                             Constitutionality of Health Care Reform


T h e p ro p o s e d H e alth S e c u rity A c t is w e ll w ith in th e a u th o rity o f C o n g re ss u n d e r th e C o m m e rc e
     C la u se , a n d it d o e s n o t v io la te T enth A m e n d m e n t o r o th e r p rin c ip le s o f fe d e ra lism .


T h e p ro p o s a l c o n ta in s n o u n c o n stitu tio n a l ta k in g s o f p riv a te p ro p e rty o r in frin g e m e n t o f lib e rty in terests.


T h e p ro p o s e d d e le g a tio n o f a d m in istra tiv e a u th o rity to th e N a tio n a l H e a lth B o a rd , and, fro m it, to state
     a llia n c e s , is n o t a n im p e rm is s ib le d e le g a tio n o f le g is la tiv e a u th o rity


                                                                                                                             O c to b e r 2 9 , 1993



                                 M e m o r a n d u m O p in io n f o r t h e A t t o r n e y G e n e r a l
                                           a n d the      A s s o c ia t e A t t o r n e y G e n e r a l



   The Health Security Act (“Act”) creates for all citizens the security that health
care coverage will always be available to them. It accomplishes this by building on
the existing American system for providing health care, which largely operates
through employers. Much of the system will be administered by the states, which
will have primary responsibility to ensure that regional health alliances are estab­
lished, to certify accountable health plans, and to provide mechanisms to resolve
complaints and disputes.
   This legislation is well within the long-recognized authority of the federal gov­
ernment. It is fair to say that, just as the substantive contents of the legislation
draw on existing models and approaches to health care delivery and financing, the
structure, processes and mechanisms the legislation uses to accomplish its substan­
tive objectives draw on already existing and validated techniques that the national
government has employed on numerous other occasions.
   Notwithstanding the well-established legitimacy of the means that the Act em­
ploys to achieve a public purpose o f paramount importance, some special interests
have such financial stake in the current system that they have strong incentives to
challenge the Act even on highly implausible grounds, if the consequences of do­
ing so were to alter the ultimate design of the system even slightly in their favor.
    Congressman Richard Gephardt has described the Act as the most historic piece
of social legislation since the Social Security Act of 1935, and in a curious way the
challenges to the constitutionality o f the Health Security Act’s basic structure re­
play arguments levelled at the Social Security Act and other New Deal legislation
enacted over fifty years ago. These arguments were considered and dismissed
then, they remain unsound to this day, and they should not be allowed in any way
to deflect consideration of the merits of the President’s proposal — nor could they


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succeed against that proposal without threatening to unravel numerous vital statutes
enacted since the 1930’s.

    • The National Government Possesses the Constitutional
      Authority to Undertake National Health Care Reform.

   The most fundamental constitutional challenge to national health care reform is
that it lies beyond the power of Congress and the President to enact. Fortunately,
the Supreme Court has long since rejected the crabbed view of national legislative
authority that necessarily lies behind such a challenge.
   During the m id-l930’s, when for a brief time the Court invalidated some as­
pects of the New Deal, a majority of the Justices accepted the argument that Con­
gress lacks the power “to protect the general public interest and the health and
comfort of the people.” 1 That argument was predicated on an exceedingly narrow
conception of the authority of the federal government to address problems of na­
tional dimension under the commerce clause of the Constitution. The Court
quickly abandoned that attack on the New Deal as inconsistent with the text and
structure of the Constitution and, indeed, with the Court’s own precedents.2 Noting
that “there has long been recognition of the authority of Congress to obtain . . .
social, health or economic advantages from the exercise of constitutional powers,”3
the Court concluded that Congress’s authority over “commerce among the several
States” empowers the national government to address all activity, “whatever its
nature . . . if it exerts a substantial economic effect on interstate commerce.”4 Up­
holding Congress’s power to regulate the sale and distribution of coal because of
the impact of that industry on American economic and social life, the Court stated:

          If the strategic character of this industry in our economy and the
          chaotic conditions which have prevailed in it do not justify legisla­
          tion, it is difficult to imagine what would. To invalidate this Act we
          would have to deny the existence of power on the part of Congress
          under the commerce clause to deal directly and specifically with
          those forces which in its judgment should not be permitted to dislo­

