Patient Protection and Affordable Care Act Ruled Unconstitutional — Again

Recently, Judge Roger Vinson of the United States District Court for the Northern District of Florida ruled the Patient Protection and Affordable Care Act (“PPACA,” known by its opponents as “Obamacare,” but arguably much more appropriately named “Americare”) unconstitutional. Vinson stated that the law’s mandatory insurance requirement violates (or is not supported by) the Commerce Clause, which allows Congress to control “activities that substantially affect interstate commerce.” He then ruled the entire Act unconstitutional, due to the inability to sever the individual mandate from the remaining provisions.

Activity-Inactivity Distinction

Like the judge in an earlier ruling in a Virginia case, Judge Vinson found the PPACA’s health insurance mandate unauthorized by the Commerce Clause because it regulates the inactivity of not buying health insurance, as opposed to an activity. He said:

[T]he individual mandate seeks to regulate economic inactivity, which is the very opposite of economic activity. And because activity is required under the Commerce Clause, the individual mandate exceeds Congress’ commerce power, as it is understood, defined, and applied in the existing Supreme Court case law.

Others have provided cogent critiques of this activity-inactivity distinction, but I’d like to assume its correctness and consider its application and consequences in connection with PPACA (“Obamacare.”)

Whatever its merits, Judge Vinson’s 78-page PPACA ruling cannot be criticized for lack of the serious thought and analysis befitting of a federal judge ruling on such an important national issue. I write not to dispute his reasoning, but to provoke some thought about it and where we go from here.

Do Federal Discrimination Laws, Held Authorized by the Commerce Clause, Also Regulate Inactivity?

My Question

Pondering this activity-inactivity distinction, which I personally found questionable, I wondered about other federal laws that might be characterized as regulating inactivity.  I immediately thought of Title VII of the Civil Rights Act of 1964, with which I work constantly as an employment lawyer.

The Civil Rights Act of 1964 prohibits, among other things, the inactivity of not serving black patrons at a restaurant or hotel or not hiring black applicants for employment. In Katzenbach v. McClung (1964), the Supreme Court upheld the Act’s prohibition of such inactivity under the Commerce Clause in a case involving a barbecue restaurant in Alabama that operated a whites-only dining room, though it was gracious enough to take black folks’ money for carry-out orders. The focus was on the activity of running the restaurant, not the inactivity of refusing to serve blacks in the dining room.

In response to an unsolicited email hailing the Florida case a victory for all that is right and good, I raised the Title VII analogy.

An Answer

Somewhat to my surprise, I received a prompt and thorough response.  A lawyer who worked on litigation opposing the Affordable Care Act said Title VII is distinguishable. “The ‘inactivity of not hiring black applicants forbidden by Title VII involves also engaging in an activity, the preferential hiring of applicants from different racial groups,” he said. “If an employer hires no black applicants, but also hires no white applicants or applicants of other races, there is no Title VII violation.  So the violation is based on activity — race-based hiring — not mere inactivity.”

This lawyer further explained Judge Vinson’s ruling, stating that “The Affordable Care Act prohibits inactivity: the refusal to buy health insurance, even if you don’t need it.”

True, perhaps, but of course, most employers have to hire someone, of whatever race. And the restaurant in Katzenbach v. McClung had to serve meals to someone. Similarly, the vast majority of people will have to obtain healthcare services somehow.

Learning by Analogy

So here’s the true analogy: Title VII provides that if you engage in the activity of hiring an employee, you may not engage in the inactivity of not hiring a better qualified black applicant; likewise health  care legislation may provide that if you engage in the activity of using health care services, you may not do so without proper funding (usually, but not necessarily insurance). About the health care inactivity, Judge Vinson said:

The uninsured can only be said to have a substantial effect on interstate commerce in the manner as described by the defendants: (i) if they get sick or injured; (ii) if they are still uninsured at that specific point in time; (iii) if they seek medical care for that sickness or injury; (iv) if they are unable to pay for the medical care received; and (v) if they are unable or unwilling to make payment arrangements directly with the health care provider, or with assistance of family, friends, and charitable groups, and the costs are thereafter shifted to others. . . . [A] number of the uninsured are taking the five sequential steps. And when they do, Congress plainly has the power to regulate them at that time (or even at the time that they initially seek medical care) . . . . But, to cast the net wide enough to reach everyone in the present, with the expectation that they will (or could) take those steps in the future, goes beyond the existing “outer limits” of the Commerce Clause . . . .

