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Friday, August 12, 2011

11th Circuit Court Healthcare Ruling

They were prolix. This is the Atlanta district and the outcome was suspected. Probably next the government will appeal to have the case heard en banc (larger group of justices). I would assume that will be granted. If the decision is the same, the SC is pretty well forced to take the case.

The CBO memo referenced in the majority opinion is here. It dates from 1994, because it was written during the HilaryCare era.

This ruling surprised me a great deal; it is actually more decisive and absolute than the Vinson decision. One change occurred in the government's argument - this time they attempted to define a limit on Congressional authority providing the individual mandate were to be judged a constitutional exercise of the Commerce Clause power. The majority rejected their argument.

The majority of two also rejected the idea that cost-shifting from uninsured individuals would be meaningfully redressed by the law, correctly noting that the majority of the cost-shifting would either be picked up by enhanced Medicaid rolls or not be addressed at all, since illegal residents are exempted from the requirements. (Surely this is the first time in history Congress has attempted to impose more obligations upon the law-abiding?)

What the court didn't note is that the majority of the cost-shifting comes from those insured under government programs already, but it did note that the expectations were for insurance premiums to rise instead of falling.

Beginning on page 100! the majority gets down to the business of deciding the Commerce/Necessary and Proper constitutionality questions.

Regarding the Necessary and Proper issue, start at about page 93. These two justices start with Comstock's five-pronged test:
The majority opinion enumerated five “considerations” that supported the statute’s constitutional validity: “(1) the breadth of the Necessary and Proper Clause, (2) the long history of federal involvement in this arena, (3) the sound reasons for the statute’s enactment in light of the Government’s custodial interest in safeguarding the public from dangers posed by those in federal custody, (4) the statute’s accommodation of state interests, and (5) the statute’s narrow scope.” Comstock, 560 U.S. at __, 130 S. Ct. at 1965.
On page 98 they make a bid for Justice Kennedy by invoking his Comstock worries over rational basis:
Justice Kennedy’s primary disagreement with the majority concerned its application of a “means-ends rationality” test. He advised that “[t]he terms ‘rationally related’ and ‘rational basis’ must be employed with care, particularly if either is to be used as a stand-alone test.” Id. at __, 130 S. Ct. at 1966 (Kennedy, J., concurring). Justice Kennedy observed that the phrase “rational basis” is typically employed in Due Process Clause contexts, where the Court adopts a very deferential review of congressional acts. Id. Under the Lee Optical test applied in such due process settings, the Court merely asks whether “‘it might be thought that the particular legislative measure was a rational way to correct’” an evil. Id. (quoting Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 487–88, 75 S. Ct. 461, 464 (1955)). By contrast, Justice Kennedy asserted, “under the Necessary and Proper Clause, application of a ‘rational basis’ test should be at least as exacting as it has been in the Commerce Clause cases, if not more so.” Id.
What is interesting about the Commerce Clause analysis is the sweeping nature of the rejection. These two justices do not find the distinction between activity (engaging in commerce) and non-activity meaningful. Instead they stake out a position which can best be described as "if the exercise of this power is so broad as to fundamentally change the rules of the game and arrogate all power to the federal government, it can't be constitutional." They flag this right up front with an SC quote:
It is because of the breadth and depth of this power that even when the Supreme Court has blessed Congress’s most expansive invocations of the Commerce Clause, it has done so with a word of warning: “Undoubtedly the scope of this power must be considered in the light of our dual system of government and may not be extended so as to embrace effects upon interstate commerce so indirect and remote that to embrace them, in view of our complex society, would effectually obliterate the distinction between what is national and what is local and create a completely centralized government.”
And now the justices in question:
Therefore, in determining if a congressional action is within the limits of the Commerce Clause, we must look not only to the action itself but also its implications for our constitutional structure. See Lopez, 514 U.S. at 563–68, 115 S. Ct. at 1632–34. While these structural limitations are often discussed in terms of federalism, their ultimate goal is the protection of individual liberty.
There are some pages of complimenting the SC's wisdom in never adopting a formulaic test or definition of commerce under the Commerce Clause. Some may consider this pure flattery; I would view it as an attempt to guide the current court's attention away from the Raich mindset back toward the Morrison and Lopez mindset.

