ACA and the U.S. Constitution

Main challenges Congress may not require people to

purchase health care insurance Violates individual autonomy

Congress may not coerce states to participate in the Medicaid expansion

Violates state autonomy

1

The individual mandate and the U.S. Constitution

States can mandate the purchase of insurance. Why not Congress?

The national government is a government of limited powers—Congress must be able to invoke an enumerated power to enact any legislation States have broad power to regulate on behalf of

the public welfare (e.g., MA health care reform) What is the source of power for the

individual mandate to purchase health care? Commerce Clause (Art. I, § 8, cl. 3)? Taxing and Spending Clause (Art. I, § 8, cl. 1)?

2

The challengers’ problem Congress can require everyone to buy

health care coverage from the government—single payer (taxing power)

Congress can require everyone to buy private health care coverage as a condition of obtaining medical care (commerce power)

Why can’t Congress simply require everyone to buy health care coverage from private insurers? Why is it worse to require participation in a

privately-operated health care system than in a government-run system? 3

Commerce Clause challenge

According to the Supreme Court, the individual mandate could not be justified under the Commerce Clause The Commerce Clause allows Congress

to regulate interstate economic activity or intrastate economic activity that has an interstate impact

The individual mandate constitutes the regulation of inactivity

NFIB v. Sibelius, 132 S. Ct. 2566 (2012)4

Administration response The individual mandate is not in fact a

regulation of inactivity—it’s actually a regulation of activity by health insurance companies

In ACA, Congress has prohibited health insurance companies from taking into account individual health status (i.e., no preexisting conditions clauses) Just as the Civil Rights Act of 1964 prohibits

discrimination on the basis of race or sex, the Affordable Care Act of 2010 prohibits discrimination on the basis of health status

5

Administration response Not fair to prohibit preexisting conditions

clauses if people can pick and choose when to buy insurance—healthy people will just wait until they’re sick to purchase coverage States with community rating and no mandate

saw non-group insurance markets collapse The anti-discrimination provision works in

tandem with the individual mandate The individual mandate therefore is justified

under the Necessary and Proper Clause (Art. I, § 8, cl. 16)

6

Was the mandate “necessary and proper?”

What would happen if ACA did not include the individual mandate? Congressional Budget Office estimated that

the number of uninsured would increase by 16 million—eliminating half of the impact of the Act

CBO, Effects of Eliminating the Individual Mandate to Obtain Health Insurance (June 16, 2010)

Other estimates range from eliminating three-fourths to one-fourth of the impact of the Act on access to health care coverage

MIT economist Jonathan Gruber (24 million), RAND Corporation (22 million), Urban Institute (18 million), Lewin Group (8 million)

7

Supreme Court answer

Not “proper” for Congress to use its commerce power to regulate people who are not already subject to federal regulation The activity-inactivity distinction

again

8

A most hollow victory Virtually any other purchase mandate

Congress might want to pass, it can pass by regulating economic activity Congress can require people to buy

broccoli when they buy food, or to cultivate broccoli when they grow their own crops

Congress can require people to own a GM car as a condition of buying gasoline

Congress sometimes requires the purchase of one product as a condition of buying another product (seat belts and cars, V-chips and TVs)

9

A most hollow victory If it’s so easy to pass purchase

mandates, why didn’t Congress pass an individual mandate that was valid under the Commerce Clause?

The individual mandate simply reflects the distinctive nature of health care insurance You need to buy your insurance in

advance Which answers the critics’ concern

about the unprecedented nature of the mandate

10

Taxing power argument Congress has the power “to lay and

collect taxes . . . to . . . provide for the . . . general welfare of the United States” (Art. I, § 8)

How is the individual mandate a tax? One could describe it as a duty to pay

2.5 percent of income (subject to minimum and maximum payments)

To help fund health care for the indigent With an exemption from the tax if you

have your own insurance policy The individual mandate appears in the IRS

part of the US Code11

Taxing power argument But raising revenue is not the

purpose of the tax—it’s designed to get people to buy insurance Supreme Court long ago abandoned its

distinction between “regulatory” taxes and “revenue-raising” taxes

In Sanchez, the Court upheld a marijuana tax As long as a tax is productive of some

revenue, it doesn’t matter that Congress might have been motivated by a desire to deter the activity being taxed (Sonzinsky)