It took me a while — because I have been a supporter of health care reform and would have preferred a single-payer system or at least the “public option” — but I have finally developed an appreciation for the fact that some people have legitimate concerns with the individual mandate.

Say you are a multi-millionaire and prefer to self-insure. Why should you have to buy insurance? Or say you are a Christian Scientist and will rely solely on prayer and not modern health care? Why should you have to buy insurance? Forcing the issue on such people is indeed an undue interference with their freedom to be uninsured.

But for everyone else, it is virtually certain that a time will come when reliance on modern health care will be required, and if that occurs they must be willing and able to pay the freight — one way or another. The timing and magnitude of the cost is highly unpredictable, factors that make insurance a desirable solution. Even a young, healthy person can experience an unexpected medical catastrophe such as a severe car accident.

How To Move Past This Issue Quickly – A Modest Proposal

The activity-inactivity Commerce Clause issue decided by Judge Vinson is too important to allow it to derail healthcare reform.  I’m not being overly dramatic if I say “lives are at stake.”  They are. People who cannot afford needed care and therefore forego or delay it are often shortening their lives.

Need We Wait For This Issue To Be Resolved By the Supreme Court?

Everyone seems to assume this constitutional issue will not be resolved until ruled upon by the Supreme Court – at least a year from now.  Such delay is unacceptable.

Conservatives like to blame our current economic weakness on uncertainty about legislation and regulation under the Obama Administration.  Why must we leave the future of PPACA (“Obamacare”) to the courts – and to a Supreme Court ruling that may not come for one or two years? that would just lock in the uncertainty.  How about a legislative fix – now?  That would eliminate a big chunk of uncertainty.

An Opt-Out Amendment Makes Sense

Based on my analogy above, I propose an amendment providing an opt-out for the rare individuals who truly prefer to manage and fund their health care without buying insurance (analogous to the rare employers who prefer to operate their businesses without hiring employees). But there’s a catch.  Such persons could opt-out, but the amendment would require that they thereafter either refuse all medical care or pay cash for it at the time of service. This would be regulating the activity of using health care services.

While prohibiting preexisting condition exclusions for those choosing insurance, this amendment would mandate them for people who change their mind after opting out — to avoid the “freerider” problem of people only buying insurance after learning of a major need, such as a cancer diagnosis.  Alternatively, it could retroactively price their insurance as if they had been buying it all along. These rules would avoid the inactivity problem because they would apply to previously opted-out people now engaged in the activity of buying insurance. The emphasized text in the quote above from Judge Vinson suggests he would agree.

This Amendment Would Fix the Inactivity Basis for the Rulings Against PPACA

With this amendment, the Affordable Care Law wouldn’t mandate any activity, as far as people using health care services (or getting sick, for that matter), or buying health insurance, but only that they be prepared to pay their medical bills in full, either through insurance or otherwise.  Just as Title VII doesn’t mandate that employers hire employees, but only that they not discriminate if they do so.

Under this amendment, the penalty for being uninsured would apply only if an opt-out individual engaged in the activity of obtaining medical services without cash payment.  I would attach a criminal penalty as well, for those who are unable to pay a cash fine.

This proposed amendment should fully satisfy those who object to the PPACA individual mandate on grounds that they prefer going uninsured and taking their chances, as well as those politically-motivated constitutional lawyers who have pushed this activity-inactivity distinction.

Political Realities and This Proposed Amendment

Of course, the PPACA passed in the previous Congress, just barely, with no GOP votes. Now the House is controlled by GOP Representatives who feel they have a mandate to disarm the PPACA. Why would they vote for a rational amendment that would allow it to withstand Constitutional scrutiny?

