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GOD BLESS JUSTICES SCALIA, KENNEDY, THOMAS AND ALITO
July 7, 2012
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Cite as: 567 U. S. ____ (2012) 1 SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 11–393, 11–398 and 11–400 _________________
NATIONAL FEDERATION OF INDEPENDENT BUSINESS, ET AL., PETITIONERS
11–393 v. KATHLEEN SEBELIUS, SECRETARY OF HEALTH
AND HUMAN SERVICES, ET AL.
DEPARTMENT OF HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS
11–398 v. FLORIDA ET AL.
FLORIDA, ET AL., PETITIONERS 11–400 v.
DEPARTMENT OF HEALTH AND HUMAN SERVICES ET AL.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
[June 28, 2012]
JUSTICE SCALIA, JUSTICE KENNEDY, JUSTICE THOMAS, and JUSTICE ALITO, dissenting.
Congress has set out to remedy the problem that the best health care is
beyond the reach of many Americans who cannot afford it. It can
assuredly do that, by exercising the powers accorded to it under the
Constitution. The question in this case, however, is whether the complex
structures and provisions of the Patient Protection and Affordable Care
Act (Affordable Care Act or ACA) go beyond those powers. We conclude
that they do.
This case is in one respect difficult: it presents two questions of first impression.
The first of those is whether failure to engage in economic activity
(the purchase of health insurance) is subject to regulation under the
Commerce Clause. Failure to act does result in an effect on commerce,
and hence might be said to come under this Court’s “affecting commerce”
criterion of Commerce Clause jurisprudence. But in none of its decisions
has this Court extended the Clause that far.
The second question is whether the congressional power to tax and
spend, U. S. Const., Art. I, §8, cl. 1, permits the conditioning of a
State’s continued receipt of all funds under a massive
state-administered federal welfare program upon its acceptance of an
expansion to that program. Several of our opinions have suggested that
the power to tax and spend cannot be used to coerce state administration
of a federal program, but we have never found a law enacted under the
spending power to be coercive. Those questions are difficult.
The case is easy and straightforward, however, in another respect.
What is absolutely clear, affirmed by the text of the 1789 Constitution,
by the Tenth Amendment ratified in 1791, and by innumerable cases of
ours in the 220 years since, is that there are structural limits upon
federal power—upon what it can prescribe with respect to private
conduct, and upon what it can impose upon the sovereign States. Whatever
may be the conceptual limits upon the Commerce Clause and upon the
power to tax and spend, they cannot be such as will enable the Federal
Government to regulate all private conduct and to compel the States to
function as administrators of federal programs.
That clear principle carries the day here. The striking case of
Wickard v. Filburn, 317 U. S. 111 (1942), which held that the economic
activity of growing wheat, even for one’s own consumption, affected
commerce sufficiently that it could be regulated, always has been
regarded as the ne plus ultra of expansive Commerce Clause
jurisprudence. To go beyond that, and to say the failure to grow wheat
(which is not an economic activity, or any activity at all) nonetheless
affects commerce and therefore can be federally regulated, is to make
mere breathing in and out the basis for federal prescription and to
extend federal power to virtually all human activity.
As for the constitutional power to tax and spend for the general
welfare: The Court has long since expanded that beyond (what Madison
thought it meant) taxing and spending for those aspects of the general
welfare that were within the Federal Government’s enumerated powers, see
United States v. Butler, 297 U. S. 1, 65–66 (1936). Thus, we now have
sizable federal Departments devoted to subjects not mentioned among
Congress’ enumerated powers, and only marginally related to commerce:
the Department of Education, the Department of Health and Human
Services, the Department of Housing and Urban Development. The principal
practical obstacle that prevents Congress from using the tax-and-spend
power to assume all the general-welfare responsibilities traditionally
exercised by the States is the sheer impossibility of managing a Federal
Government large enough to administer such a system. That obstacle can
be overcome by granting funds to the States, allowing them to administer
the program. That is fair and constitutional enough when the States
freely agree to have their powers employed and their employees enlisted
in the federal scheme. But it is a blatant violation of the
constitutional structure when the States have no choice.
The Act before us here exceeds federal power both in mandating the
purchase of health insurance and in denying nonconsenting States all
Medicaid funding. These parts of the Act are central to its design and
operation, and all the Act’s other provisions would not have been
enacted without them. In our view it must follow that the entire statute
is inoperative.
I
The Individual Mandate
Article I, §8, of the Constitution gives Congress the power to
“regulate Commerce . . . among the several States.” The
Individual Mandate in the Act commands that every “applicable individual
shall for each month beginning after 2013 ensure that the individual,
and any dependent of the individual who is an applicable individual, is
covered under minimum essential coverage.” 26 U. S. C. §5000A(a) (2006
ed., Supp. IV). If this provision “regulates” anything, it is the
failure to maintain minimum essential coverage.
One might argue that it regulates that failure by requiring it to be
accompanied by payment of a penalty. But that failure—that abstention
from commerce—is not “Commerce.” To be sure, purchasing insurance is
”Commerce”; but one does not regulate commerce that does not exist by
compelling its existence.
In Gibbons v. Ogden, 9 Wheat. 1, 196 (1824), Chief Justice Marshall
wrote that the power to regulate commerce is the power “to prescribe the
rule by which commerce is to be governed.” That understanding is
consistent with the original meaning of “regulate” at the time of the
Constitution’s ratification, when “to regulate” meant “[t]o adjust by
rule, method or established mode,” 2 N. Webster, An American Dictionary
of the English Language (1828); “[t]o adjust by rule or method,” 2 S.
Johnson, A Dictionary of the English Language (7th ed. 1785); “[t]o
adjust, to direct according to rule,” 2 J. Ash, New and Complete
Dictionary of the English Language (1775); “to put in order, set to
rights, govern or keep in order,” T. Dyche & W. Pardon, A New
General English Dictionary (16th ed. 1777).1
——————
1 The most authoritative legal dictionaries of the founding era lack any
definition for “regulate” or “regulation,” suggesting that the term
bears its ordinary meaning (rather than some specialized legal mean-
ing) in the constitutional text. See R. Burn, A New Law Dictionary 281
(1792); G. Jacob, A New Law Dictionary (10th ed. 1782); 2 T. Cunning-
ham, A New and Complete Law Dictionary (2d ed. 1771).
It can mean to direct the manner of something but not to direct that
something come into being. There is no instance in which this Court or
Congress (or anyone else, to our knowledge) has used “regulate” in that
peculiar fashion. If the word bore that meaning, Congress’ authority
“[t]o make Rules for the Government and Regulation of the land and naval
Forces,” U. S. Const., Art. I, §8, cl. 14, would have made superfluous
the later provision for authority “[t]o raise and support Armies,” id.,
§8, cl. 12, and “[t]o provide and maintain a Navy,” id., §8, cl. 13.
We do not doubt that the buying and selling of health insurance
contracts is commerce generally subject to federal regulation. But when
Congress provides that (nearly) all citizens must buy an insurance
contract, it goes beyond “adjust[ing] by rule or method,” Johnson,
supra, or “direct[ing] according to rule,” Ash, supra; it directs the
creation of commerce.
In response, the Government offers two theories as to why the
Individual Mandate is nevertheless constitutional. Neither theory
suffices to sustain its validity.
A
First, the Government submits that §5000A is “integral to the
Affordable Care Act’s insurance reforms” and “necessary to make
effective the Act’s core reforms.” Brief for Petitioners in No. 11–398
(Minimum Coverage Provision) 24 (hereinafter Petitioners’ Minimum
Coverage Brief). Congress included a “finding” to similar effect in the
Act
itself. See 42 U. S. C. §18091(2)(H). As discussed in more detail in Part V, infra, the Act
contains numerous health insurance reforms, but most notable for present
purposes are the “guaranteed issue” and “community rating” provisions,
§§300gg to 300gg–4. The former provides that, with a few exceptions,
“each health insurance issuer that offers health insurance coverage in
the individual or group market in a State must accept every employer and
individual in the State that applies for such coverage.” §300gg–1(a).
That is, an in- surer may not deny coverage on the basis of, among other
things, any pre-existing medical condition that the appli- cant may
have, and the resulting insurance must cover that condition. See
§300gg–3.
Under ordinary circumstances, of course, insurers would respond by
charging high premiums to individuals with pre-existing conditions. The
Act seeks to prevent this through the community-rating provision. Simply
put, the community-rating provision requires insurers to calculate an
individual’s insurance premium based on only four factors: (i) whether
the individual’s plan covers just the individual or his family also,
(ii) the “rating area” in which the individual lives, (iii) the
individual’s age, and (iv) whether the individual uses tobacco.
§300gg(a)(1)(A). Aside from the rough proxies of age and tobacco use
(and possibly rating area), the Act does not allow an insurer to factor
the individual’s health characteristics into the price of his insurance
premium. This creates a new incentive for young and healthy individuals
without pre-existing conditions. The insurance premiums for those in
this group will not reflect their own low actuarial risks but will
subsidize insurance for others in the pool. Many of them may decide that
purchasing health insurance is not an economically sound
decision—especially since the guaranteed- issue provision will enable
them to purchase it at the same cost in later years and even if they
have developed a
pre-existing condition. But without the contribution of above-risk
premiums from the young and healthy, the community-rating provision will
not enable insurers to take on high-risk individuals without a massive
increase in premiums.
The Government presents the Individual Mandate as a unique feature of
a complicated regulatory scheme governing many parties with
countervailing incentives that must be carefully balanced. Congress has
imposed an extensive set of regulations on the health insurance
industry, and compliance with those regulations will likely cost the
industry a great deal. If the industry does not respond by increasing
premiums, it is not likely to survive. And if the industry does increase
premiums, then there is a serious risk that its products—insurance
plans—will become economically undesirable for many and prohibitively
ex- pensive for the rest.
This is not a dilemma unique to regulation of the health- insurance
industry. Government regulation typically imposes costs on the regulated
industry—especially regulation that prohibits economic behavior in
which most market participants are already engaging, such as “piecing
out” the market by selling the product to different classes of people at
different prices (in the present context, providing much lower
insurance rates to young and healthy buyers). And many industries so
regulated face the reality that, without an artificial increase in
demand, they cannot continue on. When Congress is regulating these
industries directly, it enjoys the broad power to enact “‘all
appropriate legislation’” to “‘protec[t]’” and “‘advanc[e]’” commerce,
NLRB v. Jones & Laughlin Steel Corp., 301 U. S. 1, 36–37 (1937)
(quoting The Daniel Ball, 10 Wall. 557, 564 (1871)). Thus, Congress
might protect the imperiled industry by prohibiting low-cost
competition, or by according it preferential tax treatment, or even by
granting it a direct subsidy.
Here, however, Congress has impressed into service third parties,
healthy individuals who could be but are not customers of the relevant
industry, to offset the undesirable consequences of the regulation.
Congress’ desire to force these individuals to purchase insurance is
motivated by the fact that they are further removed from the market than
unhealthy individuals with pre-existing conditions, because they are
less likely to need extensive care in the near future. If Congress can
reach out and command even those furthest removed from an interstate
market to participate in the market, then the Commerce Clause becomes a
font of unlimited power, or in Hamilton’s words, “the hideous monster
whose devouring jaws … spare neither sex nor age, nor high nor low, nor
sacred nor profane.” The Federalist No. 33, p. 202 (C. Rossiter ed.
1961).
At the outer edge of the commerce power, this Court has insisted on
careful scrutiny of regulations that do not act directly on an
interstate market or its participants. In New York v. United States, 505
U. S. 144 (1992), we held that Congress could not, in an effort to
regulate the disposal of radioactive waste produced in several different
industries, order the States to take title to that waste. Id., at
174–177. In Printz v. United States, 521 U. S. 898 (1997), we held that
Congress could not, in an effort to regulate the distribution of
firearms in the interstate mar- ket, compel state law-enforcement
officials to perform background checks. Id., at 933–935. In United
States v. Lopez, 514 U. S. 549 (1995), we held that Congress could not,
as a means of fostering an educated interstate labor market through the
protection of schools, ban the posses- sion of a firearm within a school
zone. Id., at 559–563. And in United States v. Morrison, 529 U. S. 598
(2000), we held that Congress could not, in an effort to ensure the full
participation of women in the interstate economy, subject private
individuals and companies to suit for gender- motivated violent torts.
Id., at 609–619.
The lesson of these cases is that the Commerce Clause, even when
supplemented by the Necessary and Proper Clause, is not carte blanche
for doing whatever will help achieve the ends Congress seeks by the
regulation of commerce. And the last two of these cases show that the
scope of the Necessary and Proper Clause is exceeded not only when the
congressional action directly violates the sovereignty of the States but
also when it violates the background principle of enumerated (and hence
limited) federal power.
The case upon which the Government principally relies to sustain the
Individual Mandate under the Necessary and Proper Clause is Gonzales v.
Raich, 545 U. S. 1 (2005). That case held that Congress could, in an
effort to restrain the interstate market in marijuana, ban the local
cultivation and possession of that drug. Id., at 15–22. Raich is no
precedent for what Congress has done here. That case’s prohibition of
growing (cf. Wickard, 317 U. S. 111), and of possession (cf. innumerable
federal statutes) did not represent the expansion of the federal power
to direct into a broad new field. The mandating of economic activity
does, and since it is a field so limitless that it converts the Commerce
Clause into a general authority to direct the economy, that mandating
is not “consist[ent] with the letter and spirit of the constitution.”
McCulloch v. Mary- land, 4 Wheat. 316, 421 (1819).
Moreover, Raich is far different from the Individual Mandate in
another respect. The Court’s opinion in Raich pointed out that the
growing and possession prohibitions were the only practicable way of
enabling the prohibition of interstate traffic in marijuana to be
effectively enforced. 545 U. S., at 22. See also Shreveport Rate Cases,
234 U. S. 342 (1914) (Necessary and Proper Clause allows regulations of
intrastate transactions if necessary to the regulation of an interstate
market). Intrastate marijuana could no more be distinguished from
interstate marijuana than, for example, endangered-species trophies
obtained before the species was federally protected can be distinguished
from trophies obtained afterwards—which made it neces- sary and proper
to prohibit the sale of all such trophies, see Andrus v. Allard, 444 U.
