Healthcare Reform - Backgrounder

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Litigation Backgrounder

Health Insurance Reform & The Supreme Court:

Limits to Congress’ Power, Preserving Contracts
And the Need for Judicial Engagement

 

The Issue in a Nutshell:

In the defining constitutional debate of our time—whether the individual mandate of the Patient Protection and Affordable Care Act (PPACA) is constitutional—only one doctrine will lead the justices to fulfill their mandate to act as a check on congressional power: judicial engagement.

Several lower courts that have heard challenges to the individual mandate have opined that a properly “restrained’ federal judiciary should leave to Congress the task of deciding how to regulate the health care system. But, as the 11th U.S. Circuit Court of Appeals noted in striking down the mandate, “the Constitution requires judicial engagement, not judicial abdication.”

As the Institute for Justice stated in its amicus brief filed in the PPACA case, “Reflexively deferring to Congress’ enactment of the individual mandate is an abdication of the judicial duty owed to the American people to enforce and support the Constitution. If courts cannot find and articulate meaningful limits on the federal government’s enumerated powers, the entire constitutional architecture collapses. At a minimum, courts should be willing to draw a line between the power to regulate commerce and the power to compel it. Hundreds of years of historical understandings of the centrality of mutual assent, this Court’s own constitutional and statutory decisions relating to the commerce power, and the very nature of our federal structure all support the conclusion that, by enacting the individual mandate, Congress has pushed its commerce power one critical step too far.”

This backgrounder expands upon the IJ brief and more fully explains the concept of judicial engagement in the context of this case before the U.S. Supreme Court.

For a copy of IJ’s brief, visit: www.ij.org/PPACAbrief.



Introduction

For three days in late March, the Supreme Court will hear argument on the constitutionality of the president’s signature health care law, the Patient Protection and Affordable Care Act (“PPACA”).[1] It is fitting that the Supreme Court will devote an unprecedented five-and-a-half hours of oral argument to a law that represents an unprecedented expansion of government power.

The heart of PPACA is a requirement that virtually everyone purchase health insurance or face a fine.[2] Known as the individual mandate, this provision forces people to enter into contracts against their will, marking the first time Congress has sought to use its enumerated power to regulate existing “Commerce . . . among the several States”[3] to coerce commercial activity that would not otherwise occur.

The challenge to PPACA is a constitutional crossroads for America because if, as the Administration urges,[4] the power to regulate interstate commerce includes the power to coerce commerce, then there is nothing Congress cannot do and the nation will no longer have a federal government of limited and enumerated powers.

The Institute for Justice offers two key insights that cut through the complexity of the legal debate: (1) the importance of judicial engagement; and (2), in its amicus brief, how the individual mandate violates the most basic rule of contract law—voluntary agreement. Beginning with judicial engagement, this is the simple principle that courts must provide meaningful judicial review of challenged statutes, and not reflexively defer to the elected branches, in order to preserve the liberty-protecting structure of the federal government as one of limited and enumerated powers. The Supreme Court needs to acknowledge that Congress has pushed the nation to this brink because the Supreme Court itself has steadily abdicated its duty to enforce constitutional limitations on the power of government. Viewing the individual mandate through the nonpartisan lens of judicial engagement, rather than from a political or policy perspective, will not only make the unconstitutionality of the individual mandate plain, but also help restore real standards of judicial review to all areas of the Constitution.

Second, as explained in the Institute for Justice’s amicus brief, by trying to force millions of Americans into private contracts against their will, Congress has disregarded the most fundamental precept of contract law and a fundamental precept of liberty too: Contracts are free and voluntary agreements. The power granted by the founding generation to regulate “interstate commerce” is not the power to destroy the principle of voluntary consent upon which all commercial activity depends.

 

Judicial Engagement:
The Judiciary as a Principled and Neutral “Bulwark of Liberty”

Despite the clear words of the Constitution that Congress has only certain limited powers that are specifically spelled out in this founding document, the Supreme Court’s decision will not depend primarily on the words of the Constitution, but instead on the justices’ own approach in interpreting those words.[5] It is not enough that the Father of our Constitution, James Madison, stated in Federalist No. 45:

The powers delegated by the proposed Constitution to the federal government are few and defined. . . . The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.[6]

Although the PPACA challenge is fundamentally a debate over the role of government in our lives and whether there are any limits on federal power, a critical aspect of the legal analysis will be determining the proper role of the judiciary in applying the words of the Constitution. This is where the Institute for Justice’s perspective on judicial engagement comes in.

As a matter of constitutional history, the role of the judiciary is clear. As Alexander Hamilton observed, “the courts of justice are to be considered as the bulwarks of a limited Constitution against legislative encroachments.”[7] In the landmark case of McCulloch v. Maryland, Chief Justice Marshall declared:

[S]hould congress, under the pretext of executing its powers, pass laws for the accomplishment of objects not intrusted to the government; it would become the painful duty of this tribunal, should a case requiring such a decision come before it, to say, that such an act was not the law of the land.[8]

Meaningful judicial review of government action—what the Institute for Justice calls “judicial engagement”—is an essential defense against the exercising of extra-constitutional powers by the other branches of government, in this case, Congress. As Hamilton explained, judicial engagement in enforcing the constitutional limits does not imply a superiority of the judiciary over Congress, but merely that “the power of the people is superior to both; and that where the will of the legislature, declared in its statutes, stands in opposition to that of the people, declared in the Constitution, the judges ought to be governed by the latter rather than the former.”[9] Thus, the Supreme Court ought to approach the individual mandate as a neutral arbiter, examining the facts and rendering judgment in light of express constitutional limits on government power.

