Federal Appeals Court Upholds Health Care Reform Act

Today, a federal court of appeals upheld the health care reform legislation. The plaintiffs argued that Congress lacked the authority to pass the legislation and, specifically, to penalize individuals for not purchasing health insurance. A majority of the appeals panel held that the Commerce Clause gave Congress the power to enact the legislation. Although one judge dissented, none of the judges seem bothered by the "action"/"inaction" distinction that opponent of the legislation have asserted. None of the judges agreed that the penalty was a tax.

Opponents of the law have argued that while Congress can regulate economic "activity" under its Commerce Clause authority, it cannot regulate "inactivity" -- or the status of being uninsured. The court ruled that the penalty allows Congress to regulate activities including self-insurance, which drives up the price of medical services and insurance in the interstate markets. I have made a similar argument on this blog (see, e.g., here). Ruthann Robson at Constitutional Law Prof Blog provides a nice summary of the ruling.

Virginia Federal Judge Upholds Health Care Reform Legislation

A federal judge in Virginia has upheld portions of the recent health care reform legislation (see opinion). US District Judge Norman Moon rejected several arguments by Liberty University, the plaintiff, that portrayed the law as unconstitutional.

Among the measures that Liberty University challenged was the imposition of a financial penalty upon persons who failed to purchase health insurance. Although the court rejected the government's argument that the so-called insurance mandate constituted a permissible tax, it held that the provision was a valid exercise of the Commerce Power.

Dissenting Justice has analyzed the relationship between health care reform and the Constitution in several previous blog posts. The court's analysis of the Commerce Clause substantially mirrors the conclusions that those essays reach.

In particular, the court rejects the argument that a decision to remain uninsured cannot constitute economic activity -- which Congress can regulate -- because it simply represents a decision to refrain from commerce, or merely to exist. The court, however, held that the failure to purchase health insurance is not merely a passive, noncommercial act. Instead, it represents a decision by consumers to self-finance their inevitable use of health care. The court found that Congress could rationally assume that the consumption of medical services by uninsured individuals substantially impacts the market for health care in the nation.

In addition to upholding the penalty, the court rejected plaintiff's argument that the law would unconstitutionally require individuals to pay for abortion, regardless of their religious beliefs, and that law violated the Tenth Amendment. These arguments are inconsistent with Supreme Court precedent in this area. The court rightfully rejected them.

DOJ Defends Insurance Mandate on Commerce Clause and Taxation Grounds

The New York Times reports that the Department of Justice has defended the insurance mandate, contained in the recent healthcare legislation, as a tax. The primary justification remains the power to regulate interstate commerce. The taxation argument, according to the article, represents a secondary justification.

I have previously argued that the administration should defend the mandate as a commercial regulation and as a tax. During the healthcare debates, however, the White House said that the mandate was not a tax. I grimaced. Cooler, less political heads, have apparently prevailed during the litigation. Certainly, the mandate is not a general income tax. It only impacts individuals who are uninsured and who do not qualify for insurance subsidies.

Silliness From Wall Street Journal: Editorial Demands Kagan Recuse Herself From Healthcare Litigation

A Wall Street Journal editorial demands that Elena Kagan recuse herself from lawsuits challenging the constitutionality of the healthcare reform legislation. The editors, however, lack a legal basis to demand that Kagan recuse herself.

The Senate cannot make this demand because this would violate the separation of powers. And while federal law might require that she recuse herself from cases in which she was directly involved as Solicitor General, she has already promised not to sit on those cases if she is confirmed.

The Wall Street Journal speculates that Kagan probably offered an opinion on the legality of the healthcare statute -- but, of course, the editors cannot prove this. Lacking any factual basis to argue for recusal, the editors argue that Kagan should recuse herself from cases challenging the legislation because they disagree with her answer to questions regarding the Commerce Clause (which is central to the constitutional issue).

