More on SCOTUS and the ACA
I blogged previously on the Supreme Court ruling regarding the affordable care act. It has certainly been a market mover for health care stocks.
The ruling is here.
It is 193 pages, but I have cut some key passages (and then cut more when I saw how long my own post was).
First, the court had to consider if they could rule. If the act was a tax, they had to wait until it was levied before ruling. What we got was an odd ruling it that the court found it was not a tax so far as the anti-injuction act was concerned, but then later, that the mandate acceptable, as it was a tax.
The Affordable Care Act describes the payment as a “penalty,” not a “tax.” That label cannot control whether the payment is a tax for purposes of the Constitution, but it does determine the application of the Anti-Injunction Act.
So the court decided it could indeed go on to rule, and first order of business was the mandate. The court found the mandate unlawful under the commerce clause (causing news agencies to misreport the ruling), but lawful under the taxing provisions allowed the federal government. Snippets related to the commerce clause.
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. …Construing 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. ….. Upholding the Affordable Care Act under the Commerce Clause would give Congress the same license to regulate what people do not do. …The individual mandate thus cannot be sustained under Congress’s power to “regulate Commerce.” ...
Congress has never attempted to rely on that power to compel individuals not engaged in commerce to purchase an unwanted product. Legislative novelty is not necessarily fatal; there is a first time for everything. But sometimes “the most telling indication of [a] severe constitutional problem . . . is the lack of historical precedent” for Congress’s action. …At the very least, we should “pause to consider the implications of the Government’s arguments” when confronted with such new conceptions of federal power. ...
Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and—under the Government’s theory—empower Congress to make those decisions for him. …To consider a … example in the health care market, many Americans do not eat a balanced diet. That group makes up a larger percentage of the total population than those without health insurance. .. The failure of that group to have a healthy diet increases health care costs, to a greater extent than the failure of the uninsured to purchase insurance. … 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 [such as eat healthier]..
They also did not find the mandate passed muster due to its necessity to the bill itself.
Nor can the individual mandate be sustained under the Necessary and Proper Clause as an integral part of the Affordable Care Act’s other reforms. … Even if the individual mandate is “necessary” to the Affordable Care Act’s other reforms, such an expansion of federal power is not a “proper” means for making those reforms effective.
I did not think myself that the mandate would stand up to these. I am pleased the court found it did not. I was worried about slippery slope implications if the court found it had (e.g. would they then make George Bush senior buy broccolli?). ....
I did not consider however that even if they found that unlawful, that they would then find the mandate OK if they could call it a tax. After all, if it was a tax, it was presumed they wouldn't rule on it, though they found a way to do just that. ...
The most straightforward reading of the individual mandate is that it commands individuals to purchase insurance. But, for the reasons explained, the Commerce Clause does not give Congress that power. It is therefore necessary to turn to the Government’s alternative argument: that the mandate may be upheld as within Congress’s power to “lay and collect Taxes.” …the question is whether it is “fairly possible” to interpret the mandate as imposing such a tax ….CHIEF JUSTICE ROBERTS delivered the opinion of the Court with respect to Part III–C, concluding that the individual mandate may be upheld as within Congress’s power under the Taxing Clause. …The payment is not so high that there is really no choice but to buy health insurance; the payment is not limited to willful violations, as penalties for unlawful acts often are; and the payment is collected solely by the IRS through the normal means of taxation. … Neither the Affordable Care Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS.
That, according to the Government, means the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And 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. … It is of course true that the Act describes the payment as a “penalty,” not a “tax.” But while that label is fatal to the application of the Anti-Injunction Act …, it does not determine whether the payment may be viewed as an exercise of Congress’s taxing power. ....
… Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. …We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance. ...
So, it first wasn't a tax, but then it was. OK then, and good ruling despite the head scratching way of getting to it. I had previously called congress cowardly in their use of a 'mandate' in part as a way to say they did not pass a 'tax'. Well, sorry Congress, the Supremes say you did. Next time you consider a mandate on 'we the people', remember it won't fly under Commerce, and if it is a tax, you will have to call it just that.
What was stricken down was the requirement for states to participate in the Medicaid expansion or risk losing all medicaid funds.
The legitimacy of Spending Clause legislation, however, depends on whether a State voluntarily and knowingly accepts the terms of such programs. …. “[T]he Constitution simply does not give Congress the authority to require the States to regulate.” …. When Congress threatens to terminate other grants as a means of pressuring the States to accept a Spending Clause program, the legislation runs counter to this Nation’s system of federalism.
This will cause some issues for those [Republican] governors who signed on to oppose this, but will find it pretty unwise to actually reject the expansion. I doubt many (any?) will, though they will grumble loudly.
As for Romney. He passed something very similar in MA when he was governor. So his 'we need to repeal this' is likely far more pander than promise. He'll try to tweak to appease his base should he be elected, but overall the ACA will likely survive. He is probably pleased this ruling followed the primary season, though he will hear it at the convention, his prior support of a similar measure won't cost him the nomination. And to be fair, Obama is labeled with this now, as he did indeed passit, but he was never a fan of a direct mandate. Should make for some ironic debate exchanges in the coming months.