FedSoc SCOTUScast – Randy Barnett and Neal Katyal Discuss Obamacare

• July 16, 2012 • 11:10 am

On June 28, 2012, the Federalist Society organized a SCOTUScast (recording here) on the Affordable Care Act decision. Randy Barnett, the Carmack Waterhouse Professor of Legal Theory at the Georgetown University Law Center, discussed the case with Neal Katyal, a partner at Hogan Lovells, professor at Georgetown Law Center, and former Deputy Solicitor General.

Barnett began by noting that the two most important provisions of the ACA at stake were the individual mandate and the Medicaid provision.  The former required that all Americans purchase health insurance as a means to compensate insurance companies for the costs that were being imposed upon them by various restrictions or various requirements–for example, guaranteeing community rating, which required that they issue policies for coverage for pre-existing conditions and that their rates adjusted accordingly.  The Medicaid provision, he explained, represented a substantial change in the program: Congress was going to provide considerable additional funding for new expanded Medicaid programs. It conditioned this new funding on states’ acceptance of the expanded program, but it also reserved the right to condition the funding for all existing Medicaid programs.  It was the entire funding condition that was challenged because it was alleged to be coercive toward the states.

Barnett said that the answers to this issues were not what anybody expected. Just about everybody on both sides expected that if the ACA was upheld, it would be upheld under the Commerce Clause as well as under the tax power, but if it was struck down, then the Commerce Clause arguments and the challenges that were being made would be accepted and the government’s objections would be rejected. So basically it would be all or nothing. But that is not what his side got, he noted. Instead, there was a very unexpected opinion from Chief Justice Roberts as the swing vote: he strongly affirmed the Commerce Clause argument that Barnett and others had been making since the beginning. Second, that the courts will enforce those limits. Third, that the individual mandate exceeds those limits because it goes beyond the regulation of activity to the mandating or requiring of activity that would then be regulated. Chief Justice Roberts accepted that argument in its entirety, according to Barnett. He also accepted the argument that the Necessary and Proper Clause did not save the statue because, however necessary it might have been in the overall scheme of the ACA, it was not a proper means of exercising Congress’ power. But then he turned around and gave the statute a limiting construction, which he called a “saving construction”: the part of the individual mandate that required activity was eliminated by the penalty part, which was the cost of not getting insurance. He said the penalty part standing alone could be reconstructed to be a tax. Roberts explained that it was not the best or natural reading of the statute, but he said it was a possible reading that could be reasonable and therefore under the obligation of the Court to uphold the statue where possible. He adopted this saving construction, which he said he wouldn’t need to do if he could have upheld the entire mandate under the commerce clause and necessary and proper clause. So that is what happened on that score.

As for the Medicaid provision, Robert held with the concurrence of seven justices that the conditions being imposed on Medicaid spending were in fact unconstitutionally coercive, adding that this is the first time since the New Deal that any conditions based on congressional spending have been held to be both coercive and unconstitutional.  But then he said that the remedy for that was not to strike down or invalidate the entire Medicaid provisions but to say the secretary of HHS would not be able to condition existing Medicaid spending on the acceptance of the new programs.  Thus, states would essentially have a free choice to accept the new funding and expanded programs or not accept those things, while retaining and receiving the funds for the original program. Barnett then turned the discussion over to Neal Katyal.

Katyal congratulated Barnett for winning most of what he asked for: For the first time since the New Deal, the Supreme Court said that something transcends the limits of the commerce power. The kind of ethos of the decision–the muscular commerce clause limitation–could be something that would be fertile ground for litigation–even more so on the Medicaid side because, as Barnett said, the Court held that these restrictions on spending were too coercive. Moreover, other programs that use the spending power as a stick will be potentially deemed unconstitutional.

After agreeing with Katyal’s analysis, Barnett offered a hypothetical: What would have happened if Congress had written the law the same way except they explicitly called the penalty a tax. Barnett said that even though he and others would have argued that it is still unconstitutional because it would be a direct tax, etc., he said it was pretty safe to say that the lower federal courts would have upheld that tax.  That would have been the case even though it was a potentially punitive tax on inactivity. Yet had the law been written that way, and had it been upheld by the lower courts, Barnett doubted that the Supreme Court would have granted cert to the case. Thus, we would not have gotten terrific benefit of this decision on the Commerce Clause and Necessary and Proper Clause, as well as this limited ruling on the tax power.

The discussion continued from there…