The Big Decision

By Greg Scandlen

I have read the Florida decision, and—WOW!

If you have a chance, I encourage you to read Judge Vinson’s entire decision.   It is well-written and well-reasoned. It’s like taking an entire semester of Constitutional law without paying tuition.  I don’t think very many of the commentators have actually read it or they wouldn’t be going off on snarky tangents. In the New York Times, for instance, Kevin Sack repeats a charge by Mark Hall of Wake University Law School that Vinson was writing a “Tea Party Manifesto” by mentioning the original Tea Party in his discussion. He also quotes liberal blogger Igor Volsky as calling the decision “an overreach.”

Sack obviously did not read the decision himself, or he would not have had to quote such partisans, who very likely did not themselves read the decision, either. Instead of addressing the issues raised, they attack the judge – a common tactic in these days of supposed civility.

In fact, the judge is very cautious in his ruling. He hews strictly to Supreme Court precedent and does not venture into new territory. If there is an overreach here, it is in the law itself, which even the Congressional Research Service (CRS) warned is “novel,” “unprecedented” and may lack a “solid constitutional foundation.”

But, first, the judge dismisses the plaintiff’s claim that the Medicaid expansion amounts to coercion by the federal government on the states.  He writes,

The gist of this claim is that because Medicaid is the single largest federal grant-in-aid program to the states, and because the states and the needy persons receiving that aid have come to depend upon it, the state plaintiffs are faced with an untenable Hobson’s Choice. They must either (1) accept the Act’s transformed Medicaid program with its new costs and obligations, which they cannot afford, or (2) exit the program altogether and lose the federal matching funds that are necessary and essential to provide health care coverage to their neediest citizens (along with other Medicaid-linked federal funds). Either way, they contend that their state Medicaid systems will eventually collapse, leaving millions of their neediest residents without health care. The state plaintiffs assert that they effectively have no choice other than to participate in the program. In their voluminous materials filed in support

After reviewing existing case law, he concludes there is little support for the coercion claim. He says that, while it may be very difficult politically to do, states still retain the power to opt-out of Medicaid, or to raise taxes to support the program. But he adds –

I appreciate the difficult situation in which the states find themselves. It is a matter of historical fact that at the time the Constitution was drafted and ratified, the Founders did not expect that the federal government would be able to provide sizeable funding to the states and, consequently, be able to exert power over the states to the extent that it currently does. To the contrary, it was expected that the federal government would have limited sources of tax and tariff revenue, and might have to be supported by the states. This reversal of roles makes any state- federal partnership somewhat precarious given the federal government’s enormous economic advantage. Some have suggested that, in the interest of federalism, the Supreme Court should revisit and reconsider its Spending Clause cases. See Lynn A. Baker, The Spending Power and the Federalist Revival, 4 Chap. L. Rev. 195-96 (2001) (maintaining the “greatest threat to state autonomy is, and has long been, Congress’s spending power” and “the states will be at the mercy of Congress so long as there are no meaningful limits on its spending power”). However, unless and until that happens, the states have little recourse to remaining the very junior partner in this partnership.

He then goes on to consider the individual mandate, beginning with a very thorough review of evolving case law respecting the Commerce Clause. There is plenty to discuss here, but I will let it pass for now. Let’s just say that the Depression-era Supreme Court turned 150 years of established precedent on its head with several decisions. Curious that today the senate insists on the importance of “stare decisiswhen confirming judicial appointments, when most of the case law we are living with paid little attention to it in the past. But these New Deal decisions hugely expanded the scope of the Commerce clause, so that –

… from the New Deal period through the next five decades, not a single federal legislative enactment was struck down as exceeding Congress’ power under the Commerce Clause power — until Lopez in 1995.

