Professor Mark Hall, Fred D. & Elizabeth L. Turnage Professor of Law, Wake Forest University School of Law
Because insurance is necessary for decent access to health care, credible studies estimate that eliminating the Affordable Care Act or its individual mandate could cause thousands of avoidable deaths a year. That is sobering, but far more chilling is the loss of life that might result from the constitutional precedent that a negative ACA ruling would set. If the challengers’ chief argument is accepted, it creates the frightening prospect that the federal government may be unable to respond effectively to a catastrophic public health emergency that threatens millions of lives, if effective response requires mandating citizen behaviors unconditioned on any engagement in commerce.
Credible scenarios for natural disasters and flu pandemics might require just such federal actions, in the form of mandatory vaccination, evacuation, screening, treatment, or even mundane sanitary measures — and the Commerce Clause is the only source for such power when military defense is not involved. State and local governments are the primary source of authority for such measures, but recent disasters and near-misses demonstrate the real possibility that their responses may prove inadequate. Thus, rather than fretting over what slippery-slope vegetables the government might force people to purchase if the mandate were upheld, courts should be much more concerned about the insurmountable barriers that a nullifying precedent would set for effective federal response to realistic catastrophes.
[Ed. Note: Professor Hall's paper may be found here]
Like a tragic literary figure, the 11th Circuit’s opinion declaring the individual mandate unconstitutional is doomed to failure by its own internal contradictions. What follows is a series of quotes directly from the opinion, paired to show how desperately the majority twisted logic in order to find its path to a unsupportable conclusion:
1. On the key necessary and proper argument, the court obfuscated as follows:
The government’s argument derives from a Commerce Clause doctrine of recent  vintage: . . . the “essential part of a larger regulation of economic activity” language in Lopez. . . . Raich [is the] the only instance in which a statute has been sustained by the larger regulatory scheme doctrine.
HOWEVER, the court was well aware that
The Supreme Court’s most definitive statement of the Necessary and Proper Clause’s function remains Chief Justice Marshall’s articulation in McCulloch v.Maryland: 17 U.S. (4 Wheat.) 316, 421 (1819).
2. Wearing this historical and precedential blinder, the court framed the relevant test as whether the mandate is “essential” to the ACA’s overall regulatory scheme:
[W]e conclude that the Supreme Court’s “larger regulatory scheme” doctrine embodies an observation put forth in the New Deal case of Jones & Laughlin Steel Corp.: “Although activities may be intrastate in character when separately considered, if they have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions, Congress cannot be denied the power to exercise that control.” . . . [The failure to purchase insurance] in no way “burdens” or “obstructs” Congress’s ability to enforce its regulation of the insurance industry. . . . The government’s assertion that the individual mandate is “essential” to Congress’s broader economic regulation is further undermined by components of the Act itself.
BUT, of course, “essential,” “burden,” and “obstruct” are not the operative tests. Instead, the court itself explained earlier in its decision that a much more lenient rational basis test applies:
“the Necessary and Proper Clause makes clear that the Constitution’s grants of specific federal legislative authority are accompanied by broad power to enact laws that are ‘convenient, or useful’ or ‘conducive’ to the authority’s ‘beneficial exercise.’” . . . On the breadth of the Necessary and Proper Clause, the Comstock Court noted that The Supreme Court must determine whether a federal statute “constitutes a means that is rationally related to the implementation of a constitutionally enumerated power.” “[T]he relevant inquiry is simply ‘whether the means chosen are reasonably adapted to the attainment of a legitimate end under the commerce power’ or under other powers that the Constitution grants Congress the authority to implement.”
The court never invokes or applies this test, even though (and perhaps because) it is one that the government easily meets.
3. On whether the mandate relates to commerce:
[W]e are not persuaded that the formalistic dichotomy of activity and inactivity provides a workable or persuasive enough answer in this case. Although the Supreme Court’s Commerce Clause cases frequently speak in activity-laden terms, the Court has never expressly held that activity is a precondition for Congress’s ability to regulate commerce–perhaps, in part, because it has never been faced with the type of regulation at issue here. . . . As an inferior court, we may not craft new dichotomies … not recognized by Supreme Court doctrine. . . .
BUT, of course the decision was all about a new categorical limit:
[T]he Act is forcing market entry by those outside the market . . . Until Congress passed the Act, the power to regulate commerce had not included the authority to issue an economic mandate. Now Congress seeks not only the power to reach a new class of “activity”–financial decisions whose effects are felt some time in the future–but it wishes to do so through a heretofore untested power: an economic mandate. . . . [T]his distinction . . . in truth  strikes at the heart of whether Congress has acted within its enumerated power. Individuals subjected to this economic mandate have not made a voluntary choice to enter the stream of commerce, but instead are having that choice imposed upon them by the federal government. . . . Never before has Congress sought to regulate commerce by compelling non-market participants to enter into commerce so that Congress may regulate them. . . . The individual mandate does not wait for market entry.
