Straight talk on health care reform: Both sides argue individual mandate in appeals court in Atlanta

The future of national health care reform under the Affordable Care Act may hinge on a single provision in the new law. The individual mandate, or the "minimum essential coverage provision," requires most uninsured Americans to purchase health coverage or pay a tax penalty. The big question is whether the individual mandate is constitutional.

Twenty-six state attorneys general (25 Republicans, including Colorado's John Suthers, and one Democrat) have joined the state of Florida in challenging the mandate. That case, State of Florida vs. U.S. Department of Health and Human Services, represents the most significant test of the mandate. Oral arguments were heard last week in the 11th Circuit Court of Appeals in Atlanta.

The three hours of arguments covered many technical issues and addressed other topics, but the main focus was on the mandate provision. The basic arguments were fairly straightforward.

Opposing arguments

Opponents contend that if citizens make the decision not to buy health insurance and assume financial responsibility for their own health care, then they should have that right.

Thus, the question, as stated by Paul Clement, the attorney representing the states, is whether Congress has the authority (under its power to regulate commerce) to compel an individual to engage in commerce in order to better regulate it.(1) According to the attorney general of South Carolina, "For the federal government to be telling people that they must buy health insurance, or they must buy anything at all, is not one of the powers that is given to the federal government by the Constitution."(2)

The mandate's opponents argue that the Commerce Clause of the Constitution, from which this power would arise, applies only to "economic activity." Failure to buy insurance is the opposite – "inactivity." It is therefore unconstitutional to compel Americans to engage in a form of economic activity that they would not otherwise choose to be a part of. Clement said that in the more than 200 years that Congress has exercised its commerce powers, no similar law has ever been imposed and no legal precedent or past court case supports such an action.

Supporters of the individual mandate contend that everyone will ultimately engage in this form of commerce, since everyone will eventually have to use and pay for health care. However, Clement argued "they are not engaged in commerce if they are sitting in their living rooms,"(3) and even if they may need health care at some point in future, right now they do not.

Clement suggested that it would be constitutional to require the purchase of health insurance at the time of medical treatment – basically, after the individual has chosen to engage in commerce. He also said that Congress took the easiest path by imposing an individual mandate rather than a more constitutionally viable approach, such as passing a tax and then providing a credit to individuals who purchase health insurance.

Finally, the attorneys for the states argued that if the individual mandate and its broad definition of commercial regulation were upheld, it would represent an unconstitutional expansion of federal power and authority that could extend beyond health care. According to Judge Roger Vinson of the Federal District Court of Northern Florida, in the ruling that led to last week's hearing, "If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain, for it would be difficult to perceive any limitation on federal power."(4)

Supporting arguments

Neal Katyal, the acting solicitor general of the United States, said that the purpose of the mandate is neither to force Americans to buy a private product nor expand congressional authority. "It's about how and when health care will be paid for,"(5) he said. The individual mandate is commercial and economic in nature, it substantially affects interstate commerce, and as such, is entirely within the powers granted to Congress by the Constitution. If the provision were determined to be unconstitutional, it would seriously undercut the ability of Congress to regulate this major sphere of national commerce.

It is true that health care and health insurance represent a significant portion of the national economy. A study from the Department of Health and Human Services in 2010 indicated that in the previous year, health care spending was estimated to be 17.6 percent of the gross domestic product (GDP). That is equal to $2.5 trillion, or about $8,047 per person. The same study, done prior to the passage of the Affordable Care Act, projected that those costs would almost double by 2019, to $4.7 trillion.(6) In 2009, private health insurance spending was projected to be about $854 billion and covered medical supplies, drugs and equipment that are shipped between states.(7)

Katyal insisted that the issue of inactivity was irrelevant to the constitutionality of the mandate because health care is completely unique when compared to all other commercial markets. At some point in time, virtually every American will use health care, unlike any other commercial market or activity. No American can or will remain inactive permanently. Secondly, because hospitals cannot turn away patients based upon inability to pay, the cost of uncompensated care is passed on to individuals and employers who have health insurance. No other commercial sphere functions in the same way.

He said the argument boils down to "the failure to pay and not the failure to buy"(8) and noted that $43 billion in uncompensated care is passed on or shifted to other Americans each year. This represents an increase in premium costs of more than $1,000 annually for each American family. Rather than an effort to make individuals buy a private insurance product, the mandate is about ensuring that the cost of their care will not be disproportionately shifted on to others.

Through the powers granted by the Commerce Clause, Congress chose the individual mandate because it is based upon the existing private insurance system and is the most effective way of regulating this commercial sector. A radical restructuring of the system, state-based alternatives, incentives or tax options would not address the problem as efficiently or effectively.

Finally, responding to the argument of expanding federal control and authority, Katyal argued that the individual mandate represents a unique solution for a unique market. It is not universally applicable to other forms of federal regulation and oversight. In addition, other provisions of the Constitution and legal precedent will prevent the wholesale expansion of federal authority. For this approach to be used again, the problem must be economic, it must substantially affect commerce, it must solve a national and not local problem, there must be direct causation and it cannot contravene other provisions of the Constitution.

The debate between these positions will likely continue throughout this year and the next. While the legal arguments will be based in case law and precedents, the core of each position will likely remain the same.

-- Bob Semro

End notes
1) C-SPAN, Court Hears Case on Obama Health Care Bill; Oral argument heard in 11th Circuit Court of Appeals, June 8, 2011.
2) Zachary Roth, Could SCOTUS Be the Death Panel For Health-Care Reform?, TalkingPointsMemo, March 23, 2010.
3) C-SPAN, June 8, 2011.
4) State of Florida v. U.S. Department of Health and Human Services, p. 42, Jan. 31, 2011.
5) C-SPAN, June 8, 2011.
6) Andrea M. Sisko, et. al, National Health Spending Projections: The Estimated Impact of Reform Through 2019, Health Affairs; At the intersection of health, health care and policy, September 2010.
7) Ezra Klein, The Washington Post, Max Baucus: The individual mandate is constitutional, Dec. 22, 2009.
8) C-SPAN, June 8, 2011.