When the Supreme Court heard oral arguments on the individual mandate of the Affordable Care Act, the Solicitor General argued that virtually all citizens are in the medical services market and that Congress therefore has the power under the Commerce Clause to regulate how people pay for these services. This argument made it difficult for the Solicitor General to define reasonable limits on the Commerce Clause. He might have been able to avoid this problem if he had instead argued that Congress has the power to enact the law under the Taxing and Spending Clause. In this post, I explore the viability of such an argument by attempting to answer some of the questions that the justices asked the Solicitor General.
JUSTICE KENNEDY: Can you create commerce in order to regulate it?
A: No, but that is not what the Affordable Care Act does. Under the Affordable Care Act, people are free to forgo medical insurance entirely or purchase insurance that does not meet the minimum essential coverage requirements defined by the government. When they do this, the government will still, as it has since 1987, guarantee that they can receive emergency medical care even if they cannot pay for it, but they will no longer get this benefit for free. They will now have to pay a penalty that will help offset the costs that society will bear if they need emergency medical services, and they are unable to pay. If, however, people ensure that they will be able to pay their own medical expenses by purchasing a qualified medical insurance plan, they will not have to pay this penalty.
JUSTICE ALITO: All right, suppose that you and I walked around downtown Washington at lunch hour and we found a couple of healthy young people and we stopped them and we said, “You know what you’re doing? You are financing your burial services right now because eventually you’re going to die, and somebody is going to have to pay for it, and if you don’t have burial insurance and you haven’t saved money for it, you’re going to shift the cost to somebody else.” Isn’t that a very artificial way of talking about what somebody is doing?
And if that’s true, why isn’t it equally artificial to say that somebody who is doing absolutely nothing about health care is financing health care services?
A: It is not artificial to say that these young people are financing their burial services because they are helping to pay for this benefit with their taxes. The situation is different with emergency medical services. In this case, people who are doing nothing about health care are not financing health care services. They are relying on society to pay their medical expenses if they require emergency medical care and they are unable to pay. This is the problem.
JUSTICE ALITO: I don’t see the difference. You can get burial insurance. You can get health insurance. Most people are going to need health care. Almost everybody. Everybody is going to be buried or cremated at some point. What’s the difference?
A: In both cases, the government is guaranteeing that the individual can receive a benefit regardless of his or her ability to pay. The difference is that these hypothetical young people are helping to pay for the burial services benefit with their taxes, but they are not currently paying anything for the emergency medical services benefit.
JUSTICE KENNEDY: But the reason, the reason this is concerning is because it requires the individual to do an affirmative act. In the law of torts, our tradition, our law has been that you don’t have the duty to rescue someone if that person is in danger. The blind man is walking in front of a car and you do not have a duty to stop him, absent some relation between you. And there is some severe moral criticisms of that rule, but that’s generally the rule.
And here the government is saying that the Federal Government has a duty to tell the individual citizen that it must act, and that is different from what we have in previous cases, and that changes the relationship of the Federal Government to the individual in a very fundamental way.
A: There is at least one previous case in which the government has effectively told the individual citizen that it must act. Under the 1987 Emergency Medical Treatment and Active Labor Act, if a blind man walks in front of a car and gets injured, hospitals have to treat him, regardless of his ability to pay. Now hospitals are not individuals, but hospitals have no choice but to pass these costs on to their paying customers. In doing so, they are compelling their paying customers to help the blind man. In effect, under the current law, the government is compelling individuals who pay their medicals bills to also pay the medical bills of people who do not pay.
As for the Affordable Care Act, it actually strengthens the law of torts and helps reduce the amount of charity that people are forced to provide. It does this by requiring people to pay a penalty if they do not ensure that they will be able to pay their medical expenses. This penalty is a Pigovian tax that helps correct the market imbalances that are occurring because everyone in the United States can demand emergency medical services regardless of their ability to pay. Requiring citizens to pay this penalty lies well within Congress’s enumerated powers under the Taxing and Spending Clause.
JUSTICE KENNEDY: I’m not sure which way it cuts, if the Congress has alternate means. Let’s assume that it could use the tax power to raise revenue and to just have a national health service, single payer. How does that factor into our analysis? In one sense, it can be argued that this is what the government is doing; it ought to be honest about the power that it’s using and use the correct power.
On the other hand, it means that since the Court can do it anyway — Congress can do it anyway, we give a certain amount of latitude. I’m not sure which the way the argument goes.