   1 C arter v. C airer C oal Co , 298 U S 238, 290 (1936). Justice C ardozo, jo in e d by Justices B randeis and
Stone, d issented from the m ajority's denial to C ongress o f the pow er to deal w ith a problem — unrestrained
com petition in the coal industry — that “choked and b u rd en ed '’ com m erce and had produced “bankruptcy
and waste and ru in " Id at 331 (C ardozo, J , dissenting). Five years later, the Suprem e C ourt explicitly
endorsed Justice C ard o zo 's understanding o f congressional p o w er w ith only one Justice in dissent See
Sunshine A n th n u ite C oal Co v A dkins, 310 U S 3 8 1 ,3 9 5 (1940) The follow ing Term , a unanim ous C ourt
dism issed the view s o f the C arter C oal m ajority as inconsistent w ith sound constitutional principle U nited
States v. D a rb y, H12 U S. 100, 123 (1941)
   2 The C o u rt's flirtation with a lim ited view o f national pow er was b rie f indeed. C arter C oal was decided
on M ay 18, 1936. and effectively repudiated by a trilogy o f cases decided on A pril 12. 1937 See, t #., N LR B
v Jones & Laughhn S teel C orp ,3 0 1 U S . I (1937)
   3 C loverleaj B utter Co v Patterson, 3 15 U S 148, 163 (1942)
   4 W ic k a rd v F ilh u m , 3 17 U S. I l l , 125 (1942)

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          cate an important segment o f our economy and to disrupt and bur­
          den interstate channels of trade. . . . Congress under the commerce
          clause is not impotent to deal with what it may consider to be dire
          consequences of laissez-faire.5

   The American health care industry is one of the largest and fastest growing
segments of the American economy, and it has the most direct and crucial impact
on the lives of all Americans. Spiralling health care costs and inequities in the
provision of health care services have an immediate and massive effect on the na­
tional economy and thus upon interstate commerce. As a result Congress unques­
tionably possesses the power “to deal directly and specifically” with health care in
order to obtain “social, health [and] economic advantages” for the American peo­
ple.

   • National Health Care Reform Preserves our Federal System.

   The President’s health care reform plan will invite state participation in the for­
mulation and administration of national health policy; if an individual state gov­
ernment should choose not to participate, the federal government will administer
the health care system in that state. This type of cooperative federal-state program
is now quite common in federal legislation. Examples range from many of the
major modern environmental laws, including the Clean Air Act, the Clean Water
Act, and the Resource Conservation and Recovery Act, to much older legislation,
such as Title IX of the Social Security Act, establishing a system for unemploy­
ment compensation. Challenges to such legislation based on constitutional princi­
ples of federalism were made during the New Deal, when it was alleged that the
national reform legislation of that era stripped the states of powers that were re­
served to them by the Tenth Amendment. But that argument was wholly without
merit then, and it remains wholly without merit today.
   In rejecting the notion that principles of federalism somehow rendered the old
age benefits of the Social Security Act of 1935 invalid under the Tenth Amend­
ment, the Supreme Court admonished that “nation-wide calamities] . . . may be
checked, if Congress so determines, by the resources of the Nation [in order] to
save men and women from the rigors of the poor house as well as from the haunt­
ing fear that such a lot awaits them when journey’s end is near.”6 More funda­
mentally, that same day, the Court also rejected a Tenth Amendment challenge to
elements of the Social Security Act that created a cooperative plan whereby states
were free to provide unemployment compensation and thereby trigger benefits un­
der the Act for employers in the state. In so doing, the Court issued a resounding
declaration that Congress may enact legislation that addresses a “problem . . . na­

  5 S u n sh in e A n th ra c ite C o a l Co. v A dkins, 310 U.S. a t 3 95-96
  6 H e lve rin g v. D avis, 301 U .S. 619, 641 (1 9 3 7 )

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tional in area and dimensions” by providing the states with the option to share in
the solution or not, at the choice of the individual state.7 The Court did not accept
the claim that a state is “coerced” by Congress when, pursuant to federal legislation
the state “cho[oses] to have relief administered under laws of her own making, by
agents of her own selection, instead of under federal laws, administered by federal
officers.”8 The Court described such legislation as “the creation of a larger free­
dom, the states and the nation joining in a cooperative endeavor to avert a common
evil.”9 Similarly, under the President’s health care proposals, states will have the
option to formulate specific plans for implementing the federally guaranteed pack­
age of benefits and to oversee the provision and quality of care to their residents as
a means of addressing our “common” health care crisis.

   * Health Care Reform will Respect the Constitutional
     Rights of Individuals.