Then we settle down to the meat (pg 113):
Every day, Americans decide what products to buy, where to invest or save, and how to pay for future contingencies such as their retirement, their children’s education, and their health care. The government contends that embedded in the Commerce Clause is the power to override these ordinary decisions and redirect those funds to other purposes. Under this theory, because Americans have money to spend and must inevitably make decisions on where to spend it, the Commerce Clause gives Congress the power to direct and compel an individual’s spending in order to further its overarching regulatory goals, such as reducing the number of uninsureds and the amount of uncompensated health care.
They point out that the unprecedented nature of the action is not favorable, because it is indeed attractive but yet it has never been done. They quote the SC:
As the Supreme Court has noted, “the utter lack of statutes imposing obligations on the States’ executive (notwithstanding the attractiveness of that course to Congress), suggests an assumed absence of such power.” Printz, 521 U.S. at 907–08, 117 S. Ct. at 2371; see also Va. Office for Prot. & Advocacy v. Stewart, 563 U.S. __, __, 131 S. Ct. 1632, 1641 (2011) (“Lack of historical precedent can indicate a constitutional infirmity.”); Alden v. Maine, 527 U.S. 706, 743–44, 119 S. Ct. 2240, 2261 (1999).
See page 119 and 120. On page 124, after having discussed Wickard and aggregation:
The question before us is whether Congress may regulate individuals outside the stream of commerce, on the theory that those “economic and financial decisions” to avoid commerce themselves substantially affect interstate commerce. Applying aggregation principles to an individual’s decision not to purchase a product would expand the substantial effects doctrine to one of unlimited scope. Given the economic reality of our national marketplace, any person’s decision not to purchase a good would, when aggregated, substantially affect interstate commerce in that good. 95 From a doctrinal standpoint, we see no way to cabin the government’s theory only to decisions not to purchase health insurance. If an individual’s mere decision not to purchase insurance were subject to Wickard’s aggregation principle, we are unable to conceive of any product whose purchase Congress could not mandate under this line of argument.
I can't either. Page 130:
The government’s position amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life.
Page 137:
Ultimately, the government’s struggle to articulate cognizable, judicially administrable limiting principles only reiterates the conclusion we reach today: there are none.
See page 139, in which the court points out the bogosity of the government's argument about cost-shifting as a unique factor.

On page 147 they address the federalism issue, noting correctly that the states have traditionally regulated their own insurance markets. This is the weakest line of reasoning. They know it, but amass detail and finally end that line of argument on page 157 which brings us to the Necessary and Proper issue.

On page 158:
On this facial versus as-applied point, the Raich Court declared that “the statutory challenges at issue in [Lopez and Morrison] were markedly different from the challenge respondents pursue in the case at hand. Here, respondents ask us to excise individual applications of a concededly valid statutory scheme. In contrast, in both Lopez and Morrison, the parties asserted that a particular statute or provision fell outside Congress’ commerce power in its entirety.” Id. at 23, 125 S. Ct. at 2209. The Court deemed this facial versus as-applied distinction “pivotal,” as “we have often reiterated that ‘[w]here the class of activities is regulated and that class is within the reach of federal power, the courts have no power to excise, as trivial, individual instances of the class.’” Id. (quoting Perez, 402 U.S. at 154, 91 S. Ct. at 1361). The plaintiffs here, of course, are not asking for courts to excise, as trivial, individual instances of a class—rather, the plaintiffs contend the mandate to purchase insurance from a private company falls outside of Congress’s commerce power in its entirety.
This is the real issue to be decided:
At best, the individual mandate is designed not to enable the execution of the Act’s regulations, but to counteract the significant regulatory costs on insurance companies and adverse consequences stemming from the fully executed reforms. That may be a relevant political consideration, but it does not convert an unconstitutional regulation (of an individual’s decision to forego purchasing an expensive product) into a constitutional means to ameliorate adverse cost consequences on private insurance companies engendered by Congress’s broader regulatory reform of their health insurance products.128
I believe the interpretation of the necessary and proper clause as allowing exercises of power which otherwise clearly violate the constitutional structure is obviously flawed.

For example, what if Congress added the provision in the the health care reform that since a woman having more than five lifetime sexual partners greatly increases the odds of STDs and associated health complications, women having more than five lifetime sexual partners would henceforth be charged an excise tax on their tax returns? Furthermore, that since anal sex is associated with much higher rates of structural dysfunction as well serious infectious diseases, it will cost those engaging in butt sex an extra $2,000 each year on their tax returns.

The findings are true, and the measures are rationally related to holding down health care insurance premiums. We will pause for a moment of awed silence while contemplating enforcement measures - perhaps the IRS could offer a $500 reward to those wishing to report a "tax cheat" for one or the other offense.

The SC however would find these provisions of the law unconstitutional, given the penumbras and emanations of cases such as Casey and Lawrence. The Supreme Court has found in the Constitution the principles that who individuals choose as sexual partners and the activities in which persons engage with said partners are deeply personal matters involving a fundamental liberty not to be regulated by government.

