THE AFFORDABLE CARE ACT CASES

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

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Nos. 11–393, 11–398 and 11–400

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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]

Chief Justice Roberts announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, and III–C, an opinion with respect to Part IV, in which Justice Breyer and Justice Kagan join, and an opinion with respect to Parts III–A, III–B, and III–D.

Today we resolve constitutional challenges to two provisions of the Patient Protection and Affordable Care Act of 2010: the individual mandate, which requires individuals to purchase a health insurance policy providing a minimum level of coverage; and the Medicaid expansion, which gives funds to the States on the condition that they provide specified health care to all citizens whose income falls below a certain threshold. We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation’s elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions.

In our federal system, the National Government possesses only limited powers; the States and the people retain the remainder. Nearly two centuries ago, Chief Justice Marshall observed that “the question respecting the extent of the powers actually granted” to the Federal Government “is perpetually arising, and will probably continue to arise, as long as our system shall exist.” McCulloch v. Maryland, 4 Wheat. 316, 405 (1819). In this case we must again determine whether the Constitution grants Congress powers it now asserts, but which many States and individuals believe it does not possess. Resolving this controversy requires us to examine both the limits of the Government’s power, and our own limited role in policing those boundaries.

The Federal Government “is acknowledged by all to be one of enumerated powers.” Ibid. That is, rather than granting general authority to perform all the conceiv-able functions of government, the Constitution lists, or enumerates, the Federal Government’s powers. Congress may, for example, “coin Money,” “establish Post Offices,” and “raise and support Armies.” Art. I, §8, cls. 5, 7, 12. The enumeration of powers is also a limitation of powers, because “[t]he enumeration presupposes something not enumerated.” Gibbons v. Ogden, 9 Wheat. 1, 195 (1824). The Constitution’s express conferral of some powers makes clear that it does not grant others. And the Federal Government “can exercise only the powers granted to it.” McCulloch, supra, at 405.

Today, the restrictions on government power foremost in many Americans’ minds are likely to be affirmative pro-hibitions, such as contained in the Bill of Rights. These affirmative prohibitions come into play, however, only where the Government possesses authority to act in the first place. If no enumerated power authorizes Congress to pass a certain law, that law may not be enacted, even if it would not violate any of the express prohibitions in the Bill of Rights or elsewhere in the Constitution.

Indeed, the Constitution did not initially include a Bill of Rights at least partly because the Framers felt the enu-meration of powers sufficed to restrain the Government. As Alexander Hamilton put it, “the Constitution is itself, in every rational sense, and to every useful purpose, a bill of rights.” The Federalist No. 84, p. 515 (C. Ros-siter ed. 1961). And when the Bill of Rights was ratified, it made express what the enumeration of powers necessarily implied: “The powers not delegated to the United States by the Constitution . . . are reserved to the States respectively, or to the people.” U. S. Const., Amdt. 10. The Federal Government has expanded dramatically over the past two centuries, but it still must show that a constitutional grant of power authorizes each of its actions. See, e.g., United States v. Comstock, 560 U. S. ___ (2010).

The same does not apply to the States, because the Con-stitution is not the source of their power. The Consti-tution may restrict state governments—as it does, for example, by forbidding them to deny any person the equal protection of the laws. But where such prohibitions do not apply, state governments do not need constitutional au-thorization to act. The States thus can and do perform many of the vital functions of modern government—punishing street crime, running public schools, and zoning property for development, to name but a few—even though the Constitution’s text does not authorize any government to do so. Our cases refer to this general power of governing, possessed by the States but not by the Federal Government, as the “police power.” See, e.g., United States v. Morrison, 529 U. S. 598 –619 (2000).

“State sovereignty is not just an end in itself: Rather, federalism secures to citizens the liberties that derive from the diffusion of sovereign power.” New York v. United States, 505 U. S. 144, 181 (1992) (internal quotation marks omitted). Because the police power is controlled by 50 different States instead of one national sovereign, the facets of governing that touch on citizens’ daily lives are normally administered by smaller governments closer to the governed. The Framers thus ensured that powers which “in the ordinary course of affairs, concern the lives, liberties, and properties of the people” were held by governments more local and more accountable than a distant federal bureaucracy. The Federalist No. 45, at 293 (J. Madison). The independent power of the States also serves as a check on the power of the Federal Government: “By denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power.” Bond v. United States, 564 U. S. ___, ___ (2011) (slip op., at 9–10).

This case concerns two powers that the Constitution does grant the Federal Government, but which must be read carefully to avoid creating a general federal authority akin to the police power. The Constitution authorizes Congress to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Art. I, §8, cl. 3. Our precedents read that to mean that Congress may regulate “the channels of interstate commerce,” “persons or things in interstate commerce,” and “those activities that substantially affect interstate commerce.” Morrison, supra, at 609 (internal quotation marks omitted). The power over activities that substantially affect interstate commerce can be expansive. That power has been held to authorize federal regulation of such seem-ingly local matters as a farmer’s decision to grow wheat for himself and his livestock, and a loan shark’s extor-tionate collections from a neighborhood butcher shop. See Wickard v. Filburn, 317 U. S. 111 (1942) ; Perez v. United States, 402 U. S. 146 (1971) .

Congress may also “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.” U. S. Const., Art. I, §8, cl. 1. Put simply, Congress may tax and spend. This grant gives the Federal Government considerable influence even in areas where it cannot directly regulate. The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control. See, e.g., License Tax Cases, 5 Wall. 462, 471 (1867). And in exercising its spending power, Congress may offer funds to the States, and may condition those offers on compliance with specified conditions. See, e.g., College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U. S. 666, 686 (1999) . These offers may well induce the States to adopt policies that the Federal Government itself could not impose. See, e.g., South Dakota v. Dole, 483 U. S. 203 –206 (1987) (conditioning federal highway funds on States raising their drinking age to 21).

The reach of the Federal Government’s enumerated powers is broader still because the Constitution authorizes Congress to “make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.” Art. I, §8, cl. 18. We have long read this provision to give Congress great latitude in exercising its powers: “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.” McCulloch, 4 Wheat., at 421.

Our permissive reading of these powers is explained in part by a general reticence to invalidate the acts of the Nation’s elected leaders. “Proper respect for a co-ordinate branch of the government” requires that we strike down an Act of Congress only if “the lack of constitutional authority to pass [the] act in question is clearly demonstrated.” United States v. Harris, 106 U. S. 629, 635 (1883) . Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.

Our deference in matters of policy cannot, however, become abdication in matters of law. “The powers of the legislature are defined and limited; and that those limits may not be mistaken, or forgotten, the constitution is written.” Marbury v. Madison, 1 Cranch 137, 176 (1803). Our respect for Congress’s policy judgments thus can never extend so far as to disavow restraints on federal power that the Constitution carefully constructed. “The peculiar circumstances of the moment may render a measure more or less wise, but cannot render it more or less constitutional.” Chief Justice John Marshall, A Friend of the Constitution No. V, Alexandria Gazette, July 5, 1819, in John Marshall’s Defense of McCulloch v. Maryland 190–191 (G. Gunther ed. 1969). And there can be no question that it is the responsibility of this Court to enforce the limits on federal power by striking down acts of Congress that transgress those limits. Marbury v. Madison, supra, at 175–176.

The questions before us must be considered against the background of these basic principles.

I

In 2010, Congress enacted the Patient Protection and Affordable Care Act, 124Stat. 119. The Act aims to increase the number of Americans covered by health in-surance and decrease the cost of health care. The Act’s 10 titles stretch over 900 pages and contain hundreds of provisions. This case concerns constitutional challenges to two key provisions, commonly referred to as the individual mandate and the Medicaid expansion.

The individual mandate requires most Americans to maintain “minimum essential” health insurance coverage. 26 U. S. C. §5000A. The mandate does not apply to some individuals, such as prisoners and undocumented aliens. §5000A(d). Many individuals will receive the required cov-erage through their employer, or from a government program such as Medicaid or Medicare. See §5000A(f). But for individuals who are not exempt and do not receive health insurance through a third party, the means of satisfying the requirement is to purchase insurance from a private company.

Beginning in 2014, those who do not comply with the mandate must make a “[s]hared responsibility payment” to the Federal Government. §5000A(b)(1). That payment, which the Act describes as a “penalty,” is calculated as a percentage of household income, subject to a floor based on a specified dollar amount and a ceiling based on the average annual premium the individual would have to pay for qualifying private health insurance. §5000A(c). In 2016, for example, the penalty will be 2.5 percent of an individ-ual’s household income, but no less than $695 and no more than the average yearly premium for insurance that covers 60 percent of the cost of 10 specified services (e.g., prescription drugs and hospitalization). Ibid.; 42 U. S. C. §18022. The Act provides that the penalty will be paid to the Internal Revenue Service with an individual’s taxes, and “shall be assessed and collected in the same manner” as tax penalties, such as the penalty for claiming too large an income tax refund. 26 U. S. C. §5000A(g)(1). The Act, however, bars the IRS from using several of its normal enforcement tools, such as criminal prosecutions and levies. §5000A(g)(2). And some individuals who are subject to the mandate are nonetheless exempt from the penalty—for example, those with income below a certain threshold and members of Indian tribes. §5000A(e).

On the day the President signed the Act into law, Florida and 12 other States filed a complaint in the Federal District Court for the Northern District of Florida. Those plaintiffs—who are both respondents and petitioners here, depending on the issue—were subsequently joined by 13 more States, several individuals, and the National Fed-eration of Independent Business. The plaintiffs alleged, among other things, that the individual mandate provisions of the Act exceeded Congress’s powers under Article I of the Constitution. The District Court agreed, holding that Congress lacked constitutional power to enact the individual mandate. 780 F. Supp. 2d 1256 (ND Fla. 2011). The District Court determined that the individual mandate could not be severed from the remainder of the Act, and therefore struck down the Act in its entirety. Id., at 1305–1306.

The Court of Appeals for the Eleventh Circuit affirmed in part and reversed in part. The court affirmed the District Court’s holding that the individual mandate exceeds Congress’s power. 648 F. 3d 1235 (2011). The panel unanimously agreed that the individual mandate did not impose a tax, and thus could not be authorized by Congress’s power to “lay and collect Taxes.” U. S. Const., Art. I, §8, cl. 1. A majority also held that the individual mandate was not supported by Congress’s power to “regulate Commerce . . . among the several States.” Id., cl. 3. According to the majority, the Commerce Clause does not empower the Federal Government to order individuals to engage in commerce, and the Government’s efforts to cast the individual mandate in a different light were unpersuasive. Judge Marcus dissented, reasoning that the individual mandate regulates economic activity that has a clear effect on interstate commerce.

Having held the individual mandate to be unconstitutional, the majority examined whether that provision could be severed from the remainder of the Act. The ma-jority determined that, contrary to the District Court’s view, it could. The court thus struck down only the individual mandate, leaving the Act’s other provisions intact. 648 F. 3d, at 1328.

Other Courts of Appeals have also heard challenges to the individual mandate. The Sixth Circuit and the D. C. Circuit upheld the mandate as a valid exercise of Congress’s commerce power. See Thomas More Law Center v. Obama, 651 F. 3d 529 (CA6 2011); Seven-Sky v. Holder, 661 F. 3d 1 (CADC 2011). The Fourth Circuit determined that the Anti-Injunction Act prevents courts from considering the merits of that question. See Liberty Univ., Inc. v. Geithner, 671 F. 3d 391 (2011). That statute bars suits “for the purpose of restraining the assessment or collection of any tax.” 26 U. S. C. §7421(a). A majority of the Fourth Circuit panel reasoned that the individual mandate’s penalty is a tax within the meaning of the Anti-Injunction Act, because it is a financial assessment collected by the IRS through the normal means of taxation. The majority therefore determined that the plaintiffs could not challenge the individual mandate until after they paid the penalty. 1

The second provision of the Affordable Care Act directly challenged here is the Medicaid expansion. Enacted in 1965, Medicaid offers federal funding to States to assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care. See 42 U. S. C. §1396a(a)(10). In order to receive that funding, States must comply with federal criteria governing matters such as who receives care and what services are provided at what cost. By 1982 every State had chosen to participate in Medicaid. Federal funds received through the Medicaid program have become a substantial part of state budgets, now constituting over 10 percent of most States’ total revenue.

The Affordable Care Act expands the scope of the Medicaid program and increases the number of individuals the States must cover. For example, the Act requires state programs to provide Medicaid coverage to adults with incomes up to 133 percent of the federal poverty level, whereas many States now cover adults with children only if their income is considerably lower, and do not cover childless adults at all. See §1396a(a)(10)(A)(i)(VIII). The Act increases federal funding to cover the States’ costs in expanding Medicaid coverage, although States will bear a portion of the costs on their own. §1396d(y)(1). If a State does not comply with the Act’s new coverage requirements, it may lose not only the federal funding for those requirements, but all of its federal Medicaid funds. See §1396c.

Along with their challenge to the individual mandate, the state plaintiffs in the Eleventh Circuit argued that the Medicaid expansion exceeds Congress’s constitutional powers. The Court of Appeals unanimously held that the Medicaid expansion is a valid exercise of Congress’s power under the Spending Clause. U. S. Const., Art. I, §8, cl. 1. And the court rejected the States’ claim that the threatened loss of all federal Medicaid funding violates the Tenth Amendment by coercing them into complying with the Medicaid expansion. 648 F. 3d, at 1264, 1268.

We granted certiorari to review the judgment of the Court of Appeals for the Eleventh Circuit with respect to both the individual mandate and the Medicaid expansion. 565 U. S. ___ (2011). Because no party supports the Eleventh Circuit’s holding that the individual mandate can be completely severed from the remainder of the Affordable Care Act, we appointed an amicus curiae to defend that aspect of the judgment below. And because there is a reasonable argument that the Anti-Injunction Act deprives us of jurisdiction to hear challenges to the individ-ual mandate, but no party supports that proposition, we appointed an amicus curiae to advance it. 2

II

Before turning to the merits, we need to be sure we have the authority to do so. The Anti-Injunction Act provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” 26 U. S. C. §7421(a). This statute protects the Government’s ability to collect a consistent stream of revenue, by barring litigation to enjoin or otherwise obstruct the collection of taxes. Because of the Anti-Injunction Act, taxes can ordinarily be challenged only after they are paid, by suing for a refund. See Enochs v. Williams Packing & Nav. Co., 370 U. S. 1 –8 (1962).

The penalty for not complying with the Affordable Care Act’s individual mandate first becomes enforceable in 2014. The present challenge to the mandate thus seeks to restrain the penalty’s future collection. Amicus contends that the Internal Revenue Code treats the penalty as a tax, and that the Anti-Injunction Act therefore bars this suit.

The text of the pertinent statutes suggests otherwise. The Anti-Injunction Act applies to suits “for the purpose of restraining the assessment or collection of any tax.” §7421(a) (emphasis added). Congress, however, chose to describe the “[s]hared responsibility payment” imposed on those who forgo health insurance not as a “tax,” but as a “penalty.” §§5000A(b), (g)(2). There is no immediate reason to think that a statute applying to “any tax” would apply to a “penalty.”

Congress’s decision to label this exaction a “penalty” rather than a “tax” is significant because the Affordable Care Act describes many other exactions it creates as “taxes.” See Thomas More, 651 F. 3d, at 551. Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally. See Russello v. United States, 464 U. S. 16, 23 (1983) .

Amicus argues that even though Congress did not label the shared responsibility payment a tax, we should treat it as such under the Anti-Injunction Act because it functions like a tax. It is true that Congress cannot change whether an exaction is a tax or a penalty for constitutional pur-poses simply by describing it as one or the other. Congress may not, for example, expand its power under the Taxing Clause, or escape the Double Jeopardy Clause’s constraint on criminal sanctions, by labeling a severe financial pun-ishment a “tax.” See Bailey v. Drexel Furniture Co., 259 U. S. 20 –37 (1922); Department of Revenue of Mont. v. Kurth Ranch, 511 U. S. 767, 779 (1994) .

The Anti-Injunction Act and the Affordable Care Act, however, are creatures of Congress’s own creation. How they relate to each other is up to Congress, and the best evidence of Congress’s intent is the statutory text. We have thus applied the Anti-Injunction Act to statutorily described “taxes” even where that label was inaccurate. See Bailey v. George, 259 U. S. 16 (1922) (Anti-Injunction Act applies to “Child Labor Tax” struck down as exceeding Congress’s taxing power in Drexel Furniture).

Congress can, of course, describe something as a penalty but direct that it nonetheless be treated as a tax for purposes of the Anti-Injunction Act. For example, 26 U. S. C. §6671(a) provides that “any reference in this title to ‘tax’ imposed by this title shall be deemed also to refer to the penalties and liabilities provided by” subchapter 68B of the Internal Revenue Code. Penalties in subchapter 68B are thus treated as taxes under Title 26, which includes the Anti-Injunction Act. The individual mandate, however, is not in subchapter 68B of the Code. Nor does any other provision state that references to taxes in Title 26 shall also be “deemed” to apply to the individual mandate.

