The Case against President Obama's Health Care Reform: A Primer for Non Lawyers, Cato White Paper...

8/7/2019 The Case against President Obama's Health Care Reform: A Primer for Non Lawyers, Cato White Paper No. 32

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Copyright 2011 by the Cato Institute.

All rights reserved.

Cover design by Jon Meyers.

Printed in the United States of America.

Cato InstItute

1000 Massachusetts Ave., N.W.

Washington, D.C., 20001

www.cato.org


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Contents

Executive Summary 1

Introduction 3

The Individual Mandate 3

The Taxing Power 3

Backdoor Regulation 4

A Penalty, Not a Tax 4

Income, Excise, and Direct Taxes 4

Of Credits and Debits 5

The Commerce Clause 5

Wickard v. Filburn 5

The Modern Framework 6

Compelled Activity 6

Other Mandates 7

Timing Decisions 7

The Necessary and Proper Clause 8

Cost Shifting and the Uninsured 8

Preexisting Conditions 9

The Meaning of Necessary 9

The Meaning of Proper 10

What Should Congress Have Done? 11

Notes 11


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Biography

Multiple challenges to President Obamashealth care reform are percolating through thefederal courts. Soon the Supreme Court will

be asked to weigh in on perhaps the most im-portant question of the postNew Deal era: Arethere any remaining limits on the breadth andscope of federal power?

Reinforced by decades of Court decisionsthat have gutted the Framers original concep-tion of limited government, the Obama ad-ministration has embraced an unprecedentedexpansion of centralized control. This paperaddresses the Patient Protection and Afford-able Care Act, which includes a mandate thatindividuals either purchase a government-pre-

scribed health insurance policy or pay a penalty.The Department of Health and Human Ser-

vices has asserted three constitutional provi-sions as sources of authority for the mandatethe Taxing Power, the Commerce Clause, and

the Necessary and Proper Clause. Each of thosepurported sources is deficient.

First, the penalty for not buying health insur-

ance is not a tax. Even if the penalty were a tax,it would fail the constitutional requirements forincome, excise, or direct taxes. Second, the powerto regulate interstate commerce extends only toeconomic activities; it does not permit Congressto compel such activities in order to regulatethem. Third, the mandate is not necessary; in-deed, it is merely a means to circumvent prob-lems that would not exist if not for PPACA itself.Nor is the mandate proper; it cannot be recon-ciled with the Framers original design for a lim-ited federal government of enumerated powers.

An essential aspect of liberty is the freedomnot to participate. PPACAs directive that Amer-icans buy an unwanted product from a privatecompany debases individual liberty. And itsunconstitutional.

Executive Summary

Robert A. Levy is chairman of the Cato Institute. He is the author ofShakedown: How Corporations,Government, and Trial Lawyers Abuse the Judicial Process (2004) and coauthor of The Dirty Dozen:How 12 Supreme Court Cases Radically Expanded Government and Eroded Freedom (2008).


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CBO wrote,A mandaterequiring allindividuals

to purchasehealth insurancewould be anunprecedentedform of federalaction.

Introduction

The Supreme Court will soon get a crackat President Obamas most important piece

of domestic legislation. Three lower courtsin Virginia, Michigan, and Washington, D.C.1

have ruled that the Patient Protection and Affordable Care Act (PPACA)2 is constitu-tional. Two other courtsin Florida and asecond district in Virginia3disagreed. Ap-peals are pending. Oral argument in the Vir-ginia cases is scheduled for May 10 before theU.S. Court of Appeals for the Fourth Circuit.The Michigan case will be heard on June 1before the Sixth Circuit, and the Florida casewill be heard on June 8 before the Eleventh

Circuit. A momentous Supreme Court deci-sion on the limits of congressional power islikely by June 2012, or earlier if the Court un-expectedly grants Virginias motion for expe-dited review, which would skip the intermedi-ate appeals process.

The central issue is whether there is con-stitutional authorization for Congress tohave enacted PPACAmore specifically, themandate in PPACA that individuals mustacquire prescribed health insurance or paya penalty for not doing so. Proponents of

PPACA have cited the Taxing Power, theCommerce Clause, and the Necessary andProper Clause as their constitutional pedi-grees. Opponents dispute each of those ar-guments. For a better understanding of theconstitutional complexities, here is a primeron the case against President Obamas healthcare reform.