4. On the slippery slope concern:
To connect this conduct to interstate commerce would . . . allow Congress to regulate anything. . . . To give but one example, Congress could undoubtedly require every American to purchase liability insurance, lest the consequences of their negligence or inattention lead to unfunded costs (medical and otherwise) passed on to others in the future . . .
BUT, why is this any real concern, considering:
The fact that Congress has never before exercised this supposed authority is telling . . . Few powers, if any, could be more attractive to Congress than compelling the purchase of certain products. Yet even if we focus on the modern era, when congressional power under the Commerce Clause has been at its height, Congress still has not asserted this authority. Even in the face of a Great Depression, a World War, a Cold War, recessions, oil shocks, inflation, and unemployment, Congress never sought to require the purchase of wheat or war bonds, force a higher savings rate or greater consumption of American goods, or require every American to purchase a more fuel efficient vehicle . . . .
5. On the mandate’s fit with legislative purposes, the court complained that:
the individual mandate’s attempt to reduce the number of the uninsured and correct the cost-shifting problem is woefully overinclusive.
BUT, the court also criticized the mandate for being underinclusive:
Even if the individual mandate remained intact, the “adverse selection” problem identified by Congress would persist not only with respect to [the] eight broad exemptions, but also with respect to those healthy persons who choose to pay the mandate penalty. . . . Additionally, Congress has hamstrung its own efforts to ensure compliance with the mandate by opting for toothless enforcement mechanisms.
6. The court thought the mandate is not necessary to regulate insurers because:
[T]he conduct regulated by the individual mandate–an individual’s decision not to purchase health insurance and the concomitant absence of a commercial transaction–in no way “burdens” or “obstructs” Congress’s ability to enforce its regulation of the insurance industry.
BUT, the court conceded there is universal agreement that the mandate is needed to combat adverse selection:
Distinguished economists have filed helpful briefs on both sides of the case. While they disagree on some things, they agree about the theory of adverse selection. They agree some relatively healthy people refrain from, or opt out of, buying health insurance more often than people who are unhealthy or sick seek insurance. This results in a smaller and less healthy pool of insured persons for private insurance companies.
AND, in an analogous regulatory arena (flood insurance), the court went to some length to explain that:
Without an “individual mandate,” the flood insurance program has largely been a failure. . . . One key reason for this low participation is not surprising. . . . People living in a flood plain know that even if they do not have insurance, they can count on the virtually guaranteed availability of federal funds.
7. Finally, on the government’s burden of persuasion, the court reflexively said:
We, as all federal courts, must begin with a presumption of constitutionality . . . We are loath to invalidate an act of Congress, and do so only after extensive circumspection.
BUT of course how it really thought and reasoned was:
[T[he government has been unable, either in its briefs or at oral argument, to point this Court to Supreme Court precedent that addresses the constitutionality [or economic mandates]. . . . The government’s position . . . affords no limiting principles in which to confine Congress’s enumerated power. . . . [T]he government’s insistence that we defer to Congress’s fact findings underscores the lack of any judicially enforceable stopping point . . . . At best, we can say that the uninsured may, at some point in the unforeseeable future, create [a] cost-shifting consequence. Yet this readily leads to a scenario where we must “pile inference upon inference” to sustain Congress’s legislation . . . . The government’s factbased criteria would lead to expansive involvement by the courts in congressional legislation, requiring us to sit in judgment over when the situation is serious enough to justify an economic mandate.
Mark A. Hall, J.D., is the Fred D. & Elizabeth L. Turnage Professor of Law at Wake Forest University School of Law and a regular contributor to Seton Hall Law School’s Health Reform Watch. He is one of the nation’s leading scholars in the areas of health care law and policy and medical and bioethics and also teaches in the MBA program at the Babcock School and is on the research faculty at Wake Forest’s Medical School. He regularly consults with government officials, foundations and think tanks about health care public policy issues, and was recently awarded the American Society of Law, Medicine and Ethics distinguished teaching award. He is the author or editor of fifteen books, including Making Medical Spending Decisions (Oxford University Press), and Health Care Law and Ethics (Aspen). He has published scholarship in the law reviews at Berkeley, Chicago, Duke, Michigan, Pennsylvania, and Stanford, and his articles have been reprinted in a dozen casebooks and anthologies.
On first read, the most striking aspect of Judge Vinson’s ruling today is not its remedy — striking the Affordable Care Act in its entirety — but the impression one gets that the opinion was written in part as a Tea Party Manifesto. At least half of the relevant part of the opinion is devoted to discussing what Hamilton, Madison, Jefferson and other Founding Fathers would have thought about the individual mandate, including the following remarkably telling passage (p. 42):
It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place.
As I’ve written elsewhere, the same Founders wrote a Constitution that allowed the federal government to take property from unwilling sellers and passive owners, when needed to construct highways, bridges and canals. But Judge Vinson dismissed those and other examples with the briefest of parenthetical asides: “(all of [these] are obviously distinguishable)” (p. 39). Instead, he twice cites and quotes the lower court opinion in Schechter Poultry (pp. 53, 55), which struck down the National Industrial Recovery Act, at the height of the Great Depression and the pinnacle of Lochner jurisprudence.