Amicus attempts to show that Congress did render the Anti-Injunction Act applicable to the individual mandate, albeit by a more circuitous route. Section 5000A(g)(1) spec-ifies that the penalty for not complying with the mandate “shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.” Assessable penalties in subchapter 68B, in turn, “shall be assessed and collected in the same manner as taxes.” §6671(a). According to amicus, by directing that the penalty be “assessed and collected in the same man-ner as taxes,” §5000A(g)(1) made the Anti-Injunction Act applicable to this penalty.

The Government disagrees. It argues that §5000A(g)(1) does not direct courts to apply the Anti-Injunction Act, because §5000A(g) is a directive only to the Secretary of the Treasury to use the same “ ‘methodology and procedures’ ” to collect the penalty that he uses to collect taxes. Brief for United States 32–33 (quoting Seven-Sky, 661 F. 3d, at 11).

We think the Government has the better reading. As it observes, “Assessment” and “Collection” are chapters of the Internal Revenue Code providing the Secretary author-ity to assess and collect taxes, and generally specifying the means by which he shall do so. See §6201 (assess-ment authority); §6301 (collection authority). Section 5000A(g)(1)’s command that the penalty be “assessed and collected in the same manner” as taxes is best read as referring to those chapters and giving the Secretary the same authority and guidance with respect to the penalty. That interpretation is consistent with the remainder of §5000A(g), which instructs the Secretary on the tools he may use to collect the penalty. See §5000A(g)(2)(A) (barring criminal prosecutions); §5000A(g)(2)(B) (prohibiting the Secretary from using notices of lien and levies). The Anti-Injunction Act, by contrast, says nothing about the procedures to be used in assessing and collecting taxes.

Amicus argues in the alternative that a different section of the Internal Revenue Code requires courts to treat the penalty as a tax under the Anti-Injunction Act. Section 6201(a) authorizes the Secretary to make “assessments of all taxes (including interest, additional amounts, additions to the tax, and assessable penalties).” (Emphasis added.) Amicus contends that the penalty must be a tax, because it is an assessable penalty and §6201(a) says that taxes include assessable penalties.

That argument has force only if §6201(a) is read in isolation. The Code contains many provisions treating taxes and assessable penalties as distinct terms. See, e.g., §§860(h)(1), 6324A(a), 6601(e)(1)–(2), 6602, 7122(b). There would, for example, be no need for §6671(a) to deem “tax” to refer to certain assessable penalties if the Code already included all such penalties in the term “tax.” Indeed, amicus’s earlier observation that the Code requires assessable penalties to be assessed and collected “in the same manner as taxes” makes little sense if assessable penalties are themselves taxes. In light of the Code’s consistent distinction between the terms “tax” and “assessable penalty,” we must accept the Government’s in-terpretation: §6201(a) instructs the Secretary that his authority to assess taxes includes the authority to assess penalties, but it does not equate assessable penalties to taxes for other purposes.

The Affordable Care Act does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act. The Anti-Injunction Act therefore does not apply to this suit, and we may proceed to the merits.

III

The Government advances two theories for the proposition that Congress had constitutional authority to enact the individual mandate. First, the Government argues that Congress had the power to enact the mandate under the Commerce Clause. Under that theory, Congress may order individuals to buy health insurance because the failure to do so affects interstate commerce, and could un-dercut the Affordable Care Act’s other reforms. Second, the Government argues that if the commerce power does not support the mandate, we should nonetheless uphold it as an exercise of Congress’s power to tax. According to the Government, even if Congress lacks the power to direct individuals to buy insurance, the only effect of the individual mandate is to raise taxes on those who do not do so, and thus the law may be upheld as a tax.

A

The Government’s first argument is that the individual mandate is a valid exercise of Congress’s power under the Commerce Clause and the Necessary and Proper Clause. According to the Government, the health care market is characterized by a significant cost-shifting problem. Everyone will eventually need health care at a time and to an extent they cannot predict, but if they do not have insurance, they often will not be able to pay for it. Because state and federal laws nonetheless require hospitals to provide a certain degree of care to individuals without regard to their ability to pay, see, e.g., 42 U. S. C. §1395dd; Fla. Stat. Ann. §395.1041, hospitals end up receiving compensation for only a portion of the services they provide. To recoup the losses, hospitals pass on the cost to insurers through higher rates, and insurers, in turn, pass on the cost to policy holders in the form of higher premiums. Congress estimated that the cost of uncompensated care raises family health insurance premiums, on average, by over $1,000 per year. 42 U. S. C. §18091(2)(F).

In the Affordable Care Act, Congress addressed the problem of those who cannot obtain insurance coverage because of preexisting conditions or other health issues. It did so through the Act’s “guaranteed-issue” and “communityrating” provisions. These provisions together prohibit insurance companies from denying coverage to those with such conditions or charging unhealthy individuals higher premiums than healthy individuals. See §§300gg, 300gg–1, 300gg–3, 300gg–4.

The guaranteed-issue and community-rating reforms do not, however, address the issue of healthy individuals who choose not to purchase insurance to cover potential health care needs. In fact, the reforms sharply exacerbate that problem, by providing an incentive for individuals to delay purchasing health insurance until they become sick, relying on the promise of guaranteed and affordable coverage. The reforms also threaten to impose massive new costs on insurers, who are required to accept unhealthy individuals but prohibited from charging them rates necessary to pay for their coverage. This will lead insurers to significantly increase premiums on everyone. See Brief for America’s Health Insurance Plans et al. as Amici Curiae in No. 11–393 etc. 8–9.

The individual mandate was Congress’s solution to these problems. By requiring that individuals purchase health insurance, the mandate prevents cost-shifting by those who would otherwise go without it. In addition, the mandate forces into the insurance risk pool more healthy individuals, whose premiums on average will be higher than their health care expenses. This allows insurers to subsidize the costs of covering the unhealthy individuals the reforms require them to accept. The Government claims that Congress has power under the Commerce and Necessary and Proper Clauses to enact this solution.

1

The Government contends that the individual mandate is within Congress’s power because the failure to pur-chase insurance “has a substantial and deleterious effect on interstate commerce” by creating the cost-shifting prob-lem. Brief for United States 34. The path of our Commerce Clause decisions has not always run smooth, see United States v. Lopez, 514 U. S. 549 –559 (1995), but it is now well established that Congress has broad authority under the Clause. We have recognized, for example, that “[t]he power of Congress over interstate commerce is not confined to the regulation of commerce among the states,” but extends to activities that “have a substantial effect on interstate commerce.” United States v. Darby, 312 U. S. 100 –119 (1941). Congress’s power, more-over, is not limited to regulation of an activity that by itself substantially affects interstate commerce, but also extends to activities that do so only when aggregated with similar activities of others. See Wickard, 317 U. S., at 127–128.

Given its expansive scope, it is no surprise that Congress has employed the commerce power in a wide variety of ways to address the pressing needs of the time. But Congress has never attempted to rely on that power to compel individuals not engaged in commerce to purchase an unwanted product. 3 Legislative novelty is not nec-essarily fatal; there is a first time for everything. But sometimes “the most telling indication of [a] severe con-stitutional problem . . . is the lack of historical precedent” for Congress’s action. Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. ___, ___ (2010) (slip op., at 25) (internal quotation marks omitted). At the very least, we should “pause to consider the implications of the Government’s arguments” when confronted with such new conceptions of federal power. Lopez, supra, at 564.

The Constitution grants Congress the power to “regulate Commerce.” Art. I, §8, cl. 3 (emphasis added). The power to regulate commerce presupposes the existence of commercial activity to be regulated. If the power to “regulate” something included the power to create it, many of the provisions in the Constitution would be superfluous. For example, the Constitution gives Congress the power to “coin Money,” in addition to the power to “regulate the Value thereof.” Id., cl. 5. And it gives Congress the power to “raise and support Armies” and to “provide and maintain a Navy,” in addition to the power to “make Rules for the Government and Regulation of the land and naval Forces.” Id., cls. 12–14. If the power to regulate the armed forces or the value of money included the power to bring the subject of the regulation into existence, the specific grant of such powers would have been unnecessary. The language of the Constitution reflects the natural understanding that the power to regulate assumes there is already something to be regulated. See Gibbons, 9 Wheat., at 188 (“[T]he enlightened patriots who framed our constitution, and the people who adopted it, must be understood to have employed words in their natural sense, and to have intended what they have said”). 4

Our precedent also reflects this understanding. As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching “activity.” It is nearly impossible to avoid the word when quoting them. See, e.g., Lopez, supra, at 560 (“Where economic activity substantially affects interstate commerce, legislation regulating that activity will be sustained”); Perez, 402 U. S., at 154 (“Where the class of activities is regulated and that class is within the reach of federal power, the courts have no power to excise, as trivial, individual instances of the class” (emphasis in original; internal quotation marks omitted)); Wickard, supra, at 125 (“[E]ven if appellee’s activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce”); NLRB v. Jones & Laughlin Steel Corp., 301 U. S. 1, 37 (1937) (“Although activities may be intrastate in character when separately considered, if they have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions, Congress cannot be denied the power to exercise that control”); see also post, at 15, 25–26, 28, 32 (Ginsburg, J., concurring in part, concurring in judgment in part, and dissenting in part). 5

The individual mandate, however, does not regulate existing commercial activity. It instead compels individ-uals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Con-gress to regulate individuals precisely because they are doing nothing would open a new and potentially vast do-main to congressional authority. Every day individuals do not do an infinite number of things. In some cases they decide not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and—under the Government’s theory—empower Congress to make those decisions for him.

Applying the Government’s logic to the familiar case of Wickard v. Filburn shows how far that logic would carry us from the notion of a government of limited powers. In Wickard, the Court famously upheld a federal penalty im-posed on a farmer for growing wheat for consumption on his own farm. 317 U. S., at 114–115, 128–129. That amount of wheat caused the farmer to exceed his quota under a program designed to support the price of wheat by limiting supply. The Court rejected the farmer’s argument that growing wheat for home consumption was beyond the reach of the commerce power. It did so on the ground that the farmer’s decision to grow wheat for his own use allowed him to avoid purchasing wheat in the market. That decision, when considered in the aggregate along with sim-ilar decisions of others, would have had a substantial ef-fect on the interstate market for wheat. Id., at 127–129.

Wickard has long been regarded as “perhaps the most far reaching example of Commerce Clause authority over intrastate activity,” Lopez, 514 U. S., at 560, but the Government’s theory in this case would go much further. Under Wickard it is within Congress’s power to regulate the market for wheat by supporting its price. But price can be supported by increasing demand as well as by decreasing supply. The aggregated decisions of some consumers not to purchase wheat have a substantial effect on the price of wheat, just as decisions not to purchase health insurance have on the price of insurance. Congress can therefore command that those not buying wheat do so, just as it argues here that it may command that those not buying health insurance do so. The farmer in Wickard was at least actively engaged in the production of wheat, and the Government could regulate that activity because of its effect on commerce. The Government’s theory here would effectively override that limitation, by establishing that individuals may be regulated under the Commerce Clause whenever enough of them are not doing something the Government would have them do.

Indeed, the Government’s logic would justify a mandatory purchase to solve almost any problem. See Seven-Sky, 661 F. 3d, at 14–15 (noting the Government’s inability to “identify any mandate to purchase a product or service in interstate commerce that would be unconstitu-tional” under its theory of the commerce power). To consider a different example in the health care market, many Americans do not eat a balanced diet. That group makes up a larger percentage of the total population than those without health insurance. See, e.g., Dept. of Agriculture and Dept. of Health and Human Services, Dietary Guidelines for Americans 1 (2010). The failure of that group to have a healthy diet increases health care costs, to a greater extent than the failure of the uninsured to purchase insurance. See, e.g., Finkelstein, Trogdon, Cohen, & Dietz, Annual Medical Spending Attributable to Obesity: Payerand Service-Specific Estimates, 28 Health Affairs w822 (2009) (detailing the “undeniable link between ris-ing rates of obesity and rising medical spending,” and esti-mating that “the annual medical burden of obesity has risen to almost 10 percent of all medical spending and could amount to $147 billion per year in 2008”). Those in-creased costs are borne in part by other Americans who must pay more, just as the uninsured shift costs to the insured. See Center for Applied Ethics, Voluntary Health Risks: Who Should Pay?, 6 Issues in Ethics 6 (1993) (noting “overwhelming evidence that individuals with unhealthy habits pay only a fraction of the costs associated with their behaviors; most of the expense is borne by the rest of society in the form of higher insurance premiums, government expenditures for health care, and disability benefits”). Congress addressed the insurance problem by ordering everyone to buy insurance. Under the Gov-ernment’s theory, Congress could address the diet problem by ordering everyone to buy vegetables. See Dietary Guidelines, supra, at 19 (“Improved nutrition, appropriate eating behaviors, and increased physical activity have tre-mendous potential to . . . reduce health care costs”).

People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures—joined with the similar failures of others—can readily have a substantial effect on interstate commerce. Under the Government’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act.

That is not the country the Framers of our Constitution envisioned. James Madison explained that the Commerce Clause was “an addition which few oppose and from which no apprehensions are entertained.” The Federalist No. 45, at 293. While Congress’s authority under the Commerce Clause has of course expanded with the growth of the national economy, our cases have “always recognized that the power to regulate commerce, though broad indeed, has limits.” Maryland v. Wirtz, 392 U. S. 183, 196 (1968) . The Government’s theory would erode those limits, permitting Congress to reach beyond the natural extent of its authority, “everywhere extending the sphere of its activity and drawing all power into its impetuous vortex.” The Federalist No. 48, at 309 (J. Madison). Congress already enjoys vast power to regulate much of what we do. Accepting the Government’s theory would give Congress the same license to regulate what we do not do, fundamentally changing the relation between the citizen and the Federal Government. 6

To an economist, perhaps, there is no difference between activity and inactivity; both have measurable economic effects on commerce. But the distinction between doing something and doing nothing would not have been lost on the Framers, who were “practical statesmen,” not metaphysical philosophers. Industrial Union Dept., AFL–CIO v. American Petroleum Institute, 448 U. S. 607, 673 (1980) (Rehnquist, J., concurring in judgment). As we have ex-plained, “the framers of the Constitution were not mere visionaries, toying with speculations or theories, but practical men, dealing with the facts of political life as they understood them, putting into form the government they were creating, and prescribing in language clear and intelligible the powers that government was to take.” South Carolina v. United States, 199 U. S. 437, 449 (1905) . The Framers gave Congress the power to regulate commerce, not to compel it, and for over 200 years both our decisions and Congress’s actions have reflected this understanding. There is no reason to depart from that understanding now.

The Government sees things differently. It argues that because sickness and injury are unpredictable but unavoidable, “the uninsured as a class are active in the market for health care, which they regularly seek and obtain.” Brief for United States 50. The individual mandate “merely regulates how individuals finance and pay for that active participation—requiring that they do so through insurance, rather than through attempted self-insurance with the back-stop of shifting costs to others.” Ibid.

The Government repeats the phrase “active in the market for health care” throughout its brief, see id., at 7, 18, 34, 50, but that concept has no constitutional significance. An individual who bought a car two years ago and may buy another in the future is not “active in the car market” in any pertinent sense. The phrase “active in the market” cannot obscure the fact that most of those regulated by the individual mandate are not currently engaged in any commercial activity involving health care, and that fact is fatal to the Government’s effort to “regulate the uninsured as a class.” Id., at 42. Our precedents recognize Congress’s power to regulate “class[es] of activities,” Gonzales v. Raich, 545 U. S. 1, 17 (2005) (emphasis added), not classes of individuals, apart from any activity in which they are engaged, see, e.g., Perez, 402 U. S., at 153 (“Petitioner is clearly a member of the class which engages in ‘extortionate credit transactions’ . . .” (emphasis deleted)).

The individual mandate’s regulation of the uninsured as a class is, in fact, particularly divorced from any link to existing commercial activity. The mandate primarily affects healthy, often young adults who are less likely to need significant health care and have other priorities for spending their money. It is precisely because these individuals, as an actuarial class, incur relatively low health care costs that the mandate helps counter the effect of forcing insurance companies to cover others who impose greater costs than their premiums are allowed to reflect. See 42 U. S. C. §18091(2)(I) (recognizing that the mandate would “broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums”). If the individual mandate is targeted at a class, it is a class whose commercial inactivity rather than activity is its defining feature.

The Government, however, claims that this does not matter. The Government regards it as sufficient to trigger Congress’s authority that almost all those who are uninsured will, at some unknown point in the future, engage in a health care transaction. Asserting that “[t]here is no temporal limitation in the Commerce Clause,” the Government argues that because “[e]veryone subject to this regulation is in or will be in the health care market,” they can be “regulated in advance.” Tr. of Oral Arg. 109 (Mar. 27, 2012).

