Thursday, June 28, 2012

Obamacare Wins, But So Does Federalism

While Chief Justice Roberts found a way to uphold the ACA (Affordable Care Act) under Congress’s taxing power, he did so without expanding the federal government's powers under the Commerce Clause. He reaffirmed the basic principles of federalism: "In our federal system, the National Government possesses only limited powers; the States and the people retain the remainder." The federal government does not have a general police power: "Because the police power is controlled by 50 different States instead of one national sovereign, the facets of governing that touch on citizens’ daily lives are normally administered by smaller governments closer to the governed. The Framers thus ensured that powers which ‘in the ordinary course of affairs, concern the lives, liberties, and properties of the people’ were held by governments more local and more accountable than a distant federal bureaucracy." "By denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power." He continued, "And there can be no question that it is the responsibility of this Court to enforce the limits on federal power by striking down acts of Congress that transgress those limits."

The Chief Justice rejected the government’s argument that the Individual Mandate was constitutional under the Commerce Clause. "The Government contends that the individual mandate is within Congress’s power because the failure to purchase insurance ‘has a substantial and deleterious effect on interstate commerce’ by creating the cost-shifting problem." However, he pointed out, "But Congress has never attempted to rely on that power to compel individuals not engaged in commerce to purchase an unwanted product." "Our precedent also reflects this understanding. As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching ‘activity.’" He concludes the Individual Mandate is unconstitutional under 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."

He also rejected the Government’s Necessary and Proper Clause argument. "Under this argument, it is not necessary to consider the effect that an individual’s inactivity may have on interstate commerce; it is enough that Congress regulate commercial activity in away that requires regulation of inactivity to be effective." Roberts noted, "But we have also carried out our responsibility to declare unconstitutional those laws that undermine the structure of government established by the Constitution." He concluded, "Applying these principles, the individual mandate cannot be sustained under the Necessary and Proper Clause as an essential component of the insurance reforms. . . . The individual mandate, by contrast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power."

Roberts did hold that the Individual mandate was constitutional under Congress’s taxing powers, noting that "The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control." He added: "The question is not whether that is the most natural interpretation of the mandate, but only whether it is a ‘fairly possible’ one."

While the above is based on established principles of federalism, the portion concerning the Medicaid expansion raises a new question of whether Congress can require regulation or spending by the states through the Spending Clause. "The States also contend that the Medicaid expansion exceeds Congress’s authority under the Spending Clause. They claim that Congress is coercing the States to adopt the changes it wants by threatening to withhold all of a State’s Medicaid grants, unless the State accepts the new expanded funding and complies with the conditions that come with it. This, they argue, violates the basic principle that the "Federal Government may not compel the States to enact or administer a federal regulatory program."

Justice Roberts agreed with the states with the support of all but two justices. He wrote, "There is no doubt that the Act dramatically increases state obligations under Medicaid." He remarked. "our cases have recognized limits on Congress’s power under the Spending Clause to secure state compliance with federal objectives." "We have repeatedly characterized . . . Spending Clause legislation as‘much in the nature of a contract.’" "The legitimacy of Congress’s exercise of the spending power"thus rests on whether the State voluntarily and knowingly accepts the terms of the ‘contract.’" He added, "Respecting this limitation is critical to ensuring that Spending Clause legislation does not undermine the status of the States as independent sovereigns in our federal system. That system "rests on what might at first seem a counterintuitive insight, that ‘freedom is enhanced by the creation of two governments, not one.’" In addition, "But when "pressure turns into compulsion," ibid., the legislation runs contrary to our system of federalism. "[T]he Constitution simply does not give Congress the authority to require the States to regulate." Finally, "Permitting the Federal Government to force the States to implement a federal program would threaten the political accountability key to our federal system."

Roberts held the Medicaid expansion unconstitutional because it "coerced," rather than "encouraged." He declared: "In this case, the financial ‘inducement" Congress has chosen is much more than "relatively mild encouragement’—it is a gun to the head." The effect of this holding is: "Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding."

In sum, while the Court upheld the ACA, it did so without expanding the federal government’s powers or cutting back on federalism. In fact, it expanded states’ rights by ruling that Congress cannot coerce a state to enact a regulatory scheme. While Justice Roberts’s opinion will receive much criticism over the next few weeks, I find it to be a well-reasoned opinion based on principle, even though I am against the Individual Mandate politically. His opinion follows existing jurisprudence on the Commerce Clause and Congress’s power to tax and spend.

(Scott Fruehwald)

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