Although Kagan's statements reflect current Supreme Court doctrine, the Wall Street Journal editors accuse her of incorrectly supporting an expansive view of the commerce power. Because they disagree with an expansive view of the Commerce Clause, they believe she should recuse herself from the healthcare litigation if it reaches the Court. According to the editors, her view (with which they disagree) proves she is partial:

We also think there are grounds for recusal based on her response during her Senate hearings on the substance of the state legal challenge. The Florida case boils down to whether Congress can compel individuals to buy health insurance under the Commerce Clause. Ms. Kagan danced around the history of Commerce Clause jurisprudence, but in one response to Senator Coburn she did betray a bias for a very expansive reading of Congress's power.

The Commerce Clause has "been interpreted to apply to regulation of any instruments or instrumentalities or channels of commerce," she said, "but it's also been applied to anything that would substantially affect interstate commerce." Anything? This is the core question in the Florida case. If she already believes that the Commerce Clause justifies anything that substantially affects interstate commerce, then she has all but prejudged the individual mandate question.

This is a baseless argument. In US v Lopez, one of the most important cases on the Commerce Clause, the Court held that Congress could "regulate those activities having a substantial relation to interstate commerce . . . i.e., those activities that substantially affect interstate commerce" (emphasis added). This is essentially what Kagan stated during the hearings.

While language in some cases suggests that "activities" only include "economic" activity, the Court has not indicated that this is a requirement. In Gonzales v. Raich, for example, the Court upheld enforcement of the Controlled Substances Act against an individual who consumed homegrown marijuana for medicinal purposes. The individual did not obtain marijuana on the open market. Nevertheless, the Court held that in the aggregate, homegrown marijuana could have a substantial effect on the market for marijuana (making it more available -- contrary to the purpose of the federal statute). Justice Scalia concurred and argued that so long as the activity being regulated is part of a broader statute dealing with interstate commerce, then Congress can regulate the activity pursuant to its Commerce Clause authority. Even one of the most conservative justices has embraced Kagan's view of the Commerce Clause.

The Wall Street Journal editors' demand for Kagan to recuse herself is blatantly political and without merit. Finally, it seems like the editors have conceded the point that the mandate has a substantial relation to interstate commerce. Perhaps the Supreme Court will agree.

UPDATE: Media Matters has published an extensive essay that criticizes the Wall Street Journal editorial.

UPDATE II: Think Progress also has a good article on this subject.

More on the Constitutionality of Healthcare Reform: A Warning to Conservatives

According to multiple news sources, several state attorneys general are poised to bring legal challenges to the healthcare reform legislation.  According to most sources, the legal challenges will center around the constitutionality of the individual mandate.

Commerce Clause and Taxation Power
Most legal analysis I have found on this subject concludes that Congress has at least two sources of authority to mandate the purchase of health insurance. These include the commerce clause and the taxation power. The individual mandate is literally drafted as a tax on uninsured individuals. It is also part of a larger statute regulating interstate commerce -- which is a standard that the Supreme Court, including Justice Scalia, has approved to test the legitimacy of regulations of noneconomic activity. I have written on this subject before. Please feel free to read that analysis.

Irony
There is an interesting irony in many of the conservative objections to the individual mandate. Conservatives argue that Congress cannot use its commerce power to compel individuals to enter into commerce (i.e., purchase health insurance). While I would argue that Congress is really using its commerce and taxing power to entice people to cover the risks associated with their own health, that is a side argument.

Most importantly, conservative arguments in this area unwittingly support more expansive regulation. Here's why.

Conservatives believe that Congress cannot mandate that individuals purchase insurance. In order to avoid this outcome, Congress could have raised taxes on everyone, created a public plan, and fully subsidized participation by indigent uninsured individuals. This alternative is more expansive than the voted upon exchange system, coupled with a mandate. The latter option uses a market based approach. The public plan, however, represents government sponsorship of health care.  Yet, because the public plan would not involve coercion, it is presumably fine under existing commerce clause and taxation precedent -- according to conservative logic.

Clearly, conservatives cannot contest a public plan on constitutional grounds, as this is the same as Medicare, Medicaid, TRICARE, SCHIP and other government-sponsored plans.  Accordingly, Congress could have chosen this more expansive route, but this is certainly not what conservatives want.