S. 51 (1979).
With the present statute, by contrast, there are many ways other than
this unprecedented Individual Mandate by which the regulatory scheme’s
goals of reducing insurance premiums and ensuring the profitability of
insurers could be achieved. For instance, those who did not purchase
insurance could be subjected to a surcharge when they do enter the
health insurance system. Or they could be denied a full income tax
credit given to those who do purchase the insurance.
The Government was invited, at oral argument, to suggest what federal
controls over private conduct (other than those explicitly prohibited
by the Bill of Rights or other constitutional controls) could not be
justified as necessary and proper for the carrying out of a general
regulatory scheme. See Tr. of Oral Arg. 27–30, 43–45 (Mar. 27, 2012). It
was unable to name any. As we said at the outset, whereas the precise
scope of the Commerce Clause and the Necessary and Proper Clause is
uncertain, the proposition that the Federal Government cannot do
everything is a fundamental precept. See Lopez, 514 U. S., at 564 (“[I]f
we were to accept the Government’s arguments, we are hard pressed to
posit any activity by an individual that Congress is without power to
regulate”). Section 5000A is defeated by that proposition.
B
The Government’s second theory in support of the Individual Mandate
is that §5000A is valid because it is actually a “regulat[ion of]
activities having a substantial relation to interstate commerce, . . .
i.e., . . . activities that substantially affect interstate commerce.”
Id., at 558–559. See also Shreveport Rate Cases, supra. This argument
[Cite as: 567 U. S. ____ (2012) 11] takes a few different forms, but the
basic idea is that §5000A regulates “the way in which individuals
finance their participation in the health-care market.” Petitioners’
Minimum Coverage Brief 33 (emphasis added). That is, the provision
directs the manner in which individuals purchase health care services
and related goods (directing that they be purchased through insurance)
and is there- fore a straightforward exercise of the commerce power.
The primary problem with this argument is that §5000A does not apply
only to persons who purchase all, or most, or even any, of the health
care services or goods that the mandated insurance covers. Indeed, the
main objection many have to the Mandate is that they have no intention
of purchasing most or even any of such goods or services and thus no
need to buy insurance for those purchases. The Government responds that
the health-care market involves “essentially universal participation,”
id., at 35. The principal difficulty with this response is that it is,
in the only relevant sense, not true. It is true enough that everyone
consumes “health care,” if the term is taken to include the purchase of a
bottle of aspirin. But the health care “market” that is the object of
the Individual Mandate not only includes but principally consists of
goods and services that the young people primarily affected by the
Mandate do not purchase. They are quite simply not participants in that
market, and cannot be made so (and thereby subjected to regulation) by
the simple device of defining participants to include all those who
will, later in their lifetime, probably purchase the goods or services
covered by the mandated insurance.2 Such a definition of ——————
2 JUSTICE GINSBURG is therefore right to note that Congress is “not
mandating the purchase of a discrete, unwanted product.” Ante, at 22
(opinion concurring in part, concurring in judgment in part, and
dissenting in part). Instead, it is mandating the purchase of an
unwanted suite of products—e.g., physician office visits, emergency room
visits, hospital room and board, physical therapy, durable medical
equipment, mental health care, and substance abuse detoxification. See
Selected Medical Benefits: A Report from the Dept. of Labor to the Dept.
of Health & Human Services (April 15, 2011) (reporting that over
two- thirds of private industry health plans cover these goods and
services), online at http://www.bls.gov/ncs/ebs/sp/selmedbensreport.pdf
(all Inter- net materials as visited June 26, 2012, and available in
Clerk of Court’s case file).
Cite as: 567 U. S. ____ (2012)
market participants is unprecedented, and were it to be a premise for
the exercise of national power, it would have no principled limits.
In a variation on this attempted exercise of federal power, the
Government points out that Congress in this Act has purported to
regulate “economic and financial decision[s] to forego [sic] health
insurance coverage and [to] attempt to self-insure,” 42 U. S. C.
§18091(2)(A), since those decisions have “a substantial and deleterious
effect on interstate commerce,” Petitioners’ Minimum Coverage Brief 34.
But as the discussion above makes clear, the decision to forgo
participation in an interstate market is not itself commercial activity
(or indeed any activity at all) within Congress’ power to regulate. It
is true that, at the end of the day, it is inevitable that each American
will affect commerce and become a part of it, even if not by choice.
But if every person comes within the Commerce Clause power of Congress
to regulate by the simple reason that he will one day engage in
commerce, the idea of a limited Government power is at an end.
Wickard v. Filburn has been regarded as the most expansive assertion
of the commerce power in our history. A close second is Perez v. United
States, 402 U. S. 146 (1971), which upheld a statute criminalizing the
eminently local activity of loan-sharking. Both of those cases,
however,involved commercial activity. To go beyond that, and to say that
the failure to grow wheat or the refusal to make loans affects
commerce, so that growing and lending can be federally compelled, is to
extend federal power to virtu- ally everything. All of us consume food,
and when we do so the Federal Government can prescribe what its quality
must be and even how much we must pay. But the mere fact that we all
consume food and are thus, sooner or later, participants in the “market”
for food, does not empower the Government to say when and what we will
buy. That is essentially what this Act seeks to do with respect to the
purchase of health care. It exceeds federal power.
C
A few respectful responses to JUSTICE GINSBURG’s dissent on the issue
of the Mandate are in order. That dissent duly recites the test of
Commerce Clause power that our opinions have applied, but disregards the
premise the test contains. It is true enough that Congress needs only a
“‘rational basis’ for concluding that the regulated activity
substantially affects interstate commerce,” ante, at 15 (emphasis
added). But it must be activity affecting com- merce that is regulated,
and not merely the failure to engage in commerce. And one is not now
purchasing the health care covered by the insurance mandate simply
because one is likely to be purchasing it in the future. Our test’s
premise of regulated activity is not invented out of whole cloth, but
rests upon the Constitution’s requirement that it be commerce which is
regulated. If all inactivity affecting commerce is commerce, commerce is
everything. Ultimately the dissent is driven to saying that there is
really no difference between action and inaction, ante, at 26, a
proposition that has never recommended itself, neither to the law nor to
common sense. To say, for example, that the inaction here consists of
activity in “the self- insurance market,” ibid., seems to us wordplay.
By parity
of reasoning the failure to buy a car can be called participation in the
non-private-car-transportation market. Commerce becomes everything.
The dissent claims that we “fai[l] to explain why the individual
mandate threatens our constitutional order.” Ante, at 35. But we have
done so. It threatens that order because it gives such an expansive
meaning to the Commerce Clause that all private conduct (including
failure to act) becomes subject to federal control, effectively destroy-
ing the Constitution’s division of governmental powers. Thus the
dissent, on the theories proposed for the validity of the Mandate, would
alter the accepted constitutional relation between the individual and
the National Govern- ment. The dissent protests that the Necessary and
Proper Clause has been held to include “the power to enact criminal
laws, . . . the power to imprison, . . . and the power to create a
national bank,” ante, at 34–35. Is not the power to compel purchase of
health insurance much lesser? No, not if (unlike those other
dispositions) its application rests upon a theory that everything is
within federal control simply because it exists.
The dissent’s exposition of the wonderful things the Federal Government
has achieved through exercise of its assigned powers, such as “the
provision of old-age and survivors’ benefits” in the Social Security
Act, ante, at 2, is quite beside the point. The issue here is whether
the federal government can impose the Individual Mandate through the
Commerce Clause. And the relevant history is not that Congress has
achieved wide and wonderful results through the proper exercise of its
assigned powers in the past, but that it has never before used the
Commerce Clause to compel entry into commerce.3
—————— 3 In its effort to show the contrary, JUSTICE GINSBURG’S
dissent comes up with nothing more than two condemnation cases, which it
says demonstrate “Congress’ authority under the commerce power to
compel an ‘inactive’ landholder to submit to an unwanted sale.” Ante, at
24. Wrong on both scores. As its name suggests, the condemnation power
does not “compel” anyone to do anything. It acts in rem, against the
property that is condemned, and is effective with or without a transfer
of title from the former owner. More important, the power to condemn for
public use is a separate sovereign power, explicitly acknowledged in
the Fifth Amendment, which provides that “private property [shall not]
be taken for public use, without just compensation.”
Thus, the power to condemn tends to refute rather than support the power
to compel purchase of unwanted goods at a prescribed price: The latter
is rather like the power to condemn cash for public use. If it existed,
why would it not (like the condemnation power) be accompanied by a
requirement of fair compensation for the portion of the exacted price
that exceeds the goods’ fair market value (here, the difference between
what the free market would charge for a health- insurance policy on a
young, healthy person with no pre-existing conditions, and the
government-exacted community-rated premium)? Cite as: 567 U. S. ____
(2012) 15
The dissent treats the Constitution as though it is an enumeration of
those problems that the Federal Government can ad- dress—among which,
it finds, is “the Nation’s course in the economic and social welfare
realm,” ibid., and more specifically “the problem of the uninsured,”
ante, at 7. The Constitution is not that. It enumerates not federally
soluble problems, but federally available powers. The Federal Government
can address whatever problems it wants but can bring to their solution
only those powers that the Constitution confers, among which is the
power to regulate commerce.
4 No one seriously contends that any of Congress’ other enumerated
powers gives it the authority to enact §5000A as a regulation.
None of our cases say anything else. Article I contains no whatever-it-takes-to-solve-a-national- problem power.
The dissent dismisses the conclusion that the power to compel entry
into the health-insurance market would include the power to compel entry
into the new-car or broccoli markets. The latter purchasers, it says,
“will be obliged to pay at the counter before receiving the vehicle or
nourishment,” whereas those refusing to purchase health-insurance will
ultimately get treated anyway, at others’ expense. Ante, at 21. “[T]he
unique attributes of the health-care market . . . give rise to a
significant free- riding problem that does not occur in other markets.”
Ante, at 28. And “a vegetable-purchase mandate” (or a car-purchase
mandate) is not “likely to have a substantial effect on the health-care
costs” borne by other Americans. Ante, at 29. Those differences make a
very good argument by the dissent’s own lights, since they show that the
failure to purchase health insurance, unlike the failure to purchase
cars or broccoli, creates a national, social-welfare problem that is (in
the dissent’s view) included among the unenumerated “problems” that the
Constitution authorizes the Federal Government to solve. But those
differences do not show that the failure to enter the health-insurance
market, unlike the failure to buy cars and broccoli, is an activity that
Congress can “regulate.” (Of course one day the failure of some of the
public to purchase American cars may endanger the existence of domestic
automobile manufacturers; or the failure of some to eat broccoli may be
found to deprive them of a newly discovered cancer- fighting chemical
which only that food contains, producing health-care costs that are a
burden on the rest of us—in which case, under the theory of JUSTICE
GINSBURG’s dissent, moving against those inactivities will also come
within the Federal Government’s unenumerated problem- solving powers.)
II
The Taxing Power
As far as §5000A is concerned, we would stop there. Congress has
attempted to regulate beyond the scope of its Commerce Clause
authority,4 and §5000A is therefore invalid.
The Government contends, however, as expressed in the caption to Part
II of its brief, that “THE MINIMUM COVERAGE PROVISION IS INDEPENDENTLY
AUTHORIZED BY CONGRESS’S TAXING POWER.” Petitioners’ Minimum Coverage
Brief 52. The phrase “independently authorized” suggests the existence
of a creature never hitherto seen in the United States Reports: A
penalty for constitutional purposes that is also a tax for
constitutional purposes. In all our cases the two are mutually
exclusive. The provision challenged under the Constitution is either a
penalty or else a tax. Of course in many cases what was a regulatory
mandate enforced by a penalty could have been imposed as a tax upon
permissible action; or what was imposed as a tax upon permissible action
could have been a regulatory mandate enforced by a penalty. But we know
of no case, and the Government cites none, in which the imposition was,
for constitutional purposes, both.5
5 Of course it can be both for statutory purposes, since Congress can
define “tax” and “penalty” in its enactments any way it wishes. That is
why United States v. Sotelo, 436 U. S. 268 (1978), does not disprove
our statement. That case held that a “penalty” for willful failure to
pay one’s taxes was included among the “taxes” made non-dischargeable
under the Bankruptcy Code. 436 U. S., at 273–275. Whether the “penalty”
was a “tax” within the meaning of the Bankruptcy Code had absolutely no
bearing on whether it escaped the constitutional limita- tions on
penalties.
The two are mutually exclusive. Thus, what the Government’s caption
should have read was “ALTERNATIVELY, THE MINIMUM COVERAGE PROVISION IS
NOT A MANDATE-WITH- PENALTY BUT A TAX.” It is important to bear this in
mind in evaluating the tax argument of the Government and of those who
support it: The issue is not whether Congress had the power to frame the
minimum-coverage provision as a tax, but whether it did so.
In answering that question we must, if “fairly possible,” Crowell v.
Benson, 285 U. S. 22, 62 (1932), construe the provision to be a tax
rather than a mandate-with-penalty, since that would render it
constitutional rather than un- constitutional (ut res magis valeat quam
pereat). But we cannot rewrite the statute to be
what it is not. “ ‘ “[A]l- though this Court will often
strain to construe legis- lation so as to save it against constitutional
attack, it must not and will not carry this to the point of perverting
the purpose of a statute . . .” or judicially rewriting it.’” Commodity
Futures Trading Comm’n v. Schor, 478 U. S. 833, 841 (1986) (quoting
Aptheker v. Secretary of State, 378 U. S. 500, 515 (1964), in turn
quoting Scales v. United States, 367 U. S. 203, 211 (1961)). In this
case, there is simply no way, “without doing violence to the fair
meaning of the words used,” Grenada County Supervisors v. Brog- den, 112
U. S. 261, 269 (1884), to escape what Congress enacted: a mandate that
individuals maintain minimum essential coverage, enforced by a penalty.
