Obamacare Heads to the Supreme Court

by Doug Bandow

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When Congress was pushing through President Barack Obama's plan to nationalize health care decision-making, legislators gave little thought to the Constitution. After all, the denizens of Capitol Hill had grown accustomed to passing whatever laws they desired, with the expectation that, if necessary, compliant courts would fashion another magical legal doctrine or two to justify Congress' action. Naturally, all of the president's men and their allies dismissed the legal cases filed against Obamacare after it became law.

However, the advocates of government-controlled medicine are no longer laughing. The Eleventh Circuit Court of Appeals last week struckdown an essential part of the legislation. This evens the score, balancing an earlier decision by the Sixth Circuit to uphold the vast expansion of federal power. In the latest case, Judge Frank Hull, a Democratic appointee, voted with Chief Judge Joel Dubina to overturn the legislation.

The substantive sections of the majority opinion in State of Florida, et al., vs. U.S. Department of Health and Human Services run roughly 150 pages, making it the longest and most detailed decision yet. As such, noted my Cato Institute colleague Ilya Shapiro, the "ruling shows that the constitutional issues raised by the healthcare reform — and especially the individual mandate — are complex, serious, and non-ideological."

Doug Bandow is a Senior Fellow at the Cato Institute and the Senior Fellow in International Religious Persecution at the Institute on Religion and Public Policy. A former Special Assistant to President Ronald Reagan, he is author of Beyond Good Intentions: A Biblical View of Politics (Crossway).

More by Doug Bandow

The decision obviously will affect Americans' health care. But the more basic issue is whether there remains any limit to the reach of the federal government. The Framers viewed the national government as having important but only limited and enumerated powers. That is, Washington was an island of government authority in an ocean of individual liberty.

Over the years the courts have gutted constitutional doctrines intended to limit state power and justified almost any government action unless barred by the Bill of Rights. Indeed, the Commerce Clause, which authorizes federal regulation of commerce "among the several states," has been interpreted to largely swallow up Article 1, Section 8, which enumerates Congress's authority. The ocean became one of government power, with but a few islands of personal freedom.

However, Obamacare went further than any previous federal intrusion. In the name of regulating commerce, the law ordered people who had not entered any market to purchase a private product. If upheld, the measure would establish the principle that Americans could be forced to buy American cars to bail out the auto industry, Lehman securities to save Wall Street, and homes to revive the housing market. Whether or not the insurance mandate is good policy — and there are lots of reasons to argue that it is not — it effectively dismantles any meaningful limits on the national government.

The five federal District Court decisions so far have broken three-to-two in upholding Obamacare. Although in the majority, the former have been less than persuasive. Indeed, District Court Judge Gladys Kessler stated in her opinion that the government could regulate "mental activity" — under a constitutional provision involving "commerce."

All of these rulings were appealed. The Sixth Circuit was first to deliver its opinion, with the judges split two-to-one in favor of the president's plan to treat passivity as if it was activity. Then last week the Eleventh Circuit said no.

Twenty-six states sued the federal government, challenging several aspects of the misnamed Patient Protection and Affordable Care Act. (The law actually supersedes patient choice and bends the medical cost curve upward.)

One claim was that the legislation's dramatic expansion of Medicaid, which would impose additional costs on the states, was "coercive." Explained Judges Dubina and Hull: "[T]he coercion test asks whether the federal scheme removes state choice and compels the state to act because the state, in fact, has no other option."

Unfortunately, the states all have chosen to accept federal Medicaid dollars. With their hands greedily extended, they have been unable to convince any judge in any case that they could do nothing about the extra costs to be imposed. The Eleventh Circuit majority noted: "[S]tates have plenty of notice — nearly four years from the date the bill was signed into law — to decide whether they will continue to participate in Medicaid by adopting the expansions or not."

States might want to stay in the program without paying more, but that is not the same as being unable to pay more. Thus, observed the judges, "Medicaid-participating states have a real choice — not just in theory but in fact — to participate in the Act's Medicaid expansion" and "Where an entity has a real choice, there can be no coercion."

States should take this lesson to heart before again lining up for a federal handout.

The more important challenge was to the individual mandate. Under any serious interpretation of the meaning of "commerce" carried out "among" the states, not buying insurance does not qualify. The activity would have to cross state boundaries and, more important, actually be a commercial activity.

Under extraordinary political pressure the New Deal Supreme Court systematically denuded the Constitution of limits on government, substituting political preference for legal principle. In Wickard v. Filburn, the justices allowed the federal government to restrict a farmer from planting food for his family's personal use, ruling that intra-state non-commercial activity was the same as inter-state commerce, since the former could affect the latter.

It was a profoundly dishonest opinion, ignoring the plain meaning of the phrase as well as clear intent of those who wrote and ratified the Constitution. Had the recently rebellious Americans understood that they would end up authorizing the federal government to regulate almost every human activity with this one phrase, they would have struck it from the text or refused to ratify the document.

Still, Wickard only covered almost everything. Explained Judges Dubina and Hull in Florida v. HHS: "Nonetheless, the Supreme Court has staunchly maintained that the commerce power contains outer limits which are necessary to preserve the federal-state balance in the Constitution."

Those limits may be hard to discern, but the high court eventually enunciated them in two cases. In 1995 the majority ruled in United States v. Lopez that the Commerce Clause did not allow Congress to ban possession of a gun in a school zone since there was no commerce. In United States v. Morrison, decided in 2000, the Court overturned a penalty against gender-related violence, since there was no "economic activity." In both cases the Supreme Court recognized that accepting the government's position yielded no obvious limit to government power. Said the majority in Lopez, "[W]e are hard pressed to posit any activity by an individual that Congress is without power to regulate." The justices stepped back from that jurisprudential abyss.

