Health Care Financing Reform (134): Judge Graham's Opinion in Obama v. Thomas More Law Center

Here is a summary of Judge Graham's dissenting opinion from the decision of the Sixth Circuit in Obama v. Thomas More Law Center.  Judge Graham would strike down the individual mandate of the PPACA as unconstitutional.

Judge James Graham, a District Court judge sitting by assignment on the Sixth Circuit Court of Appeals, dissented from the decision of the court in Obama v. Thomas More Law Center.  He concluded that Congress lacks the authority under the Commerce Clause to enact the individual mandate contained in the Patient Protection and Affordable Care Act.

Judge Graham rejects the government's contention that the individual mandate of the PPACA may be properly characterized as a regulation of the health care industry rather than the health insurance industry:

The requirement that all citizens obtain health insurance does not depend on them receiving health care services in the first place. Individuals must carry insurance each and every month regardless of whether they have actually entered the market for health services. Simply put, the mandate does not regulate the commercial activity of obtaining health care. It regulates the status of being uninsured.

However, Judge Graham also purports to reject the challengers' distinction between "activity" and "inactivity" as a basis for determining the scope of Congress' authority under the Commerce Clause.  He states:

Much has been made in this litigation of the distinction between activity and inactivity. The Supreme Court has often employed the word �activity� to describe the regulatory subjects of Congress�s power over interstate commerce. See Wickard, 317 U.S. at 125; Lopez, 514 U.S. at 559; Morrison, 529 U.S. at 609-10; Raich, 545 U.S. at 17. Yet I do not interpret those cases as drawing a constitutional line between activity and inactivity. That distinction would suffer from the same failings as the �direct� and �indirect� effects test of prior Commerce Clause jurisprudence. See NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 36-38 (1937) (rejecting the direct/indirect distinction and stating that the question of Congress�s authority is �necessarily one of degree�); Lopez, 514 U.S. at 579 (Kennedy, J., concurring) (noting that questions of constitutional law are often �not susceptible to application of bright and clear lines�). Imposing an activity/inactivity line could hinder Congress in future cases from removing burdens on commerce that certain classes of individuals have passively enabled. See he mechanical United States v. Faasse, 265 F.3d 475, 487 (6th Cir. 2001) (upholding the constitutionality of the Child Support Recovery Act and rejecting the argument that the willful failure to make a court-ordered, out-of-state child support payment from California to Michigan was insufficient for Commerce Clause purposes).

Instead, Judge Graham finds that the activity being regulated by the individual mandate - a person's failure to have health insurance – is not "economic" in nature:

The inquiry should start by considering the �economic nature of the regulated activity.� Morrison, 529 U.S. at 610; see also Lopez, 514 U.S. at 559-61 (finding that possession of a gun in a school zone was not an economic activity); Raich, 545 U.S. at 25 (finding that growing and consuming a crop was �quintessentially economic�).  Congress here attempts to regulate a class of individuals who have refrained from purchasing health insurance. The conduct being regulated is the decision not to enter the market for insurance. Plaintiffs have not bought or sold a good or service, nor have they manufactured, distributed, or consumed a commodity. See Raich, 545 U.S. at 25-26 (defining �economics� as the �production, distribution, and consumption of commodities�). Rather, they are strangers to the health insurance market. This readily differentiates the present case from others cited by the government. See Wickard, 317 U.S. at 128 (Filburn cultivated wheat); Raich, 545 U.S. at 19 (Raich cultivated marijuana); Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 243 (1964) (appellant operated a motel). Certainly there is an interstate market for health insurance, but, unlike the plaintiffs in Wickard and Raich, plaintiffs here have not entered the market. In no other instance has Congress before attempted to force a non-participant into a market.

Despite his skepticism about the "activity/inactivity" dichotomy, Judge Graham bases his decision that the individual mandate is unconstitutional on the ground that an individual's failure to have health insurance is not "economic activity":

Certainly, plaintiffs� conduct may be considered in the aggregate with the conduct of similarly-situated individuals, see Raich, 545 U.S. at 20; however, the Commerce Clause cannot be satisfied when economic activity is lacking in the first instance.

Judge Graham then expressly embraces Justice Clarence Thomas' skepticism of standard commerce clause analysis – his antipathy towards the substantial effects test – in finding that to apply that standard to uphold the individual mandate would obliterate any principled limitation on Congress' power to regulate:

Lopez and Morrison rejected a view of causation whereby the cost-shifting to society caused by violent conduct can satisfy the substantial effects test. See Lopez, 514 U.S. at 564 (rejecting the government�s �costs of crime� and loss of �national productivity� reasoning); Morrison, 529 U.S. at 615 (same). The government fails to show why a view of cost-shifting caused by risky conduct should fare any better. The problem with the government�s line of reasoning here is that it has no logical end point, and it illustrates precisely Justice Thomas�s concerns with the substantial effects test. See Morrison, 529 U.S. at 627 (Thomas, J., concurring) (calling the test �rootless and malleable�). That test, when paired with the aggregation principle, invites manipulation and �draw[ing] the circle broadly enough to cover an activity that, when taken in isolation, would not have substantial effects on commerce.� Lopez, 514 U.S. at 600 (Thomas, J., concurring).

Judge Graham returns to the "activity/inactivity" theme when he distinguishes between regulation of an economic market and regulation of "private decisions to refrain from commerce":

The mandate and its penalty are not conditioned on the failure to pay for health care services, or, for that matter, conditioned on the consumption of health care. Congress instead choose a more coercive and intrusive regulation. The proper object of Congress�s power is interstate commerce, not private decisions to refrain from commerce.

