23 March 2010

The AGs' New Suit

If the plural of Attorney General is AttorneyS General, would the plural of the abbreviation "AG" be A'sG? Sorry... random thought as I was typing my title for this post....

Anyway, if you haven't heard the news, now that President Obama has signed the Patient Protection and Affordable Healthcare Act (HR3590) into law, already 13 states' Attorneys General have filed a lawsuit in the Supreme Court alleging that the law is unconstitutional and asking for it to be immediately struck down. This morning, I read through the .pdf file of the lawsuit, and wanted to express some thoughts.

First, a summation. The principle plaintiff in this suit is the Attorney General of the State of Florida, along with the AGs of South Carolina, Nebraska, Texas, Utah, Louisiana, Colorado, Michigan, Alabama, Pennsylvania, Washington, Idaho and South Dakota. The defendents are the US Dept. of Health and Human Services (HHS) and Secretary of HHS Katherine Sebelius, US Dept. of the Treasury (Treasury) and Secretary Timothy Geithner, and US Dept. of Labor (Labor) and Secretary Hilda Solis. For purposes of this blog post, I am going to call the AGs the Plaintiffs and the Depts and Secretaries the Defendents just so we can keep track of everyone.

The Plaintiffs allege that HR3590 is unconstitutional on three fronts, all of which I will delve into in a moment in greater detail. First is that HR3590 is unconstitutional because is unfairly encroaches on the powers of the states in violation of the 10th Amendment of the Constitution. "The Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying healthcare coverage." The second front is that the new law is unconstitutional because it levies a tax penalty on any person who chooses not to purchase health insurance in violation of Article 1, Sections 2 and 9 of the Constitution. The suit calls this type of tax a "capitation tax," which is unlawful. The third and final front is an ideological argument which basically says that the federal government encroaching on the sovereignty of the states to use their discretion in providing health insurance, what the suit calls a "derogation of the core constitutional principle of federalism upon which this nation was founded."

The suit seeks "declaratory and injunctive relief against the Act's operation" to preserve the individual liberty of the states and their citizens. Basically, this just means that they want the Court to strike down the law. So then, upon further examination of the issue, do the Plaintiffs have a case?

1. Violation of the 10th Amendment.
The tenth amendment to the Constitution states "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." In other words, if the Constitution does not give the government, specifically in this case, the Congress, the power to do something, then that power rests with either the states or with individuals as applicable. And indeed, one interpretation of this clause would suggest that because the Constitution does not give government the explicit right to provide for health insurance, therefore that power is reserved to the states.

On the other hand, as the bill claims in Section 1501, "the individual responsibility requirement... is commercial and economic in nature, and substantially affects interstate commerce" because both "the requirement regulates activity that is commercial and economic in nature" and "health insurance and health care services are a significant part of the national economy (HR3590 p. 317-318)." This, according to the Congress, therefore places this bill as under the Commerce Clause of the Constitution, Article 1, Section 8, Clause 3. This is really a significant argument, as the Supreme Court could side with the premise that this healthcare extension is indeed protected under the Commerce Clause.

In the case of Gibbons v. Ogden in 1824, where two individuals operated competing steamboat services between New York and New Jersey, the Supreme Court was asked to decide a question on the exclusivity of Congress' powers under the Commerce Clause. The most interesting, and applicable, piece of information from Gibbons to this current case is Chief Justice John Marshall's characterization of the Commerce Clause. He said, "Comprehensive as the word 'among' is, it may very properly be restricted to that commerce which concerns more states than one." If we go by a definition like this, Congress would have power to regulate health insurance, given the very large number of people who use insurance programs provided for by the government (Medicare, Medicaid).

In that manner, it is likely that the court would affirm that HR3590 does NOT violate the 10th Amendment.

2. Violation of the "Capitation Tax" provisions of Art. 1, Sec. 2 and 9.
This is kind of a hard notion to wrap one's head around, given the amount of legal-ese involved with the definitions of a capitation tax, direct taxation, and apportionment, but I'm going to do my best here for the loyal readers who've stuck through the Commerce Clause stuff!

Article 1, Section 2 says that, among other things, "Representatives and direct Taxes shall be apportioned among the several States... according to their respective numbers...." It was later changed by the XIV Amendment because of the practice of counting 3/5 of each slave. Art. 1, Sec. 9 says that "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census...." This was also later changed by the XVI Amendment to give Congress the power "to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to and census or enumeration."

First, a couple definitions: a capitation tax, or "head tax," is "an assessment levied by the government upon a person at a fixed rate regardless of income or worth (from the Legal Dictionary at The Free Dictionary)." A direct tax is "a tax paid directly by the person on whom it is levied." And apportionment is a system of dividing something (in our case, the tax burden) among the states based upon the population of the state according to the Census. For example, a state with twice the population of another state would pay twice the amount of tax.