Our cases establish a clear line between a tax and a penalty: “‘[A] tax
is an enforced contribution to provide for the support of government; a
penalty . . . is an exaction imposed by statute as punishment for an
unlawful act.’” United States v. Reorganized CF&I Fabricators of
Utah, Inc., 518 U. S. 213, 224 (1996) (quoting United States v. La
Franca, 282 U. S. 568, 572 (1931)). In a few cases, this Court has held
that a “tax” imposed upon private conduct was so onerous as to be in
effect a penalty. But we have never held—never—that a penalty imposed
for violation of the law was so trivial as to be in effect a tax. We
have never held that any exaction imposed for violation of the law is an
exercise of Congress’ taxing power—even when the statute calls it a
tax, much less when (as here) the statute repeatedly calls it a penalty.
When an act [Cite as: 567 U. S. ____ (2012) 19] “adopt[s] the
criteria of wrongdoing” and then imposes a monetary penalty as the
“principal consequence on those who transgress its standard,” it creates
a regulatory penalty, not a tax. Child Labor Tax Case, 259 U. S. 20, 38
(1922).
So the question is, quite simply, whether the exaction here is imposed
for violation of the law. It unquestionably is. The minimum-coverage
provision is found in 26 U. S. C. §5000A, entitled “Requirement to
maintain mini- mum essential coverage.” (Emphasis added.) It commands
that every “applicable individual shall . . . ensure that the individual
. . . is covered under minimum essential cover- age.” Ibid. (emphasis
added). And the immediately fol- lowing provision states
that, “[i]f . . . an applicable individual . . . fails to
meet the requirement of subsection (a) . . . there is hereby imposed . .
. a penalty.” §5000A(b) (emphasis added). And several of Congress’
legislative “findings” with regard to §5000A confirm that it sets forth a
legal requirement and constitutes the assertion of regu- latory power,
not mere taxing power. See 42 U. S. C. §18091(2)(A) (“The requirement
regulates activity . . .”); §18091(2)(C) (“The requirement . . . will
add millions of new consumers to the health insurance market …”);
§18091(2)(D) (“The requirement achieves near-universal coverage”);
§18091(2)(H) (“The requirement is an essential part of this larger
regulation of economic activity, and the absence of the requirement
would undercut Federal regu- lation of the health insurance market”);
§18091(3) (“[T]he Supreme Court of the United States ruled that
insurance is interstate commerce subject to Federal regulation”).
The Government and those who support its view on the tax point rely on
New York v. United States, 505 U. S. 144, to justify reading “shall” to
mean “may.” The “shall” in that case was contained in an introductory
provision—a recital that provided for no legal consequences—which said
that “[e]ach State shall be responsible for providing. . . for the
disposal of . . . low-level radioactive waste.” 42 U. S. C.
§2021c(a)(1)(A).
The Court did not hold that “shall” could be construed to mean
“may,” but rather that this preliminary provision could not impose upon
the operative provisions of the Act a mandate that they did not contain:
“We … decline petitioners’ invitation to construe §2021c(a)(1)(A),
alone and in isolation, as a command to the States independent of the
remainder of the Act.” New York, 505 U. S., at 170. Our opinion then
proceeded to “consider each [of the three operative provisions] in
turn.” Ibid. Here the mandate—the “shall”—is contained not in an
inoperative preliminary recital, but in the dispositive operative
provision itself. New York pro- vides no support for reading it to be
permissive.
Quite separately, the fact that Congress (in its own words) “imposed .
. . a penalty,” 26 U. S. C. §5000A(b)(1), for failure to buy insurance
is alone sufficient to render that failure unlawful. It is one of the
canons of interpretation that a statute that penalizes an act makes it
unlawful: “[W]here the statute inflicts a penalty for doing an act,
although the act itself is not expressly prohibited, yet to do the act
is unlawful, because it cannot be supposed that the Legislature intended
that a penalty should be inflicted for a lawful act.” Powhatan
Steamboat Co. v. Appomattox R. Co., 24 How. 247, 252 (1861). Or in the
words of Chancellor Kent: “If a statute inflicts a penalty for doing an
act, the penalty implies a prohibition, and the thing is unlawful,
though there be no prohibitory words in the statute.” 1 J. Kent,
Commentaries on American Law 436 (1826).
We never have classified as a tax an exaction imposed for violation
of the law, and so too, we never have classified as a tax an exaction
described in the legislation itself as a penalty. To be sure, we have
sometimes treated as a tax a statutory exaction (imposed for something
other than a violation of law) which bore an agnostic label that does
not entail the significant constitutional consequences [Cite as: 567 U.
S. ____ (2012) 21 SCALIA, KENNEDY, THOMAS, and ALITO, JJ.,
dissenting] of a penalty—such as “license” (License Tax Cases, 5 Wall.
462 (1867)) or “surcharge” (New York v. United States, supra.). But we
have never—never—treated as a tax an exaction which faces up to the
critical difference between a tax and a penalty, and explicitly
denominates the exaction a “penalty.” Eighteen times in §5000A itself
and else- where throughout the Act, Congress called the exaction in
§5000A(b) a “penalty.”
That §5000A imposes not a simple tax but a mandate to which a penalty
is attached is demonstrated by the fact that some are exempt from the
tax who are not ex- empt from the mandate—a distinction that would make
no sense if the mandate were not a mandate. Section 5000A(d) exempts
three classes of people from the definition of “applicable individual”
subject to the minimum coverage requirement: Those with religious
objections or who participate in a “health care sharing ministry,”
§5000A(d)(2); those who are “not lawfully present” in the United States,
§5000A(d)(3); and those who are incarcerated, §5000A(d)(4). Section
5000A(e) then creates a separate set of exemptions, excusing from
liability for the penalty certain individuals who are subject to the
mini- mum coverage requirement: Those who cannot afford coverage,
§5000A(e)(1); who earn too little income to re- quire filing a tax
return, §5000A(e)(2); who are members of an Indian tribe, §5000A(e)(3);
who experience only short gaps in coverage, §5000A(e)(4); and who, in
the judgment of the Secretary of Health and Human Services, “have
suffered a hardship with respect to the capability to obtain coverage,”
§5000A(e)(5). If §5000A were a tax, these two classes of exemption would
make no sense; there being no requirement, all the exemptions would
attach to the pen- alty (renamed tax) alone.
In the face of all these indications of a regulatory requirement
accompanied by a penalty, the Solicitor General assures us that “neither
the Treasury Department nor the Department of Health and Human Services
interprets Section 5000A as imposing a legal obligation,” Petitioners’
Minimum Coverage Brief 61, and that “[i]f [those subject to the Act] pay
the tax penalty, they’re in compliance with the law,” Tr. of Oral Arg.
50 (Mar. 26, 2012). These self- serving litigating positions are
entitled to no weight. What counts is what the statute says, and that is
entirely clear. It is worth noting, moreover, that these assurances
contradict the Government’s position in related litigation. Shortly
before the Affordable Care Act was passed, the Commonwealth of Virginia
enacted Va. Code Ann. §38.2– 3430.1:1 (Lexis Supp. 2011), which states,
“No resident of [the] Commonwealth . . . shall be required to obtain or
maintain a policy of individual insurance coverage except as required by
a court or the Department of Social Services . . . .” In opposing
Virginia’s assertion of standing to challenge §5000A based on this
statute, the Government said that “if the minimum coverage provision is
unconstitutional, the [Virginia] statute is unnecessary, and if the
minimum coverage provision is upheld, the state statute is void under
the Supremacy Clause.” Brief for Appellant in No. 11–1057 etc. (CA4), p.
29. But it would be void under the Supremacy Clause only if it was
contradicted by a federal “require[ment] to obtain or maintain a policy
of individual insurance coverage.”
Against the mountain of evidence that the minimum coverage
requirement is what the statute calls it—a requirement—and that the
penalty for its violation is what the statute calls it—a penalty—the
Government brings forward the flimsiest of indications to the contrary.
It notes that “[t]he minimum coverage provision amends the Internal
Revenue Code to provide that a non-exempted individual . . . will owe a
monetary penalty, in addition to the income tax itself,” and that “[t]he
[Internal Revenue Service (IRS)] will assess and collect the penalty in
the same manner as assessable penalties under the Internal [Cite as:
567 U. S. ____ (2012) 23 SCALIA, KENNEDY, THOMAS, and ALITO, JJ.,
dissenting] Revenue Code.” Petitioners’ Minimum Coverage Brief 53.
The manner of collection could perhaps suggest a tax if IRS
penalty-collection were unheard-of or rare. It is not. See, e.g., 26 U.
S. C. §527(j) (2006 ed.) (IRS-collectible pen-alty for failure to make
campaign-finance disclosures); §5761(c) (IRS-collectible penalty for
domestic sales of tobacco products labeled for export); §9707
(IRS-collectible penalty for failure to make required health-insurance
premium payments on behalf of mining employees). In Reorganized CF&I
Fabricators of Utah, Inc., 518 U. S. 213, we held that an exaction not
only enforced by the Commissioner of Internal Revenue but even called a
“tax” was in fact a penalty. “[I]f the concept of penalty means
anything,” we said, “it means punishment for an unlawful act or
omission.” Id., at 224. See also Lipke v. Lederer, 259 U. S. 557 (1922)
(same). Moreover, while the penalty is assessed and collected by the
IRS, §5000A is administered both by that agency and by the Department of
Health and Human Services (and also the Secretary of Veteran Affairs),
see §5000A(e)(1)(D), (e)(5), (f)(1)(A)(v), (f)(1)(E) (2006 ed., Supp.
IV), which is responsible for defining its substantive scope—a feature
that would be quite extraordinary for taxes.
The Government points out that “[t]he amount of the penalty will be
calculated as a percentage of household income for federal income tax
purposes, subject to a floor and [a] ca[p],” and that individuals who
earn so little money that they “are not required to file income tax re-
turns for the taxable year are not subject to the penalty” (though they
are, as we discussed earlier, subject to the mandate). Petitioners’
Minimum Coverage Brief 12, 53. But varying a penalty according to
ability to pay is an utterly familiar practice. See, e.g., 33 U. S.
C. §1319(d) (2006 ed., Supp. IV) (“In determining the amount of a civil
penalty the court shall consider . . . the economic impact of the
penalty on the violator”); see also 6 U. S. C. §488e(c); 7
24 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
U. S. C. §§7734(b)(2), 8313(b)(2); 12 U. S. C. §§1701q–1(d)(3),
1723i(c)(3), 1735f–14(c)(3), 1735f–15(d)(3), 4585(c)(2); 15 U. S. C.
§§45(m)(1)(C), 77h–1(g)(3), 78u–2(d), 80a–9(d)(4), 80b–3(i)(4),
1681s(a)(2)(B), 1717a(b)(3), 1825(b)(1), 2615(a) (2)(B), 5408(b)(2); 33
U. S. C. §2716a(a).
The last of the feeble arguments in favor of petition- ers that we will
address is the contention that what this statute repeatedly calls a
penalty is in fact a tax because it contains no scienter requirement.
The presence of such a requirement suggests a penalty—though one can
imagine a tax imposed only on willful action; but the absence of such a
requirement does not suggest a tax. Penalties for absolute-liability
offenses are commonplace. And where a statute is silent as to scienter,
we traditionally presume a mens rea requirement if the statute imposes a
“severe penalty.” Staples v. United States, 511 U. S. 600, 618 (1994).
Since we have an entire jurisprudence addressing when it is that a
scienter requirement should be inferred from a penalty, it is quite
illogical to suggest that a penalty is not a penalty for want of an
express scienter requirement.
And the nail in the coffin is that the mandate and penalty are
located in Title I of the Act, its operative core, rather than where a
tax would be found—in Title IX, containing the Act’s “Revenue
Provisions.” In sum, “the terms of [the] act rende[r] it unavoidable,”
Parsons v. Bedford, 3 Pet. 433, 448 (1830), that Congress imposed a
regulatory penalty, not a tax.
For all these reasons, to say that the Individual Man- date merely
imposes a tax is not to interpret the statute but to rewrite it.
Judicial tax-writing is particularly troubling. Taxes have never been
popular, see, e.g., Stamp Act of 1765, and in part for that reason, the
Constitution requires tax increases to originate in the House of
Representatives. See Art. I, §7, cl. 1. That is to say, they must
originate in the legislative body most accountable to the
[Cite as: 567 U. S. ____ (2012) 25 SCALIA, KENNEDY, THOMAS, and
ALITO, JJ., dissenting] people, where legislators must weigh the need
for the tax against the terrible price they might pay at their next
election, which is never more than two years off. The Federalist No. 58
“defend[ed] the decision to give the origination power to the House on
the ground that the Chamber that is more accountable to the people
should have the primary role in raising revenue.” United States v.
Munoz-Flores, 495 U. S. 385, 395 (1990). We have no doubt that Congress
knew precisely what it was doing when it rejected an earlier version of
this legislation that imposed a tax instead of a
requirement-with-penalty. See Affordable Health Care for America Act, H.
R. 3962, 111th Cong., 1st Sess., §501 (2009); America’s Healthy Future
Act of 2009, S. 1796, 111th Cong., 1st Sess., §1301. Imposing a tax
through judicial legislation inverts the constitutional scheme, and
places the power to tax in the branch of government least accountable to
the citizenry.