After a detailed review, the Eleventh Circuit noted that Congress' latest assertion of power is unprecedented: "Even in the face of a Great Depression, a World War, a Cold War, recessions, oil shocks, inflation, and unemployment, Congress never sought to require the purchase of wheat or war bonds, force a higher savings rate or greater consumption of American goods, or require every American to purchase a more fuel efficient vehicle."

Equally important, the power being claimed through Obamacare is extraordinary. The majority added:

In sum, the individual mandate is breathtaking in its expansive scope. It regulates those who have not entered the health care market at all. It regulates those who have entered the health care market, but have not entered the insurance market (and have no intention of doing so). It is overinclusive in when it regulates: it conflates those who presently consumer health care with those who will not consume health care for many years into the future. The government's position amounts to an argument that the mere fact of an individual's existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life. This theory affords no limiting principles in which to confine Congress's enumerated power.

The Administration makes much of the alleged uniqueness of the market and the problem of cost-shifting from the uninsured. However, the majority noted that the proffered distinctions have no constitutional relevance. Moreover, "the primary persons regulated by the individual mandate are not cost-shifters, but healthy individuals who forego purchasing insurance." This merely reaffirms the extraordinary nature of the mandate, "forcing market entry by those outside the market."

Reinforcing the Eleventh Circuit's caution in approaching the mandate was the fact that "insurance qualifies as an area of traditional state regulation." So does health care, since "a state's role in safeguarding the health of its citizens is a quintessential component of its sovereign powers." Federalism became the clincher. Stated the majority: "When this federalism factor is added to the numerous indicia of constitutional infirmity delineated above, we must conclude that the individual mandate cannot be sustained as a valid exercise of Congress's power to regulate activities that substantially affect interstate commerce."

The administration made two other unsuccessful claims to salvage the mandate. The first was that the requirement was "a necessary and proper exercise" of the commerce power. Nice try, but no cigar, said Judges Dubina and Hull.

The majority concluded that the argument the mandate is "necessary" is undermined by PPACA's own terms, with "broad exemptions and exceptions to the individual mandate (and its penalty) that impair its scope and functionality." In short, "to the extent the uninsureds' ability to delay insurance purchases would leave a 'gaping hole' in Congress' efforts to reform the insurance market, Congress has seen fit to bore the hole itself.”

But even assuming "necessity" is not enough, the judges explained: "It would be nonsensical to suggest that, in announcing its 'larger regulatory scheme' doctrine, the Supreme Court gave Congress carte blanche to enact unconstitutional regulations so long as such enactments were part of a broader, comprehensive regulatory scheme." A law must be "proper" — that is, within the federal government's constitutional power — as well as "necessary."

The government's second claim was that the mandate, backed by a tax penalty, actually is a tax. In this case the majority didn't even say nice try. Rather, noted the opinion, "all of the federal courts, which have otherwise reached sharply divergent conclusions on the constitutionality of the individual mandate, have spoken on this issue with clarion uniformity. Beginning with the district court in this case, all have found, without exception, that the individual mandate operates as a regulatory penalty, not a tax."

It could not be otherwise. Congress declared the penalty to be a penalty, counted on no revenue from the provision, limited IRS power to enforce the penalty, and cited the Commerce Clause as the law's constitutional basis. Moreover, the fact that the Obama administration claimed the mandate was essential to its regulatory scheme demonstrated that the penalty was, in fact, a penalty enacted to back the mandate. The majority opined: "The individual mandate as written cannot be supported by the tax power."

Although the appellate court gutted Obamacare by voiding the insurance mandate, the judges did not kill the legislation. They reversed the trial court on the issue of "severability" — that is, whether the mandate can be separated from the rest of the bill. The District Court said no, since the mandate was integral to the legislation.

The Eleventh Circuit came out differently, however. The courts favor severability when possible, even when legislators fail, as in this case, to include a clause supporting severability. Thus, ruled the majority, the rest of the law stands since "the lion's share of the Act has nothing to do with private insurance, much less the mandate that individuals buy insurance."

The dissent, too, is long — over 80 pages. Judge Stanley Marcus called for a "pragmatic" decision reflecting "the undeniable fact that Congress' commerce power has grown exponentially over the past two centuries." Yet even he admitted that "the individual mandate is a novel exercise of Congress' Commerce Clause power" and that "it is surely true that there is no Supreme Court decision squarely on point dictating the result that the individual mandate is within the commerce power of Congress."

More tellingly, Judge Marcus dismissed "the parade of horribles said to follow ineluctably from upholding the individual mandate," since the supposedly "powerful limits" from Lopez and Morrison would remain. However, if these "powerful limits" do not prevent Congress from treating market inaction as market participation, they are "powerful" only in the opinion writer's mind. Affirming the individual mandate would effectively write the Article 1, Section 8 enumeration out of the Constitution.

Judge Marcus's more basic point is that doing the latter would be no big deal since "upholding the individual mandate would be far from a cosmic expansion of the boundaries of the Commerce Clause." In short, since the federal government can do almost everything that it wants already, why not let it do everything? The idea that the Constitution was created to protect individual liberty is of no matter, since most politicians (and most judges, including this one, obviously) today are not interested in protecting individual liberty.

The legal battle over Obamacare may look like just another esoteric court fight. However, the outcome will determine whether people retain the freedom to decide on their own medical treatment. The case also will decide whether any substantive powers remain beyond the federal government. Only if the judges affirm that the Constitution means what it says will our liberties be secure.