Did Congress Employ the Commerce Power to Impose Individual Mandates in the 1790s? Of Course Not.

Recently some, including Eliot Spitzer (see here) and Einer Elhauge before him (see here) have invoked early maritime legislation in support of their argument that the Affordable Care Act's coercive individual mandate is consistent with the original meaning of the Commerce Clause, in part because so many of the Founders were members of Congress during the 1790s.  Both point to two such statutes:  First, a 1798 "Act for the Relief of Sick and Disabled Seamen," which required ship owners to collect taxes to support health care for seamen and second, a 1790 Act purportedly requiring ship owners to purchase health insurance for seamen manning their vessels.  Spitzer refers to Professor Elhauge's essay  as a "brilliant article" involving "spectacular historical reporting."  Professor Elhauge's tone, it should be noted, is far more nuanced and modest.

Invocation of the 1798 Act is not new in this context.  As early as January, 2011, Ezra Klein of the Washington Post invoked this statute in his blog, claiming that the Act constituted precedent for the Affordable Care Act's coercive requirement that Americans who can afford to do so must purchase health insurance policies whose terms are dictated by the National Government.  In so doing, Klein claimed that the 1798 Act "was, in essence, a regulation against a form of inactivity: You were not allowed to not do something, in this case, pay for sailor's health insurance."

Others issued effective rebuttals to this claim at the time.  (See this excellent January 2011 essay in Forbes by Avik Roy.) 

Neither statute provides precedent for the Affordable Care Act's coercive individual mandate.

The 1798 statute, for instance, was a quintessential regulation of interstate commerce.  By its terms, the statute only applied to vessels whose owners affirmatively sought licenses to engage the so-called "coasting trade," that is, the carriage of goods within the waters of the United States from one port to another.  According to Joseph Story, Congress's power over the coasting trade derived from the Commerce Clause, and "extends to the regulation of navigation, and to the coasting trade and fisheries, within, as well as without any state, wherever it is connected with the commerce or intercourse with any other state, or with foreign nations."  See Joseph Story, II Commentaries on the Constitution of the United States, Ch. 15, Section 1071 (1833).  Indeed, as Story explained, this power "extend[ed] to the regulation and government of seamen on board of American ships."  Id.

Indeed, it may be that the 1798 Act involved an exercise of the taxing and spending power.  As Matthew Franck has explained, the statute imposed a "payroll tax collected by shipowners from seamen’s wages for purposes of a federal spending program on caring for sick sailors."  Characterized in this way, the statute was not a regulation of commerce at all, but instead an exercise of the power to "lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States."   Of course, under a Madisonian view of the Commerce Power, such spending could only further the general welfare if it carried into execution  one of Congress's enumerated powers, such as the Commerce Power.

The 1790 Act provides no more support for the Spitzer/Elhauge claim.

Here is the relevant text:

"[E]very ship or vessel belonging to a citizen or citizens of the United States, of the burthen of one hundred and fifty tons or upwards, navigated by ten or more persons in the whole, and bound on a voyage without the limits of the United States, shall be provided with a chest of medicines, put up by some apothecary of known reputation, and accompanied by directions for administering the same; and the said medicines shall be examined by the same or some other apothecary, once at least in every year, and supplied with fresh medicines in the place of such as shall have been used or spoiled; and in default of having such medicine chest so provided, and kept fit for use,Penalty on the master for default. the master or commander of such ship or vessel shall provide and pay for all such advice, medicine, or attendance of physicians, as any of the crew shall stand in need of in case of sickness, at every port or place where the ship or vessel may touch or trade at during the voyage, without any deduction from the wages of such sick seaman or marine."

As Matthew Franck (again) has explained, the Act did not require vessel owners to provide health care as such.  Instead, owners only had to provide such care if they "default[ed]" on the statute's requirement to provide "a chest of medicines, put up by some apothecary of known reputation, and accompanied by directions for administering the same . . ."   Moreover, the statute did not apply to any and all vessels but instead applied only to those vessels "navigated by ten or more persons in the whole, and bound on a voyage without the limits of the United States."   Thus, the statute did not even apply to the so-called "coasting trade" governed by the 1798 Act.

