Summary of the U.S. Supreme Court decision in the case of National Federation of Independent Businesses et al. v. Sebelius, Secretary of Health and Human Services, et al.
Posted on June 28, 2012 | Comments (3)
The Supreme Court handed down its long-awaited ruling in the case of National Federation of Independent Businesses et al. v. Sebelius, Secretary of Health and Human Services, et al., upholding the individual requirement to maintain insurance coverage as a reasonable exercise of Congress’s taxing and spending authority and also upholding the constitutionality of the Medicaid coverage expansion. In a surprise coalition, Chief Justice Roberts was joined in his majority opinion by Justices Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan. The summary below describes the majority opinion, the concurring opinion (authored by Justice Ginsburg), and the dissenting opinion (jointly authored by Justices Scalia, Kennedy, Alito, and Thomas). Because the Court upheld the individual mandate, it never reached the issue of the severability of the mandate.
The majority began its opinion discussing whether it had the authority to rule on the merits given the federal Anti-Injunction Act:
“The Anti-Injunction Act bars litigation to enjoin or otherwise obstruct the collection of taxes. Because of the Anti-Injunction Act, taxes can ordinarily be challenged only after they are paid, by suing for a refund….Congress, however, chose to describe the ‘[s]hared responsibility payment’ imposed on those who forgo health insurance not as a ‘tax,’ but as a ‘penalty.’ There is no immediate reason to think that a statute applying to ‘any tax’ would apply to a ‘penalty.’ Congress’s decision to label this exaction a ‘penalty’ rather than a ‘tax’ is significant because the Affordable Care Act describes many other exactions it creates as ‘taxes.’” Majority, p. 11-12.
“In light of the [Internal Revenue] Code’s consistent distinction between the terms ‘tax’ and ‘assessable penalty,’ we must accept the Government’s interpretation. The Affordable Care Act does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act. The Anti-Injunction Act therefore does not apply to this suit, and we may proceed to the merits.” Majority, p. 15.
The Court then turned its attention to the constitutionality of the individual mandate, under the Commerce Clause, the Necessary and Proper Clause, and Congress’s Taxing and Spending Power:
“The power to regulate commerce presupposes the existence of commercial activity to be regulated. If the power to ‘regulate’ something included the power to create it, many of the provisions in the Constitution would be superfluous.” Majority, p. 18. “Our precedent also reflects this understanding. As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching ‘activity.’” Majority, p. 19. “The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.” Majority, p. 20. “The phrase ‘active in the market’ cannot obscure the fact that most of those regulated by the individual mandate are not currently engaged in any commercial activity involving health care, and that fact is fatal to the Government’s effort to ‘regulate the uninsured as a class.’” Majority, p. 25.
Having ruled that the Commerce Clause did not provide Congress with the authority to pass the individual mandate, the Court turned its attention to the Necessary and Proper Clause:
“The individual mandate cannot be sustained under the Necessary and Proper Clause as an essential component of the insurance reforms. Each of our prior cases upholding laws under that Clause involved exercises of authority derivative of, and in service to, a granted power…The individual mandate, by contrast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power….Rather, such a conception of the Necessary and Proper Clause would work a substantial expansion of federal authority.” Majority, p. 29.
Finally, the Court considered whether congressional spending powers provided a sufficient basis for passing the individual mandate:
“The text of a statute can sometimes have more than one possible meaning. And it is well established that if a statute has two possible meanings, one of which violates the Constitution, courts should adopt the meaning that does not do so.” Majority, p. 31. “The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects….It is of course true that the Act describes the payment as a ‘penalty,’ not a ‘tax.’ But while that label is fatal to the application of the Anti-Injunction Act, it does not determine whether the payment may be viewed as an exercise of Congress’s taxing power.” Majority, p. 33. “None of this is to say that the payment is not intended to affect individual conduct. Although the payment will raise considerable revenue, it is plainly designed to expand health insurance coverage. But taxes that seek to influence conduct are nothing new.” Majority, p. 36. “In distinguishing penalties from taxes, this Court has explained that ‘if the concept of penalty means anything, it means punishment for an unlawful act or omission.’ While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful. Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS.” Majority, p. 37.
