The Impact of a 'Middle-Management' Health Care Ruling

JURIST Guest Columnist Sallie Sanford of the University of Washington School of Law says that the opinion upholding health care reform by Judge Sutton, a self-described "middle-management judge," will prove influential in other circuits and beyond due to his conservative status and well-crafted opinion...
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Just in time for Fourth of July holiday reading and less than a month after it heard oral arguments, the US Court of Appeals for the Sixth Circuit issued a path-breaking decision upholding federal health care reform. Congress has the constitutional authority under the Commerce Clause, a majority of the three-judge panel held, to mandate that most citizens have health insurance or pay a penalty.

As Judge Jeffrey Sutton wrote in the Thomas More Law Center v. Obama opinion, which is rightfully getting the most attention of the three, "[c]all this mandate what you will—an affront to individual autonomy or an imperative of national health care—it meets the requirement of regulating activities that substantially affect interstate commerce." While suggesting that he disagrees with Congress's policy choice in this regard, Judge Sutton writes that the government has the better legal argument and that the Patient Protection and Affordable Care Act clearly survives a facial constitutional challenge. Holding otherwise and overturning long-standing Supreme Court precedent is not, Judge Sutton wrote, the role of a "middle-management judge."

A Judge with Solid Conservative Credentials

Judge Sutton's opinion, technically a concurrence though it provides the controlling analysis, is getting the most attention because of who he is and because of how his well-crafted opinion reads. He is the first Republican-appointed judge to uphold the individual mandate. More than that though, Judge Sutton is a highly respected jurist with solid conservative credentials. He clerked for Justice Antonin Scalia and later argued for the states in many states' rights cases.

Another member of the panel, Judge Boyce Martin, would have upheld the individual mandate on a broader rationale, and visiting Senior District Judge James Graham would have struck it down. Judge Sutton's concurrence makes what has been called the conservative case for upholding the law while providing a road map for the Supreme Court to overturn it and precedent cases. Former Reagan administration solicitor general Charles Fried described it as a "thorough, balanced and thoughtful," consideration of the challengers' best arguments, and a "devastatingly convincing" decision.

The Mandate to Maintain Insurance

The individual mandate is at the heart of the more than two dozen pending lawsuits that challenge the constitutionality of the health care reform. In the Sixth Circuit case, the challengers are the conservative Thomas More Law Center and several individual plaintiffs. The individual mandate (also known as the minimum coverage provision) is only one piece of a lengthy and complex law. It is, however, a central piece. It is inexorably linked with other reforms, particularly the prohibition on denying insurance or charging more based on a pre-existing medical condition. The individual mandate is so central that Judge Roger Vinson of the US District Court for the Northern District of Florida ruled that it could not be severed from the rest of the law, and thus voided it in its entirety.

I believe that it is misleading to many in the public, and to the overall debate, that news reports often described the individual mandate as a requirement that everyone will have to buy or purchase health insurance, suggesting that even those who think they are not paying for coverage—or actually are not—will have to go out and buy a plan. The requirement, which goes into effect in 2014, requires most citizens to, in the words of the statute; maintain a minimum level of health insurance unless a financial or religious exemption applies. The insurance can be in the form of Medicare, Medicaid, an employer-sponsored plan or individual purchase. It is not uncommon to hear people who are on employer-sponsored plans say that they get insurance "for free," when actually they do pay a portion of the premium, though in the less-visible form of a paycheck deduction.

As a law explicitly drafted to maintain and reform the current, largely private health insurance system, the health care reform law envisions that most people will maintain their current form of coverage. Many of the currently uninsured will be added to the Medicaid rolls, and others will sign up for employer-sponsored plans or buy individual plans. For those who do purchase a plan on the yet-to-be-created insurance exchanges, sliding-scale premium and cost-sharing subsidies will be available if their income is below 400 percent of the federal poverty level. Those who are required to have insurance and do not obtain it will be required to include with their annual federal tax a "shared responsibility payment" of 2.5 percent of household income or $695 per person, whichever is greater.

Substantially Affecting Commerce

The three opinions in the Thomas More, when they address the merits, all focus on Congress's authority under the Commerce Clause. (There is no doubt that states have the power to enact an individual mandate, as Massachusetts has done, under their general police powers.) Existing Supreme Court precedent allows Congress to regulate matters, even wholly intrastate, that Congress rationally believes substantially affect interstate commerce.