Although Lopez was a compelling issue (forbidding the possession of firearms in school zones), the Court could not see the logic in using the Commerce Clause to allow federal intervention. Judge Vinson quotes Justice Kennedy’s concurring opinion in the case –

(Kennedy explained) that it is the Court’s duty to “recognize meaningful limits on the commerce power” and intervene if Congress “has tipped the scales too far” as federal balance “is too essential a part of our constitutional structure and plays too vital a role in securing freedom.”

This, by the way, is only one of many instances in which Judge Vinson quotes Kennedy’s opinions. The man is politically savvy, knowing that Kennedy will be the swing vote on the Court and using his writings to support Vinson’s conclusions will surely help in the final verdict.

He then looks at United States v. Morrison and quotes –

The Court began its analysis by recognizing the foundational principle that the power of the federal government is “defined and limited” and therefore: “Every law enacted by Congress must be based on one or more of its powers enumerated in the Constitution.” It emphasized that while the legal analysis of the Commerce Clause “has changed as our Nation has developed,” which has resulted in Congress having “considerably greater latitude in regulating conduct and transactions under the Commerce Clause than our previous case law permitted,” authority under the Clause “is not without effective bounds.” (citations omitted.)

He goes on to discuss “activity,” arguing that in every case the Court has reviewed there was some activity involved and an individual could get out from under the scope of the law by ceasing the activity. Even the infamous Wickard decision, which regulated a farmer who simply wanted to grow and consume wheat on his own farm, the farmer could choose not to grow that wheat, and thus be free of the regulation.

The Defendants in this case (the U.S. government) countered that the Supreme Court has never addressed the “activity” issue. But Judge Vinson responded –

(T)here is a simple and rather obvious reason why the Supreme Court has never distinguished between activity and inactivity before: it has not been called upon to consider the issue because, until now, Congress had never attempted to exercise its Commerce Clause power in such a way before. See CBO Analysis (advising Congress during the previous health care reform efforts in 1994 that “[t]he government has never required people to buy any good or service as a condition of lawful residence in the United States.”)

He goes on to quote extensively from an analysis provided to Congress by attorneys at the Congressional Research Service prior to enactment of the law –

One could argue that while regulation of the health insurance industry or the health care system could be considered economic activity, regulating a choice to purchase health insurance is not. It may also be questioned whether a requirement to purchase health insurance is really a regulation of an economic activity or enterprise, if individuals who would be required to purchase health insurance are not, but for this regulation, a part of the health insurance market. In general, Congress has used its authority under the Commerce Clause to regulate individuals, employers, and others who voluntarily take part in some type of economic activity. While in Wickard and Raich, the individuals were participating in their own home activities (i.e., producing wheat for home consumption and cultivating marijuana for personal use), they were acting of their own volition, and this activity was determined to be economic in nature and affected interstate commerce. However, [the individual mandate] could be imposed on some individuals who engage in virtually no economic activity whatsoever. This is a novel issue: whether . . . this type of required participation can be considered economic activity.

Congress was certainly warned ahead of time that what they were doing was likely unconstitutional, but in its lust for power it ignored the warning, just as it ignored the broad public opposition to the bill and the gross violation of normal congressional procedures.

The government further argued that people who fail to buy insurance are indeed participating in an economic activity because everyone will consume health care eventually, but Judge Vinson was not impressed with the argument, because everyone needs food and shelter eventually, too. That mere fact would hardly justify Congress to force them to buy what Congress prefers they buy. He says –

… the mere status of being without health insurance, in and of itself, has absolutely no impact whatsoever on interstate commerce (not “slight,” “trivial,” or “indirect,” but no impact whatsoever) — at least not any more so than the status of being without any particular good or service. If impact on interstate commerce were to be expressed and calculated mathematically, the status of being uninsured would necessarily be represented by zero. Of course, any other figure multiplied by zero is also zero. Consequently, the impact must be zero, and of no effect on interstate commerce.

But, he adds, that such an uninsured person may indeed go on to seek medical care sometime in the future –

And when they do, Congress plainly has the power to regulate them at that time (or even at the time that they initially seek medical care), a fact with which the plaintiffs agree.