The Individual Mandate

The health insurance mandate is the cen-terpiece of PPACA. Its an unprecedentedlegal requirement that Americans purchasean approved policy, under penalty of law.Without the mandate, said President Obamato a joint session of Congress, the rest of thelegislation falls apart. Thats because PPACAbars insurers from denying coverage for pre-

existing conditionsa step meant princi-pally to address loss of coverage when a sickemployee changes jobs. Predictably, there areunintended consequences. Consumers arenot ignorant. If they know an insurer cannot

deny coverage for preexisting conditions,rational consumers will wait until they aresick or injured before buying a policy. Thewaiting game means insurers wont collectpremiums from healthy people to cover theclaims of unhealthy people. PPACAs solu-tion: Dont let consumers wait until theyresick; require everyone to buy insurance now,and impose a penalty on anyone who de-clines.

Prior to 2010, a federal mandate to pur-chase a product from a private company had

never been tested in the courts. When onewas last proposed in the context of Hillary-care in 1994, the Congressional Budget Of-fice wrote: A mandate requiring all indi-viduals to purchase health insurance wouldbe an unprecedented form of federal action.The government has never required peopleto buy any good or service as a condition oflawful residence in the United States.4 Yetthat is precisely what PPACA will dounlessand until the Supreme Court says otherwise.

The Taxing Power

Art. I, sec. 8, cl. 1: The Congress shallhave Power To lay and collect Taxes. . . [to] provide for the . . . generalWelfare of the United States.

The federal governments first line of ar-gument is that the mandate is authorizedunder Congresss Taxing Power. Contraryto modern readings, that clause does not

grant Congress an independent power to taxfor the general welfare. If it did, there wouldbe no need to enumerate any other powers.Rather, the clause authorizes Congress toraise revenue in support of the specificallyenumerated powers that follow it. And thegeneralwelfare restriction precludes Congressfrom taxing to provide forspecialinterests.


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Contrary tomodern readings,

the TaxingPower does notgrant Congress

an independentpower to tax

for the generalwelfare.

All the same, the Supreme Court inHel-vering v. Davis (1937)5 established that taxescan be levied for just about any purposethat allegedly serves the general welfare. According to the Obama administration,

that would include subsidizing insurers sothey can afford to cover preexisting condi-tions. To their credit, none of the five fed-eral courts that have ruled on PPACA hasembraced the Taxing Power logic.

Backdoor RegulationChallengers offered three responses to the

administrations Taxing-Power justification.First, Congress cannot use the Taxing Poweras a backdoor means of regulating, unlessthe regulation is authorized elsewhere in the

Constitution (see Bailey v. Drexel Furniture[1922])6. The purpose of a tax is to generaterevenue. By contrast, the insurance mandateexists solely to coerce people into obtaininghealthcare coverage. If the mandate workedperfectly, it would raise no revenue.

But U.S. district judge Roger Vinson re-jected that claim of backdoor regulation.7 Although he denied the federal govern-ments motion to dismiss a lawsuit by Flor-idajoined by 25 other states, the NationalFederation of Independent Businesses, and

two individual plaintiffsVinson noted thatcourts no longer draw a sharp distinctionbetween regulatory and revenue-raising pur-poses. In some sense, he declared, every taxhas a regulatory component; the mandate isnot unconstitutional merely because it regu-lates.

A Penalty, Not a TaxThe challengers fared considerably bet-

ter in their second response to the govern-ments invocation of the Taxing Power. The

assessment is not a tax, they asserted, but apenalty. Judge Vinson agreed. He pointedout that Congress had written tax in anearlier version of PPACA, but changed theword to penalty in the final version. More-over, the word tax is used elsewhere in thebill to describe other sources of revenue; sothe drafters of the legislation knew how to

specify a tax when thats what they meant.In addition, PPACA cited not the TaxingPower but the Commerce Clause as its con-stitutional authority. The bill even barredthe IRS from using its ordinary enforce-

ment methods to collect the penalty, andthe dollars supposedly to be collected werenot counted in revenue estimates from theCongressional Budget Office. ApparentlyCongress did not want the scrutiny thatattaches to multibillion-dollar tax increas-esespecially after President Obama hadrepeatedly called the assessment a penaltyand reminded voters of his promise not toimpose any new taxes on the middle class.

On the basis of that record, Judge Vinsonwas justifiably reluctant to override clear con-

gressional intent. He concluded that penal-ty was not just a label, but was indicative ofa nontax legislative purpose. In December, amonth before the Vinson opinion, a secondfederal judge, Henry Hudson, reached thesame conclusion, upholding Virginias chal-lenge to PPACA. He characterized revenuegeneration as a transparent afterthoughtand extraneous to any tax need.8 Plainlythe mandate imposes a penalty, not a tax.