The Court wrapped up its analysis of the individual mandate, upholding it under the taxing power, thusly:
“Although the breadth of Congress’s power to taxis greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior. Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individuals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the attendant consequences of being branded a criminal: deprivation of otherwise protected civil rights, such as the right to bear arms or vote in elections; loss of employment opportunities; social stigma; and severe disabilities in other controversies, such as custody or immigration disputes. By contrast, Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more.” Majority, p. 43.
The majority then turned its attention to the question of whether Medicaid expansion was unlawfully coercive under the federal Constitution:
“The Constitution simply does not give Congress the authority to require the States to regulate. That is true whether Congress directly commands a State to regulate or indirectly coerces a State to adopt a federal regulatory system as its own.” Majority, p. 47-48. “When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressuring the States to accept policy changes.” Majority, p. 50. Furthermore, the Medicaid expansion “accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for four particular categories of the needy: the disabled, the blind, the elderly, and needy families with dependent children. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. It is no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage.” Majority, p. 53-54. However, “nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.” Majority, p. 55.
Justice Ginsburg wrote a concurring opinion regarding three issues: whether the individual mandate is constitutional under the Commerce clause; whether the individual mandate is constitutional under the Necessary and Proper clause; and whether the ACA’s Medicaid expansion is constitutional under the Spending clause. Justice Sotomayor joined in this concurring opinion and agreed with all three issues, while Justices Breyer and Kagan agreed with only certain pieces of the concurrence on the two individual mandate issues, and Justices Breyer and Kagan did not join her on the Medicaid expansion analysis.
Justice Ginsburg began her concurring opinion with an overall statement that she “agree[s] with the Chief Justice that the Anti-Injunction Act does not bar the Court’s consideration of this case, and that the minimum coverage provision [i.e., the individual mandate] is a proper exercise of Congress’ taxing power. Unlike the Chief Justice, however, I would hold, alternatively, that the Commerce Clause authorizes Congress to enact the minimum coverage provision. I would also hold that the Spending Clause permits the Medicaid expansion exactly as Congress enacted it.” Concurrence, p. 1.
Justice Ginsburg then explained why she believes that the enactment of the individual mandate is a proper exercise of constitutional power under the Commerce clause: “The net result: Those with health insurance subsidize the medical care of those without it. As economists would describe what happens, the uninsured ‘free ride’ on those who pay for health insurance.” Concurrence, p. 6. She further stated that “we have repeatedly emphasized that Congress’ authority under the Commerce Clause is dependent upon ‘practical’ considerations, including ‘actual experience.’” Concurrence, p. 14. She then provided the test the Court utilized to determine constitutionality, noting that: “First, Congress has the power to regulate economic activities ‘that substantially affect interstate commerce.’ This capacious power extends even to local activities that, viewed in the aggregate, have a substantial impact on interstate commerce. Second, we owe a large measure of respect to Congress when it frames and enacts economic and social legislation. When appraising such legislation, we ask only (1) whether Congress had a ‘rational basis’ for concluding that the regulated activity substantially affects interstate commerce, and (2) whether there is a ‘reasonable connection between the regulatory means selected and the asserted ends.’” Concurrence, p. 15, 16.
Justice Ginsburg, in applying the facts of the case to this legal standard, then stated:
“Straightforward application of these principles would require the Court to hold that the minimum coverage provision is proper Commerce Clause legislation. Beyond dispute, Congress had a rational basis for concluding that the uninsured, as a class, substantially affect interstate commerce….” Concurrence, p. 16. “The minimum coverage provision, furthermore, bears a ‘reasonable connection’ to Congress’ goal of protecting the health-care market from the disruption caused by individuals who fail to obtain insurance. By requiring those who do not carry insurance to pay a toll, the minimum coverage provision gives individuals a strong incentive to insure. This incentive, Congress had good reason to believe, would reduce the number of uninsured and, correspondingly, mitigate the adverse impact the uninsured have on the national health-care market.” Concurrence, p. 17.
