ObamaCare is Now on the Ropes

The decision of Judge Henry Hudson in Virginia v. Sebelius is no bird of passage that will easily be pushed aside as the case winds its way up to its inevitable disposition in the United States Supreme Court.  The United States gave the case its best shot, and it is not likely that it will come up with a new set of arguments that will strengthen its hand in subsequent litigation.

The key successful move for Virginia was that it found a way to sidestep the well known 1942 decision of the Supreme Court in Wickard v. Filburn, which held in effect that the power to regulate commerce among the several states extended to decisions of farmers to feed their own grain to their own cows.  Wickard  does not pass the laugh test if the issue is whether it bears any fidelity to the original constitutional design.  It was put into place for the rather ignoble purpose of making sure that the federally sponsored cartel arrangements for agriculture could be properly administered.

At this point, no District Court judge dare turn his back on the ignoble and unprincipled decision in Wickard.  But Virginia did not ask for radical therapy.  It rather insisted that “all” Wickard stands for is the proposition that if a farmer decides to grow wheat, he cannot feed it to his own cows if a law of Congress says otherwise.  It does not say that the farmer must grow wheat in order that the federal government will have something to regulate.

It is just that line that controls this case.  The opponents of the individual mandate say that they do not have to purchase insurance against their will.  The federal government may regulate how people participate in the market, but it cannot make them participate in the market.  For if it could be done in this case it could be done in all others.

In making this position, the District Court rejected the view that the individual mandate was a necessary and proper offset to the Congressional decision to require all insurers to take customers without regard to their preexisting conditions.  In the government’s view, the two issues are the opposite side of the same coin.  If the system is going to give some individuals a subsidy, it must find a way to tax someone else to provide that subsidy. Hence the individual mandate.

Notwithstanding the unanimous support of the cross subsidy by the political classes, their use is not a sound idea.  Cross subsidies are always unstable because they lead to overconsumption by the privileged class and massive resistance by the losers.  In a real sense, a revitalized takings clause argument would condemn these as transfers of wealth from A to B, without just cause.

But here no one in the political elites of either party wants to challenge the correctness of the subsidy.  So the argument now has to be that the only way to fund this is out of general revenues, not out of selective charges against those who do not wish to join in the system.  As a matter of political theory, there is no clear rule that says if X group is entitled to the subsidy, we can somehow identify the Y group that is duty bound to pay it.  So as a normative matter, it is hard to explain why the individual mandate has to be the flip side of the subsidy when general taxes are still available.

As a political matter, however, the unhappiness with the cross subsidy could prove the undoing of ObamaCare.  The only way to get general revenues for this proposal is to get the next Congress to go along, which will not happen now that there is a Republican House of Representatives. So a bill that is already in hock is now ruinously so, which will only increase the political unease.

The government finds itself here in a real pickle.  Virginia has drawn a clear line that accounts for all the existing cases, so that no precedent has to be overruled to strike down this legislation.  On the other hand, to uphold it invites the government to force me to buy everything from exercise machines to bicycles, because there is always some good that the coercive use of state authority can advance.  The ironic point is that this is not a commerce clause argument as such, for in my view any state statute would be subject to the same objection even though the state has plenary police powers.

So how does it stand?  If you know which way Justice Kennedy will vote, you have a pretty good shot of getting the final outcome.   But if one plays the odds, this is a 12 round fight.  As of today, ObamaCare is losing on rounds.

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More On This Topic

YOO > The Commerce Clause and ObamaCare’s Undoing

RAHE > ObamaCare’s Fate

SAVAGE > Ruling: ObamaCare Unconstitutional

LIMBAUGH > Command Control Health Care

  1. cdor

    Mr. Epstein, I always have to read you very slowly and carefully. This, of course, is a good thing. Your explanation here is very helpful. So the fate of this latest socialist power grab comes down, once again, to a single appointed judge. 

  2. Duane Oyen

    Prof. Epstein, doesn’t that essentially turn this into an “either single payer or no ObamaCare” ball game, given that single payer is the all-general-revenues alternative? 

  3. Kennedy Smith

     Did the court also rule that the mandate provision was severable?  Oy, that’ll cause a headache.  Insurance companies were really playing with fire when they supported this.  I don’t see how they survive (as health insurance providers).