Finally, we must observe that rewriting §5000A as a tax in order to
sustain its constitutionality would force us to confront a difficult
constitutional question: whether this is a direct tax that must be
apportioned among the States according to their population. Art. I, §9,
cl. 4. Perhaps it is not (we have no need to address the point); but the
meaning of the Direct Tax Clause is famously unclear, and its
application here is a question of first impression that deserves more
thoughtful consideration than the lick-and- a-promise accorded by the
Government and its supporters. The Government’s opening brief did not
even address the question—perhaps because, until today, no federal court
has accepted the implausible argument that §5000A is an exercise of the
tax power. And once respondents raised the issue, the Government
devoted a mere 21 lines of its reply brief to the issue. Petitioners’
Minimum Coverage Reply Brief 25. At oral argument, the most prolonged
statement about the issue was just over 50 words. Tr. of Oral Arg. 79
(Mar. 27, 2012). One would expect this Court to demand more than
fly-by-night briefing and argument before deciding a difficult
constitutional question of first impression.
III
The Anti-Injunction Act
There is another point related to the Individual Man- date that we
must discuss—a point that logically should have been discussed first:
Whether jurisdiction over the challenges to the minimum-coverage
provision is precluded by the Anti-Injunction Act, which provides that
“no suit for the purpose of restraining the assessment or collection of
any tax shall be maintained in any court by any per- son,” 26 U. S. C.
§7421(a) (2006 ed.).
We have left the question to this point because it seemed to us that the
dispositive question whether the minimum-coverage provision is a tax is
more appropriately addressed in the significant constitutional context
of whether it is an exercise of Congress’ taxing power. Hav- ing found
that it is not, we have no difficulty in deciding that these suits do
not have “the purpose of restraining the assessment or collection of any
tax.”6
——————
6The amicus appointed to defend the proposition that the Anti-
Injunction Act deprives us of jurisdiction stresses that the penalty for
failing to comply with the mandate “shall be assessed and collected in
the same manner as an assessable penalty under subchapter B of chapter
68,” 26 U. S. C. §5000A(g)(1) (2006 ed., Supp. IV), and that such
penalties “shall be assessed and collected in the same manner as taxes,”
§6671(a) (2006 ed.). But that point seems to us to confirm the
inapplicability of the Anti-Injunction Act. That the penalty is to be
“assessed and collected in the same manner as taxes” refutes the
proposition that it is a tax for all statutory purposes, including with
respect to the Anti-Injunction Act. Moreover, elsewhere in the Internal
Revenue Code, Congress has provided both that a particular payment shall
be “assessed and collected” in the same manner as a tax and that no
suit shall be maintained to restrain the assessment or collection of the
payment. See, e.g., §§7421(b)(1), §6901(a); §6305(a), (b). The
Cite as: 567 U. S. ____ (2012) 27
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
The Government and those who support its position on this point make
the remarkable argument that §5000A is not a tax for purposes of the
Anti-Injunction Act, see Brief for Petitioners in No. 11–398
(Anti-Injunction Act), but is a tax for constitutional purposes, see
Petitioners’ Mini- mum Coverage Brief 52–62. The rhetorical device that
tries to cloak this argument in superficial plausibility is the same
device employed in arguing that for constitutional purposes the
minimum-coverage provision is a tax: confusing the question of what
Congress did with the question of what Congress could have done. What
qualifies as a tax for purposes of the Anti-Injunction Act, unlike what
qualifies as a tax for purposes of the Constitution, is entirely within
the control of Congress. Compare Bailey v. George, 259 U. S. 16, 20
(1922) (Anti-Injunction Act barred suit to restrain collections under
the Child Labor Tax Law), with Child Labor Tax Case, 259 U. S., at 36–41
(holding the same law unconstitutional as exceeding Congress’ taxing
power). Congress could have defined “tax” for purposes of that statute
in such fashion as to exclude some exactions that in fact are “taxes.”
It might have prescribed, for example, that a particular exercise of the
taxing power “shall not be regarded as a tax for purposes of the
Anti-Injunction Act.” But there is no such prescription here. What the
Government would have us believe in
——————
latter directive would be superfluous if the former invoked the Anti- Injunction Act.
Amicus also suggests that the penalty should be treated as a tax because
it is an assessable penalty, and the Code’s assessment provi- sion
authorizes the Secretary of the Treasury to assess “all taxes (in-
cluding interest, additional amounts, additions to the tax, and as-
sessable penalties) imposed by this title.” §6201(a) (2006 ed., Supp.
IV). But the fact that such items are included as “taxes” for purposes
of assessment does not establish that they are included as “taxes” for
purposes of other sections of the Code, such as the Anti-Injunction Act,
that do not contain similar “including” language.
28 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
these cases is that the very same textual indications that show this is
not a tax under the Anti-Injunction Act show that it is a tax under the
Constitution. That carries ver- bal wizardry too far, deep into the
forbidden land of the sophists.
IV
The Medicaid Expansion
We now consider respondents’ second challenge to the
constitutionality of the ACA, namely, that the Act’s dramatic expansion
of the Medicaid program exceeds Congress’ power to attach conditions to
federal grants to the States.
The ACA does not legally compel the States to participate in the
expanded Medicaid program, but the Act authorizes a severe sanction for
any State that refuses to go along: termination of all the State’s
Medicaid funding. For the average State, the annual federal Medicaid
subsidy is equal to more than one-fifth of the State’s expenditures.7 A
State forced out of the program would not only lose this huge sum but
would almost certainly find it necessary to increase its own health-care
expenditures substantially, requiring either a drastic reduction in
funding for other programs or a large increase in state taxes. And these
new taxes would come on top of the federal taxes already paid by the
State’s citizens to fund the Medicaid program in other States.
The States challenging the constitutionality of the ACA’s Medicaid
Expansion contend that, for these practical reasons, the Act really does
not give them any choice at all. As proof of this, they point to the
goal and the struture of the ACA.
——————
7 “State expenditures” is used here to mean annual expenditures from the
States’ own funding sources, and it excludes federal grants unless
otherwise noted.
Cite as: 567 U. S. ____ (2012) 29
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
The goal of the Act is to provide near- universal medical coverage,
42 U. S. C. §18091(2)(D), and without 100% State participation in the
Medicaid pro- gram, attainment of this goal would be thwarted. Even if
States could elect to remain in the old Medicaid program, while
declining to participate in the Expansion, there would be a gaping hole
in coverage. And if a substantial number of States were entirely
expelled from the program, the number of persons without coverage would
be even higher.
In light of the ACA’s goal of near-universal coverage, petitioners
argue, if Congress had thought that anything less than 100% state
participation was a realistic possibility, Congress would have provided a
backup scheme. But no such scheme is to be found anywhere in the more
than 900 pages of the Act. This shows, they maintain, that Congress was
certain that the ACA’s Medicaid offer was one that no State could
refuse.
In response to this argument, the Government contends that any
congressional assumption about uniform state participation was based on
the simple fact that the offer of federal funds associated with the
expanded coverage is such a generous gift that no State would want to
turn it down.
To evaluate these arguments, we consider the extent of the Federal
Government’s power to spend money and to attach conditions to money
granted to the States.
A
No one has ever doubted that the Constitution author- izes the
Federal Government to spend money, but for many years the scope of this
power was unsettled. The Constitution grants Congress the power to
collect taxes “to … provide for the … general Welfare of the United
States,” Art. I, §8, cl. 1, and from “the foundation of the Nation sharp
differences of opinion have persisted as to
[30 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting]
the true interpretation of the phrase” “the general wel- fare.”
Butler, 297 U. S., at 65. Madison, it has been said, thought that the
phrase “amounted to no more than a reference to the other powers
enumerated in the subse- quent clauses of the same section,” while
Hamilton “main- tained the clause confers a power separate and distinct
from those later enumerated [and] is not restricted in meaning by the
grant of them.” Ibid.
The Court resolved this dispute in Butler. Writing for the Court,
Justice Roberts opined that the Madisonian view would make Article I’s
grant of the spending power a “mere tautology.” Ibid. To avoid that, he
adopted Hamil- ton’s approach and found that “the power of Congress to
authorize expenditure of public moneys for public pur- poses is not
limited by the direct grants of legislative power found in the
Constitution.” Id., at 66. Instead, he wrote, the spending power’s
“confines are set in the clause which confers it, and not in those of
section 8 which be- stow and define the legislative powers of the
Congress.” Ibid.; see also Steward Machine Co. v. Davis, 301 U. S. 548,
586–587 (1937); Helvering v. Davis, 301 U. S. 619, 640 (1937).
The power to make any expenditure that furthers “the general welfare”
is obviously very broad, and shortly after Butler was decided the Court
gave Congress wide leeway to decide whether an expenditure qualifies.
See Helvering, 301 U. S., at 640–641. “The discretion belongs to Con-
gress,” the Court wrote, “unless the choice is clearly wrong, a display
of arbitrary power, not an exercise of judgment.” Id., at 640. Since
that time, the Court has never held that a federal expenditure was not
for “the general welfare.”
B
One way in which Congress may spend to promote the general welfare is by making grants to the States. Mone-
Cite as: 567 U. S. ____ (2012) 31
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
tary grants, so-called grants-in-aid, became more frequent during the
1930’s, G. Stephens & N. Wikstrom, Ameri- can Intergovernmental
Relations—A Fragmented Federal Polity 83 (2007), and by 1950 they had
reached $20 billion8 or 11.6% of state and local government expenditures
from their own sources.9 By 1970 this number had grown to $123.7
billion10 or 29.1% of state and local government expenditures from their
own sources.11 As of 2010, fed- eral outlays to state and local
governments came to over $608 billion or 37.5% of state and local
government expenditures.12
When Congress makes grants to the States, it customar- ily attaches
conditions, and this Court has long held that the Constitution generally
permits Congress to do this. See Pennhurst State School and Hospital v.
Halderman, 451 U. S. 1, 17 (1981); South Dakota v. Dole, 483 U. S. 203,
206 (1987); Fullilove v. Klutznick, 448 U. S. 448, 474 (1980) (opinion
of Burger, C. J.); Steward Machine, supra, at 593.
C This practice of attaching conditions to federal funds
——————
8 This number is expressed in billions of Fiscal Year 2005 dollars.
9 See Office of Management and Budget, Historical Tables, Budget of the
U. S. Government, Fiscal Year 2013, Table 12.1—Summary Com- parison of
Total Outlays for Grants to State and Local Governments: 1940–2017
(hereinafter Table 12.1), http://www.whitehouse.gov/omb/
budget/Historicals; id., Table 15.2—Total Government Expenditures:
1948–2011 (hereinafter Table 15.2).
10 This number is expressed in billions of Fiscal Year 2005 dollars.
11 See Table 12.1; Dept. of Commerce, Bureau of Census, Statistical
Abstract of the United States: 2001, p. 262 (Table 419, Federal Grants-
in-Aid Summary: 1970 to 2001).
12 See Statistical Abstract of the United States: 2012, p. 268 (Table
431, Federal Grants-in-Aid to State and Local Governments: 1990 to
2011).
32 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
greatly increases federal power. “[O]bjectives not thought to be
within Article I’s enumerated legislative fields, may nevertheless be
attained through the use of the spending power and the conditional grant
of federal funds.” Dole, supra, at 207 (internal quotation marks and
citation omit- ted); see also College Savings Bank v. Florida Prepaid
Postsecondary Ed. Expense Bd., 527 U. S. 666, 686 (1999) (by attaching
conditions to federal funds, Congress may induce the States to “tak[e]
certain actions that Congress could not require them to take”).
This formidable power, if not checked in any way, would present a
grave threat to the system of federalism created by our Constitution. If
Congress’ “Spending Clause power to pursue objectives outside of
Article I’s enumerated legislative fields,” Davis v. Monroe County Bd.
of Ed., 526 U. S. 629, 654 (1999) (KENNEDY, J., dissenting) (internal
quotation marks omitted), is “limited only by Congress’ notion of the
general welfare, the reality, given the vast financial resources of the
Federal Government, is that the Spending Clause gives ‘power to the
Congress to tear down the barriers, to invade the states’ jurisdiction,
and to become a parliament of the whole people, subject to no
restrictions save such as are self-imposed,’” Dole, supra, at 217
(O’Connor, J., dissenting) (quoting Butler, 297 U. S., at 78). “[T]he
Spending Clause power, if wielded without concern for the federal
balance, has the potential to oblite- rate distinctions between national
and local spheres of interest and power by permitting the Federal
Government to set policy in the most sensitive areas of traditional
state concern, areas which otherwise would lie outside its reach.”
Davis, supra, at 654–655 (KENNEDY, J., dissenting).
Recognizing this potential for abuse, our cases have long held that
the power to attach conditions to grants to the States has limits. See,
e.g., Dole, supra, at 207–208; id., at 207 (spending power is “subject
to several general re-
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
strictions articulated in our cases”). For one thing, any such
conditions must be unambiguous so that a State at least knows what it is
getting into. See Pennhurst, supra, at 17. Conditions must also be
related “to the federal interest in particular national projects or
programs,” Massachusetts v. United States, 435 U. S. 444, 461 (1978),
and the conditional grant of federal funds may not “induce the States to
engage in activities that would themselves be unconstitutional,” Dole,
supra, at 210; see Lawrence County v. Lead-Deadwood School Dist. No.
40–1, 469 U.S. 256, 269–270 (1985). Finally, while Congress may seek to
induce States to accept conditional grants, Congress may not cross the
“point at which pressure turns into compul- sion, and ceases to be
inducement.” Steward Machine, 301 U. S., at 590. Accord, College Savings
Bank, supra, at 687; Metropolitan Washington Airports Authority v.
Citizens for Abatement of Aircraft Noise, Inc., 501 U. S. 252, 285
(1991) (White, J., dissenting); Dole, supra, at 211.
When federal legislation gives the States a real choice whether to
accept or decline a federal aid package, the federal-state relationship
is in the nature of a contractual relationship. See Barnes v. Gorman,
536 U. S. 181, 186 (2002); Pennhurst, 451 U. S., at 17. And just as a
contract is voidable if coerced, “[t]he legitimacy of Congress’ power to
legislate under the spending power . . . rests on whether the State
voluntarily and knowingly accepts the terms of the ‘contract.’” Ibid.