Income, Excise, and Direct Taxes

Assume, however, the Supreme Court ul-timately disagrees and finds that the penaltyfor not purchasing health insurance is indeeda tax. Nevertheless, say opponents of PPACAthe tax would be unconstitutional. Theyunderscore that taxes are of three typesincome, excise, or direct. Each type mustmeet specified constitutional constraintsBecause the mandate penalty under PPACAdoes not satisfy any of the constraints, it isnot a valid tax.

Income taxes, authorized by the Sixteenth

Amendment, must (by definition) be triggered by income. Yet the mandate penalty istriggered by the nonpurchase of insuranceExcept for an exemption available to low-income families, the amount of the penaltydepends on age, family size, geographic loca-tion, and smoking status. So the penalty isnot an income tax.


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Plainly put, themandate cannotbe justifiedunder CongressPower To layand collect Taxe. . . [to] providefor the . . .general Welfareof the UnitedStates.

Excise taxes are assessed on selected trans-actions. Because the penalty arises from anontransaction, perhaps it qualifies as a reverse excise tax. If so, it has to be uniformacross the country (U.S. Const., Art. I, sec. 8).

But the penalty varies by location, so it can-not be a constitutional excise tax.Direct taxes are assessed on persons or

their property. Because the penalty is im-posed on nonownership of property, per-haps it could be classified as a reverse directtax. But direct taxes must be apportionedamong the states by population (U.S. Const., Art. I, sec. 2). The mandate penalty is as-sessed on individuals without regard to anystates population. Hence, it is not a lawfuldirect tax.

Of Credits and DebitsDespite that, the administration notes

that PPACA would have raised no eyebrowsif the mandate had been structured as a taxcredit for those who purchase health insur-ance rather than a debit for those who donot. After all, the Internal Revenue Codeis replete with credits that incentivize vari-ous behaviors. Why not a credit for buyinghealth insurance? Any person obtaining apolicy would pay less tax than a person who

did notprecisely the effect of PPACAs pen-alty.

The reality, however, is that Congress de-cided on a debit, not a credit. If Congress hadenacted a credit, it would have lessened theimpact of a preexisting, (presumably) legiti-mate tax thus implicating the Constitutiononly to ensure that favored parties would nothave to relinquish key rights as quid pro quo,and disfavored parties would not be subjectto invidious or otherwise unreasonable dis-crimination. Furthermore, because tax cred-

its reduce government revenue, some budgetanalysts characterize them as tax expendi-tures. If one subscribes to the notion thatcredits are equivalent to expenditures, thenthey would be authorized under Congressspower to spend money.

Conversely, instead of reducing revenue,tax debits raise money and must therefore

be authorized under the Taxing Power. Asnoted, the Taxing Power is subject to con-straints not applicable to spendingthatis, taxes must be income, excise, or direct;and each tax, depending on its type, must

respectively be triggered by income, be geo-graphically uniform, or be apportioned bypopulation. The penalty for non-purchaseof health insurance does not qualify as anyof the three types of tax.

Plainly put, the mandate cannot be justi-fied under Congresss Power To lay and col-lect Taxes . . . [to] provide for the . . . generalWelfare of the United States. And that leadsto the presidents second asserted sourceof constitutional authority: the power Toregulate Commerce . . . among the several

States.

The Commerce Clause

Art. I, sec. 8, cl. 3: Congress shall havePower . . . To regulate Commerce . . .among the several States.

The Commerce Power was not designedto provide Congress open-ended authorityto regulate anything and everything that af-

fects commerce. Instead, the Framers aimedat creating a national free-trade zone, put-ting an end to the interstate protectionismallowed under the Articles of Confedera-tion. To ensure free trade among the states,Congress was given the power to regulate, ormake regular, such commerce. If the clausehad been understood to grant Congress thelimitless regulatory power it now exercises,the Constitution would never have beenratified. Yet, in recent decades, the courtshave allowed Congress to drift far from the

original meaning of the Commerce Clause,regulating behaviors that are neither inter-state nor commerce. That regrettable devel-opment was rooted in the New Deal.

Wickard v. Filburn

The infamous 1942 case of Wickard v.Filburn laid the groundwork for a vastly


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The CommercePower was not

designed toprovide Congress

open-endedauthority to

regulate anythingand everything

that affectscommerce.

expanded regulatory state.9 Filburn grewwheat primarily for consumption by hisfamily and farm animals. During the 1930s,to boost depressed prices of agriculturalproducts, the Roosevelt administration de-

cided to cut wheat production. Accordingly,the federal government ordered Filburn togrow fewer bushels. When Filburn asked of-ficials for their constitutional authority, thegovernment cited the power to regulate in-terstate commerce.

