Balkinization: Teaching Materials for NFIB v. Sebelius

Teaching Materials for NFIB v. Sebelius

Here are the questions I've put together for teaching The Health Care Cases, NFIB v. Sebelius. A version of these will appear in the 2012 Supplement to Brest, Levinson, Balkin, Amar and Siegel, Processes of Constitutional Decisionmaking (5th edition). Because we are planning a new edition to appear sometime in the middle of 2013, most of this material will probably not make it into the next edition, and so I'm publishing it here for future use by law professors and students.

I've divided the questions into general topics, starting with questions about the health care cases as an example of popular constitutionalism and then going on to consider the tax power, commerce clause, necessary and proper clause and spending power issues.

A special note about discussion question 4. A large number of people who wrote about the constitutionality of the individual mandate in the media may never have actually read the full text of the mandate. The text, however, is quite important to deciding such questions as (1) whether the constitutional avoidance canon applied, which Justice Ginsburg doubted; (2) whether the canon was necessary to decide the case under the tax power, as Justice Roberts seemed to believe; and, perhaps most important (3) whether the mandate can reasonably be read as a tax or whether Chief Justice Roberts illicitly tortured or rewrote the language of the statute in order to make it into a tax.

Question 4 publishes the text of the individual mandate as it currently appears in the Internal Revenue Code. You might consider having the students read it carefully to decide for themselves whether it looks like a tax to them, or equally important, whether a court could reasonably read it either as a tax, or as a law that, however described, falls within Congress's power to tax and provide for the general welfare.

Because I was one of the most public advocates of the tax power theory early on, it will probably not surprise you that it always seemed obvious to me that what Congress had done was create a tax on (some but not all) uninsured people, and that it used the word "penalty" out of political cowardice. My views were no doubt shaped by reading the different drafts of the bill as it proceeded from the House to the Senate and then to reconciliation. Throughout it was obvious to me that the bill was a tax and acted like a tax; the major problem was that the Democrats were simply afraid to call it a tax. As a result, they fought the entire litigation with one hand tied behind their back.

But you may reach a different conclusion. Indeed, I have discovered that the text of the mandate seems to act like a Rorschach test. If one begins with the assumption that the mandate is constitutional, the text looks like a constitutional tax. However, if one begins with the assumption that the mandate is unconstitutional, the text looks different. An interesting question is how we will look at the text a decade from now.

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Discussion

1. The Health Care Cases and the Constitution outside the courts. The Health Care Cases offer an excellent example of how constitutional ideas in politics eventually influence judicial decisions. The debate over the Affordable Care Act in 2009 and 2010 was extremely contentious; with opponents arguing that the act would involve a government takeover of health care, and former vice-presidential candidate Sarah Palin (among others) darkly warning about “death panels” hidden in the act. The individual mandate had originally been a Republican idea, developed at the Heritage Foundation as a conservative alternative to the Clinton health care proposal in the 1990s. However, after President Obama and the Democrats made it a key element of their proposal, Congressional Republicans began to oppose it, first on policy grounds, and later, on constitutional grounds. The Act passed along party lines in March 2010. Several lawsuits were quickly filed around the country, targeting the individual mandate and the Medicaid extension. The hope was that if either or both of these elements were struck down, the courts might invalidate the entire act.

When the litigation began, most constitutional scholars, relying on existing precedents, believed that the odds that either provision would be held unconstitutional were fairly small. Nevertheless, the rise of the Tea Party and the Republican landslide of 2010 gave hope to mandate opponents. The unconstitutionality of the mandate became virtually the official position of the Republican Party, which put its considerable resources behind promoting constitutional arguments against the mandate, not only in the courts but also in the public sphhttp://www.blogger.com/img/blank.gifere. As a result, constitutional arguments against the mandate quickly moved from “off the wall” to “on the wall,” and, by the conclusion of the oral arguments at the Supreme Court in March 2012, many observers expected that the individual mandate would be held unconstitutional. For a discussion of the role of different actors in altering public understandings of the challenge, see Jack M. Balkin, "From Off the Wall to On the Wall: How the Mandate Challenge Went Mainstream," The Atlantic, June 4, 2012, at http://www.theatlantic.com/national/archive/2012/06/from off the wall to on the wall how the mandate challenge went mainstream/258040/

What do these events tell us about the relationship between political change and constitutional change? Can you think of other examples in the cases we have studied in which powerful political mobilizations changed the plausibility of constitutional arguments? What are the similarities and differences to the health care litigation?