In the bill HR3590, the tax penalty being challenged by the Attorneys General is this:
- Beginning in 2014, a penalty will be levied on the income of any person over 18 who does not maintain a minimum level of acceptable health insurance coverage, or on any taxpayer whose under-18 dependents are similarly not covered. This tax penalty will not exceed 300% of the single taxpayer's applicable dollar amount (ADA). The ADA is $95 per person in 2014, $350 per person in 2015, and $750 in 2016. After 2016, the ADA will increase based upon cost of living adjustments, rounded down to the nearest $50. The ADA for a minor under 18 not covered will be 1/2 of the ADA for whomever is supposed to provide him or her coverage.

Since the 16th Amendment changed the definition of what the Congress is allowed to do with income taxes, however much I may agree that the penalty on income taxes is a capitation tax, I don't know if the argument can be made that the bill is unconstitutional because the penalty is unconstitutional because it is not being apportioned to the states based on Census data. In my opinion, it seems that the Court would be forced to strike down the Plaintiffs' claim.

3. The Ideological Argument
The Plaintiffs' entire argument centers around the encroachment of the federal government on the sovereignty of the states themselves to regulate health insurance within their borders. To that end, according to the lawsuit, the unfunded federal mandate that states expand their Medicaid services, government offices to accommodate millions more currently-uninsured people, and infrastructure changes would place an unfair burden on the states which, due to the recession, are already hurting.

In the example given by the brief in the case of Florida, the state's Agency for Healthcare Administration (AHCA) estimates that 1.2 million people in the state are below the 133% threshhold of the federal poverty line, and are thus mandated to be added to the Medicaid register. That's a cost that Florida will have to bear on its own. For this year, Florida estimates spending $18 billion on Medicaid for approximately 2.7 million people. The new costs to just the State of Florida are about $150 million in 2014, $430 million in 2015, $940 million by 2017, and $1.05 billion by 2019. All this while the federal percentage of coverage per dollar spent in Florida declines from 67% in 2009 to 55% in 2011.

This is the dangerous part of the bill. Placing ever-increasing costs on the states while not funding them through the federal government could end up over-burdening the states themselves to the point where state economies could collapse - Florida, California, and certain New England states would be among what I would think would be the first to go. Not a good precedent.

That said, I could see the Supreme Court going either way on a decision like this. Either they see the case similarly to how I do and affirm the constitutionality of HR3590 under the Commerce Clause and as not in violation of the 10th Amendment or they take a more restrictive view of the Constitution and side with the Plaintiffs' arguments about the burden the law places on states as an unfunded mandate, and by that, it therefore restricts state sovereignty under the 10th Amendment.

Personally, as much as I wouldn't mind seeing the Court strike this one down so that Congress has to start over with healthcare reform, I just can't see them doing it on the bases that this lawsuit provides. I would be very interested to know what some of my readers think, because I know a few of you are law scholars or students in your own rights. Post your comments and let me know if I've missed anything, or if you have a different viewpoint.


  1. I think that the law office that handles this will be inundated with phone calls from both sides of the fence. The outcome will be historical.

  2. The supreme court won't overturn the individual mandate on those grounds, or any other. Federal mandates have always held up.
    FICA withholding, FUTA, Selective Service, federal jury duty, 1040.

    The militia act of 1792 required individuals to purchase a gun.

    They were not stupid when they chose to administer this through the IRS instead of DOJ, HHS, FTC, etc. If they had levied it as a fine instead of as a tax, they would have had to fight the 5th amendment. They would have had to argue against both the takings clause & self-incrimination for the uninsured.

    If you are really against the mandate and want a way out, just convert to the Amish. (Side note: you would also be giving up your medicare & social security....plus electricity, guns, cars, etc)

  3. Question: why would levying a fine versus a tax penalty mean the law would stand against the takings and self-incrimination clauses? Can you expand on that point?

  4. These guys explain it pretty well since I don't fully understand the takings clause argument.


    The suit against Masscare arguing the takings clause already lost last year.

    For the self incrimination argument, basically, the DOJ or HHS could not ask you if you have insurance, then fine you if you say "no". They couldn't do that to your employer either, because the employer might also receive a fine.

    However, you cannot plead the 5th on your taxes. Al Capone learned that lesson in Alcatraz.

    A fine requires prosecution, taxes don't.

    To be perfectly honest, almost no one will ever pay the fine. There is not a penalty for refusing to pay it (other than maybe an IRS audit).

    From the bill: "In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure."

  5. Hm... interesting. I did not think of it that way. Thanks for the perspective!