The proposition that Congress may dictate the conduct of an individual today because of prophesied future ac-tivity finds no support in our precedent. We have said that Congress can anticipate the effects on commerce of an eco-nomic activity. See, e.g., Consolidated Edison Co. v. NLRB, 305 U. S. 197 (1938) (regulating the labor practices of utility companies); Heart of Atlanta Motel, Inc. v. United States, 379 U. S. 241 (1964) (prohibiting discrimination by hotel operators); Katzenbach v. McClung, 379 U. S. 294 (1964) (prohibiting discrimination by restaurant owners). But we have never permitted Congress to anticipate that activity itself in order to regulate individuals not currently engaged in commerce. Each one of our cases, including those cited by Justice Ginsburg, post, at 20–21, involved preexisting economic activity. See, e.g., Wickard, 317 U. S., at 127–129 (producing wheat); Raich, supra, at 25 (growing marijuana).

Everyone will likely participate in the markets for food, clothing, transportation, shelter, or energy; that does not authorize Congress to direct them to purchase particular products in those or other markets today. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions. Any police power to regulate individuals as such, as opposed to their activities, remains vested in the States.

The Government argues that the individual mandate can be sustained as a sort of exception to this rule, because health insurance is a unique product. According to the Government, upholding the individual mandate would not justify mandatory purchases of items such as cars or broccoli because, as the Government puts it, “[h]ealth in-surance is not purchased for its own sake like a car or broccoli; it is a means of financing health-care consumption and covering universal risks.” Reply Brief for United States 19. But cars and broccoli are no more purchased for their “own sake” than health insurance. They are purchased to cover the need for transportation and food.

The Government says that health insurance and health care financing are “inherently integrated.” Brief for United States 41. But that does not mean the compelled purchase of the first is properly regarded as a regulation of the second. No matter how “inherently integrated” health insurance and health care consumption may be, they are not the same thing: They involve different transactions, entered into at different times, with different providers. And for most of those targeted by the mandate, significant health care needs will be years, or even decades, away. The proximity and degree of connection between the mandate and the subsequent commercial activity is too lack-ing to justify an exception of the sort urged by the Government. The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity. Such a law cannot be sustained under a clause authorizing Congress to “regulate Commerce.”

2

The Government next contends that Congress has the power under the Necessary and Proper Clause to enact the individual mandate because the mandate is an “integral part of a comprehensive scheme of economic regulation”—the guaranteed-issue and community-rating insurance reforms. Brief for United States 24. Under this argument, it is not necessary to consider the effect that an individual’s inactivity may have on interstate commerce; it is enough that Congress regulate commercial activity in a way that requires regulation of inactivity to be effective.

The power to “make all Laws which shall be necessary and proper for carrying into Execution” the powers enumerated in the Constitution, Art. I, §8, cl. 18, vests Congress with authority to enact provisions “incidental to the [enumerated] power, and conducive to its beneficial exercise,” McCulloch, 4 Wheat., at 418. Although the Clause gives Congress authority to “legislate on that vast mass of incidental powers which must be involved in the con-stitution,” it does not license the exercise of any “great substantive and independent power[s]” beyond those specifi-cally enumerated. Id., at 411, 421. Instead, the Clause is “ ‘merely a declaration, for the removal of all uncertainty, that the means of carrying into execution those [powers] otherwise granted are included in the grant.’ ” Kinsella v. United States ex rel. Singleton, 361 U. S. 234, 247 (1960) (quoting VI Writings of James Madison 383 (G. Hunt ed. 1906)).

As our jurisprudence under the Necessary and Proper Clause has developed, we have been very deferential to Congress’s determination that a regulation is “necessary.” We have thus upheld laws that are “ ‘convenient, or use-ful’ or ‘conducive’ to the authority’s ‘beneficial exercise.’ ” Comstock, 560 U. S., at ___ (slip op., at 5) (quoting McCulloch, supra, at 413, 418). But we have also carried out our responsibility to declare unconstitutional those laws that undermine the structure of government established by the Constitution. Such laws, which are not “consist[ent] with the letter and spirit of the constitution,” McCulloch, supra, at 421, are not “proper [means] for carrying into Execution” Congress’s enumerated powers. Rather, they are, “in the words of The Federalist, ‘merely acts of usurpation’ which ‘deserve to be treated as such.’ ” Printz v. United States, 521 U. S. 898, 924 (1997) (alterations omitted) (quoting The Federalist No. 33, at 204 (A. Hamilton)); see also New York, 505 U. S., at 177; Comstock, supra, at ___ (slip op., at 5) (Kennedy, J., concurring in judgment) (“It is of fundamental importance to consider whether essential attributes of state sovereignty are compromised by the assertion of federal power under the Necessary and Proper Clause . . .”).

Applying these principles, the individual mandate cannot be sustained under the Necessary and Proper Clause as an essential component of the insurance reforms. Each of our prior cases upholding laws under that Clause involved exercises of authority derivative of, and in service to, a granted power. For example, we have upheld provisions permitting continued confinement of those already in federal custody when they could not be safely released, Comstock, supra, at ___ (slip op., at 1–2); criminalizing bribes involving organizations receiving federal funds, Sabri v. United States, 541 U. S. 600, 602, 605 (2004) ; and tolling state statutes of limitations while cases are pending in federal court, Jinks v. Richland County, 538 U. S. 456, 459, 462 (2003) . The individual mandate, by con-trast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power.

This is in no way an authority that is “narrow in scope,” Comstock, supra, at ___ (slip op., at 20), or “incidental” to the exercise of the commerce power, McCulloch, supra, at 418. Rather, such a conception of the Necessary and Proper Clause would work a substantial expansion of federal authority. No longer would Congress be limited to regulating under the Commerce Clause those who by some preexisting activity bring themselves within the sphere of federal regulation. Instead, Congress could reach beyond the natural limit of its authority and draw within its regulatory scope those who otherwise would be outside of it. Even if the individual mandate is “necessary” to the Act’s insurance reforms, such an expansion of federal power is not a “proper” means for making those reforms effective.

The Government relies primarily on our decision in Gonzales v. Raich. In Raich, we considered “comprehensive legislation to regulate the interstate market” in marijuana. 545 U. S., at 22. Certain individuals sought an exemption from that regulation on the ground that they engaged in only intrastate possession and consumption. We denied any exemption, on the ground that marijuana is a fungible commodity, so that any marijuana could be readily diverted into the interstate market. Congress’s attempt to regulate the interstate market for marijuana would therefore have been substantially undercut if it could not also regulate intrastate possession and consumption. Id., at 19. Accordingly, we recognized that “Congress was acting well within its authority” under the Necessary and Proper Clause even though its “regulation ensnare[d] some purely intrastate activity.” Id., at 22; see also Perez, 402 U. S., at 154. Raich thus did not involve the exercise of any “great substantive and independent power,” McCulloch, supra, at 411, of the sort at issue here. Instead, it concerned only the constitutionality of “individual applications of a concededly valid statutory scheme.” Raich, supra, at 23 (emphasis added).

Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a “necessary and proper” component of the insurance re-forms. The commerce power thus does not authorize the mandate. Accord, post, at 4–16 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ., dissenting).

B

That is not the end of the matter. Because the Commerce Clause does not support the individual mandate, it is necessary to turn to the Government’s second argument: that the mandate may be upheld as within Congress’s enumerated power to “lay and collect Taxes.” Art. I, §8, cl. 1.

The Government’s tax power argument asks us to view the statute differently than we did in considering its commerce power theory. In making its Commerce Clause argument, the Government defended the mandate as a regulation requiring individuals to purchase health in-surance. The Government does not claim that the taxing power allows Congress to issue such a command. Instead, the Government asks us to read the mandate not as ordering individuals to buy insurance, but rather as imposing a tax on those who do not buy that product.

The text of a statute can sometimes have more than one possible meaning. To take a familiar example, a law that reads “no vehicles in the park” might, or might not, ban bicycles in the park. And it is well established that if a statute has two possible meanings, one of which violates the Constitution, courts should adopt the meaning that does not do so. Justice Story said that 180 years ago: “No court ought, unless the terms of an act rendered it unavoidable, to give a construction to it which should involve a violation, however unintentional, of the constitution.” Parsons v. Bedford, 3 Pet. 433, 448–449 (1830). Justice Holmes made the same point a century later: “[T]he rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act.” Blodgett v. Holden, 275 U. S. 142, 148 (1927) (concurring opinion).

The most straightforward reading of the mandate is that it commands individuals to purchase insurance. After all, it states that individuals “shall” maintain health insurance. 26 U. S. C. §5000A(a). Congress thought it could enact such a command under the Commerce Clause, and the Government primarily defended the law on that basis. But, for the reasons explained above, the Commerce Clause does not give Congress that power. Under our precedent, it is therefore necessary to ask whether the Government’s alternative reading of the statute—that it only imposes a tax on those without insurance—is a reasonable one.

Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. See §5000A(b). That, according to the Government, means the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.

The question is not whether that is the most natural interpretation of the mandate, but only whether it is a “fairly possible” one. Crowell v. Benson, 285 U. S. 22, 62 (1932) . As we have explained, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.” Hooper v. California, 155 U. S. 648, 657 (1895) . The Government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the Constitution. Granting the Act the full measure of deference owed to federal statutes, it can be so read, for the reasons set forth below.

C

The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects. The “[s]hared responsibility payment,” as the statute entitles it, is paid into the Treasury by “taxpayer[s]” when they file their tax returns. 26 U. S. C. §5000A(b). It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. §5000A(e)(2). For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status. §§5000A(b)(3), (c)(2), (c)(4). The requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which—as we previously explained—must assess and collect it “in the same manner as taxes.” Supra, at 13–14. This process yields the essential feature of any tax: it produces at least some revenue for the Government. United States v. Kahriger, 345 U. S. 22 , n. 4 (1953). Indeed, the payment is expected to raise about $4 billion per year by 2017. Congressional Budget Office, Payments of Penalties for Being Uninsured Under the Patient Protection and Affordable Care Act (Apr. 30, 2010), in Selected CBO Publications Related to Health Care Legislation, 2009–2010, p. 71 (rev. 2010).

It is of course true that the Act describes the payment as a “penalty,” not a “tax.” But while that label is fatal to the application of the Anti-Injunction Act, supra, at 12–13, it does not determine whether the payment may be viewed as an exercise of Congress’s taxing power. It is up to Con-gress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Congress’s choice of label on that question. That choice does not, however, control whether an exaction is within Congress’s constitutional power to tax.

Our precedent reflects this: In 1922, we decided two challenges to the “Child Labor Tax” on the same day. In the first, we held that a suit to enjoin collection of the so-called tax was barred by the Anti-Injunction Act. George, 259 U. S., at 20. Congress knew that suits to obstruct taxes had to await payment under the Anti-Injunction Act; Congress called the child labor tax a tax; Congress therefore intended the Anti-Injunction Act to apply. In the second case, however, we held that the same exaction, although labeled a tax, was not in fact authorized by Con-gress’s taxing power. Drexel Furniture, 259 U. S., at 38. That constitutional question was not controlled by Congress’s choice of label.

We have similarly held that exactions not labeled taxes nonetheless were authorized by Congress’s power to tax. In the License Tax Cases, for example, we held that federal licenses to sell liquor and lottery tickets—for which the licensee had to pay a fee—could be sustained as exercises of the taxing power. 5 Wall., at 471. And in New York v. United States we upheld as a tax a “surcharge” on out-of-state nuclear waste shipments, a portion of which was paid to the Federal Treasury. 505 U. S., at 171. We thus ask whether the shared responsibility payment falls within Congress’s taxing power, “[d]isregarding the designa-tion of the exaction, and viewing its substance and application.” United States v. Constantine, 296 U. S. 287, 294 (1935) ; cf. Quill Corp. v. North Dakota, 504 U. S. 298, 310 (1992) (“[M]agic words or labels” should not “disable an otherwise constitutional levy” (internal quotation marks omitted)); Nelson v. Sears, Roebuck & Co., 312 U. S. 359, 363 (1941) (“In passing on the constitutionality of a tax law, we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it” (internal quotation marks omitted)); United States v. Sotelo, 436 U. S. 268, 275 (1978) (“That the funds due are referred to as a ‘penalty’ . . . does not alter their essential character as taxes”). 7

Our cases confirm this functional approach. For example, in Drexel Furniture, we focused on three practical characteristics of the so-called tax on employing child laborers that convinced us the “tax” was actually a penalty. First, the tax imposed an exceedingly heavy burden—10 percent of a company’s net income—on those who employed children, no matter how small their infraction. Second, it imposed that exaction only on those who knowingly employed underage laborers. Such scienter require-ments are typical of punitive statutes, because Congress often wishes to punish only those who intentionally break the law. Third, this “tax” was enforced in part by the Department of Labor, an agency responsible for pun-ishing violations of labor laws, not collecting revenue. 259 U. S., at 36–37; see also, e.g., Kurth Ranch, 511 U. S., at 780–782 (considering, inter alia, the amount of the exaction, and the fact that it was imposed for violation of a separate criminal law); Constantine, supra, at 295 (same).

The same analysis here suggests that the shared responsibility payment may for constitutional purposes be considered a tax, not a penalty: First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more. 8 It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the “prohibitory” financial punishment in Drexel Furniture. 259 U. S., at 37. Second, the individual mandate contains no scienter requirement. Third, the payment is collected solely by the IRS through the normal means of taxation—except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution. See §5000A(g)(2). The reasons the Court in Drexel Furniture held that what was called a “tax” there was a penalty support the conclusion that what is called a “penalty” here may be viewed as a tax. 9

None of this is to say that the payment is not intended to affect individual conduct. Although the payment will raise considerable revenue, it is plainly designed to expand health insurance coverage. But taxes that seek to influence conduct are nothing new. Some of our earliest federal taxes sought to deter the purchase of imported manufactured goods in order to foster the growth of domestic industry. See W. Brownlee, Federal Taxation in America 22 (2d ed. 2004); cf. 2 J. Story, Commentaries on the Constitution of the United States §962, p. 434 (1833) (“the taxing power is often, very often, applied for other purposes, than revenue”). Today, federal and state taxes can compose more than half the retail price of cigarettes, not just to raise more money, but to encourage people to quit smoking. And we have upheld such obviously regulatory measures as taxes on selling marijuana and sawed-off shotguns. See United States v. Sanchez, 340 U. S. 42 –45 (1950); Sonzinsky v. United States, 300 U. S. 506, 513 (1937) . Indeed, “[e]very tax is in some measure regula-tory. To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed.” Sonzinsky, supra, at 513. That §5000A seeks to shape decisions about whether to buy health insurance does not mean that it cannot be a valid exercise of the taxing power.

In distinguishing penalties from taxes, this Court has explained that “if the concept of penalty means anything, it means punishment for an unlawful act or omission.” United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, 224 (1996) ; see also United States v. La Franca, 282 U. S. 568, 572 (1931) (“[A] penalty, as the word is here used, is an exaction imposed by statute as punishment for an unlawful act”). While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful. Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS. The Government agrees with that reading, confirming that if someone chooses to pay rather than obtain health insurance, they have fully complied with the law. Brief for United States 60–61; Tr. of Oral Arg. 49–50 (Mar. 26, 2012).

Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. See Congressional Budget Office, supra, at 71. We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.

The plaintiffs contend that Congress’s choice of language—stating that individuals “shall” obtain insurance or pay a “penalty”—requires reading §5000A as punishing unlawful conduct, even if that interpretation would ren-der the law unconstitutional. We have rejected a similar argument before. In New York v. United States we examined a statute providing that “ ‘[e]ach State shall be responsible for providing . . . for the disposal of . . . low-level radioactive waste.’ ” 505 U. S., at 169 (quoting 42 U. S. C. §2021c(a)(1)(A)). A State that shipped its waste to another State was exposed to surcharges by the receiving State, a portion of which would be paid over to the Federal Government. And a State that did not adhere to the statutory scheme faced “[p]enalties for failure to comply,” including increases in the surcharge. §2021e(e)(2); New York, 505 U. S., at 152–153. New York urged us to read the statute as a federal command that the state legislature enact legislation to dispose of its waste, which would have violated the Constitution. To avoid that outcome, we interpreted the statute to impose only “a series of incentives” for the State to take responsibility for its waste. We then sustained the charge paid to the Federal Government as an exercise of the taxing power. Id., at 169–174. We see no insurmountable obstacle to a similar approach here. 10

The joint dissenters argue that we cannot uphold §5000A as a tax because Congress did not “frame” it as such. Post, at 17. In effect, they contend that even if the Constitution permits Congress to do exactly what we interpret this statute to do, the law must be struck down because Congress used the wrong labels. An example may help illustrate why labels should not control here. Suppose Congress enacted a statute providing that every taxpayer who owns a house without energy efficient windows must pay $50 to the IRS. The amount due is adjusted based on factors such as taxable income and joint filing status, and is paid along with the taxpayer’s income tax return. Those whose income is below the filing threshold need not pay. The required payment is not called a “tax,” a “penalty,” or anything else. No one would doubt that this law imposed a tax, and was within Congress’s power to tax. That conclusion should not change simply because Congress used the word “penalty” to describe the pay-ment. Interpreting such a law to be a tax would hardly “[i]mpos[e] a tax through judicial legislation.” Post, at 25. Rather, it would give practical effect to the Legislature’s enactment.