2. The Commerce Clause and individual liberty. Mandate opponents argued that it was unprecedented for the government to force individuals to purchase goods and services from private parties. If the mandate was upheld, Congress could force individuals to do all sorts of things, thus undermining personal liberty, and working a fundamental change in the relationship between the federal government and its citizens. See Randy E. Barnett, Commandeering the People: Why the Individual Health Insurance Mandate is Unconstitutional, 5 N.Y.U. J.L. & Liberty 581 (2010). Although the arguments against the mandate technically concerned the limits to Congress’s commerce power (and the Necessary and Proper Clause), they sounded in notions of individual liberty, including, in particular, economic liberty.

In the post-New Deal era, mandate opponents were unlikely to argue for protecting freedom of contract as a matter of substantive due process. (And nothing in Chief Justice Roberts’ opinion or the joint dissent would prevent states from imposing mandates identical to the ACA’s.) Nevertheless, the idea of protecting economic liberty through limitations on federal power has a long history in debates in American constitutional law. Can you think of examples?

3. The Health Care Cases and the future of constitutional development. One remarkable feature of the Health Care Cases is that the Supreme Court gave its blessing to the most important change to the social contract since the Great Society in the 1960s. Yet, at the same time, five Justices argued for a more limited understanding of the Commerce Clause and the Necessary and Proper Clause, while seven Justices argued-- for the first time since the New Deal--for significant limits on the spending power.

Which result turns out to be more important in the long run--the change in the role of government or the change in constitutional doctrine--will likely depend on who wins the next several presidential elections and thus gets to appoint most of the federal judiciary. A Republican dominated judiciary will likely expand on the decision’s innovations, while a Democratic dominated judiciary may read them quite narrowly. In the meantime, the doctrinal puzzles created by the Health Care Cases will keep lawyers busy for many years to come.

4. The constitutional avoidance canon. Was Roberts’ Commerce Clause argument necessary to his tax power holding? If it was not, then presumably the discussion is merely dicta. At issue is the constitutional avoidance canon, which counsels that courts should avoid interpreting statutes in ways that render them unconstitutional if reasonably possible. What theory of judicial review justifies this canon?

Roberts argued that “The most straightforward reading of the mandate is that it commands individuals to purchase insurance” because it imposes a “requirement” and says that the relevant individuals “shall” purchase insurance. Therefore he argued that he had to consider the Commerce Clause/Necessary and Proper Clause issues before he could reach the taxing power argument, which was only a “fairly possible” reading. Do you agree? Does the answer depend on whether the tax interpretation is also a natural or obvious reading?

Here is the text of Section 5000A as it currently appears in the U.S. Code:

USC Title 26—Internal Revenue Code

Subtitle D: Miscellaneous Excise Taxes

CHAPTER 48—MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE

§ 5000A. Requirement to maintain minimum essential coverage

(a) Requirement to maintain minimum essential coverage

An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.

(b) Shared responsibility payment

(1) In general

If a taxpayer who is an applicable individual, or an applicable individual for whom the taxpayer is liable under paragraph (3), fails to meet the requirement of subsection (a) for 1 or more months, then, except as provided in subsection (e), there is hereby imposed on the taxpayer a penalty with respect to such failures in the amount determined under subsection (c).

(2) Inclusion with return

Any penalty imposed by this section with respect to any month shall be included with a taxpayer’s return under chapter 1 for the taxable year which includes such month.

(3) Payment of penalty

If an individual with respect to whom a penalty is imposed by this section for any monthC

(A) is a dependent (as defined in section 152) of another taxpayer for the other taxpayer’s taxable year including such month, such other taxpayer shall be liable for such penalty, or

(B) files a joint return for the taxable year including such month, such individual and the spouse of such individual shall be jointly liable for such penalty.

(1) In general

The amount of the penalty imposed by this section on any taxpayer for any taxable year with respect to failures described in subsection (b)(1) shall be equal to the lesser ofC

(A) the sum of the monthly penalty amounts determined under paragraph (2) for months in the taxable year during which 1 or more such failures occurred, or

(B) an amount equal to the national average premium for qualified health plans which have a bronze level of coverage, provide coverage for the applicable family size involved, and are offered through Exchanges for plan years beginning in the calendar year with or within which the taxable year ends.

Subsection (d) defines “applicable individual . . . as an individual other than an individual described in paragraph[s] (2), (3), or (4)”—which refer to people with religious objections, people operating “health care sharing ministries,” aliens (lawfully or unlawfully present) and incarcerated persons. In addition, subsection (e) states that “No penalty shall be imposed under subsection (a) with respect to . . (1) Individuals who cannot afford coverage[;] (2) Taxpayers with income below [the income tax] filing threshold[;] (3) Members of Indian tribes; (4) [persons who have] short coverage gaps [in insurance; and] (5) [cases of] [h]ardship.”

