The Legal Future of Obamacare


ACRU Staff


February 2, 2011

This column by ACRU General Counsel Peter Ferrara appeared February 2, 2011 on The American Spectator website.

As of this moment Obamacare is officially not the law of the land. As Federal Judge Roger Vinson ruled on Monday in Florida, “[T]here is a long standing presumption that officials of the Executive Branch will adhere to the law as declared by the court. As a result, the declaratory judgment is the functional equivalent of an injunction.” That law as declared by the Federal District Court in Florida is now that Obamacare is unconstitutional.

This, of course, is the second federal court ruling that Obamacare is unconstitutional, following the ruling of Judge Henry Hudson in the Northern District of Virginia on December 13. I predicted in this space at the time that Judge Vinson would rule the same. Now he has. I filed amicus curiae briefs in both cases on behalf of the American Civil Rights Union arguing for these results. Those briefs drew on my work in The Obamacare Disaster: An Appraisal of the Patient Protection and Affordable Care Act, published by the Heartland Institute.

Recall former House Speaker Nancy Pelosi laughing off Tea Party objections that Obamacare was unconstitutional with the reply, “Are you serious? Are you serious?” Now she knows just how serious we were.

Limits to Federal Power

Judge Vinson’s ruling, as Judge Hudson’s before him, represents a return to the original Constitution of limited enumerated powers delegated by the people to the federal government. Vinson opens his decision quoting James Madison in the Federalist Papers explaining, “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite,” noting further that “the Tenth Amendment reaffirmed that relationship.”

Vinson goes on to explain that the reason for that is to “ensure protection of our fundamental liberties” and “reduce the risk of tyranny and abuse.” He goes on to quote the ultimate explanation again from James Madison in The Federalist Papers:

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

The enumerated power claimed by Congress for Obamacare was the Commerce Clause, which grants Congress the power “To regulate Commerce with foreign nations, and among the several states, and with the Indian Tribes.” Trade among the states was mentioned so Congress would have the power to eliminate the protectionist trade restrictions and barriers that had been erected among the states against trade with each other. Eliminating those protectionist trade barriers is a fundamental reason for the long term, world leading prosperity of America. This is the original reason for the Commerce Clause, not to allow abominations like Obamacare.

But this was dramatically changed during the New Deal to allow Congress to affirmatively regulate interstate commerce based on the language of the Commerce Clause, and neither Judge Vinson nor Judge Hudson challenged that change. But more recent Supreme Court decisions have reaffirmed that there are still limits to Congress’s power to regulate under the Commerce Clause. Both Judge Vinson and Judge Hudson have now ruled that the individual mandate in Obamacare exceeds those limits.

Obamacare’s individual mandate requires all individuals without employer-provided health insurance to buy insurance with all the politically correct and expensive coverage the government dictates they must buy. But as Judge Vinson noted, “(essentially for life) just for being alive and residing in the United States.” Every prior regulation upheld as constitutional under the Commerce Clause involved some activity that could be construed as participation in interstate commerce. But failure to buy health insurance involves no such activity, and no participation in interstate commerce at all.

As a result, Judge Vinson concluded:

It would be a radical departure from existing case law to hold that Congress can regulate inactivity under the Commerce Clause. If it has the power to compel an otherwise passive individual into a commercial transaction with a third party merely by asserting…that compelling the actual transaction is itself commercial and economic in nature, and substantially affects interstate commerce…it is not hyperbolizing to suggest that Congress could do almost anything it wanted.

Then in words that will be memorialized on future Tea Party walls, Vinson wrote:

It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place.

Judge Vinson consequently ruled, “If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be difficult to perceive any limitation on federal power.”

They Can’t Believe He Ate the Whole Thing

Once the individual mandate was declared unconstitutional, it was inevitable that the whole Obamacare law would be struck down, as Judge Vinson also ruled. The legislation included no severability clause as in most every bill, which provides if one provision is struck down, the rest survives. That was not an oversight.

Without the individual mandate, the rest of Obamacare is transparently unworkable, as President Obama and the Democrats themselves said during the jihad for its enactment. That is because the bill also includes what is known as “guaranteed issue” and “community rating.” Under those provisions, an insurance company must insure whoever applies, and charge them no more than anyone else, no matter how sick or costly they are when they first apply.

This is like fire insurance regulation requiring the insurer to accept whoever calls for coverage, and to charge them no more than anyone else, even if their house is already on fire when they first call! In health insurance as in fire insurance, this would naturally cause premiums to skyrocket. But it’s worse than that.

The skyrocketing premiums cause younger and healthier individuals to drop their coverage. That forces insurers to raise premiums even more because the remaining pool is even sicker and costlier on average. The younger and healthier then flee even more, knowing they can automatically get coverage later if they become sick! In fire insurance terms, this leaves the insurer with a “risk pool” of all burnt down houses, which is quite costly to cover. The result is a financial death spiral both for the insurers and anyone still trying to pay premiums.