Our precedent demonstrates that Congress had the power to impose the exaction in §5000A under the taxing power, and that §5000A need not be read to do more than impose a tax. That is sufficient to sustain it. The “question of the constitutionality of action taken by Congress does not depend on recitals of the power which it undertakes to exercise.” Woods v. Cloyd W. Miller Co., 333 U. S. 138, 144 (1948) .

Even if the taxing power enables Congress to impose a tax on not obtaining health insurance, any tax must still comply with other requirements in the Constitution. Plaintiffs argue that the shared responsibility payment does not do so, citing Article I, §9, clause 4. That clause provides: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” This requirement means that any “direct Tax” must be apportioned so that each State pays in proportion to its population. According to the plaintiffs, if the individual mandate imposes a tax, it is a direct tax, and it is unconstitutional because Congress made no effort to apportion it among the States.

Even when the Direct Tax Clause was written it was unclear what else, other than a capitation (also known as a “head tax” or a “poll tax”), might be a direct tax. See Springer v. United States, 102 U. S. 586 –598 (1881). Soon after the framing, Congress passed a tax on ownership of carriages, over James Madison’s objection that it was an unapportioned direct tax. Id., at 597. This Court upheld the tax, in part reasoning that apportioning such a tax would make little sense, because it would have required taxing carriage owners at dramatically different rates depending on how many carriages were in their home State. See Hylton v. United States, 3 Dall. 171, 174 (1796) (opinion of Chase, J.). The Court was unanimous, and those Justices who wrote opinions either directly asserted or strongly suggested that only two forms of taxation were direct: capitations and land taxes. See id., at 175; id., at 177 (opinion of Paterson, J.); id., at 183 (opinion of Iredell, J.).

That narrow view of what a direct tax might be per-sisted for a century. In 1880, for example, we explained that “direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate.” Springer, supra, at 602. In 1895, we expanded our interpretation to include taxes on personal property and income from personal property, in the course of striking down aspects of the federal income tax. Pollock v. Farmers’ Loan & Trust Co., 158 U. S. 601, 618 (1895) . That result was overturned by the Sixteenth Amendment, although we continued to consider taxes on personal property to be direct taxes. See Eisner v. Macom-ber, 252 U. S. 189 –219 (1920).

A tax on going without health insurance does not fall within any recognized category of direct tax. It is not a capitation. Capitations are taxes paid by every person, “without regard to property, profession, or any other circumstance.” Hylton, supra, at 175 (opinion of Chase, J.) (emphasis altered). The whole point of the shared responsibility payment is that it is triggered by specific cir-cumstances—earning a certain amount of income but not obtaining health insurance. The payment is also plainly not a tax on the ownership of land or personal property. The shared responsibility payment is thus not a direct tax that must be apportioned among the several States.

There may, however, be a more fundamental objection to a tax on those who lack health insurance. Even if only a tax, the payment under §5000A(b) remains a burden that the Federal Government imposes for an omission, not an act. If it is troubling to interpret the Commerce Clause as authorizing Congress to regulate those who abstain from commerce, perhaps it should be similarly troubling to permit Congress to impose a tax for not doing something.

Three considerations allay this concern. First, and most importantly, it is abundantly clear the Constitution does not guarantee that individuals may avoid taxation through inactivity. A capitation, after all, is a tax that everyone must pay simply for existing, and capitations are expressly contemplated by the Constitution. The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we ab-stain from the regulated activity. But from its creation, the Constitution has made no such promise with respect to taxes. See Letter from Benjamin Franklin to M. Le Roy (Nov. 13, 1789) (“Our new Constitution is now established . . . but in this world nothing can be said to be certain, except death and taxes”).

Whether the mandate can be upheld under the Commerce Clause is a question about the scope of federal authority. Its answer depends on whether Congress can exercise what all acknowledge to be the novel course of directing individuals to purchase insurance. Congress’s use of the Taxing Clause to encourage buying something is, by contrast, not new. Tax incentives already promote, for example, purchasing homes and professional educations. See 26 U. S. C. §§163(h), 25A. Sustaining the mandate as a tax depends only on whether Congress has properly exercised its taxing power to encourage purchasing health insurance, not whether it can. Upholding the individual mandate under the Taxing Clause thus does not recognize any new federal power. It determines that Congress has used an existing one.

Second, Congress’s ability to use its taxing power to influence conduct is not without limits. A few of our cases policed these limits aggressively, invalidating punitive exactions obviously designed to regulate behavior otherwise regarded at the time as beyond federal authority. See, e.g., United States v. Butler, 297 U. S. 1 (1936) ; Drexel Furniture, 259 U. S. 20 . More often and more recently we have declined to closely examine the regulatory motive or effect of revenue-raising measures. See Kahriger, 345 U. S., at 27–31 (collecting cases). We have nonetheless maintained that “ ‘there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment.’ ” Kurth Ranch, 511 U. S., at 779 (quoting Drexel Furniture, supra, at 38).

We have already explained that the shared responsibility payment’s practical characteristics pass muster as a tax under our narrowest interpretations of the taxing power. Supra, at 35–36. Because the tax at hand is within even those strict limits, we need not here decide the precise point at which an exaction becomes so punitive that the taxing power does not authorize it. It remains true, however, that the “ ‘power to tax is not the power to destroy while this Court sits.’ ” Oklahoma Tax Comm’n v. Texas Co., 336 U. S. 342, 364 (1949) (quoting Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U. S. 218, 223 (1928) (Holmes, J., dissenting)).

Third, although the breadth of Congress’s power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior. Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individ-uals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the attendant consequences of being branded a criminal: deprivation of otherwise protected civil rights, such as the right to bear arms or vote in elections; loss of employment opportunities; social stigma; and severe disabilities in other controversies, such as custody or immigration disputes.

By contrast, Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the se-vere burden that taxation—especially taxation motivated by a regulatory purpose—can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice. 11

The Affordable Care Act’s requirement that certain in-dividuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Be-cause the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.

D

Justice Ginsburg questions the necessity of rejecting the Government’s commerce power argument, given that §5000A can be upheld under the taxing power. Post, at 37. But the statute reads more naturally as a command to buy insurance than as a tax, and I would uphold it as a command if the Constitution allowed it. It is only because the Commerce Clause does not authorize such a command that it is necessary to reach the taxing power question. And it is only because we have a duty to construe a stat-ute to save it, if fairly possible, that §5000A can be interpreted as a tax. Without deciding the Commerce Clause question, I would find no basis to adopt such a saving construction.

The Federal Government does not have the power to order people to buy health insurance. Section 5000A would therefore be unconstitutional if read as a command. The Federal Government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional, because it can reasonably be read as a tax.

IV A

The States also contend that the Medicaid expansion exceeds Congress’s authority under the Spending Clause. They claim that Congress is coercing the States to adopt the changes it wants by threatening to withhold all of a State’s Medicaid grants, unless the State accepts the new expanded funding and complies with the conditions that come with it. This, they argue, violates the basic principle that the “Federal Government may not compel the States to enact or administer a federal regulatory program.” New York, 505 U. S., at 188.

There is no doubt that the Act dramatically increases state obligations under Medicaid. The current Medicaid program requires States to cover only certain discrete categories of needy individuals—pregnant women, children, needy families, the blind, the elderly, and the dis-abled. 42 U. S. C. §1396a(a)(10). There is no mandatory coverage for most childless adults, and the States typically do not offer any such coverage. The States also enjoy considerable flexibility with respect to the coverage levels for parents of needy families. §1396a(a)(10)(A)(ii). On average States cover only those unemployed parents who make less than 37 percent of the federal poverty level, and only those employed parents who make less than 63 percent of the poverty line. Kaiser Comm’n on Medicaid and the Uninsured, Performing Under Pressure 11, and fig. 11 (2012).

The Medicaid provisions of the Affordable Care Act, in contrast, require States to expand their Medicaid programs by 2014 to cover all individuals under the age of 65 with incomes below 133 percent of the federal poverty line. §1396a(a)(10)(A)(i)(VIII). The Act also establishes a new “[e]ssential health benefits” package, which States must provide to all new Medicaid recipients—a level sufficient to satisfy a recipient’s obligations under the individual man-date. §§1396a(k)(1), 1396u–7(b)(5), 18022(b). The Af-fordable Care Act provides that the Federal Government will pay 100 percent of the costs of covering these newly eligible individuals through 2016. §1396d(y)(1). In the following years, the federal payment level gradually decreases, to a minimum of 90 percent. Ibid. In light of the expansion in coverage mandated by the Act, the Federal Government estimates that its Medicaid spending will in-crease by approximately $100 billion per year, nearly 40 percent above current levels. Statement of Douglas W. Elmendorf, CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010, p. 14, Table 2 (Mar. 30, 2011).

The Spending Clause grants Congress the power “to pay the Debts and provide for the . . . general Welfare of the United States.” U. S. Const., Art. I, §8, cl. 1. We have long recognized that Congress may use this power to grant federal funds to the States, and may condition such a grant upon the States’ “taking certain actions that Congress could not require them to take.” College Savings Bank, 527 U. S., at 686. Such measures “encourage a State to regulate in a particular way, [and] influenc[e] a State’s policy choices.” New York, supra, at 166. The con-ditions imposed by Congress ensure that the funds are used by the States to “provide for the . . . general Welfare” in the manner Congress intended.

At the same time, our cases have recognized limits on Congress’s power under the Spending Clause to secure state compliance with federal objectives. “We have repeatedly characterized . . . Spending Clause legislation as ‘much in the nature of a contract.’ ” Barnes v. Gorman, 536 U. S. 181, 186 (2002) (quoting Pennhurst State School and Hospital v. Halderman, 451 U. S. 1, 17 (1981) ). The legitimacy of Congress’s exercise of the spending power “thus rests on whether the State voluntarily and knowingly accepts the terms of the ‘contract.’ ” Pennhurst, supra, at 17. Respecting this limitation is critical to ensuring that Spending Clause legislation does not undermine the status of the States as independent sovereigns in our fed-eral system. That system “rests on what might at first seem a counterintuitive insight, that ‘freedom is enhanced by the creation of two governments, not one.’ ” Bond, 564 U. S., at ___ (slip op., at 8) (quoting Alden v. Maine, 527 U. S. 706, 758 (1999) ). For this reason, “the Constitution has never been understood to confer upon Congress the ability to require the States to govern according to Congress’ instructions.” New York, supra, at 162. Otherwise the two-government system established by the Framers would give way to a system that vests power in one central government, and individual liberty would suffer.

That insight has led this Court to strike down federal legislation that commandeers a State’s legislative or administrative apparatus for federal purposes. See, e.g., Printz, 521 U. S., at 933 (striking down federal legislation compelling state law enforcement officers to perform federally mandated background checks on handgun purchasers); New York, supra, at 174–175 (invalidating provisions of an Act that would compel a State to either take title to nuclear waste or enact particular state waste regulations). It has also led us to scrutinize Spending Clause legislation to ensure that Congress is not using financial inducements to exert a “power akin to undue influence.” Steward Machine Co. v. Davis, 301 U. S. 548, 590 (1937) . Congress may use its spending power to create incentives for States to act in accordance with federal policies. But when “pressure turns into compulsion,” ibid., the legislation runs contrary to our system of federalism. “[T]he Constitution simply does not give Congress the authority to require the States to regulate.” New York, 505 U. S., at 178. That is true whether Congress directly commands a State to regulate or indirectly coerces a State to adopt a federal regulatory system as its own.

Permitting the Federal Government to force the States to implement a federal program would threaten the political accountability key to our federal system. “[W]here the Federal Government directs the States to regulate, it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regu-latory program may remain insulated from the electoral ramifications of their decision.” Id., at 169. Spending Clause programs do not pose this danger when a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds. In such a situation, state officials can fairly be held politically accountable for choosing to accept or refuse the federal offer. But when the State has no choice, the Federal Government can achieve its objectives without accountability, just as in New York and Printz. Indeed, this danger is heightened when Congress acts under the Spending Clause, because Congress can use that power to implement federal policy it could not impose directly under its enumerated powers.

We addressed such concerns in Steward Machine. That case involved a federal tax on employers that was abated if the businesses paid into a state unemployment plan that met certain federally specified conditions. An employer sued, alleging that the tax was impermissibly “driv[ing] the state legislatures under the whip of economic pressure into the enactment of unemployment compensation laws at the bidding of the central government.” 301 U. S., at 587. We acknowledged the danger that the Federal Government might employ its taxing power to exert a “power akin to undue influence” upon the States. Id., at 590. But we observed that Congress adopted the challenged tax and abatement program to channel money to the States that would otherwise have gone into the Federal Treasury for use in providing national unemployment services. Congress was willing to direct businesses to instead pay the money into state programs only on the condition that the money be used for the same purposes. Predicating tax abatement on a State’s adoption of a particular type of un-employment legislation was therefore a means to “safeguard [the Federal Government’s] own treasury.” Id., at 591. We held that “[i]n such circumstances, if in no others, inducement or persuasion does not go beyond the bounds of power.” Ibid.

In rejecting the argument that the federal law was a “weapon[ ] of coercion, destroying or impairing the autonomy of the states,” the Court noted that there was no reason to suppose that the State in that case acted other than through “her unfettered will.” Id., at 586, 590. Indeed, the State itself did “not offer a suggestion that in passing the unemployment law she was affected by duress.” Id., at 589.

As our decision in Steward Machine confirms, Congress may attach appropriate conditions to federal taxing and spending programs to preserve its control over the use of federal funds. In the typical case we look to the States to defend their prerogatives by adopting “the simple expedient of not yielding” to federal blandishments when they do not want to embrace the federal policies as their own. Massachusetts v. Mellon, 262 U. S. 447, 482 (1923) . The States are separate and independent sovereigns. Sometimes they have to act like it.

The States, however, argue that the Medicaid expansion is far from the typical case. They object that Congress has “crossed the line distinguishing encouragement from coercion,” New York, supra, at 175, in the way it has structured the funding: Instead of simply refusing to grant the new funds to States that will not accept the new conditions, Congress has also threatened to withhold those States’ existing Medicaid funds. The States claim that this threat serves no purpose other than to force unwilling States to sign up for the dramatic expansion in health care coverage effected by the Act.

Given the nature of the threat and the programs at issue here, we must agree. We have upheld Congress’s authority to condition the receipt of funds on the States’ complying with restrictions on the use of those funds, because that is the means by which Congress ensures that the funds are spent according to its view of the “general Welfare.” Conditions that do not here govern the use of the funds, however, cannot be justified on that basis. When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressuring the States to accept policy changes.

In South Dakota v. Dole, we considered a challenge to a federal law that threatened to withhold five percent of a State’s federal highway funds if the State did not raise its drinking age to 21. The Court found that the condition was “directly related to one of the main purposes for which highway funds are expended—safe interstate travel.” 483 U. S., at 208. At the same time, the condition was not a restriction on how the highway funds—set aside for specific highway improvement and maintenance efforts—were to be used.

We accordingly asked whether “the financial inducement offered by Congress” was “so coercive as to pass the point at which ‘pressure turns into compulsion.’ ” Id., at 211 (quoting Steward Machine, supra, at 590). By “financial inducement” the Court meant the threat of losing five percent of highway funds; no new money was offered to the States to raise their drinking ages. We found that the inducement was not impermissibly coercive, because Congress was offering only “relatively mild encouragement to the States.” Dole, 483 U. S., at 211. We observed that “all South Dakota would lose if she adheres to her chosen course as to a suitable minimum drinking age is 5%” of her highway funds. Ibid. In fact, the federal funds at stake constituted less than half of one percent of South Dakota’s budget at the time. See Nat. Assn. of State Budget Officers, The State Expenditure Report 59 (1987); South Dakota v. Dole, 791 F. 2d 628, 630 (CA8 1986). In consequence, “we conclude[d] that [the] encouragement to state action [was] a valid use of the spending power.” Dole, 483 U. S., at 212. Whether to accept the drinking age change “remain[ed] the prerogative of the States not merely in theory but in fact.” Id., at 211–212.

