Posted on: 6/29/2012
Sheila J. Carpenter, Jorden Burt
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The Supreme Court surprised many on June 28 by deciding 5-4 that the Patient Protection and Affordable Care Act (“ACA”) is constitutional, upholding the individual mandate. It also held, 7-2, that the federal government cannot punish states who refuse to accept the ACA’s expansion of Medicaid -- to all persons under age 65 with incomes less than 133% of the poverty level -- by cutting off their existing Medicaid funding.
Chief Justice Roberts was the deciding vote in upholding the individual mandate (and therefore the ACA itself), joining the “liberal” justices in ruling that the penalty for failing to buy health insurance is a “tax” permissible under Congress’s power to levy taxes. Justices Breyer and Kagan joined the “conservative” justices (including Justice Roberts) in narrowing the Medicaid provisions. Justice Roberts agreed with the dissenters that the individual mandate exceeds Congressional power under the Commerce Clause.
In a 61-page opinion, Justice Ginsburg concurred, concurred in the judgment and dissented, all in part. Justices Scalia, Kennedy, Thomas and Alito authored a joint dissent. The only “Opinion of the Court” is the part of Justice Roberts’s opinion with respect to the Anti-Injunction Act and the taxing power. The decision is posted on the Court’s home page, www.supremecourt.gov, under “Recent Decisions.” For those without time to read all 193 pages, here is a quick summary of what the Court held and the Justices’ reasoning.
The Anti-Injunction Act Does Not Bar a Decision on the Merits
The Anti-Injunction Act bars litigation to enjoin or invalidate a tax prior to the imposition of that tax. In Part II of the Court’s opinion, written by Chief Justice Roberts, the Court holds that the “penalty” in the ACA for failing to purchase health insurance is not the same type of “penalty” treated as a tax in the Internal Revenue Code, e.g., a penalty for failure to pay taxes on time. Thus, suits challenging tax penalties are subject to the Anti-Injunction Act, but the ACA penalty is not one of that sort, and the Anti-Injunction Act does not apply.
Commerce Clause Does Not Permit Mandate
By a 5-4 vote, the Court held that the Commerce Clause does not empower Congress to force individuals to purchase health insurance. Chief Justice Roberts cast the deciding vote but his opinion on the Commerce Clause is his alone. He argued that the power to “regulate” commerce “presupposes the existence of commercial activity to be regulated.” To allow Congress to compel “activity” would make the federal government one of unlimited power, contrary to the Framers’ intent to create a government of limited and enumerated powers. “The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions. Any police power to regulate individuals as such, as opposed to their activities, remains vested in the States.”
Justice Ginsburg’s dissent on the Commerce Clause issue leans heavily on the sociopolitical arguments in favor of requiring everyone to buy health insurance rather than shifting the burden of care for the uninsured onto others. She takes an expansive view of the Commerce Clause, arguing that Congress, in order to reach the uninsured who will use health care services soon, has the power to require that all uninsureds be covered. In requiring insurance, Congress is only regulating how and when medical services are paid for; insurance pays for them in advance. Justice Ginsburg also argues that the market for health care is unlike any other; while a person may decide never to buy a car or eat broccoli, everyone needs health care at some point. Allowing the mandate for this unique market does not provide support for Congress to dictate behavior in other areas.
Taxing Power Permits Individual Mandate
The Court held, 5-4, that the mandate to purchase health insurance was constitutional pursuant to Congress’s taxing power. Justice Roberts wrote for the Court, joined by Justices Ginsburg, Breyer, Sotomayor and Kagan. Although the ACA describes the payment required for the failure to purchase health insurance as a “penalty,” it is in fact a “tax.” Unlike a fine or penalty, its economic consequences are minor; the penalty is far less than the cost of insurance. Second, there is no scienter requirement as is usually the case with penalties. Finally, the penalty is collected by the normal means of collecting taxes, through the IRS, and it is not unlawful to choose the penalty over buying insurance. Those without sufficient income to file a return are not required to pay the penalty. The dissent scoffs at this analysis, noting that Congress repeatedly referred to the payment as a “penalty” for failure to comply with the ACA’s “requirement” that individuals purchase insurance.
Necessary and Proper Clause Does Not Permit Mandate
In his opinion, C.J. Roberts also said that the mandate could not be upheld under the “Necessary and Proper” clause of the Constitution because this clause can only be used in connection with one of the federal government’s powers enumerated in the Constitution.
The Joint Dissent
Justices Scalia, Kennedy, Thomas and Alito, in their lengthy dissenting opinion, reject denominating the “penalty” for noncompliance with the individual mandate as a “tax” and discuss each of the major provisions of the ACA, arguing that none of them should stand given their conclusion that the mandate is unconstitutional. “The Court today decides to save a statute Congress did not write. It rules that what the statute declares to be a requirement with a penalty is instead an option subject to a tax. And it changes the intentionally coercive sanction of a total cut-off of Medicaid funds to a supposedly noncoercive cut-off of only the incremental funds that the Act makes available.”
In a very brief additional dissent, Justice Thomas reiterated his view that “substantial effects” on interstate commerce are an insufficient basis for federal regulation, and that the ACA is an example of how the Court’s previous adoption of this test encourages the view that federal power has no limits.
A key question left unanswered: If the penalty is to be effective, can it be constitutional?
Key to Chief Justice Roberts’s vote to uphold the individual mandate was the fact that the “penalty” is small - a fraction of the cost of health insurance. However, to motivate healthy uninsureds to buy insurance, the penalty will need to be raised to the point that they decide that it makes more sense to buy insurance rather than continue to pay an extra tax. But at that point, would the Chief Justice find the penalty to be punitive, impermissibly coercing behavior? He specifically withheld judgment on the issue of whether a large penalty would pass Constitutional muster. When and if the penalty becomes a realistic motivator, will we be back where we started?