The Great Dissent Part V: Why the Entire Obamacare System Must Be Struck Down in Court
This column by ACRU Senior Legal Analyst Ken Klukowski was published July 12, 2012 on Breitbart.com.
The capstone to the Great Dissent was the explanation of why the entire 2,700-page Affordable Care Act (ACA) must be struck down along with the unconstitutional Individual Mandate and the unconstitutional Medicaid Expansion.
When part of a law is found unconstitutional and invalidated by a court, severability doctrine is the set of rules under which a court determines how much of the law must fall alongside the invalid provision. While most large statutes include a severability clause that declares Congress’ wish that if part of the law is invalidated, the remaining provisions should survive, Congress declined to insert such a clause in Obamacare. That does not automatically mean that the law is nonseverable, but it does mean that courts have a much more difficult task determining how much of the law to save.
Following my overall analysis of the Obamacare decision, we decided to take up the call of the four dissenting justices, that this case should be a historic teaching opportunity to impress upon the American people the structure and nature of the Constitution and how its limits on government power are to ensure the liberty and happiness of the American people by keeping government out of their lives.
Here is the fifth and final part of our five-part series on the Great Dissent. Part I discussed the dissenting justices’ conclusion on why Obamacare must be struck down, and Part II explained why the Commerce Clause does not authorize the Individual Mandate. Part III explained why the Individual Mandate is not a tax, and why Mitt Romney was right both in saying that it was not a tax, but that it is one now because of the Supreme Court’s stunning redefinition of the word “tax.” Part IV explains why Obamacare’s massive Medicaid expansion–which threatened to strip all Medicaid funds from any state that refuses to go along–was an unconstitutional coercion of the states, exceeding the limits of the Constitution’s Spending Clause and thereby violating the Tenth Amendment.
We examine severability now in Part V, which I approach both as an academic who has published a law review article on severability and a lawyer who filed briefs specifically on this issue in the Obamacare litigation–briefs that were cited by the district court when Judge Roger Vinson held the Individual Mandate could not be severed and struck down Obamacare entirely.
This discussion gets a little dense. But for readers looking for an explanation of why the ACA weaves such a tangled web that striking down a major part of it requires taking down the entire system, no one could do it better than the justices who came within just one vote of doing exactly that.
After invalidating part of the Medicaid expansion, Chief Justice John Roberts turned to the question of severability, writing:
The Court today limits the financial pressure the Secretary may apply to induce States to accept the terms of the Medicaid expansion. As a practical matter, that means States may now choose to reject the expansion… We have no way of knowing how many States will accept the terms of the expansion, but we do not believe Congress would have wanted the whole Act to fall, simply because some may choose not to participate. The other reforms Congress enacted… will still function in a way consistent with Congress’ basic objectives… Confident that Congress would not have intended anything different, we conclude that the rest of the Act need not fall in light of our constitutional holding.
While I would argue the Supreme Court has no reason for such confidence, it was also unfortunate that Chief Justice Roberts did nothing to try to clarify exactly how courts should determine how much of a statute to strike down.
But the Great Dissent did so. In addition to making a compelling case that the Individual Mandate and Medicaid Expansion must fall, the four dissenting justices did an excellent job of explaining why the remaining provisions of Obamacare can no longer work as Congress intended, and therefore why the Court should have struck down every part of Obamacare and returned the issue to the American people to take up through their elected leaders after the next election.
From Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito in NFIB v. Sebelius (omitting case names, citations, punctuation, and editing marks):
The Affordable Care Act seeks to achieve “near-universal” health insurance coverage. The two pillars of the Act are the Individual Mandate and the expansion of coverage under Medicaid. In our view, both these central provisions of the Act–the Individual Mandate and Medicaid Expansion–are invalid. It follows, as some of the parties urge, that all other provisions of the Act must fall as well. The following section explains the severability principles that require this conclusion. This analysis also shows how closely interrelated the Act is, and this is all the more reason why it is judicial usurpation to impose an entirely new mechanism for withdrawal of Medicaid funding, which is one of many examples of how rewriting the Act alters its dynamics.