In this case, the financial “inducement” Congress has chosen is much more than “relatively mild encouragement”—it is a gun to the head. Section 1396c of the Medicaid Act provides that if a State’s Medicaid plan does not comply with the Act’s requirements, the Secretary of Health and Human Services may declare that “further payments will not be made to the State.” 42 U. S. C. §1396c. A State that opts out of the Affordable Care Act’s expansion in health care coverage thus stands to lose not merely “a relatively small percentage” of its existing Medicaid funding, but all of it. Dole, supra, at 211. Medicaid spending accounts for over 20 percent of the average State’s total budget, with federal funds covering 50 to 83 percent of those costs. See Nat. Assn. of State Budget Officers, Fiscal Year 2010 State Expenditure Report, p. 11, Table 5 (2011); 42 U. S. C. §1396d(b). The Federal Government estimates that it will pay out approximately $3.3 trillion between 2010 and 2019 in order to cover the costs of pre-expansion Medicaid. Brief for United States 10, n. 6. In addition, the States have developed intricate statutory and administrative regimes over the course of many decades to implement their objectives under existing Medicaid. It is easy to see how the Dole Court could conclude that the threatened loss of less than half of one percent of South Dakota’s budget left that State with a “prerogative” to reject Congress’s desired policy, “not merely in theory but in fact.” 483 U. S., at 211–212. The threatened loss of over 10 percent of a State’s overall budget, in contrast, is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. 12

Justice Ginsburg claims that Dole is distinguishable because here “Congress has not threatened to withhold funds earmarked for any other program.” Post, at 47. But that begs the question: The States contend that the expansion is in reality a new program and that Congress is forcing them to accept it by threatening the funds for the existing Medicaid program. We cannot agree that existing Medicaid and the expansion dictated by the Affordable Care Act are all one program simply because “Congress styled” them as such. Post, at 49. If the expansion is not properly viewed as a modification of the existing Medicaid program, Congress’s decision to so title it is irrelevant. 13

Here, the Government claims that the Medicaid expansion is properly viewed merely as a modification of the ex-isting program because the States agreed that Congress could change the terms of Medicaid when they signed on in the first place. The Government observes that the Social Security Act, which includes the original Medicaid provisions, contains a clause expressly reserving “[t]he right to alter, amend, or repeal any provision” of that statute. 42 U. S. C. §1304. So it does. But “if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously.” Pennhurst, 451 U. S., at 17. A State confronted with statutory language reserving the right to “alter” or “amend” the pertinent provisions of the Social Security Act might reasonably assume that Congress was entitled to make adjustments to the Medicaid program as it developed. Congress has in fact done so, sometimes conditioning only the new funding, other times both old and new. See, e.g., Social Security Amendments of 1972, 86Stat. 1381–1382, 1465 (extending Med-icaid eligibility, but partly conditioning only the new funding); Omnibus Budget Reconciliation Act of 1990, §4601, 104Stat. 1388–166 (extending eligibility, and conditioning old and new funds).

The Medicaid expansion, however, accomplishes a shift in kind, not merely degree. The original program was de-signed to cover medical services for four particular cat-egories of the needy: the disabled, the blind, the elderly, and needy families with dependent children. See 42 U. S. C. §1396a(a)(10). Previous amendments to Medicaid eligibility merely altered and expanded the boundaries of these categories. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. It is no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage. 14

Indeed, the manner in which the expansion is structured indicates that while Congress may have styled the expansion a mere alteration of existing Medicaid, it recognized it was enlisting the States in a new health care program. Congress created a separate funding provision to cover the costs of providing services to any person made newly eligible by the expansion. While Congress pays 50 to 83 percent of the costs of covering individuals currently enrolled in Medicaid, §1396d(b), once the expansion is fully implemented Congress will pay 90 percent of the costs for newly eligible persons, §1396d(y)(1). The conditions on use of the different funds are also distinct. Congress mandated that newly eligible persons receive a level of coverage that is less comprehensive than the traditional Medicaid benefit package. §1396a(k)(1); see Brief for United States 9.

As we have explained, “[t]hough Congress’ power to legislate under the spending power is broad, it does not include surprising participating States with postacceptance or ‘retroactive’ conditions.” Pennhurst, supra, at 25. A State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program included the power to transform it so dramatically.

Justice Ginsburg claims that in fact this expansion is no different from the previous changes to Medicaid, such that “a State would be hard put to complain that it lacked fair notice.” Post, at 56. But the prior change she dis-cusses—presumably the most dramatic alteration she could find—does not come close to working the transformation the expansion accomplishes. She highlights an amendment requiring States to cover pregnant women and increasing the number of eligible children. Ibid. But this modification can hardly be described as a major change in a program that—from its inception—provided health care for “families with dependent children.” Previous Medicaid amendments simply do not fall into the same category as the one at stake here.

The Court in Steward Machine did not attempt to “fix the outermost line” where persuasion gives way to coercion. 301 U. S., at 591. The Court found it “[e]nough for present purposes that wherever the line may be, this statute is within it.” Ibid. We have no need to fix a line either. It is enough for today that wherever that line may be, this statute is surely beyond it. Congress may not simply “conscript state [agencies] into the national bureaucratic army,” FERC v. Mississippi, 456 U. S. 742, 775 (1982) (O’Connor, J., concurring in judgment in part and dissenting in part), and that is what it is attempting to do with the Medicaid expansion.

B

Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding. Section 1396c gives the Secretary of Health and Human Services the authority to do just that. It allows her to withhold all “further [Medicaid] payments . . . to the State” if she determines that the State is out of compliance with any Medicaid requirement, including those contained in the expansion. 42 U. S. C. §1396c. In light of the Court’s holding, the Secretary cannot apply §1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion.

That fully remedies the constitutional violation we have identified. The chapter of the United States Code that contains §1396c includes a severability clause confirming that we need go no further. That clause specifies that “[i]f 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.” §1303. Today’s holding does not affect the continued ap-plication of §1396c to the existing Medicaid program. Nor does it affect the Secretary’s ability to withdraw funds pro-vided under the Affordable Care Act if a State that has chosen to participate in the expansion fails to comply with the requirements of that Act.

This is not to say, as the joint dissent suggests, that we are “rewriting the Medicaid Expansion.” Post, at 48. Instead, we determine, first, that §1396c is unconstitutional when applied to withdraw existing Medicaid funds from States that decline to comply with the expansion. We then follow Congress’s explicit textual instruction to leave unaffected “the remainder of the chapter, and the application of [the challenged] provision to other persons or circumstances.” §1303. When we invalidate an application of a statute because that application is unconstitutional, we are not “rewriting” the statute; we are merely enforcing the Constitution.

The question remains whether today’s holding affects other provisions of the Affordable Care Act. In considering that question, “[w]e seek to determine what Congress would have intended in light of the Court’s constitutional holding.” United States v. Booker, 543 U. S. 220, 246 (2005) (internal quotation marks omitted). Our “touchstone for any decision about remedy is legislative intent, for a court cannot use its remedial powers to circumvent the intent of the legislature.” Ayotte v. Planned Parenthood of Northern New Eng., 546 U. S. 320, 330 (2006) (internal quotation marks omitted). The question here is whether Congress would have wanted the rest of the Act to stand, had it known that States would have a genuine choice whether to participate in the new Medicaid expansion. Unless it is “evident” that the answer is no, we must leave the rest of the Act intact. Champlin Refining Co. v. Corporation Comm’n of Okla., 286 U. S. 210, 234 (1932) .

We are confident that Congress would have wanted to preserve the rest of the Act. It is fair to say that Congress assumed that every State would participate in the Medicaid expansion, given that States had no real choice but to do so. The States contend that Congress enacted the rest of the Act with such full participation in mind; they point out that Congress made Medicaid a means for satisfying the mandate, 26 U. S. C. §5000A(f)(1)(A)(ii), and enacted no other plan for providing coverage to many low-income individuals. According to the States, this means that the entire Act must fall.

We disagree. The Court today limits the financial pressure the Secretary may apply to induce States to accept the terms of the Medicaid expansion. As a practical matter, that means States may now choose to reject the expansion; that is the whole point. But that does not mean all or even any will. Some States may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administrative resources necessary to support the expansion. Other States, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the Act offers at the outset.

We have no way of knowing how many States will accept the terms of the expansion, but we do not believe Congress would have wanted the whole Act to fall, simply because some may choose not to participate. The other reforms Congress enacted, after all, will remain “fully operative as a law,” Champlin, supra, at 234, and will still function in a way “consistent with Congress’ basic objectives in enacting the statute,” Booker, supra, at 259. Confident that Congress would not have intended anything different, we conclude that the rest of the Act need not fall in light of our constitutional holding.

*  *  *

The Affordable Care Act is constitutional in part and unconstitutional in part. The individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause. That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it. In this case, however, it is reasonable to con-strue what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance. Such legislation is within Con-gress’s power to tax.

As for the Medicaid expansion, that portion of the Affordable Care Act violates the Constitution by threatening existing Medicaid funding. Congress has no authority to order the States to regulate according to its instructions. Congress may offer the States grants and require the States to comply with accompanying conditions, but the States must have a genuine choice whether to accept the offer. The States are given no such choice in this case: They must either accept a basic change in the nature of Medicaid, or risk losing all Medicaid funding. The remedy for that constitutional violation is to preclude the Federal Government from imposing such a sanction. That remedy does not require striking down other portions of the Affordable Care Act.

The Framers created a Federal Government of limited powers, and assigned to this Court the duty of enforcing those limits. The Court does so today. But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people.

The judgment of the Court of Appeals for the Eleventh Circuit is affirmed in part and reversed in part.

It is so ordered.

__________________________________

1  The Eleventh Circuit did not consider whether the Anti-Injunction Act bars challenges to the individual mandate. The District Court had determined that it did not, and neither side challenged that holding on appeal. The same was true in the Fourth Circuit, but that court examined the question sua sponte because it viewed the Anti-Injunction Act as a limit on its subject matter jurisdiction. See Liberty Univ., 671 F. 3d, at 400–401. The Sixth Circuit and the D. C. Circuit considered the question but determined that the Anti-Injunction Act did not apply. See Thomas More, 651 F. 3d, at 539–540 (CA6); Seven-Sky, 661 F. 3d, at 5–14 (CADC).

2  We appointed H. Bartow Farr III to brief and argue in support of the Eleventh Circuit’s judgment with respect to severability, and Robert A. Long to brief and argue the proposition that the Anti-Injunction Act bars the current challenges to the individual mandate. 565 U. S. ___ (2011). Both amici have ably discharged their assigned responsibilities.

3  The examples of other congressional mandates cited by Justice Ginsburg, post, at 35, n. 10 (opinion concurring in part, concurring in judgment in part, and dissenting in part), are not to the contrary. Each of those mandates—to report for jury duty, to register for the draft, to purchase firearms in anticipation of militia service, to exchange gold currency for paper currency, and to file a tax return—are based on constitutional provisions other than the Commerce Clause. See Art. I, §8, cl. 9 (to “constitute Tribunals inferior to the supreme Court”); id., cl. 12 (to “raise and support Armies”); id., cl. 16 (to “provide for organizing, arming, and disciplining, the Militia”); id., cl. 5 (to “coin Money”); id., cl. 1 (to “lay and collect Taxes”).

4  Justice Ginsburg suggests that “at the time the Constitution was framed, to ‘regulate’ meant, among other things, to require action.” Post, at 23 (citing Seven-Sky v. Holder, 661 F. 3d 1, 16 (CADC 2011); brackets and some internal quotation marks omitted). But to reach this conclusion, the case cited by Justice Ginsburg relied on a dictionary in which “[t]o order; to command” was the fifth-alternative definition of “to direct,” which was itself the second-alternative definition of “to regulate.” See Seven-Sky, supra, at 16 (citing S. Johnson, Dictionary of the English Language (4th ed. 1773) (reprinted 1978)). It is unlikely that the Framers had such an obscure meaning in mind when they used the word “regulate.” Far more commonly, “[t]o regulate” meant “[t]o adjust by rule or method,” which presupposes something to adjust. 2 Johnson, supra, at 1619; see also Gibbons, 9 Wheat., at 196 (defining the commerce power as the power “to prescribe the rule by which commerce is to be governed”).

5  Justice Ginsburg cites two eminent domain cases from the 1890s to support the proposition that our case law does not “toe the activity versus inactivity line.” Post, at 24–25 (citing Monongahela Nav. Co. v. United States, 148 U. S. 312 –337 (1893), and Cherokee Nation v. Southern Kansas R. Co., 135 U. S. 641 –659 (1890)). The fact that the Fifth Amendment requires the payment of just compensation when the Government exercises its power of eminent domain does not turn the taking into a commercial transaction between the landowner and the Government, let alone a government-compelled transaction between the landowner and a third party.

6  In an attempt to recast the individual mandate as a regulation of commercial activity, Justice Ginsburg suggests that “[a]n individual who opts not to purchase insurance from a private insurer can be seen as actively selecting another form of insurance: self-insurance.” Post, at 26. But “self-insurance” is, in this context, nothing more than a description of the failure to purchase insurance. Individuals are no more “activ[e] in the self-insurance market” when they fail to purchase insurance, ibid., than they are active in the “rest” market when doing nothing.

7  Sotelo, in particular, would seem to refute the joint dissent’s contention that we have “never” treated an exaction as a tax if it was denominated a penalty. Post, at 20. We are not persuaded by the dissent’s attempt to distinguish Sotelo as a statutory construction case from the bankruptcy context. Post, at 17, n. 5. The dissent itself treats the question here as one of statutory interpretation, and indeed also relies on a statutory interpretation case from the bankruptcy context. Post, at 23 (citing United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, 224 (1996) ).

8  In 2016, for example, individuals making $35,000 a year are expected to owe the IRS about $60 for any month in which they do not have health insurance. Someone with an annual income of $100,000 a year would likely owe about $200. The price of a qualifying insurance policy is projected to be around $400 per month. See D. Newman, CRS Report for Congress, Individual Mandate and Related Information Re-quirements Under PPACA 7, and n. 25 (2011).

9  We do not suggest that any exaction lacking a scienter requirement and enforced by the IRS is within the taxing power. See post, at 23–24 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ., dissenting). Congress could not, for example, expand its authority to impose criminal fines by creating strict liability offenses enforced by the IRS rather than the FBI. But the fact the exaction here is paid like a tax, to the agency that collects taxes—rather than, for example, exacted by Department of Labor inspectors after ferreting out willful malfeasance—suggests that this exaction may be viewed as a tax.

10  The joint dissent attempts to distinguish New York v. United States on the ground that the seemingly imperative language in that case was in an “introductory provision” that had “no legal consequences.” Post, at 19. We did not rely on that reasoning in New York. See 505 U. S., at 169–170. Nor could we have. While the Court quoted only the broad statement that “[e]ach State shall be responsible” for its waste, that language was implemented through operative provisions that also use the words on which the dissent relies. See 42 U. S. C. §2021e(e)(1) (entitled “Requirements for non-sited compact regions and non-member States” and directing that those entities “shall comply with the following requirements”); §2021e(e)(2) (describing “Penalties for failure to comply”). The Court upheld those provisions not as lawful commands, but as “incentives.” See 505 U. S., at 152–153, 171–173.

11  Of course, individuals do not have a lawful choice not to pay a tax due, and may sometimes face prosecution for failing to do so (although not for declining to make the shared responsibility payment, see 26 U. S. C. §5000A(g)(2)). But that does not show that the tax restricts the lawful choice whether to undertake or forgo the activity on which the tax is predicated. Those subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing they may not lawfully do is not buy health insurance and not pay the resulting tax.

12  Justice Ginsburg observes that state Medicaid spending will increase by only 0.8 percent after the expansion. Post, at 43. That not only ignores increased state administrative expenses, but also assumes that the Federal Government will continue to fund the expansion at the current statutorily specified levels. It is not unheard of, however, for the Federal Government to increase requirements in such a manner as to impose unfunded mandates on the States. More importantly, the size of the new financial burden imposed on a State is irrelevant in analyzing whether the State has been coerced into accepting that burden. “Your money or your life” is a coercive proposition, whether you have a single dollar in your pocket or $500.

13  Nor, of course, can the number of pages the amendment occu-pies, or the extent to which the change preserves and works withinthe existing program, be dispositive. Cf. post, at 49–50 (opinion of Ginsburg, J.). Take, for example, the following hypothetical amendment: “All of a State’s citizens are now eligible for Medicaid.” That change would take up a single line and would not alter any “operational aspect[ ] of the program” beyond the eligibility requirements. Post, at 49. Yet it could hardly be argued that such an amendment was a permissible modification of Medicaid, rather than an attempt to foist an entirely new health care system upon the States.

14  Justice Ginsburg suggests that the States can have no objection to the Medicaid expansion, because “Congress could have repealed Medicaid [and,] [t]hereafter, . . . could have enacted Medicaid II, a new program combining the pre-2010 coverage with the expanded coverage required by the ACA.” Post, at 51; see also post, at 38. But it would certainly not be that easy. Practical constraints would plainly inhibit, if not preclude, the Federal Government from repealing the existing program and putting every feature of Medicaid on the table for political reconsideration. Such a massive undertaking would hardly be “ritualistic.” Ibid. The same is true of Justice Ginsburg’s suggestion that Congress could establish Medicaid as an exclusively federal program. Post, at 44.

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 –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 interstate commerce is a case in point.