 

Judicial Abdication:
The Individual Mandate Depends on the Court Continuing to Ignore the Constitution

Judicial engagement is a key to understanding the challenge to the individual mandate because proponents of the law’s constitutionality do not rely on the text of the Constitution. Such a position would be untenable. Those who wrote and ratified the Constitution intended the commerce power to enable Congress to regulate the channels of interstate and foreign trade, which is what “commerce” meant at the time. Neither the words of the Constitution, nor the intent of the ratifiers, bestowed a general regulatory power on Congress, much less the power to compel involuntary private contracts.[10]

Rather than rely on the words of the Constitution, the administration relies on the Supreme Court’s longstanding practice of ignoring the Constitution. Indeed, the individual mandate seems like a plausible exercise of the commerce power only because the Supreme Court has refused for generations to subject federal law to meaningful commerce clause scrutiny.

Often called “judicial deference” or “judicial minimalism,” the Supreme Court’s guiding philosophy has been to allow the elected branches to reach much farther than the Constitution contemplates. Since the New Deal, the Supreme Court has held that the commerce power enables Congress to regulate: (1) the channels of interstate commerce; (2) the instrumentalities of interstate commerce, and persons and things in interstate commerce; and (3) activities that substantially affect interstate commerce.[11]

The Supreme Court has interpreted this last category so broadly that Congress is allowed to regulate even purely local activities that have only conceivable effects on interstate commerce, even if de minimis or highly attenuated. For example, in one of the most famous cases in constitutional law, the Supreme Court held in 1941 that the power to regulate interstate commerce gave Congress the authority to prohibit an Ohio farmer from growing wheat on his own land for his own consumption because, by doing so, he would “affect” (though imperceptibly) the price of wheat on the interstate market.[12] Since that case, Wickard v. Filburn, lower courts have concluded that virtually no activity is so local that it does not “affect” interstate commerce in some manner as to justify the exercise of federal power over it.

Under Supreme Court precedent, determining whether an activity “affects” interstate commerce is largely a test of the imagination: Can the courts or government lawyers dream up some conceivable connection between an activity and interstate commerce that justifies the exercise of federal power? In holding that the only practical limits on federal power are the limits of the human imagination, the Supreme Court has made clear that its role is not to defend the constitutional structure that the Framers envisioned, but to rationalize the exercise of power that the Constitution does not actually allow. The enormous expansion of federal power since the New Deal is a direct consequence of the judiciary’s failure to confine Congress’ constitutional authority to regulate interstate commerce to actual “commerce . . . among the several States.”

Since the New Deal, the Supreme Court has enforced limits on Congress’ commerce power only twice. In both instances, the invalidated statutes involved non-economic activity—one prohibiting gun possession near schools[13] and the other penalizing violence against women.[14] The Supreme Court struck down these statutes principally because the power to regulate interstate commerce does not encompass the power to regulate non-economic conduct with only the most hypothetical connection to commerce.[15] And herein lies the link to the constitutional debate over the individual mandate.

Congress indisputably has the power to regulate existing interstate economic activity. But if Congress lacks the power under the commerce clause to regulate purely local, non-economic activity—such as gun possession and gender-motivated violence—then it must also lack the power to regulate purely local inactivity.

The individual mandate is unconstitutional because it does not regulate existing economic activity. Instead, it compels economic activity. As the 11th Circuit noted, the “power to regulate commerce, of course, presupposes that something exists to regulate.”[16] If the Supreme Court finds that Congress can compel Americans to engage in economic activity against their will, and then use that coerced economic activity as the basis for further regulation, there is nothing Congress cannot do and the federal government will have acquired the all-encompassing legislative power that the Constitution expressly forbids.

But in the end, no matter how compelling the case for invalidating the individual mandate, the outcome will turn on whether the Supreme Court follows the logic of judicial abdication to its ultimate conclusion—no enforceable limits on the commerce power—or strides back from that precipice, acknowledging that there remain at least some limits on what Congress may enact. As the 11th Circuit noted in striking down the individual mandate as beyond Congress’ power, “the Constitution requires judicial engagement, not judicial abdication.”[17]

 

The Institute’s Amicus Brief:
“Coerced Contract” Is an Oxymoron that the Constitution Does Not Permit

A clear opportunity exists for the Court to practice judicial engagement by examining the real-world legal implications of upholding the mandate, implications that run counter to one of the most fundamental aspects of American common law. These implications are fully developed in the Institute’s brief that offers the Court a key insight: the individual mandate contains a fatal defect that has largely escaped attention. By forcing individuals to enter into contracts to purchase health insurance, the individual mandate violates the most fundamental principle of contract law—to be legally enforceable, a contract must be freely consented to. Upholding the individual mandate would dismantle centuries of well-established contract law by jettisoning the lynchpin of all legally binding contracts—voluntary consent.

