The vision of the Commerce Clause outlined in the Supreme Court's healthcare decision has long term consequences.
By Roger Parloff, senior editor
FORTUNE — One way to summarize the new vision of the Commerce Clause outlined in Thursday’s landmark healthcare ruling, National Federation of Independent Business v. Sebelius, might be this: We now all enjoy a constitutional right to a free lunch.
This may sound like a caustic and uncharitable way to describe a ruling that I praised just three days ago. But today I am no longer focusing on the statesmanship of Chief Justice John Roberts’s split-the-baby ruling (in which I accepted, as a given, Roberts’ deeply held, extremely conservative view of the Constitution) but rather on the long-term practical consequences of having decided that Congress was powerless to enact the Affordable Care Act under the Commerce Clause. (The Commerce Clause gives Congress the power to “regulate commerce…among the several states.”)
The new right to a free lunch stems from the conservative majority’s categorical refusal to grant Congress power to address a free rider problem that it had found, based on ample and plausible empirical data, to be having a serious impact on interstate commerce — increasing healthcare premiums nationwide by about $1,000 per year.
In the individual mandate provision of Obamacare, Congress attempted to use its Commerce Power to impose a penalty (or tax or whatever you want to call it) on freeloaders: those who have the means to buy health insurance but choose not to. (Under the terms of the law, the sum to be paid usually works out to far less than what the freeloader would have had to pay to buy insurance, and never more.) Though some uninsured people, in the absence of Obamacare, might have both the wealth and the good fortune to self-insure successfully for some period of time, being spared catastrophic accidents or illness, there was evidence Congress was entitled to credit showing that, over the long-term, self-insurance didn’t work. On the contrary, many uninsured ended up using health services they couldn’t begin to pay for. (Health services were not denied to them both because of humanitarian state laws and physicians’ ethical responsibilities — exceptional circumstances that don’t apply to products and services sold in most other private markets.) These unpaid costs resulted in higher prices being charged by healthcare providers, and health insurers then passed along their higher costs to customers in the form of higher premiums.
Last Thursday, the five conservative justices refused to see the free rider problem as something Congress could address under the Commerce Clause because it viewed each individual’s decision to self-insure as amounting to “doing nothing.” The Court then ruled that Congress can only regulate an “activity,” not “inactivity.” (The word “activity” does not appear in the Commerce Clause, but the majority concluded that it was implicit in the notion of “regulation.”)
In a nutshell, the majority found they were required to deny Congress the power to deal with a real and pressing national problem affecting interstate commerce in order to save us from several hypothetical and exceedingly unlikely ones: primarily the prospect of a future Congress forcing us to buy broccoli.
An alternative way of viewing the new constitutional principle might be this: In Commerce Clause cases, Justices are henceforth forbidden from seeing the forest for the trees. Though the collective impact of many individuals’ private choices may be having an enormous impact on interstate commerce, Justices must ignore that fact and immerse themselves instead in the hermeneutics of whether the individual private choice in question can best be characterized as “activity” or “inactivity.”
Given that many readers will view my précis of the ruling as snide and unfair, I owe them at least one quick summary of what’s wrong with the broccoli argument. Don’t conservatives have a point, some readers want to know. If Obamacare had been upheld under the Commerce Clause, wasn’t it true that there seemed to be no limiting principle, and that Congress could, in fact, have forced us to buy broccoli?
Here’s the response: To begin with, the fact that one can imagine a constitutional power being used to enact foolish legislation does not mean that there must be some constitutional bar preventing such laws. Nobody seems to mind the fact, for instance, that, even under the conservative justices’ view of the world, states always have been, and remain, free to force us to buy broccoli. We draw what comfort we can from the fact that if legislators act foolishly, we can vote them out of office.
In addition, there might well be some constitutional bars to a Congressional act forcing us to buy broccoli. To enact laws under the Commerce Clause, Congress must have a “rational basis” for concluding that interstate commerce is affected, and there must also be a “reasonable connection” between what the law does and its stated objective. Though these are not high hurdles to meet, it’s unlikely that a law forcing Americans to buy broccoli could clear them. Justice Ginsburg put it this way:
This sort of piling of inference upon inference would likely fail both the “rational basis” and “reasonable connection” tests, she wrote.
In contrast, Congress’s requirement that people of means either buy health insurance or pay an equal (or, in most cases, much lower) sum to the government was directly related to counteracting a well-documented phenomenon in which free riders weren’t buying health insurance but were using the healthcare system and not paying for their care. Here, under the highly unusual circumstances of the healthcare market — where service providers won’t deny care to those who don’t pay because of humanitarian laws and professional ethical obligations — there was a rational basis for the government to require that this particular product be purchased. In contrast, for most products, like broccoli, no comparable justifications for forcing purchases would exist.
There is also available, conceivably, a constitutional concept that has sometimes come into play during our history called substantive due process. Though the doctrine is out of favor, some federal laws have been held in the past to deprive citizens of liberties so fundamental that no amount of “due process” could ever justify the deprivation; these laws were said to violate “substantive due process.” Most justices, across the political spectrum, are reluctant to use this highly open-ended doctrine, though, and Justices Antonin Scalia and Clarence Thomas have explicitly rejected its legitimacy. In the healthcare case, in fact, Justice Ginsburg chided the conservative majority for effectively smuggling substantive due process back into the picture through the backdoor of the Commerce Clause.
To sum up, then, the key questions I am still hearing about the individual mandate come down to these two. Those pleased by last week’s ruling ask: Without it, what would have prevented Congress from enacting a law forcing Americans to buy broccoli? Those furious with it ask: Now that Obamacare has been upheld under the taxing power, what’s to prevent Congress from enacting a law forcing Americans to eat broccoli?
The key answers to both questions are these:
The gut instinct that there ought to be some additional safeguard against Congress passing foolish hypothetical laws is not a legitimate basis for reading limits into enumerated constitutional powers.