Still, it’s fair enough to conclude, absent controlling precedent, that being uninsured might not constitute interstate commerce. What’s harder to swallow is the judge’s rejection of the Necessary and Proper Clause. In refusing to sever the individual mandate, he not only concedes the mandate “is indisputably necessary to the Act’s insurance market reforms, which are, in turn, indisputably necessary to . . . what Congress was ultimately seeking to accomplish,” he astonishingly devotes about ten pages (63-74) to hammering home the mandate’s necessity, explaining, for instance, that:
this Act has been analogized to a finely crafted watch . . . . It has approximately 450 separate pieces, but one essential piece (the individual mandate) is defective and must be removed. It cannot function as originally designed. There are simply too many moving parts in the Act and too many provisions dependent (directly and indirectly) on the individual mandate and other health insurance provisions — which, as noted, were the chief engines that drove the entire legislative effort — for me to try and dissect out the proper from the improper
So if the mandate is so clearly necessary, why is it not “proper.” The answer, as in Virginia’s Judge Hudson’s opinion, is a virtual tautology: because the Commerce Clause does not permit it. Here are critical excerpts:
the Clause is not an independent source of federal power (p. 58) . . . Ultimately, the Necessary and Proper Clause vests Congress with the power and authority to exercise means which may not in and of themselves fall within an enumerated power, to accomplish ends that must be within an enumerated power. (p. 60)
In light of [United States v. South-Eastern Underwriters], the “end” of regulating the health care insurance industry (including preventing insurers from excluding or charging higher rates to people with pre-existing conditions) is clearly “legitimate” and “within the scope of the constitution.” But, the means used to serve that end must be “appropriate,” “plainly adapted,” and not “prohibited” or inconsistent “with the letter and spirit of the constitution.” . . . The Necessary and Proper Clause cannot be utilized to “pass laws for the accomplishment of objects” that are not within Congress’ enumerated powers. (p. 62)
The defendants have asserted again and again that the individual mandate is absolutely “necessary” and “essential” for the Act to operate as it was intended by Congress. I accept that it is. Nevertheless, the individual mandate falls outside the boundary of Congress’ Commerce Clause authority and cannot be reconciled with a limited government of enumerated powers. By definition, it cannot be “proper.” (p. 63)
My full rebuttal is here, but in brief: none of this is consistent with Comstock, which allows the federal government to commit mentally ill former prisoners to civil treatment, despite the clear absence of any general federal civil commitment power. And this is inconsistent with Lopez and with Justice Scalia’s concurrence in Raich, which note that regulation, otherwise forbidden, of local noneconomic activities, can be justified when this is “an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.” Thus, we still await a convincing explanation of why rejecting the “necessary and proper” defense is consistent with recent Supreme Court opinions, authored or joined by most of the conservative justices.
The following article, forthcoming in U. Penn. L. Rev., pinpoints the strongest arguments for and against federal power under the Commerce Clause to mandate the purchase of health insurance: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1747189
Among the key points I make in defense of this federal law are:
1. The “commerce” in question is simply health insurance, and not the non-purchase of insurance as challengers have framed it. Because “regulate” clearly allows both prohibitions and mandates of behavior, mandating purchase is lexically just as valid an application of the clause as is prohibiting purchase or mandating the sale of insurance.
2. Although existing precedent might allow a line to be drawn between economic activity and inactivity, there is no reason in principle or theory why such a line should be drawn in order to preserve state sovereignty. Purchase mandates, after all, are as rare under state law as under federal law.
3. Challengers do not seriously dispute the constitutional validity of the ACA’s regulation of insurers or the economic necessity of the mandate in order for that regulation to be effective. In fact, they essentially concede the mandate’s necessity by asking to strike the entire law if it is declared invalid. Accordingly, the mandate would pass the tests for constitutional necessity articulated by at least seven of the Justices in the Comstock opinion last year, and might even pass the necessity test embraced by Justices Thomas and Scalia.
4. An important challenge, not yet clearly discussed by court opinions to date, is that the mandate does not, strictly speaking, simply “carry into execution” Congress’ other regulatory powers, but is the exercise of a distinct power. However, both modern and historical precedents under the Necessary and Proper Clause are not limited narrowly to merely implementation measures. Both Comstock and a series of decisions under the Postal Power are good examples to the contrary since they authorize independent federal powers that expand the range of purposes and measures permitted by express Congressional powers.
5. There is no coherent basis for declaring a purchase mandate to be constitutionally “improper,” and a categorical ban on regulating inactivity would contradict the implicit reasoning underlying several other established precedents — such as those upholding the draft and the Congressional subpoena power. Also, federal eminent domain allows compelled transactions justified in part by the Necessary and Proper clause’s expansion of the commerce power, when applied, for instance, to citizen’s refusal to sell land for use in constructing highways, bridges, and canals.