It has long been recognized that, for a contract to be valid, the parties must have voluntarily consented to its terms. Indeed at the time the Constitution was ratified in 1789, major contract-law doctrines were grounded in the commonsense notion that a party who fails to fully and freely assent to the material terms of a contract, cannot be bound by it. Consequently, a contract could be voided due to fraud, mistake, duress, or incapacity (such as having a mental disability or being underage)—circumstances which, by definition, involve a lack of meaningful consent by one of the parties. Similarly, coercion renders a contract invalid because it is antithetical to freely given consent.

With the individual mandate, the government is compelling individuals to enter into a contractual relationship under threat of penalty. The individual’s “consent” is being extorted by the government under threat of punishment. Such coerced consent cannot form the basis of a legally valid agreement.

It is impossible to believe that the people’s 1789 grant of power to Congress in the form of the Commerce Clause included the power to destroy the most basic principle of commerce. No one would grant the government this power in a charter of liberty and the founding generation certainly did not.

In light of these well-established principles of contract law, Congress’ power to “regulate Commerce . . . among the several States” cannot be interpreted to include the improper power to force individuals to enter into commercial transactions against their will. To do so would cross a line that will expand government power in unprecedented and unintended ways.

 

The Institute for Justice Team

Clark Neily, an Institute senior attorney, is the director of the Institute for Justice’s Center for Judicial Engagement. Working with him are Senior Attorney Jeff Rowes and Attorney Robert McNamara.

The authors of the Institute’s amicus brief are Elizabeth Price Foley, executive director of IJ’s Florida Chapter, and Senior Attorney Steve Simpson joined on the brief by William H. Mellor, president and general counsel of the Institute for Justice, and Dana Berliner, litigation director.

 

The Institute for Justice: A History of Protecting Individual Rights

Founded in 1991, the Institute for Justice is a nonprofit, public-interest law firm committed to securing greater protection of individual liberty by restoring constitutional limits on the power of government.

Based in Arlington, Va., the Institute for Justice also has state chapters in Arizona, Florida, Minnesota, Texas and Washington, as well as the Clinic on Entrepreneurship at the University of Chicago Law School.

 

For more information, contact:

John E. Kramer
Vice President for Communications
Institute for Justice
901 Glebe Road, Suite 900
Arlington, VA 22207
jkramer@ij.org

(703) 682-9320 ext. 205



[1] Pub. L. No. 111-148, 124 Stat. 119.

[2] 26 U.S.C.A. §5000A.

[3] U.S. Const. art. I, § 8, cl. 3.

[4] Dep’t of Health and Human Servs. v. Florida, No. 11-398, Brief for Petitioners (Minimum Coverage Provision.

[5] Dep’t of Health and Human Servs. v. Florida, No. 11-398, Brief for Petitioners (Minimum Coverage Provision) at 22 (“[T]he federal government is one of enumerated powers.”); Brief for Private Respondents on the Individual Mandate at 11 (“[W]hile the powers that remain in the State governments are numerous and indefinite, the powers delegated to the federal government are few and defined.”) (internal quotations omitted); Brief for State Respondents on the Minimum Coverage Provision at 18 (“It is common ground that the powers of the federal government “are few and defined” and those of the States “numerous and infinite.”) (citation omitted).

[6] The Federalist No. 45 (James Madison).

[7] The Federalist No. 78 (Alexander Hamilton) (“Limitations [on legislative authority] can be preserved in practice no other way than through the medium of courts of justice, whose duty it must be to declare all acts contrary to the manifest tenor of the Constitution void. Without this, all the reservations of particular rights or privileges would amount to nothing.”).

[8] McCulloch v. Maryland, 17 U.S. 316, 423 (1819).

[9] The Federalist No. 78 (Alexander Hamilton).

[10] Barnett, Randy E., Restoring the Lost Constitution: The Presumption of Liberty (2004).

[11] See Gonzales v. Raich, 545 U.S. 1, 16-17 (2005).

[12] Wickard v. Filburn, 317 U.S. 111 (1942). See also Gonzales, 545 U.S. at 26-33; id. at 40 (Scalia, J., concurring) (“marijuana that is grown at home and possessed for personal use is never more than an instant from the interstate market”).

[13] United States v. Lopez, 514 U.S. 549 (1995).

[14] United States v. Morrison, 529 U.S. 598 (2000).

[15] With the Supreme Court’s 2005 decision in [[Raich]], holding that the purely intrastate, non-commercial growth and consumption of marijuana for medical purposes can be banned via the commerce clause, most legal commentators view the outcomes in Lopez and Morrison as anomalies rather than foundational precedent for a broader trend.

[16] Florida v. U.S. Dep’t of Health and Human Servs., 648 F.3d 1235, 1285 (11th Cir. 2011).

[17] Id. at 1284.


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