In sum neither Act provides precedent for the Affordable Care Act's coercive individual mandate.  Instead, both regulate --- that is, prescribe a rule governing --- Commerce Among the Several States and with Foreign Nations.  Indeed, in  Gibbons v. Ogden, 22 U.S. 1, 197 (1824), a case often invoked by advocates of broad national power, Chief Justice John Marshall defined the power to regulate interstate commerce as the power "to prescribe the rule by which commerce is to be governed."   The two early statutes invoked by Spitizer and Elhuage do exactly that --- they impose a rule on individuals volutarily conducting interstate commerce.  Thus, the requirements of these statutes are indistinguishable from, say, a requirement that interstate railroads install particular safety equipment, allow their employees to unionize, or travel at certain speeds.  Examples could be multiplied.  Like so many other laws, all such requirements "mandate" that firms voluntarily operating in interstate commerce perform certain acts they would not otherwise perform. 

By contrast, of course, the Affordable Care Act's individual mandate applies to individuals as such, regardless whether such individuals are engaged in interstate commerce.  That is to say, instead of prescribing a rule by which parties conduct interstate commerce that already exists, such legislation conscripts individuals into engaging in interstate commerce in the first place.  The maritime Acts invoked by Spitzer, Elhauge and others no more support such an unprecedented expansion of Federal power than they would support, for instance, a ban on the possession of guns near a school.  See United States v. Lopez, 514 U.S. 549 (1995) (invalidating such a ban)  or the regulation of purely intrastate commerce.  See A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) (invalidating such regulation). 

Update:  After publishing this post I located a response by Professor Elhauge to a similar but briefer argument made by Randy Barnett.  The core of Elhauge's response is worth quoting in full, though I have highlighted key portions.

Although Barnett acknowledges that the early medical insurance mandates were exercises of Congress’ commerce clause power, he distinguishes them on the ground that they were imposed on actors who were in commerce, namely on shipowners and (in a third example he omits) seamen. His distinction thus means that he admits that these precedents show that if one is engaged in commerce in market A – here the shipping market or the seamen labor market – then Congress has the power to impose a mandate to purchase in market B – here the medical insurance market – even though markets A and B are totally unrelated. This concession conflicts with the argument of the challengers, which claimed that widespread activity in the health care market did not permit a purchase mandate even in the highly related health insurance market. Indeed, this concession seems to make the whole action/inaction distinction collapse because the fact that no relation between the markets is required means that commercial activity in any market – say, the market for employment or food or housing – would permit the Obamacare mandate. Because the Obamacare mandate applies only to those who have income that subjects them to income tax, it is necessarily limited to people who are active in some commercial market and thus his test would be satisfied.

Basically, then, Elhauge argues that the coercive individual mandate is constitutional because it only applies to individuals who earn enough income to subject themselves to the requirement.  As such they are "in commerce" with the result that Congress may require them to purchase products in an unrelated market, just as Congress required the owners of vessels to, for instance, purchase medicine.

Elhauge's argument ellides two distinct questions: (1) whether individuals subject to the mandate are engaged in commerce and (2) whether the mandate constitutes a regulation of that commerce.  Elhauge is certainly correct that individuals who work for employers and earn income are "in commerce" (at least according to the Supreme Court's modern case law.)   In this sense they are analogous to the vessels travelling in interstate commerce regulated by the statutes discussed above.  However, while the individuals are analogous to the vessels, the mandate is emphatically NOT analogous to the regulations of those vessels that Congress promulgated in the 1790s.   Simply put, given the definition of "regulate" announced in Gibbons and discussed above, the coercive individual mandate is not a "regulation" of employment or other income generating activity.  That is to say, the mandate does NOT "prescribe the rule by which commerce [earning income] is to be governed."  Instead, the mandate has nothing to do with that income-generating activity.

Indeed, if Professor Elhauge is correct, then choosing to enter the workforce would thereby subject an individual to any regulation of Congress's choosing.  Congress could, for instance, require all individuals to do a certain number of push ups each day, or ban exercise altogether.  It could ban poker or require it.  It could require all individuals to eat rice pudding or broccoli.  Nothing in the American Constitution grants Congress this sort of power.

