Neil Siegel

January 23, 2012Duke Law News

Making the case on health care reform


This spring, the U.S. Supreme Court will hear oral arguments on one of the most hotly contested laws in recent memory: The Patient Protection and Affordable Care Act of 2010 (ACA). Should the appeal from a ruling of the U.S. Court of Appeals for the Eleventh Circuit pass a jurisdictional challenge, the key issue before the Court will be the constitutionality of the ACA’s minimum coverage provision. Called the “individual mandate” by its critics, the provision requires most non-elderly Americans to purchase a minimum amount of health insurance coverage or pay what the law calls a “penalty” each year.

Various amicus curiae briefs being filed with the Court cite the work of Professor Neil Siegel. An expert in U.S. constitutional law and theory, Siegel has focused much of his recent scholarship on the ACA debate, directly addressing four matters central to the controversy. In a series of new and forthcoming articles, he argues that (1) Congress acted within the scope of its commerce power in passing the minimum coverage provision in an attempt to solve economic problems that spill over state boundaries; (2) a mandate to purchase health insurance does not leave the door open to any and all government mandates in the future; (3) the minimum coverage provision is not subject to the federal tax Anti-Injunction Act, which, if applicable, would delay resolution of the constitutional questions until after the first exactions are collected following the filing of 2014 taxes; and (4) the ACA exaction for remaining uninsured is, in fact, a tax for constitutional purposes.

With national spending on health care amounting to 16.2 percent of GDP in 2007 and rising, and with 50 million Americans lacking health insurance in 2009, Congress was seeking to address critical problems in passing the ACA, Siegel says. Still, he notes that his goal is not to defend the ACA as a policy matter, but to make the case that the Supreme Court has no justifiable basis on which to strike down the minimum coverage requirement.

“I’m focused on the constitutionality of the minimum coverage provision,” says Siegel, who co-directs the Program in Public Law. “If, as certain conservatives have long said, plenty of stupid laws are constitutional, then it follows that plenty of imperfect laws are constitutional as well. It’s one thing to say that this law is problematic in various ways. It’s another for the justices to use arguments that have no basis in constitutional text, history, structure, or precedent to reject the verdict of the political process regarding a debate that extends over many decades going back to FDR.”

Finding Commerce Clause support for the individual mandate


On the merits, the debate over the minimum coverage provision centers primarily on its constitutionality under the Commerce Clause, either alone or combined with the Necessary and Proper Clause. Under current doctrine, the Commerce Clause permits Congress to regulate the channels and instrumentalities of interstate commerce, and economic activities that substantially affect interstate commerce.

Considerable debate has centered on whether Congress has the authority to regulate “inactivity” in the health insurance market — that is, an individual’s choice to not purchase something. The distinction between the regulation of “inactivity” and “activity” lies at the heart of the challenges to the minimum coverage provision and the current circuit split; the Eleventh Circuit ruled the purchase mandate unconstitutional, while the Sixth and District of Columbia Circuits upheld it.

“Critics who say Congress is improperly regulating inactivity are focusing on activity in the insurance market,” Siegel says. “But Congress was focused on the health care market as well, and almost all people are or eventually will be active in the health care market. The two markets are closely connected — health care is overwhelmingly financed by health insurance. And you can be completely inactive in both markets for the time being and still benefit from the existence of the health care infrastructure.” ACA critics agree that once an individual participates in the health care market, Congress can mandate insurance as a condition of participation, he adds.

But, Siegel argues, the emphasis should not be on the distinction between inactivity and activity. Congress is regulating economic subject matter with the ACA, he maintains, as an individual’s decision to purchase or not to purchase health insurance is itself an economic decision about how to manage substantial financial risk.

The key federalism question, he says, is whether these economic problems are better dealt with by the states acting on their own, or via collective action among the states generally. “Are there good reasons to think Congress is better situated to deal with this than the states are? That’s the central question under the Commerce Clause.”

Reining in health care “free riders”


Siegel calls on earlier scholarly work to characterize the challenges in the interstate health care market as classic “collective action” problems worthy of federal intervention; the economic behavior of individuals — choosing not to purchase health insurance, for example — affects the welfare of others across state lines.

Congress, he says, sought with the minimum coverage provision to curb two problems of economic free-riding that spill over state boundaries: “cost-shifting” and “adverse selection” in the health care and health insurance markets.

“As a matter of federal and state law and as a matter of longstanding charitable practice, we don’t let people die in the streets,” he says. “When people come to the emergency room very ill or injured, we treat first and ask about insurance later.” Each year, uninsured Americans obtain more than $40 billion worth of medical services, he points out. “Those costs are shifted from the uninsured to the insured, to federal and state governments, to insurance companies and providers, and other participants in the health care system.”

The adverse selection problem arises when people delay purchasing insurance until they are ill. “Without the minimum coverage provision, people have every incentive to wait and delay getting insurance until they are sick,” says Siegel, who adds that the ACA exacerbates the problem by prohibiting insurers from denying coverage based on preexisting conditions. “It’s basically insurance on demand.”