True, the Supreme Court has never said that Congress can't pass a law mandating that individuals buy dildoes, condoms, or shares of stock in which various Congress Critters have substantial holdings and disappointing profits, or the shares of companies that have given substantial donations to Congress Critter campaign funds. But this does not make such laws constitutional.

For example, consider the banks. Suppose Congress needed to engage in yet another TARP campaign, but found that for some puzzling reason China really didn't want to buy another trillion dollars worth of Treasuries? Such a provision might be one of the few ways that Congress could bail out the nation's financial system. This isn't really farfetched - once Congress realizes it has the power, it is likely that it will take to spending taxpayers' money by fiat with great enthusiasm.

Yet the mere fact that the Supreme Court has never said that Congress cannot mandate that taxpayers purchase bank stocks obviously does not make it constitutional for Congress to do so, nor does it become constitutional under the rubric of the Necessary and Proper Clause pursuant to Commerce Clause powers. There is no doubt that Congress has the authority to regulate the nation's banking and financial system, yet I do not think the Supreme Court would have found a law mandating that individuals with AGIs greater than 30K must buy at least 5 shares of Bear Stearns stock each month or pay a penalty of an equivalent amount on their tax returns constitutional. The justices wouldn't have liked the investment themselves.

In the end, this will be decided by the Supreme Court, which has government health insurance and thus might have been deemed by Congress to be more compliant with its desires on this issue. But even if the Supreme Court gives it a thumbs up, I believe the voters will not. The US Constitution contains provision for constitutional amendments, and the crazed Congress that voters are now contemplating will not be trusted with this power.

Congress clearly has the power to levy a tax upon households and individuals, and to use the proceeds to buy those uninsured individuals insurance (of a sort) from private companies. But it did not employ that power in this law. Congress has the power to levy a tax and to set up some sort of nationalized health system, but it did not employ that power either. The supporters of the constitutionality of this bill ignore a meaningful distinction; this blurring of the public/private line does have constitutional implications, and it does fundamentally change the structure of government.

Here I will refer you back to the CBO memo linked above. It might seem tangential, but it is not. Passing laws that mandate private expenditures for public purposes completely obscures the line between government and "everything else", and it does so without accountability or right of appeal under law, because it splits the categories of those impacted under the law, it hides the expenditures made under such laws, and it shifts the axis of negotiation (a forced purchase must surely involve great need for negotiation) from a unified government to individuals and a number of private companies.

Therefore, if I were arguing this case before the SC, I would argue it under due process and equal protection grounds, and advance the claim that such a scheme must inevitably deny masses of individuals equal treatment before the law and an effective avenue of redress. Great power can never be safely combined with evasions of accountability, and an evasion of accountability was largely what Congress sought to achieve with the healthcare reform law/ Some parts of the bill are fiscally impossible to implement, but the individual mandate is by far the most pernicious aspect.

Congress has the power to set up a nationalized health system, and to tax us all to fund it. But it did not use that power. Congress has the power to tax individuals and households and use the proceeds to buy uninsured individuals health coverage from private companies, but it did not use that power. I don't think Congress has the power to tax uninsured individuals and NOT use the proceeds to secure them insurance, and I am certain that if Congress has the power to tax an uninsured individual $2,000 for not having insurance it has the power to tax an uninsured individual $10,000 for not having insurance. The power to tax is the power to compel, and used in this way, the power to tax amounts to complete destruction of liberty and representation.

I do believe that the "tax" is in fact a penalty, but regardless, the regulatory structure which Congress has here erected is both so viciously incompetent and yet so cleverly splintered that it, in effect, destroys the fundamental nature of representative government under the Constitution.

In the end, I believe the SC will strike this provision, and I believe it will do so because it fears being overridden by the population and it would correctly view that as creating a constitutional crisis.

Thanks, MOM, for all the work done on this. It puts things into proper perspective ala legal maneuvering.

As one pundit (Instapundit, I think) put it, "If the individual mandate stands, the next step will be mandating the purchase of all electric autos."
Going through the numbers, does anyone know if the % paid of the uninsured's bills is percent of total charges?

This is a very interesting point because total charges are defined as three times what Medicare will pay for them. All insurance companies have contracts with the hospitals and providers to pay only what Medicare will pay. Therefore, when I'm running reports, we actually only expect to get 33% of our charges back as payments and write off the rest as contractual adjustments. If their numbers for percent the uninsured pay are coming from the same metric, then we're in bigger trouble than most people realize.

Side note: If you're ever without insurance and can pay up front in the emergency room, you can usually bargain down about 15% of the costs. Little known but very valuable fact.
Jimmy--I wouldn't bet on an electric car mandate. I would bet on mandated purchases of GM and Chrysler vehicles, though. Hey, the state has a "compelling interest" in the success of those companies, after all.

L'etat, c'est l'AFL-CIO.
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