The New Health Dialogue

(This is another in a series of posts on legal aspects of health reform by Tony Cardona, a newly minted lawyer with an interest in health policy, is doing some work for us this summer.)

Law school books are filled with cases that you swear were completely contrived by a bored professor. The case of the kid who tried to redeem his Pepsi points for a fighter jet. The guy who rigged a shot-gun in his shack to shoot potential intruders. The infamous case of the man who receives hand surgery and ends up with a hairy hand.

Then there's the one about a farmer who was told he couldn't grow wheat for personal use because it impacted interstate commerce. (Just think about how that one would go over amid our current public debates about privacy and individual liberty.) The wheat case, Wickard v. Filburn, is a typical read for first year law students since it explores the constraints on Federal power to regulate private activities.

The story goes like this: Under the Agricultural Adjustment Act, the Secretary of Agriculture limits the amount of wheat a farmer can produce in order to control the interstate wheat market, pursuant to powers under the Commerce Clause. Farmer Roscoe Filburn grows more wheat than his allotted amount, but keeps the excess for personal use so it's not introduced into "commerce." He is told he cannot do this. The Supreme Court hears the case and upholds the regulation, arguing that it is a valid exercise of the Commerce power because of the impact that Filburn’s surplus will have, in the aggregate, on the interstate market for wheat. The Court stated, "the power to regulate commerce includes the power to regulate the prices at which commodities in that commerce are dealt in and practices affecting such prices" -- even if it is a completely private activity such as growing wheat to feed your own family.

In the 2005 case Gonzales v. Raich, weed became the new wheat. The Supreme Court decided whether the federal government had the power to prohibit the manufacture and possession of marijuana in compliance with California law. Writing for the majority, Justice Stevens cited Wickard extensively and argued that "Congress can regulate purely intrastate activity that is not itself commercial ... if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity." Gonzales v. Raich, 545 U.S. 1, 18 (2005). Federal regulation included private intrastate activities that had no direct impact on the interstate market.

Both Gonzales and Wickard demonstrate the federal government’s ability to regulate individual activity regardless of whether that activity is personal or only intrastate (rather than interstate). While both these cases involve tangible goods, unlike health insurance, in 1944 the Supreme Court allowed Congress to use the Sherman Act to regulate insurance, an intangible product, under the commerce clause. Congressional power to regulate both intangible and tangible goods is established within three categories: Congress can regulate (1) the channels of interstate commerce, (2) the instrumentalities of interstate commerce, and persons or things in interstate commerce, and (3) activities that substantially affect interstate commerce. Gonzales, 545 U.S. at 16-17.

After reading Wickard and Gonzales, Congressional power under the commerce clause is vast; yet, the power is constrained to regulate only economic activities. That distinction was upheld and illustrated in both United States v. Lopez, on the Gun-Free School Zones Act of 1990 and in United States v. Morrison, which found the Violence Against Women Act of 1994 unconstitutional. Those two laws however, were exceptions, and the basis of review is generally in the government’s favor. As long as there is a rational basis for concluding that a regulated activity affects interstate commerce, the Court will not interfere.   

The new health care law is a mandate on an individual level. Many proponents find challenges to the individual mandate frivolous. Under the new law, the commercial activity regulated is expressly described as an interstate economic activity and not the more tenuous intrastate activity like growing wheat or marijuana for individual use. In fact, section 1501(a)(2) of the health reform law is entitled, “Effects on the National Economy and Interstate Commerce.” The language directly asserts that health care insurance and health care services are interstate economic activity.

Until recently, the legal principle behind Wickard v. Filburn and Gonzales v. Raich was a central argument for the government's lawyers in supporting the individual mandate for health insurance. Their argument was that, similar to Wickard, under the Commerce Clause, Congress has the ability to regulate private activities that would affect the health insurance market. If individuals choose to opt out of the market, those opting in will have to pay higher premiums. Consequently, people who would otherwise opt-in may choose to opt-out because of the higher cost. Fewer people covered by health insurance means a higher cost for everybody.

Opponents of this argument however distinguished Wickard from the individual mandate, suggesting that under the new law Congress is controlling an inactivity not an activity. Never before, they argue, has Congress used its commerce power to require that an individual engage in a certain economic activity with a private industry.

This is really where the fight over the commerce clause will be. Congress' power to regulate is pretty vast, albeit with some minor limitations. However, using the commerce clause to require people to buy private insurance or pay a penalty is new. As Georgetown Law Professor Randy Barnett stated in the Washington Post last March, "the individual mandate extends the commerce clause's power beyond economic activity, to economic inactivity ... [N]ever before has [Congress] used its commerce power to mandate that an individual person engage in an economic transaction with a private company."

Given Congress' broad authority under the Commerce Clause, are these argument nevertheless frivolous? Federal Judge Henry Hudson does not think so. A few days ago he refused to dismiss Virginia’s lawsuit challenging the constitutionality of the individual mandate, allowing it to proceed to a full hearing. Although a setback for the White House, they are nevertheless confident that the Affordable Care Act is constitutional.