6. Using the 10th Amendment to justify a categorical prohibition of purchase mandates (as Randy Barnett has argued) would be no more convincing than using the 9th or 5th Amendments (substantive due process). Instead, such a move would, for the first time and contrary to precedent, make the 10th a protector of individual liberties rather than just federalism concerns, and would radically enforce an absolute right to economic liberty, regardless of level of legislative justification or judicial scrutiny (see point 9).
7. Slippery slope concerns are no greater here than for any other of a range of expansive federal powers. Instead, the novelty of the mandate subjects it to greater political constraint, and so “parade of horribles” concerns may be even more unrealistic than similar settings where the Court has rejected them.
8. Grounding the mandate in the Necessary and Proper clause helps to confine its precedential effect by emphasizing it’s necessary role in the ACA’s particular regulatory scheme that, in other respects, clearly resides within the core of the conventional commerce power. This essential supportive and interconnected role is not shared by free-standing mandates to purchase American cars or broccoli, for instance.
9. Counteracting imaginary slippery slope concerns about absurd hypothetical laws are the legitimate concerns about insurmountable barriers that a prohibition of purchase mandates would erect. Forbidding Congress from any purchase mandate could cripple necessary efforts, for instance, to require preventive measures in the face of a massive pandemic that threatened tens of millions of lives.
This just in: Stirred by the arguments of Randy Barnett, Ilya Somin, Judge Hudson and others, Justice Joseph Story — miraculously from the grave! — has filed an amicus brief in the 4th Circuit appeal on the constitutionality of mandating the purchase of health insurance. Of note, he wrote his brief in the form of a parable about Congress’ power under the postal clause to build roads — an issue that was hotly contested 2 centuries ago. Defenders of states’ rights argued that the power to “establish Post Offices and post Roads” conveyed only the power to designate which existing state roads to use for postal routes, and not the power to acquire land and build new federal roads. From the faint echoes of this historical debate, Justice Story appears to suggest there are lessons to learn about the modern Commerce Clause (emphases added):
The grounds of the [more restrictive position] seem to be as follows. The power given under the confederation never practically received any other construction. Congress never undertook to make any roads, but merely designated those existing roads, on which the mail should pass. At the adoption of the constitution there is not the slightest evidence, that a different arrangement, as to the limits of the power, was contemplated. . . . when a road is declared by law to be a mail-road, the United States have a right of way over it; . . . It was thought necessary to insert an express provision in the constitution, enabling the government to exercise jurisdiction over ten miles square for a seat of government, and of such places, as should be ceded by the states for forts, arsenals, and other similar purposes. It is incredible, that such solicitude should have been expressed for such inconsiderable spots, and yet, that at the same time, the constitution intended to convey by implication the power to construct roads throughout the whole country, with the consequent right to use the timber and soil, and to exercise jurisdiction over them . . . The terms of the constitution are perfectly satisfied by this limited construction, and the power of congress to make whatever roads they may please, in any state, would be a most serious inroad upon the rights and jurisdiction of the states. It never could have been contemplated. . . . The power to create the office does not necessarily include the power to carry the mail, or regulate the conveyance of letters, or employ carriers. The one may exist independently of the other. A state might without absurdity possess the right to carry the mail, while the United States might possess the right to designate the post-offices, . . .
Yet, no man ever imagined such a construction to be justifiable. And why not? Plainly, because constitutions of government are not instruments to be scrutinized, and weighed, upon metaphysical or grammatical niceties. They do not turn upon ingenious subtleties; but are adapted to the business and exigencies of human society; and the powers given are understood in a large sense, in order to secure the public interests. Common sense becomes the guide, and prevents men from dealing with mere logical abstractions. . . .
Under the constitution congress has, without any questioning, given a liberal construction to the power to establish post-offices and post-roads. It has been truly said, that in a strict sense, “this power is executed by the single act of making the establishment. But from this has been inferred the power and duty of carrying the mail along the post-road from one post-office to another. And from this implied power has been again inferred the right to punish those, who steal letters from the post-office, or rob the mail. It may be said with some plausibility, that the right to carry the mail, and to punish those, who rob it, is not indispensably necessary to the establishment of a post-office and a post-road. This right is indeed essential to the beneficial exercise of the power; but not indispensably necessary to its existence.” . . . If the practice of the government is, therefore, of any weight in giving a constitutional interpretation, it is in favour of the liberal interpretation of the clause.
The fact, if true, that congress have not hitherto made any roads for the carrying of the mail, would not affect the right, or touch the question. . . . But the argument would have it, that, because this exercise of the power, clearly within its scope, has been hitherto restrained to making existing roads post-roads, therefore congress cannot proceed constitutionally to make a post-road, where no road now exists. This is clearly what lawyers call a non sequitur. It might with just as much propriety be urged, that, because congress had not hitherto used a particular means to execute any other given power, therefore it could not now do it. If, for instance, congress had never provided a ship for the navy, except by purchase, they could not now authorize ships to be built for a navy, or à converso. . . . If they had never erected a custom-house, or court-house, they could not now do it. Such a mode of reasoning would be deemed by all persons wholly indefensible. . . .
