Online symposium: The Bar Review version of NFIB v. Sebelius
on Jul 6, 2012 at 5:31 pm
The following contribution to our post-decision symposium on the health care cases is written by David B. Kopel, adjunct professor of constitutional law, Denver University. Author of the Independence Institute amicus brief on state sovereignty and the Medicaid mandate.
I may be a law professor by vocation, but the bar review is in my blood. My parents, Jerry and Dolores Kopel, founded and for over a quarter-century directed the Colorado Bar Refresher (now part of the BAR/BRI empire). So let’s take a look at the concrete legal rules that have emerged from NFIB v. Sebelius, as they might be presented in a bar review outline, or perhaps in a little more depth in a student study aid for Constitutional Law I.
I. The power to regulate commerce among the several states
Article I, § 8: “The Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;”
- NFIB does not question existing doctrine about the power of Congress to regulate actual commerce.
- However, Congress may not call commerce into being so that it can be regulated. The power to regulate “commerce” presupposes that there is some commerce going on.
- Congress may not use the commerce power to compel persons to engage in commerce.
- That a person may (or almost certainly will) engage in commerce in the future does not mean that Congress can compel the person into commerce in the present. For example, almost all persons eventually consume some health care services. Congress cannot force them to consume a product today (expensive health insurance) because Congress thinks that they might eventually use something related to the product in the future.
- Moreover, all persons consume food. Unlike health care, food consumption is always ongoing. Yet Congress cannot force persons to purchase a particular type of food.
- Does the NFIB return the Commerce Clause to the original meaning of “commerce”—that is, mercantile exchange? Absolutely not.
- NFIB does make an explicit rule a principle which might seem too obvious to need saying: “commerce” is a type of “activity.” Therefore, in order for someone or something to be subject to the commerce power, there must be an “activity.” Metaphysical efforts to define inactivity (staying at home, doing nothing) as a form of “activity” (engaging in self-insurance) are not valid.
- Key issue in future cases: Is Congress regulating an “activity,” or not?
- NFIB reaffirms the three part rule from United States v. Lopez (1995). Using the Commerce Clause, Congress can regulate:
- Instrumentalities of interstate commerce. E.g., safety regulations or price controls for airplanes or ships.
- Channels of interstate commerce. E.g., prohibit interstate shipment of unsafe food or drugs.
- Activities which “substantially affect” interstate commerce. E.g., regulate collective bargaining at a steel mill, because a strike at the steel mill substantially affects the interstate shipment of goods and materials to and from the mill. N.L.R.B. v. Jones & Laughlin Steel Corp. (1937)
The “activity” test will almost always be relevant only to the third type of use of the Commerce Clause.
- The New Deal today: Wickard v. Filburn (1942) should be seen as marking the furthest boundaries for the reach of the Commerce Clause. Wickard and similar cases remain precedents which no one except Justice Thomas is willing to overrule, but they are not bases from which even broader uses of the Commerce Power can be extrapolated. They are maxima, not starting points.
- Roberts (quoting Lopez): “Wickard has long been regarded as ‘perhaps the most far reaching example of Commerce Clause authority over intrastate activity.’”
- Joint Dissent: Wickard “always has been regarded as the ne plus ultra of expansive Commerce Clause jurisprudence. . . ” (Ne plus ultra is French for “not more beyond” or “go no further.” Some people say that the words were inscribed on the Pillars of Hercules at Gibraltar, as a warning for sailors. The term can also be used as praise: “His perfect scores of 800 on all his college admissions tests were the ne plus ultra of standardized test success.” In any case, the meaning is that the final limit has been reached.)
II. The Necessary and Proper Clause
Article I, § 8: “The Congress shall have Power . . . To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”
- Unlike with the Commerce Clause, Necessary and Proper doctrine is now fully originalist. NFIB returns Necessary and Proper doctrine to the originalist doctrine explicated by Chief Justice Marshall in McCulloch v. Maryland (1819).
- Note that McCulloch resolved a dispute among the Framers themselves. Alexander Hamilton favored a broader reading of the N&P Clause, while James Madison, Edmund Randolph, and Thomas Jefferson preferred a narrower reading. McCulloch (and derivatively, NFIB) adopt the Hamilton approach of an expansive but not limitless interpretation of N&P.
