Truth about the Supreme Court health care decision: Only your mother can make you eat your broccoli

By Elizabeth A. Wolford The Daily Record Newswire On June 29, in National Federation of Independent Business v. Sebelius, the U.S. Supreme Court issued its much-anticipated decision concerning the Patient Protection and Affordable Care Act -- commonly referred to as "Obamacare." The media reports concerning the Court's decision have included some outright falsehoods, like the early FOX and CNN reports that the Court had held the entire law unconstitutional. Other media reports have focused on particular aspects of the decision, to the exclusion of other parts. This article examines the accuracy of some of the common reports concerning the decision. The Court declared Obamacare a tax This is partly true, but also partly incorrect. The Court held that the individual mandate was a tax for constitutional purposes, but not a direct tax, and not a tax at all for purposes of the Anti-Injunction Act. The Court's critical distinctions on this issue were characterized by the Joint Dissenters (Justices Anthony Kennedy, Antonin Scalia, Clarence Thomas and Samuel Alito) as carrying "verbal wizardry too far, deep into the forbidden land of the sophists." The individual mandate requires all Americans of certain means to purchase health insurance or pay a "shared responsibility payment" to the federal government. The Act provides that this "penalty" will be paid to the Internal Revenue Service with an individual's taxes, and it shall be "assessed and collected in the same manner" as a tax. This "shared responsibility payment" is expected to raise about $4 billion per year by 2017, although the payment should not exceed the actual cost of purchasing health insurance. The amount of the "shared responsibility payment" is based on an individual's income. For example, it is estimated that in 2016, individuals making $35,000 a year are expected to owe the IRS about $60 for any month in which they do not have health insurance, whereas someone with an annual income of $100,000 would likely owe about $200. The individual mandate contains no scienter requirement, and the payment is collected solely by the IRS through the normal means of taxation without any ability to enforce through criminal prosecution. In the words of Chief Justice John Roberts, by imposing the payment for failure to comply with the individual mandate "Congress did not think it was creating four million outlaws." As has been widely reported, Justice Roberts determined that the individual mandate was a constitutional exercise of Congress's taxing authority. Justice Roberts concluded that the "shared responsibility payment" was not a penalty as characterized by Congress, as it was not punitive in nature. Rather, it was a "tax" for constitutional purposes. However, in another part of the decision, Justice Roberts concluded that the individual mandate was not a tax for purposes of the Anti-Injunction Act. The Anti-Injunction Act bars litigation to enjoin the collection of taxes. In other words, taxes can only be challenged after they have been paid. The purpose behind this Act is to protect the government's ability to collect a consistent stream of revenue. Therefore, if the individual mandate was a tax under the Anti-Injunction Act, the Court would lack jurisdiction to consider the issue until after the "tax" went into effect in 2014. Justice Roberts concluded that because Congress chose to describe the individual mandate payment as a "shared responsibility payment" or "penalty," as opposed to a "tax," the language chosen by Congress controlled for purposes of determining applicability of the Anti-Injunction Act. In other words, Congress could not change whether an exaction is a "tax" for constitutional purposes by simply describing it as a "penalty" versus a "tax," but the choice of language employed by Congress was determinative for purposes of the Anti-Injunction Act because that Act was itself a creation of Congress. In addition to holding that the individual mandate did not impose a tax for purposes of the Anti-Injunction Act, Justice Roberts also concluded that the individual mandate did not impose a "direct tax." Even if the taxing power enables Congress to impose a tax, any tax must still comply with other requirements of the Constitution, including Article I, section 9, clause 4 which provides: "No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census of Enumeration herein before directed to be taken." This requirement means that any "direct tax" must be apportioned so that each State pays in proportion to its population. Justice Roberts concluded that going without health insurance does not fall within any recognized category of direct tax (e.g., a "head tax" or "poll tax"). The payment is triggered by a specific set of circumstances - earning a certain amount of income but not obtaining health insurance. The chief justice was joined in his conclusion by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan. The joint dissenters strongly disagreed with this conclusion, noting that the issue of whether the payment was a "direct tax" was not thoroughly briefed by the parties and characterizing the limited discussion of the issue as "fly-by-night briefing and argument." Justice Roberts sided with the 'liberal justices' to craft the decision There is no question that on the issue of the individual mandate, the law was upheld because Justice Roberts determined that it was constitutional under Congress's taxing authority, and he was joined in that decision by his more "liberal" brethren (Justices Ginsburg, Breyer, Sotomayor and Kagan). However, on the issue of the Medicaid expansion, and the Court's decision to hold a portion of that law unconstitutional, Justices Breyer and Kagan actually joined with their more conservative colleagues to determine that the threat to revoke federal funding if states did not expand the scope of Medicaid coverage was an unconstitutional exercise of Congress's Spending power. Moreover, while disagreeing with that conclusion, Justices Ginsburg and Sotomayor concurred in Justice Roberts' judgment that Congress may offer states funds to expand the availability of health care and require the states accepting those funds to comply with the conditions on their use. Medicaid funding to states to assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care, constitutes over 10 percent of most states' total revenue. The Affordable Care Act expands the scope of the Medicaid program, requiring states to expand their Medicaid programs by 2014 to cover all individuals under the age of 65 with incomes below 133 percent of the federal poverty line. The federal government will pay 100 percent of the cost of covering these newly eligible individuals through 2016, with the levels gradually decreasing to a minimum of 