It is said, that there is no reason, why congress should be invested with such a power, seeing that the state roads may, and will furnish convenient routes for the mail. When the state-roads do furnish such routes, there can certainly be no sound policy in congress making other routes. But there is a great difference between the policy of exercising a power, and the right of exercising it. But, suppose the state-roads do not furnish . . . suitable routes for the mails, what is then to be done? Is the power of the general government to be paralyzed? Suppose a mail-road is out of repair and founderous, cannot congress authorize the repair of it? If they can, why then not make it originally? Is the one more a means to an end, than the other? If not, then the power to carry the mails may be obstructed; nay, may be annihilated by the neglect of a state. . .
The supposed silence of the Federalist proves nothing. That work was principally designed to meet objections, and remove prejudices. . . .
Most everyone expected district Judge Hudson in Richmond VA to strike the individual mandate as unconstitutional, so the outcome of today’s decision is hardly surprising. What was uncertain is: 1) what remedy he would grant; and 2) how he would handle the government’s strongest argument, which is based on the “necessary and proper” clause. On both points, he either punted or fumbled. (See also here and here.)
For the remedy, the tough choice is whether to strike most or all of the Affordable Care Act, realizing that the Act lacks a severability provision and that Congress obviously never would have enacted it without an individual mandate. Banning medical underwriting without an individual mandate will wreak havoc on the market for individual insurance, perhaps causing many or most insurers to withdraw, as they’ve already done in the market for child-only insurance. Despite all of that, the judge severed and struck only the individual mandate, leaving to Congress or administrative agencies the task of avoiding the train wreck of potential market collapse.
Other courts might not be so cavalier (subtle pun intended, for those from UVA), even if they were inclined to agree on the merits. But then they would have to strike most or all of the ACA — a much bolder move. Both the state and the federal government agreed that severing the individual mandate was not the right move — conceding, in effect, that the mandate is inextricably intertwined with the ACA’s regulation of insurance. That naturally leads to the next issue: whether the mandate is necessary and proper.
On that question, the Richmond court reasoned inscrutably (p. 24) that
“Because an individual’s personal decision to purchase–or decline to purchase–health insurance from a private provider is beyond the historical reach of the Commerce Clause, the Necessary and Proper Clause does not provide a safe sanctuary.”
What?? I thought the whole point of the N&P clause was to expand powers beyond those enumerated. If the Commerce Clause itself provided the power, then we wouldn’t need N&P; thus, the ONLY time we need N&P is when the power in question is beyond enumerated powers.
The court continued:
“This clause grants Congress broad authority to pass laws in furtherance of its constitutionally-enumerated powers. This authority may only be constitutionally deployed when tethered to a lawful exercise of an enumerated power. . . . The Minimum Essential Coverage Provision is neither within the letter nor the spirit of the Constitution. Therefore, the Necessary and Proper Clause may not be employed to implement this affirmative duty to engage in private commerce.”
What!? (I’m channeling Jon Stewart here). Doesn’t this reason that the power in question is untethered because it’s not tethered to itself? Shouldn’t we be looking to link to OTHER powers or objectives that ARE within the Commerce Clause? The government’s clearly stated position, summarized by the court itself, is obviously that regulating how insurance is offered and sold is easily within the core of the commerce power. That forms the anchor to which the individual mandate is tethered – a straightforward position to which the court never responded.
Other quirks: Although the court nodded to the challengers’ burden of persuasion and the presumption in favor of constitutionality, it emphasized the lack of any “specifically articulated constitutional authority . . . to mandate the purchase of health insurance” (p. 20). And although the case was about government powers rather than constitutionally-protected individual rights, the judge said (p. 37) that, “At its core this dispute is . . . about an individual’s right to choose” to be uninsured.
These parts of the opinion read to me as someone determined to strike the mandate regardless of the force of argument in the way.
[Read here Professor Hall's prior articles in Health Reform Watch on the individual mandate : "Is it Unconstitutional to Mandate Health Insurance?" and "Are the Attorneys General's Constitutional Claims Bogus."]
Mark A. Hall, J.D., is the Fred D. & Elizabeth L. Turnage Professor of Law at Wake Forest University School of Law. He is one of the nation’s leading scholars in the areas of health care law and policy and medical and bioethics and a contributor to Health Reform Watch. The author or editor of fifteen books, including Making Medical Spending Decisions (Oxford University Press), and Health Care Law and Ethics (Aspen), he is currently engaged in research in the areas of consumer-driven health care, doctor/patient trust, insurance regulation, and genetics. He has published scholarship in the law reviews at Berkeley, Chicago, Duke, Michigan, Pennsylvania, and Stanford, and his articles have been reprinted in a dozen casebooks and anthologies.
Professor Hall also teaches in the MBA program at the Babcock School and is on the research faculty at Wake Forest’s Medical School. He regularly consults with government officials, foundations and think tanks about health care public policy issues, and was recently awarded the American Society of Law, Medicine and Ethics distinguished teaching award.
