July 03, 2012
8 min read

Supreme Court jurisprudence and the health care law explained

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In May’s Orthopedic Medical Legal Advisor column, we addressed U.S. Supreme Court jurisdiction, its power of judicial review and the various constitutional clauses relevant to understanding the Patient Protection and Affordable Care Act. We now follow-up with an examination of the Court’s upholding of the Patient Protection and Affordable Care Act. On June 28, 2012, the Court held that the controversial act was constitutional in part, and unconstitutional in part.

The “individual mandate” contained in the act had generated much debate. This mandate requires Americans to maintain “minimum essential” health insurance coverage, through an employer, government program or private insurance company. For individuals who are not exempt, and do not comply with this mandate, effective 2014 a “shared responsibility payment” must be made to the federal government, and this “penalty” is to be paid to the Internal Revenue Service with the tax return. The act specifies that the penalty “shall be assessed and collected in the same manner” as tax penalties.

Another aspect of the ruling relates to Medicaid coverage in the individual states. The act requires states to increase Medicaid coverage to adults with incomes up to 133% of the federal poverty level. Most states now cover adults with children only if their income is considerably less, and do not cover childless adults. The act provides federal funding to help states comply with this expanded coverage requirement. If a state fails to comply, then it may lose not only the federal funding for those requirements, but also all of its federal Medicaid funds.

The Supreme Court ruling

The importance of the Supreme Court ruling is in its finding that the individual mandate is an unconstitutional reach of congressional power under the Commerce Clause. As we discussed in the previous column, the Commerce Clause is an enumerated power in the Constitution that gives Congress the power “To regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes.” The Commerce Clause is understood by the related “Necessary and Proper Clause,” which states that Commerce Clause power, and other enumerated powers are implemented by the power “To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.” The Necessary and Proper Clause is the practical means by which Congress puts into operation its enumerated powers that are captured in various other parts of the Constitution.

B. Sonny Bal, MD, MBA 

B. Sonny Bal

Lawrence H. Brenner, JD 

Lawrence H. Brenner

As for the Medicaid expansion, the Court held that the act violates the Constitution by threatening existing Medicaid funding. Congress has no authority to order the states to regulate according to its instructions. Congress may offer the states grants and require the states to comply with accompanying conditions, but the states must have a realistic choice whether to accept the offer. Instead, the act forces states to either accept a basic change in the nature of Medicaid, or risk losing all Medicaid funding. The remedy for that constitutional violation according to the Court was to deter the federal government from imposing such a sanction. It did so by isolating the Medicaid provision as unconstitutional; the rest of the act survived the Court’s scrutiny.

Analysis of the ruling

The Court heard this consolidated lawsuit titled, “National Federation of Independent Business et al v. Sebelius, Secretary of Health and Human Services, et al” and issued its long-awaited opinion on June 28, 2012. The Court of Appeals for the Eleventh Circuit previously upheld the Medicaid expansion as a valid exercise of congressional spending power, but concluded that Congress lacked authority to enact the individual mandate.

The Court acknowledged that the Constitution empowers Congress to “regulate Commerce” according to Article I. But, the Court noted that judicial precedent has reflected an understanding that commercial activity must exist in the first place, in order to be subject to congressional regulation. The individual mandate, as specified in the Act, compels individuals to buy a product on the ground that failure to do so affects interstate commerce. The Court said that giving Congress this new and expansive power to compel commerce, rather than regulate it, exceeded the framers’ intention that the federal government is to be one of limited and enumerated powers.

The Necessary and Proper Clause did not rescue the individual mandate either. According to the Court, under this clause, congressional exercise of power must be derived of, and in service to, a granted power. The act sough to vest in Congress the extraordinary ability to create the necessary predicate to the exercise of an enumerated power, and draw within its regulatory scope those who would otherwise be outside of it. Even if the individual mandate were deemed “necessary” to the act’s reforms, said the Court, such expansion of federal power is not a “proper” means for making those reforms take effect.

The Court also concluded that the Medicaid expansion violates the Constitution by threatening states with the loss of their existing Medicaid funding if they decline to comply with the proposed expansion. Citing earlier jurisprudence, the Court said that when Congress threatens to terminate grants as a means of pressuring the states to accept a program, the legislation runs counter to this nation’s system of federalism. The proposed remedy for this constitutional violation was to preclude the Secretary of Health and Human Services from withdrawing existing Medicaid funds for failure to comply with the requirements set out in the expansion.

To summarize, neither the individual mandate nor the penalties prescribed for state refusal to expand Medicaid survived the Court’s scrutiny. The significance of this ruling, as other case law before it, is in helping define the outer contours of congressional exercise of its powers under the Constitution.

How did the act survive?

The government had alternatively argued that even if the individual mandate were unconstitutional, under Article I Congress has the power to tax and spend. Specifically, under Article I, Congress may “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States.” This clause gives the federal government expansive influence even in areas that it cannot directly regulate. The government may, for example, tax activity that it cannot otherwise authorize, forbid, or control. In so doing, Congress may offer funds to the states, and may condition those offers on compliance with specified conditions. These offers may induce states to adopt policies that the federal government itself could not impose. For example, in the 1987 case of South Dakota v. Dole, the Court had upheld conditioning federal highway funds on states raising their drinking age to 21 years as a valid exercise of congressional power.

