National Federation of Independent Business v. Sebelius

Summary

In March 2010 Congress passed and President Obama signed the Patient Protection and Affordable Care Act. Two provisions drew constitutional challenge. The individual mandate required most Americans to maintain a minimum level of health insurance or make a shared responsibility payment to the Internal Revenue Service. The Medicaid expansion required states to cover adults with incomes up to 133 percent of the federal poverty level, on pain of losing not only the new funds but all of their existing federal Medicaid money. On the day the law was signed, Florida and twelve other states sued; more states joined, as did the National Federation of Independent Business and individual plaintiffs. The Eleventh Circuit held the mandate beyond Congress's commerce power but upheld the Medicaid expansion. The challengers argued that Congress may regulate commerce but may not compel people to enter it by buying a product; that the payment was a penalty, not a tax; and that threatening states with the loss of all Medicaid funds was coercion rather than an offer. The government answered that nearly everyone eventually uses health care, that the uninsured shift billions of dollars in costs onto others, that the mandate was a necessary part of insurance reforms, that the payment could in any case be sustained as a tax, and that Congress may attach conditions to federal funds. On 28 June 2012 the Court issued a divided ruling. Chief Justice Roberts, writing for himself, concluded that the Commerce Clause does not authorize Congress to compel individuals to buy insurance, because regulating people for doing nothing would open a vast new domain of federal power; the four joint dissenters agreed on this point. But for the Court, joined by Justices Ginsburg, Breyer, Sotomayor and Kagan, he held by five to four that the payment could fairly be read as a tax on those without insurance, and so sustained the mandate under the taxing power. On Medicaid, seven justices agreed that threatening states with the loss of existing funds was unconstitutionally coercive; Roberts, joined by Breyer and Kagan, remedied the defect by barring the withdrawal of existing funds, leaving the expansion itself optional. Justice Ginsburg, joined by Justice Sotomayor and in part by Justices Breyer and Kagan, would have upheld the mandate under the Commerce Clause as well and the Medicaid expansion as enacted, calling the Chief Justice's reading of the commerce power a return to an earlier era. The joint dissent of Justices Scalia, Kennedy, Thomas and Alito would have held that the mandate exceeded both the commerce and taxing powers, that the Medicaid expansion was coercive, and that the whole Act should fall. The library text contains excerpts of the three opinions, without footnotes; Roberts's portion ends during his discussion of the taxing power, so his Medicaid analysis is not reproduced. In 2017 Congress reduced the payment to zero, and in California v. Texas (2021) the Court dismissed a renewed challenge for lack of standing. Many states later chose to expand Medicaid.

Top Lessons

• Activity and inactivity

  Roberts and the joint dissenters held that the commerce power regulates existing activity and cannot compel people to begin buying a product. Ginsburg answered that almost everyone takes part in the health-care market sooner or later, so the uninsured are already participants whose choices affect prices for all.

• Labels and substance

  Congress called the payment a penalty, yet the Court upheld it as a tax by looking to how it actually worked. The joint dissent objected that the Court was rewriting a statute Congress had framed differently, while Roberts said the Court must adopt any fairly possible reading that saves a law.

• Federal money and state independence

  Seven justices concluded that threatening a state with the loss of all existing Medicaid funds left no real choice. The decision marked the first time the Court held a spending condition coercive, and it turned the expansion into a decision each state could make for itself.

• Deference and duty

  Roberts began by insisting that judges possess neither the expertise nor the prerogative to make policy, yet he also held that deference cannot become abdication. Each opinion in the case claimed to respect the Constitution's limits while drawing them in different places.

Verified Quotes

Medical Lens

The case decided the constitutional fate of the largest change in American health-care financing since Medicare and Medicaid, and the opinions preserve a judicial account of the economics of care: uncompensated treatment of the uninsured, adverse selection in insurance markets, the Massachusetts reform, and the dependence of state budgets on Medicaid, which the Chief Justice notes exceeded 10 percent of most states' revenue.

• Opinion of Chief Justice Roberts, Part I, paragraph beginning The second provision of the Affordable Care Act directly challenged here is the Medicaid expansion

  Describes Medicaid's origins in 1965, its universal adoption by the states by 1982, and the expansion's extension of coverage to adults up to 133 percent of the poverty level.

• Opinion of Justice Ginsburg, Part I-A and I-B, paragraphs beginning In 2009, approximately 50 million people were uninsured

  Sets out national health-expenditure figures, the scale of uncompensated care, and how the costs of treating the uninsured are passed on to insured patients and providers.