Immediately after passage of health care reform, over a dozen state A.G.s sued to declare it unconstitutional, as violating states’ rights. The Florida complaint is here, and Virginia’s here. Reminiscent of southern governors in the 1960s blocking their state universities’ gates, these legal officers in effect are saying “not on our sovereign soil.” Since the constitutional issues have already been hashed through so thoroughly, what’s new to talk about?
First, the Florida complaint, which a dozen other states joined (AL, CO, ID, LA, MI, NE, PA,SC, SD, TX, UT, WA), focuses mainly on the financial burdens of expanding Medicaid. This is challenged under the “commandeering” principle, as requiring states to devote sovereign resources to achieve federal aims. But, as we know, states are free to withdraw from Medicaid, so the argument seems to fall entirely flat. The complaint makes a bait-and-switch type of estoppel argument , that states got into Medicaid without any expectation of this expansion, and now it’s too damaging for them to withdraw. So, in effect, states argue that the Constitution allows them to keep the federal carrot but refuse the federal stick. Good luck selling that to an appellate court.
Second, these states complain about having to implement the insurance purchasing exchanges and their rules, but here again, states are entirely free to opt out and let their citizens use the federal exchange. The only reason states have to implement exchanges is that they insisted the legislation give them this option, rather than forcing everyone into a single national exchange. States can hardly complain about the responsibilities they asked for, especially when they’re still free to duck them.
Third, there are procedural problems. States probably have no standing to enforce arguments about violation of individual rights (which is the main concern regarding the individual mandate). Also, consider the remedy if states were to prevail: It would wreak havoc to overturn the mandate to purchase, but not the mandate for insurers to sell without any medical underwriting. Doing that would cause massive adverse selection and probably destroy some companies and some portions of the market, so a court would have little option but to strike down most or all of the entire law. Surely that measure is extreme enough to give even the most activist judge pause, and so will compel most courts to find every possible way to uphold constitutionality, regardless of political persuasion.
Finally, do state nullification statutes like Virginia’s make a difference? Not according to Harvard’s Charles Fried (who was Reagan’s Solicitor General):
The notion that a state can just choose to opt out is just preposterous…. As long as the federal law is independently constitutional, it doesn’t matter what Virginia says… It’s like Virginia saying we don’t have to pay income tax….One is left speechless by the absurdity of it.
This leaves only the well-worn arguments about exceeding powers to regulate commerce and to tax for the general welfare. On these, most legal scholars are loud and clear about the merits. In sum, as Sandy Levinson’s (Univ. Texas) says, “The argument about constitutionality is, if not frivolous, close to it.”
Originally posted at the O’Neill Institute for National and Global Health, Legal Issues in Health Reform.
[Ed. Note: Also Read Professor Hall's prior post on Health Reform Watch, "Is it Unconstitutional to Mandate Health Insurance?"]
Filed under: Cost Control, Quality Improvement, Uncategorized
Taking a break from law, this post is about whether the Veterans Health Administration provides care more efficiently than the private sector. Paul Krugman and others have held the VA out as a shining example of the government’s ability to provide high quality care efficiently, as well as the private sector’s need to lower costs and improve quality through electronic medical records, comparative effectiveness research, reduced overhead, salaried physicians, and integrated delivery systems — all issues that are central to current health reform debates. It would be a huge blow if it turns out none of this is true — but that’s precisely what’s suggested by an article published by VA researchers earlier this year.
Wm. Weeks, MD (at Dartmouth and the VA’s regional center) reported that, from 2001-2006, the VA cost 33% more than equivalent care in the private sector, and its quality was not notably better. Here, I focus on the cost findings, since they diverge dramatically from the prior, state-of-the-art, study by Nugent, Hendricks et al (also from the VA), which found that, in 1999, the VA cost about 20% less than Medicare. Since Medicare itself costs 25-30% less than the private sector, Dr. Weeks reports the VA costs about twice what Dr. Nugent and other VA colleagues previously reported. What makes this discrepancy even more remarkable is that Weeks did not even cite this prior work of VA colleagues, published in multiple articles in leading journals.
What gives? I’m not expert, but its clear their methods differed sharply. Nugent et al. took all care delivered at 6 VA centers and valued the services at actual Medicare fee-for-service rates, comparing the total with costs borne by the 6 VA centers. Thus, the measures and comparison are direct, apples-to-apples. Weeks, on the other hand, compared total VA medical costs (excluding nursing homes) per user with per person costs reported by VA users in the Medical Expenditure Panel Survey (MEPS), which values those services at private sector rates. MEPS is a national survey that contains only a small subsample of 500 VA users, about 1 of every 50,000 VA user. Extrapolating from such a small sample is a much more indirect comparison, so merits closer scrutiny, which reveals many potential flaws:
- The 500 VA users in MEPS are probably not an accurate reflection of 5 million total users. MEPS surveys people living at home who respond to surveys. This entirely excludes people who are homeless, institutionalized, or have died earlier in the year, and it under-represents mentally ill or substance abusers. All of these categories have worse health, and regrettably are prevalent among vets, so MEPS almost certainly omits vets who reflect the highest burden of illness.