The individual mandate was intended to be the antidote to this death spiral. If everyone must buy the insurance in any event, premiums would still rise, but no one could drop out in response. The system could then still function, albeit at higher insurance rates, exactly contrary to what was promised. But without the individual mandate, the whole system inevitably collapses as described above.

This is why, as Judge Vinson wrote, “the defendants concede that the individual mandate is absolutely necessary for the Act’s insurance market reforms to work as intended. In fact, they refer to it as an essential part of the Act at least fourteen times in their motion to dismiss.” Where there is no severability clause, the legal standard that determines whether the whole law must
be struck down is whether what is left can still function independently of the part that was struck down, and whether Congress would have intended for the law to continue in that manner. The remaining dysfunctional Obamacare without the individual mandate does not fit this legal standard.

As a result, Judge Vinson rightly concluded:

[T]he record seems to strongly indicate that Congress would not have passed the Act in its present form if it had not included the individual mandate. This is because the individual mandate was indisputably essential to what Congress was ultimately seeking to accomplish….The Act, like a defectively designed watch, needs to be redesigned and reconstructed by the watchmaker.

The Supremes in the Final Act

Just as I predicted that Vinson would follow Hudson in making this ruling, I predict as well that Justices Roberts, Scalia, Thomas, and Alito will now follow Vinson and Hudson in also finding the individual mandate unconstitutional, and in throwing the whole Obamacare Act out on the same grounds as above.

The swing fifth vote is as usual up to Justice Anthony Kennedy. I believe what will be decisive in winning his vote as well is to demonstrate there are other alternative means to achieving the goals of Obamacare that would be constitutional, so we would not be asking Kennedy to rule that universal health care for all must be unconstitutional.

Just two basic reforms would provide a universal health care safety net that would ensure that no one need ever suffer without essential health care. First would be to block-grant Medicaid back to the states, with each state then to replace it with Medicaid vouchers for the purchase of private health insurance. Each state would decide how much to provide at each income level in their state to ensure that no one would lack basic health insurance because they were too poor.

This would benefit the poor enormously because the current Medicaid program so badly underpays doctors and hospitals that the poor often cannot find doctors and hospitals that will treat them under Medicare. With these Medicaid vouchers, the poor would enjoy the same health care as the middle class, because they would enjoy the same health insurance as the middle class.

The second reform is state uninsurable risk pools for those who nevertheless still do not buy health insurance, and then become too sick and costly to buy it, like the homeowner who fails to buy fire insurance before his house catches on fire. These uninsurables would get coverage from the risk pool, paying premiums based on their ability to pay. The state would subsidize the pool for the remaining costs. A majority of the states already operate such uninsurable risk pools, and they have proved quite workable.

Everyone would then have the means of obtaining essential coverage and care, without any individual or employer mandate. Indeed, unlike Obamacare, this safety net covers everyone, and so achieves the valid social goal far better.

These reforms would not be costly because less than one fourth of the uninsured fail to get health coverage because they are too poor to do so, and only a relatively small number of people find themselves without insurance and then too sick to get it. If we do this in the context of block-granting Medicaid back to the states, the net result could well be less overall government spending rather than more. The only reason President Obama and the Democrats would not even consider this approach is that it does not involve the government takeover of health care, which was the real goal all along, so the wise government could run health care in the interests of progressive “social justice” (which sometimes means denying people health care).

The only option left for President Obama is to decide when he gets the final death notice for Obamacare, before the 2012 election or after. If he agrees to an expedited appeal to the Supreme Court, he will likely have to run for reelection having wasted his first term putting the entire country through a meaningless exercise, which only served to discredit the Democrat party. If he decides to slog through the Circuit Courts, he will likely suffer further adverse rulings before Election Day, with legal momentum building against him, reinforcing the likelihood that the Reagan-appointed Kennedy would go with the conservatives.

We can see the impact of that legal momentum in Vinson’s ruling. Hudson declined to strike down the entire statute, even though that inevitable result was obvious then, undoubtedly because he felt it was brave enough to find the individual mandate unconstitutional. But Vinson was emboldened by his ruling as a bolstering precedent to go the whole nine yards.

But it would be wise to deny Obama even this choice, because which way Kennedy would go can never be certain. That is why Senate Republicans should still force a vote on the House repeal, which is even more likely to win assent now. Obamacare will decline even further in the polls as the public increasingly recognizes its unconstitutionality, and even fewer Senate Democrats will be willing to fall on their political swords for an increasingly doomed cause.

President Obama would then have the choice of killing his own Obamacare baby himself, and then running on taking the credit for it.



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