5. The taxing power. What are the limits of the taxing power after the Health Care Cases? Roberts points to four features that distinguish a lawful tax from an unlawful penalty: First, “for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more.” This means “that [i]t may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the `prohibitory’ financial punishment in Drexel Furniture.” Second, the tax was not structured like a criminal penalty—for example, it did not have a scienter requirement. Third, the tax was administered and collected by the IRS like other taxes. Fourth, failure to purchase insurance was not treated as an unlawful act, and there were no adverse consequences other than having to pay the tax. Which of these criteria is the most important?

Note that the upshot of Roberts’ argument is that a constitutional tahttp://www.blogger.com/img/blank.gifx creates incentives rather than mandates for behavior; that is, it always preserves the option to pay the tax, which is not so high that it effectively compels or coerces compliance with the government’s preferred regulatory outcome. For a discussion of the constitutional limits on the tax power, see Robert D. Cooter & Neil S. Siegel, Not the Power to Destroy: An Effects Theory of the Tax Power, 99 Va. L. Rev. (forthcoming October 2012).

Roberts could also have added a fifth criterion: the tax did not burden a fundamental right. Thus, a tax on people who refuse to attend church weekly would violate the Free Exercise Clause (and the Establishment Clause); a tax on people who refuse to eat broccoli might violate the Due Process Clause. Are all taxes that affect the exercise of fundamental rights unconstitutional? The federal income tax sometimes taxes married couples filing jointly more than two people filing separately. Is this constitutional?

6. Using taxes rather than mandates. The effect of Roberts’ argument is that if Congress wishes to impose mandates on people who are not already engaged in an activity that could be regulated by the Commerce Clause, it must use the taxing power instead, always giving people the option to pay the tax. Are there structural reasons to prefer taxes to mandates in these circumstances? Does the doctrine promote federalism? Regardless of whether it promotes federalism, does it promote individual liberty?

7. Holding or dicta? What parts of Roberts’ opinion constitute the holding of the Court? Parts III-A and III-B (which no other Justices join) purport to hold that Congress may not enact the individual mandate under the Commerce Clause, even assisted by the Necessary and Proper Clause, and Part IV (joined only by Breyer and Kagan) holds that the Medicaid extension goes beyond Congress's spending power.. (Justice Ginsburg and Justice Sotomayor join only the remedy).

In Marks v. United States, 430 U.S. 188, 193 (1977), the Court explained its test for determining the holding of a case when there is no majority opinion on a particular issue: “When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds.”

The problem here is that the Justices who agree with Roberts on limiting the Commerce Clause and the Necessary and Proper Clause do not concur in the judgment; they dissent. "The joint dissenters make arguments similar to and even more restrictive than Roberts' arguments, but they do not agree with the judgment of the Court and they do not join either Part III or Part IV of Roberts’ opinion. Instead, they merely criticize his holding on the tax power, and the remedy with respect to the Medicaid extension.

Are Roberts’ positions on these issues binding law? Note, interestingly, that Part III-C of his opinion, joined by five Justices, notes in passing that “The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity.” Part IV-B, joined only by Roberts, Breyer, and Kagan, states that “In light of the Court’s holding, the Secretary cannot apply ' 1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion.”

Even if you believe that Roberts’ arguments (other than the tax power holding) are either dicta or a plurality opinion, do you expect that lower federal courts will treat them as law, given that lower courts know that five Justices now support doctrines that limit federal powers? How should lower courts interpret these opinions?

8. The activity/inactivity distinction. Both Roberts and the joint dissent argue that Congress can regulate activities under the Commerce Clause (and Necessary and Proper Clause), but not inactivity. If Congress could regulate inactivity, they argue, there would be no limit to the federal government’s powers. However, such limits already exist, for example, in Lopez and Morrison. Is the activity/inactivity distinction necessary to preserve the rule of Lopez and Morrison, or the priniciple that the federal government is one of limited and enumerated powers? Why? Does the distinction promote federalism, individual freedom, or both?

The activity/inactivity distinction is related to the act/omission distinction. Lawyers are sometimes able to manipulate this distinction by expanding or contracting the relevant time frame or by redescribing events in different ways. See Mark Kelman, "Interpretive Construction in the Substantive Criminal Law," 33 Stan. L. Rev. 591 (1981); J.M. Balkin, The Rhetoric of Responsibility, 76 Va. L. Rev. 197 (1990).