And he again quotes Justice Kennedy in the Morrison decision –

In a sense any conduct in this interdependent world of ours has an ultimate commercial origin or consequence, but we have not yet said the commerce power may reach so far.

He sums up the discussion on the reach of the Commerce Clause –

The Commerce Clause originally applied to the trade and exchange of goods as it sought to eliminate trade barriers by and between the states. Over the years, the Clause’s reach has been expanded from covering actual interstate commerce (and its channels and instrumentalities) to intrastate activities that substantially affect interstate commerce. It has even been applied to activities that involve the mere consumption of a product (even if there is no legal commercial interstate market for that product). To now hold that Congress may regulate the so-called “economic decision” to not purchase a product or service in anticipation of future consumption is a “bridge too far.” It is without logical limitation and far exceeds the existing legal boundaries established by Supreme Court precedent.

Because I find both the “uniqueness” and “economic decision” arguments unpersuasive, I conclude that the individual mandate seeks to regulate economic inactivity, which is the very opposite of economic activity. And because activity is required under the Commerce Clause, the individual mandate exceeds Congress’ commerce power, as it is understood, defined, and applied in the existing Supreme Court case law.

There is an extensive discussion of the “necessary and proper” clause, and Judge Vinson finds that it cannot be used to justify an otherwise unconstitutional Congressional action. But it is the “severability” ruling that is most important. In this ruling, he departs from Judge Hudson’s decision in Virginia, and declares that because the individual mandate is unconstitutional, what other parts of the law can survive should be a legislative, not a judicial decision. He says –

I note that the defendants have acknowledged that the individual mandate and the Act’s health insurance reforms, including the guaranteed issue and community rating, will rise or fall together as these reforms “cannot be severed from the [individual mandate].”

He acknowledges that there are many provisions in the law that have nothing to do with the individual mandate and would be able to stand alone without a problem. But it is not clear to him that Congress would have enacted these provision on a stand-alone basis without the mandate and related provisions. Congress purposefully removed the severability clause that had originally been in the bill, implying that it believed the entire package was essential.

Plus, virtually all the discussion of the bill centered on “health insurance reform” aspects. Reforming health insurance was clearly what Congress intended and other provisions were merely incidental to that goal –

(T)he defendants have conceded that the Act’s health insurance reforms cannot survive without the individual mandate, which is extremely significant because the various insurance provisions, in turn, are the very heart of the Act itself. The health insurance reform provisions were cited repeatedly during the health care debate, and they were instrumental in passing the Act. In speech after speech President Obama emphasized that the legislative goal was “health insurance reform” and stressed how important it was that Congress fundamentally reform how health insurance companies do business, and “protect every American from the worst practices of the insurance industry.”

The defendants went so far as to write in a memorandum to the court –

[The individual mandate] is essential to Congress’s overall regulatory reform of the interstate health care and health insurance markets . . . is “essential” to achieving key reforms of the interstate health insurance market . . . [and is] necessary to make the other regulations in the Act effective.

Given that this provision is “essential” to the workings of the entire Act, a judge would have to go through the 2,700-page law line-by-line and make an independent determination of which provisions could stand alone. This is a legislative function, one that a federal judge is neither competent nor authorized to do. For example –

(C)onsider the Internal Revenue Service Form 1099 reporting requirement, which requires that businesses, including sole proprietorships, issue 1099 tax forms to individuals or corporations to whom or which they have paid more than $600 for goods or services in any given tax year. This provision has no discernable connection to health care and was intended to generate offsetting revenue for the Act, the need of which is greatly diminished in the absence of the “health benefit exchanges,” subsidies and tax credits, and Medicaid expansion (all of which, as the defendants have conceded, “work in tandem” with the individual mandate and other insurance reform provisions). How could I possibly determine if Congress intended the 1099 reporting provision to stand independently of the insurance reform provisions? Should the fact that it has been widely criticized by both Congressional supporters and opponents of the Act and the fact that there have been bipartisan efforts to repeal it factor at all into my determination?

