The Supreme Court’s ruling on the constitutionality of the Patient Protection and Affordable Care Act (ACA)’s so-called individual mandate was generally perceived as legitimizing an expansion of federal power. While the provision was upheld under Congress’s power to tax, the contorted position of the majority further solidified the Court as a lagging indicator of conservative-dominated politics in the United States since 1980. Chief Justice John Roberts’s opinion in National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012), codified the Obama Administration’s signature piece of domestic legislation while simultaneously threatening the future scope of federal power. How can this be?
This contradiction is derived from a fundamentally misunderstood debate, in the press as well as the Court, over Congress’s power to regulate interstate commerce. This false debate posed a symbolic question: if Congress can compel individuals to buy health insurance, could they also force individuals to purchase broccoli? Or, as Justice Scalia argues in his minority opinion, would doing so “…make mere breathing in and out the basis for federal prescription”? The characteristics of health care as an economic good – coupled with the history of the federal commerce power – indicate otherwise.
I. Health Care as an Economic Good
Identifying these characteristics is essential to understanding the individual mandate’s constitutionality. First among these is the sheer magnitude of health care expenditures. The growth of these costs has far outpaced inflation, decreasing the purchasing power of consumers and inflating federal outlays related to health care. In 2010 alone, national spending on health care exceeded $2.5 trillion, accounting for 17.9% of gross domestic product. Second, on the individual level, health care consumption is ubiquitous. According to a 2010 study by the National Center for Health Statistics, 82.5% of American adults had visited a health care professional within the last year; 96% had done so within five years; and only 1% had never done so. However, such ubiquity is qualified by temporal uncertainty; although people can reasonably predict they will consume health care, they cannot reasonably predict when.
Beyond size and scope, the market for health care is defined by distortions that affect the behavior of consumers and health professionals alike. Because health care consumption decisions affect the physical well being of consumers, demand is relatively insensitive to price volatility. This inelasticity results in a disproportionate percentage of consumption in the last years of life, with emotional and psychological norms about death obstructing any semblance of rationality in cost-benefit analyses. Moreover, these societal norms have affected the behavior of health care professionals, insurance providers and federal instrumentalities. According to Amici Curiae, a consortium of health law professors:
Researchers have labeled this sociological phenomenon the ‘identifiable victim effect’: people are consistently unwilling to let a named or visible person die for lack of money, even though they might not act to save a larger group of anonymous people under otherwise similar circumstances.
As a result, state and federal laws mandate that hospitals provide a certain level of emergency care, irrespective of ability to pay. These distortions result in a significant free rider problem, whereby hospitals are only compensated for a portion of the care they provide.
The free rider problem reverberates throughout the entire system, introducing externalities as a distinguishing economic characteristic of the health care market. In 2008, according to Amici, unpaid care increased federal spending by $25.6 billion, state spending by $17.2 billion, and private spending by $14.5 billion. “Not only do those without insurance consume a large amount of health care each year,” Justice Ginsburg writes. “…[T]heir inability to pay for a significant portion of that consumption drives up market prices, foists costs on other consumers, and reduces market efficiency and stability.” Because hospitals transfer free rider costs to insurance companies – who then transfer them to insured consumers – the decision of whether or not to purchase insurance directly affects the cost and quality of health care for other consumers. Thus, the individual mandate aims to prevent cost shifting by forcing healthy free riders – whose decision to forgo insurance until they become sick imposes higher premiums on others – into the insurance risk pool.
II. The Federal Commerce Power
The Constitution enumerates Congress with the ability to “regulate Commerce” (Art. 1, §8, cl. 3). Historically, Congress’s enumerated powers have been strengthened by the Necessary and Proper Clause, which grants Congress the power “to make all laws which shall be necessary and proper for carrying into Execution the foregoing powers” (Art. I, §8, cl. 13.) The scope of Congress’s implied powers under the Necessary and Proper Clause is rooted in the landmark case, McCulloch v. Maryland, 17 U.S. 316 (1819). “Let the end be legitimate, let it be within the scope of the constitution,” Chief Justice John Marshall writes, “and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the constitution, are constitutional.” This definition has endured, conferring broad power for Congress to employ various means to a constitutionally enumerated end.
The scope of the Commerce Clause is far more contentious and its trajectory far less consistent. Nevertheless, since the New Deal, the Court has taken a “pragmatic approach” to the federal commerce power. Like other enumerated powers, the scope of the Commerce Clause – augmented by the Necessary and Proper Clause – has fluctuated to meet the demands of a modern government and administrative state. Regarding the constitutionality of the individual mandate, the following precedent is instructive:
Chief Justice Charles Evans Hughes, National Labor Relations Board v. Jones & Laughlin Steel Corporation, 301 U.S. 1 (1937):
Although activities may be intrastate in character, if they have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions, Congress cannot be denied the power to exercise that control.
Justice Robert H. Jackson, Wickard v. Filburn, 317 U.S. 111 (1942):
But even if appellee’s activity be local, and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce, and this irrespective of whether such effect is what might at some earlier time been defined as ‘direct’ or ‘indirect.’
Justice John Paul Stevens, Gonzales v. Raich, 545 U.S. 1 (2005):
In Wickard, we had no difficulty concluding that Congress had a rational basis for believing that, when viewed in the aggregate, leaving home-consumed wheat outside the regulatory scheme would have a substantial influence on price and market conditions…In both cases, the regulation is squarely within Congress’ commerce power because production of the commodity meant for home consumption, be it wheat or marijuana, has a substantial effect on supply and demand in the national market for that commodity.