    You note that a District Court would never overturn Wickard.  What are the odds that the Supreme Court would finally do so?  Not that it can’t be evaded in this case, but it would be good to be rid of it.

  4. Michael Labeit
    Richard Epstein: The opponents of the individual mandate say that they do not have to purchase insurance against their will.  The federal government may regulate how people participate in the market, but it cannot make them participate in the market.  For if it could be done in this case it could be done in all others.

    Given the trend in constitutional law, I see no reason why the anti-coerced market participation interpretation of the regulatory power of the government will not be overcome by some spurious, pro-coerced market participation interpretation of the regulatory power of the government. What’s the argument behind the inviolability of the anti-coerced participation interpretation? That its never been the case that the government has forced people to participate in the market? 

    Constitutional law is an arena of never ending unpleasant surprises in the form of new expansive interpretations of government power. Far greater hurdles constructed against the growth of government have already been breached, particularly in the monetary realm.

    Richard Epstein: On the other hand, to uphold it invites the government to force me to buy everything from exercise machines to bicycles…

    Well, this scenario doesn’t seem so inconceivable, personally.

  5. Good Berean

    Thank you professor. I agree with cdor, your writing is dense prose but extremely informative. Thank you for shining the light on Wickard. It seems ironic that an “ignoble and unprincipled decision” would prove to be the undoing of another ignoble and unprincipled decision that gave us Obamacare. Such is the arcane world of American jurisprudence. It is refreshing to see stare decisis working in favor of individual liberty for a change!

  6. Duane Oyen
    Kennedy Smith:  Did the court also rule that the mandate provision was severable?  Oy, that’ll cause a headache.  Insurance companies were really playing with fire when they supported this.  I don’t see how they survive (as health insurance providers).

    You note that a District Court would never overturn Wickard.  What are the odds that the Supreme Court would finally do so?  Not that it can’t be evaded in this case, but it would be good to be rid of it. · Dec 13 at 12:50pm

    Kennedy, there are way too many thoroughly ingrained regulations dependent on Wickard, including a lot of FDA regulations of in-state drug traffic (e.g., Raich); execrable law, but the basic idea will hang around, even if the original fact pattern was ridiculous.

    That’s why it was so beautiful that the decision didn’t plow into Wickard- one less “gotcha” on the way up the chain.

  7. Good Berean

    By the way, here is the ruling, from the Virginia Attorney General’s web page.

  8. Brian Watt

    If the mandate authority somehow survives the Supremes, shouldn’t we anticipate that the federal government can then require Americans to purchase Chevy Volts…whether they are licensed to drive or not?

  9. Brian Watt

    Isn’t the fundamental problem NOT regulating commerce that an individual American is already engaged in BUT INSTEAD forcing an individual American to engage in commerce that he or she may have no intention of engaging in – essentially being compelled under threat of fine to purchase a service from a private company – an insurance provider  - and afterwards then claiming the Constitutional authority in the commerce clause to begin to regulate their activity? This would be very different than the Wickard case cited, would it not – since the Constitution doesn’t compel ordinary citizens to become farmers…or lawyers…or teachers or doctors against their will? Farmers are already engaged in farming and so subject to some regulations and requirements as onerous (and as Constitutionally brittle) as they may be under the commerce clause. In the case of the healthcare individual mandate, I don’t think there is a precedent for this and that’s why it fails the Constitutional smell test.

  10. Brian Watt

    …or perhaps I’m restating what the good professor has already stated in my own way.

  11. Richard Epstein
    C
    Duane Oyen: Prof. Epstein, doesn’t that essentially turn this into an “either single payer or no ObamaCare” ball game, given that single payer is the all-general-revenues alternative?  · Dec 13 at 12:41pm

    Not at all.  At this point, the rest of the bill with the private/public arrangements remain.  It is only the funding for this source.  To get single payer one has to go back to square one, which this Congress will not do.

  12. Richard Epstein
    C
    Michael Labeit

    Given the trend in constitutional law, I see no reason why the anti-coerced market participation interpretation of the regulatory power of the government will not be overcome by some spurious, pro-coerced market participation interpretation of the regulatory power of the government. What’s the argument behind the inviolability of the anti-coerced participation interpretation? That its never been the case that the government has forced people to participate in the market? 

