failure to comply with a coercive regulatory edict to purchase health insurance.   In so doing, the Chief Justice explained that the penalty is small enough that individuals can choose not to purchase health insurance, self-insure and simply pay the tax instead.  In the same way, individuals who choose to self-finance and purchase their homes outright must pay higher taxes than those who choose to borrow money to make such purchases and thereby deduct interest payments from their income.
As a result, Obamacare survives, but so too does Federalism.    Under today's ruling Congress could not, for instance, impose fines or civil penalties on individuals who refuse to purchase health insurance.  Nor, of course, could Congress impose jail sentences on such individuals.  Thus, while Congress may encourage individuals to purchase health insurance instead of choosing to self-insure, in the same way that Congress may encourage individuals to borrow money to purchase a home, they may not compel such a purchase or compel such borrowing under penalty of law.  President Obama's effort, aided by numerous scholars and commentators, to radically alter the balance of authority between individuals and the National Government has failed, for now.