Critical Condition

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Sixth Circuit: ‘There is No Constitutional Impediment to … Regulating Inactivity’


Today, in the case of the Thomas More Law Center v. Obama, the U.S. Court of Appeals for the Sixth Circuit upheld a lower court ruling that Obamacare’s individual mandate was indeed constitutional. This is the first decision by a federal appeals court out of three expected this year, and then everything will end up in the Supreme Court.

The ruling is particularly notable because the Sixth Circuit’s three-judge panel included two Republican appointees — Jeffrey Sutton (George W. Bush) and James Graham (Reagan) — along with a Carter appointee, Boyce Martin. It’s the first time that a Republican-appointed judge has upheld the mandate: Martin wrote the main opinion, with Sutton concurring in part and Graham dissenting in part.

It won’t surprise you to learn that I think Graham’s dissent is the most persuasive of the three — and the one that makes exactly the arguments that the plaintiffs in other cases should use. But we’ll get to that in a minute.

Jeffrey Sutton’s concurrence
We’ll start with Judge Sutton’s concurrence, because it was Sutton’s vote that allowed the government to win the case. Ilya Shapiro describes Sutton’s opinion as “an exercise in overzealous judicial deference [by Sutton], who avoided the logical implications of this ruling and punted the main issue to the Supreme Court” (h/t Hadley Heath).

Judge Sutton notes that the Supreme Court “has given Congress wide berth in regulating commerce, frequently adopting limits on that authority and just as frequently abandoning them, all while continuing to deny that Congress has unlimited national police powers.” The Supreme Court’s schizophrenic Commerce Clause jurisprudence is frustrating to Sutton:

At one level, past is precedent, and one tilts at hopeless causes in proposing new categorical limits on the commerce power. But there is another way to look at these precedents—that the Court either should stop saying that a meaningful limit on Congress’s commerce powers exists or prove that it is so. The stakes of identifying such a limit are high.

Sutton notes that the mandate is unprecedented in scope:

The plaintiffs thus present (1) a theory of constitutional invalidity that the Court has never considered before, (2) a legislative line that Congress has never crossed before, and (3) a theory of commerce power that has the potential to succeed where others have failed: by placing a categorical cap on congressional power.

Nonetheless, Sutton says, “in my opinion, the government has the better of the arguments,” because “few people escape the need to obtain health care at some point in their lives,” and therefore the mandate “meets the requirement of regulating activities that substantially affect interstate commerce.” He concurs with Boyce Martin (see below) that the Commerce Clause does not “contain an action/inaction dichotomy that limits congressional power.”

He gets to the key question on page 51, “the lingering intuition — shared by most Americans, I suspect — that Congress should not be able to compel citizens to buy products they do not want”:

If Congress can require Americans to buy medical insurance today, what of tomorrow? Could it compel individuals to buy health care itself in the form of an annual check-up or for that matter a health-club membership? Could it require computer companies to sell medical-insurance policies in the open market in order to widen the asset pool available to pay insurance claims? And if Congress can do this in the healthcare field, what of other fields of commerce and other products?

But Sutton says, unpersuasively, that health care is different, because it involves “regulating how citizens pay for what they already receive.” He points out that Congress could pass a universal health care tax and deduct it for those who buy insurance, achieving the same thing as a mandate — which is true, but hardly means that a mandate is constitutional.

In sum, Sutton asks the right questions, but fizzles on the answers. For those, we go to James Graham’s dissent.

James Graham’s dissent

As Graham points out, “no prior exercise of [the Commerce Clause power] has required individuals to purchase a good or service. This fact alone does not answer the constitutional question, but it does highlight the need for judicial scrutiny.” Graham is the only judge of the three who actually gets the key point: “the requirement that all citizens obtain health insurance does not depend on them receiving health care services in the first place.”

The government’s argument turns the mandate into something it is not. The requirement that all citizens obtain health insurance does not depend on them receiving health care services in the first place. Individuals must carry insurance each and every month regardless of whether they have actually entered the market for health services. Simply put, the mandate does not regulate the commercial activity of obtaining health care. It regulates the status of being uninsured.

He points out that, yeah, forcing everyone to buy insurance will affect interstate commerce. But that is an effect of the mandate, not a cause of it. “Congress cannot be tolerated to justify its exercise of power by creating its own substantial effects.”

Plaintiffs have not bought or sold a good or service, nor have they manufactured, distributed, or consumed a commodity…Rather, they are strangers to the health insurance market. This readily differentiates the present case from others cited by the government…In no other instance has Congress before attempted to force a non-participant into a market.

Graham points out, rightly, that “the mandate and its penalty are not conditioned on the failure to pay for health care services, or, for that matter, conditioned on the consumption of health care.” He gets it. “The proper object of Congress’ power is interstate commerce, not private decisions to refrain from commerce.” He points out, unlike the other judges, that “the free-riding problem is substantially one of Congress’ own creation.”

Graham also points out that the mandate intrudes on the Tenth Amendment:

Here, Congress’s exercise of power intrudes on both the States and the people. It brings an end to state experimentation and overrides the expressed legislative will of several states that have guaranteed to their citizens the freedom to choose not to purchase health insurance. See Idaho Code Ann. § 39-9003; Utah Code Ann. § 63M-1-2505.5; Va. Code Ann. § 38.2-3430.1:1. The mandate forces law-abiding individuals to purchase a product – an expensive product, no less – and thereby invades the realm of an individual’s financial planning decisions. Cf. Maryland v. Wirtz, 392 U.S. 183, 196 n.27 (1968) (“Neither here nor in Wickard had the Court declared that Congress may use a relatively trivial impact on commerce as an excuse for broad general regulation of state or private activities.”). In the absence of the mandate, individuals have the right to decide how to finance medical expenses. The mandate extinguishes that right.