Filburn responded that his farm was en-tirely within a single state and he neitherbought nor sold crops across state lines. Nomatter, held the Supreme Court. By grow-ing his own wheat, Filburn avoided buying. And, if he had not eaten what he grew, he

would have been able to sell what was leftover. Thus, by not buying and not selling,Filburn had an effect on the supply and de-mand for wheatwhich, when considered inthe aggregate, along with the crops of otherfarmers who did the same, undoubtedly im-pacted interstate commerce. That openedthe floodgates through which the regulato-ry state was ready to pourregulating any-thing and everything under the CommerceClause.

The Modern FrameworkStill, could the power to regulate com-

merceproperly defined as the exchangeof goodsconceivably cover a non-economicevent; that is, an event that does not involve growing, mining, manufacturing, buy-ing, selling, distributing, or consuming? Ittook the Supreme Court more than a half-century to clarify the answer to that ques-tion. In United States v. Lopez (1995), the Courtheld that the Commerce Clause does notempower the federal government to crimi-

nalize possession of a gun near a school.10Five years later, in United States v. Morrison,the Court overturned a statute that invokedthe Commerce Clause to grant victims ofgender-motivated violence a right to sue infederal court.11

Those two cases, together with Wickard,yielded this modern framework for inter-

preting the Commerce Clause: Congressmay regulate the exchange of productsthat is, commerceacross state lines, andtransportation linked to such exchangesCongress can also regulate noncommercial

economic acts having a substantial aggre-gate effect on interstate commerce, such asgrowing and consuming wheat in WickardBut Congress may not regulate non-economicacts, such as the mere possession of a guninLopez or a gender-based crime inMorrison

Constitutional originalists insist that therules derived from Wickard andLopez are farmore expansive than the Framers intendedToday, instead of serving as a shield againststate interference with free trade, the Com-merce Power has become a sword wielded

by the federal government in pursuit of aboundless array of regulations. Indeed, if theFramers intended the Commerce Clause tocover any economic act that had a substantialeffect on interstate commerce, why did theyseparately enumerate powers for Congressto coin money, establish post offices, and is-sue patents? Surely, those powers would beredundant and add nothing to the text. Yet,as Chief Justice John Marshall admonishedin Marbury v. Madison (1803), It cannot bepresumed that any clause in the constitution

is intended to be without effect.12

Compelled ActivityNonetheless, thats where we now stand

The federal Commerce Power is indeed ex-pansive. But the individual mandate in PPA-CA stretches still furtherbeyond dictatinghow, when, and under what conditions aproduct may be produced, distributed, ex-changed, or consumed. The mandate actu-ally compels that a transaction occur. Ratherthan merely regulating an economic act that

affects interstate commerce, PPACA com-mands the purchase of a producthealthinsurancethat cannot legally be purchasedacross state lines. Under PPACA, neitheran act nor an interstate market exists to beregulated.

Essentially, the insurance mandate isregulatory bootstrapping of the worst sort


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Instead of servinas a shieldagainst stateinterference withfree trade, theCommerce Powehas become asword wieldedby the federal

governmentin pursuit of aboundless arrayof regulations.

Congress forces someone to engage in com-merce, then proclaims that the activity maybe regulated under the Commerce Clause.If Congress can do that, it can prescribe allmanner of human conduct.

We know, however, that liberty and pervasive government cannot coexist. Even ifCongress can regulate Filburns wheat pro-duction, that does not mean Congress canrequire consumers to purchase bread fromtheir local grocer in order to subsidize wheatgrowers. At least for now, the SupremeCourts tortured Commerce Clause juris-prudence does not reach that far. In JudgeHudsons words: Courts have never extend-ed Commerce Clause powers to compel anindividual to involuntarily enter the stream

of commerce by purchasing a commodity inthe private market.13

The litmus test is economic activity. Amental decision not to buy insurance is nota physical economic act. In that respect, itis no different than a decision not to work.Neither decision can be regulated simplybecause the non-act, if converted into anact, might have an effect on interstate com-merce. As Judge Hudson put it, the subjectmatter must be economic in nature and af-fect interstate commerce, and . . . must involve

activity.14 (Emphasis added.) Thought pro-cesses are not subject to regulation.

Other MandatesDefenders of PPACA respond that courts

have upheld other federal mandates such as jury duty, the military draft, and obtainingguns for militia service. Perhaps so; but thosemandates are encompassed within specificconstitutional provisions. The Sixth andSeventh Amendments guarantee jury trials,which imply a power to select jurors. Article

I, section 8 expressly empowers CongressTo raise and support Armies and providefor . . . arming . . . the Militia. When neces-sary, the Framers knew how to provide an ex-press power, independent of the CommerceClause.

