ACA and the U.S. Constitution

1. 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

2. 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)?

3. 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?

4. 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)

5. 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

6. 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)

7. 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)

8. 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

9. 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)

10. 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

11. 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 Code

12. 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

13. 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

14. 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

15. 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)

16. 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?

17. 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

18. 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

19. 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.

20. 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” effect

21. 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)

22. Federal poverty level

23. 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