    The President’s plan will guarantee to all Americans an extensive package of
health care benefits while protecting the individual’s right to make fundamental
choices about health care. The plan will ensure the availability of health care by
taking into account the economic needs of providers and freeing them from unnec­
essary paperwork. At the same time, as the President has stated, an essential prin­
ciple of national health care reform is the exercise of responsibility by health care
providers and consumers.
   Reports in the media already suggest that opponents of health care reform are
preparing to object to the plan as an intrusion into the Constitution’s protections of
liberty or as a “taking” of private property.10 Neither argument can be sustained.
Indeed, both arguments were pressed unsuccessfully by those who sought to un­
dermine the New Deal.
   Almost sixty years ago, the Supreme Court rejected the claim that New Deal-era
regulation of the economic choices individuals or businesses make is unconstitu­
tional. While the Justices acknowledged that “[u]nder our form of government the
use of property and the making of contracts are normally matters of private and not
of public concern,” the Court stated that

         Equally fundamental with the private right is that of the public to
         regulate it in the common interest. . . . Thus has this court from the
         early days affirmed that the power to promote the general welfare is
         inherent in government. . . . [N]o exercise of the legislative pre­
         rogative to regulate the conduct of the citizen [can be imagined]


  7 S te w a rd M a ch in e Co. v D avis, 301 U S 548, 586 (1937)
  8 Id al 590.
  9 Id at 587.
  10 See E dw ard Felsenthal, AM A to Fight Lim its on D o c to rs ’ F ees, W all Si. J., Sept. 9, 1993.

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          which will not to some extent abridge his liberty or affect his prop­
          erty. But subject only to constitutional restraint the private right
          must yield to the public need.11

Three years later, the Court explained that the liberty protected by the Constitution
“is liberty in a social organization which requires the protection of law against the
evils which menace the health, safety, morals and welfare of the people.” 12 Health
care reform will require responsible participation by providers and consumers alike
“in the interests of the community.” 13 In doing so the President’s plan preserves
‘“ the balance which our Nation, built upon postulates of respect for the liberty of
the individual, has struck between that liberty and the demands of organized soci­
ety.’” 14
    The contention that health care reform would in some manner effect an uncon­
stitutional “taking” of the property o f providers rests on a mistaken equation of the
Constitution’s requirements with the dictates of a particular economic theory.15
Health care reform undeniably will have an impact on the business decisions and
economic interests of providers, and it will require financial contributions and per­
sonal accountability on the part of consumers. As such, however, the plan will be
an “adjustm ent of] the benefits and burdens of economic life to promote the com­
mon good” 16 rather than a taking o f private property.17




     11 N eh b ia v. N ew York, 291 U S 502, 5 2 3 -2 5 (1934) W hile the p articular question before the C ourt in
N eb b ia c o n cern ed the relationship between ind iv id u al liberty and the pow er o f a state, the C ourt expressly
stated that w ithin its sphere C o n g ress also p o ssesses the “p o w er to prom ote the general w elfare” : “Touching
the m atters co m m itte d to it by the C onstitution, the U nited States possesses the pow er ” Id at 524
     12 W est C o a st H o te l Co v P arrish, 300 U S. 379, 391 (1 9 3 7 ). As in N ebbia v N ew York, the Justices
w ere ad d re ssin g the m eaning o f liberty in the context o f a challenge to state legislation but m ade it clear that
th eir re a so n in g applied to the C onstitution’s restraints on the federal governm ent as well.
     13 W est C o a st H o te l Co. v P a rrish , 300 U .S . at 391
     14 P la n n ed P a re n th o o d v C asev, 505 U .S. 833, 850 (1 9 9 2 ) (O ’C onnor, K ennedy, & Souter, JJ.) (quoting
P o e v . V U m an, 367 U.S 497, 542 (1961) (H arlan , J., d issen tin g ))
     15 W hen a m ajority o f the Suprem e C o u rt's m em bers app eared to m ake ju st such an equation, Justice
H olm es po in ted out the e rro r in their reasoning in a fam ous dissent T h e “constitution is not intended to
e m body a p a rtic u la r eco n o m ic theory, w h e th er o f p aternalism and the organic relation o f the citizen to the
S tate o r o f laissez faire." L o c h n e r v N ew York, 198 U S 45, 75 (1905) The C ourt cam e to decide that
Ju stic e H o lm es w as right and the Lochner m ajo rity w rong m any decades ago. See F erguson v Skrupa, 372
U .S. 726, 7 2 9 -3 0 (1 9 6 3 ) (citin g Justice H o lm e s’s dissent and noting that ”‘[t]he doctrine that prevailed in
Lochner          . has long since b een discarded").
     16 P enn C en tra l T ransp Co v New York City’, 438 U .S 1 0 4 ,1 2 4 (1 9 7 8 ) By requiring responsibility on
the part o f all, the plan clearly avoids econom ic im positions “disproportionately concentrated on a few p e r­
s o n s” — th e h allm ark o f an unconstitutional taking. Id
     17 T h at h ealth care reform w ill have d ifferin g econom ic im pacts on different persons, w hile obviously
true, does not m ean that those impacts w ill be “ tak in g s” w ithin the m eaning o f the C onstitution
“G o v e rn m e n t hardly co u ld go on if to som e e x ten t values incident to property could not be dim inished w ith ­
o u t paying for every such change in the g en eral la w ” P en n sylva n ia C o a l Co v M ahon, 2 60 U S. 393, 413
(1 9 2 2 ) S e e a lso U n ited S ta te s v. Sperrv C o rp , 493 U .S. 52 (1989)

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    • The President and Congress May Establish a National
      Health Board and State Health Alliances to Implement
      National Health Care Reform.