Misstatements
Conservatives also argue that Congress has never used its commerce power to force individuals to engage in commercial activities. That point is not true.

Take two leading cases on the commerce clause: Wickard v. Filburn and Gonzales v. Raich. In Wickard, the Court upheld a production limit on wheat as applied to someone who produced and consumed "home grown" wheat. Congress did not want suppliers to produce more than the statutory maximum because doing so would result in lower prices.  The law was a basic price control. But for the homegrown wheat consumer, enforcement of this requirement would mean individuals had to purchase wheat on the open market.  The Court, however, validated this outcome.

In Raich, the Court (a 7-2 majority, including Justice Scalia) upheld the enforcement of federal drug laws that ban possession of marijuana. The Court concluded that the federal government could enforce the laws against someone who used homegrown marijuana for medical purposes. Consequently, the individual would have to purchase some alternative treatment on the open market (as in Wickard). This outcome, however, did not render enforcement unconstitutional.

Similarly, with respect to the insurance mandate, Congress has determined that the alternatives to having almost universal coverage are an impediment to commerce. Removing this impediment will require a few consumers who are uninsured to purchase insurance, but this is not a novel concept. It is true that the regulations in the other cases did not directly mandate that individuals engage in commerce, but this was the impact of the regulations in those cases.

Distraction
Even assuming that the Supreme Court finds the mandate unconstitutional, the Court would not then invalidate the entire statute. Instead, it would only invalidate the mandate itself. This would leave intact the many other components of the legislation that conservatives presumably loathe. Many conservatives, however, seem to believe that if the mandate is declared unconstitutional, that they have defeated healthcare reform. That is untrue. They will simply have defeated the mandate, which President Obama campaigned against in the first place.

Furthermore, if the Court invalidates the mandate, Congress could implement a voluntary public plan option (see above). It could also expand the income limits for Medicaid or lower the age requirements for Medicare to cover many uninsured individuals. Also, Congress could (and almost certainly would) continue to subsidize the purchase of insurance by individuals who cannot afford to do so. Accordingly, attacking the mandate does not seem to carry much promise for opponents of the legislation.  It could, in fact, open the door to more expansive approaches.

See also: Is Healthcare Reform "Unconstitutional"? No -- Why Rivkin and Casey Are Wrong

UPDATE: It is unclear that a state attorney general would even have standing to bring a suit in federal court regarding the mandate. The mandate applies to individuals, not to state governments. Also, the mandate does not take effect immediately. Federal courts could avoid this litigation altogether if standing does not exist.

More Hot Air from "Hot Air": Implies Healthcare Reform Unconstitutional

No serious Constitutional Law scholar has argued that healthcare reform (in any of the currently proposed formats) is unconstitutional. Some conservative commentators, however, have tried unsuccessfully to float the argument.

Yes, Virginia, Healthcare Reform Is Constitutional
On August 22, David Rivkin Jr. and Lee A. Casey, two rightwing attorneys, argued in the Washington Post, that healthcare reform violated the Constitution. Their argument, however, only captured the hearts of conservatives desperate to find a good good reason to oppose healing the sick.

Today, the conservative blog Hot Air tried to revive the argument by posting footage of Senator Mark Warner explaining why healthcare reform is constitutional. Although the video link no longer works, the summary by Hot Air states that Warner cites to the Commerce Power as authority for healthcare reform. This is exactly correct, but I would add the Taxation and Spending Powers as well. I have thoroughly analyzed this issue in a prior blog post (and in the comments section to that post). Even conservative Constitutional Law professors have made similar arguments (see the post I linked).

Absurdity of the Question
It is absolutely absurd to ask whether the constitution specifically or explicitly allows Congress to regulate or reform healthcare. The Constitution speaks broadly and ambiguously. Only a few provisions are specific and beyond dispute (like the age requirement for presidents and members of Congress).

The Constitution does not specifically or explicitly authorize the creation of the Air Force or Medicare, nor does it discuss the federal prosecution of crack cocaine possession. And the "Framers" certainly did not specifically contemplate airplanes, prescription drug and hospital plans for seniors, or crack cocaine because these things were not realities when they wrote the Constitution.