- The text says “necessary and proper,” so there are two separate elements to consider. A law which is “necessary” might not be “proper.”
- “Necessary”= “convenient” or “appropriate” to achieve the end. Need not be indispensable, or the only means to accomplish the end. (Contrast with the Article I, § 10, ban on any state taxes on exports or imports, except such as are “absolutely necessary for executing its inspection Laws.”)
- According to the Roberts opinion, the individual mandate was “necessary” but not “proper.” “Necessary” because the mandate was one convenient means of preventing the ACA’s regulations of insurance (prohibitions of pricing based on actuarial health risks; guaranteed issue) from destroying the insurance business.
But not “proper,” because in violation of McCulloch’s other rules.
- The Necessary and Proper Clause adds nothing to congressional power. Instead, the clause is simply a restatement of the common law doctrine of incidental powers: when you grant an express power, you also implicitly grant the lesser, incidental, powers that come with it.
- Incidental powers: “manage my farm for a year” includes the implicit, incidental powers to repair fences, or to make futures contracts to hedge the prices for sale of the year’s crops.
- An incidental power is, by definition, not as “great” or “worthy” as the express power. So “manage my farm for a year” does not include the equally greater (or even greater) power to sell the farm.
- So any power exercised under the N&P Clause cannot be self-standing. Rather, the power must be an incident of some other power which the Constitution grants to Congress.
- As applied to the ACA, the Constitution grants Congress the power to regulate commerce. The Constitution does not grant Congress the power to call commerce into being, or to compel commerce. Therefore, the individual mandate’s compulsion of commerce is not an “incident” of power to regulate commerce.
- Further, the power to compel involuntary commerce would be a “great substantive and independent power” (Roberts quoting McCulloch), as least as “great” as the power to regulate commercial activity. Ergo, the power to compel involuntary commerce is not an “incident” of the power to regulate interstate commerce.
- How this changes the law: Some courts and commentators have only paid attention to the portion of McCulloch which expansively defined “necessary.” They have ignored the rest of the opinion, such as Marshall’s long analysis of the doctrine of incidental powers (the first part of the case), and Marshall’s admonition that a law must be “proper” as well as “necessary.” NFIB applies Marshall’s full teachings from McCulloch.
III. The Spending Power
“The Congress shall have Power . . . to pay the Debts and provide for the common Defence and general Welfare of the United States;”
- From 1789 until 1936, the Supreme Court did not settle the question of whether congressional spending can be only in service of the other enumerated powers, or can instead be for anything that advances “the general welfare.”
- United States v. Butler (1936), adopted the broader, Hamiltonian reading. So Congress can spend money on subjects which are not within the scope of the other enumerated powers (e.g., agriculture, education).
- Can Congress use the Spending Clause to encourage States to enact certain laws desired by Congress? Yes.
- Can Congress use the Spending Clause to coerce States to enact certain laws desired by Congress? No.
- Steward Machine Company v. Davis (1937) and South Dakota v. Dole (1987) express the anti-coercion rule, while finding that the conditional grants in those particular cases did not exert undue influence.
- NFIB is not the first case to apply the anti-coercion rule, but it is the first case to find a conditional grant unconstitutionally coercive.
- What are the factors which made the Medicaid mandate coercive?
- Relative impact on state budgets. The Medicaid cut-off involved at least ten percent of almost every state’s budget. The five percent of federal highway funds cut in South Dakota v. Dole was less than one-half of one percent of the state’s budget. Dole called this “relatively mild encouragement.” In NFIB, the ten-percent cut to a state’s overall budget was characterized as “a gun to the head.” Somewhere between “a gun to the head” (ten percent) and “mild encouragement” (one-half of one percent) is the line of “undue influence.” Roberts declines to delineate the line: “wherever that line may be, this statute is surely beyond it.”
- The threatened cuts had too distant a relation to what Congress wanted the states to do.