They may not, which is fine. At least the public will have seen how Democrats proposed a reasonable resolution to one of the main objections to the law and Republicans stayed true to their “Party of No” role. Additionally, this amendment could be rolled in with others designed to meet other specific objections about the law.

The more compromises are unsuccessfully offered by Democrats, the worse the GOP refusal to play along will look. The battle for Independents (like me) is on.

We Need to Fix the PPACA – For the Sake of Business and People

Regardless of the legal merits, many find the current opposition to the Affordable Care Act ill-advised – both the recently-failed repeal efforts and the recently-successful lawsuits.

In my view, irrational opposition to healthcare reform is increasing the socially destructive inequality in the U.S.

In the healthcare arena, opponents of “Obamacare” are pushing the wrong kind of “American exceptionalism,” one that falsely asserts we are superior to all the countries with which we compete, because we supposedly have the best health care in the world.  The rest of the world laughs; they know their governments provide health care to all citizens at much lower cost — and with better health outcomes.

Negative Impact of American Health Care System on Free Enterprise and Small Business

The organization that sent me the email rejoicing in Judge Vinson’s decision, CEI (Competitive Enterprise Institute), has as its slogan or mission “Free Markets and Limited Government.”

IMHO (in my humble opinion) free enterprise is not well served by a system under which someone cannot afford to quit a job and start their own firm, because they can’t buy insurance in the individual market — I didn’t say can’t buy it at a reasonable price — I said can’t buy it at ANY price.

If you haven’t applied for individual health insurance and been rejected, you may be shocked that you needn’t have a history of cancer or heart attack or the like to meet such rejection.  A garden variety chronic condition requiring expensive maintenance medication will suffice.

Free enterprise is also not well served, IMHO, by an insurance marketplace in which small businesses, the engine of growth, are subject to pricing that is often much less favorable than that offered to large companies.

For big groups, insurers establish rates based on known averages; if a couple of employees out of 10,000 have huge medical expenses in a given year, that’s no problem because the likelihood of that is actuarially priced in.  But small businesses confront high base prices and/or sharp increases when they have employees with high costs.

I know of a small business in my market, covering just a handful of employees and dependents, that faced a 33% increase this year, following 17% and 16% two prior years.  One of the owners pays his family’s premium out-of-pocket and anticipates that total family medical costs, premiums included, will probably be around $25,000-$30,000 this year. How many people can afford that?

The present broken system also harms our free enterprise system because it freezes labor mobility as millions of people take or remain in positions they don’t like, which may not be their highest, best use in the economy, solely because of good health benefits. This grossly distorts the labor market mechanisms I’m sure advocates of “Free Markets and Limited Government” dearly love.

The Human Cost

In addition, many people suffer under the present system. Recently, the sister of a younger friend of mine, a young woman in her early 20s, underwent surgery for a grapefruit-sized mass on her ovary. She will end up sterile. She was uninsured and held off going to the ER until the pain was unbearable — and her mother, who went with her, had to watch her child suffering in that condition. Regular preventive care and access to a doctor would likely have caught the condition earlier — and maybe spared her ability to bear a child some day.

Something like that probably happens every minute of every day. How many uninsured people even die prematurely, simply trying to avoid the costs of medical assistance?

My Challenge to PPACA Opponents

Despite the fierce opposition from Republicans, much of the PPACA health care plan has already been put in motion, and numerous polls have shown that many aspects of it are popular among American citizens.  In fact, a recent poll released by The Washington Post and ABC found that 62% of the poll’s participants would like to continue Obamacare.

Of course, the law isn’t perfect. I have some concerns about its length and complexity.  President Obama has admitted that it’s not perfect and has invited reasonable suggestions for improvement.  Improvement – not repeal.

So, by all means, oppose Obamacare if you like. Rejoice when judges rule against it. But I want to start hearing about the improvements for which you are lobbying — ones that will cut costs and extend access to all Americans without discrimination based on health events over which people have no control.  I’ll be all ears – and so will the President.

Special thanks to intern Laura Berndt, a recent graduate of Beloit College, my alma mater, for her assistance with this post.

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