Understanding the Health Care Litigation, Part Three

First, the gloating.

Yesterday, I wrote:  "Commerce doesn't exist to be regulated until people engage in commerce. The ACA forces people to engage in commerce, then regulates them."

Today at the Supreme Court, Justice Kennedy asked the Solicitor General: "Can you create commerce order to regulate it?"

Now, I'm not saying that Justice Kennedy checks out the Wizard of Laws before important arguments, but is it more than a coincidence that his first question to the Solicitor General echoed the Wiz?  Just sayin'.

Now, to business.

Today's Arguments

Not a good day for the Obama administration or its Solicitor General, Donald Verrilli.  He was questioned relentlessly by the Justices -- especially Kennedy, Alito, and Scalia -- on the implications of the administration position that the individual mandate was founded on the Commerce Clause.

Here are three beautiful statements by Justice Scalia:

The argument here is that this also is -- may be necessary, but it's not proper, because it violates an equally evident principle in the Constitution, which is that the Federal Government is not supposed to be a government that has all powers; that it's supposed to be a government of limited powers. And that's what all this questioning has been about. What -- what is left? If the government can do this, what -- what else can it not do?

          and

An equally evident constitutional principle is the principle that the Federal Government is a government of enumerated powers and that the vast majority of powers remain in the States and do not belong to the Federal Government.

          and

I mean, the Tenth Amendment says the powers not given to the Federal Government are reserved, not just to the States, but to the States and the people. And the argument here is that the people were left to decide whether they want to buy insurance or not.

Verrilli had a difficult time, but as flustered as he got, Paul Clement, arguing for the 26 states challenging Obamacare, was that composed and cool under fire.  Here's an example from an exchange between Clement and Justice Breyer, who, as part of a question that ran two pages in the transcript, inquired whether Congress had the power to create commerce, based on the fact that Congress created a national bank, which was approved by the Supreme Court in the 1819 McCulloch v Maryland decision.  Clement replied coolly:

MR. CLEMENT: Well, Justice Breyer, let me start at the beginning of your question with McCulloch.  McCulloch was not a commerce power case.

JUSTICE BREYER: It was both?  

MR. CLEMENT: No, the bank was not justified and the corporation was not justified as an exercise of commerce power. So that is not a case that says that it's okay to conjure up the bank as an exercise of the commerce power.

That's pretty much the way the day went -- Verrilli struggling and Clement in command.  As most appellate lawyers will tell you, it's risky to predict outcomes based on questions during oral argument, but it's difficult to see this as anything other than a good day for Obamacare opponents.

Wednesday's Arguments on Severability and Medicaid

Read about severability here.  If the lower court decisions on severability were laid end to end, they would point in all directions.  Still, it's hard to imagine that this bill would have passed without the individual mandate, so if the mandate is declared unconstitutional, there is no logical reason the rest of the bill should survive.

The other issue is Obamacare's Medicaid expansion.  As described by the 26 states challenging the law:

Title II of the ACA expands the Medicaid program in multiple respects and transforms it from a cooperative program addressed to specific categories of the most needy into a mandatory program designed to fulfill the individual mandate for the entire non-elderly population with income below 138% of the federal poverty line. Whereas States traditionally were required to offer Medicaid only to those low-income individuals who fell within certain “categorically needy” groups (families with dependent children, elderly, blind, disabled, children, and pregnant women), and retained significant flexibility to determine whether and to what extent to cover other low-income individuals, the Act requires States to cover all individuals under age 65 with incomes up to 133% of the poverty level, with a 5% “income disregard” provision that effectively raises that threshold to 138%.

Congress could not require the states to implement and expand these programs through direct legislation, however, so it is attempting to accomplish it through the "spending power."  Congress has conditioned the receipt of all federal monies on state compliance with the new Medicaid provisions, thus effectively coercing state compliance by a kind of blackmail.  As the 26 states put it:

The ACA threatens States with the loss of every penny of federal funding under the single largest grant-in-aid program in existence—literally billions of dollars each year—if they do not capitulate to Congress’ steep new demands. There is no plausible argument that a State could afford to turn down such a massive federal inducement, particularly when doing so would mean assuming the full burden of covering its neediest residents’ medical costs, even as billions of federal tax dollars extracted from the State’s residents would continue to fill federal coffers to fund Medicaid in the other 49 States.

