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December 13, 2010

Is the Health Care Law Beyond the Commerce Power?

In his decision this week in Virginia v. Sebelius finding the Patient Protection and Affordable Care Act unconstitutional, United States District Judge Henry E. Hudson explains that Congress cannot, under Article I’s Commerce Clause, compel individuals to purchase health care insurance by assessing them a penalty if they choose not to do so. He distinguishes this case from Wickard v. Filburn. In that case, the Supreme Court concluded that Congress can regulate the activity of the individual wheat farmer, because such activity in the aggregate has a substantial effect on interstate commerce even if the wheat transactions of each individual farmer do not.

But wouldn’t there be a significant effect on interstate commerce—as Congress believes—if individuals declined to purchase health care insurance (assuming they are not otherwise covered)? Indeed, isn’t that the whole point of the new health care law—to avoid that effect by creating incentives, through the assessment of a tax penalty, for individuals to purchase coverage?

The answer to the second question is yes—but the answer to the first, according to Judge Hudson, depends on the activity in question. In his view, Congress’s commerce power only reaches activity in a market, not the decision not to participate in a market. Yet in Wickard, the Court allowed Congress to reach wheat farmers who chose not to sell the wheat they produced—just as in this case, where Congress is trying to reach individuals who have chosen not to purchase their own health insurance.

Not so fast, Judge Hudson tells us. In Wickard, the individual farmers could have avoided regulation entirely by choosing not to engage in the production of wheat, while in this case, he argues, individuals cannot avoid the regulation: they must either purchase coverage or pay the penalty.

This reasoning has a superficial appeal, but it ignores the fact that, unlike the farmer who chooses not to grow wheat, no individual living in the United States can help being a part of the health care market. If you choose (for whatever reason) not to have health insurance coverage, that does not mean that you are not participating in the health care market—and it does not mean the health care services you will inevitably receive at some point in your life have no economic value. Rather, you have simply chosen a different way to structure your particular health care transaction—namely, by relying upon the rest of us to pay for the consequences of your decision not to have coverage.

In the end, you may have chosen not to pay for health insurance coverage, but you have not chosen to avoid an economic transaction. Surely Congress has the authority under the Commerce Clause to regulate the aggregate effect on interstate commerce of all those individuals who have chosen to engage in that particular economic transaction.

Lawrence Friedman

1 comment:

  1. Great post I was looking for information on VA vs. Sebelius