A Presidential Remedy for Obamacare

Understood the Nature of Executive Power

Ditto

Last week former Senator Norm Coleman, purportedly an advisor to Governor Romney, predicted that no President, Republican or otherwise, could repeal President Obama's Health Care Reform Legislation in its entirety.  Instead, he said, Republicans could repeal portions of the legislation while leaving other portions intact.  In so doing, he contradicted promises by major Republican candidates for President to work with Congress to repeal so-called "Obamacare" if elected to replace President Obama. 

Senator Coleman may overestimate the difficulty of eliminating "Obamacare" in its entirety.  After all, as some courts have already held (see also here), the Law's coercive requirement that individuals purchase health insurance policies designed by the National Government exceeds the authority that the Constitution confers on the Congress of the United States, by requiring individuals to engage in commerce, instead of regulating commerce.  Moreover, absent executive branch enforcement, this mandate would become a nullity, as individuals who declined to purchase such insurance would suffer no penalty.  Thus, upon taking office, a President who believed the coercive individual mandate to be unconstitutional could decline to enforce that provision of "Obamacare," thereby discharging his or her duty to "take care that the laws are faithfully executed," given  that the Constitution is, by its terms, the supreme LAW of the land.  (In so doing, the President would also "preserve, protect and defend the Constitution of the United States" as required by the Presidential Oath specified in Article II, Section 1 of the Constitution.)   For, as explained elsewhere on this blog (see also here), the text and structure of the Constitution require the President to decline to enforce statutes that he or she believes to be unconstitutional, without regard to the position taken by courts on the matter.  As James Madison explained more than sixteen decades ago:

       "As the Legislative, Executive, and Judicial departments of the United States are co-ordinate, and each     equally bound to support the Constitution, it follows that each must, in the exercise of its functions, be guided by the text of the Constitution according to its own interpretation of it; and, consequently, that in the event of irreconcilable interpretations, the prevalence of the one or the other department must depend on the nature of the case, as receiving its final decision from one or the other."

Thus, even if the Supreme Court were to err and uphold the coercive individual mandate this term, a President who believed the mandate to be unconstitutional would be duty-bound to decline to enforce that mandate.  In the same way, for instance, Andrew Jackson vetoed a bill attempting to recharter the Bank of the United States in 1832, partly on constitutional grounds, even though the Supreme Court had sustained identical legislation in McCulloch v. Maryland.  As Jackson put it:

"The Congress, the Executive, and the Court must each for itself be guided by its own opinion of the Constitution. Each public officer who takes an oath to support the Constitution swears that he will support it as he understands it, and not as it is understood by others. It is as much the duty of the House of Representatives, of the Senate, and of the President to decide upon the constitutionality of any bill or resolution which may be presented to them for passage or approval as it is of the supreme judges when it may be brought before them for judicial decision. The opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both. The authority of the Supreme Court must not, therefore, be permitted to control the Congress or the Executive when acting in their legislative capacities, but to have only such influence as the force of their reasoning may deserve."

Of course, President Obama's health care reform legislation contains provisions other than the coercive individual mandate.  Moreover, some of these other provisions may not exceed the power of Congress.  Thus, declining to enforce the individual mandate would not itself repeal the legislation in its entirety.  Indeed, courts often strike down particular portions of laws, leaving other portions intact, applying the doctrine of "severability."   However, as previously explained on this blog, Congress declined to include a so-called "severability clause" in the legislation, thus weakening the argument Congress intended parts of the legislation to remain intact if other parts are struck down.  Morevoer, the Obama administration has argued that the individual mandate is a critical part of the reform legislation, without which the legislation could not serve its intended purpose.  This is not surprising.  For, as previously explained on this blog, the individual mandate requires healthy individuals to pay unreasonable rates for health insurance, thereby subsidizing the purchase of health insurance by individuals who are less healthy and thus would otherwise pay higher premiums.  Without the coercive individual mandate to purchase health insurance at unreasonable rates, healthy individuals would rationally choose to self-insure, thereby thwarting the National Government's objective of forcing insurance companies to provide below-cost health insurance to millions.   As a result, a President could rationally conclude, as did one Federal Judge, that the individual mandate is not severable from the rest of the legislation, with the result that the entire legislative reform package is void.  At the very least, the President could conclude that certain provisions inextricably intertwined with the coercive individual mandate must fall along with that mandate.

Hopefully a newly-elected President will heed the views of Madison and Jackson and rid the country of the individual mandate, unless the Supreme Court does so first.