Ultimately, I think the Court may end up not deciding the Medicaid question at all.  If the Court finds the individual mandate unconstitutional and determines that it is not severable, the entire act, including the Medicaid provisions, crumbles.  At that point, the Medicaid issue is moot and can be reserved for another day.

Another fascinatiing day coming up on Wednesday, with severability being the big issue of the day.

Understanding the Health Care Litigation, Part Two

Round one is over, and the world waits anxiously for round two tomorrow in what is the most important Supreme Court case since Brown v Board of Education, and maybe since Marbury v Madison.

Today's Arguments

Today the Supreme Court heard arguments on whether it should or should not decide the health care cases because of the federal Anti-Injunction Act.  This law, passed in 1867, essentially provides that a tax cannot be challenged until it is paid.  One court found that, since the penalty (the alleged "tax") imposed by the Patient Protection and Affordable Care Act (ACA) for not buying health insurance does not take effect until 2014, and since therefore no one had been forced to pay the tax yet, the challenge to the law is not yet "ripe" for decision. 

All the parties challenging the law and the federal government agreed that the the case is ready to be decided, so the Supreme Court had to appoint an attorney, Robert Long, to argue that the the Anti-Injunction Act barred the proceedings.  Things didn't go too well for him.

From the questioning, it was fairly apparent that the justices want to reach the merits of the ACA litigation.  Justice Sotomayor asked Mr. Long to describe the "parade of horribles" that would occur if the court decided to reach the merits.  Much fumbling ensued, leading Justice Scalia to observe "there will be no parade of horribles."  Justice Breyer pointed out that the statute calls it a penalty, not a tax, and Justice Ginsburg observed that it is not a revenue-raising measure since, if everyone obeys the law, there will be no revenue associated with the penalty.

When the Solictor General, Donald Verrilli, argued that the penalty is not a tax, Justice Alito snagged him with the conflicting positions taken by the Administration.  To get the case heard, Verrilli argued the penalty is not a tax; but to get the law upheld, Verrilli argues the penalty is a tax, an inconsistency upon which Justice Alito seized:

General Verrilli, today you are arguing that the penalty is not a tax. Tomorrow you are going to be back and you will be arguing that the penalty is a tax. Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?

 So what was Verrilli's answer to that?  It turns out, the same words can mean different things on different days:

Tomorrow the question is whether Congress has the authority under the taxing power to enact it and the form of words doesn't have a dispositive effect on that analysis. Today we are construing statutory text where the precise choice of words does have a dispositive effect on the analysis.

Based on the tenor of the questioning, I think there is little doubt the court will brush aside the Anti-Injunction Act in order to get to the meat of the case.

Arguments Over The Individual Mandate

Today's argument was one hour and 29 minutes long. Tomorrow, the court has allotted two hours for the main event -- the argument over the individual mandate.

The ACA requires that virtually every living person in America -- except for illegal aliens and some other, incredibly narrow, categories -- must buy health insurance.  For the first time in the history of this nation, the federal government is requiring Americans to engage in commerce merely because they are alive.

There are a lot of requirements that arise once a person decides to participate in commerce, but there has never before been a law forcing people to make economic decisions.

The argument over the individual mandate --- also known as the mandatory coverage issue -- will focus on whether the federal government has the power to impose the mandate based on the Commerce Clause or the Necessary and Proper Clause. 

Article I, Section 8 of the Constitution provides:

The Congress shall have Power - To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

This provision only permits the Congress to make laws that are necessary to carry out its other powers, so to find the mandate "necessary and proper," the court will have to decide whether the mandate is permitted under Congress's other powers, which sends us right back to the Commerce Clause, Article I, Section 8:

The Congress shall have Power [...] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

Commerce doesn't exist to be regulated until people engage in commerce.  The ACA forces people to engage in commerce, then regulates them.  There has never been a law like it, and the only reason there is any argument about its constitutionality is the Supreme Court's historical and ridiculous distortion of the Commerce Clause in the support of political aims.

The modern, nearly limitless, interpretation of the Commerce Clause had its genesis in the 1942 case of Wickard v Filburn.  The U.S. government had established a Depression-era scheme designed to prop up the price of wheat, and it worked.  In 1941, wheat producers cooperating with the "Agricultural Adjustment" program received $1.16 a bushel, compared to the world market price of $.40 a bushel. 