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 –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 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 insurer may not deny coverage on the basis of, among other things, any pre-existing medical condition that the applicant 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 expensive 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 –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 market, 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 possession 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. Maryland, 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 necessary 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 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 therefore 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 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 virtually 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 commerce 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 destroying 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 Government. 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 The dissent treats the Constitution as though it is an enumeration of those problems that the Federal Government can address—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. 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 cancerfighting 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 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 unconstitutional (ut res magis valeat quam pereat). But we cannot rewrite the statute to be what it is not. “ ‘ “[A]lthough this Court will often strain to construe legislation 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. Brogden, 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 “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 minimum essential coverage.” (Emphasis added.) It commands that every “applicable individual shall . . . ensure that the individual . . . is covered under minimum essential coverage.” Ibid. (emphasis added). And the immediately following 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 regulatory 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 regulation 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 provides 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 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 elsewhere 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 exempt 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 minimum coverage requirement: Those who cannot afford coverage, §5000A(e)(1); who earn too little income to require 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 penalty (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 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 penalty 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 returns 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 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 petitioners 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 Mandate 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 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 Mandate 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 person,” 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. Having 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

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’ Minimum 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 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 verbal 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 struc ture of the ACA. 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 program, 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 authorizes 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 the true interpretation of the phrase” “the general welfare.” 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 subsequent clauses of the same section,” while Hamilton “maintained 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 Hamilton’s approach and found that “the power of Congress to authorize expenditure of public moneys for public purposes 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 bestow and define the legislative powers of the Congress.” Ibid.; see also Steward Machine Co. v. Davis, 301 U. S. 548 –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 Congress,” 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. Monetary grants, so-called grants-in-aid, became more frequent during the 1930’s, G. Stephens & N. Wikstrom, American Intergovernmental Relations—A Fragmented Federal Polity 83 (2007), and by 1950 they had reached $20 billion 8 or 11.6% of state and local government expenditures from their own sources. 9 By 1970 this number had grown to $123.7 billion 10 or 29.1% of state and local government expenditures from their own sources. 11 As of 2010, federal 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 customarily 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 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 omitted); 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 obliterate 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 restrictions 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 –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 compulsion, 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 destruction 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 according to Congress’ instructions.” New York, 505 U. S., at 162. Congress may not “simply commandeer the legislative 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 compulsion 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 rendered 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 Employees 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 decision 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 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 constitutional 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 voluntariness 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 State’s federal highway funds on the State’s adoption of a minimum drinking age of 21 years. South Dakota argued 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 highway grant programs,” we found that “Congress ha[d] offered 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 program 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 distinguishing encouragement from coercion,” New York, supra, at 175, a federal program that coopts the States’ political processes must be declared unconstitutional. “[T]he federal 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 Government, 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 interpretation of the anticoercion rule would permit Congress to dictate 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 secondary education. Suppose also that this funding came with conditions governing such things as school curriculum, the hiring and tenure of teachers, the drawing of school districts, the length and hours of the school day, the 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 subdivisions 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 unconstitutional 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 unambiguously signaled its belief that every State would have no real choice but to go along with the Medicaid Expansion. 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 realistic option. Before the ACA’s enactment, Medicaid funded medical care for pregnant women, families with dependents, 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 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 Expenditure 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 $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 expenditures 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 expenditures 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 allocate 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 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 expenditures. Id., at 7, 16, 47.

A State forced out of the Medicaid program would face burdens in addition to the loss of federal Medicaid funding. 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 Medicaid] plan”). And withdrawal or expulsion from the Medicaid 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 Emergency 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 exceedingly difficult to comply with federal law unless they were given substantial state support. See, e.g., Brief for Economists 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 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 encouragement,” 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 attempts 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 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 program 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 Medicaid coverage under the ACA may be able to secure private insurance, either through their employers or by obtaining subsidized insurance through an exchange. See 26 U. S. C. §36B(a) (2006 ed., Supp. IV); Brief for Respondents in No. 11–400, at 12. But the new federal subsidies are not available to those whose income is below the federal 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, Congress would surely have devised a backup scheme so that the most vulnerable groups in our society, those previously 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—Congress extended the availability of the new federal insurance 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 withdrawal or expulsion from the program, Congress surely would have made them eligible for the tax subsidies provided 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. Congress 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 Government sees things, Congress is like the generous benefactor 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 “exceedingly 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 Amendments of 1972, 86Stat. 1465.

Congress’ decision to do otherwise here reflects its understanding that the ACA offer is not an “exceedingly generous” gift that no State in its right mind would decline. 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. Elmendorf, 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 increasingly 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 Medicaid 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 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 Medicaid 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. Furthermore, 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 insurance 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 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” legislation 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 budget. 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 authority do not rest with this Court.

V Severability

The Affordable Care Act seeks to achieve “near-universal” health insurance coverage. §18091(2)(D) (2006 ed., Supp. IV). The two pillars of the Act are the Individual 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 provisions of the Act must fall as well. The following section explains the severability principles that require this conclusion. 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 authority to declare a statute partially unconstitutional has been well established since Marbury v. Madison, 1 Cranch 137 (1803), when the Court severed an unconstitutional provision 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 Interpretation 144 (2010), it has not always done so, see, e.g., Minnesota v. Mille Lacs Band of Chippewa Indians, 526 U. S. 172 –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 measure 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 policies, 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 address the conditions that pertained when the statute was considered at the outset.

The Court has applied a two-part guide as the framework 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 Congress 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 asking whether “the balance of the legislation is incapable of functioning independently.” Id., at 684. Even if the remaining 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 Accounting 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]mbodying 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 determine if Congress would have enacted them standing alone and without the unconstitutional portion. If Congress would not, those provisions, too, must be invalidated. See Alaska Airlines, supra, at 685 (“[T]he unconstitutional provision must be severed unless the statute created 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) (plurality 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 according 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 other requirements; comprehensive regulation and penalties; some undoubted taxes; and increases in some governmental 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 Congress would have intended, even when the major provisions 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, 124Stat. 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 industry 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). Insurance companies are required to sell them insurance regardless 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, 124Stat. 865, 1017 (excise tax); Health Care and Education Reconciliation Act of 2010 (HCERA) §1401, 124Stat. 1059 (excise tax). States are expected to expand Medicaid eligibility and to create regulated marketplaces called exchanges 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 purchase of insurance through federal subsidies available on health-insurance exchanges. See 26 U. S. C. §36B (2006 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) (Medicare cuts); ACA Title IX, Subtitle A, 124Stat. 847 (“Revenue 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 individuals, insurers, governments, hospitals, and employers—while, at the same time, offsetting significant portions of those costs with new benefits to each group. For example, the Federal Government bears the burden of paying billions for the new entitlements mandated by the Medicaid Expansion and federal subsidies for insurance purchases on the exchanges; but it benefits from reductions in the reimbursements it pays to hospitals. Hospitals 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 lowincome Medicaid recipients who will enroll in insurance companies’ Medicaid-funded managed care programs. In summary, the Individual Mandate and Medicaid Expansion offset insurance regulations and taxes, which offset reduced reimbursements to hospitals, which offset increases 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, 124Stat. 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 Individual Mandate as working “together with the other provisions 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 uninsured); §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 “significantly reduce administrative costs and lower health insurance premiums”). The Act calls the Individual Mandate “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 nonseverable. 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 –244 (1929) (holding nonseverable 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 separately—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 reimbursements 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 provisions 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 spending 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 intended without the Individual Mandate and Medicaid Expansion. Absent the invalid portions, the other major provisions could impose enormous risks of unexpected burdens 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 not intend.

a Insurance Regulations and Taxes

Without the Individual Mandate and Medicaid Expansion, 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 responsibility.” 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, 124Stat. 865, 1017 (excise tax); HCERA §1401, 124Stat. 1059 (excise tax).

The Court has been informed by distinguished economists 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 otherwise dwarf the industry’s current profit margin. See Brief for Economists as Amici Curiae in No. 11–393 etc. (Severability), 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 companies, despite the Act’s goal of “effective health insurance markets.” §18091(2)(J).

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 Mandate and Medicaid Expansion necessarily would impose significant risks and real uncertainties on insurance companies, their customers, all other major actors in the system, and the government treasury. And what also is known is this: Unnecessary risks and avoidable uncertainties 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 Federal 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 hospitals’ revenues, which will offset the government’s reductions 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 insurance coverage, such as community rating and the Medicaid 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] 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 unknowable. 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 reductions in reimbursements to hospitals and the ACA’s other Medicare cuts must be invalidated. The ACA’s $455 billion in Medicare and Medicaid savings offset the $434-billion cost of the Medicaid Expansion. See CBO Estimate, 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), 124Stat. 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 provisions.” 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 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 compromise” 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 assurance that it would render the ACA deficit-neutral. See ACA §§1563(a)(1), (2), 124Stat. 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 marketplace 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. Individuals 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). Without the community-rating insurance regulation, however, 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 responsibility” 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, insurance 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 policies 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, individuals 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 buyer’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 exchanges 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 requires them to make a payment to the Federal Government 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 exchanges; 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 regulations and taxes), States (the Medicaid Expansion), the Federal Government (the federal subsidies for exchanges and for the Medicaid Expansion), and hospitals (the reductions 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, including 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, 124Stat. 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 minor provision will be the price paid for support of a major provision. So, if the major provision were unconstitutional, 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 Expansion and the exchanges’ federal subsidies. See Title IX, Subtitle A—Revenue Offset Provisions, 124Stat. 847. With the Medicaid Expansion and the exchanges invalidated, 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 severability. 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 context of an omnibus enactment like the ACA, which includes not only many provisions that are ancillary to its central provisions but also many that are entirely unrelated—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.’ ” Trade-Mark Cases, 100 U. S., at 99.

This Court must not impose risks unintended by Congress or produce legislation Congress may have lacked the support to enact. For those reasons, the unconstitutionality 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 sanction 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 design 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 Individual 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 concerns 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 today 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 undermines 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 provisions 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 important ones, for which reason they alone were embodied 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 invalid in its entirety. We respectfully dissent.

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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 meaning) in the constitutional text. See R. Burn, A New Law Dictionary 281 (1792); G. Jacob, A New Law Dictionary (10th ed. 1782); 2 T. Cunningham, A New and Complete Law Dictionary (2d ed. 1771).

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 dis-senting 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).

3  In its effort to show the contrary, Justice Ginsburg’s dissent comesup 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 supportthe 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)?

4  No one seriously contends that any of Congress’ other enumerated powers gives it the authority to enact §5000A as a regulation.

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 limitations on penalties.

6  The 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 collectedin 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 manneras taxes,” §6671(a) (2006 ed.). But that point seems to us to confirmthe inapplicability of the Anti-Injunction Act. That the penalty is tobe “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). Thelatter 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 provision 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.

7  “State expenditures” is used here to mean annual expenditures from the States’ own funding sources, and it excludes federal grants unless otherwise noted.

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 Comparison 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).

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.

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.

15  The Federal Government reports a higher percentage. Accordingto 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.

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 Ginsburg, with whom Justice Sotomayor joins, and with whom Justice Breyer and Justice Kagan join as to Parts I, II, III, and IV, concurring in part, concurring in the judgment in part, and dissenting in part.

I agree with The Chief Justice that the Anti-Injunction Act does not bar the Court’s consideration of this case, and that the minimum coverage provision is a proper exercise of Congress’ taxing power. I therefore join Parts I, II, and III–C of The Chief Justice’s opinion. Unlike The Chief Justice, however, I would hold, alternatively, that the Commerce Clause authorizes Congress to enact the minimum coverage provision. I would also hold that the Spending Clause permits the Medicaid expansion exactly as Congress enacted it.

I

The provision of health care is today a concern of national dimension, just as the provision of old-age and survivors’ benefits was in the 1930’s. In the Social Security Act, Congress installed a federal system to provide monthly benefits to retired wage earners and, eventually, to their survivors. Beyond question, Congress could have adopted a similar scheme for health care. Congress chose, instead, to preserve a central role for private insurers and state governments. According to The Chief Justice, the Commerce Clause does not permit that preservation. This rigid reading of the Clause makes scant sense and is stunningly retrogressive.

Since 1937, our precedent has recognized Congress’ large authority to set the Nation’s course in the economic and social welfare realm. See United States v. Darby, 312 U. S. 100, 115 (1941) (overruling Hammer v. Dagenhart, 247 U. S. 251 (1918) , and recognizing that “regulations of commerce which do not infringe some constitutional prohibition are within the plenary power conferred on Congress by the Commerce Clause”); NLRB v. Jones & Laughlin Steel Corp., 301 U. S. 1, 37 (1937) (“[The commerce] power is plenary and may be exerted to protect interstate commerce no matter what the source of the dangers which threaten it.” (internal quotation marks omitted)). The Chief Justice’s crabbed reading of the Commerce Clause harks back to the era in which the Court routinely thwarted Congress’ efforts to regulate the national economy in the interest of those who labor to sustain it. See, e.g., Railroad Retirement Bd. v. Alton R. Co., 295 U. S. 330, 362, 368 (1935) (invalidating compulsory retirement and pension plan for employees of carriers subject to the Interstate Commerce Act; Court found law related essentially “to the social welfare of the worker, and therefore remote from any regulation of commerce as such”). It is a reading that should not have staying power.

A

In enacting the Patient Protection and Affordable Care Act (ACA), Congress comprehensively reformed the national market for health-care products and services. By any measure, that market is immense. Collectively, Americans spent $2.5 trillion on health care in 2009, accounting for 17.6% of our Nation’s economy. 42 U. S. C. §18091(2)(B) (2006 ed., Supp. IV). Within the next decade, it is anticipated, spending on health care will nearly double. Ibid.

The health-care market’s size is not its only distinctive feature. Unlike the market for almost any other product or service, the market for medical care is one in which all individuals inevitably participate. Virtually every person residing in the United States, sooner or later, will visit a doctor or other health-care professional. See Dept. of Health and Human Services, National Center for Health Statistics, Summary Health Statistics for U. S. Adults: National Health Interview Survey 2009, Ser. 10, No. 249, p. 124, Table 37 (Dec. 2010) (Over 99.5% of adults above 65 have visited a health-care professional.). Most people will do so repeatedly. See id., at 115, Table 34 (In 2009 alone, 64% of adults made two or more visits to a doctor’s office.).

When individuals make those visits, they face another reality of the current market for medical care: its high cost. In 2010, on average, an individual in the United States incurred over $7,000 in health-care expenses. Dept. of Health and Human Services, Centers for Medicare and Medicaid Services, Historic National Health Expenditure Data, National Health Expenditures: Selected Calendar Years 1960–2010 (Table 1). Over a lifetime, costs mount to hundreds of thousands of dollars. See Alemayahu & Warner, The Lifetime Distribution of Health Care Costs, in 39 Health Service Research 627, 635 (June 2004). When a person requires nonroutine care, the cost will generally exceed what he or she can afford to pay. A single hospital stay, for instance, typically costs upwards of $10,000. See Dept. of Health and Human Services, Office of Health Policy, ASPE Research Brief: The Value of Health Insurance 5 (May 2011). Treatments for many serious, though not uncommon, conditions similarly cost a substantial sum. Brief for Economic Scholars as Amici Curiae in No. 11–398, p. 10 (citing a study indicating that, in 1998, the cost of treating a heart attack for the first 90 days exceeded $20,000, while the annual cost of treating certain cancers was more than $50,000).

Although every U. S. domiciliary will incur significant medical expenses during his or her lifetime, the time when care will be needed is often unpredictable. An accident, a heart attack, or a cancer diagnosis commonly occurs without warning. Inescapably, we are all at peril of needing medical care without a moment’s notice. See, e.g., Campbell, Down the Insurance Rabbit Hole, N. Y. Times, Apr. 5, 2012, p. A23 (telling of an uninsured 32-year-old woman who, healthy one day, became a quadriplegic the next due to an auto accident).

To manage the risks associated with medical care— its high cost, its unpredictability, and its inevitability—most people in the United States obtain health insurance. Many (approximately 170 million in 2009) are insured by private insurance companies. Others, including those over 65 and certain poor and disabled persons, rely on government-funded insurance programs, notably Medicare and Medicaid. Combined, private health insurers and State and Federal Governments finance almost 85% of the medical care administered to U. S. residents. See Congressional Budget Office, CBO’s 2011 Long-Term Budget Outlook 37 (June 2011).

Not all U. S. residents, however, have health insurance. In 2009, approximately 50 million people were uninsured, either by choice or, more likely, because they could not afford private insurance and did not qualify for government aid. See Dept. of Commerce, Census Bureau, C. DeNavas-Walt, B. Proctor, & J. Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2009, p. 23, Table 8 (Sept. 2010). As a group, uninsured individuals annually consume more than $100 billion in healthcare services, nearly 5% of the Nation’s total. Hidden Health Tax: Americans Pay a Premium 2 (2009), available at http://www.familiesusa.org (all Internet material as visited June 25, 2012, and included in Clerk of Court’s case file). Over 60% of those without insurance visit a doctor’s office or emergency room in a given year. See Dept. of Health and Human Services, National Center for Health Statistics, Health—United States—2010, p. 282, Table 79 (Feb. 2011).