Is the activity/inactivity distinction subject to manipulation in the same way? For example, people may be active or inactive in commerce depending on how broadly we describe the market they participate in (health care, health insurance, purchase of over-the-counter remedies, etc.) and depending on how broadly we consider the relevant time frame (day, month, year, decade, lifetime). Another example: at the time Title II of the Civil Rights Act was passed in 1964, the proprietor of the Heart of Atlanta Motel was not serving black people—and the law required him to do so. However, the owner was operating a hotel that served white people. In Wickard v. Filburn, Justice Jackson described Filburn’s conduct both as activity and inactivity: "The effect of thttp://www.blogger.com/img/blank.gifhe statute before us is to restrict the amount which may be produced for market and the extent, as well, to which one may forestall resort to the market by producing to meet his own needs" That is, the problem that Congress sought to address was that Filburn was failing to purchase wheat in the market. Mark Tushnet, The “Activity-Inactivity” Distinction, Balkinization, December 13, 2010, at http://balkin.blogspot.com/2010/12/activity inactivity distinction.html

Are there administrable ways for courts to fix the relevant description of events, the relevant market, and the relevant time frame in order to decide how to apply the activity/inactivity distinction? Can judges just rely on “common sense?” In her opinion in the Health Care Cases, Justice Ginsburg argued that it was obvious that almost everyone was engaged in the health care market, or soon would be; therefore requiring the purchase of health insurance was simply a way of regulating how people pay for commercial transactions in which they will inevitably engage. The joint dissent argued that this description of the situation was too broad—because it would suggest that since everyone is in the food market, or soon will be, they can be required to purchase broccoli—and that the relevant market was the market for health insurance. Is there a correct answer to this question?

9. Workarounds. Assuming that the activity/inactivity distinction is now part of Commerce Clause doctrine, could Congress get around the distinction by requiring that everyone who purchases more than 500 dollars of health care related products or services in a calendar year must henceforth be subject to an insurance mandate or pay a 500 dollar yearly penalty? Could Congress require that everyone who buys more than 500 dollars worth of food in a given year must henceforth purchase 500 dollars of broccoli each year or be subject to a 500 dollar penalty?

Could Congress require purchase of health insurance if a person has ever been previously covered by health insurance? Has ever visited an emergency room and received subsidized treatment? Has ever crossed state lines in order to receive medical care? Has ever received medical care in more than one state? (Would such requirements be constitutional if applied retroactivity? What if they were only applied prospectively?)

10. Necessary but not proper? Chief Justice Roberts and the joint dissent argue that the mandate was not necessary and proper to make the guaranteed issue and community ratings rules effective. Roberts claimed that even if the mandate was “necessary,” it was not “proper.” He argued that the mandate would “undermine the structure of government established by the Constitution” and was “not consist[ent] with the letter and spirit of the constitution.” It would involve a “great substantive and independent power,” and work “a substantial expansion of federal authority.” How should judges apply these ideas in future cases? Did the vast expansion of commerce clause authority in Darby and Wickard (already) violate this test? Note that Roberts assumes that the statute challenged in Wickard is “proper.” If so, is Roberts’ argument just another way of saying that Congress cannot reach inactivity through the Necessary and Proper Clause if it cannot reach it through the Commerce Clause? To what extent is this consistent with the logic of McCulloch? With the logic of Comstock?

The joint dissent reached the same conclusion a little differently. It argued that the mandate is not necessary and proper for two reasons. First, Raich involved a situation of true necessity, whereas in this case there were other ways to achieve the goals of the ACA other than using a mandate. (Is this consistent with McCulloch?) Second, the joint dissent argued that mandates greatly expand federal power into new fields. If mandates are necessary and proper to realize the statute’s goals, there are no limits to federal power, and that cannot be proper. Again, does this assume that Lopez and Morrison would become effectively irrelevant?

Is it clear that there is no limiting principle that would allow the mandate but not give the federal government unlimited regulatory power? For example, what if the Court had held that only mandates to exchange money for goods or services—i.e., to engage in commerce—were permitted under the Commerce Clause and Necessary and Proper Clause, but no other mandates? (Thus, a mandate to eat broccoli or to exercise once a day would not fall within the commerce power, even when assisted by the Necessary and Proper Clause). Is this distinction significantly less administrable than the activity/inactivity distinction?

11. The spending power. Note carefully the differences between Chief Justice Roberts’ account of the spending power (joined by Justices Breyer and Kagan) and that of the joint dissent.

The joint dissent argues that because the size of the threatened withdrawal of federal funding is so great, the Medicaid expansion is an offer the states cannot refuse, and therefore it is coercive. This might suggest that the federal government may not impose new conditions on (and thus threaten to withdraw funding from) any program that has become a sufficiently large percentage of a state’s budget. Does the joint dissent’s test allow the federal government to abolish existing programs that constitute a significant proportion of a state’s budget?