Finally, Graham gets to the heart of the matter: that if Congress can force people to buy insurance, it can force people to do just about anything. Taking on the government’s “common refrain” that the health-care market is constitutionally unique, and therefore that the mandate doesn’t have broader implications, he writes that “this assurance is troubling on many levels and should hardly be heard to come from a body with limited powers”:

The uniqueness that justifies one exercise of power becomes precedent for the next contemplated exercise. And permitting the mandate would clear the path for Congress to cause or contribute to certain “unique” factors, such as free-riding and adverse selection, and then impose a solution that is ill-fitted to the others.

Graham’s concluding paragraph says it all: “If the exercise of power is allowed and the mandate upheld, it is difficult to see what the limits on Congress’ Commerce Clause authority would be.”

What aspect of human activity would escape federal power? The ultimate issue in this case is this: Does the notion of federalism still have vitality? To approve the exercise of power would arm Congress with the authority to force individuals to do whatever it sees fit (within boundaries like the First Amendment and Due Process Clause), as long as the regulation concerns an activity or decision that, when aggregated, can be said to have some loose, but-for type of economic connection, which nearly all human activity does. See Lopez, 514 U.S. at 565 (“[D]epending on the level of generality, any activity can be looked upon as commercial.”). Such a power feels very much like the general police power that the Tenth Amendment reserves to the States and the people. A structural shift of that magnitude can be accomplished legitimately only through constitutional amendment.

This is the whole ball of wax. If the mandate is upheld, “what aspect of human activity would escape federal power?” It’s a question that is notably ignored in Boyce Martin’s ruling.

Boyce Martin’s opinion

Martin’s opinion is actually a bit boring. It breaks little new ground, relative to the other judges who have upheld the mandate. As you might expect, Martin never addresses the implications of the individual mandate: that, if the mandate is constitutional, there are effectively no limits on what Congress can force people to buy.

The crux of the ruling comes on page 19, where Martin determines that failing to buy health insurance “is no less economic [activity] than the activity of purchasing an insurance plan”:

The activity of foregoing health insurance and attempting to cover the cost of health care needs by self-insuring is no less economic than the activity of purchasing an insurance plan. Thus, the financing of health care services, and specifically the practice of self-insuring, is economic activity.

Martin cites the seminal Supreme Court case Wickard v. Filburn, in which a farmer growing wheat on his own land for personal use was subject to the Commerce Clause, as providing sufficient grounds for the individual mandate:

Similar to the causal relationship in Wickard, self-insuring individuals are attempting to fulfill their own demand for a commodity rather than resort to the market and are thereby thwarting Congress’s efforts to stabilize prices. Therefore, the minimum coverage provision is a valid exercise of the Commerce Power because Congress had a rational basis for concluding that, in the aggregate, the practice of self-insuring for the cost of health care substantially affects interstate commerce.

But even if one accepts the argument that choosing not to buy insurance “were not economic activity with a substantial effect on interstate commerce,” Congress still has the right to enforce a mandate because “the minimum coverage provision is an essential part of a broader economic regulatory scheme.” To justify this, Martin cites the insidious 2005 Supreme Court decision, Gonzales v. Raich, in which a 6–3 majority ruled that Congress could criminalize the home-grown production and personal use of marijuana under the Commerce Clause:

Thus, where Congress comprehensively regulates interstate economic activity, it may regulate non-economic intrastate activity if it rationally believes that, in the aggregate, the failure to do so would undermine the effectiveness of the overlying regulatory scheme.

Martin dismisses the argument that there’s a difference between economic activity and inactivity, because “the text of the Commerce Clause does not acknowledge a constitutional distinction between activity and inactivity, and neither does the Supreme Court.” This doesn’t make a lot of sense. Can Congress force me to subscribe to the New York Post? Can Congress force me to buy broccoli? No one can credibly argue that the authors of the Commerce Clause, nor its ratifiers, wished to give Congress that power.

But Martin thinks otherwise: indeed, according to the court, “there is no constitutional impediment to enacting legislation that could be characterized as regulating inactivity.”

Here’s where Martin veers into illogic. He argues that, “far from regulating inactivity, the minimum coverage provision regulates individuals who are, in the aggregate, active in the health care market.” In the aggregate, yes. But not individually. If I am perfectly healthy for all of my life, and then die one day in my sleep, I haven’t participated in the health-care market. To take a more common example, I could choose to buy insurance at the age of 40, but not before, precisely because insurance for the young is a rotten deal: you pay thousands of dollars a year without consuming many, or any, health-care services.

Indeed, it’s precisely these “young invincibles” — young, healthy people who make the perfectly rational choice not to pay for overpriced insurance that they don’t need — who are the mandate’s targets. The entire purpose of the individual mandate is to force young, healthy people to further subsidize the health care of the old and infirm.

The bottom line
What’s telling in reading these three opinions is how they perfectly represent the three schools of judicial thought about the mandate. Martin’s opinion represents the standard liberal jurisprudential model, in which Congress can do whatever it wants under the Commerce Clause. Graham’s dissent is full of well-argued concern with the mandate’s trampling of individual liberties and its assertion of unlimited federal power. And Sutton’s “punt” is representative of a minority of conservatives, who seem to suffer from a kind of constitutional fatigue, shrugging their shoulders because the Supreme Court has already run roughshod over the Commerce Clause.

The only question that matters is: Will Anthony Kennedy fall in the Graham or Sutton camp? We’ll find out next year.

— Avik Roy is an equity research analyst at Monness, Crespi, Hardt & Co., and blogs on health-care policy at The Apothecary. You can follow him on Twitter at @aviksaroy.


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