When an unconstitutional provision is but a part of a more comprehensive statute, the question arises as to the validity of the remaining provisions…
An automatic or too cursory severance of statutory provisions risks rewriting a statute and giving it an effect altogether different from that sought by the measure viewed as a whole. The Judiciary, if it orders uncritical severance, then assumes the legislative function; for it imposes on the Nation, by the Court’s decree, its own new statutory regime, consisting of policies, risks, and duties that Congress did not enact. That can be a more extreme exercise of the judicial power than striking the whole statute and allowing Congress to address the conditions that pertained when the statute was considered at the outset.
The Court has applied a two-part guide as the framework for severability analysis… First, if the Court holds a statutory provision unconstitutional, it then determines whether the now truncated statute will operate in the manner Congress intended. If not, the remaining provisions must be invalidated… The question is whether the provisions will work as Congress intended. The relevant inquiry in evaluating severability is whether the statute will function in a manner consistent with the intent of Congress….
Second, even if the remaining provisions can operate as Congress designed them to operate, the Court must determine if Congress would have enacted them standing alone and without the unconstitutional portion. If Congress would not, those provisions, too, must be invalidated….
The Act was passed to enable affordable, “near-universal” health insurance coverage. The resulting, complex statute consists of mandates and other requirements; comprehensive regulation and penalties; some undoubted taxes; and increases in some governmental expenditures, decreases in others. Under the severability test set out above, it must be determined if those provisions function in a coherent way and as Congress would have intended, even when the major provisions establishing the Individual Mandate and Medicaid Expansion are themselves invalid.
Congress did not intend to establish the goal of near universal coverage without regard to fiscal consequences. And it did not intend to impose the inevitable costs on any one industry or group of individuals. The whole design of the Act is to balance the costs and benefits affecting each set of regulated parties. Thus, individuals are required to obtain health insurance. Insurance companies are required to sell them insurance regardless of patients’ pre-existing conditions and to comply with a host of other regulations. And the companies must pay new taxes. States are expected to expand Medicaid eligibility and to create regulated marketplaces called exchanges where individuals can purchase insurance. Some persons who cannot afford insurance are provided it through the Medicaid Expansion, and others are aided in their purchase of insurance through federal subsidies available on health-insurance exchanges. The Federal Government’s increased spending is offset by new taxes and cuts in other federal expenditures, including reductions in Medicare and in federal payments to hospitals. Employers with at least 50 employees must either provide employees with adequate health benefits or pay a financial exaction if an employee who qualifies for federal subsidies purchases insurance through an exchange.
In short, the Act attempts to achieve near-universal health insurance coverage by spreading its costs to individuals, insurers, governments, hospitals, and employers–while, at the same time, offsetting significant portions of those costs with new benefits to each group… In summary, the Individual Mandate and Medicaid Expansion offset insurance regulations and taxes, which offset reduced reimbursements to hospitals, which offset increases in federal spending. So, the Act’s major provisions are interdependent.
The Act then refers to these interdependencies as “shared responsibility.” In at least six places, the Act describes the Individual Mandate as working “together with the other provisions of this Act.”… The Act calls the Individual Mandate “an essential part” of federal regulation of health insurance and warns that “the absence of the requirement would undercut Federal regulation of the health insurance market.”
Major provisions of the Affordable Care Act–i.e., the insurance regulations and taxes, the reductions in federal reimbursements to hospitals and other Medicare spending reductions, the exchanges and their federal subsidies, and the employer responsibility assessment–cannot remain once the Individual Mandate and Medicaid Expansion are invalid. That result follows from the undoubted inability of the other major provisions to operate as Congress intended without the Individual Mandate and Medicaid Expansion. Absent the invalid portions, the other major provisions could impose enormous risks of unexpected burdens on patients, the healthcare community, and the federal budget. That consequence would be in absolute conflict with the ACA’s design of “shared responsibility,” and would pose a threat to the Nation that Congress did not intend.