B

The large number of individuals without health insurance, Congress found, heavily burdens the national health-care market. See 42 U. S. C. §18091(2). As just noted, the cost of emergency care or treatment for a serious illness generally exceeds what an individual can afford to pay on her own. Unlike markets for most products, however, the inability to pay for care does not mean that an uninsured individual will receive no care. Federal and state law, as well as professional obligations and embedded social norms, require hospitals and physicians to provide care when it is most needed, regardless of the patient’s ability to pay. See, e.g., 42 U. S. C. §1395dd; Fla. Stat. §395.1041(3)(f) (2010); Tex. Health & Safety Code Ann. §§311.022(a) and (b) (West 2010); American Medical Association, Council on Ethical and Judicial Affairs, Code of Medical Ethics, Current Opinions: Opinion 8.11—Neglect of Patient, p. 70 (1998–1999 ed.).

As a consequence, medical-care providers deliver significant amounts of care to the uninsured for which the providers receive no payment. In 2008, for example, hospitals, physicians, and other health-care professionals received no compensation for $43 billion worth of the $116 billion in care they administered to those without insurance. 42 U. S. C. §18091(2)(F) (2006 ed., Supp. IV).

Health-care providers do not absorb these bad debts. Instead, they raise their prices, passing along the cost of uncompensated care to those who do pay reliably: the government and private insurance companies. In response, private insurers increase their premiums, shifting the cost of the elevated bills from providers onto those who carry insurance. The net result: Those with health insurance subsidize the medical care of those without it. As economists would describe what happens, the uninsured “free ride” on those who pay for health insurance.

The size of this subsidy is considerable. Congress found that the cost-shifting just described “increases family [insurance] premiums by on average over $1,000 a year.” Ibid. Higher premiums, in turn, render health insurance less affordable, forcing more people to go without insurance and leading to further cost-shifting.

And it is hardly just the currently sick or injured among the uninsured who prompt elevation of the price of health care and health insurance. Insurance companies and health-care providers know that some percentage of healthy, uninsured people will suffer sickness or injury each year and will receive medical care despite their inability to pay. In anticipation of this uncompensated care, health-care companies raise their prices, and insurers their premiums. In other words, because any uninsured person may need medical care at any moment and because health-care companies must account for that risk, every uninsured person impacts the market price of medical care and medical insurance.

The failure of individuals to acquire insurance has other deleterious effects on the health-care market. Because those without insurance generally lack access to preventative care, they do not receive treatment for conditions—like hypertension and diabetes—that can be successfully and affordably treated if diagnosed early on. See Institute of Medicine, National Academies, Insuring America’s Health: Principles and Recommendations 43 (2004). When sickness finally drives the uninsured to seek care, once treatable conditions have escalated into grave health problems, requiring more costly and extensive intervention. Id., at 43–44. The extra time and resources providers spend serving the uninsured lessens the providers’ ability to care for those who do have insurance. See Kliff, High Uninsured Rates Can Kill You—Even if You Have Coverage, Washington Post (May 7, 2012) (describing a study of California’s health-care market which found that, when hospitals divert time and resources to provide uncompensated care, the quality of care the hospitals deliver to those with insurance drops significantly), available at http://www.washingtonpost.com/blogs/ezra-klein/post/ high-uninsured-rates-can-kill-you-even-if-you-have-coverage/2012/ 05/07/gIQALNHN8T_print.html.

C

States cannot resolve the problem of the uninsured on their own. Like Social Security benefits, a universal health-care system, if adopted by an individual State, would be “bait to the needy and dependent elsewhere, encouraging them to migrate and seek a haven of repose.” Helvering v. Davis, 301 U. S. 619, 644 (1937) . See also Brief for Commonwealth of Massachusetts as Amicus Curiae in No. 11–398, p. 15 (noting that, in 2009, Massachusetts’ emergency rooms served thousands of uninsured, out-of-state residents). An influx of unhealthy individuals into a State with universal health care would result in increased spending on medical services. To cover the increased costs, a State would have to raise taxes, and private health-insurance companies would have to increase premiums. Higher taxes and increased insurance costs would, in turn, encourage businesses and healthy individuals to leave the State.

States that undertake health-care reforms on their own thus risk “placing themselves in a position of economic disadvantage as compared with neighbors or competitors.” Davis, 301 U. S., at 644. See also Brief for Health Care for All, Inc., et al. as Amici Curiae in No. 11–398, p. 4 (“[O]ut-of-state residents continue to seek and receive millions of dollars in uncompensated care in Massachusetts hospitals, limiting the State’s efforts to improve its health care system through the elimination of uncompensated care.”). Facing that risk, individual States are unlikely to take the initiative in addressing the problem of the uninsured, even though solving that problem is in all States’ best interests. Congress’ intervention was needed to overcome this collectiveaction impasse.

D

Aware that a national solution was required, Congress could have taken over the health-insurance market by establishing a tax-and-spend federal program like Social Security. Such a program, commonly referred to as a single-payer system (where the sole payer is the Federal Government), would have left little, if any, room for private enterprise or the States. Instead of going this route, Congress enacted the ACA, a solution that retains a robust role for private insurers and state governments. To make its chosen approach work, however, Congress had to use some new tools, including a requirement that most individuals obtain private health insurance coverage. See 26 U. S. C. §5000A (2006 ed., Supp. IV) (the minimum coverage provision). As explained below, by employing these tools, Congress was able to achieve a practical, altogether reasonable, solution.

A central aim of the ACA is to reduce the number of uninsured U. S. residents. See 42 U. S. C. §18091(2)(C) and (I) (2006 ed., Supp. IV). The minimum coverage provision advances this objective by giving potential recipients of health care a financial incentive to acquire insurance. Per the minimum coverage provision, an individual must either obtain insurance or pay a toll constructed as a tax penalty. See 26 U. S. C. §5000A.

The minimum coverage provision serves a further purpose vital to Congress’ plan to reduce the number of uninsured. Congress knew that encouraging individuals to purchase insurance would not suffice to solve the problem, because most of the uninsured are not uninsured by choice. 1 Of particular concern to Congress were people who, though desperately in need of insurance, often cannot acquire it: persons who suffer from preexisting medical conditions.

Before the ACA’s enactment, private insurance companies took an applicant’s medical history into account when setting insurance rates or deciding whether to insure an individual. Because individuals with preexisting medical conditions cost insurance companies significantly more than those without such conditions, insurers routinely refused to insure these individuals, charged them substantially higher premiums, or offered only limited coverage that did not include the preexisting illness. See Dept. of Health and Human Services, Coverage Denied: How the Current Health Insurance System Leaves Millions Behind 1 (2009) (Over the past three years, 12.6 million nonelderly adults were denied insurance coverage or charged higher premiums due to a preexisting condition.).

To ensure that individuals with medical histories have access to affordable insurance, Congress devised a three-part solution. First, Congress imposed a “guaranteed issue” requirement, which bars insurers from denying coverage to any person on account of that person’s medical condition or history. See 42 U. S. C. §§300gg–1, 300gg–3, 300gg–4(a) (2006 ed., Supp. IV). Second, Congress required insurers to use “community rating” to price their insurance policies. See §300gg. Community rating, in effect, bars insurance companies from charging higher premiums to those with preexisting conditions.

But these two provisions, Congress comprehended, could not work effectively unless individuals were given a powerful incentive to obtain insurance. See Hearings before the House Ways and Means Committee, 111th Cong., 1st Sess., 10, 13 (2009) (statement of Uwe Reinhardt) (“[I]mposition of community-rated premiums and guaranteed issue on a market of competing private health insurers will inexorably drive that market into extinction, unless these two features are coupled with . . . a mandate on individual[s] to be insured.” (emphasis in original)).

In the 1990’s, several States—including New York, New Jersey, Washington, Kentucky, Maine, New Hampshire, and Vermont—enacted guaranteed-issue and community-rating laws without requiring universal acquisition of insurance coverage. The results were disastrous. “All seven states suffered from skyrocketing insurance premium costs, reductions in individuals with coverage, and reductions in insurance products and providers.” Brief for American Association of People with Disabilities et al. as Amici Curiae in No. 11–398, p. 9 (hereinafter AAPD Brief). See also Brief for Governor of Washington Christine Gregoire as Amicus Curiae in No. 11–398, pp. 11–14 (describing the “death spiral” in the insurance market Washington experienced when the State passed a law requiring coverage for preexisting conditions).

Congress comprehended that guaranteed-issue and community-rating laws alone will not work. When insurance companies are required to insure the sick at affordable prices, individuals can wait until they become ill to buy insurance. Pretty soon, those in need of immediate medical care—i.e., those who cost insurers the most—become the insurance companies’ main customers. This “adverse selection” problem leaves insurers with two choices: They can either raise premiums dramatically to cover their ever-increasing costs or they can exit the market. In the seven States that tried guaranteed-issue and community-rating requirements without a minimum coverage provision, that is precisely what insurance companies did. See, e.g., AAPD Brief 10 (“[In Maine,] [m]any insurance providers doubled their premiums in just three years or less.”); id., at 12 (“Like New York, Vermont saw substantial increases in premiums after its . . . insurance reform measures took effect in 1993.”); Hall, An Evaluation of New York’s Reform Law, 25 J. Health Pol. Pol’y & L. 71, 91–92 (2000) (Guaranteed-issue and community-rating laws resulted in a “dramatic exodus of indemnity insurers from New York’s individual [insurance] market.”); Brief for Barry Friedman et al. as Amici Curiae in No. 11–398, p. 17 (“In Kentucky, all but two insurers (one State-run) abandoned the State.”).

Massachusetts, Congress was told, cracked the adverse selection problem. By requiring most residents to obtain insurance, see Mass. Gen. Laws, ch. 111M, §2 (West 2011), the Commonwealth ensured that insurers would not be left with only the sick as customers. As a result, federal lawmakers observed, Massachusetts succeeded where other States had failed. See Brief for Commonwealth of Massachusetts as Amicus Curiae in No. 11–398, p. 3 (noting that the Commonwealth’s reforms reduced the number of uninsured residents to less than 2%, the lowest rate in the Nation, and cut the amount of uncompensated care by a third); 42 U. S. C. §18091(2)(D) (2006 ed., Supp. IV) (noting the success of Massachusetts’ reforms). 2 In coupling the minimum coverage provision with guaranteed-issue and community-rating prescriptions, Congress followed Massachusetts’ lead.

*  *  *

In sum, Congress passed the minimum coverage provision as a key component of the ACA to address an economic and social problem that has plagued the Nation for decades: the large number of U. S. residents who are unable or unwilling to obtain health insurance. Whatever one thinks of the policy decision Congress made, it was Congress’ prerogative to make it. Reviewed with appropriate deference, the minimum coverage provision, allied to the guaranteed-issue and community-rating prescriptions, should survive measurement under the Commerce and Necessary and Proper Clauses.

II A

The Commerce Clause, it is widely acknowledged, “was the Framers’ response to the central problem that gave rise to the Constitution itself.” EEOC v. Wyoming, 460 U. S. 226 , n. 1 (1983) (Stevens, J., concurring) (citing sources). Under the Articles of Confederation, the Constitution’s precursor, the regulation of commerce was left to the States. This scheme proved unworkable, because the individual States, understandably focused on their own economic interests, often failed to take actions critical to the success of the Nation as a whole. See Vices of the Political System of the United States, in James Madison: Writings 69, 71, ¶5 (J. Rakove ed. 1999) (As a result of the “want of concert in matters where common interest requires it,” the “national dignity, interest, and revenue [have] suffered.”). 3

What was needed was a “national Government . . . armed with a positive & compleat authority in all cases where uniform measures are necessary.” See Letter from James Madison to Edmund Randolph (Apr. 8, 1787), in 9 Papers of James Madison 368, 370 (R. Rutland ed. 1975). See also Letter from George Washington to James Madison (Nov. 30, 1785), in 8 id., at 428, 429 (“We are either a United people, or we are not. If the former, let us, in all matters of general concern act as a nation, which ha[s] national objects to promote, and a national character to support.”). The Framers’ solution was the Commerce Clause, which, as they perceived it, granted Congress the authority to enact economic legislation “in all Cases for the general Interests of the Union, and also in those Cases to which the States are separately incompetent.” 2 Records of the Federal Convention of 1787, pp. 131–132, ¶8 (M. Farrand rev. 1966). See also North American Co. v. SEC, 327 U. S. 686, 705 (1946) (“[The commerce power] is an affirmative power commensurate with the national needs.”).

The Framers understood that the “general Interests of the Union” would change over time, in ways they could not anticipate. Accordingly, they recognized that the Constitution was of necessity a “great outlin[e],” not a detailed blueprint, see McCulloch v. Maryland, 4 Wheat. 316, 407 (1819), and that its provisions included broad concepts, to be “explained by the context or by the facts of the case,” Letter from James Madison to N. P. Trist (Dec. 1831), in 9 Writings of James Madison 471, 475 (G. Hunt ed. 1910). “Nothing . . . can be more fallacious,” Alexander Hamilton emphasized, “than to infer the extent of any power, proper to be lodged in the national government, from . . . its immediate necessities. There ought to be a capacity to provide for future contingencies[,] as they may happen; and as these are illimitable in their nature, it is impossible safely to limit that capacity.” The Federalist No. 34, pp. 205, 206 (John Harvard Library ed. 2009). See also McCulloch, 4 Wheat., at 415 (The Necessary and Proper Clause is lodged “in a constitution[,] intended to endure for ages to come, and consequently, to be adapted to the various crises of human affairs.”).

B

Consistent with the Framers’ intent, we have repeatedly emphasized that Congress’ authority under the Commerce Clause is dependent upon “practical” considerations, including “actual experience.” Jones & Laughlin Steel Corp., 301 U. S., at 41–42; see Wickard v. Filburn, 317 U. S. 111, 122 (1942) ; United States v. Lopez, 514 U. S. 549, 573 (1995) (Kennedy, J., concurring) (emphasizing “the Court’s definitive commitment to the practical conception of the commerce power”). See also North American Co., 327 U. S., at 705 (“Commerce itself is an intensely practical matter. To deal with it effectively, Congress must be able to act in terms of economic and financial realities.” (citation omitted)). We afford Congress the leeway “to undertake to solve national problems directly and realistically.” American Power & Light Co. v. SEC, 329 U. S. 90, 103 (1946) .

Until today, this Court’s pragmatic approach to judging whether Congress validly exercised its commerce power was guided by two familiar principles. First, Congress has the power to regulate economic activities “that substantially affect interstate commerce.” Gonzales v. Raich, 545 U. S. 1, 17 (2005) . This capacious power extends even to local activities that, viewed in the aggregate, have a substantial impact on interstate commerce. See ibid. See also Wickard, 317 U. S., at 125 (“[E]ven if appellee’s activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce.” (emphasis added)); Jones & Laughlin Steel Corp., 301 U. S., at 37.

Second, we owe a large measure of respect to Congress when it frames and enacts economic and social legislation. See Raich, 545 U. S., at 17. See also Pension Benefit Guaranty Corporation v. R. A. Gray & Co., 467 U. S. 717, 729 (1984) (“[S]trong deference [is] accorded legislation in the field of national economic policy.”); Hodel v. Indiana, 452 U. S. 314, 326 (1981) (“This [C]ourt will certainly not substitute its judgment for that of Congress unless the relation of the subject to interstate commerce and its effect upon it are clearly non-existent.” (internal quotation marks omitted)). When appraising such legislation, we ask only (1) whether Congress had a “rational basis” for concluding that the regulated activity substantially affects interstate commerce, and (2) whether there is a “reasonable connection between the regulatory means selected and the asserted ends.” Id., at 323–324. See also Raich, 545 U. S., at 22; Lopez, 514 U. S., at 557; Hodel v. Virginia Surface Mining & Reclamation Assn., Inc., 452 U. S. 264, 277 (1981) ; Katzenbach v. McClung, 379 U. S. 294, 303 (1964) ; Heart of Atlanta Motel, Inc. v. United States, 379 U. S. 241, 258 (1964) ; United States v. Carolene Products Co., 304 U. S. 144 –153 (1938). In answering these questions, we presume the statute under review is constitutional and may strike it down only on a “plain showing” that Congress acted irrationally. United States v. Morrison, 529 U. S. 598, 607 (2000) .

C

Straightforward application of these principles would require the Court to hold that the minimum coverage provision is proper Commerce Clause legislation. Beyond dispute, Congress had a rational basis for concluding that the uninsured, as a class, substantially affect interstate commerce. Those without insurance consume billions of dollars of health-care products and services each year. See supra, at 5. Those goods are produced, sold, and delivered largely by national and regional companies who routinely transact business across state lines. The uninsured also cross state lines to receive care. Some have medical emergencies while away from home. Others, when sick, go to a neighboring State that provides better care for those who have not prepaid for care. See supra, at 7–8.

Not only do those without insurance consume a large amount of health care each year; critically, as earlier explained, their inability to pay for a significant portion of that consumption drives up market prices, foists costs on other consumers, and reduces market efficiency and stability. See supra, at 5–7. Given these far-reaching effects on interstate commerce, the decision to forgo insurance is hardly inconsequential or equivalent to “doing nothing,” ante, at 20; it is, instead, an economic decision Congress has the authority to address under the Commerce Clause. See supra, at 14–16. See also Wickard, 317 U. S., at 128 (“It is well established by decisions of this Court that the power to regulate commerce includes the power to regulate the prices at which commodities in that commerce are dealt in and practices affecting such prices.” (emphasis added)).