If conservatives only believe Congress can regulate things that are explicitly mentioned in the actual text of the Constitution, then they should essentially advocate the abolition of the federal government. At a minimum, they should seek the immediate repeal of laws banning partial-birth abortion and kidnapping; the Constitution does not mention children or abortion.

Also, as many students of high school and college civics classes know, Article I of the Constitution contains the "necessary and proper" clause, which endows Congress with unenumerated powers that are needed to carry out its expressly delegated powers. In the very first case interpreting this provision (McCulloch v. Maryland), the Supreme Court rejected the narrow interpretation offered by anti-federalists.

Many of today's conservatives pretend that the Necessary and Proper Clause does not exist or that courts can only interpret it conservatively. Nothing in the history of the clause or the Court's interpretation of it compels an exclusively narrow interpretation.

Finally, I find it ironic that the GOP's so-called Bill of Rights for Seniors pretends to offer protection for Medicare, while conservatives have repeatedly asserted that healthcare reform violates the Constitution. If Congress lacks the power to pass healthcare reform, then it probably lacks the power to create Medicare, which conservatives claim to support. The inconsistencies are absolutely dizzying.

Is Healthcare Reform "Unconstitutional"? No -- Why Rivkin and Casey Are Wrong

FOR UPDATED DEVELOPMENTS, SEE: More on the Constitutionality of Healthcare Reform


David Rivkin Jr. and Lee A. Casey, two very conservative partners (see sample of their writings following this article) at the law firm Baker Hostetler LLP, have co-authored an op-ed in the Washington Post that attempts to challenge the constitutionality of pending healthcare reform legislation. Specifically, Rivkin and Casey argue that Congress lacks the authority to require everyone (with a few exceptions) to have health insurance. Rivkin and Casey argue that neither the Commerce Power nor the power to "tax" authorizes Congress to mandate universal coverage.

The Commerce Clause authorizes Congress to regulate commerce with "foreign nations," "Indian tribes," and "among the several states." As Rivkin and Casey acknowledge, for six decades beginning in the 1930s, the Supreme Court interpreted the Commerce Power quite expansively. During that time it became a major source of power authorizing the enactment of measures as diverse as federal criminal laws, environmental laws, labor laws, securities laws and civil rights. The Rehnquist revolution, however, has led to a conservative shift (the degree of which is debatable) in the Court's interpretation of the Commerce Power.

Although the Court has seemingly shifted to a more restrictive analysis of the Commerce Clause, it has not completely abandoned showing deference and flexibility to Congress. In the 2005 Gonzales v. Raich decision, the Court upheld Congress' authority to regulate the "intrastate, noncommercial cultivation, possession and use of marijuana."

Rivkin and Casey argue that Raich cannot justify the individual insurance mandate because the Court found that the Controlled Substance Act (CSA) regulates "economic" activity, while a mandate to enroll in a health plan does not. There are two serious problems with this argument: It misreads Raich, and it fails to recognize the economic impact of uninsured people on the medical services and health insurance markets.

Requiring Health Insurance = Prohibiting Use of Medical Marijuana?
In Raich, the Supreme Court held that Congress could regulate the intrastate use or possession of medical marijuana for three reasons. First, the CSA represents a valid exercise of the Commerce Power because the statute "regulates the production, distribution, and consumption of commodities for which there is an established, and lucrative, interstate market." Second, considered in the aggregate, the use or possession of medical marijuana substantially affects interstate commerce because it increases the availability of marijuana in the nonmedical and interstate markets. Third, regulating the use or possession of medical marijuana is "an essential part of the larger regulatory scheme" accomplished by the CSA.

Justice Scalia wrote separately, concurring in the judgment, and he based his arguments exclusively on the fact that the marijuana prohibition is part of a broader commercial regulation (the CSA). Only two justices (O'Connor and Thomas) dissented.

