Wednesday, March 31, 2010

ObamaCare and the Courts

By now you’ve heard a parade of diverse (read: all far left) law school professors tell you that the lawsuits filed by the state attorneys general are “frivolous.” I guess it doesn’t take much to be a law professor these days. “Frivolous” is a legal term which basically means so obviously wrong that you’re wasting the court’s time. For a lawyer to call these suits “frivolous” is pure propaganda, and tells you more about the lawyer than the law. Let’s talk about the two major claims and what their chances of success might be.

Issue One: Individual Mandates.
The first major challenge involves the requirement that individuals obtain insurance under threat of being fined. This is, in fact, the key to making ObamaCare work (to the extent that it does). This is what allows the Democrats to claim this bill provides “universal coverage,” even though it actually “provides” no coverage, and they are relying on the fines expected to be paid by 24 million Americans to finance the bill.

ObamaCare defenders argue that this is just like requiring drivers to get car insurance. But that argument is laughable. First, the analogy is flawed, as you only need to get insurance if you intend to drive. ObamaCare, on the other hand, requires you to buy insurance no matter what. More importantly, the ObamaCare defenders are comparing apples to oranges. It is the states, not Congress, that impose the car insurance requirements. States, unlike Congress, have the power to do that because they have the power to regulate intrastate activities. Congress has no such power; it may only regulate interstate activities. The fact that states can do something that is clearly within their power cannot be used to show that Congress has that same power.

Congress’ power to regulate comes from its power to regulate interstate commerce. Congress has the power “to make all laws which shall be necessary and proper” to regulate interstate commerce.

Using this, ObamaCare supporters point to a 2005 Supreme Court ruling, Gonzales v. Raich, in which the court held 6-3, that the federal government could make it a federal crime for Californians to grow marijuana at home for their own personal, medical use. According to the court, regulating local behavior is necessary and proper when doing so is an “essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.”

But there are two problems with applying this to ObamaCare. First, while the drug trade clearly involves interstate commerce, and thus is subject to federal law, it is not at all clear that the same is true of "health care." Indeed, while parts of the health care industry are clearly engaged in interstate commerce, at its core, health care remains about patients and doctors, and that relationship does not touch upon interstate commerce. Thus, it's not clear that Raich can apply.

Secondly, even if the court finds such a connection, the situation in Raich still isn't comparable to ObamaCare. Indeed, in Raich it was obvious that allowing drug growers a safe harbor by claiming that they only sell locally, would all but wipe out Congressional efforts to stop the drug trade. But the same is not true with ObamaCare, where it’s not at all clear how one person not having insurance could in any way hurt other efforts to regulate health care?

So what the ObamaCare supporters argue is that the cumulative effects of the uninsured using emergency room facilities affect interstate commerce. But the Supreme Court rejected this very argument in U.S. v. Morrison, in 2000, where the court struck down part of the Violence Against Women Act. In U.S. v. Lopez, in 1995, the Supreme Court held that Congress could not make it a federal crime to possess a gun near a school zone, because possession of a gun near a school had nothing to do with interstate commerce. So when the Congress passed the VAWA, they specifically included findings that the cumulative effects of domestic violence are a burden on the economy and, thus, affect interstate commerce -- the same argument being advanced now. The Supreme Court rejected that argument in Morrison. There is no reason to believe the court will change its mind for ObamaCare.

Moreover, even if the court accepted this argument, ObamaCare still runs afoul of another issue that arises in constitutional law. The Supreme Court generally requires that laws be narrowly tailored to fit the harm they tend to address. In other words, if the use of the emergency room by the uninsured was the harm to be addressed, then the Supreme Court is unlikely to allow a solution that imposes broad-based requirements on all Americans, when the Congress could instead have found less invasive solutions.

Additionally, in each of the above cases, the court had serious heartburn about letting Congress regulate these activities. But ObamaCare goes even further than this: it regulates “inactivity.” I am not aware of any instance in which the court has ever allowed Congress to impose a penalty for failing to engage in interstate commerce.

So what does this mean? It’s hard to tell. Predicting how courts will decide issues, especially close issues like this one, is extremely difficult. There are dozens of side issues that could affect the outcome, and there are political considerations as well as legal considerations. Would the Supreme Court launch itself into something as far-reaching and contentious as this issue? Absolutely. Would it defer to Congress? That seems to be the default setting of the court these days, but not always.