- This sample may lacks much statistical validity, even for the vets it does include. MEPS weights responses to make them nationally representative for demographic characteristics, but not for veteran status. Without this weighting, the chance of random error is much greater. This is suggested, for instance, by the fact that the value of VA care reported over this six-year study ranged two-fold from year to year, with no discernible pattern (the sixth year was twice the fifth year, which was half the third year, etc.)
- Even for those whom MEPS does represent, it underreports actual health care costs. Exactly how much and why is somewhat unsettled, but what seem to be the most recent studies conclude that MEPS underreports by 14% – 19%, in large part because reports of both utilization and costs are understated. Weeks acknowledges these possible flaws, but asserts that studies he and others have done show MEPS is reasonably accurate — again without citing any of the leading studies to the contrary.
Moreover, even Weeks’ self-selected cites do not fully support his accuracy claim. For instance, he says a RAND study reports that “MEPS expenditure estimates ‘agree quite well’ with estimates from other databases.” But, the RAND study (p. 34) spoke in that phrase only to utilization, not to expenditures, and even for utilization it said MEPS underreports by 85% for outpatient hospital use. For expenditures (use X price), RAND (on the very next page) said that MEPS underreports hospital costs by 21% and physician costs by 54%.
What is this Journal of Health Care Finance that would publish a flawed use of MEPS? It is hardly a leading health research journal. According to its website, it is
devoted solely to helping you meet your facility’s financial goals. . . . Make easier, better decisions, with advice from industry experts. . . . Experts in the field share their experiences on successful programs, proven strategies, practical management tools, and innovative alternatives, . . . including hospital/physician contracts, alternative delivery systems, generating maximum margins under PPS, improving productivity, taxation management, health care insurance, employee benefit cost-containment, joint ventures, mergers and acquisitions, employee incentive systems, and more.
An e-mail from its editor states that most articles are reviewed only internally, by its editorial board whose members are drawn primarily from industry.
It appears the Weeks article did not receive peer academic scrutiny, but what about scrutiny from the study’s own coauthors, who are affiliated with Dartmouth and Washington & Lee? The second author happens to be Weeks’ wife, and the third appears to be their son. As for Weeks himself, he is deeply embroiled in two serious legal controversies with the VA.
On balance, the Nugent, Hendricks et al. study remains unrebutted. In my view, the Weeks study suffers from too many serious flaws, and is too lacking in objective critique, to hold much or any credence in this important debate.
Originally posted at the O’Neill Institute for National Global Health.
Is it unconstitutional to mandate health insurance? It seems unprecedented to require citizens to purchase insurance simply because they live in the U.S. (rather than as a condition of driving a car or owning a business, for instance). Therefore, several credentialed, conservative lawyers think that compulsory health insurance is unconstitutional. See here and here and here. Their reasoning is unconvincing and deeply flawed. Since I’m writing in part for a non-legal audience, I’ll start with some basics and provide a lay explanation. (Go here for a fuller account).
Constitutional attacks fall into two basic categories: (1) lack of federal power (Congress simply lacks any power to do this under the main body of the Constitution); and (2) violation of individual rights protected by the “Bill of Rights.” Considering (1), Congress has ample power and precedent through the Constitution’s “Commerce Clause” to regulate just about any aspect of the national economy. Health insurance is quintessentially an economic good. The only possible objection is that mandating its purchase is not the same as “regulating” its purchase, but a mandate is just a stronger form of regulation. When Congressional power exists, nothing in law says that stronger actions are less supported than weaker ones.
An insurance mandate would be enforced through income tax laws, so even if a simple mandate were not a valid “regulation,” it still could fall easily within Congress’s plenary power to tax or not tax income. For instance, anyone purchasing insurance could be given an income tax credit, and those not purchasing could be assessed an income tax penalty. The only possible constitutional restriction is an archaic provision saying that if Congress imposes anything that amounts to a “head tax” or “poll tax” (that is, taxing people simply as people rather than taxing their income), then it must do so uniformly (that is, the same amount per person). This technical restriction is easily avoided by using income tax laws. Purists complain that taxes should be proportional to actual income and should not be used mainly to regulate economic behavior, but our tax code, for better or worse, is riddled with such regulatory provisions and so they are clearly constitutional.
Arguments about federal authority deal mainly with states’ rights and sovereign power, but the real basis for opposition is motivated more by sentiments about individual rights – the notion that government should not use its recognized authority to tell people how to spend their money. This notion of economic liberty had much greater traction in a prior era, but it has little basis in modern constitutional law. Eighty years ago, the Supreme Court used the concept of “substantive due process” to protect individual economic liberties, but the Court has thoroughly and repeatedly repudiated this body of law since the 1930s. Today, even Justice Scalia regards substantive due process as an “oxymoron.”