III. The Individual Mandate
Accordingly, the Government premised its contention in NFIB v. Sebelius on the “substantial and deleterious effect on interstate commerce” caused by failing to purchase insurance. The argument asserts that while an individual failing to purchase health insurance may not substantially affect interstate commerce, when aggregated, the cost-shifting problem amounts to a substantially market-altering economic activity. Moreover, the distinction between what is ‘national’ and what is ‘local’ is less relevant to the government due to the inextricable ties between the interstate and intrastate markets for health care.
First, Chief Justice Roberts’s rejection of this argument relies upon a distinction between commercial activity and inactivity:
As expansive as our cases concerning the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching ‘activity’…The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce.
To Roberts, this distinction makes NFIB systematically different from and therefore inapplicable to previous Commerce Clause case law, particularly the holdings in Wickard and Raich. These cases involved Congress regulating the production of wheat and marijuana, even though such production was intrastate and may not have even yet occurred. Although these individuals had either not planned to sell or had not yet sold these commodities, their regulation was nevertheless granted under the commerce power because (i) these activities, when aggregated, substantially affected interstate commerce; and (ii) interstate and intrastate commerce were so inextricably tied that the incidental regulation of intrastate commerce was unavoidable.
Both Roberts and Scalia – who deems Wickard the ne plus ultra of Commerce Clause case law – reject this notion, whose strict constructions fail to recognize the nuances of varying economic activities. Because externalities characterize health care consumption, the decision not to purchase health insurance affects the market as much, if not more, than does doing so. “An individual who bought a car two years ago and may buy another one in the future,” the Chief Justice writes, “is not ‘active in the car market’ in any pertinent sense.” This analogy is inapt. First, as a practical matter, the car market is not ubiquitous as is the health care market. While a bike-rider may decide to purchase a car in the future, it is not as certain as an uninsured patient requiring health care. Second, bike riders do not exert influence on the car market the way the uninsured do on the health care market. Indeed, inactivity and activity are not equivalent in the car market the way they are in the market for health care. In this way, differentiating inactivity from activity is far too myopic a construction for regulating economic conduct under the Commerce Clause.
The Chief Justice himself recognizes that such a distinction between activity and inactivity would be lost on economists. “But the distinction between doing something and doing nothing,” he declares, “would not have been lost on the framers.” Here, the Chief Justice introduces what Justice Ginsburg names the “broccoli horrible.” The distinction would not have been lost on the Framers, he asserts, because they would have been conscious of the slippery slope: if inactivity could be mandated in the health care market, what would stop Congress from enacting a broccoli mandate? This contention relies upon the separation between regulating commerce and compelling commerce. However, the individual mandate does not compel commercial activity in any meaningful way. Rather, it regulates activity in which all people will engage, albeit preemptively and without temporal certainty.
Justice Ginsburg notes how the uniqueness of the health care market makes the individual mandate constitutional without bestowing carte blanche authority to Congress. She writes:
The inevitable yet unpredictable need for medical care and the guarantee that emergency care will be provided when required are conditions nonexistent in other markets…Although an individual might buy a car or a crown of broccoli one day, there is no certainty she will ever do so. And if she eventually wants a crown or has a craving for broccoli, she will be obliged to pay at the counter before receiving the vehicle or nourishment. She will get no free ride or food, at the expense of another consumer forced to pay an inflated price.
She does not posit, as Scalia suggests, that “…[i]f all inactivity affecting commerce is commerce, commerce is everything.” On the contrary, the mandate is constitutional only because health care is: (i) provided regardless of ability to pay; (ii) consumed, for all intents and purposes, by everyone; (iii) characterized by free riders whose inaction, when aggregated, substantially and directly affects the market through insurance premiums. Without these characteristics, in the case of the broccoli or car markets, for example, the mandate would no longer constitute the regulation of economic activity as recognized in precedent.
Ultimately, the Chief Justice concludes that “[t]he proximity and degree” of the connection between the mandate and subsequent commercial activity is insufficient to justify its constitutionality. Certainly, mandating the purchase of vegetables to lower health care costs merits this criticism. But in the health care market, the proximity and degree of the connection is quite clear. Activity or not, the decision not to purchase health insurance constitutes “economic conduct” with clear and demonstrable effects on the market. Although the mandate may regulate future activity in some sense, it primarily regulates the activity generated by what the Chief Justice deems inactivity.
In this way, the opinions of the Chief Justice and Justice Scalia signal a fundamental shift in constitutional interpretation. Until NFIB, the Commerce and Necessary and Proper Clauses were interpreted cooperatively to confer broad power to Congress. However, limiting the precedent-established breadth of the commerce power hinders Congress’ – and the Constitution’s – ability to adapt to the nuances of modernity in our economy as well as in our government. Herein lies the contradiction: while the Court did uphold President Obama’s chief domestic legislative achievement, NFIB will establish a precedent that disregards the necessity of such latitude over the federal commerce power. The decision abandons the Court’s historically pragmatic approach to the Commerce Clause, dictated instead by a constrictive, myopic standard of the economic activity encompassed by it. Thus, the future of the commerce power is threatened: as modernity demands adaptability from the Constitution, the Chief Justice instead has endangered the primary Constitutional means of doing so.