Raich could indeed justify the insurance mandate. The proposed reforms seek to reduce costs, inefficiencies and inaccessibility in the health insurance and medical services markets. These markets are inherently interstate and commercial. Caring for uninsured persons unduly increases the costs associated with health insurance and medical services and diminishes access and coverage for consumers who desire these services. Finally, requiring universal coverage is an essential part of the Congressional scheme designed to lower costs and expand access in health insurance and medical services markets.

Taxation
Although the Constitution gives Congress the power to "tax" and to "spend" in the general welfare of the country, Rivkin and Casey argue that the Tax Power cannot justify mandatory coverage because Congress cannot use this power to circumvent the constraints imposed by the Constitution. To support this argument, Rivkin and Casey reached deeply into the vault and retrieved the 1922 case Bailey v. Drexel Furniture. In that case, the Court invalidated a 10% tax on the profits of companies that used child labor. The Court held that even though the Tax Power is very broad, Congress could not use it as a pretext to accomplish an otherwise unconstitutional end. There are major differences between Drexel Furniture and proposed healthcare reform.

First, in Hamer v. Dagenhart, decided just 4 years prior to Drexel Furniture, the Court explicitly invalidated a federal law that banned the use of child labor. Because the Court had so recently held that Congress could not prohibit child labor, it was easy to view the onerous tax in Drexel Furniture as an improper attempt to evade prior case law.

Over time, the Court has expanded the scope of the Commerce Power and explicitly overruled Dagenhart. This same doctrinal evolution authorizes Congress to mandate individual coverage. Clearly, if Congress can mandate coverage under the Commerce Power, then taxing or imposing a penalty upon individuals who fail to pay would not contradict Drexel Furniture.

Final Thoughts
On some level, I agree with Rivkin and Casey who argue that raising taxes and funding "universal care" (rather than mandating universal coverage) would provide a "neater" solution to these issues. But this is not a politically popular solution. The fact that a cleaner solution exists, however, does not make the one that Congress has proposed unconstitutional. The current case law permits Congress to regulate health insurance and medical services markets. Requiring universal coverage is an essential component of that broader regulatory effort.

Note: Jonathan Adler, writing for the Volokh Conspiracy, has a similar take:

While I agree that the recent commerce clause cases hold that Congress may not regulate noneconomic activity, as such, they also state that Congress may reach otherwise unregulable conduct as part of an overarching regulatory scheme, where the regulation of such conduct is necessary and proper to the success of such scheme. In this case, the overall scheme would involve the regulation of "commerce" as the Supreme Court has defined it for several decades, as it would involve the regulation of health care markets. And the success of such a regulatory scheme would depend upon requiring all to participate. (Among other things, if health care reform requires insurers to issue insurance to all comers, and prohibits refusals for pre-existing conditions, then a mandate is necessary to prevent opportunistic behavior by individuals who simply wait to purchase insurance until they get sick.)

Note: My essay only addresses the Congressional authority claim. Whether some individuals could successfully assert an individual right against the mandate is a different question. Because the mandate operates like a tax, it is difficult to imagine a successful "rights" claim.

Note: Speaking of "wrong," look at this essay by the same duo: David B. Rivkin Jr. & Lee A. Casey on Amnesty International on National Review Online.

Or this nugget: Tortured Logic on Torture.

Despite all of the evidence to the contrary, Rivkin and Casey still deny that the Bush administration engaged in torture: The Memos Prove We Didn't Torture - WSJ.com.

Doctor, Pass the Bong! States Continue to Consider Medical Pot Laws Despite Federal Ban

In 2005, the Supreme Court held that Congress had the authority to regulate the possession of "homegrown" marijuana, even when consumed for medicinal purposes. The Comprehensive Drug Abuse Prevention and Control Act of 1970 bans the possession, distribution and manufacture of several categories of "controlled substances," including marijuana. Congress has refused to exempt "medicinal marijuana" from coverage under the statute, despite a growing movement in states and in Congress to legalize the usage of pot to treat a variety of illnesses (wink).

The liberals on the Supreme Court, joined by Justice Scalia, disagreed with the view that homegrown and consumed marijuana fell outside of Congress' regulatory authority because it lacked a sufficient nexus to "commerce." The case, Gonzales v. Raich, required the Court to consider the extent of the "Commerce Power," contained in Article I, Section 8, Clause 3 of the constitution.

