Obamacare and the Supreme Court

By guest blogger, Tom Packer

As we have seen Obamacare is a radical reform to the mixed system of healthcare in the United States , and one that is  highly politically contentious.  It has also become legally contentious.  For over a hundred years it’s been accepted in the United States that the federal (that is national) government’s laws can be essentially overturned by the federal courts for being unconstitutional, that is that congress has tried to do something it legally cannot that is ‘unconstitutional’.  Increasingly for better and for worse the existence of concepts like ‘European law’ make the British situation much more analogous.  Thus seeing how the courts consider healthcare policy in the United States – including their response to political pressure is probably increasingly relevant for those of us in the UK.

In the case of Obamacare the majority of the states have now sued to have the law declared unconstitutional.  After clashing rulings by lesser court it has now just been heard at the end of last month in the Supreme Court. The court’s ruling is expected in June.

The challenges which have got as far as the supreme court are challenges to two different aspects of the law.  The first is against the individual mandate – the requirement to purchase insurance (or face a fine) which as I have previously explained is fairly central to the operation of the law.  The second is that the conditions attached to the expansion of Medicaid ( the state run programme for relatively low income people’s healthcare)  unconstitutionally ‘coerce’ the states. I will focus on the first challenge because it cuts closer to the heart of the law, has more complicated legal issues and in my opinion is more likely to succeed.

The  basis given by congress when passing the individual mandate was the ‘commerce clause’. This states that Congress has power ‘To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes;’ Another clause of the constitution  (the ‘necessary  and proper’ clause)  gives Congress the power ‘To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers’ .

On the face of it a requirement to buy a product for all Americans might not seem to flow naturally from such a provision. However it’s important to realize how broadly the Supreme Court has come to interpret the power given by the Commerce clause since the 1930’s. In the case of Wickard v Filburn it was stated that Congress had the power to ban a farmer feeding himself with corn he’d grown because of the knock on effect  on attempts to control commerce in corn. This ruling was arguably upheld recently (2006)  in Gonzales v Raich where a ban on  the use of marijuana was upheld as necessary for a ban on drugs crossing state lines though the plaintiffs did not challenge the  ban on exporting drugs. Most of the  US government’s regulation of the US economy and society has been based on this ‘strong’ commerce clause. This has been true of issues as varying as racial policy and the regulation of wetlands.  Even assuming the Supreme Court was in favour of repealing the modern American regulatory state it is unlikely they would risks the political backlash- and the threat the court’s power would be broken by changes in the law (that nearly happened the last time the court took a strong stance on the commerce clause in the 1930’s)

On the other hand there has in recent decades been an attempt by court to ‘recreate’ limits to the power the commerce clause gives congress to control activities.  A key case was in 1995 when in the case of  United States V Lopez a law was struck down banning  carrying guns using the commerce clause powers.  The court ruled carrying guns near a school was just too distant from the activities of commerce to count.

This gives some ground for thinking the court might overturn the mandate.  Particularly because it could be done on the grounds that the commerce clause does not give the power to create commerce as oppose to regulate or ban.  Thus the supreme court would be able to give teeth to the commerce clause without overthrowing the regulatory state of the last 80 or so years.  Indeed no act of congress has compelled the purchase of a product under the commerce clause before so it could be argued they would only be stopping further expansion in the clause’s meaning.

On the more brutal and obvious political level the mandate itself is unpopular – so the chances of attacks on the power of the court or the status of the justices would be reduced.

There are well thought out arguments on the other side of the issue.  One is that the mandate is necessary for the rest of the law to work and that is a proper exercise of congress’ power to regulate commerce (which does raise again the question of whether this sets any real limits on the power of the commerce clause).  Another argument is that healthcare is a distinctive product in that everyone by being alive becomes part of the market so the mandate is  merely a regulation of the market (like the law forcing healthcare providers to treat the critically ill).  This suffers from issues of definition (where does ‘healthcare’ end?) and again is not a very obvious limiting principle – why would it not apply even more clearly to the purchase of food for example.  Another textually is that the mandate is a tax break (that is it’s a tax on everyone with those buying insurance exempted) and justified under the federal government’s undoubted power to levy taxes. However this suffers from complications as to whether it’s a constitutional form of taxation and also from the fact that the mandate applies to various people exempted from the fine.

Perhaps the strongest ‘political’ reason the court might not strike down is through the complex topic of ‘Severability’.  That is, if the mandate is struck down what parts of the law survive? This is rendered particularly complex question because Obamacare lacks a ‘severability’ clause that is a clause stating what aspects of the law survive or fall if other parts of the law endure.  It’s not clear if it was a mistake not to have one – or an attempt to protect questionable parts of the bill legally  by attaching them to the whole bill.

There are essentially three basic options on ‘Severability’ for the Supreme Court in the event they declared the mandate unconstitutional.

  1. The Supreme court could strike down the mandate and let the rest of the law stand. As  previous explained  the loss of the ‘mandate’ is likely to lead to the destruction of the US insurance industry and spiralling premiums for healthcare  as people only sign up when ill (at the state level this has tended to end up with the repeal of such mandates). The court is likely to be very uncomfortable about this and may be worried they would get political blame as well.
  2. Get rid of the parts of the law most obviously served by the mandate – the ‘community rating’ which a common price for health insurance people regardless of risk, cost etc. Of course if the court does this they risk being blamed for getting rid of the most popular aspects of the court.  That may well be why this is what the Obama administration has argued is the case if the mandate is repealed.
  3. Get rid of the whole law and treat the mandate as sufficiently central to the law as to justify invalidating the whole law in the absence of a severability clause. This risks making the court look highly partisan and political

One (probably) minor note is in theory the court could refuse to rule on the constitutionality.  This is because of the ‘Anti-injunction act’ which bans suing against a tax until it’s been levied (this is to prevent tax collection being paralysed by lawsuits ).  Even leaving aside the arguments against the mandate being at tax it’s worth noting the Obama administration has argued the act does not apply, there’s a very strong case that it’s possible for the US government to waive any protection from it and finally I think the court would be wary of creating so much uncertainty on the management of 15% of the US economy.

The Medicaid expansion argument will be dealt with more briefly.  It essentially boils down to the argument that because of the enormous sums involved the Medicaid expansion unconstitutionally ‘coerces’ the states – because they lose so much money (paid for out of taxation by the citizens of all states including the states) if they refuse the conditions.  It relies on a single sentence of a 1987 cases which suggests this is possible in principle.  It’s quite difficult to establish how this is different from Medicaid as currently constituted in principle, even some very conservative legal scholars argue against this being ‘coercive’  and there’s a valid case that the more money attached to conditions the less ‘coercion not more.  On the other hand the court has shown a real concern with upholding ‘the dignity’ of state governments.

So how will the Supreme Court rule?  It’s certainly very difficult to predict. Most experts seem to conclude the court will refuse to invalidate any of the law.  My own view (given with very little confidence) is that the desire to give meaning to the commerce clause and prevent further expansion will lead to an invalidation of the mandate with the rest of the law left to stand.  However virtually any result is very plausible ranging from the whole law being upheld to the whole law being struck out.

Thus the stakes for Obamacare at the Supreme Court are very high indeed.

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