Archives for June 2012

PPACA: Dissent Analysis

This post was authored by Wolters Kluwer editors Danielle Capilla & Tracy Pfeiffer.

As we reported yesterday in our coverage of the majority opinion, the United States Supreme Court voted 5-4 to uphold the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). The four dissenters included Justices Scalia, Kennedy, Thomas and Alito.

In the opinion’s introduction, the dissenting justices agreed that PPACA should be struck down in its entirety. They found that Congress exceed its power through both the individual mandate to purchase health insurance and its denial of Medicaid funding to states that do not consent to the expansion of their Medicaid programs. As those two elements are both central to the operation of PPACA as a whole, the dissenters believe that the remaining provisions would not have been enacted without, and were therefore inseverable from, those elements.

Following that conclusion, the dissenters focused on each individual issue in turn:

Individual Mandate

Commerce Clause

Regarding the government’s argument that Congress has the power impose an individual mandate to purchase health insurance through the Commerce Clause, the dissenters appear aligned with the reasoning of the majority opinion. Dissenting justices expressed the same concerns that it is unprecedented for the Court to interpret the regulation of commerce as compelling the participation of citizens in commercial behavior in which they were not engaged in prior. To “regulate” is to “direct the manner of something,” not to bring about that something’s existence.

The government’s contention that the Congress’s commerce power applies to young, health individuals who will participate in the insurance market in the future was not persuasive. Congress cannot define participants in the market by predicting their future participation later in their lifetime. Such an interpretation would have “no principled limits” as a premise for the exercise of federal power.

 Necessary and Proper Clause

Also like the majority, the dissenters reject the government’s contention that the mandate is “necessary and proper” to its insurance reform scheme. Precedent cases illustrate that the scope of the Necessary and Proper Clause is exceeded when it “violates the background of principle of enumerated (and hence limited) federal power.”

The dissenting justices disagreed that forcing young, healthy individuals to participate in an insurance market that they choose not to participate in is not the proper means to achieve the government’s goal of reducing premiums while ensuring the profitability of health insurers. The justices even suggested alternative means such as imposing a surcharge on the uninsured when they do elect to buy health insurance or offer an income tax credit for buying health care coverage that the uninsured will not receive.

 Taxing Power

Unlike the majority, the dissenters take issue with interpreting as a tax what is referred to in PPACA’s text as a “penalty.” They maintain that labels do in fact matter, and that it must be considered one or the other for constitutional purposes, as has been the case in precedents. They claim the issue that must be decided by the Court is not whether the government had the power to frame the mandate as a tax, but whether it actually did so.

While the Court should attempt to read legislation as constitutional, it cannot judicially rewrite a statute to “the point of perverting” its purpose. The dissenters concluded that Congress plainly intended to enact a “mandate that individuals maintain minimum essential coverage, enforced by a penalty,” not a tax. The Court has never found that a penalty imposed on citizens for violation of a law is an exercise of the constitutional taxing power, particularly when the text repeatedly (18 times in PPACA) refers to it as a “penalty.”

The dissenters bolstered their position that PPACA imposes a penalty, not a simple tax, by the fact that no citizen is exempt from the mandate, although some are exempt from the penalty. Additionally, the absence of a “scienter requirement” was not persuasive to the justices that the penalty was a tax as penalties are often based on strict-liability offenses. Finally, the location of the mandate and penalty provisions are in Title I of PPACA, its “operating core,” not in Title IX “Revenue Provisions” where taxes would be listed.

The Anti-Injunction Act

Having found that the mandate’s penalty is not a tax, the dissenters held that the suit was not barred by the Anti-Injunction Act for having “the purpose of restraining the assessment or collection of any tax.” They referred to the majority’s definition of the same penalty as a tax for constitutional purposes, but not a tax for Anti-Injunction Act purposes, as “verbal wizardry” carried “too far, deep into the forbidden land of the sophists.”