Are Self-Insurers Free Riders?

Overplaying the "Free Rider" Card

In an Op-Ed last week in the New York Times, Laurence Tribe joins the effort to demonize individuals who decline to purchase health insurance, claiming that such individuals "choose to take a free ride on the health care system."

According to Tribe:

"Individuals who don’t purchase insurance they can afford have made a choice to take a free ride on the health care system. They know that if they need emergency-room care that they can’t pay for, the public will pick up the tab. This conscious choice carries serious economic consequences for the national health care market, which makes it a proper subject for federal regulation."

As Tribe sees it, such a "choice" to free ride by declining to purchase insurance impacts interstate commerce, with the result that Congress can ban that choice, by requiring individuals to purchase a health insurance policy whose terms are set by the national government.

Tribe's broad-brush characterization of those who decline to purchase health insurance fails to consider a more obvious explanation for why many individuals choose not to purchase health insurance and is thus off the mark, to say the least. Moreover, even if some such individuals ARE properly characterized as free riders, such a "choice" to free ride does not justify requiring such individuals to purchase the sort of health insurance mandated by the recent health care reform legislation. Finally, Tribe's argument proves too much, as it would justify all sorts of regulation of personal choices plainly beyond the reach of the National Government on the flimsy ground that unregulated individuals are "free riding."

Consider the following:

First, Tribe fails to note that the health care reform legislation he supports itself deters many individuals from purchasing health insurance and thereby would, without the coercive individual mandate, increase the number of individuals who are uninsured. Why? Because the law raises the price of health insurance for relatively young and healthy individuals by mandating a form of community rating whereby perfectly healthy individuals must pay significantly more each year for health insurance than the expected annual cost of their care. It should be no surprise, then, that some such individuals will, because of the new "reform," choose not to purchase insurance in the marketplace, opting instead to pay for their own medical expenses "out of pocket." Such individuals would not be "free riding" at all, but instead avoiding a federal requirement that they pay unreasonable prices for their health insurance. (In the same way, good drivers might decline to purchase automobile insurance if the State required insurance companies to charge reckless drivers and perfect drivers the very same premium, a premium that would have to reflect the average expected losses from accidents caused by both drivers during any given year.) While subsidizing the health care expenses of less healthy individuals may be good public policy, the body politic could instead choose to do so in an honest and transparent fashion, instead of diverting attention from the true impact of the law by falsely characterizing all who fail to purchase health insurance as "free riders."

Second, individuals who self-insure, that is, pay for their health care expenses "out of pocket," often subsidize individuals who receive their health care under the auspices of insurance plans. While insurance plans can obtain discounts from health care providers because they bargain on behalf of numerous individuals, individuals bargain on behalf of themselves, only. Paying full price for health care is hardly "free riding."

Third, while Tribe decries the possibility of free riding, he ignores the fact that the individual mandate does not apply to those individuals most likely to end up incurring medical bills they cannot afford. For, as Tribe notes, the law only requires individuals to purchase insurance if they are financially able to do so. However, individuals with the financial wherewithal to purchase the sort of over-priced insurance mandated by the new law will often have the financial means necessary to pay for their own medical care, including emergency room visits. (While federal law requires hospitals that receive federal funds to provide emergency care regardless of willingness or ability to pay, it does not prevent hospitals from billing individuals for such care after the fact.) By contrast, individuals who, often through no fault of their own, cannot afford such overpriced plans will more often not be able to pay their own health expenses and thus are more likely to free ride on the overall health care system. But, again, the individual mandate does not apply to such individuals.

Fourth, let's assume for the sake of argument that some who decline to purchase over-priced health insurance are properly characterized as free riders because they ultimately end up using emergency room care. (I should note, however, that Tribe offers no data hinting at what proportion of self-insuring individuals in fact fall into this category.) Even so, such free riding does not, as a matter of policy, justify mandating the purchase of basic health insurance that covers run-of-the-mill health care expenditures. Instead, at most, the prospect of such free riding would, as a matter of policy, merely justify a requirement that such individuals purchase a policy to cover catastrophic health care expenditures associated with, say, a very expensive visit to the emergency room.