Overall, I would say, the odds are even that this part will be overturned.
Issue Two: State Mandates.
The second major issue is the requirement that state governments expand Medicaid (the only actual extension of coverage in the bill). Most people assume Medicaid is a federal program, but that’s not entirely accurate. Medicaid is really a block grant, where the federal government gives money to the states provided that the states pass certain state laws. This is exactly like the highway bills you’ve probably heard about, where the feds agree to pay for the construction of new highways, if the state imposes a seat belt law. So in reality, the feds aren't imposing anything on the states, they are simply offering a bribe. But there is a catch.

In 1992, the Supreme Court held in New York v. United States, that the federal government can’t conscript states to act as its agents and it cannot “simply commandeer the State’s legislative processes.” What this came down to was that Congress could not cross the line from “encouragement to coercion.”

Thus, the anti-ObamaCare argument will be that Congress crossed that line from encouragement to coercion when it imposed these very high requirements (requiring states to spending billions of state tax dollars on expanding Medicaid eligibility and establishing these insurance exchanges) under threat of forcing the states to drop out of Medicaid if they refused.

I understand this argument, but I doubt the court will buy it. Unless the states can come up with evidence that they really could not drop Medicaid, i.e. that they truly had no choice, then it is unlikely that the Supreme Court will see ObamaCare as coercive.

Overall, I would say, the odds are about 10% that this part will be overturned.


Joel Farnham said...

The odds that the law will be overturned are small, but then again I thought Congress would not be that stupid as to actually pass it.

The odds that it will be repealed are much better.

If it is upheld, then abortion should be made unlawful, since Congress can control our bodies, the state then can control people from getting abortions. At least until the "majority" decides something else.

StanH said...

Like anything that goes to court, the outcome is not assured. It would appear our best bet still is too vote it out, repeal and replace. Please keep us updated that was interesting and hopeful.

I have a question for you Andrew, on page #766 Sec 2716 “Prohibition on discrimination in favor of highly compensated individuals.” of the healthcare monstrosity. They go into a discussion about gun owner ship, and the 2nd Amendment, they specifically say (in a capsule portrayal) that they will not trace gun ownership, ammo etc. My wife and I are concerned that by putting this language of prohibition in the “healthcare bill” leaves it open for further review, or tinkering by a later congress by fiat, or budget reconciliation. We are concerned that this is the starting point to remove our 2nd Amendment rights, via the healthcare bill, or are we being paranoid? We just thought it was odd

Tennessee Jed said...

good post, Andrew - let me play devil's advocate or at least ask you a couple of questions about part 1:

1) Wouldn't advocates of Bamacare argue that the feds are not actually regulating doctor/patient, but rather a mechanims to pay for it; e.g. insurance. Put differently, if you are siick while vacationing in a different state, your insurance would still pay for your treatment (subject to other standard provisions) so it really is interstate commerce?

2) Wouldn't advocates argue that drug trafficking, an illegal interstate activity would not be interstate for California. In other words, there law only deals with lawful in state growing for medical purposes. If somebody illegally transfers it out of state, that is an entirely different issue.

Kind of rushed at the moment, so I may not have phrased my questions ideally. Nevertheless, I have been saying for some time, Justice Kennedy may in up being a huge player in all this.

AndrewPrice said...

Joel, I do think the best strategy is still to repeal it. Even if the Supremes do take down part of it, the rest of it still sits there causing all sorts of cost-increasing distortions.

AndrewPrice said...

Stan, Yep, court outcomes are always uncertain. That's the nature of the business for a variety of reasons. One thing these claims are not, however, is frivolous. That's ridiculous.

AndrewPrice said...

Jed, On point 2 first:

That is precisely the argument the supporters will make. But the difference is the effect that allowing the "intrastate" activity would make. The drug market is by it's nature an interstate activity. And while the local growers are acting entirely interstate in theory, allowing them to continue unchecked would provide a base from which they could put these drugs into interstate commerce. In other words, it wasn't actually the people who grew for themselves that were the problem, it was distinguishing them from the people who would suddenly claim they were growing for themselves but were really just using the loophole as a way to hide their interstate operations. There is nothing comparable in ObamaCare because whether or not you buy insurance has no ability to create any similar safe harbor for others who would be involved in interstate activities.