What about state mandates such as in- voluntary community service, compulsory

schooling, and car insurance? First, statesexercise police power and are not subjectto constraints on federal authority in theU.S. Constitution. Second, community ser-vice does not require purchasing a good or

service, and is not imposed by all schoolsespecially private and home schools. Third,compulsory schooling and mandatory carinsurance are designed to protect the rightsof innocent third partieschildren, otherdrivers, and pedestrians. No car owner iscompelled to buy casualty or comprehen-sive insurance that reimburses for injury tohimself or his property. By contrast, PPACAdirects individuals to acquire insurance ontheir own health. Fourth, cars are driven onpublic roads, so the government has some

authority to dictate conditions for use ofthose roads. Fifth, nondrivers are not re-quired to purchase car insurance. Drivingis a voluntary activity, which has associatedresponsibilities. The insurance mandate isnot voluntary and is imposed on everyone.

Timing DecisionsFinally, even if the mandate, considered

in isolation, doesnt regulate economicactivity, PPACA supporters contend thatrequiring health insurance is no different

than requiring advance purchase of healthcare. Nearly everyone ultimately consumeshealth care; and consumption is clearly aneconomic act. Why then, so the argumentgoes, wouldnt the Commerce Clause allowthe federal government to direct that healthcare be purchased now, by obtaining insur-ance, rather than later when the medical billcomes due? In other words, buying healthinsurance is just a timing decision aboutwhen, not whether, to incur medical costs.And if failure to purchase insurance were to

trigger a penalty, it too would be mere tim-ingno different than assessing a penaltylater, on someone who obtains future ser-vices from a hospital or doctor and does notpay the bill.

Judge Vinson was not convinced. Norshould he have been. Virtually all forms ofinsurance represent timing decisionspay-


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The meanschosen under the

Necessary and

Proper Clausemust respect the

Constitutionsstructure and

spirit of limitedgovernment.

ing up front for burial costs, loss of life, dis-ability, supplemental income, credit default,business interruption, and more. Only a fed-eral government of unbounded powers couldmandate that every American insure against

such risks. And while it might be permissibleto penalize an uninsured person who showsup at a hospital or doctors office demand-ing that his expenses be borne by the taxpay-ers, that is not what PPACA does. Instead,PPACA penalizes alluninsured persons, notjust those who seek to be reimbursed by gov-ernment for costs they should have bornethemselves. And PPACA does more than man-date coverage; it also prescribes certain provi-sions that each policy must include. ManyAmericans who prefer to insure using, for ex-

ample, Health Savings Accounts with high de-ductible coverage, will be told by their federaloverseers that such coverage isnt adequate.

Never has the Commerce Clause beenstretched to such lengths. Never could theFramers have envisioned such overweeningfederal power. Thats why proponents ofPPACA had to fashion a fallback position.

The Necessary andProper Clause

Art. I, sec. 8, cl. 18: Congress shallhave Power . . . To make all Laws whichshall be necessary and proper for car-rying into Execution the foregoingPowers.

The Necessary and Proper Clause grantsCongress the means to execute its enumer-ated powers or ends. It adds no new ends.And the chosen means must be both nec-essary and proper: They must respect the

Constitutions structure and spirit of limit-ed government, the dual sovereignty of stateand federal governments, and the rights re-tained by the people.

The Obama administration attempts, un-successfully, to shoehorn the insurance man-date into that framework. Suppose the man-date to buy health insurance does not qualify

as a direct regulation of interstate commerceEven so, the administration argues, the Con-stitution authorizes implicit powers underthe Necessary and Proper Clause. If govern-ment can show that (a) it has Commerce

Clause authority to regulate interstate healthcare, (b) the insurance mandate is necessaryfor Congress to regulate interstate healthcare, and (c) the mandate is a proper meansof doing so, then the courts are unlikely tointervene.

Note that the governments argument isstill premised on its underlying CommerceClause authoritybut over health care, nothealth insurance. Forcing Americans to pur-chase an insurance product they do not wantis ostensibly permissible, but only because

the mandate is a necessary and proper meansof regulating the national health care systemThat assertion is the corollary of two under-lying contentions, both of which are flawed.

Cost Shifting and the UninsuredFirst, the mandate is said to be necessary

because its elimination would perpetuatethe problem of the uninsuredthat is, tax-payers would continue to bear the burdenof uncompensated emergency care. Withoutthe mandate, responsible, insured consum-

ers would have to pay the health costs of ir-responsible, uninsured consumers.