… Unnecessary risks and avoidable uncertainties are hostile to economic progress and fiscal stability and thus to the safety and welfare of the Nation and the Nation’s freedom. If those risks and uncertainties are to be imposed, it must not be by the Judiciary.
The Affordable Care Act reduces payments by the Federal Government to hospitals by more than $200 billion over 10 years.
Invalidating the key mechanisms for expanding insurance coverage, such as community rating and the Medicaid Expansion, without invalidating the reductions in Medicare and Medicaid, distorts the ACA’s design of “shared responsibility.”… It is not the proper role of the Court, by severing part of a statute and allowing the rest to stand, to impose unknowable risks that Congress could neither measure nor predict. And Congress could not have intended that result in any event.
There is a second, independent reason why the reductions in reimbursements to hospitals and the ACA’s other Medicare cuts must be invalidated. The ACA’s $455 billion in Medicare and Medicaid savings offset the $434 billion cost of the Medicaid Expansion….
That finding was critical to the ACA. The Act’s “shared responsibility” concept extends to the federal budget….
If the Medicare and Medicaid reductions would no longer be needed to offset the costs of the Medicaid Expansion, the reductions would no longer operate in the manner Congress intended. They would lose their justification and foundation. In addition, to preserve them would be to eliminate a significant quid pro quo of the legislative compromise and create a statute Congress did not enact. It is no secret that cutting Medicare is unpopular; and it is most improbable Congress would have done so without at least the assurance that it would render the ACA deficit-neutral.
The ACA requires each State to establish a health insurance “exchange.”… The exchanges cannot operate in the manner Congress intended if the Individual Mandate, Medicaid Expansion, and insurance regulations cannot remain in force.
The Act’s design is to allocate billions of federal dollars to subsidize individuals’ purchases on the exchanges. Individuals with incomes between 100 and 400 percent of the poverty level receive tax credits to offset the cost of insurance to the individual purchaser. By 2019, 20 million of the 24 million people who will obtain insurance through an exchange are expected to receive an average federal subsidy of $6,460 per person. Without the community-rating insurance regulation, however, the average federal subsidy could be much higher ….
The result would be an unintended boon to insurance companies, an unintended harm to the federal fisc, and a corresponding breakdown of the “shared responsibility” between the industry and the federal budget that Congress intended. Thus, the federal subsidies must be invalidated.
In the absence of federal subsidies to purchasers, insurance companies will have little incentive to sell insurance on the exchanges. Under the ACA’s scheme, few, if any, individuals would want to buy individual insurance policies outside of an exchange, because federal subsidies would be unavailable outside of an exchange… With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.
… the employer-responsibility assessment must be invalidated. … the ACA makes a direct link between the employer-responsibility assessment and the exchanges. The financial assessment against employers occurs only under certain conditions. One of them is the purchase of insurance by an employee on an exchange. With no exchanges, there are no purchases on the exchanges; and with no purchases on the exchanges, there is nothing to trigger the employer-responsibility assessment.
The next question is whether the invalidation of the ACA’s major provisions requires the Court to invalidate the ACA’s other provisions. It does.
… It spends government money on, among other things, the study of how to spend less government money….
… Often, a minor provision will be the price paid for support of a major provision. So, if the major provision were unconstitutional, Congress would not have passed the minor one.
Some provisions, such as requiring chain restaurants to display nutritional content, appear likely to operate as Congress intended, but they fail the second test for severability… When we are confronted with such a so-called “Christmas tree,” a law to which many nongermane ornaments have been attached, we think the proper rule must be that when the tree no longer exists the ornaments are superfluous. We have no reliable basis for knowing which pieces of the Act would have passed on their own. It is certain that many of them would not have, and it is not a proper function of this Court to guess which. To sever the statute in that manner would be to make a new law, not to enforce an old one. This is not part of our duty.
This Court must not impose risks unintended by Congress or produce legislation Congress may have lacked the support to enact. For those reasons, the unconstitutionality of both the Individual Mandate and the Medicaid Expansion requires the invalidation of the Affordable Care Act’s other provisions.
For the reasons here stated, we would find the Act invalid in its entirety. We respectfully dissent.