The federal regulations established wheat production limts based on acreage.  Filburn was a farmer who decided to grow more than his allotment, but he grew the wheat for his own use; he did not sell any of the wheat in interstate commerce.   Nonetheless, the court found that Filburn had violated the law, which was a valid exercise of government power under the Commerce Clause.  The court reasoned that, if Filburn had not grown the excess wheat for his own use, he would have had to buy wheat on the open market.  Although Filburn alone might not have been able to affect the market, the cumulative effect of thousands like him would be substantial.  Therefore, Congress has the authority to regulate a completely intrastate market if the cumulative effect of such activities would have a substantial effect on interstate commerce.

Thus, constitutional doctrine was founded on the "what-if-everyone-did-that" argument, explaining at least in part why Wickard v Filburn makes most lists of the worst Supreme Court decisions in history.

The health care cases go beyond Wickard.  Way beyond Wickard.  If the ACA is upheld as a constitutional exercise of Commerce Clause authority, there is nothing the federal government can't require under the same theory.  The government can tell us what to eat, what to wear, what to do, how many children to have -- there will be no limit.

To put it in Wickard terms, upholding the ACA would mean the government could not only tell us not to produce excess wheat, it could force us to stop producing wheat altogether and buy that wheat only from government-sponsored exchanges.  That is, it could if the anti-gluten forces don't get there first.

In other words, this case is huge.  The hugest.  Stay tuned.

Understanding the Health Care Litigation, Part One

After all the politics appearing in these hallowed pages lately, it's time to get back to fundamentals, as befits the Wizard of Laws.  (Though I dare say that my January 7 and November 9 posts below have been amply vindicated).

The big event of the U.S. Supreme Court's 2011-2012 term -- and perhaps the most important since Brown v Board of Education -- will be the decision on the various cases involving the Patient Protection and Affordable Care Act. commonly known as Obamacare.

The issues to be argued are known generally by the public, but few understand them in any detail.  For example, during a recent forum, the Lieutenant Governor here in the Enchanted Mitten, arguing for a state-established health care exchange, said that even if the Court finds the individual mandate unconstitutional, it will have no effect on health care exchanges, since HCEs are not before the Court.  This position is not exactly accurate.  If the Court determines that the individual mandate is unconstitutional. it will then  expressly decide whether the entire law must be struck down, including those provisions pertaining to health care exchanges.

The issue of whether to invalidate an entire law when one provision is declared unconstitutional is what is known as the issue of severability.  In other words, can the offending provision be severed from the rest of the law so that the law remains in effect, minus the severed provision?

There is a fair amount of misconception about severability.  Many people believe that an unconstitutional  provision cannot be severed unless there is a severability clause in the law itself.  Since Obamacare contains no severability clause, the argument goes that declaring the individual mandate unconstitutional will strike down the entire law automatically.

This is not true.

The Supreme Court established the applicable severability standard in the 1987 case of Alaska Airlines v Brock, in which it held that an unconstitutional provision may be severed "unless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not."  So, severability is presumed, unless it is clear that, without the unconstitutional provision, Congress would not have enacted the law.

The Brock standard is not exactly a model that lends itself to metaphysical certainty.  The Court found that the "more relevant inquiry in evaluating severability is whether the statute will function in a manner consistent with the intent of Congress."  Again, there is a certain subjectivity to this standard, which relies on faithful application by the courts.

Yes, I said "faithful," not "consistent."  In the four cases in which the individual mandate was found unconstitutional, the courts dealt with severability in four separate ways.  The courts in question decided:

1.  Only the mandate and those directly-dependent provisions which make specific reference to the mandate were to be severed;

2.  The mandate is non-severable and the entire law is invalidated;

3.  Only the mandate itself is severed; and

4.  The mandate is non-severable from the guaranteed-issue and preexisting conditions provisions, but the rest of the law remains intact.

One Supreme Court petitioner wrote:

As these four divergent opinions make clear, there is serious confusion as to how to apply this Court's severability jurisprudence to the [Act].  That confusion stems in large part from the unusual facts at hand, including the extraordinary length and complexity of the Act, and 'the haste with which the final version of the 2,700 page bill was rushed to the floor for a Christmas Eve vote.'

As you can tell, this is a complicated issue, but it is now before the Court and, if the individual mandate is declared unconstitutional, the Supreme Court will then determine whether Congress would have enacted Obamacare without the individual mandate.  If the Court declares the mandate non-severable, the entire law will be invalidated, including those provisions related to health care exchanges.

Next time:  a closer look at the individual mandate and interstate commerce.