- Traditional Medicaid is a program for certain especially vulnerable people (the blind, the disabled, some children, and some adults living in poverty). For the adults, many states provided only a fraction of full Medicaid coverage. Under the ACA, states had to expand Medicaid to cover all adults who had incomes below 133% of the federal poverty line.
- Thus, Medicaid was “transformed” into a broad program to provide full Medicaid coverage to able-bodied, childless, non-poor adults.
- Because of the transformation, the threat of cutting traditional Medicaid was too attenuated from Congress’s objective of getting the states to provide medical welfare to able-bodied non-poor adults.
- Future cases: Consider the quantitative impact of the threatened cut, as a percent of state budgets. Also consider whether the cuts in a particular grant really have a very close relationship to the action which states are supposed to take.
IV. The Tax Power
“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises . . . ; but all Duties, Imposts and Excises shall be uniform throughout the United States;” Art. I, § 8.
“No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” Art. I, § 9. (The Sixteenth Amendment removes the apportionment requirement for taxes on incomes, such as taxes on real estate income.)
- Even if Congress calls something a “penalty,” that thing may still be an exercise of Congress’s tax power, just as some previous cases have held that something which Congress called a “tax” was really a penalty.
- What are the indicia that a “penalty” is really a tax?
- A person who is subject to the “tax” is not considered to have violated the law in any way. (Solicitor General Verrilli described the individual mandate this way during oral argument. Chief Justice Roberts adopted this interpretation of the statute, while admitting that it was not the most natural reading.)
- The “tax” is low enough so that a person can make a “reasonable financial decision” to pay the tax instead of doing whatever is being taxed. The tax is not at a “prohibitory” level.
- The “tax” is collected by the Internal Revenue Service in the same manner as other taxes.
- No scienter requirement. Scienter is usually associated with crimes or other unlawful acts, and not with tax liability.
- The above guidelines add much clarity to the Court’s tax vs. penalty jurisprudence. Department of Revenue of Montana v. Kurth Ranch (1994) involved a very harsh “tax” which the Court decided was really a criminal penalty. NFIB goes much further than Kurth Ranch in policing the tax/penalty line.
- For the first time, the NFIB Court holds that a tax on not doing something is not necessarily a direct tax. This is the only aspect of the NFIB decision which broadens congressional powers.
V. NFIB in broader context.
- Future implications: As a practical matter, lower federal courts, and future Supreme Courts, exercise great latitude about how faithfully they apply Supreme Court precedents.
- Many lower federal courts have resisted Lopez, and some federal courts are reading District of Columbia v. Heller (2008) very narrowly too. Judges who consider Wickard v. Filburn to have been “a good start” rather than the outer limit may brush off the NFIB rules as “dicta.”
- Other judges may not, especially since the Roberts opinion does not aim to be innovative, but simply to enforce principles that have been part of the fabric of American constitutional law since the New Deal and before.
- The extent to which future courts follow the NFIB rules depends in part on the broader social and political culture in which the judges live, and in part on whether the judges are appointed by a President whose party sees the NFIB rules as restatements of obvious constitutional truths, or as dangerous limitations on the power of a beneficent Congress to legislate about any topic which a majority of Congress considers to be a national problem.
- Historical irony: The famous “switch in time that saved nine” never happened. Justice Owen Roberts had already made his conference vote in West Coast Hotel v. Parrish (1937) weeks before FDR announced his Court-packing plan.
- The Court-packing plan was politically disastrous for Roosevelt, and after it was announced, Congress never enacted any major new item of New Deal legislation.
- Because Court deliberations were kept secret, Justice Owen Roberts was unfairly maligned as a spineless worm who caved to FDR’s anti-judicial threats. In fact, as legal historian Barry Cushman has explicated in his book Rethinking the New Deal Court: The Structure of a Constitutional Revolution (1998), Roberts had decided that the Fourteenth Amendment doctrine of liberty of contract, which had been used to invalidate minimum wage laws, had become incoherent and unusable, and so Justice Roberts decided to stop using it.
- If recent media reports are true, then the second Justice Roberts is the Justice who really did abandon what he considered to be a correct interpretation of the law, submitting to the threats of a President who attempted (this time successfully) to coerce the Supreme Court of the United States.