    Constitutional law is an arena of never ending unpleasant surprises in the form of new expansive interpretations of government power. Far greater hurdles constructed against the growth of government have already been breached, particularly in the monetary realm.

    That is the mystery of all this.  Why this particular line seems to have held.  The answer is, I think, that this line has clarity and forces the government to decide which other rules are, or are not, constitutional.  One striking feature of the judge’s decision is that it did not entertain the government’s freerider argument which is just one such spurious attempt.

  13. Richard Epstein
    C
    Brian Watt: Isn’t the fundamental problem NOT regulating commerce that an individual American is already engaged in BUT INSTEAD forcing an individual American to engage in commerce that he or she may have no intention of engaging in – essentially being compelled under threat of fine to purchase a service from a private company – an insurance provider  - then claiming the Constitutional authority in the commerce clause to begin to regulate their activity? This would be very different than the Wickard case cited, would it not – since the Constitution doesn’t compel ordinary citizens to become farmers…or lawyers…or teachers or doctors against their will? Farmers are already engaged in farming and so subject to some regulations and requirements as onerous as they may be under the commerce clause. In the case of the healthcare individual mandate, I don’t think there is a precedent for this and that’s why it fails the Constitutional smell test. 

    And you got the court to go along with you.  There is a difference.  What is odd is that some of the worst regulations come when government shapes how people do engage in activities.  The agricultural and labor areas are prime examples.

  14. Quixotic

    Under Article 1, Section 8 Congress is authorized to “To establish Post Offices and Post Roads.”  Because the mailing of letters by individuals is both Necessary and Proper for the establishment of Post Offices (as opposed to idle buildings), I’m introducing a bill next week requiring all Americans to mail at least 50 letters per year using the USPS.

    Why not?

  15. Brian Watt

    My favorite part of the ruling: 

    “Critical to the Secretary’s argument is the notion that an individual’s decision not to purchase health insurance is in effect “economic activity…The Secretary rejects the Commonwealth’s implied premise that a person can simply elect to avoid participation in the healthcare market. It is inevitable, in her view, that every individual – today or in the future – healthy or otherwise – will require medical care.”

    We’re now in Lewis Carroll’s and George Orwell’s realm. Non-activity is really activity. A penalty for not participating in healthcare is not really a tax. 2 + 2 often equals 4 but occasionally does not.

  16. Brian Watt

    My decision not to buy ice cream (substitute your own product or service) does have an impact on the ice cream market resulting in a percentage of ice cream not being purchased; those people choosing not to purchase ice cream are essentially keeping the price high because demand is not driving the cost of ice cream down. Therefore, the federal government (Michelle Obama notwithstanding) should have the right to penalize me for my non-participation in the ice cream market because it’s keeping it at a prohibitive cost for those who want to buy it but simply can’t afford it … and we all know that sooner or later I’m going to break down and buy ice cream. So, who am I trying to kid?

  17. Brian Watt

    “To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them, to use logic against logic, to repudiate morality while laying claim to it, to believe that democracy was impossible and that the Party was the guardian of democracy”  – George Orwell, 1984

  18. Brian Watt

    “I’ve had nothing yet,” Alice replied in an offended tone: “so I can’t take more.” “You mean you can’t take less,” said the Hatter: “it’s very easy to take more than nothing.”

    – Lewis Caroll, Alice in Wonderland 

  19.  Ron Swanson

    This decision is good for national health care supporters.  Health insurance companies who supported, or at least did not oppose, Obamacare because of the individual mandate, and all the new customers, will now go broke faster forcing the government to provide “universal” health care.

    Why is it unconstitutional to require a private citizen to buy health insurance but it is constitutional to require a company to issue health insurance?  I keep reading how Republican leaders support the “must issue” provision of Obamacare but disagree with the individual mandate.

    As a personal note.  I am unemployed and no longer have health insurance due to a 3x increase in my pregnant wife’s insurance deductible.  I remember Obama saying health insurance costs would fall under his plan.  He was correct since I no longer have health insurance so my cost is zero.