To put that in perspective, the Census Bu-reau reports that roughly 46 million Ameri-cans did not have health insurance at somepoint during 2007. But 10 million were non-citizens, mostly illegal; 14 million either didnot report their Medicaid enrollment to theCensus, or qualified but did not enroll; 10million earned more than $75,000 annuallyand might have preferred to self-insure.15

Even allowing for overlap, there were far few-

er than 46 million uninsured citizens with in-come below $75,000 who were not receivingor eligible to receive Medicaid. And many ofthe uninsured were temporarily without cov-erage because they were starting or switchingjobs. Yes, theres a residual problem, but itsmuch less severe than trumpeted by backersof PPACA.


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Defaults oncredit cardsand mortgagesimpose

substantialcosts onnondefaulters.Can governmencompel creditcard andmortgageinsurance?

Furthermore, as Judge Vinson observed,cost shifting by the uninsured is not inevita-ble. It arises only if a person gets sick, seeksmedical care, cannot pay, and has no accessto funds from family, friends, or private

charities.

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That cost can be more efficientlyaddressed if and when it arises.Uncompensated care in the United States

accounts for $56 billion yearlyabout 2.2percent of our annual $2.5 trillion in nation-al health expenditures.17 Thats meaningful,but scarcely a crisis. Besides, many of the un-insuredthose who are financially able andchoose to self-insurepay their bills withoutimposing costs on anyone. And because theyself-insure, they typically pay higher pricesfor medical caresignificantly more than is

ordinarily reimbursed by public or privateinsurance. Those higher prices subsidize un-healthy insured individuals and offset thetax burden of uncompensated care.

Moreover, an insurance mandate doesnot eliminate the cost of uncompensatedcare. It simply transfers the cost to insur-ance companies, which recoup their outlaysby selling PPACA-mandated policies to in-dividuals who prefer not to own them. Infact, total healthcare costs will increase asmore persons become insured. Thats the

moral hazard predicament. Insured personsdemand more medical services than personswho pay their own way. Higher demandmeans higher prices. Its no accident that thecosts of lasik and cosmetic surgery, whichare not covered by insurance, have declinedwhile the cost of MRIs, which is covered byinsurance, has skyrocketed. PPACAs insur-ance mandate will make matters worse. It isnot only unnecessary; it is undesirable.

Admittedly, nonpurchasers of healthinsurance sometimes impose costs on oth-

ers; but so do nonpurchasers of many oth-er products that could potentially reducehealth costssuch as nutritional foods, exer-cise gear, and preventive medicine. Does thegovernment also claim authority under theNecessary and Proper Clause to coerce pur-chase of those products? If so, why stop withhealth care? Defaults on credit cards and

mortgages surely impose substantial costson nondefaulters. Can government compelcredit card and mortgage insurance?

Preexisting Conditions

The administrations second rationale forinvoking the Necessary and Proper Clause isno more convincing: Namely, it is essentialthat everyone be covered for preexisting con-ditions, and the insurance mandate is key toaccomplishing that goal.

Interestingly, PPACA allotted $5 billion forthe Department of Health and Human Ser-vices to provide stopgap insurance to personswith preexisting conditions until the man-date is effective in 2014. Taxpayers subsidize65 percent of the costs; coverage is extended

to anyone turned down by a single insurancecompany; and premiums vary only by age, nothealth status. From the programs inceptionin July 2010 through January 2011, combinedfederal and state enrollees numbered justover 12,000. Compare that to HHS estimatesof 375,000 enrollees in the first four monthsand 400,000 more each year. That promptedtheWall Street Journalto editorialize that claimsabout a nation of sick indigents who are de-nied insurance may well be bogus. The coun-try likely does not need a multitrillion-dollar

entitlement to help 12,000 people.18

The Meaning of NecessaryIronically, HHS has defended both sides

of this argument. On one hand, the man-date is presumably necessary for purposesof the Necessary and Proper Clause. On theother hand, in its legal briefs, HHS advisedthe courts that the mandate is severablemeaning that PPACA need not be overturnedin its entirety even if the mandate is declaredunconstitutional. Put somewhat differently,

HHS maintains that the mandate can bestripped from the legislation without affect-ing the bulk of its other provisions.

To explain that apparent contradiction,the administration relies on an 1819 SupremeCourt opinion,McCulloch v. Maryland.19 There,Chief Justice John Marshall rejected the com-monplace meaning of necessarythat is,


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The regulationofinactivity is

never necessaryin executing

CongresssCommerce Clause

authority.

required, needed, essentialand broadened itto include all means that are plainly adaptedto achieving a designated objective. Applyingthat expansive standard, Congress decidedthat compulsory health insurance is a reason-

able measure to facilitate coverage of preexist-ing conditions. Thus, pronounces HHS, themandate may not be indispensible, but it isplainly adapted.