Justice Ginsburg then provided more rationale that drives home the core issue in her opinion:
“Virtually everyone, I reiterate, consumes health care at some point in his or her life. Health insurance is a means of paying for this care, nothing more. In requiring individuals to obtain insurance, Congress is therefore not mandating the purchase of a discrete, unwanted product. Rather, Congress is merely defining the terms on which individuals pay for an interstate good they consume: Persons subject to the mandate must now pay for medical care in advance (instead of at the point of service) and through insurance (instead of out of pocket). Establishing payment terms for goods in or affecting interstate commerce is quintessential economic regulation well within Congress’ domain. . . .” Concurrence, p. 22. “An individual’s decision to self-insure, I have explained, is an economic act with the requisite connection to interstate commerce.” Concurrence, p. 28.
The concurring opinion then went on to briefly discuss the individual mandate’s constitutionality under the Necessary and Proper clause of the Constitution. Justice Ginsburg began this part of her analysis by reiterating that the “Necessary and Proper Clause ‘empowers Congress to enact laws in effectuation of its [commerce] powe[r] that are not within its authority to enact in isolation.’ Hence, ‘[a] complex regulatory program . . . can survive a Commerce Clause challenge without a showing that every single facet of the program is independently and directly related to a valid congressional goal.’” Concurrence, p. 32.
She then reminded readers that “one of Congress’ goals in enacting the Affordable Care Act was to eliminate the insurance industry’s practice of charging higher prices or denying coverage to individuals with preexisting medical conditions. The commerce power allows Congress to ban this practice, a point no one disputes.” Concurrence, p. 32. Therefore, she argued, “the minimum coverage provision, together with the guaranteed issue and community-rating requirements, is ‘reasonably adapted’ to the attainment of a legitimate end under the commerce power: the elimination of pricing and sales practices that take an applicant’s medical history into account.” Concurrence, p. 33. Because of this link, Justice Ginsburg contended that the individual mandate is constitutional under the Necessary and Proper clause as well as the Commerce clause.
Finally, Justice Ginsburg’s concurring opinion argued that the Medicaid expansion as envisioned under the ACA is perfectly constitutional under the Spending clause, but given the majority’s opinion, nonetheless agrees that the way to fix the majority’s problem is to simply limit the Secretary’s authority to withhold funds from states not wishing to expand their Medicaid programs to the ACA’s required levels.
Justice Ginsburg began her Medicaid expansion argument by pointing out that “[t]hrough Medicaid, Congress has offered the States an opportunity to furnish health care to the poor with the aid of federal financing. The spending power conferred by the Constitution, the Court has never doubted, permits Congress to define the contours of programs financed with federal funds. And to expand coverage, Congress could have recalled the existing legislation, and replaced it with a new law making Medicaid as embracive of the poor as Congress chose.” Concurrence, p. 38.
This led her to frame the issue as follows:
“The question posed by the 2010 Medicaid expansion, then, is essentially this: To cover a notably larger population, must Congress take the repeal/reenact route, or may it achieve the same result by amending existing law? The answer should be that Congress may expand by amendment the classes of needy persons entitled to Medicaid benefits. A ritualistic requirement that Congress repeal and reenact spending legislation in order to enlarge the population served by a federally funded program would advance no constitutional principle and would scarcely serve the interests of federalism. To the contrary, such a requirement would rigidify Congress’ efforts to empower States by partnering with them in the implementation of federal programs.” Concurrence, p. 38.
Justice Ginsburg then reinforced her position by reminding us that “[i]n shaping Medicaid, Congress did not endeavor to fix permanently the terms participating states must meet; instead, Congress reserved the ‘right to alter, amend, or repeal’ any provision of the Medicaid Act.” Concurrence, p. 39.
To counter the argument of the Chief Justice that this Medicaid expansion is unduly coercive because, inter alia, it constitutes “a new grant program, not an addition to the Medicaid program existing before the ACA’s enactment,” Concurrence, p. 39, Justice Ginsburg argued that “Medicaid, as amended by the ACA, however, is not two spending programs; it is a single program with a constant aim—to enable poor persons to receive basic health care when they need it. Congress is simply requiring States to do what States have long been required to do to receive Medicaid funding: comply with the conditions Congress prescribes for participation.” Concurrence, p. 39, 40.
In conclusion, Justice Ginsburg reiterated her position on the issues:
“For the reasons stated, I agree with the Chief Justice that, as to the validity of the minimum coverage provision, the judgment of the Court of Appeals for the Eleventh Circuit should be reversed. In my view, the provision encounters no constitutional obstruction. Further, I would uphold the Eleventh Circuit’s decision that the Medicaid expansion is within Congress’ spending power.” Concurrence, p. 61.