Addressing the “slippery slope”


Siegel disagrees with the assertions of ACA critics that “if Congress can make you buy health insurance, there are no limits to what Congress can do,” but notes that the government will have to make that case to the justices far more effectively than he believes it has done thus far. “Defenders of the ACA can’t spend all of their time explaining how [the minimum coverage provision] is easily and obviously constitutional under current doctrine,” he says. “The justices can change the doctrine.”

He recalls the government’s 1995 oral argument in United States v. Lopez, when, in response to direct inquiries from the justices regarding the federal regulation of guns near schools, the solicitor general failed to identify a single possible regulation that would exceed the scope of the commerce power. Lopez marked the first time since the New Deal that the Court struck down a federal law as beyond the scope of the commerce power.

By contrast, Siegel says the ACA’s insurance requirement leaves the commerce power limited in at least four ways: it does not regulate noneconomic subject matter; it does not violate other constitutional rights, such as the right to bodily integrity; it does mitigate a significant collective action problem involving multiple states; and it does not impose an economic mandate where Congress readily could have imposed an equally effective and less coercive alternative.

Addressing jurisdiction


In the interests of regulatory guidance, Siegel believes the Court should rule on the merits of the ACA challenge in its current term — not wait, as some lower courts have held, until after the minimum coverage provision comes into effect on Jan. 1, 2014. But there is a potential jurisdictional hurdle to the high court appeal posed by the federal tax Anti-Injunction Act (TAIA). Because that law bars taxpayer lawsuits that have the purpose of restraining tax assessments or collections until after an exaction is actually paid, it could delay challenges until 2015, following the assessment and collection of 2014 taxes.

“The substance of the health care law was and remains politically divisive. The timing of litigation over its constitutionality should not be,” Siegel says.

Last September, the U.S. Court of Appeals for the Fourth Circuit cited the TAIA in declining to rule on an ACA challenge, as did Judge Brett Kavanaugh in his dissent to the D.C. Circuit’s ruling on the merits. Majorities on the D.C., Sixth, and Eleventh Circuits, however, said the TAIA’s ban on pre-enforcement challenges to a “tax” assessment or collection does not apply to the “penalty” mandated by the ACA.

Siegel and collaborator Michael Dorf of Cornell Law School hope the Supreme Court will consider the novel jurisdictional argument they make in a new paper. In their view, even if the ACA exaction for noninsurance qualifies as a tax for purposes of the TAIA, the government’s authority to assess that tax will not exist until Jan. 1, 2014. On that basis, they maintain that current challenges to the minimum coverage provision do not have the purpose, required by the TAIA, of restraining tax assessment or collection.

But Siegel and Dorf go further, encouraging Congress to pass a clearly permissible special-purpose statute allowing pre-enforcement challenges to the minimum coverage provision to proceed in the current Supreme Court term.

Calling in the tax power


The exact nature of the monetary exaction mandated by the ACA for failing to buy health insurance is also central to the current Supreme Court case. Much controversy, like the jurisdictional question, has centered on whether the so-called “penalty” for being uninsured is or is not a tax for purposes of Congress’s tax power. The levy of a penalty, Siegel points out, requires Commerce Clause justification, while the levy of a tax can be justified by the tax power.

According to Siegel and Robert Cooter of Berkeley Law, his co-author of a forthcoming article, determining whether an exaction is a tax or a penalty should turn on the exaction’s material characteristics, not the label that Congress attaches to it. And with respect to the ACA, the exaction will work like a tax, Siegel says.

“In terms of its material characteristics and how it’s likely to operate in practice, it’s not just a tax — it’s emphatically a tax,” he says. Most importantly, the exaction is relatively low; it is never higher than the cost of the most basic level of private insurance. This means that the exaction will operate as a financial incentive, as taxes do; it will not prohibit the conduct of those who are determined to remain uninsured, as regulatory penalties do. Because the exaction will dampen behavior without preventing it, the exaction is projected to raise a significant amount of revenue — about $4 billion per year.

“From our point of view, it has all the earmarks of a tax, and the Court has said that the label doesn’t matter. What matters is how the exaction operates.” Offering a clear theory to distinguish between the two prevents Congress from evading limits on the Commerce Clause, Siegel adds.

Siegel’s overall approach to the ACA defends very broad, but not limitless, federal power, he points out.

“It’s basically a defense of the regime under which Americans have lived since 1937 — a regime that now is under attack, and that I think is worthy of being defended. There’s a reason why Article 1, Section 8 gives Congress robust power. It’s to accomplish what Chief Justice John Marshall famously said in McCulloch v. Maryland, which is to ensure the preservation of the Constitution and the nation: ‘This provision is made in a constitution, intended to endure for ages to come, and consequently, to be adapted to the various crises of human affairs.’” — Frances Presma

» Duke Law scholars tackle the Affordable Care Act

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Neil Siegel

quote calloutlI'm focused on the constitutionality of the minimum coverage provision. … It’s one thing to say this law is problematic in various ways. It’s another for the justices to use arguments that have no basis in constitutional text, history, structure, or precedent to reject the verdict of the political process regarding a debate that extends over many decades going back to FDR."

—Neil Siegel










Winter 2012
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