On point 1: They have made that argument as well, but there are two problems with it. First, to the extent an insurer offers insurance only in a particular state, it's not involved in interest commerce -- thus the Fed's power to regulate is suspect. But more importantly, they aren't regulating the insurer, which is the payment mechanism, they are actually requiring people who are not engaged in any activity, to engage in an activity, which they are then claiming is an interstate activity, which they claim lets them regulate the conduct. That's circular reasoning. It's the first step that is the problem. In other words, you can regulate how payment is made once the person engages in interstate conduct, but you can't force them into interstate commerce in the first place.

MegaTroll said...

Good analysis. Thanks. It would be nice if the media actually pointed things like this out.

AndrewPrice said...

Stan, I don't know exactly what the angles might be and it's possible this is in the bill as some sort of trojan horse, but on it's surface, it appears aimed at protecting the Second Amendment. What it does is that it forbid "wellness" clinics from collecting any information about gun ownership.

The reason for that, I assume, is that the AMA has been going on for years now about guns being a public health issue. I would assume that this was included to prevent the anti-gun left from turning ObamaCare into a secret form of gun registration by letting doctors do it.

I could be wrong, but that's what it appears to be on the surface.

AndrewPrice said...

Thanks Mega. Trust me, I wish the media would do their jobs too.

JG said...

Thanks for the breakdown, Andrew. And I think the "regulating inactivity" part is the crux of the matter. What else does the government penalize you for *not* participating in? What precedent is there for that? The closest I can think of is showing up for jury duty.

patti said...

andrew: my senator, john cornyn, is against repel because it's "risky" and is telling those up for reelection to be careful to run on that issue. makes me crazy (ier).

thanks for the great article. i can always count on your guys cutting to the chase. (may be my link for tomorrow.)

BevfromNYC said...

Could they have corrected the "interstate" issue by allowing the sale of insurance across state lines?

AndrewPrice said...

JG, You're welcome. I'm not sure that jury duty is even a good analogy. There are duties we owe the government, like the payment of taxes, the presentation of an identification when questioned, and the appearance at jury duty.

But ObamaCare is creating a duty to go out and engage in commerce. This would be like saying "you must buy a VCR every year." It's truly unprecedented.

In fact, if ObamaCare had simply imposed a huge tax, and the government had used that money to provide insurance to people, I think it would have been on much firmer legal standing -- because the obligation to pay taxes is to the government. But the Democrats tried to achieve the same thing by applying a mandate that I believe is beyond the government's power.

AndrewPrice said...

Thanks Patti! I'm glad you liked it.

I think Cornyn is very wrong. I think the "repeal and replace" mantra not only is electoral gold, but it will create the mandate that is needed for action on this once the newbies get to Washington. Without that, there the new Congress will spin its wheels and this horrible program will stay in place.

AndrewPrice said...

Bev, No, not really. To the extent the insurance carriers act across state lines, they can be regulated. There is no doubt about that.

But the individual who refuses to buy insurance still isn't engaging in interstate commerce. And that's where ObamaCare imposes its mandate -- on the people who aren't engaged in interstate commerce.

That's the problem with the individual mandate -- they are trying to force people who are doing nothing into interstate commerce so that they can claim an interstate commerce basis for forcing them in the first place. That doesn't work legally.

LawHawkSF said...

Andrew: Although I agree that the Supreme Court will probably continue to rule the same way on marijuana production in the future, I am not a big fan of "cumulative effect." It is a power which has been badly abused, and with the leviathan that Obama is creating, will likely be even more abused in the future. My view is that states should have their own independent authority to decide on the issue, and the rulings should be based on what actually happens, not what the Court thinks might happen. Given our modern transportation and travel conditions, what doesn't eventually make its way across state lines? If California marijuana makes it across a border, deal with it as a violation of law.

That's my anti-fed rant for the morning, and more importantly, I agree with you that Obamacare is an entirely different animal. Every individual activity ultimately has an effect on local commerce, then state commerce, then interstate commerce, but it's an expansion ad absurdum. We're talking about the law here, not some airy-fairy "butterfly effect." Fortunately, our current Supreme Court is limiting this ridiculous expansion of the definition of cumulative effect as quickly as the Congress tries to claim it. More importantly, there is a major difference between prohibitory legislation involving interstate commerce and mandatory legislation expanding federal power over the states and their individual citizens in a manner never allowed in all of American history and law.