(emphasis added). If a federal spending program coerces participation
the States have not “exercise[d] their choice”—let alone made an
“informed choice.” Id., at 17, 25.
Coercing States to accept conditions risks the destruc- tion of the
“unique role of the States in our system.” Davis, supra, at 685
(KENNEDY, J., dissenting). “[T]he Constitution has never been understood
to confer upon Congress the ability to require the States to govern
accord- ing to Congress’ instructions.” New York, 505 U. S., at
34 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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162. Congress may not “simply commandeer the legisla- tive processes
of the States by directly compelling them to enact and enforce a federal
regulatory program.” Id., at 161 (internal quotation marks and brackets
omitted). Congress effectively engages in this impermissible com-
pulsion when state participation in a federal spending program is
coerced, so that the States’ choice whether to enact or administer a
federal regulatory program is ren- dered illusory.
Where all Congress has done is to “encourag[e] state regulation
rather than compe[l] it, state governments remain responsive to the
local electorate’s preferences; state officials remain accountable to
the people. [But] where the Federal Government compels States to
regulate, the accountability of both state and federal officials is
diminished.” New York, supra, at 168.
Amici who support the Government argue that forcing state employees
to implement a federal program is more respectful of federalism than
using federal workers to implement that program. See, e.g., Brief for
Service Em- ployees International Union et al. as Amici Curiae in No.
11–398, pp. 25–26. They note that Congress, instead of expanding
Medicaid, could have established an entirely federal program to provide
coverage for the same group of people. By choosing to structure Medicaid
as a cooperative federal-state program, they contend, Congress allows
for more state control. Ibid.
This argument reflects a view of federalism that our cases have
rejected—and with good reason. When Congress compels the States to do
its bidding, it blurs the lines of political accountability. If the
Federal Government makes a controversial decision while acting on its
own, “it is the Federal Government that makes the deci- sion in full
view of the public, and it will be federal officials that suffer the
consequences if the decision turns out to be detrimental or unpopular.”
New York, 505 U. S., at
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
168. But when the Federal Government compels the States to take
unpopular actions, “it may be state officials who will bear the brunt of
public disapproval, while the federal officials who devised the
regulatory program may remain insulated from the electoral ramifications
of their decision.” Id., at 169; see Printz, supra, at 930. For this
reason, federal officeholders may view this “departur[e] from the
federal structure to be in their personal interests . . . as a means of
shifting responsibility for the eventual decision.” New York, 505 U. S.,
at 182–183. And even state officials may favor such a “departure from
the constitu- tional plan,” since uncertainty concerning responsibility
may also permit them to escape accountability. Id., at 182. If a program
is popular, state officials may claim credit; if it is unpopular, they
may protest that they were merely responding to a federal directive.
Once it is recognized that spending-power legislation cannot coerce
state participation, two questions remain: (1) What is the meaning of
coercion in this context? (2) Is the ACA’s expanded Medicaid coverage
coercive? We now turn to those questions.
D 1
The answer to the first of these questions—the meaning of coercion in
the present context—is straightforward. As we have explained, the
legitimacy of attaching conditions to federal grants to the States
depends on the voluntari- ness of the States’ choice to accept or
decline the offered package. Therefore, if States really have no choice
other than to accept the package, the offer is coercive, and the
conditions cannot be sustained under the spending power. And as our
decision in South Dakota v. Dole makes clear, theoretical voluntariness
is not enough.
In South Dakota v. Dole, we considered whether the spending power permitted Congress to condition 5% of the
36 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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State’s federal highway funds on the State’s adoption of a minimum
drinking age of 21 years. South Dakota ar- gued that the program was
impermissibly coercive, but we disagreed, reasoning that “Congress ha[d]
directed only that a State desiring to establish a minimum drinking age
lower than 21 lose a relatively small percentage of certain federal
highway funds.” 483 U. S., at 211. Because “all South Dakota would lose
if she adhere[d] to her chosen course as to a suitable minimum drinking
age [was] 5% of the funds otherwise obtainable under specified high- way
grant programs,” we found that “Congress ha[d] of- fered relatively
mild encouragement to the States to enact higher minimum drinking ages
than they would otherwise choose.” Ibid. Thus, the decision whether to
comply with the federal condition “remain[ed] the prerogative of the
States not merely in theory but in fact,” and so the pro- gram at issue
did not exceed Congress’ power. Id., at 211– 212 (emphasis added).
The question whether a law enacted under the spending power is coercive
in fact will sometimes be difficult, but where Congress has plainly
“crossed the line distinguish- ing encouragement from coercion,” New
York, supra, at 175, a federal program that coopts the States’ political
processes must be declared unconstitutional. “[T]he fed- eral balance
is too essential a part of our constitutional structure and plays too
vital a role in securing freedom for us to admit inability to
intervene.” Lopez, 514 U. S., at 578 (KENNEDY, J., concurring).
2
The Federal Government’s argument in this case at best pays lip
service to the anticoercion principle. The Federal Government suggests
that it is sufficient if States are “free, as a matter of law, to turn
down” federal funds. Brief for Respondents in No. 11–400, p. 17
(emphasis added); see also id., at 25. According to the Federal Gov-
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
ernment, neither the amount of the offered federal funds nor the amount
of the federal taxes extracted from the taxpayers of a State to pay for
the program in question is relevant in determining whether there is
impermissible coercion. Id., at 41–46.
This argument ignores reality. When a heavy federal tax is levied to
support a federal program that offers large grants to the States, States
may, as a practical matter, be unable to refuse to participate in the
federal program and to substitute a state alternative. Even if a State
believes that the federal program is ineffective and inefficient,
withdrawal would likely force the State to impose a huge tax increase on
its residents, and this new state tax would come on top of the federal
taxes already paid by residents to support subsidies to participating
States.13
Acceptance of the Federal Government’s interpreta- tion of the
anticoercion rule would permit Congress to dic- tate policy in areas
traditionally governed primarily at the state or local level. Suppose,
for example, that Congress enacted legislation offering each State a
grant equal to the State’s entire annual expenditures for primary and
sec- ondary education. Suppose also that this funding came with
conditions governing such things as school curricu- lum, the hiring and
tenure of teachers, the drawing of school districts, the length and
hours of the school day, the
——————
13 JUSTICE GINSBURG argues that “[a] State . . . has no claim on the
money its residents pay in federal taxes.” Ante, at 59, n. 26. This is
true as a formal matter. “When the United States Government taxes United
States citizens, it taxes them ‘in their individual capacities’ as ‘the
people of America’—not as residents of a particular State.” Ante, at
58, n. 26 (quoting U. S. Term Limits, Inc. v. Thornton, 514 U. S. 779,
839 (1995) (KENNEDY, J., concurring)). But unless JUSTICE GINSBURG
thinks that there is no limit to the amount of money that can be
squeezed out of taxpayers, heavy federal taxation diminishes the
practical ability of States to collect their own taxes.
38 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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school calendar, a dress code for students, and rules for student
discipline. As a matter of law, a State could turn down that offer, but
if it did so, its residents would not only be required to pay the
federal taxes needed to support this expensive new program, but they
would also be forced to pay an equivalent amount in state taxes. And if
the State gave in to the federal law, the State and its subdivi- sions
would surrender their traditional authority in the field of education.
Asked at oral argument whether such a law would be allowed under the
spending power, the Solicitor General responded that it would. Tr. of
Oral Arg. 44–45 (Mar. 28, 2012).
E
Whether federal spending legislation crosses the line from enticement to
coercion is often difficult to determine, and courts should not
conclude that legislation is uncon- stitutional on this ground unless
the coercive nature of an offer is unmistakably clear. In this case,
however, there can be no doubt. In structuring the ACA, Congress unam-
biguously signaled its belief that every State would have no real choice
but to go along with the Medicaid Expan- sion. If the anticoercion rule
does not apply in this case, then there is no such rule.
1
The dimensions of the Medicaid program lend strong support to the
petitioner States’ argument that refusing to accede to the conditions
set out in the ACA is not a realis- tic option. Before the ACA’s
enactment, Medicaid funded medical care for pregnant women, families
with depend- ents, children, the blind, the elderly, and the disabled.
See 42 U. S. C. §1396a(a)(10) (2006 ed., Supp. IV). The ACA greatly
expands the program’s reach, making new funds available to States that
agree to extend coverage to all individuals who are under age 65 and
have incomes below
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
133% of the federal poverty line. See §1396a(a) (10)(A)(i)(VIII). Any
State that refuses to expand its Medicaid programs in this way is
threatened with a severe sanction: the loss of all its federal Medicaid
funds. See §1396c (2006 ed.).
Medicaid has long been the largest federal program of grants to the
States. See Brief for Respondents in No. 11– 400, at 37. In 2010, the
Federal Government directed more than $552 billion in federal funds to
the States. See Nat. Assn. of State Budget Officers, 2010 State Expendi-
ture Report: Examining Fiscal 2009–2011 State Spending, p. 7 (2011)
(NASBO Report). Of this, more than $233 billion went to pre-expansion
Medicaid. See id., at 47.14 This amount equals nearly 22% of all state
expenditures combined. See id., at 7.
The States devote a larger percentage of their budgets to Medicaid than
to any other item. Id., at 5. Federal funds account for anywhere from
50% to 83% of each State’s total Medicaid expenditures, see §1396d(b)
(2006 ed., Supp. IV); most States receive more than $1 billion in
federal Medicaid funding; and a quarter receive more than
——————
14 The Federal Government has a higher number for federal spending on
Medicaid. According to the Office of Management and Budget, federal
grants to the States for Medicaid amounted to nearly $273 billion in
Fiscal Year 2010. See Office of Management and Bud- get, Historical
Tables, Budget of the U. S. Government, Fiscal Year 2013, Table
12.3—Total Outlays for Grants to State and Local Gov- ernments by
Function, Agency, and Program: 1940–2013, http://
www.whitehouse.gov/omb/budget/Historicals. In that Fiscal Year, total
federal outlays for grants to state and local governments amounted to
over $608 billion, see Table 12.1, and state and local government
expenditures from their own sources amounted to $1.6 trillion, see Table
15.2. Using these numbers, 44.8% of all federal outlays to both state
and local governments was allocated to Medicaid, amounting to 16.8% of
all state and local expenditures from their own sources.
40 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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$5 billion, NASBO Report 47. These federal dollars total nearly two
thirds—64.6%—of all Medicaid expenditures nationwide.15 Id., at 46.
The Court of Appeals concluded that the States failed to establish
coercion in this case in part because the “states have the power to tax
and raise revenue, and therefore can create and fund programs of their
own if they do not like Congress’s terms.” 648 F. 3d 1235, 1268 (CA11
2011); see Brief for Sen. Harry Reid et al. as Amici Curiae in No. 11–
400, p. 21 (“States may always choose to decrease expendi- tures on
other programs or to raise revenues”). But the sheer size of this
federal spending program in relation to state expenditures means that a
State would be very hard pressed to compensate for the loss of federal
funds by cutting other spending or raising additional revenue. Arizona,
for example, commits 12% of its state expendi- tures to Medicaid, and
relies on the Federal Government to provide the rest: $5.6 billion,
equaling roughly one-third of Arizona’s annual state expenditures of $17
billion. See NASBO Report 7, 47. Therefore, if Arizona lost federal
Medicaid funding, the State would have to commit an additional 33% of
all its state expenditures to fund an equivalent state program along the
lines of pre-expansion Medicaid. This means that the State would have
to allo- cate 45% of its annual expenditures for that one purpose. See
ibid.
The States are far less reliant on federal funding for any other program. After Medicaid, the next biggest federal
——————
15 The Federal Government reports a higher percentage. According to
Medicaid.gov, in Fiscal Year 2010, the Federal Government made Medicaid
payments in the amount of nearly $260 billion, repre- senting 67.79% of
total Medicaid payments of $383 billion. See www.medicaid.gov /
Medicaid-CHIP-Program-Information / By-State / By- State.html.
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
funding item is aid to support elementary and secondary education, which
amounts to 12.8% of total federal outlays to the States, see id., at 7,
16, and equals only 6.6% of all state expenditures combined. See ibid.
In Arizona, for example, although federal Medicaid expenditures are
equal to 33% of all state expenditures, federal education funds amount
to only 9.8% of all state expenditures. See ibid. And even in States
with less than average federal Medicaid funding, that funding is at
least twice the size of federal education funding as a percentage of
state expend- itures. Id., at 7, 16, 47.
A State forced out of the Medicaid program would face burdens in
addition to the loss of federal Medicaid fund- ing. For example, a
nonparticipating State might be found to be ineligible for other major
federal funding sources, such as Temporary Assistance for Needy Families
(TANF), which is premised on the expectation that States will
participate in Medicaid. See 42 U. S. C. §602(a)(3) (2006 ed.)
(requiring that certain beneficiaries of TANF funds be “eligible for
medical assistance under the State[’s Medi- caid] plan”). And withdrawal
or expulsion from the Medi- caid program would not relieve a State’s
hospitals of their obligation under federal law to provide care for
patients who are unable to pay for medical services. The Emer- gency
Medical Treatment and Active Labor Act, §1395dd, requires hospitals that
receive any federal funding to provide stabilization care for indigent
patients but does not offer federal funding to assist facilities in
carrying out its mandate. Many of these patients are now covered by
Medicaid. If providers could not look to the Medicaid program to pay for
this care, they would find it exceed- ingly difficult to comply with
federal law unless they were given substantial state support. See, e.g.,
Brief for Econ- omists as Amici Curiae in No 11–400, p. 11.
For these reasons, the offer that the ACA makes to the States—go along with a dramatic expansion of Medicaid or
42 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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potentially lose all federal Medicaid funding—is quite unlike anything
that we have seen in a prior spending- power case. In South Dakota v.