The joint dissenters also argue that if the federal government offers the states participation in a sufficiently large social welfare program, states may not be able to refuse and so the offer is coercive. First, the federal tax dollars paid by a state’s citizens that the state forgoes will be given to the poor in other states. Second, the state will have to raise additional state taxes to provide comparable services. Does this mean that it was unconstitutional for Congress to offer the states Medicaid in the first place? Does it mean that there is a limit on how much money the federal government can offer to the states with conditions attached?

Roberts’ argument is different. He distinguishes between two situations. In the first, Congress places conditions on funds it gives to states for a particular program. For example, Congress gives highway funds to states in exchange for states’ promise that the roads will be built with certain types of materials, and will have certain types of safety signs. These conditions, Roberts argues, are perfectly appropriate because they help ensure that Congress’s distribution of money serves the general welfare, as required by the text of the General Welfare Clause.

The second situation is when Congress asks states to do something or else it will withdraw funds from an unrelated or independent program. Imagine, for example , that Congress requires states to spend highway funds on extra roadway signs; but if a state refuses, Congress will withdraw not only its highway funding, but all of its educational grants to the state. In this situation, Roberts argues, we must inquire into whether there is undue coercion.

In South Dakota v. Dole, for example, federal highway funding was made conditional on raising a state’s drinking age. Dole held that the condition had to be—and was—germane to the purposes for which the funds were offered, in this case, highway safety. Nevertheless, Roberts pointed out, the condition did not concern how states should use the highway funds themselves.

In this sort of situation, when “conditions take the form of threats to terminate other significant independent grants,” Roberts argues, courts must inquire whether the bargain is unduly coercive. In Dole, the amount of money that the state would lose was very small: about 5% of South Dakota’s highway funds, and less than half of one percent of South Dakota’s budget. Therefore the Court concluded that the bargain was not coercive. In the case of the Medicaid extension, by contrast, "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." Therefore, Roberts concludes, this bargain, which threatens to withdraw at least 10 percent of a state's budget, is coercive. (Note in particular Roberts’ statement that although one half of one percent would not be coercive, 10 percent would be “dragooning”).

There is an obvious rejoinder: in this case, Congress is not threatening to terminate another program. Its conditions are all conditions on state’s use of Medicaid funds. The ACA simply expands Medicaid, and all the federal government has done is add new conditions. That is permissible because Congress had reserved the right to add new conditions to Medicaid by statute, and the states agreed to that bargain.

Roberts responds that if the changes to an existing program are sufficiently drastic, they are changes in kind rather than degree, and the resulting program is a “new” and independent program. In essence, Roberts says, Congress is threatening to withdraw funding from Old Medicaid if the states do not agree to participate in New Medicaid.. It is true that Congress reserved the right to add new conditions to Medicaid in its original agreement with the states. However, “[a] State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program included the power to transform it so dramatically.” Because there is no fair warning, courts should treat the new conditions as part of a new program separate from Old Medicaid. Therefore we must ask whether the amount that Congress threatens to withdraw from the older program is so great as to be coercive.

How would this test apply to other federal statutes, for example, federal civil rights laws? Title IX of the Education Amendments of 1972 and Title VI of the Civil Rights Act of 1964 impose conditions on federal grants of funds to states and local governments and require nondiscrimination on the basis of sex, race, and other categories. The Civil Rights Restoration Act of 1988, 42 U.S.C. ' 2000d-4a, states that state agencies, school districts and municipalities that receive federal funds must comply with these laws in all areas of their operations, not merely in the particular program or activity that has received federal funding. If Congress amended its civil rights laws to prohibit sexual orientation discrimination in entities that receive federal funds, could states refuse to accept the new conditions on the grounds that Congress had created a “new” program? Could states refuse on the grounds that the “conditions take the form of threats to terminate other significant independent grants”? On the grounds that they had become dependent on federal funding for many decades and could not realistically refuse any new conditions?

12. More workarounds. How easy will it be for Congress to work around Roberts’ new test? For example, could Congress simply abolish Medicaid and create a new program in its place and invite the states to participate? Could Congress stipulate that a state may participate in Medicaid for only a year at a time and then must reapply each year to a new program in order to receive funding?

Congress can, if it wishes, simply convert Medicaid into a fully federal program like Medicare. But then it would have to increase the number of federal employees in order to administer the program. Are there good reasons for the federal government to ask states to administer federal-state cooperative programs like Medicaid? How does Roberts’ new test affect the federal government’s incentives?

Posted 8:50 AM by JB [link]