Fifth, it should be clear that the sort of mandate that Tribe favors is vastly over-inclusive and also under-inclusive. That is, it applies to all sorts of individuals who are NOT free riders and who instead choose to self-insure to avoid paying unreasonably high premiums. Moreover, the law does NOT apply to those individuals who, because they are of modest means, cannot afford such insurance.

Sixth, even if Tribe's argument somehow made sense as a matter of policy, it falls flat as a matter of Constitutional Law because it "proves too much," that is, it justifies national regulation that plainly exceeds the power of Congress under any conceivable account of the scope of the Commerce Clause. All sorts of human inactivity impacts the health care system in one sense or another. For instance, each day millions of Americans who do have health insurance or are eligible for Medicare or Medicaid choose not to exercise, to eat too much and/or eat the wrong things, to sleep too little (or too much), etc. Each such choice can increase the risk that an individual who has insurance will have to incur health care expenses reimbursed by his or her health plan or, for that matter, Medicare or Medicaid. Thus, in failing to exercise regularly, for instance, individuals "free ride" on taxes or premiums paid by those who DO exercise regularly and thus minimize their own health care expenses. No where does Tribe articulate an account of the Commerce Clause that would, for instance, empower Congress to jail or otherwise penalize those Americans who fail to do 50 jumping jacks each morning.

Missourians Reject an Individual Health Insurance Mandate Despite Corporate Speech!

Yesterday Missouri's citizens voted to reject the National Government's effort to require the state's citizens to purchase health insurance against their will. So-called Proposition C amends Missouri law to protect each citizen's right to pay health care providers directly for services rendered as well as the right to decline to purchase health insurance. Presumably Missouri voters had in mind their state model, inscribed on the state seal pictured above, i.e., "salus populi suprema lex esto" ("Let the welfare of the people be the supreme law.") The measure passed with 71 percent of the vote.

Of course, valid federal law preempts state law, including Proposition C, under the Federal Constitution's Supremacy Clause. But many argue that a coercive federal requirement to purchase health insurance exceeds the scope of Congress's limited and enumerated powers and is thus invalid. (For a summary of this argument, see the following Op-Ed in the Wall Street Journal by Randy Barnett, of Georgetown Law School.) Presumably many Missourians who voted for Proposition C did so because they believe Congress exceeded the powers the Constitution confers upon it, though some may simply agree with former Vermont Governor Howard Dean that the individual mandate is poor public policy.

Ordinarily, the "proper party" for challenging such a mandate would be an individual citizen facing a fine for not complying with the new law. (Note in this connection that the individual mandate does not even take effect until 2014.) That is to say, ordinarily a state cannot itself challenge a federal law, even one that burdens its citizens, simply because the law exceeds the scope of Congress's power. See Frothingham v. Mellon, 262 U.S. 447 (1923). However, by enshrining the right not to purchase health insurance in state law, Missouri, like several other states, has ensured that any effort to enforce the individual mandate will also preempt Missouri law. The prospect of such preemption thereby increases the chance that Missouri would itself have standing to challenge the individual mandate as a sovereign entity. Indeed, earlier this week, Judge Hudson of the Eastern District of Virginia ruled that Virginia has standing to challenge such an individual mandate, relying in part upon Virginia's Patient Protection and Affordable Care Act, which, like Proposition C, protects Virginia's from an individual mandate.

It should be noted that the Missouri Hospital Association, exercising their first amendment rights, apparently spent over $400,000 speaking in opposition to Proposition C, according to one organization that tracks these sorts of things. This is not surprising, for two different reasons. First, some citizens who choose not to purchase insurance may nonetheless require medical attention that hospitals receiving federal subsidies must provide under federal law. If the citizen cannot pay for that care, then hospitals will be left holding the bag. An individual mandate would thereby reduce the anticipated costs that hospitals must incur. Second, the premiums mandated by federal law, particularly those imposed on the young, may significantly exceed the prices justified by the expected cost of providing health care for those required to purchase insurance. If so, then the individual mandate will, other things being equal, increase overall spending on health care and thereby increase the profits earned by hospitals.

Strangely, progressive opponents of corporate political speech have not condemned the Missouri Hospital Associations efforts to drown out the speech of individual Missourians who oppose the national mandate, some of whom relied upon billboards strapped to pickup trucks to convey their support for Proposition C.