Dole, the total amount that the States would have lost if every single
State had refused to comply with the 21-year-old drinking age was
approximately $614.7 million—or about 0.19% of all state expenditures
combined. See Nat. Assn. of State Budget Officers, 1989 (Fiscal Years
1987– 1989 Data) State Expenditure Report 10, 84 (1989),
http://www.nasbo.org/publications-data/state-expenditure-
report/archives. South Dakota stood to lose, at most, funding that
amounted to less than 1% of its annual state expenditures. See ibid.
Under the ACA, by contrast, the Federal Government has threatened to
withhold 42.3% of all federal outlays to the states, or approximately
$233 billion. See NASBO Report 7, 10, 47. South Dakota stands to lose
federal funding equaling 28.9% of its annual state expenditures. See
id., at 7, 47. Withholding $614.7 million, equaling only 0.19% of all
state expenditures combined, is aptly characterized as “relatively mild
en- couragement,” but threatening to withhold $233 billion, equaling
21.86% of all state expenditures combined, is a different matter.
2
What the statistics suggest is confirmed by the goal and structure of
the ACA. In crafting the ACA, Congress clearly expressed its informed
view that no State could possibly refuse the offer that the ACA extends.
The stated goal of the ACA is near-universal health care coverage. To
achieve this goal, the ACA mandates that every person obtain a minimum
level of coverage. It at- tempts to reach this goal in several different
ways. The guaranteed issue and community-rating provisions are designed
to make qualifying insurance available and affordable for persons with
medical conditions that may
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
require expensive care. Other ACA provisions seek to make such policies
more affordable for people of modest means. Finally, for low-income
individuals who are simply not able to obtain insurance, Congress
expanded Medicaid, transforming it from a program covering only members
of a limited list of vulnerable groups into a pro- gram that provides at
least the requisite minimum level of coverage for the
poor. See 42 U. S. C. §§1396a(a) (10)(A)(i)(VIII) (2006
ed., Supp. IV), 1396u–7(a), (b)(5), 18022(a). This design was intended
to provide at least a specified minimum level of coverage for all
Americans, but the achievement of that goal obviously depends on
participation by every single State. If any State—not to mention all of
the 26 States that brought this suit— chose to decline the federal
offer, there would be a gaping hole in the ACA’s coverage.
It is true that some persons who are eligible for Medi- caid coverage
under the ACA may be able to secure private insurance, either through
their employers or by obtain- ing subsidized insurance through an
exchange. See 26 U. S. C. §36B(a) (2006 ed., Supp. IV); Brief for
Respond- ents in No. 11–400, at 12. But the new federal subsidies are
not available to those whose income is below the fed- eral poverty
level, and the ACA provides no means, other than Medicaid, for these
individuals to obtain coverage and comply with the Mandate. The
Government counters that these people will not have to pay the penalty,
see, e.g., Tr. of Oral Arg. 68 (Mar. 28, 2012); Brief for Respondents in
No. 11–400, at 49–50, but that argument misses the point: Without
Medicaid, these individuals will not have coverage and the ACA’s goal of
near-universal coverage will be severely frustrated.
If Congress had thought that States might actually refuse to go along
with the expansion of Medicaid, Con- gress would surely have devised a
backup scheme so that the most vulnerable groups in our society, those
previously
44 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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eligible for Medicaid, would not be left out in the cold. But nowhere in
the over 900-page Act is such a scheme to be found. By contrast,
because Congress thought that some States might decline federal funding
for the operation of a “health benefit exchange,” Congress provided a
backup scheme; if a State declines to participate in the operation of an
exchange, the Federal Government will step in and operate an exchange
in that State. See 42 U. S. C. §18041(c)(1). Likewise, knowing that
States would not necessarily provide affordable health insurance for
aliens lawfully present in the United States—because Medicaid does not
require States to provide such coverage—Con- gress extended the
availability of the new federal insur- ance subsidies to all
aliens. See 26 U. S. C. §36B(c) (1)(B)(ii) (excepting from
the income limit individuals who are “not eligible for the medicaid
program . . . by reason of [their] alien status”). Congress did not make
these subsidies available for citizens with incomes below the poverty
level because Congress obviously assumed that they would be covered by
Medicaid. If Congress had contemplated that some of these citizens would
be left without Medicaid coverage as a result of a State’s with- drawal
or expulsion from the program, Congress surely would have made them
eligible for the tax subsidies pro- vided for low-income aliens.
These features of the ACA convey an unmistakable message: Congress never
dreamed that any State would refuse to go along with the expansion of
Medicaid. Con- gress well understood that refusal was not a practical
option.
The Federal Government does not dispute the inference that Congress
anticipated 100% state participation, but it argues that this assumption
was based on the fact that ACA’s offer was an “exceedingly generous”
gift. Brief for Respondents in No. 11–400, at 50. As the Federal Gov-
ernment sees things, Congress is like the generous bene-
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
factor who offers $1 million with few strings attached to 50 randomly
selected individuals. Just as this benefactor might assume that all of
these 50 individuals would snap up his offer, so Congress assumed that
every State would gratefully accept the federal funds (and conditions)
to go with the expansion of Medicaid.
This characterization of the ACA’s offer raises obvious questions. If
that offer is “exceedingly generous,” as the Federal Government
maintains, why have more than half the States brought this lawsuit,
contending that the offer is coercive? And why did Congress find it
necessary to threaten that any State refusing to accept this “exceed-
ingly generous” gift would risk losing all Medicaid funds? Congress
could have made just the new funding provided under the ACA contingent
on acceptance of the terms of the Medicaid Expansion. Congress took such
an approach in some earlier amendments to Medicaid, separating new
coverage requirements and funding from the rest of the program so that
only new funding was conditioned on new eligibility extensions. See,
e.g., Social Security Amend- ments of 1972, 86 Stat. 1465.
Congress’ decision to do otherwise here reflects its un- derstanding
that the ACA offer is not an “exceedingly generous” gift that no State
in its right mind would de- cline. Instead, acceptance of the offer will
impose very substantial costs on participating States. It is true that
the Federal Government will bear most of the initial costs associated
with the Medicaid Expansion, first paying 100% of the costs of covering
newly eligible individuals between 2014 and 2016. 42 U. S. C. §1396d(y).
But that is just part of the picture. Participating States will be
forced to shoulder substantial costs as well, because after 2019 the
Federal Government will cover only 90% of the costs associated with the
Expansion, see ibid., with state spending projected to increase by at
least $20 billion by 2020 as a consequence. Statement of Douglas W.
Elmen-
46 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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dorf, CBO’s Analysis of the Major Health Care Legislation Enacted in
March 2010, p. 24 (Mar. 30, 2011); see also R. Bovbjerg, B. Ormond,
& V. Chen, Kaiser Commission on Medicaid and the Uninsured, State
Budgets under Federal Health Reform: The Extent and Causes of Variations
in Estimated Impacts 4, n. 27 (Feb. 2011) (estimating new state
spending at $43.2 billion through 2019). After 2019, state spending is
expected to increase at a faster rate; the CBO estimates new state
spending at $60 billion through 2021. Statement of Douglas W. Elmendorf,
supra, at 24. And these costs may increase in the future because of the
very real possibility that the Federal Government will change funding
terms and reduce the percentage of funds it will cover. This would leave
the States to bear an in- creasingly large percentage of the bill. See
Tr. of Oral Arg. 74–76 (Mar. 28, 2012). Finally, after 2015, the States
will have to pick up the tab for 50% of all administrative costs
associated with implementing the new program, see §§1396b(a)(2)–(5), (7)
(2006 ed., Supp. IV), costs that could approach $12 billion between
fiscal years 2014 and 2020, see Dept. of Health and Human Services,
Center for Medi- caid and Medicare Services, 2010 Actuarial Report on
the Financial Outlook for Medicaid 30.
In sum, it is perfectly clear from the goal and structure of the ACA
that the offer of the Medicaid Expansion was one that Congress
understood no State could refuse. The Medicaid Expansion therefore
exceeds Congress’ spending power and cannot be implemented.
F
Seven Members of the Court agree that the Medicaid Expansion, as enacted
by Congress, is unconstitutional. See Part IV–A to IV–E, supra; Part
IV–A, ante, at 45–55 (opinion of ROBERTS, C. J., joined by BREYER and
KAGAN, JJ.). Because the Medicaid Expansion is unconstitutional, the
question of remedy arises. The most natural remedy
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would be to invalidate the Medicaid Expansion. However, the Government
proposes—in two cursory sentences at the very end of its
brief—preserving the Expansion. Under its proposal, States would receive
the additional Medi- caid funds if they expand eligibility, but States
would keep their pre-existing Medicaid funds if they do not expand
eligibility. We cannot accept the Government’s suggestion.
The reality that States were given no real choice but to expand Medicaid
was not an accident. Congress assumed States would have no choice, and
the ACA depends on States’ having no choice, because its Mandate
requires low-income individuals to obtain insurance many of them can
afford only through the Medicaid Expansion. Fur- thermore, a State’s
withdrawal might subject everyone in the State to much higher insurance
premiums. That is because the Medicaid Expansion will no longer offset
the cost to the insurance industry imposed by the ACA’s in- surance
regulations and taxes, a point that is explained in more detail in the
severability section below. To make the Medicaid Expansion optional
despite the ACA’s structure and design “‘would be to make a new law, not
to enforce an old one. This is no part of our duty.’” Trade-Mark Cases,
100 U. S. 82, 99 (1879).
Worse, the Government’s proposed remedy introduces a new dynamic: States
must choose between expanding Medicaid or paying huge tax sums to the
federal fisc for the sole benefit of expanding Medicaid in other States.
If this divisive dynamic between and among States can be introduced at
all, it should be by conscious congressional choice, not by
Court-invented interpretation. We do not doubt that States are capable
of making decisions when put in a tight spot. We do doubt the authority
of this Court to put them there.
The Government cites a severability clause codified with Medicaid in Chapter 7 of the United States Code stating
48 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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that if “any provision of this chapter, or the application thereof to
any person or circumstance, is held invalid, the remainder of the
chapter, and the application of such provision to other persons or
circumstances shall not be affected thereby.” 42 U. S. C. §1303 (2006
ed.). But that clause tells us only that other provisions in Chapter 7
should not be invalidated if §1396c, the authorization for the cut-off
of all Medicaid funds, is unconstitutional. It does not tell us that
§1396c can be judicially revised, to say what it does not say. Such a
judicial power would not be called the doctrine of severability but
perhaps the doctrine of amendatory invalidation—similar to the
amendatory veto that permits the Governors of some States to reduce the
amounts appropriated in legislation. The proof that such a power does
not exist is the fact that it would not preserve other congressional
dispositions, but would leave it up to the Court what the “validated”
legis- lation will contain. The Court today opts for permitting the
cut-off of only incremental Medicaid funding, but it might just as well
have permitted, say, the cut-off of funds that represent no more than x
percent of the State’s bud- get. The Court severs nothing, but simply
revises §1396c to read as the Court would desire.
We should not accept the Government’s invitation to attempt to solve a
constitutional problem by rewriting the Medicaid Expansion so as to
allow States that reject it to retain their pre-existing Medicaid funds.
Worse, the Government’s remedy, now adopted by the Court, takes the ACA
and this Nation in a new direction and charts a course for federalism
that the Court, not the Congress, has chosen; but under the
Constitution, that power and au- thority do not rest with this Court.
V
Severability
The Affordable Care Act seeks to achieve “near-
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
universal” health insurance coverage. §18091(2)(D) (2006 ed., Supp. IV).
The two pillars of the Act are the Individ- ual Mandate and the
expansion of coverage under Medicaid. In our view, both these central
provisions of the Act—the Individual Mandate and Medicaid Expansion—are
invalid. It follows, as some of the parties urge, that all other provi-
sions of the Act must fall as well. The following section explains the
severability principles that require this con- clusion. This analysis
also shows how closely interrelated the Act is, and this is all the more
reason why it is judicial usurpation to impose an entirely new
mechanism for withdrawal of Medicaid funding, see Part IV–F, supra,
which is one of many examples of how rewriting the Act alters its
dynamics.
A
When an unconstitutional provision is but a part of a more comprehensive
statute, the question arises as to the validity of the remaining
provisions. The Court’s author- ity to declare a statute partially
unconstitutional has been well established since Marbury v. Madison, 1
Cranch 137 (1803), when the Court severed an unconstitutional provi-
sion from the Judiciary Act of 1789. And while the Court has sometimes
applied “at least a modest presumption in favor of . . . severability,”
C. Nelson, Statutory Interpreta- tion 144 (2010), it has not always done
so, see, e.g., Minne- sota v. Mille Lacs Band of Chippewa Indians, 526
U. S. 172, 190–195 (1999).
An automatic or too cursory severance of statutory provisions risks
“rewrit[ing] a statute and giv[ing] it an effect altogether different
from that sought by the meas- ure viewed as a whole.” Railroad
Retirement Bd. v. Alton R. Co., 295 U. S. 330, 362 (1935). The
Judiciary, if it orders uncritical severance, then assumes the
legislative function; for it imposes on the Nation, by the Court’s
decree, its own new statutory regime, consisting of poli-
50 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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cies, risks, and duties that Congress did not enact. That can be a more
extreme exercise of the judicial power than striking the whole statute
and allowing Congress to ad- dress the conditions that pertained when
the statute was considered at the outset.
The Court has applied a two-part guide as the frame- work for
severability analysis. The test has been deemed “well established.”
Alaska Airlines, Inc. v. Brock, 480 U. S. 678, 684 (1987). First, if the
Court holds a statutory provision unconstitutional, it then determines
whether the now truncated statute will operate in the manner Con- gress
intended. If not, the remaining provisions must be invalidated. See id.,
at 685. In Alaska Airlines, the Court clarified that this first inquiry
requires more than ask- ing whether “the balance of the legislation is
incapable of functioning independently.” Id., at 684. Even if the re-
maining provisions will operate in some coherent way, that alone does
not save the statute. The question is whether the provisions will work
as Congress intended. The “relevant inquiry in evaluating severability
is whether the statute will function in a manner consistent with the
intent of Congress.” Id., at 685 (emphasis in original). See also Free
Enterprise Fund v. Public Company Account- ing Oversight Bd., 561 U. S.