Medicaid Expansion

As discussed in the majority opinion, the issue at hand was whether Congress exceeded its authority to require states to expand their Medicaid coverage to qualifying individuals as defined by PPACA. Specifically, by 2014, states would have to cover all individuals under the age of 65 with income below 133 percent of the federal poverty limit. Furthermore, everyone with Medicaid coverage would be entitled to an essential health benefit package.

The federal government would cover 100 percent of the costs of this expansion through 2016; after that, federal assistance would gradually decrease until it reached 90 percent. Compliance with this expansion was governed by funding; states that chose not to expand their Medicaid rolls would obviously not receive the funding for expansion and would lose their former funding, forcing them to fund their Medicaid program on their own. The majority opinion found that Congress could not revoke the original Medicaid funding if a state chose not to expand their Medicaid program.

In the dissenting opinion, Justice Kennedy noted that “our cases have long held that the power to attach conditions to grants to the States has limits” and that those limits must ensure that a state can independently and voluntarily decide whether or not to accept the federal money. This is crucial because if Congress compels a state to take an unpopular action, “it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision.”

Here the justices found that while the states could, as a matter of law, decide not to expand Medicaid coverage, practically speaking they could not make that decision. Furthermore it was clear to the court that Congress intended 100% of the states to participate in the Medicaid expansion program. The remedy suggested by the majority opinion is also unacceptable to the dissenting justices, they note that “States must choose between expanding Medicaid or paying huge tax sums to the federal fisc for the sole benefit of expanding Medicaid in other States.” They found the entire Medicaid expansion proposal unconstitutional and with no practical remedy.


The question of severability was not discussed in the majority opinion as they found the majority of PPACA constitutional. The dissent however, after finding both the individual mandate and the Medicaid expansion program unconstitutional, took a detailed look at whether or not the rest of the act could stand without these portions. The court applied a two part test to see if the act was severable.

  • After the Court holds a statutory provision unconstitutional, it then determines whether the now truncated statute will operate in the manner Congress intended.

  • Then, even if the remaining provisions can operate as Congress designed them to operate, the Court must determine if Congress would have enacted them standing alone and without the unconstitutional portion.

In this case the court determined that Congress intended to pass “near universal health care coverage” with a system set up to make it fiscally viable. Without the individual mandate and Medicaid expansion, near universal coverage is not achieved, nor are the new programs fiscally viable. For those reasons the dissenting justices found that the individual mandate and the Medicaid expansion project were not severable.


The dissenting justices ended the opinion with a firm statement: “For the reasons here stated, we would find the Act invalid in its entirety.”

Justice Thomas – Dissenting

Justice Thomas joined the dissent with a one page dissent of his own, noting that under the Commerce Clause the government was making an unprecedent claim that it can regulate not only economic activity but economic inactivity.

PPACA: Majority Opinion Analysis on Medicaid Expansion

In our continued analysis of Chief Justice Robert’s majority opinion (see part one on the individual mandate here), we are looking at the second major portion of the opinion which was dedicated to the issue of Medicaid expansion, which begins on page 45 of the opinion.   The entirety of the Patient Protection and Affordable Care Act (PPACA) can be found here: (P.L. 111-148).

The Medicaid Issue

As we discussed in March, the issue at hand was whether Congress exceeded its authority to require states to expand their Medicaid coverage to qualifying individuals as defined by PPACA. Specifically, by 2014, states would have to cover all individuals under the age of 65 with income below 133 percent of the federal poverty limit. Furthermore, everyone with Medicaid coverage would be entitled to an essential health benefit package.

The federal government would cover 100 percent of the costs of this expansion through 2016; after that, federal assistance would gradually decrease until it reached 90 percent. Compliance with this expansion was governed by funding; states that chose not to expand their Medicaid rolls would obviously not receive the funding for expansion and would lose their former funding, forcing them to fund their Medicaid program on their own.

Spending Clause Argument

In March, the states argued that this requirement exceeds Congress’s authority under the Spending Clause which grants Congress the power to pay the debts and provide for the general welfare of the states. This allows Congress to grant funds to the states and impose appropriate conditions on those funds to ensure they are properly spent.