As in all the health reform cases, the book-end Commerce Clause cases of Wickard v. Filburn and Gonzales v. Raich get a workout. In the 1942 case of Wickard, the Supreme Court upheld a federal law that limited the amount of wheat a farmer could grow for his own use. The Court concluded that this production, though not for sale, did impact interstate commerce because it reduced the amount the farmer would buy and, considering the activities of similar-minded farmers, would impact the total amount grown. More than a half-century later, the 2005 case of Raich once again affirmed an expansive view of the Commerce Clause in a 6-3 opinion. The Court held that the federal government has the power to supersede state law and to prohibit marijuana cultivation, even if grown at home for personal medical use and not for sale.

The intervening years saw the Court giving Congress a wide berth in regulating commerce, all the while maintaining that there are limits, and that the national legislative body does not have unlimited police powers. One limit was set in the 1995 case of United States v. Lopez, which involved a federal prohibition on guns near public schools, and the 2000 case of United States v. Morrison, which challenged the federal Violence Against Women Act. Both of these were 5-4 decisions overturning the federal laws as beyond the scope of the Commerce Clause because they involved regulation of non-economic, basically criminal activity.

While the Supreme Court has the latitude to revisit its Commerce Clause jurisprudence, Judge Sutton wrote, existing precedent supports the government on this point. "No matter how you slice the relevant market—as obtaining health care, as paying for health care, as insuring for health care—all of these activities affect interstate commerce, in a substantial way." Health-related spending amounted to 17.9 percent of the US economy in 2009, virtually everyone requires health care at some point, and many aspects of it (e.g. medical supplies and medications) are directly linked to interstate commerce. The health insurance market is inextricably linked to interstate commerce.

What of those who "self-insure," either by saving sufficient money for health care expenses or by not saving enough and relying on "good fortune or the good graces of others?" They too substantially affect interstate commerce according to Judge Sutton. (In his opinion upholding the law, Judge Martin also uses the term "self-insure" but stresses that few people have the financial capacity to truly self-insure for the expenses of a major illness or injury.) Congress found that providing uncompensated medical care to the uninsured cost $43 billion in 2008 and much of this cost was shifted to others through higher premiums. Judge Sutton does not address the economic impact, though Judge Martin does, of an insured risk pool skewed towards an older, sicker population when younger, healthier people "self-insure."

"Call this mandate what you will—an affront to individual autonomy or an imperative of national health care—it meets the requirement of regulating activities that substantially affect interstate commerce." Indeed, writes Judge Sutton, Wickard and Raich arguably involved more substantial incursions on the general police powers of the states.

Actively Inactive

The law's challengers argue that there must be a limit to the Commerce Clause's scope, and one limit is that it applies only to individuals already engaged in commerce. Congress can regulate actions or activities, but not inaction, and cannot force people into the market. By definition, they argue, a person who declines to purchase health insurance is not engaging in commerce at all. "Of all the arguments auditioning to invalidate the individual mandate this," in Judge Sutton's view "is the most compelling."

In part it is compelling because Congress has never before regulated in precisely this way. Neither the government nor amici have been able to point to an example of the federal government requiring individuals to purchase a private product apart from other engagement in the market. While the second Congress did require certain men to have a gun and ammunition (even if this meant they had to buy them), this mandate could be seen as a necessary and proper way of implementing Congress's authority to raise an army.

Judge Sutton found the inactivity argument is ultimately unpersuasive for several reasons. As a textual matter, the Commerce Clause does not contain that limitation. Additionally, the Supreme Court has not interpreted it to include such a limitation. Furthermore, in practice the activity/inactivity dichotomy breaks down. Roscoe Filburn and Angel Raich never actively entered any market and yet Congress constitutionally regulated them.

One example he gives regards an individual plaintiff in the Thomas More case who actually now has health insurance but asserts that Congress cannot require her to maintain it. Having now entered the market, has she not taken action, and would she not be doing so by dropping her insurance? "No one is inactive when deciding how to pay for health care, as self-insurance and private insurance are two forms of action for addressing the same risk. Each requires affirmative choices; one is no less active than the other; and both affect commerce."

There might be some individuals who could successfully make an inactivity-based argument once the law is in effect, Judge Sutton wrote, but the case at hand is a facial challenge. To succeed the plaintiffs had to establish that there is no set of circumstances under which the law would be valid. They could not do this.