___, ___ (2010) (slip op., at 28) (the Act “remains fully operative as a
law with these tenure restrictions excised”) (internal quotation marks
omitted); United States v. Booker, 543 U. S. 220, 227 (2005) (“[T]wo
provisions . . . must be invalidated in order to allow the statute to
operate in a manner consistent with congressional intent”); Mille Lacs,
supra, at 194 (“[E]m- bodying as it did one coherent policy, [the entire
order] is inseverable”).
Second, even if the remaining provisions can operate as Congress
designed them to operate, the Court must de- termine if Congress would
have enacted them standing alone and without the unconstitutional
portion. If Con-
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gress would not, those provisions, too, must be invalidated. See Alaska
Airlines, supra, at 685 (“[T]he unconstitu- tional provision must be
severed unless the statute cre- ated in its absence is legislation that
Congress would not have enacted”); see also Free Enterprise Fund, supra,
at ___ (slip op., at 29) (“[N]othing in the statute’s text or
historical context makes it ‘evident’ that Congress, faced with the
limitations imposed by the Constitution, would have preferred no Board
at all to a Board whose members are removable at will”); Ayotte v.
Planned Parenthood of Northern New Eng., 546 U. S. 320, 330 (2006)
(“Would the legislature have preferred what is left of its statute to no
statute at all”); Denver Area Ed. Telecommunications Consortium, Inc.
v. FCC, 518 U. S. 727, 767 (1996) (plural- ity opinion) (“Would Congress
still have passed §10(a) had it known that the remaining provisions
were invalid” (internal quotation marks and brackets omitted)).
The two inquiries—whether the remaining provisions will operate as
Congress designed them, and whether Congress would have enacted the
remaining provisions standing alone—often are interrelated. In the
ordinary course, if the remaining provisions cannot operate accord- ing
to the congressional design (the first inquiry), it almost necessarily
follows that Congress would not have enacted them (the second inquiry).
This close interaction may explain why the Court has not always been
precise in distinguishing between the two. There are, however, occasions
in which the severability standard’s first inquiry (statutory
functionality) is not a proxy for the second inquiry (whether the
Legislature intended the remaining provisions to stand alone).
B
The Act was passed to enable affordable, “near-universal” health
insurance coverage. 42 U. S. C. §18091(2)(D). The
resulting, complex statute consists of mandates and
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other requirements; comprehensive regulation and penal- ties; some
undoubted taxes; and increases in some gov- ernmental expenditures,
decreases in others. Under the severability test set out above, it must
be determined if those provisions function in a coherent way and as Con-
gress would have intended, even when the major provi- sions
establishing the Individual Mandate and Medicaid Expansion are
themselves invalid.
Congress did not intend to establish the goal of near- universal
coverage without regard to fiscal consequences. See, e.g., ACA §1563,
124 Stat. 270 (“[T]his Act will reduce the Federal deficit between 2010
and 2019”). And it did not intend to impose the inevitable costs on any
one indus- try or group of individuals. The whole design of the Act is
to balance the costs and benefits affecting each set of regulated
parties. Thus, individuals are required to obtain health insurance. See
26 U. S. C. §5000A(a). Insur- ance companies are required to sell them
insurance re- gardless of patients’ pre-existing conditions and to
comply with a host of other regulations. And the companies must pay new
taxes. See §4980I (high-cost insurance plans); 42 U. S. C.
§§300gg(a)(1), 300gg–4(b) (community rating); §§300gg–1, 300gg–3,
300gg–4(a) (guaranteed issue); §300gg–11 (elimination of coverage
limits); §300gg–14(a) (dependent children up to age 26); ACA §§9010,
10905, 124 Stat. 865, 1017 (excise tax); Health Care and Educa- tion
Reconciliation Act of 2010 (HCERA) §1401, 124 Stat. 1059 (excise tax).
States are expected to expand Medicaid eligibility and to create
regulated marketplaces called ex- changes where individuals can purchase
insurance. See 42 U. S. C. §§1396a(a)(10)(A)(i)(VIII) (2006 ed., Supp.
IV) (Medicaid Expansion), 18031 (exchanges). Some persons who cannot
afford insurance are provided it through the Medicaid Expansion, and
others are aided in their pur- chase of insurance through federal
subsidies available on health-insurance exchanges. See 26 U. S. C.
§36B (2006
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ed., Supp. IV), 42 U. S. C. §18071 (2006 ed., Supp. IV) (federal
subsidies). The Federal Government’s increased spending is offset by new
taxes and cuts in other federal expenditures, including reductions in
Medicare and in federal payments to hospitals. See, e.g., §1395ww(r)
(Med- icare cuts); ACA Title IX, Subtitle A, 124 Stat. 847 (“Rev- enue
Offset Provisions”). Employers with at least 50 employees must either
provide employees with adequate health benefits or pay a financial
exaction if an employee who qualifies for federal subsidies purchases
insurance through an exchange. See 26 U. S. C. §4980H (2006 ed.,
Supp. IV).
In short, the Act attempts to achieve near-universal health insurance
coverage by spreading its costs to indi- viduals, insurers, governments,
hospitals, and employers— while, at the same time, offsetting
significant portions of those costs with new benefits to each group. For
ex- ample, the Federal Government bears the burden of pay- ing billions
for the new entitlements mandated by the Medicaid Expansion and federal
subsidies for insurance purchases on the exchanges; but it benefits
from reduc- tions in the reimbursements it pays to hospitals. Hospi-
tals lose those reimbursements; but they benefit from the decrease in
uncompensated care, for under the insurance regulations it is easier for
individuals with pre-existing conditions to purchase coverage that
increases payments to hospitals. Insurance companies bear new costs
imposed by a collection of insurance regulations and taxes, including
“guaranteed issue” and “community rating” requirements to give coverage
regardless of the insured’s pre-existing conditions; but the insurers
benefit from the new, healthy purchasers who are forced by the
Individual Mandate to buy the insurers’ product and from the new low-
income Medicaid recipients who will enroll in insurance companies’
Medicaid-funded managed care programs. In summary, the Individual
Mandate and Medicaid Expan-
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sion offset insurance regulations and taxes, which offset reduced
reimbursements to hospitals, which offset in- creases in federal
spending. So, the Act’s major provisions are interdependent.
The Act then refers to these interdependencies as “shared
responsibility.” See ACA Subtitle F, Title I, 124 Stat. 242 (“Shared
Responsibility”); ACA §1501, ibid. (same); ACA §1513, id., at 253
(same); ACA §4980H, ibid. (same). In at least six places, the Act
describes the Indi- vidual Mandate as working “together with the other
pro- visions of this Act.” 42 U. S. C. §18091(2)(C) (2006 ed., Supp.
IV) (working “together” to “add millions of new consumers to the health
insurance market”); §18091(2)(E) (working “together” to “significantly
reduce” the economic cost of the poorer health and shorter lifespan of
the unin- sured); §18091(2)(F) (working “together” to “lower health
insurance premiums”); §18091(2)(G) (working “together” to “improve
financial security for families”); §18091(2)(I) (working “together” to
minimize “adverse selection and broaden the health insurance risk pool
to include healthy individuals”); §18091(2)(J) (working “together” to
“signif- icantly reduce administrative costs and lower health insurance
premiums”). The Act calls the Individual Man- date “an essential part”
of federal regulation of health insurance and warns that “the absence of
the requirement would undercut Federal regulation of the health
insurance market.” §18091(2)(H).
C
One preliminary point should be noted before applying severability
principles to the Act. To be sure, an argument can be made that those
portions of the Act that none of the parties has standing to challenge
cannot be held nonse- verable. The response to this argument is that our
cases do not support it. See, e.g., Williams v. Standard Oil Co. of
La., 278 U. S. 235, 242–244 (1929) (holding nonsever-
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SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
able statutory provisions that did not burden the parties). It would be
particularly destructive of sound government to apply such a rule with
regard to a multifaceted piece of legislation like the ACA. It would
take years, perhaps decades, for each of its provisions to be
adjudicated sepa- rately—and for some of them (those simply expending
federal funds) no one may have separate standing. The Federal
Government, the States, and private parties ought to know at once
whether the entire legislation fails.
The opinion now explains in Part V–C–1, infra, why the Act’s major
provisions are not severable from the Mandate and Medicaid Expansion. It
proceeds from the insurance regulations and taxes (C–1–a), to the
reductions in reim- bursements to hospitals and other Medicare
reductions (C–1–b), the exchanges and their federal subsidies (C–1–c),
and the employer responsibility assessment (C–1–d). Part V–C–2, infra,
explains why the Act’s minor provi- sions also are not severable.
1
The Act’s Major Provisions
Major provisions of the Affordable Care Act—i.e., the insurance
regulations and taxes, the reductions in federal reimbursements to
hospitals and other Medicare spend- ing reductions, the exchanges and
their federal subsidies, and the employer responsibility
assessment—cannot remain once the Individual Mandate and Medicaid
Expansion are invalid. That result follows from the undoubted inability
of the other major provisions to operate as Congress in- tended without
the Individual Mandate and Medicaid Expansion. Absent the invalid
portions, the other major provisions could impose enormous risks of
unexpected bur- dens on patients, the health-care community, and the
federal budget. That consequence would be in absolute conflict with the
ACA’s design of “shared responsibility,” and would pose a threat to the
Nation that Congress did
56 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
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a
Insurance Regulations and Taxes
Without the Individual Mandate and Medicaid Expan- sion, the Affordable
Care Act’s insurance regulations and insurance taxes impose risks on
insurance companies and their customers that this Court cannot measure.
Those risks would undermine Congress’ scheme of “shared re-
sponsibility.” See 26 U. S. C. §4980I (2006 ed., Supp. IV) (high-cost
insurance plans); 42 U. S. C. §§300gg(a)(1) (2006 ed., Supp. IV),
300gg–4(b) (community rating); §§300gg–1, 300gg–3, 300gg–4(a)
(guaranteed issue); §300gg–11 (elimination of coverage limits);
§300gg–14(a) (dependent children up to age 26); ACA §§9010, 10905, 124
Stat. 865, 1017 (excise tax); HCERA §1401, 124 Stat. 1059 (excise tax).
The Court has been informed by distinguished econo- mists that the Act’s
Individual Mandate and Medicaid Expansion would each increase revenues
to the insurance industry by about $350 billion over 10 years; that this
combined figure of $700 billion is necessary to offset the
approximately $700 billion in new costs to the insurance industry
imposed by the Act’s insurance regulations and taxes; and that the new
$700-billion burden would other- wise dwarf the industry’s current
profit margin. See Brief for Economists as Amici Curiae in No. 11–393
etc. (Sever- ability), pp. 9–16, 10a.
If that analysis is correct, the regulations and taxes will mean higher
costs for insurance companies. Higher costs may mean higher premiums for
consumers, despite the Act’s goal of “lower[ing] health insurance
premiums.” 42 U. S. C. §18091(2)(F) (2006 ed., Supp. IV). Higher
costs also could threaten the survival of health-insurance com- panies,
despite the Act’s goal of “effective health insurance markets.”
§18091(2)(J).
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The actual cost of the regulations and taxes may be more or less than
predicted. What is known, however, is that severing other provisions
from the Individual Man- date and Medicaid Expansion necessarily would
impose significant risks and real uncertainties on insurance com-
panies, their customers, all other major actors in the sys- tem, and the
government treasury. And what also is known is this: Unnecessary risks
and avoidable uncertain- ties are hostile to economic progress and
fiscal stability and thus to the safety and welfare of the Nation and
the Nation’s freedom. If those risks and uncertainties are to be
imposed, it must not be by the Judiciary.
b
Reductions in Reimbursements to Hospitals and Other Reductions in Medicare Expenditures
The Affordable Care Act reduces payments by the Fed- eral Government to
hospitals by more than $200 billion over 10 years. See 42 U. S. C.
§1395ww(b)(3)(B)(xi)–(xii) (2006 ed., Supp. IV); §1395ww(q); §1395ww(r);
§1396r– 4(f)(7).
The concept is straightforward: Near-universal coverage will reduce
uncompensated care, which will increase hos- pitals’ revenues, which
will offset the government’s re- ductions in Medicare and Medicaid
reimbursements to hospitals. Responsibility will be shared, as burdens
and benefits balance each other. This is typical of the whole dynamic of
the Act.
Invalidating the key mechanisms for expanding insur- ance coverage, such
as community rating and the Medi- caid Expansion, without invalidating
the reductions in Medicare and Medicaid, distorts the ACA’s design of
“shared responsibility.” Some hospitals may be forced to raise the cost
of care in order to offset the reductions in reimbursements, which could
raise the cost of insurance premiums, in contravention of the Act’s
goal of “lower[ing]
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health insurance premiums.” 42 U. S. C. §18091(2)(F)
(2006 ed., Supp. IV). See also §18091(2)(I) (goal of “lower[ing] health
insurance premiums”); §18091(2)(J) (same). Other hospitals, particularly
safety-net hospitals that serve a large number of uninsured patients,
may be forced to shut down. Cf. National Assn. of Public Hospitals, 2009
Annual Survey: Safety Net Hospitals and Health Systems Fulfill Mission
in Uncertain Times 5–6 (Feb. 2011). Like the effect of preserving the
insurance regulations and taxes, the precise degree of risk to hospitals
is unknow- able. It is not the proper role of the Court, by severing
part of a statute and allowing the rest to stand, to impose unknowable
risks that Congress could neither measure nor predict. And Congress
could not have intended that result in any event.
There is a second, independent reason why the reduc- tions in
reimbursements to hospitals and the ACA’s other Medicare cuts must be
invalidated. The ACA’s $455 bil- lion in Medicare and Medicaid savings
offset the $434- billion cost of the Medicaid Expansion. See CBO Esti-
mate, Table 2 (Mar. 20, 2010). The reductions allowed Congress to find
that the ACA “will reduce the Federal deficit between 2010 and 2019” and
“will continue to reduce budget deficits after 2019.” ACA §§1563(a)(1),
(2), 124 Stat. 270.