Previous Supreme Court cases have limited this power, however, typically when the Court has found that the program commandeers a State’s legislation or administration for a federal purpose or when Congress is using financial incentives to exert power that could be seen as undue influence. State officials must be responsible for deciding to accept or refuse federal funding without being forced.

Expansion & Existing Medicaid Funding

In this case, the Supreme Court found that Congress cannot threaten to terminate other significant independent grants of money (the original Medicaid funding) as a means of pressuring states to accept a policy change (the expansion of Medicaid). Specifically, the termination of all Medicaid funding was not “relatively mild encouragement” to expand a state Medicaid program to meet the needs of an entire population. States must be free to decline participation in the new program without losing their current level of funding.

Furthermore, Congress can offer new funds under PPACA to expand availability, but they cannot withdraw any existing funding. Although Congress assumed that all states would participate in the expanded program, the Supreme Court found that even if they did not, the expanded coverage program can continue on a state by state basis. Failure of all the states to participate does not invalidate the entire portion of PPACA.

Coverage of the Court’s dissenting opinions still to come…stay tuned!

PPACA: Majority Opinion Analysis on the Individual Mandate

Today, the U.S. Supreme Court issued its long-awaited opinion on the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), ruling 5-4 that the individual mandate is constitutional as a tax. As a surprise to many, the fifth vote was not made by swing-voter Justice Kennedy, but by conservative Chief Justice Roberts, who broke with the other conservative members of the Court and authored the opinion.

He was careful to emphasize in his introduction that he was strictly giving an analysis based on the Constitution, not whether political policies were necessarily wise, and that “[i]t is not our job to save the people from the consequences of their political choices.”

As the centerpiece of PPACA, the individual mandate will require most Americans, beginning in 2014, to maintain “minimum essential” health insurance coverage or be subject to a “penalty.” The “penalty,” known as a “shared responsibility payment,” is to be paid with the person’s taxes to the Internal Revenue Service (IRS).

The Court considered whether this mandate was imposed by Congress constitutionally, and considered the federal government’s arguments that Congress’ power derived from the Commerce Clause, Necessary and Proper Clause and the Taxing Clause of the Constitution.

Commerce Clause Analysis

“The Framers gave Congress the power to regulate commerce, not to compel it.”

The Court concluded that the imposition of a mandate to purchase health care insurance was outside of Congress’ Commerce Power granted under Article I, Section 8, Clause 3 of the U.S. Constitution. The Commerce Clause grants Congress the power to “regulate Commerce with foreign Nations and among the several States, and with the Indian Tribes.”

Rejected, was the government’s argument that the mandate was within Congress’s Commerce Power because a cost-shifting problem is created by the failure of individuals to purchase insurance, which has a “substantial and deleterious effect on interstate commerce.”

Chief Justice Roberts reasoned that the power to regulate commerce is dependent on the pre-existence of commercial activity that can be regulated. Congress does not have the power to force individuals who have chosen not to engage in commerce to buy a product they do not desire. To grant such a power to legislators would be dangerously opening a door to a “new and potentially vast domain to congressional authority,” putting a potentially unlimited number of individual decisions under Congress’s authority to make such decisions for people.

The Chief Justice hypothesized that Congress imposed a law requiring all citizens to buy vegetables, with the goal in mind that an unbalanced diet results in diseases which increase health care costs (even more so than uninsured persons) that are passed on other citizens in the market. He observed that the bad decisions of other people commonly have a negative effect on others engaged in interstate commerce; however, under the government’s rationale, Congress could force others to act how the federal government wanted them to act, drastically changing the relationship between citizen and government.

Necessary & Proper Clause Analysis

Under Article I, Section 8, Clause 18 of the Constitution, Congress is granted the authority to enact provisions “incidental to the [enumerated] power, and conducive to its beneficial exercise” and “make all laws that are necessary and proper for carrying into execution” its Constitutionally enumerated powers. The government argued that the mandate is necessary as it serves as an “integral part of a comprehensive scheme of economic regulation” of insurance reforms.

The Court concluded the clause does not license the exercise of any “great substantive and independent power” beyond those specifically granted in the Constitution. The mandate is distinguished as it provides Congress with the “extraordinary ability to create the necessary predicate to the exercise of an enumerated power.”

