Even without mentioning the word “bankruptcy,” the most important court decision in years may still have a huge effect on future bankruptcies. How? Possibly by greatly reducing the need to file bankruptcies resulting from medical debts.
First, a short summary.
Last week’s Supreme Court decision upheld the “individual mandate,” the most contentious part of the Affordable Care Act. That’s the obligation for certain people who don’t get health insurance to pay a penalty for not doing so. The Court held that the mandate is not constitutional under the Commerce Clause because NOT buying insurance is NOT engaging in commerce. So not buying insurance is not behavior that Congress has the power to regulate on that basis.
However, the Court still determined that the mandate is constitutional, under a different part of the Constitution, Congress’ taxing power. Even though Congress did not call the penalty a tax, it functions as a tax because, among other reasons, payment and collection of the penalty are done only through the IRS.
The Court also upheld the “Medicaid expansion” part of the Act. But while doing so the Court significantly limited a penalty for any states which decide not to participate in that expansion.
Second, if you want to read all or part of the full opinion, it’s here on the Supreme Court’s website. And for a good all-around news summary of the decision, here is an article from the Washington Post on the day it was released. For a more thorough summary, see this blog in “plain English” from the highly respected SCOTUSblog.
Third, to make it even easier for you, the rest of this blog consists of key quotations from the Court’s opinion. So you get the actual language of the court without wading through what are actually four different opinions totaling 193 pages. Thes following excerpts come only from the “opinion of the Court,” the parts which got the necessary five-out-of-nine votes to carry the day, totaling only about 36 pages out of the 193. Also to keep it manageable, these excerpts focus only on the “individual mandate” issue, not the Medicaid issue or any of the other procedural ones. (If you want to find any of the excerpts within the full opinion, the page number from Chief Justice Roberts’ opinion is in parentheses at the end of each one.)
“In our federal system, the National Government possesses only limited powers; the States and the people retain the remainder. Nearly two centuries ago, Chief Justice Marshall observed that ‘the question respecting the extent of the powers actually granted’ to the Federal Government ’is perpetually arising, and will probably continue to arise, as long as our system shall exist.’ McCulloch v. Maryland, 4 Wheat. 316, 405 (1819).” (p. 2)
“The Federal Government has expanded dramatically over the past two centuries, but it still must show that a constitutional grant of power authorizes each of its actions.” (p. 3)
“Our permissive reading of these powers is explained in part by a general reticence to invalidate the acts of the Nation’s elected leaders. ‘Proper respect for a co-ordinate branch of the government’ requires that we strike down an Act of Congress only if ‘the lack of constitutional authority to pass [the] act in question is clearly demonstrated.’ United States v. Harris, 106 U. S. 629, 635 (1883). Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices. (p. 6)
“In 2010, Congress enacted the Patient Protection and Affordable Care Act, 124 Stat. 119. The Act aims to increase the number of Americans covered by health insurance and decrease the cost of health care. … .
“The individual mandate requires most Americans to maintain ‘minimum essential’ health insurance coverage. 26 U. S. C. §5000A. The mandate does not apply to some individuals, such as prisoners and undocumented aliens. §5000A(d). Many individuals will receive the required coverage through their employer, or from a government program such as Medicaid or Medicare. See §5000A(f). But for individuals who are not exempt and do not receive health insurance through a third party, the means of satisfying the requirement is to purchase insurance from a private company.” (p. 7)
“The Government advances two theories for the proposition that Congress had constitutional authority to enact the individual mandate. First, the Government argues that Congress had the power to enact the mandate under the Commerce Clause. Under that theory, Congress may order individuals to buy health insurance because the failure to do so affects interstate commerce, and could undercut the Affordable Care Act’s other reforms. Second, the Government argues that if the commerce power does not support the mandate, we should nonetheless uphold it as an exercise of Congress’s power to tax. According to the Government, even if Congress lacks the power to direct individuals to buy insurance, the only effect of the individual mandate is to raise taxes on those who do not do so, and thus the law may be upheld as a tax.” (p. 15)
The Commerce Clause
“The Constitution grants Congress the power to ’regulate Commerce.’ Art. I, §8, cl. 3 (emphasis added). The power to regulate commerce presupposes the existence of commercial activity to be regulated.” (p. 19)
“The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce.” (p. 20)
“Congress already enjoys vast power to regulate much of what we do. Accepting the Government’s theory would give Congress the same license to regulate what we do not do, fundamentally changing the relation between the citizen and the Federal government.” (pp. 23-24)
“The Framers gave Congress the power to regulate commerce, not to compel it, and for over 200 years both our decisions and Congress’s actions have reflected this understanding.” (p. 24)
“The Government argues that the individual mandate can be sustained as a sort of exception to this rule, because health insurance is a unique product. According to the Government, upholding the individual mandate would not justify mandatory purchases of items such as cars or broccoli because, as the Government puts it, ‘[h]ealth insurance is not purchased for its own sake like a car or broccoli; it is a means of financing health-care consumption and covering universal risks.’ Reply Brief for United States 19. But cars and broccoli are no more purchased for their ‘own sake’ than health insurance. They are purchased to cover the need for transportation and food.” (p. 27)
“No matter how “inherently integrated” health insurance and health care consumption may be, they are not the same thing: They involve different transactions, entered into at different times, with different providers. And for most of those targeted by the mandate, significant health care needs will be years, or even decades, away. The proximity and degree of connection between the mandate and the subsequent commercial activity is too lacking to justify an exception of the sort urged by the Government. The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity. Such a law cannot be sustained under a clause authorizing Congress to ‘regulate Commerce.’ ” (p. 27)
Congressional Taxing Power
“The Government’s tax power argument asks us to view the statute differently than we did in considering its commerce power theory. In making its Commerce Clause argument, the Government defended the mandate as a regulation requiring individuals to purchase health insurance. The Government does not claim that the taxing power allows Congress to issue such a command. Instead, the Government asks us to read the mandate not as ordering individuals to buy insurance, but rather as imposing a tax on those who do not buy that product.” (p. 31)
“Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. See §5000A(b). That, according to the Government, means the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.” (p. 32)
“The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects. The ‘[s]hared responsibility payment,’ as the statute entitles it, is paid into the Treasury by ‘taxpayer[s]’ when they file their tax returns. 26 U. S. C. §5000A(b). It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. §5000A(e)(2). For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status. §§5000A(b)(3), (c)(2), (c)(4). The requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which—as we previously explained—must assess and collect it “in the same manner as taxes.” Supra, at 13–14. This process yields the essential feature of any tax: it produces at least some revenue for the Government.” (p. 33)
“Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the severe burden that taxation—especially taxation motivated by a regulatory purpose—can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.” (pp. 43-44)
“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” (p. 44)