That finding was critical to the ACA. The Act’s “shared responsibility”
concept extends to the federal budget. Congress chose to offset new
federal expenditures with budget cuts and tax increases. That is why the
United States has explained in the course of this litigation that
“[w]hen Congress passed the ACA, it was careful to ensure that any
increased spending, including on Medicaid, was offset by other
revenue-raising and cost-saving provi- sions.” Memorandum in Support of
Government’s Motion for Summary Judgment in No. 3–10–cv–91, p. 41.
If the Medicare and Medicaid reductions would no longer
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be needed to offset the costs of the Medicaid Expansion, the reductions
would no longer operate in the manner Congress intended. They would lose
their justification and foundation. In addition, to preserve them would
be “to eliminate a significant quid pro quo of the legislative com-
promise” and create a statute Congress did not enact. Legal Services
Corporation v. Velazquez, 531 U. S. 533, 561 (2001) (SCALIA, J.,
dissenting). It is no secret that cutting Medicare is unpopular; and it
is most improbable Congress would have done so without at least the
assur- ance that it would render the ACA deficit-neutral. See ACA
§§1563(a)(1), (2), 124 Stat. 270.
c
Health Insurance Exchanges and Their Federal Subsidies
The ACA requires each State to establish a health- insurance “exchange.”
Each exchange is a one-stop mar- ketplace for individuals and small
businesses to compare community-rated health insurance and purchase the
policy of their choice. The exchanges cannot operate in the manner
Congress intended if the Individual Mandate, Medicaid Expansion, and
insurance regulations cannot remain in force.
The Act’s design is to allocate billions of federal dollars to subsidize
individuals’ purchases on the exchanges. In- dividuals with incomes
between 100 and 400 percent of the poverty level receive tax credits to
offset the cost of insurance to the individual purchaser. 26 U. S. C.
§36B (2006 ed., Supp. IV); 42 U. S. C. §18071 (2006 ed., Supp. IV). By
2019, 20 million of the 24 million people who will obtain insurance
through an exchange are expected to receive an average federal subsidy
of $6,460 per person. See CBO, Analysis of the Major Health Care
Legislation Enacted in March 2010, pp. 18–19 (Mar. 30, 2011). With- out
the community-rating insurance regulation, however,
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the average federal subsidy could be much higher; for community rating
greatly lowers the enormous premiums unhealthy individuals would
otherwise pay. Federal subsidies would make up much of the difference.
The result would be an unintended boon to insurance companies, an
unintended harm to the federal fisc, and a corresponding breakdown of
the “shared responsibil- ity” between the industry and the federal
budget that Congress intended. Thus, the federal subsidies must be
invalidated.
In the absence of federal subsidies to purchasers, insur- ance companies
will have little incentive to sell insurance on the exchanges. Under
the ACA’s scheme, few, if any, individuals would want to buy individual
insurance poli- cies outside of an exchange, because federal subsidies
would be unavailable outside of an exchange. Difficulty in attracting
individuals outside of the exchange would in turn motivate insurers to
enter exchanges, despite the exchanges’ onerous regulations. See 42
U. S. C. §18031. That system of incentives collapses if the federal
subsidies are invalidated. Without the federal subsidies, individ- uals
would lose the main incentive to purchase insurance inside the
exchanges, and some insurers may be unwilling to offer insurance inside
of exchanges. With fewer buyers and even fewer sellers, the exchanges
would not operate as Congress intended and may not operate at all.
There is a second reason why, if community rating is invalidated by the
Mandate and Medicaid Expansion’s invalidity, exchanges cannot be
implemented in a manner consistent with the Act’s design. A key purpose
of an exchange is to provide a marketplace of insurance options where
prices are standardized regardless of the buy- er’s pre-existing
conditions. See ibid. An individual who shops for insurance through an
exchange will evaluate different insurance products. The products will
offer different benefits and prices. Congress designed the ex-
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changes so the shopper can compare benefits and prices. But the
comparison cannot be made in the way Congress designed if the prices
depend on the shopper’s pre-existing health conditions. The prices would
vary from person to person. So without community rating—which prohibits
insurers from basing the price of insurance on pre-existing
conditions—the exchanges cannot operate in the manner Congress intended.
d
Employer-Responsibility Assessment
The employer responsibility assessment provides an incentive for
employers with at least 50 employees to provide their employees with
health insurance options that meet minimum criteria. See
26 U. S. C. §4980H (2006 ed., Supp. IV). Unlike the Individual
Mandate, the employer-responsibility assessment does not require
employers to provide an insurance option. Instead, it re- quires them to
make a payment to the Federal Govern- ment if they do not offer
insurance to employees and if insurance is bought on an exchange by an
employee who qualifies for the exchange’s federal subsidies. See ibid.
For two reasons, the employer-responsibility assessment must be
invalidated. First, the ACA makes a direct link between the
employer-responsibility assessment and the exchanges. The financial
assessment against employers occurs only under certain conditions. One
of them is the purchase of insurance by an employee on an exchange. With
no exchanges, there are no purchases on the ex- changes; and with no
purchases on the exchanges, there is nothing to trigger the
employer-responsibility assessment.
Second, after the invalidation of burdens on individuals (the Individual
Mandate), insurers (the insurance regu- lations and taxes), States (the
Medicaid Expansion), the Federal Government (the federal subsidies for
exchanges and for the Medicaid Expansion), and hospitals (the reduc-
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tions in reimbursements), the preservation of the employer-
responsibility assessment would upset the ACA’s design of “shared
responsibility.” It would leave employers as the only parties bearing
any significant responsibility. That was not the congressional intent.
2
The Act’s Minor Provisions
The next question is whether the invalidation of the ACA’s major
provisions requires the Court to invalidate the ACA’s other provisions.
It does.
The ACA is over 900 pages long. Its regulations include requirements
ranging from a break time and secluded place at work for nursing
mothers, see 29 U. S. C. §207(r)(1) (2006 ed., Supp. IV), to displays of
nutritional content at chain restaurants, see 21 U. S.
C. §343(q)(5)(H). The Act raises billions of dollars in taxes and
fees, includ- ing exactions imposed on high-income taxpayers, see ACA
§§9015, 10906; HCERA §1402, medical devices, see 26 U. S. C. §4191 (2006
ed., Supp. IV), and tanning booths, see §5000B. It spends government
money on, among other things, the study of how to spend less government
money. 42 U. S. C. §1315a. And it includes a number of provisions that
provide benefits to the State of a particular legislator. For example,
§10323, 124 Stat. 954, extends Medicare coverage to individuals exposed
to asbestos from a mine in Libby, Montana. Another provision, §2006,
id., at 284, increases Medicaid payments only in Louisiana.
Such provisions validate the Senate Majority Leader’s statement, “‘I
don’t know if there is a senator that doesn’t have something in this
bill that was important to them. . . . [And] if they don’t have
something in it important to them, then it doesn’t speak well of them.
That’s what this legislation is all about: It’s the art of compromise.’”
Pear, In Health Bill for Everyone, Provisions for a Few, N. Y. Times,
Jan. 4, 2010, p. A10 (quoting Sen. Reid). Often, a
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minor provision will be the price paid for support of a major provision.
So, if the major provision were unconsti- tutional, Congress would not
have passed the minor one.
Without the ACA’s major provisions, many of these minor provisions will
not operate in the manner Congress intended. For example, the tax
increases are “Revenue Offset Provisions” designed to help offset the
cost to the Federal Government of programs like the Medicaid Ex- pansion
and the exchanges’ federal subsidies. See Title IX, Subtitle A—Revenue
Offset Provisions, 124 Stat. 847. With the Medicaid Expansion and the
exchanges invali- dated, the tax increases no longer operate to offset
costs, and they no longer serve the purpose in the Act’s scheme of
“shared responsibility” that Congress intended.
Some provisions, such as requiring chain restaurants to display
nutritional content, appear likely to operate as Congress intended, but
they fail the second test for sever- ability. There is no reason to
believe that Congress would have enacted them independently. The Court
has not previously had occasion to consider severability in the con-
text of an omnibus enactment like the ACA, which in- cludes not only
many provisions that are ancillary to its central provisions but also
many that are entirely unre- lated—hitched on because it was a quick way
to get them passed despite opposition, or because their proponents
could exact their enactment as the quid pro quo for their needed
support. When we are confronted with such a so- called “Christmas tree,”
a law to which many nongermane ornaments have been attached, we think
the proper rule must be that when the tree no longer exists the
ornaments are superfluous. We have no reliable basis for knowing which
pieces of the Act would have passed on their own. It is certain that
many of them would not have, and it is not a proper function of this
Court to guess which. To sever the statute in that manner “‘would be to
make a new law, not to enforce an old one. This is not part of our
duty.’”
64 NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
Trade-Mark Cases, 100 U. S., at 99. This Court must not impose risks unintended by Con-
gress or produce legislation Congress may have lacked the support to
enact. For those reasons, the unconstitution- ality of both the
Individual Mandate and the Medicaid Expansion requires the invalidation
of the Affordable Care Act’s other provisions.
*** The Court today decides to save a statute Congress did
not write. It rules that what the statute declares to be a requirement
with a penalty is instead an option subject to a tax. And it changes the
intentionally coercive sanc- tion of a total cut-off of Medicaid funds
to a supposedly noncoercive cut-off of only the incremental funds that
the Act makes available.
The Court regards its strained statutory interpretation as judicial
modesty. It is not. It amounts instead to a vast judicial overreaching.
It creates a debilitated, inoperable version of health-care regulation
that Congress did not enact and the public does not expect. It makes
enactment of sensible health-care regulation more difficult, since
Congress cannot start afresh but must take as its point of departure a
jumble of now senseless provisions, provisions that certain interests
favored under the Court’s new de- sign will struggle to retain. And it
leaves the public and the States to expend vast sums of money on
requirements that may or may not survive the necessary congressional
revision.
The Court’s disposition, invented and atextual as it is, does not even
have the merit of avoiding constitutional difficulties. It creates them.
The holding that the Indi- vidual Mandate is a tax raises a difficult
constitutional question (what is a direct tax?) that the Court resolves
with inadequate deliberation. And the judgment on the Medicaid Expansion
issue ushers in new federalism con-
Cite as: 567 U. S. ____ (2012) 65
SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting
cerns and places an unaccustomed strain upon the Union. Those States
that decline the Medicaid Expansion must subsidize, by the federal tax
dollars taken from their citizens, vast grants to the States that accept
the Medicaid Expansion. If that destabilizing political dynamic, so
antagonistic to a harmonious Union, is to be introduced at all, it
should be by Congress, not by the Judiciary.
The values that should have determined our course to- day are caution,
minimalism, and the understanding that the Federal Government is one of
limited powers. But the Court’s ruling undermines those values at every
turn. In the name of restraint, it overreaches. In the name of
constitutional avoidance, it creates new constitutional questions. In
the name of cooperative federalism, it un- dermines state sovereignty.
The Constitution, though it dates from the founding of the Republic, has
powerful meaning and vital relevance to our own times. The
constitutional protections that this case involves are protections of
structure. Structural protections—notably, the restraints imposed by
federalism and separation of powers—are less romantic and have less
obvious a connection to personal freedom than the provi- sions of the
Bill of Rights or the Civil War Amendments. Hence they tend to be
undervalued or even forgotten by our citizens. It should be the
responsibility of the Court to teach otherwise, to remind our people
that the Framers considered structural protections of freedom the most
im- portant ones, for which reason they alone were embod- ied in the
original Constitution and not left to later amendment. The fragmentation
of power produced by the structure of our Government is central to
liberty, and when we destroy it, we place liberty at peril. Today’s
decision should have vindicated, should have taught, this truth;
instead, our judgment today has disregarded it.
For the reasons here stated, we would find the Act in- valid in its entirety. We respectfully dissent.
Cite as: 567 U. S. ____ (2012) 1 THOMAS, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 11–393, 11–398 and 11–400 _________________
NATIONAL FEDERATION OF INDEPENDENT BUSINESS, ET AL., PETITIONERS
11–393 v. KATHLEEN SEBELIUS, SECRETARY OF HEALTH
AND HUMAN SERVICES, ET AL.
DEPARTMENT OF HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS
11–398 v. FLORIDA ET AL.
FLORIDA, ET AL., PETITIONERS 11–400 v.
DEPARTMENT OF HEALTH AND HUMAN SERVICES ET AL.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
[June 28, 2012]
JUSTICE THOMAS, dissenting.
I dissent for the reasons stated in our joint opinion, but I write
separately to say a word about the Commerce Clause. The joint dissent
and THE CHIEF JUSTICE correctly apply our precedents to conclude that
the Individual Mandate is beyond the power granted to Congress under the
Commerce Clause and the Necessary and Proper Clause. Under those
precedents, Congress may regulate “economic activity [that]
substantially affects interstate commerce.” United States v. Lopez, 514
U. S. 549, 560 (1995). I adhere to my view that “the very notion of a
‘substantial effects’ test under the Commerce Clause is inconsistent
with the original understanding of Congress’ powers and with this
Court’s early Commerce Clause cases.” United States v. Morrison, 529 U.
S. 598, 627 (2000) (THOMAS, J., concurring); see also Lopez, supra, at
584–602 (THOMAS, J., concurring); Gonzales v. Raich, 545 U. S. 1, 67–69
(2005) (THOMAS, J., dissenting). As I have explained, the Court’s
continued use of that test “has encouraged the Federal Government to
persist in its view that the Commerce Clause has virtually no limits.”
Morrison, supra, at 627. The Government’s unprecedented claim in this
suit that it may regulate not only economic activity but also inactivity
that substantially affects inter- state commerce is a case in point.
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