In addition, the individual mandate does not qualify under this clause as an essential component of the government’s insurance reforms. Despite the fact that the government finds the mandate necessary to its reforms, it is not a proper vehicle.

Taxing Clause Analysis

The Court found that the individual mandate did survive the requirements of the Taxing Clause, Article I, Section 8, Clause 1 of the U.S. Constitution, which grants Congress the power to “lay and collect taxes.”

Comparing the “penalty” for not purchasing health insurance to taxes for gasoline and earning income, Chief Justice Roberts concluded that the mandate is not a “legal command” to purchase health insurance, but the choice of going without it “just another thing the Government taxes.”

Despite the fact that PPACA refers to the tax as a “penalty,” the terminology is irrelevant here as it is undeniably a tax, which the Court identifies by the following factors:

  1. The “penalty” is paid into the Treasury by taxpayers when they file their annual tax returns;
  2. The “penalty” does not apply to persons who do not pay federal income taxes;
  3. The amount of the “penalty” is calculated by taking into account factors including number of dependents, joint filing status and amount of taxable income;
  4. The requirement is included in the Internal Revenue Code and is enforced by the IRS;
  5. The “penalty” produces at least some revenue for the federal government.

Other considerations for the constitutionality of the tax include the fact that the tax is considerably less than the price of health care insurance; the mandate contains no scienter requirement; and the tax is solely collected by the IRS through normal means of taxation. The fact that a person failing to pay the tax cannot be subject to criminal sanctions is a key consideration.

The Court acknowledged that the goal of the mandate is to encourage citizens to change their behavior and buy health insurance. However, Chief Justice Roberts stated taxes to encourage or discourage certain behavior are not new to our society. Paying a tax because you do not want to do something does not make that choice unlawful. He offered examples of cigarette taxes making up half the cost of the product to discourage smoking and tax incentives given to encourage citizens to buy home mortgages. If a person chooses not to buy insurance, but instead pays the tax, his or her behavior is perfectly lawful.

Even within taxing power, the tax must conform with other constitutionality requirements. One argument against the tax is that any direct tax must be apportioned among the states, so that each state pays in proportion with its population. The Court found that this type of tax does not comprise a “direct tax” or capitation, where every single person must pay the tax regardless of his or her circumstance. The exemption of some persons from the tax and the act of not buying health insurance trigger the tax.

The Chief Justice’s larger issue was if the Commerce Clause does not allow Congress to regulate those who do not participate in commercial activity, why can Congress impose a tax for the same inactivity? He explained that it can for the following reasons:

  • This tax does not recognize a new federal power. The Constitution does not guarantee that citizens can avoid paying taxes by not doing something;
  • There are limits on Congress’ power to use its taxing power to influence conduct. The power to impose the mandate/tax does not exceed those limits because no one is punished or criminalized for not paying the tax.
  • The power to tax does not give Congress the same extent of control over individual conduct as the Commerce Clause.
    • Under the tax power, citizens can only be required to pay money to the Federal Treasury. Each person can choose whether to engage in particular action, knowing that inaction will result in a tax.
    • Under the commerce power, the federal government can “bring its full weight to bear,” including the imposition of criminal sanctions.

In Conclusion

PPACA’s financial penalty for a failure to purchase health insurance is reasonably characterized as a tax, which is permissible by the Constitution.

Stay tuned for coverage for further coverage of the majority opinion.

Prior coverage of oral arguments and amicus briefs can be found here:


SCOTUS: Health Care Reform Decision, UPDATED

In a bare bones analysis of the just-released opinion regarding the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), it appears based on media reports that PPACA was found constitutional in a 5-4 decision, with the controversial individual mandate standing after being found an allowable tax.

Our analysis today will be as follows:

  • A look at the majority opinion, first regarding the individual mandate and then the Medicaid issues.
  • A look at the dissenting opinion, written by Justice Kennedy
  • Chief Justice Robert’s independent writing
  • Justice Ginsberg’s independent writing

You can find a PDF of the opinion here: PPACA