The remedy is up to Congress –

If Congress intends to implement health care reform — and there would appear to be widespread agreement across the political spectrum that reform is needed — it should do a comprehensive examination of the Act and make a legislative determination as to which of its hundreds of provisions and sections will work as intended without the individual mandate, and which will not. It is Congress that should consider and decide these quintessentially legislative questions, and not the courts.

Finally, Judge Vinson decided not to issue a formal injunction because –

… there is a long-standing presumption “that officials of the Executive Branch will adhere to the law as declared by the court. As a result, the declaratory judgment is the functional equivalent of an injunction.”

Since the decision was released the Obama Administration has made it clear it has no intention of following the court’s order. This is not surprising from this Administration that has shown repeatedly that it places no value on judicial rulings. A federal judge ruled twice that the moratorium on drilling for oil in the Gulf of Mexico must be lifted, but no drilling has been allowed.

For that matter, this Administration has no regard for the English language or the truth. In this case, it repeatedly insisted that the mandate was “essential” to the workings of this law, but when it came to the issue of severability, it decided the mandate wasn’t essential at all. In the Virginia case, it declared that the “penalty” for noncompliance was just a “tax,” even though for two years it insisted in Congress and in the media that there was no tax involved, it was simply a penalty.

Do we need to add the astonishing claim by HHS that one-half of America would be denied coverage for pre-existing conditions if not for this wonderful law? Or the waivers from compliance handed out as political favors by Kathleen Sebelius?


6 Responses

  1. Greg, thank you for taking the time to create this excellent write-up — succinct and useful.

  2. That’s quite a detailed analysis Greg. Thanks.
    It does appear that without enormous political mischief the odds are the Supreme Court will finally sever the head of this monster once and for all.

    In the meantime you ask “How will the private sector respond?” Having somewhat of a street presence I can tell you that up until now the benefit plan sponsors have been deluged with informational compliance “How To’s” from various rent seekers such as consulting firms, law firms and of course the large insurance companies who are only too happy to “help” their clients “become accustomed” to the new law. It is kind of an organized frog boiling process.

    Most employers have been sort of figuratively staring slack jawed as they begin to understand what all this means. I have seen none in which their increasing knowledge of the law does not correspond directly with increasing anger. As this knowledge (and anger) increases I think we will see more demonstrative rebellion, and even defiance.

    As a small example, one of the silly provisions of this law (which gives us a clue to the extent of bureaucratic micro-managing will be involved) allows a group plan to be “grandfather” its benefit program as long as it does not decrease its benefits. Of course this means that the employer will not be allowed to raise deductibles appropriately to offset any increased expenses. Most employers realize that this will be completely counter productive, and are saying to hell with it (and making whatever changes they feel are necessary).

    It is clear that knowledge and understanding are the deadly enemies of the new law, and unless the public suddenly becomes less informed this law is headed to the same landfill as Hillarycare.

  3. I applaud Gov. Rick Scott for refusing the federal funds to “research exchanges.” Every state in that lawsuit should put a moratorium on any health care reform implementation. But our commissioner in KS has requested an early adopter grant of 21 million dollars, stating it is easier to pull the plug than jumpstart an exchange and not meet the deadline.

  4. […] The Big Decision by Greg Scandlen on the Real Health Reform blog. […]

  5. Very good decision

  6. Since the Florida decision really throws the whole of PPACA into legal limbo, does a private company have to comply in the present tense? Some states are taking a wait and see posture before implementing. What about private companies? To comply, for instance, we at Serigraph allowed a dozen 19-26-year-olds to be added to our plan. Should I reverse that decision, Greg, until we get a U.S. Supreme Court ruling?

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