"That brings me to the lingering intuition—shared by most Americans, I
suspect—that Congress should not be able to compel citizens to buy products they do
not want." Could it then also require people to have a health-club membership? Or—the specter raised by other courts—buy broccoli? Here Judge Sutton recognizes the government's argument that health care is unique. "Regulating how citizens pay for what they already receive (health care), never quite know when they will need, and in the case of severe illnesses or emergencies generally will not be able to afford, has few (if any) parallels in modern life."

A Broader Affirmance and a Dissent

Judge Martin's opinion goes further than Judge Sutton's and would have upheld the mandate on broader grounds. He concluded that "Congress had a rational basis for concluding that the minimum coverage provision is essential to the Affordable Care Act's larger reforms to the national markets in health care delivery and health insurance." While agreeing with the government that the decision to self-insure is an activity, he stresses that the Commerce Clause does not preclude regulation of inactivity.

The third member of the panel, District Court Judge James Graham, dissented from the majority's Commerce Clause analysis. In his view the mandate must stand or fall on its own, not as a component of the reform law's broader regulation of the health care market. On its own, it "regulates the status of being uninsured," and not economic activity. If the majority's view is correct, he writes, "what aspect of human activity would escape federal power?"

Judge Martin found it unnecessary to address whether the law could also be sustained under Congress's power to tax and spend. Judges Sutton and Graham, however, did address the issue. They conclude that "the individual mandate is a regulatory penalty, not a revenue-raising tax."

What's Next?

Noting that "we at the court of appeals are not just fallible but utterly non-final in this case," Judge Sutton expressly anticipated Supreme Court review of the law's constitutionality. The Thomas More plaintiffs announced that they will not petition for en banc review and will go straight to the Supreme Court. Will the Court take the case? Will it rule before the 2012 election? Given the importance of the issues and the divided district court opinions thus far, it seems unlikely that the question of the law's constitutionality will ultimately evade high court review.

With all the pending circuit court cases, however, the justices might well wait for at least a couple of those decisions to issue. Two circuits heard arguments on the merits this past spring, and their decisions are expected any time. The Fourth Circuit heard cases brought by the Virginia and by Liberty University. The Eleventh Circuit heard the case prominently brought by 26 governors and attorneys general (as well as a business association and a few individual plaintiffs); in addition to the individual mandate, these plaintiffs also challenge the law's expansion of Medicaid and establishment of state-based insurance exchanges. Appeals are pending in four other circuits: the Ninth, Third, Eighth and District of Columbia. This latter group includes cases that were dismissed at the district court level for lack of jurisdiction, but the circuit courts could go beyond the jurisdictional questions of standing and ripeness to address the merits.

Perhaps all the other circuits will follow the Sixth and find the law constitutional. Without a circuit split and without a ruling striking down the health care law, there might not be a Supreme Court hearing. Alternately, the Court might grant certiorari in time for a hearing in the upcoming term, and thus a decision by the summer of 2012. This timing would have resolution before the next presidential election and before the individual mandate provision goes into effect in 2014.

Stirring, Essential and Ongoing Debate

With the Fourth of July holiday comes the annual newspaper civics quizzes with their questions about constitutionally based powers and protections. As Judge Sutton articulates, one reason these cases have drawn so much attention is that they bring to the fore important and perennial questions about the meaning of the Constitution, the extent of federal power, and the role of the judiciary in reviewing the policy choices of elected officials.

Towards the end of his opinion, Judge Sutton harkens back to the Supreme Court's 1819 decision in McCulloch v. Maryland, which controversially upheld Congress's authority to create a national bank. "Today's debate about the individual mandate is just as stirring, no less essential to the appropriate role of the National Government and no less capable of political resolution." While Judge Sutton's analysis might not be followed by those who rule on health care reform in the coming months, his cogent, conservative reasoning is sure to be influential.

Sallie Sanford is an assistant professor of law at the University of Washington School of Law. She teaches Health Law both at the law school and the School of Public Health. Her research interests include health care delivery systems, health administration law, Medicare and Medicaid, comparative health law, and medical and administrative ethics. Professor Sanford has previously written on the issue of health care reform for JURIST Forum.

Suggested citation: Sallie Sanford, The Impact of a 'Middle-Management' Health Care Ruling, JURIST - Forum, July 5, 2011, http://jurist.org/forum/2011/07/sallie-sanford-middle-management.php.

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