The Court agreed that the penalty imposed by the act for failure to carry health insurance could be viewed as a tax on those who have a certain amount of income, but choose to go without health insurance. Such legislation is within Congress’s power to tax. Under this scenario, since Congress has the power to tax and spend, the individual mandate to buy insurance could be viewed as a tax. In public discussions, the government had carefully avoided framing the act as a tax increase. But the act provides that the penalty for non-compliance with its individual mandate is a payment, to be made to the Internal Revenue Service with one’s tax return. For the Court, this was sufficiently close to a tax, and since Congress has the power to tax and spend, the individual mandate could survive.

Why did the Court save the act?

Chief Justice John Roberts said that in judicial construction, because “every reasonable construction must be resorted to in order to save a statute from unconstitutionality,” the question before the Court became whether it was reasonable to view the individual mandate as imposing a tax.

The Court explained its permissive reading of congressional power in part by a general reticence to invalidate the acts of the nation’s elected leaders. Citing precedent, the Court said that “Proper respect for a coordinate branch of the government” requires that we strike down an act of Congress only if “the lack of constitutional authority to pass the act in question is clearly demonstrated.” The Court said its members are vested with the authority to interpret the law; the Court has “neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.”

Legal precedent holds that between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, the Court will adopt the interpretation that will save the act. Accordingly, the individual mandate was not seen as a legal command to buy insurance. Rather, it makes going without insurance another thing the government taxes, like buying gasoline or earning income. If the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.

The Court clarified that its deference to Congress does not mean that the Court will abdicate of the duty to uphold the Constitution. Citing the 1803 case of Marbury v. Madison, the Court said that “The powers of the legislature are defined and limited; and that those limits may not be mistaken, or forgotten, the constitution is written.” As Chief Justice John Marshall had said earlier, “The peculiar circumstances of the moment may render a measure more or less wise, but cannot render it more or less constitutional.” (McCulloch v. Maryland, 1969).

The dissent would have struck down the act in its entirety as congressional overreach of its power. At the conclusion of its dissenting opinion, the justices said: “The Constitution, though it dates from the founding of the Republic, has powerful meaning and vital relevance to our own times. The constitutional protections that this case involves are protections of structure. Structural protections – notably, the restraints imposed by federalism and separation of powers –are less romantic and have less obvious a connection to personal freedom than the provisions of the Bill of Rights or the Civil War Amendments. Hence, they tend to be undervalued or even forgotten by our citizens. It should be the responsibility of the Court to teach otherwise, to remind our people that the framers considered structural protections of freedom the most important ones, for which reason they alone were embodied in the original Constitution and not left to later amendment. The fragmentation of power produced by the structure of our government is central to liberty, and when we destroy it, we place liberty at peril. Today’s decision should have vindicated, should have taught, this truth; instead, our judgment today has disregarded it.”

What do you think?

Further legal challenges, political fragmentation, upcoming elections, and the precarious financial position of the nation ensure that the debate will continue, and how the act is ultimately implemented remains uncertain.

Share your insights on the following questions with us on www.OrthoMind.com:

Is health care so different and expansive, as the government had argued, that individual choices affect commercial activity related to health care in the aggregate? If so, did the Court err in not upholding the mandate under the Commerce Clause?

Congress already regulates health care through Medicare, Medicaid, assistance programs, penalties for health care law violations, and the like. Could the government have argued that the individual mandate was essential to its exercise of established regulatory power over health care? If so, should the Court have found the individual mandate constitutional under the Necessary and Proper Clause?

In finding the act constitutional under the Tax and Spend Clause, the Court engaged in an important exercise of judicial construction, i.e., permitting legislative acts to go forward even if they violate one part of the Constitution, but as long as some other constitutional support can be found in favor of the statute in question. Do you agree with this proposition, which probably accurately characterizes the Court’s position on a number of important cases since the time of the New Deal? Should the Supreme Court consider notions of fairness, common sense, and reason when it examines disputed legislative acts, or should it leave those things to the voting public and their elected officials? Does a democracy have a constitutional right to as bad and unreasonable a government that it chooses?

Do you agree with the dissent that Supreme Court jurisprudence must be examined in the larger light of the Republic and its founding principles? Should the Supreme Court, as the dissent suggests, have a role to educate the public about the sweeping constitutional principles that have guided the United States for more than 2 centuries, or should this function be best deferred to our public schools?

For more information:
  • B. Sonny Bal, MD, JD, MBA, is an associate professor of hip and knee replacement in the department of orthopedic surgery, University of Missouri School of Medicine.
  • Lawrence H. Brenner, JD, is on the faculties of orthopedics at Yale University and the University of Southern California, and practices in Chapel Hill, N.C. Address all correspondence to Brenner at lb@lawrencebrennerlaw.com.