Although the Commerce Clause receives very little attention (certainly not as much focus as abortion, gay rights, affirmative action, and other hot-button issues) in popular constitutional law debates, it is a very important dimension of the regulatory state, and it receives tremendous amounts of analysis from legal and political experts. Historically, the Court has viewed the Commerce Power in liberal and conservative terms, depending upon its ideological composition and the economic and political conditions facing the country at the time. Accordingly, when businesses were expanding during the age of industrialization and in the subsequent consolidation of industry, the Court, stacked with "laissez faire" jurists, viewed the Commerce Power in conservative terms and routinely invalidated laws regulating the economy and labor. But during the Great Depression and after FDR engineered his infamous court-packing plan, the Court shifted dramatically to a more liberal view, and, for a period of almost 60 years, declined to find any law unconstitutional on commerce clause grounds. Things changed in 1995 during the Rehnquist Court. Beginning with the case U.S. v Lopez, the Court would again closely scrutinize federal laws enacted pursuant to the Commerce Clause. And since the return of the conservative treatment of the Commerce Clause, the Court has struck down several popularly favored laws, such as a ban on guns in schools (in Lopez) and a provision of the Violence Against Women's Act that gave victims of gender-motivated violence a federal right to sue their offenders.

When the medicinal marijuana case came to the Court, many constitutional law experts argued that under prevailing conservative doctrine, the Court would necessarily reject the federal government's effort to regulate homegrown and consumed marijuana, which has a most tenuous connection to commerce. Nevertheless, the Court went against the current of conservative caselaw and held that Congress indeed possesses the authority to prohibit homegrown pot.

The Court justified its ruling on the fact that the federal ban on marijuana is part of a much larger and extensive federal statute that prohibits the interstate and international trafficking of drugs -- which indisputably relate to "commerce." Also, the Court held (in what I consider a stretch even for me as a liberal) that the use of homegrown pot affects the broader market for marijuana because it impacts the price structure for the substance and because Congress would face difficulty distinguishing homegrown from commercially obtained pot. Responding to the former argument in his dissent, Justice Clarence Thomas probably displayed his most effective and humorous logic as a member of the Court when he asserted that the majority's view would permit Congress to regulate "quilting bees, clothes drives, and potluck suppers throughout the 50 States" because they impact the market for quilts, clothes, and dining outside of the home.

If one considers the political reasons for the ruling, however, the fears Thomas raises in his dissent might lose their force. The liberals, for example, likely sided with the federal government in order to resurrect the liberal aspects of the Court's Commerce Clause doctrine. The only explanation I can offer for Scalia's departure from his normal pattern of voting against Congress, especially in cases involving individual rights, and for tossing aside his own conservative views of the Commerce Power and federalism is the following: Justice simply hates pot! Seriously, he does a very poor job distinguishing this case from others in which he has agreed with the conservative view of the Commerce Power.

Despite the Court giving Congress the green light for punishing medicinal usage of pot, states continue to debate and pass such measures. In November, for example, voters in Michigan will consider enacting such a provision. Last year, Connecticut passed similar legislation, but Governor Jodi Rell vetoed it.

Although the Court has concluded the Congress can prohibit the use of homegrown marijuana, it has not addressed the question of whether banning its usage for medical purposes infringes an individual rights to control one's health care decisions. The Raich case presented such an issue, but the Court declined to reach it because the lower court focused on the Commerce Clause question exclusively. Later, on remand, the liberal Ninth Circuit rejected such an argument.

Also, while many states prohibit marijuana under their own laws, states cannot enforce federal drug laws and have no obligation to design their own laws to conform with the federal prohibition (a California appeals court recently accepted this view that seems fairly uncomplicated under current doctrine). Accordingly, persons in states that permit the medical use marijuana would only face prosecution if federal authorities decided to pursue a case against them (which rarely happens with small users, rather than large distributors). These facts probably explain why voters continue to demand the enactment of such laws, despite a federal prohibition.