Once again, Judge Vinson saw throughthe sophistry: The mandate is artificiallynecessaryrequired only because Congresswent down a particular path that left few ifany alternatives. Vinson wrote: [T]he indi-vidual mandate is actually being used as themeans to avoid the adverse consequences ofthe Act itself [i.e., compulsory coverage of

preexisting conditions]. . . . [T]he more dys-functional the results of the statute are, themore essential or necessary the statutoryfix would be. Under such a rationale, themore harm the statute does, the more powerCongress could assume for itself under theNecessary and Proper Clause.20

The Supreme Court is unlikely to endorsethat rationale. But there is one other, moretechnical legal argument that the Courtshould also consider when it interprets nec-essary as it relates to the Commerce Clause.

Prior cases established two bounds in de-ciding what means could be employed inregulating interstate commerce. First, if anactivity is not commerce and not interstate,its regulation qualifies as necessary only ifthe activity has a substantial effect on in-terstate commerce. Second, if an activity isnon-economic, its regulation falls outsidethe limits of necessary. PPACAs challeng-ers now ask the Court to establish a thirdrestraint: The regulation ofinactivity is nevernecessary in executing Congresss Commerce

Clause authority. That principle is easily ad-ministered by the courts, vital to constrainall-embracing federal power, and crucial tothe Framers original design for limited gov-ernment.

The Meaning of ProperLastly, consider the remaining term in the

Necessary and Proper Clause: the require-ment that a regulation be proper. Heretoo, Chief Justice Marshall set the standardin McCulloch. A regulation is proper if itdoes not violate established rights and is

consistent with the letter and spirit of theconstitution.21 Only a handful of scholarlyarticles have addressed the legal meaning ofproper; but Judge Vinson had no troubleapplying Marshalls guidepost: The individ-ual mandate . . . cannot be reconciled with alimited government of enumerated powersBy definition, it cannot be proper.22

Joseph Story, the renowned constitutional expert, expressed the same sentimentin his 1833 Commentaries: The constitutionof the United States is to receive a reasonable

interpretation of its language, and its pow-ers, keeping in view the objects and purposesfor which those powers were conferred. . . [I]n case the words are susceptible of two dif-ferent senses, the one strict, the other moreenlarged, that should be adopted, which ismost consonant with the apparent objectsand intent of the Constitution.23 Extendingthat test to PPACA, no one could plausiblyargue that the Commerce Power is so elasticas to compel the purchase by every Americanof an unwanted, government-designed prod-

uct from a private company.For a slightly different perspective on

the meaning of proper, recall the Tenth Amendment, which provides that all powers not enumerated and delegated to thenational government are reserved to theStates . . . or to the people. That provisionprotects both state sovereignty and personalsovereignty against federal encroachmentOne aspect of such protection is to bar thefederal government from commandeeringstate legislatures (seeNew York v. United States

[1992])24 and state enforcement authorities(see Printz v. United States [1997])25 to carryout federal programs. Because the Tenth Amendment is neutral as between reserving powers to the states or to the people, itfollows that neither individuals nor statesmay be commandeered. Accordingly, a man-date that coerces individual acts is no more


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PPACAs keyprovisionthe individualinsurance

mandateisunconstitutiona

proper than a mandate that coerces stateacts.

What Should Congress

Have Done?What then should Congress have done

about uninsured consumers and coverageof preexisting conditions, without runningafoul of the Commerce Clause and the Nec-essary and Proper Clause? A number of op-tions were suggested to Congress, but reject-ed. First, expedite competition by allowinginterstate sales of health insurance. Second,encourage the states to reform their medi-cal malpractice laws. Third, eliminate re-

strictions on Health Savings Accounts withhigh-deductible coverage. Fourth, and mostimportant, change the income tax treat-ment of health insurance premiums thatdiscriminates against individual polices infavor of corporate policies.

Medical insurance premiums are mainlypaid by employers, not patients. Because pa-tients do not bargain directly with providersof corporate health insurance, guaranteedrenewable coverage, which would largelyalleviate the problem of preexisting condi-

tions, is not available in the corporate mar-ket. By comparison, individual consumersof term life insurance have no problem ob-taining guaranteed renewable policies.

Our tax code is the culprit. Employeesdo not have to include the cost of employer-provided medical insurance as part of theirtaxable income, and businesses can deductthat cost as an ordinary expense. No equiva-lent deduction is available to individualswho buy their own health insurance. So itsmore economical for each person to obtain

standardized coverage through his employ-er, rather than tailored coverage from aninsurer. In that manner, federal tax policydrives another wedge between the patientand his care provider. Not only is there aninsurance company that pays the doctor orhospital, but also an employer that pays theinsurance company. The net result is that

patients seldom monitor the cost of theirmedical care or their insurance. One solu-tion: Allow patients to deduct the cost ofmedical insurance against their personalincome taxes. That would eliminate the

incentive for employers to pay for healthinsurance and remove the employer fromthe doctor-patient relationship. It wouldencourage consumers to do what they do inother marketsshop around for adequateand fairly priced service.