The dissenting opinion was jointly authored by Justices Scalia, Kennedy, Alito, and Thomas. These four Justices opined on five separate issues: the Individual Mandate; the Taxing Power; the Anti-Injunction Act; the Medicaid Expansion; and Severability.
Before turning to their arguments on the separate issues, all four dissenting Justices agreed that the entire ACA should be struck down as unconstitutional for several reasons, including that fact that to go beyond regulating the failure to grow wheat, “is to make mere breathing in and out the basis for federal prescription and to extend federal power to virtually all human activity.” Dissent, p. 3. Because the dissenting Justices believed that the unconstitutional provisions were so intertwined with the rest of the law, they offered their argument as to why the whole law should be null and void:
The Act before us here exceeds federal power both in mandating the purchase of health insurance and in denying non-consenting States all Medicaid funding. These parts of the Act are central to its design and operation, and all the Act’s other provisions would not have been enacted without them. In our view it must follow that the entire statute is inoperative.” Dissent, p. 3.
The dissenting Justices then made their specific legal arguments as to the ACA’s unconstitutionality. Essentially, they contended that forcing young, healthy individuals to buy insurance is not a constitutionally viable solution to reducing premiums and ensuring insurance companies remain profitable. Moreover, these four Justices contended that not purchasing insurance is not an act of commerce:
The Individual Mandate in the Act commands that every ‘applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage.’ If this provision ‘regulates’ anything, it is the failure to maintain minimum essential coverage…. To be sure, purchasing insurance is ‘Commerce’; but one does not regulate commerce that does not exist by compelling its existence. Dissent, p. 4.
The dissent then clarified that they agree the buying and selling of health insurance contracts is commerce generally subject to federal regulation. But, “when Congress provides that (nearly) all citizens must buy an insurance contract, it goes beyond ‘adjust[ing] by rule or method,’ or ‘direct[ing] according to rule;’ it directs the creation of commerce.” Dissent, p. 5. They noted that “[i]f Congress can reach out and command even those furthest removed from an interstate market to participate in the market, then the Commerce Clause becomes a font of unlimited power…” Dissent, p. 8. To bolster their point, the dissenting Justices offered other options to achieve the goals of reducing insurance premiums and ensuring profitability of insurers, including subjecting those who do not purchase insurance to a surcharge when they do enter the system, or denying the full income tax credit to those who do not purchase insurance. Dissent, p. 10.
The dissenting Justices then moved on to discuss the issue of a “tax” versus a “penalty.” In short, the dissent contended that the individual mandate is a penalty, not a tax, and that because the mandate is unconstitutional, so too is the penalty for its violation. The dissent contended that the penalty cannot be a penalty for constitutional purposes and also a tax for constitutional purposes; it must be either a penalty or a tax. They argued that the individual mandate “imposes not a simple tax but a mandate to which a penalty is attached as demonstrated by the fact that some are exempt from the tax who are not exempt from the mandate – a distinction that would make no sense if the mandate were not a mandate.” Dissent, p. 17, 20, 21.
Regarding the Anti-Injunction Act, because the dissent concluded that the individual mandate is not an exercise of Congress’ taxing power, the lawsuits at hand do not have the purpose of “restraining the assessment or collection of any tax” as required by the AIA. Dissent, p. 26. The dissent essentially mocked the government’s contention that the individual mandate is a tax for constitutional purposes, but not for AIA purposes.
As for the expansion of Medicaid, the dissent noted that seven members of Court believe the Medicaid expansion, as enacted by Congress, is unconstitutionally coercive. While the Majority accepted the government’s solution to allow states that reject expansion to retain pre-existing Medicaid funds, the dissent did not. The four dissenting Justices believed that the acceptance of the government’s remedy oversteps the Court’s own power and authority:
In structuring the ACA, Congress unambiguously signaled its belief that every State would have no real choice but to go along with the Medicaid Expansion. If the anti-coercion rule does not apply in this case, then there is no such rule. Dissent, p. 38.
Finally, as to severability, the dissent concluded that the Act’s major provisions are “interdependent” and therefore the entire Act should be invalidated. Dissent, p. 54.