90 percent in the following years. The federal government estimates that its Medicaid spending will increase by approximately $100 billion per year, nearly 40 percent of the current levels. Under the Affordable Care Act, if the states do not accept these Medicaid expansions, the states not only risk not receiving the new federal moneys, but they also may lose existing Medicaid funding. Under the Spending Clause, a state must voluntarily and knowingly accept the terms of federal government spending, which is characterized in the nature of a contract. Although Congress may increase incentives for states to act in accordance with federal policies, that pressure cannot turn into "compulsion" and, if it does, it runs contrary to our system of federalism. The Court distinguished its decision in South Dakota v. Dole, 483 U.S. 203 (1987), where the Court upheld as constitutional a federal law that threatened to withhold 5 percent of the state's federal highway funds if the state did not raise its drinking age to 21. The federal funds at stake constituted less than half of one percent of South Dakota's budget, and the threat to revoke federal funding under those circumstances was simply "mild encouragement." In contrast, Justice Roberts characterized Congress's financial "inducement" with respect to the threat to revoke all Medicaid funding as "a gun to the head." Medicaid spending accounts for over 20 percent of the average state's total budget, with federal funds covering 50 to 83 percent of those costs. The federal government estimates that it will pay out approximately $3.3 trillion between 2010 and 2019 to cover the costs of pre-expansion Medicaid. The Court only struck down the Medicaid expansion provision to the extent it threatens to take away all Medicaid funding if a state decides not to participate in the expansion. The federal government may still attempt to entice the states to participate with the offer to pay for the expanded coverage and conditioning the acceptance of those additional funds upon compliance with the expanded program, but it cannot threaten to withdraw existing Medicaid funds for a state's failure to comply with the requirements of the expansion. The Court's decision restricts the reach of the Commerce Clause The primary focus of the parties' arguments concerning the individual mandate focused on the constitutionality of that provision under the Commerce Clause. The Court ultimately rejected the notion that the Commerce Clause permitted Congressional regulation in this manner. Yet, extension of Congress's commerce powers to require individuals to purchase health insurance would have arguably extended the reach of that power beyond any prior authority recognized by the Supreme Court. In the end, only time will reveal the impact that this decision may have on subsequent applications and interpretations of the Commerce Clause. Justice Roberts recognized that the "path of our Commerce Clause decisions has not always run smooth" and that Congress's power "is not limited to regulation of an activity that by itself substantially affects interstate commerce, but also extends to activities that do so only when aggregated with similar activities of others." The outer-most reaches of the Commerce Clause's application by the Supreme Court likely occurred in Wickard v. Filburn, 317 U.S. 111 (1942), where the Court upheld Congress's regulation of a farmer's wheat production for individual use as a constitutional exercise of authority under the Commerce Clause. Justice Roberts attempted to distinguish Wickard by explaining that the farmer was at least actively engaged in the production of wheat (albeit for individual use). Here, if the Commerce Clause had been interpreted to permit the individual mandate, it would have extended Congressional authority under the Commerce Clause even further than Wickard. The chief justice analogized application of the Commerce Clause to permit imposition of the individual mandate as essentially permitting the government to involve itself in any facet of an individual's life. By way of example, the chief justice explained that the group of Americans who do not eat a balanced diet makes up a larger percentage of the total population than those without health insurance. Thus, under the government's theory, "Congress could address the diet problem by ordering everyone to buy vegetables." The chief justice concluded that Congress should not be allowed to use the Commerce Clause to compel individuals to eat broccoli. Justice Roberts went on to explain: "People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures - joined with the similar failures of others - can readily have a substantial effect on interstate commerce. Under the government's logic, that authorizes Congress to use its commerce power to compel citizens to act as the government would have them act." The chief justice distinguished regulating activity from regulating individuals, concluding: "The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions. Any police power to regulate individuals as such, as opposed to their activities, remains vested in the states." The chief justice also noted that allowing Congressional regulation to compel individuals not engaged in commerce to purchase an unwanted product would expand the scope of authority under the Commerce Clause beyond any prior limits. While recognizing that "[l]egislative novelty" is not, in and of itself, fatal, Justice Roberts concluded that "[c]onstruing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority." The joint dissenters agreed with the chief justice in his conclusion that the Commerce Clause does not permit imposition of the individual mandate on individuals (although they did not actually concur in the chief justice's opinion). Justice Ginsburg authored a dissent on the Commerce Clause issue, in which she was joined by Justices Breyer, Sotomayor and Kagan. In all, the Court's decision on the Affordable Care Act is extremely well written and contains a fascinating discussion about the reaches of the federal government's power. To anyone interested in the subject, I would encourage you to take the time to read Justice Roberts' opinion, along with Justice Ginsburg's opinion and the joint dissenters' opinion. Regardless of your own personal perspective and views on the Affordable Care Act, you cannot help but be impressed by the high intellect and eloquence of the Supreme Court justices on this vital topic, including Justice Roberts' succinct summary of the role of the Court: "It is not our job to protect the people from the consequences of their political choices." ---------- Elizabeth A. Wolford is a partner with The Wolford Law Firm LLP, a firm focusing exclusively in the area of litigation. Wolford concentrates her practice in the areas of commercial and employment litigation. Published: Fri, Jul 6, 2012