A: Yes, Congress could have created a national health service, and it could have used its tax power to fund it. A single-payer solution such as this would have given the government greater control over health care than it has under the Affordable Care Act. In other words, citizens will have greater liberty under the Affordable Care Act than they would have under a single-payer system.
Alternatively, Congress could have used its tax power to require all citizens to pay an “emergency medical services tax” and used the funds to reimburse hospitals for the uncompensated medical services they provide. But this would have required citizens who have medical insurance to pay for something they would never use.
JUSTICE KENNEDY: Can you identify for us some limits on the Commerce Clause?
A: The Commerce Clause does not give Congress the right to fine or otherwise punish people who do not purchase a given commercial product or service. If, however, Congress, acting within its enumerated powers, passes a law that provides citizens with certain benefits, Congress may, under the Taxing and Spending Clause, require citizens to pay taxes to cover the costs that the government and/or citizens incur when providing these benefits.
In this specific case, the Emergency Medical Treatment and Active Labor Act granted everyone in the United States the right to receive emergency medical services. This law has existed for 25 years and its constitutionality has never been challenged. Up until now, citizens could avoid paying anything for the benefits provided under this law. The Affordable Care Act corrects this problem, but it does not require people who do not need the benefit to pay for it. People who have a qualified medical insurance plan do not need the benefit, and they are therefore exempted from paying for it.
JUSTICE KENNEDY: Could you help — help me with this. Assume for the moment — you may disagree. Assume for the moment that this is unprecedented, this is a step beyond what our cases have allowed, the affirmative duty to act to go into commerce. If that is so, do you not have a heavy burden of justification? I understand that we must presume laws are constitutional, but, even so, when you are changing the relation of the individual to the government in this, what we can stipulate is, I think, a unique way, do you not have a heavy burden of justification to show authorization under the Constitution?
A: Under the constitution, Congress could potentially require citizens to purchase a commercial product or service if the purchase was a necessary and proper means of executing one of Congress’s other powers, that is, powers other than those that are granted under the Commerce Clause.
JUSTICE SCALIA: Could you define the market — everybody has to buy food sooner or later, so you define the market as food, therefore, everybody is in the market; therefore, you can make people buy broccoli.
A: Under the above argument, the government could only make people buy broccoli if purchasing broccoli was a necessary and proper means of executing one of Congress’s other powers. The government could not require people to buy broccoli under the power of the Commerce Clause alone.
The potential market for medical insurance includes everyone who has an interest in purchasing insurance. The potential market is just about everyone. The available market consists of those who have enough money to purchase insurance. The available market is a shrinking percentage of the population because more and more people cannot afford the cost. This is due in part to the costs that are added to medical insurance products as a result of the Emergency Medical Treatment and Active Labor Act.
CHIEF JUSTICE ROBERTS: Well, but it’s critical how you define the market. If I understand the law, the policies that you’re requiring people to purchase involve — must contain provision for maternity and newborn care, pediatric services, and substance use treatment. It seems to me that you cannot say that everybody is going to need substance use treatment - substance use treatment or pediatric services, and yet that is part of what you require them to purchase.
A: Currently, healthy young people are some of those most likely to be uninsured, and some of the highest cost medical services that these people are likely to require include maternity, newborn care, pediatric services and substance abuse treatment. It is perhaps worth noting that even though men will never require maternity, newborn care or pediatric services for themselves, it takes a man and a woman to create the need for these services. In other words, men and women are equally responsible for these costs.
JUSTICE ALITO: Are you denying this? If you took the group of people who are subject to the mandate and you calculated the amount of health care services this whole group would consume and figured out the cost of an insurance policy to cover the services that group would consume, the cost of that policy would be much, much less than the kind of policy that these people are now going to be required to purchase under the Affordable Care Act?
A: Yes, I am denying this. No one is required to purchase a minimum essential benefit plan under the Affordable Care Act. Healthy young people will often only need the emergency medical benefits that are available under the Emergency Medical Treatment and Active Labor Act, and they will be free to choose this option. When they choose this option, they will now have to pay a penalty, but the penalty will be much less than the cost of a minimum essential benefit plan; it will be approximately equal to what a catastrophic health plan would cost.
Addendum
On June 28, 2012, the Supreme Court issued its decision on the constitutionality of the Affordable Care Act’s individual mandate. The court found that the “individual mandate is not a valid exercise of Congress’s power under the Commerce Clause and the Necessary and Proper Clause,” but that “the shared responsibility payment may for constitutional purposes be considered a tax.” The full text of the decision is available here.