Those market-based solutions, groundedon individual responsibility, would raise noconstitutional concerns. In contrast, PPACAis grounded on subsidies, dependency, andcompulsion. Most significant, PPACAs keyprovisionthe individual insurance man-

dateis unconstitutional. It is not a tax; itis not interstate commerce; and it is nei-ther necessary nor proper to fix our ailinghealthcare system.

At its core, wrote Judge Hudson in theVirginia case, this dispute is . . . about an in-dividuals right to choose to participate.26In Florida, Judge Vinson put it this way: IfCongress can penalize a passive individualfor failing to engage in commerce, the enu-meration of powers in the Constitutionwould have been in vain.27 That sums it up.

Notes1. Liberty Univ., Inc. v. Geithner, 2010 U.S. Dist.LEXIS 125922 (W.D. Va. 2010); Thomas More

Law Ctr. v. Obama, 720 F. Supp. 2d 882 (D. Mich.2010); Mead v. Holder, 2011 U.S. Dist. LEXIS18592 (D.D.C. 2011).

2. Patient Protection and Affordable Care Act,Pub. L. No. 111-148, 124 Stat. 119 (2010).

3. Florida v. United States HHS, 2011 U.S. Dist.

LEXIS 8822 (D. Fla. 2011); Commonwealth ex rel.Cuccinelli v. Sebelius, 728 F. Supp. 2d 768 (D. Va.2010).

4. Congressional Budget Office, The Budget-ary Treatment of an Individual Mandate to BuyHealth Insurance, August 1994, p. 1, http://www.cbo.gov/ftpdocs/48xx/doc4816/doc38.pdf.

5. Helvering v. Davis, 301 U.S. 619 (1937).


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6. Bailey v. Drexel Furniture Co., 259 U.S. 20(1922).

7. Florida v. United States HHS, 716 F. Supp. 2d1120, 1132 (D. Fla. 2010).

8. Commonwealth ex rel. Cuccinelli v. Sebelius, 728

F. Supp. 2d 768, 786 (D. Va. 2010).

9. Wickard v. Filburn, 317 U.S. 111 (1942).

10. United States v. Lopez, 514 U.S. 549 (1995).

11. United States v. Morrison, 529 U.S. 598 (2000).

12. Marbury v. Madison, 5 U.S. (1 Cranch) 137,174 (1803).

13. Commonwealth ex rel. Cuccinelli v. Sebelius, 728F. Supp. 2d 768, 782 (D. Va. 2010).

14. Commonwealth ex rel. Cuccinelli v. Sebelius, 728

F. Supp. 2d 768, 781 (D. Va. 2010).

15. Sally C. Pipes, The Top Ten Myths of Amer-ican Health Care, Pacific Research Institute,October 2008, pp. 3140, http://www.pacificresearch.org/docLib/20081020_Top_Ten_Myths.pdf.

16. Florida v. United States HHS, 2011 U.S. Dist.LEXIS 8822, *93 (D. Fla. 2011).

17. Jack Hadley, et al., Covering the Uninsuredin 2008: Current Costs, Sources of Payment,and Incremental Costs, Health Affairs 27, no. 5

(2008): w399-w415, http://content.healthaffairsorg/content/27/5/w399.abstract.

18. Editorial, The 8,011-Person Crisis: Obamacares Pre-existing Condition Program Is aBust, Wall Street Journal, November 12, 2010Note: Through October 31, 2010, 8,011 per-

sons had enrolled for the preexisting conditionprogram. Three months later, as noted in thetext above, the number of enrollees had risen to12,000a trivial increase of 1,330 per month.

19. McCulloch v. Maryland, 17 U.S. 316 (1819).

20. Florida v. United States HHS, 2011 U.S. DistLEXIS 8822, *11011 (D. Fla. 2011).

21. McCulloch v. Maryland, 17 U.S. 316, 421(1819).


23. Joseph Story, 1 Commentariesonthe Con-stitution of the united states 404 (BostonHilliard, Gray, & Co. 1833).

24. New York v. United States, 505 U.S. 144 (1992)

25. Printz v. United States , 521 U.S. 898 (1997).

26. Commonwealth ex rel. Cuccinelli v. Sebelius, 728F. Supp. 2d 768, 788 (D. Va. 2010).



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