The Court will ensure that the tax is not so severe as to be a criminal penalty in disguise

12

Taxing power argument But Congress called the 2.5 percent levy

a “penalty” rather than a “tax” Congress is not bound by its stated source of

authority. If another source of authority exists, that is sufficient

Fidelity to the statutory text is important when deciding the meaning of the statute (is it a 2.5 percent or 3.5 percent tax?), but not when deciding whether the statute is valid

No reason to think Congress cares whether the mandate is upheld on basis of commerce power or taxing power

13

Can the taxing power be used for other mandates?

The Court identified two limiting features of the individual mandate in concluding it could be treated as a tax: The penalty for not carrying insurance is not

onerous—under a child labor statute that the Court struck down 90 years ago, employers would forfeit ten percent of their income for any infraction of the statute, even employing one child for one day

People who pay the penalty for not having insurance will be viewed as fully complying with the law—there are no legal consequences for not having insurance other than having to pay the IRS 14

Medicaid expansion Under ACA, all persons will be

eligible for Medicaid if they earn no more than 138 percent of the federal poverty level

States challenged the expansion as imposing too great a fiscal burden even though the federal government will pick up 100% of the costs at first and ultimately 90% Currently, the federal government picks

up 50-75% of Medicaid costs (67 percent in Indiana)

15

Medicaid expansion

But states are not required to participate in Medicaid

If the expansion is too onerous, states can opt out of Medicaid

What’s the constitutional problem?

16

Medicaid expansion In past cases, the Supreme Court has

barred Congress from “commandeering” state governments and forcing them to do the federal government’s bidding

On the other hand, Congress may attach conditions to the receipt of funds when it exercises its spending power Congress cannot force states to adopt the

student testing policies in the No Child Left Behind statute, but Congress can offer federal funds for education to states that do adopt the testing policies

17

Medicaid expansion

According to the government, it simply was offering federal funding for health care to states that agreed to participate in the Medicaid expansion

States were free to accept or decline to participate in the Medicaid expansion

18

Medicaid expansion While states can choose whether to

participate in the Medicaid expansion, ACA said that the failure to participate could have jeopardized all of their Medicaid funding

According to the Supreme Court, Congress may not coerce states into adopting a new federal program by making the price of non-participation the loss of substantial funds from other federal programs that the states have adopted (p. 27) After NFIB, states only risk losing the federal

match for the Medicaid expansion. 19

Will states pass on Medicaid expansion?

Very unlikely Instead of the federal government

contributing 1-3 dollars for every state Medicaid dollar, the federal government will contribute 9-10 dollars for every state Medicaid expansion dollar

The state share of the Medicaid expansion does not kick in until 2017—states have time to plan and time for their economies to recover

Hospitals need the Medicaid expansion to make up for the cuts in Medicare reimbursement and DSH funding

Real cost problem from the “woodwork” effect20

No Romney repeal, but design defects are greater threat

More of a right to coverage than to care Can be difficult to find a physician who

accepts Medicaid The interests of the poor are not linked

to the interests of the financially secure Medicare versus Medicaid Original housing program

Federal-state partnerships less effective than federal-only programs Original food stamps program

Rather than fixing a broken system, ACA gives more people access to the system (as with Medicare and MA reform)

Federal poverty level

Persons in Family

FPL ($) 138%FPL ($) 400%FPL($)

1 10,830 14,945 43,336

2 14,570 20,107 58,280

3 18,310 25,268 73,240

4 22,050 30,429 88,200

Other Benchmarks

Annual income of minimum wage earner working 40

hours a week for 50 weeks is $7.25 per

hour or $14,500

Necessary and Proper Clause Congress has the power “to make

all Laws which shall be necessary and proper for carrying into Execution” its other powers “Let the end be legitimate, let it be

within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional” (emphasis added)

McCullough v. Maryland