The foregoing portions of Judge Graham's dissenting opinion tread familiar ground.  Two federal district court judges – one in Virginia and one in Florida – struck down the individual mandate on similar reasoning.  However, the latter portions of Judge Graham's opinion raise a number of troubling points.

Judge Graham argues that "a relatively trivial effect on commerce" does not justify the government's interference with "the right ["of law-abiding individuals"] to decide how to finance personal medical expenses."  Judge Graham states:

The mandate forces law-abiding individuals to purchase a product � an expensive product, no less � and thereby invades the realm of an individual�s financial planning decisions. Cf. Maryland v. Wirtz, 392 U.S. 183, 196 n.27 (1968) (�Neither here nor in Wickard had the Court declared that Congress may use a relatively trivial impact on commerce as an excuse for broad general regulation of state or private activities.�). In the absence of the mandate, individuals have the right to decide how to finance medical expenses. The mandate extinguishes that right.

There are three points that should be made in rebuttal to this argument.  First, the PPACA is not a criminal statute; instead it imposes a civil penalty for failure to purchase health insurance, and it provides substantial subsidies so that middle-class families can afford it.  Second, the effects on commerce of there being 50 million uninsured Americans are far from "trivial," as Congress determined and the other two appellate judges acknowledged.  Third, there is no constitutional right "to decide how to finance medical expenses." 

Moreover, Judge Graham utterly fails to mention that there is a strong presumption in favor of the constitutionality of economic legislation and that Congress' judgment under the Commerce Clause is to be upheld so long as there exists a "rational basis" to support it.  Instead, Judge Graham appears skeptical of Congress' exercise of power; he rejects the "fatalistic view" that "the people if offended" can resolve disputes such as this one democratically:

To the fatalistic view that Congress will always prevail and courts should step back and let the people, if offended, speak through their political representatives, I say that �courts were designed to be an intermediate body between the people and the legislature, in order, among other things, to keep the latter within the limits assigned to their authority.� The Federalist No. 78 (A. Hamilton). In this arena, the �public force� is entrusted to the courts. Oliver Wendell Holmes, The Path of the Law, 10 Harv. L. Rev. 457, 457 (1897). �[W]here the will of the legislature, declared in its statutes, stands in opposition to that of the people, declared in the Constitution, the judges ought to be governed by the latter rather than the former.� The Federalist No. 78.

Judge Graham might better have quoted Justice Holmes' dissenting opinion in Lochner v. New York (1905), where he stated that the Constitution is made "for people of fundamentally differing views," and that judges do not have the authority to strike down economic legislation with which they disagree.  As was so often the case, the Supreme Court eventually embraced Holmes' view.  Disssenting from the decision of the majority in Lochner which had struck down a law which prohibited the employment of bakers for more than 60 hours per week, Holmes wrote:

This case is decided upon an economic theory which a large part of the country does not entertain. If it were a question whether I agreed with that theory, I should desire to study it further and long before making up my mind. But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we as legislators might think as injudicious, or if you like as tyrannical, as this, and which, equally with this, interfere with the liberty to contract. Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well-known writers, is interfered with by school laws, by the Post Office, by every state or municipal institution which takes his money for purposes thought desirable, whether he likes it or not. The 14th Amendment does not enact Mr. Herbert Spencer's Social Statics. The other day we sustained the Massachusetts vaccination law. Jacobson v. Massachusetts. United States and state statutes and decisions cutting down the liberty to contract by way of combination are familiar to this court. Two years ago we upheld the prohibition of sales of stock on margins, or for future delivery, in the Constitution of California. The decision sustaining an eight-hour law for miners is still recent. Holden v. Hardy. Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire. It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States.

Judge Graham expresses frustration with the majority opinion in Gonzales v. Raich (2005), which upheld the federal Controlled Substances Act against a claim that it exceeded Congress' power to criminalize the possession of marijuana for personal, medicinal uses: 

In Lopez the Supreme Court recognized that the direction of its existing Commerce Clause jurisprudence threatened the principle of a federal government of defined and limited powers, and it began the process of developing a new jurisprudence more compatible with the Constitution. That process was interrupted by Raich, where a majority of the Court was unwilling to expressly overrule a landmark Commere Clause case in Wickard, which had been the law of the land for over sixty years.

Notwithstanding Raich, I believe the Court remains committed to the path laid down by Chief Justice Rehnquist and Justices O�Connor, Scalia, Kennedy, and Thomas to establish a framework of meaningful limitations on congressional power under the Commerce Clause. The current case is an opportunity to prove it so.

Instead, Judge Graham signalled agreement with the views that Justice Thomas and Justice O'Connor expressed in their dissenting opinions in Raich.  Justice O'Connor believed that the majority in Raich had failed to accord sufficient respect for the authority of the states to regulate the possession of addictive drugs, while Justice Thomas took the position that the "substantial effects" test defining the extent of Congress' power under the Commerce Clause should simply be overruled.   The dissenting views of Justices Thomas and O'Connor in Raich command significant scholarly and political support, and perhaps someday a majority of the Supreme Court will embrace one of those positions.  Until then, however, the Courts of Appeal are bound by existing Commerce Clause analysis including Wickard and Raich.  One of the touchstones of existing Commerce Clause analysis is proper respect for the findings and policy judgments of Congress in the area of economic legislation.  That important element is missing from Judge Graham's opinion.

Professor Huhn has taught Constitutional Law at the University of Akron for over a quarter century. You may access his websites on Constitutional Law and Health Care Financing Reform for additional materials and information about those subjects. Drafts of his scholarly work are available from his author page at ssrn: http://ssrn.com/author=83790

Tagged as: affordable care act, commerce clause, constitutionality of PPACA, dissenting opinion, health care, health care financing reform, health insurance reform, inactivity, judge graham's opinion, patient protection and affordable care act, PPACA