    The health care reform initiative will set up a National Health Board and corre­
sponding state health alliances to implement the plan pursuant to congressionally
prescribed standards. National level administrative agencies are commonplace
components of many federal statutes, and are necessary for the sound administra­
tion of complicated systems. The devolution of some administrative responsibility
to states, which then establish health alliances, is vital to the Act’s objective of
building to the extent possible on the private sector aspects of our current health
care delivery system.
    Once more, the Supreme Court’s New Deal jurisprudence clearly establishes the
legitimacy of such delegations of administrative authority. The creation of admin­
istrative bodies to carry out legislative mandates was a touchstone of New Deal
reforms. At first, the Court concluded that such schemes constituted impermissible
delegations of legislative power.18 Quickly and firmly, however, the Court moved
away from that approach — which was at odds with over a century of the Court’s
own constitutional interpretations. For example, in sustaining actions taken by an
official of the Department of Labor pursuant to the Fair Labor Standards Act
against a delegation doctrine challenge, the Court admonished that the Constitution
did not “preclude Congress from resorting to the aid of administrative officers or
boards as fact-finding agencies whose findings, made in conformity to previously
adopted legislative standards or definitions of Congressional policy, have been
made prerequisite to the operation of its statutory command.” 19 Similarly, in re­
jecting a delegation doctrine challenge to actions of the Secretary of Agriculture
under the Tobacco Inspection Act of 1935, the Court observed that the statute set
forth Congress’s “policy for the establishment of standards . . . . [T]he provision
that the Secretary shall make the necessary investigations to that end and fix the
standards according to kind and quality is plainly appropriate and conforms to fa­
miliar legislative practice.”20 Relying on a constitutional precedent from the early
days of the nation, the Court stated that

         [w]e have always recognized that legislation must often be adapted
         to conditions involving details with which it is impracticable for the
         legislature to deal directly . . . . In such cases, “a general provision
         may be made, and power given to those who are to act under such
         general provisions to fill up the details.”21

   18 See Panam a Refuting Co. v Ryan, 293 U S 388 ( 1935), S ch echter P oultry C orp v. U nited States, 295
U.S 495 (1935)
   19 O pp Cotton M ills, Inc. v A d m in istra to r, 3 12 U S. 126, 144 (1941)
   20 C urrin v. W allace, 306 U S . I, 16-17 (1939).
   21 Id at 15 (quoting W avm an v Southard, 23 U S (10 W heat.) 1, 43 (1825))

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    The health care reform initiative is such a case. Simply put, the establishment
of administrative bodies to implement the plan is entirely consistent with our con­
stitutional tradition.

   • Conclusion: The President’s Health Care Reform Plan
     is Legislation Based on Well-Established Constitutional Principles.

   As President Clinton has observed, finding a solution to the problems with our
health care system will require a willingness to change, and his reform plan is a
comprehensive proposal for far-reaching change in both the public and the private
sectors. It is possible that some confusion concerning the constitutional legitimacy
of the Health Security Act will arise precisely because it is so comprehensive and
detailed, and thus necessarily will affect all the major components of our current
health care delivery system. There may indeed be no historical analogue of a sin­
gle bill that does so many things at once. Its comprehensiveness, however, should
not mask the fact that the basic means and mechanisms of the plan rest on long-
settled principles of constitutional law, principles that seldom have been chal­
lenged since the New Deal and that stem ultimately from the work of the Founders
of the Republic. The President’s plan, far from being constitutionally question­
able, rests on what has rightly been called “the first of the constitutional achieve­
ments of the American people . .. the formation of a national government that may
lawfully deal with all national needs.”22
   The Nation’s debate over how best to deal with the great national need for
health care reform should proceed untrammelled by worries over the national gov­
ernment’s lawful powers that were laid to rest over half a century ago.


                                                                          WALTER DELLINGER
                                                                        Assistant Attorney General
                                                                         Office o f Legal Counsel

                                                                         H. JEFFERSON POWELL
                                                                                 Attorney - Advisor




  22 C h arle s L B lack, Jr., The H um ane Im a g in a tio n 1 2 0 (1 9 8 6 )

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