Under both liberal and conservative jurisprudence, the Constitution protects individual autonomy strongly only when “fundamental rights” are involved. There may be fundamental rights to decide about medical treatments, but having insurance does not require anyone to undergo treatment. It only requires them to have a means to pay for any treatment they might choose to receive. The liberty in question is purely economic and has none of the strong elements of personal or bodily integrity that invoke Constitutional protection. In short, there is no fundamental right to be uninsured, and so various arguments based on the Bill of Rights fall flat. The closest plausible argument is one based on a federal statute protecting religious liberty, but Congress is Constitutionally free to override one statute with another.
If Constitutional concerns still remain, the simplest fix (ironically) would be simply to enact social insurance (as we currently do for Medicare and social security retirement) but allow people to opt out if they purchase private insurance. Politically, of course, this is not in the cards, but the fact that social insurance faces none of the alleged Constitutional infirmities of mandating private insurance points to this basic realization: Congress is on solid Constitutional ground in expanding health insurance coverage in essentially any fashion that is politically and socially feasible.
Professor of Law and Public Health
Wake Forest University School of Law
Filed under: Cost Control, Hospital Finances, Physician Compensation
Mark A. Hall, Professor of Law and Public Health, Wake Forest University
Carl E. Schneider, Professor of Law and Internal Medicine, University of Michigan
[Ed. note: As noted above, we are very pleased to welcome Professors Mark Hall and Carl Schneider to the blog today.]
We cannot reform health care intelligently unless we understand the medical marketplace well. Debates about reform have scrutinized the health-insurance market, but they have neglected a crucially defective feature of the medical marketplace — the way doctors and hospitals charge patients when prices are not set by regulation or by negotiation with insurers.
When patients are not protected by large private or public insurers, doctors and hospitals charge them astonishingly more than patients with Medicare or managed-care insurance. Some price difference would make sense, because insurers offer providers large volume and economies of scale. But we are not talking about discounts of 10, or 20, or even 30 percent. Providers routinely double, triple, or even quadruple prices for unprotected patients. Such huge mark-ups can only be regarded as price-gouging — exploiting market power to charge prices virtually unrelated to actual cost or market value.
A comprehensive analysis of data hospitals report to Medicare shows that, on average, hospitals charge uninsured patients two-and-a-half times more than they charge insured patients and three times more than their actual costs. In some states mark-ups average four-fold.
Data for physicians’ prices are less comprehensive, but information from office management systems is disturbing. Across a range of diagnostic and invasive specialty services (echocardiography, coronary catheterization, liver biopsy, upper GI endoscopy, circumcision, flexible sigmoidoscopies, hysterectomy, appendectomy, gall bladder removal, and arthroscopic knee surgery), many physicians in 2003 charged uninsured patients roughly two to two-and-a-half times what insurers paid. Only primary care physicians appear to be staying within plausible bounds. They typically charge uninsured patients only one-third to one-half more for basic office or hospital visits than they received from insurers.
Providers defend themselves in several ways. First, they call these price differences steep discounts rather than huge mark-ups. This is almost laughable. Most providers charge “list prices” to only a small minority of patients (10-20%), so these are hardly a genuine baseline. Second, providers argue that because they often cannot collect list prices, they are on balance receiving little more than they would receive from insurers. However, when patients cannot pay inflated bills, doctors and hospitals regularly send them to collection agencies, ruining patients’ credit and bankrupting millions of them.
Third, providers blame the government by claiming that program and accounting rules require them to bill this way. But governmental agencies have declared that this is not true, and while some rules may still be irksome, rules about billing certainly do not require providers to set their prices as high as they do. Many tax-exempt (non-profit) hospitals recently wilted under scrutiny and adopted sliding-scale policies for low-income uninsured patients, but these policies do little to help insured patients who are receiving care out-of-network or uninsured patients from the broad middle class.
Insurers’ attempts to stop price gouging have failed. Some large insurers have refused to reimburse out-of-network providers for the full amounts they charge on the grounds that those amounts are not “usual, customary, and reasonable.” But New York’s Attorney General called this “consumer fraud” because patients were left owing the full bill. Courts have been little help. Consumer class-action lawsuits have attacked price gouging by non-profit hospitals, but courts have dismissed most of these cases on various technical grounds.
Government regulation has inhibited price gouging, but only for people covered by government programs. Medicare, for instance, prohibits doctors from charging Medicare patients more than about 10% over Medicare-approved rates. But inflated pricing still afflicts the uninsured and privately insured people buying care out of network. Some reformers simply advocate greater price transparency so that patients know better what to expect when seeking care without the protection of insurers. But transparency will not fix the structural dynamics of market power that allow providers to charge almost whatever they want.
To help medical markets work better, the government should cap what doctors, hospitals, and other providers may charge patients who are not protected by regulated or negotiated discounts. The details can be debated and refined, but one approach is to cap charges at, say, 150% of a normal reference rate. The reference rate could be what Medicare pays, or a weighted average of what larger private insurers normally pay across a region. Doctors with boutique practices could still charge what they wished for extra concierge services, or perhaps doctors who don’t accept any insurance should be exempted. Design features are important and tricky, but they should not keep us from setting reasonable bounds within which markets can function.