State v. United States Dep't of Health

648 F.3d 1235

108 A.F.T.R.2d 2011-5728

2011-2 USTC P 50,573

23 Fla. L. Weekly Fed. C 214

State of FLORIDA, by and through ATTORNEY GENERAL, State of South Carolina, by and through Attorney General, State of Nebraska, by and through Attorney General, State of Texas, by and through Attorney General, State of Utah, by and through Attorney General, et al., Plaintiffs–Appellees–Cross–Appellants,

v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Secretary of the United States Department of Health and Human Services, United States Department of the Treasury, Secretary of the United States Department of Treasury, United States Department of Labor, Secretary of the United States Department of Labor, Defendants–Appellants–Cross–Appellees.

Nos. 11–11021

11–11067.

United States Court of Appeals, Eleventh Circuit.

Aug. 12, 2011.

Paul D. Clement, Bancroft, PLLC, Lee Alfred Casey, Andrew Grossman, Baker & Hostetler, LLP, David B. Rivkin, Michael Anthony Carvin, Gregory Katsas, C. Kevin Marshall, Hashim M. Mooppan, Jones Day, Washington, DC, Scott Douglas Makar, Joseph W. Jacquot, Timothy David Osterhaus, Blaine H. Winship, Tallahassee, FL, Joseph R. Evans, Evanns & Walsh, Beverly Hills, CA, for Plaintiffs–Appellees.

Katherine Jean Spohn, Lincoln, NE, for State of Nebraska.

William James Cobb, III, Austin, TX, for State of Texas.

Eric B. Beckenhauer, Dana Kaersvang, Neal Kumar Katyal, Brian G. Kennedy, Samantha L. Chaifetz, Alisa B. Klein, Mark B. Stern, U.S. Dept. of Justice, Civ. Div., App. Staff, Washington, DC, for Defendants–Appellants.

Rochelle Bobroff, Nat. Sr. Citizens Law Ctr., Elizabeth B. Wydra, Constitutional Accountability Ctr., Ian Millhiser, Ctr. For Am. Progress, Philip Horton, Arnold & Porter, LLP, Stuart R. Cohen, AARP Found. Lit., Michael B. Kimberly, Mayer Brown, LLP, Frank Paul Bland, Jr., Pub. Justice, PC, Catherine E. Stetson, Hogan Lovells, US LLP, Walter Estes Dellinger, III; Jeffrey A. Lamken, MoloLamken, LLP, K. Lee Blalack, II, O'Melveny & Myers, LLP, Molly Suda, K&L Gates, Erik S. Jaffe; Kenneth Alan Klukowski, Family Research Council, Cory L. Andrews, Wash. Legal Found., John P., Elwood, Vinson, & Elkins, LLP, Hans F. Bader, Competitive Enterprise Inst., Ilya Shapiro, David Rittgers, Cato Inst., Charles J. Cooper, Cooper & Kirk, Steven Engel, Steven Bradbury, Dechert, LLP, Michael E. Rosman, Ctr. for Individual Rights, Carrie Lynn Severino, Judicial Crisis Network, Michael D. Peterson, McGuiness Yager, Washington, DC, Geoffrey D. Strommer, Hobbs, Strauss, Dean, Walker, Keith S. Dubanevich, Or. Dept. of Justice, Kurt Rohlfs, Chernoff Vilhauer, Portland, OR, J. Andrew Hirth, Jefferson City, MO, Jonathan Weissglass, Altshuler Berzon, LLP, San Francisco, CA, John Michael Stephan, Boston, MA, John Stewart Mills, The Mills Firm, PA, Gregory J. Philo; Paolo Giuseppe Annino, FSU College of Law, Tallahassee, FL, Jane Perkins, Nat. Health Law Program, Chapel Hill, NC, Adam J. Berger, Schroeder Goldmark Bender, Seattle, WA, Melissa Hart, University of Colorado Law Sch., Boulder, CO, Edward Lawrence White, III, Am. Ctr. for Law & Justice, Ann Arbor, MI, Steven J. Lechner, Mountain States Legal Found., Lakewood, CO, Deborah Dewart, Swansboro, NC, George E. Tragos, The Law Office of Tragos & Sartes, Clearwater, FL, Richard Peter Hutchison, Landmark Legal Found., Kansas City, MO, Timothy Sandefur, Luke A. Wake, Pac. Legal Found., Sacramento, CA, Dorinda C. Bordlee, Bioethics Defense Fund, Metairie, LA, Thomas M. Christina, Ogletree, Deakins, NAsh, Smoak & Stewart, PC, Greenville, SC, Victor L. Moldovan, McGuire Woods, LLP, Rebekah N. Plowman, Nelson, Mullins, Riley & Scarborough, LLP, Frank B. Strickland, Anne Ware Lewis, Bryan P. Tyson, Strickland, Brockington, Lewis, LLP, Atlanta, GA, Karen Bryant Tripp, Houston, TX, James F. Blumstein, Professor, Sch. of Law, Nashville, TN, David B. Kopel, Independence Inst., Golden, CO, Deborah Nirmala Misir, Grant Martin Lally, Lally & Misir, Mineola, NY, Anthony T. Caso, Ctr. for Const. Jurisprudence, Chapman Univ. Sch. of Law, Orange, CA, Mario Loyola, Texas Pub. Policy Found., Austin, TX, Geoffrey D. Talmon, Talmon Law Office, PLLC, Boise, ID, Carlos Ramos–Mrosovsky, Baker & Hostetler, LLP, New York City, Noah H. Huffstetler, III, Nelson, Mullins, Riley & Scarborough, LLP, Raleigh, NC, Daniel A. Himebaugh, Pac. Legal Found., Bellevue, WA, for Amici Curiae.Appeals from the United States District Court for the Northern District of Florida.