Although I'm not holding my breath on issue two, I'm not quite as sure that the high court might not find it a sufficient ground. The federal government provided the majority of the funds for the interstate highway programs, with each state providing a far smaller percentage. And the original federal interstate highway program was actually justified as a matter of national security (most people forget that). Eisenhower and Congress were concerned that the old system did not allow for quick movement of troops and supplies across vast distances inside and outside the individual states. It's a tenuous connection, but it is a connection.

Medicaid, on the other hand, will fall almost entirely on the shoulders of the states, with little help from an already bankrupt federal treasury, and only a leftist Democrat would in any way believe that someone not having "free" medical care is a danger to national security. Some Demogogues have actually suggested such a thing, but we know they're slightly insane. States were not allowed to opt out of the interstate highway system, so like that matter, the Democrats will argue that states must participate. In reality, it's much more like your example of say, a "scenic highway," in which the feds sweeten the pot, and the states have a choice whether to participate or not. Nevertheless, I think the Democrats will shoot themselves in the foot by arguing national necessity, thereby creating a "no choice" situation for the states which the court might just reject.

Of course, I'm just speculating as well. I agree entirely with your conclusion on issue 1, but I give issue 2 a 40-60 chance of being compelling.

BevfromNYC said...

LawHawk, Though the states were required to participate in the Interstate highway system, Individuals have never been required to USE the highway system. Wouldn't that be the argument?

AndrewPrice said...

Bev, They are two different issues. Issue one about the individual mandates deals with interstate commerce. Issue two, with the highway analogy, deals with what the Feds can require the states to do. They are different issues with different standards and different rules.

The issue in part 2 is that the Congress can bribe states, but it can't force them to act. When it puts the states into a spot that they simply have no choice but to comply, then the Court has found (very, very rarely) that the Congress has crossed that line into coercion.

LawHawkSF said...

Andrew: Yep, and I should have included that argument. I was talking largely about the mandate on the states, but that was indeed not a mandate on the individuals to use the interstate highways. My bad. The mandate issue is twofold, on the one hand on the states, on the other on the individual. Those two mandates must be addressed as two entirely separate arguments in the briefs. If one fails and the other succeeds, that's good enough.

AndrewPrice said...

Lawhawk, Without further proof that states couldn't opt out of Medicaid without a disasterous consequence AND that ObamaCare imposes such a huge requirement on them that it would be an extreme burden on the state, I don't see the Court buying into the second argument. I'm not saying it can't happen, but I need to see a lot more proof first.

In terms of the "cummulative effect" argument, the Supreme Court rejected that in Morrison, rightly so. That is the exception that would have eaten the rule. I can't see this court reviving that one.

LawHawkSF said...

Andrew: I think we agree on the possible results, I'm just a little more optimistic about option 2.

AndrewPrice said...

Lawhawk, Yeah, I get that sense. I'm not optimistic about that one at all, unless they can come up with something much more significant than what people are talking about right now.

Ponderosa said...

I’ve been lurking for at least six months – stopping by several times a week. The post are excellent and I love that the authors follow-up in the comments. Great blog.

A request – would you discuss in detail the history of the commerce clause? I do not have a legal training or background, but it appears as if the commerce clause was fundamentally altered with the United States v. Darby Lumber Co. decision in 1941.

Please tell my why I am wrong to question a 70-year old, 8-0 decision. I fear that I am becoming a ‘fringe element’. Obviously there is something important I do not understand. What is it?

AndrewPrice said...

Ponderosa, Thanks! And welcome! We're glad to have you here!

Let me put something together on the evolution of the commerce clause, because it certainly did change and has continued to change. Give me a couple days.

As for becoming a fringe element, unfortunately, it seems that anyone who wants the court to actually follow the Constitution is now considered a fringe element -- though there has lately been a huge resurgence in the number of people who are finding newfound respect for the Constitution. People (especially courts) need to remember that it is the law of the land and we need to respect it or else our government is nothing more than a tyrant that does whatever it wants.

Opus #6 said...

I'm thinking defund right after November, then repeal after Nov 2012.

AndrewPrice said...

Opus #6, I agree with that. Defund it as soon as possible, then repeal it and replace it with some free market reforms.

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