Before DUBINA, Chief Judge, and HULL and MARCUS, Circuit Judges. ¹DUBINA, Chief Judge, and HULL, Circuit Judge:

Soon after Congress passed the Patient Protection and Affordable Care Act, Pub.L. No. 111–148, 124 Stat. 119 (2010), amended by Health Care and Education Reconciliation Act of 2010 (“HCERA”), Pub.L. No. 111–152, 124 Stat. 1029 (2010) (the “Act”), the plaintiffs brought this action challenging the Act's constitutionality. The plaintiffs are 26 states, private individuals Mary Brown and Kaj Ahlburg, and the National Federation of Independent Business (“NFIB”) (collectively the “plaintiffs”).² The defendants are the federal Health and Human Services (“HHS”), Treasury, and Labor Departments and their Secretaries (collectively the “government”).

The district court granted summary judgment (1) to the government on the state plaintiffs' claim that the Act's expansion of Medicaid is unconstitutional and (2) to the plaintiffs on their claim that the Act's individual mandate—that individuals purchase and continuously maintain health insurance from private companies³—is unconstitutional. The district court concluded that the individual mandate exceeded congressional authority under Article I of the Constitution because it was not enacted pursuant to Congress's tax power and it exceeded Congress's power under the Commerce Clause and the Necessary and Proper Clause. The district court also concluded that the individual mandate provision was not severable from the rest of the Act and declared the entire Act invalid.

The government appeals the district court's ruling that the individual mandate is unconstitutional and its severability holding. The state plaintiffs cross-appeal the district court's ruling on their Medicaid expansion claim. For the reasons that follow, we affirm in part and reverse in part.⁴

INTRODUCTION

Legal issues concerning the constitutionality of a legislative act present important but difficult questions for the courts. Here, that importance and difficulty are heightened because (1) the Act itself is 975 pages in the format published in the Public Laws;⁵ (2) the district court, agreeing with the plaintiffs, held all of the Act was unconstitutional; and (3) on appeal, the government argues all of the Act is constitutional.

We, as all federal courts, must begin with a presumption of constitutionality, meaning that “we invalidate a congressional enactment only upon a plain showing that Congress has exceeded its constitutional bounds.” United States v. Morrison, 529 U.S. 598, 607, 120 S.Ct. 1740, 1748, 146 L.Ed.2d 658 (2000).

As an initial matter, to know whether a legislative act is constitutional requires knowing what is in the Act. Accordingly, our task is to figure out what this sweeping and comprehensive Act actually says and does. To do that, we outline the congressional findings that identify the problems the Act addresses, and the Act's legislative response and overall structure, encompassing nine Titles and hundreds of laws on a diverse array of subjects. Next, we set forth in greater depth the contents of the Act's five components most relevant to this appeal: the insurance industry reforms, the new state-run Exchanges, the individual mandate, the employer penalties, and the Medicaid expansion.

After that, we analyze the constitutionality of the Medicaid expansion and explain why we conclude that the Act's Medicaid expansion is constitutional.

We then review the Supreme Court's decisions on Congress's commerce power, discuss the individual mandate—which requires Americans to purchase an expensive product from a private insurance company from birth to death—and explicate how Congress exceeded its commerce power in enacting its individual mandate. We next outline why Congress's tax power does not provide an alternative constitutional basis for upholding this unprecedented individual mandate. Lastly, because of the Supreme Court's strong presumption of severability and as a matter of judicial restraint, we conclude that the individual mandate is severable from the remainder of the Act. Our opinion is organized as follows:

I. STANDING

II. THE ACT

A. Congressional Findings

B. Overall Structure of Nine Titles

C. Terms and Definitions

D. Health Insurance Reforms

E. Health Benefit Exchanges

F. Individual Mandate

G. Employer Penalty

H. Medicaid Expansion

III. CONSTITUTIONALITY OF MEDICAID EXPANSION

A. History of the Medicaid Program

B. Congress's Power under the Spending Clause

IV. SUPREME COURT'S COMMERCE CLAUSE DECISIONS

V. CONSTITUTIONALITY OF INDIVIDUAL MANDATE UNDER THE COMMERCE POWER

A. First Principles

B. Dichotomies and Nomenclature

C. Unprecedented Nature of the Individual Mandate

D. Wickard and Aggregation

E. Broad Scope of Congress's Regulation

F. Government's Proposed Limiting Principles

G. Congressional Findings

H. Areas of Traditional State Concern

I. Essential to a Larger Regulatory Scheme

J. Conclusion

VI. CONSTITUTIONALITY OF INDIVIDUAL MANDATE UNDER THE TAX POWER

A. Repeated Use of the Term “Penalty” in the Individual Mandate

B. Designation of Numerous Other Provisions in the Act as “Taxes”

C. Legislative History of the Individual Mandate

VII. SEVERABILITY

I. STANDING

As a threshold matter, we consider the government's challenge to the plaintiffs' standing to bring this lawsuit. “Article III of the Constitution limits the jurisdiction of federal courts to ‘cases' and ‘controversies.’ ” Socialist Workers Party v. Leahy, 145 F.3d 1240, 1244 (11th Cir.1998) (citations omitted). As we...