The minimum coverage provision, furthermore, bears a “reasonable connection” to Congress’ goal of protecting the health-care market from the disruption caused by individuals who fail to obtain insurance. By requiring those who do not carry insurance to pay a toll, the minimum coverage provision gives individuals a strong incentive to insure. This incentive, Congress had good reason to believe, would reduce the number of uninsured and, correspondingly, mitigate the adverse impact the uninsured have on the national health-care market.

Congress also acted reasonably in requiring uninsured individuals, whether sick or healthy, either to obtain insurance or to pay the specified penalty. As earlier observed, because every person is at risk of needing care at any moment, all those who lack insurance, regardless of their current health status, adversely affect the price of health care and health insurance. See supra, at 6–7. Moreover, an insurance-purchase requirement limited to those in need of immediate care simply could not work. Insurance companies would either charge these individuals prohibitively expensive premiums, or, if community-rating regulations were in place, close up shop. See supra, at 9–11. See also Brief for State of Maryland and 10 Other States et al. as Amici Curiae in No. 11–398, p. 28 (hereinafter Maryland Brief) (“No insurance regime can survive if people can opt out when the risk insured against is only a risk, but opt in when the risk materializes.”).

“[W]here we find that the legislators . . . have a rational basis for finding a chosen regulatory scheme necessary to the protection of commerce, our investigation is at an end.” Katzenbach, 379 U. S., at 303–304. Congress’ enactment of the minimum coverage provision, which addresses a specific interstate problem in a practical, experience-informed manner, easily meets this criterion.

D

Rather than evaluating the constitutionality of the minimum coverage provision in the manner established by our precedents, The Chief Justice relies on a newly minted constitutional doctrine. The commerce power does not, The Chief Justice announces, permit Congress to “compe[l] individuals to become active in commerce by purchasing a product.” Ante, at 20 (emphasis deleted).

1 a

The Chief Justice’s novel constraint on Congress’ commerce power gains no force from our precedent and for that reason alone warrants disapprobation. See infra, at 23–27. But even assuming, for the moment, that Congress lacks authority under the Commerce Clause to “compel individuals not engaged in commerce to purchase an unwanted product,” ante, at 18, such a limitation would be inapplicable here. Everyone will, at some point, consume health-care products and services. See supra, at 3. Thus, if The Chief Justice is correct that an insurance-purchase requirement can be applied only to those who “actively” consume health care, the minimum coverage provision fits the bill.

The Chief Justice does not dispute that all U. S. residents participate in the market for health services over the course of their lives. See ante, at 16 (“Everyone will eventually need health care at a time and to an extent they cannot predict.”). But, The Chief Justice insists, the uninsured cannot be considered active in the market for health care, because “[t]he proximity and degree of connection between the [uninsured today] and [their] subsequent commercial activity is too lacking.” Ante, at 27.

This argument has multiple flaws. First, more than 60% of those without insurance visit a hospital or doctor’s office each year. See supra, at 5. Nearly 90% will within five years. 4 An uninsured’s consumption of health care is thus quite proximate: It is virtually certain to occur in the next five years and more likely than not to occur this year.

Equally evident, Congress has no way of separating those uninsured individuals who will need emergency medical care today (surely their consumption of medical care is sufficiently imminent) from those who will not need medical services for years to come. No one knows when an emergency will occur, yet emergencies involving the uninsured arise daily. To capture individuals who unexpectedly will obtain medical care in the very near future, then, Congress needed to include individuals who will not go to a doctor anytime soon. Congress, our decisions instruct, has authority to cast its net that wide. See Perez v. United States, 402 U. S. 146, 154 (1971) (“[W]hen it is necessary in order to prevent an evil to make the law embrace more than the precise thing to be prevented it may do so.” (internal quotation marks omitted)). 5

Second, it is Congress’ role, not the Court’s, to delineate the boundaries of the market the Legislature seeks to regulate. The Chief Justice defines the health-care market as including only those transactions that will occur either in the next instant or within some (unspecified) proximity to the next instant. But Congress could reasonably have viewed the market from a long-term perspective, encompassing all transactions virtually certain to occur over the next decade, see supra, at 19, not just those occurring here and now.

Third, contrary to The Chief Justice’s contention, our precedent does indeed support “[t]he proposition that Congress may dictate the conduct of an individual today because of prophesied future activity.” Ante, at 26. In Wickard, the Court upheld a penalty the Federal Government imposed on a farmer who grew more wheat than he was permitted to grow under the Agricultural Adjustment Act of 1938 (AAA). 317 U. S., at 114–115. He could not be penalized, the farmer argued, as he was growing the wheat for home consumption, not for sale on the open market. Id., at 119. The Court rejected this argument. Id., at 127–129. Wheat intended for home consumption, the Court noted, “overhangs the market, and if induced by rising prices, tends to flow into the market and check price increases [intended by the AAA].” Id., at 128.

Similar reasoning supported the Court’s judgment in Raich, which upheld Congress’ authority to regulate marijuana grown for personal use. 545 U. S., at 19. Homegrown marijuana substantially affects the interstate market for marijuana, we observed, for “the high demand in the interstate market will [likely] draw such marijuana into that market.” Ibid.

Our decisions thus acknowledge Congress’ authority, under the Commerce Clause, to direct the conduct of an individual today (the farmer in Wickard, stopped from growing excess wheat; the plaintiff in Raich, ordered to cease cultivating marijuana) because of a prophesied future transaction (the eventual sale of that wheat or marijuana in the interstate market). Congress’ actions are even more rational in this case, where the future activity (the consumption of medical care) is certain to occur, the sole uncertainty being the time the activity will take place.

Maintaining that the uninsured are not active in the health-care market, The Chief Justice draws an analogy to the car market. An individual “is not ‘active in the car market,’ ” The Chief Justice observes, simply because he or she may someday buy a car. Ante, at 25. The analogy is inapt. The inevitable yet unpredictable need for medical care and the guarantee that emergency care will be provided when required are conditions nonexistent in other markets. That is so of the market for cars, and of the market for broccoli as well. Although an individual might buy a car or a crown of broccoli one day, there is no certainty she will ever do so. And if she eventually wants a car or has a craving for broccoli, she will be obliged to pay at the counter before receiving the vehicle or nourishment. She will get no free ride or food, at the expense of another consumer forced to pay an inflated price. See Thomas More Law Center v. Obama, 651 F. 3d 529, 565 (CA6 2011) (Sutton, J., concurring in part) (“Regulating how citizens pay for what they already receive (health care), never quite know when they will need, and in the case of severe illnesses or emergencies generally will not be able to afford, has few (if any) parallels in modern life.”). Upholding the minimum coverage provision on the ground that all are participants or will be participants in the health-care market would therefore carry no implication that Congress may justify under the Commerce Clause a mandate to buy other products and services.

Nor is it accurate to say that the minimum coverage provision “compel[s] individuals . . . to purchase an unwanted product,” ante, at 18, or “suite of products,” post, at 11, n. 2 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ.). If unwanted today, medical service secured by insurance may be desperately needed tomorrow. Virtually everyone, I reiterate, consumes health care at some point in his or her life. See supra, at 3. Health insurance is a means of paying for this care, nothing more. In requiring individuals to obtain insurance, Congress is therefore not mandating the purchase of a discrete, unwanted product. Rather, Congress is merely defining the terms on which individuals pay for an interstate good they consume: Persons subject to the mandate must now pay for medical care in advance (instead of at the point of service) and through insurance (instead of out of pocket). Establishing payment terms for goods in or affecting interstate commerce is quintessential economic regulation well within Congress’ domain. See, e.g., United States v. Wrightwood Dairy Co., 315 U. S. 110, 118 (1942) . Cf. post, at 13 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ.) (recognizing that “the Federal Government can prescribe [a commodity’s] quality . . . and even [its price]”).

The Chief Justice also calls the minimum coverage provision an illegitimate effort to make young, healthy individuals subsidize insurance premiums paid by the less hale and hardy. See ante, at 17, 25–26. This complaint, too, is spurious. Under the current health-care system, healthy persons who lack insurance receive a benefit for which they do not pay: They are assured that, if they need it, emergency medical care will be available, although they cannot afford it. See supra, at 5–6. Those who have insurance bear the cost of this guarantee. See ibid. By requiring the healthy uninsured to obtain insurance or pay a penalty structured as a tax, the minimum coverage provision ends the free ride these individuals currently enjoy.

In the fullness of time, moreover, today’s young and healthy will become society’s old and infirm. Viewed over a lifespan, the costs and benefits even out: The young who pay more than their fair share currently will pay less than their fair share when they become senior citizens. And even if, as undoubtedly will be the case, some individuals, over their lifespans, will pay more for health insurance than they receive in health services, they have little to complain about, for that is how insurance works. Every insured person receives protection against a catastrophic loss, even though only a subset of the covered class will ultimately need that protection.

b

In any event, The Chief Justice’s limitation of the commerce power to the regulation of those actively engaged in commerce finds no home in the text of the Constitution or our decisions. Article I, §8, of the Constitution grants Congress the power “[t]o regulate Commerce . . . among the several States.” Nothing in this language implies that Congress’ commerce power is limited to regulating those actively engaged in commercial transactions. Indeed, as the D. C. Circuit observed, “[a]t the time the Constitution was [framed], to ‘regulate’ meant,” among other things, “to require action.” See Seven-Sky v. Holder, 661 F. 3d 1, 16 (2011).

Arguing to the contrary, The Chief Justice notes that “the Constitution gives Congress the power to ‘coin Money,’ in addition to the power to ‘regulate the Value thereof,’ ” and similarly “gives Congress the power to ‘raise and support Armies’ and to ‘provide and maintain a Navy,’ in addition to the power to ‘make Rules for the Government and Regulation of the land and naval Forces.’ ” Ante, at 18–19 (citing Art. I, §8, cls. 5, 12–14). In separating the power to regulate from the power to bring the subject of the regulation into existence, The Chief Justice asserts, “[t]he language of the Constitution reflects the natural understanding that the power to regulate assumes there is already something to be regulated.” Ante, at 19.

This argument is difficult to fathom. Requiring individuals to obtain insurance unquestionably regulates the interstate health-insurance and health-care markets, both of them in existence well before the enactment of the ACA. See Wickard, 317 U. S., at 128 (“The stimulation of commerce is a use of the regulatory function quite as definitely as prohibitions or restrictions thereon.”). Thus, the “something to be regulated” was surely there when Congress created the minimum coverage provision. 6

Nor does our case law toe the activity versus inactivity line. In Wickard, for example, we upheld the penalty imposed on a farmer who grew too much wheat, even though the regulation had the effect of compelling farmers to purchase wheat in the open market. Id., at 127–129. “[F]orcing some farmers into the market to buy what they could provide for themselves” was, the Court held, a valid means of regulating commerce. Id., at 128–129. In another context, this Court similarly upheld Congress’ authority under the commerce power to compel an “inactive” landholder to submit to an unwanted sale. See Monongahela Nav. Co. v. United States, 148 U. S. 312 –337 (1893) (“[U]pon the [great] power to regulate commerce[,]” Congress has the authority to mandate the sale of real property to the Government, where the sale is essential to the improvement of a navigable waterway (emphasis added)); Cherokee Nation v. Southern Kansas R. Co., 135 U. S. 641 –659 (1890) (similar reliance on the commerce power regarding mandated sale of private property for railroad construction).

In concluding that the Commerce Clause does not permit Congress to regulate commercial “inactivity,” and therefore does not allow Congress to adopt the practical solution it devised for the health-care problem, The Chief Justice views the Clause as a “technical legal conception,” precisely what our case law tells us not to do. Wickard, 317 U. S., at 122 (internal quotation marks omitted). See also supra, at 14–16. This Court’s former endeavors to impose categorical limits on the commerce power have not fared well. In several pre-New Deal cases, the Court attempted to cabin Congress’ Commerce Clause authority by distinguishing “commerce” from activity once conceived to be noncommercial, notably, “production,” “mining,” and “manufacturing.” See, e.g., United States v. E. C. Knight Co., 156 U. S. 1, 12 (1895) (“Commerce succeeds to manufacture, and is not a part of it.”); Carter v. Carter Coal Co., 298 U. S. 238, 304 (1936) (“Mining brings the subject matter of commerce into existence. Commerce disposes of it.”). The Court also sought to distinguish activities having a “direct” effect on interstate commerce, and for that reason, subject to federal regulation, from those having only an “indirect” effect, and therefore not amenable to federal control. See, e.g., A. L. A. Schechter Poultry Corp. v. United States, 295 U. S. 495, 548 (1935) (“[T]he distinction between direct and indirect effects of intrastate transactions upon interstate commerce must be recognized as a fundamental one.”).

These line-drawing exercises were untenable, and the Court long ago abandoned them. “[Q]uestions of the power of Congress [under the Commerce Clause],” we held in Wickard, “are not to be decided by reference to any formula which would give controlling force to nomenclature such as ‘production’ and ‘indirect’ and foreclose consideration of the actual effects of the activity in question upon interstate commerce.” 317 U. S., at 120. See also Morrison, 529 U. S., at 641–644 (Souter, J., dissenting) (recounting the Court’s “nearly disastrous experiment” with formalistic limits on Congress’ commerce power). Failing to learn from this history, The Chief Justice plows ahead with his formalistic distinction between those who are “active in commerce,” ante, at 20, and those who are not.

It is not hard to show the difficulty courts (and Congress) would encounter in distinguishing statutes that regulate “activity” from those that regulate “inactivity.” As Judge Easterbrook noted, “it is possible to restate most actions as corresponding inactions with the same effect.” Archie v. Racine, 847 F. 2d 1211, 1213 (CA7 1988) (en banc). Take this case as an example. An individual who opts not to purchase insurance from a private insurer can be seen as actively selecting another form of insurance: self-insurance. See Thomas More Law Center, 651 F. 3d, at 561 (Sutton, J., concurring in part) (“No one is inactive when deciding how to pay for health care, as self-insurance and private insurance are two forms of action for addressing the same risk.”). The minimum coverage provision could therefore be described as regulating activists in the self-insurance market. 7 Wickard is another example. Did the statute there at issue target activity (the growing of too much wheat) or inactivity (the farmer’s failure to purchase wheat in the marketplace)? If anything, the Court’s analysis suggested the latter. See 317 U. S., at 127–129.

At bottom, The Chief Justice’s and the joint dissenters’ “view that an individual cannot be subject to Commerce Clause regulation absent voluntary, affirmative acts that enter him or her into, or affect, the interstate market expresses a concern for individual liberty that [is] more redolent of Due Process Clause arguments.” Seven-Sky, 661 F. 3d, at 19. See also Troxel v. Granville, 530 U. S. 57, 65 (2000) (plurality opinion) (“The [Due Process] Clause also includes a substantive component that provides heightened protection against government interference with certain fundamental rights and liberty interests.” (internal quotation marks omitted)). Plaintiffs have abandoned any argument pinned to substantive due process, however, see 648 F. 3d 1235, 1291, n. 93 (CA11 2011), and now concede that the provisions here at issue do not offend the Due Process Clause. 8

2

Underlying The Chief Justice’s view that the Commerce Clause must be confined to the regulation of active participants in a commercial market is a fear that the commerce power would otherwise know no limits. See, e.g., ante, at 23 (Allowing Congress to compel an individual not engaged in commerce to purchase a product would “permi[t] Congress to reach beyond the natural extent of its authority, everywhere extending the sphere of its activity, and drawing all power into its impetuous vortex.” (internal quotation marks omitted)). The joint dissenters express a similar apprehension. See post, at 8 (If the minimum coverage provision is upheld under the commerce power then “the Commerce Clause becomes a font of unlimited power, . . . the hideous monster whose devouring jaws . . . spare neither sex nor age, nor high nor low, nor sacred nor profane.” (internal quotation marks omitted)). This concern is unfounded.

First, The Chief Justice could certainly uphold the individual mandate without giving Congress carte blanche to enact any and all purchase mandates. As several times noted, the unique attributes of the health-care market render everyone active in that market and give rise to a significant free-riding problem that does not occur in other markets. See supra, at 3–7, 16–18, 21.

Nor would the commerce power be unbridled, absent The Chief Justice’s “activity” limitation. Congress would remain unable to regulate noneconomic conduct that has only an attenuated effect on interstate commerce and is traditionally left to state law. See Lopez, 514 U. S., at 567; Morrison, 529 U. S., at 617–619. In Lopez, for example, the Court held that the Federal Government lacked power, under the Commerce Clause, to criminalize the possession of a gun in a local school zone. Possessing a gun near a school, the Court reasoned, “is in no sense an economic activity that might, through repetition elsewhere, substantially affect any sort of interstate commerce.” 514 U. S., at 567; ibid. (noting that the Court would have “to pile inference upon inference” to conclude that gun possession has a substantial effect on commerce). Relying on similar logic, the Court concluded in Morrison that Congress could not regulate gender-motivated violence, which the Court deemed to have too “attenuated [an] effect upon interstate commerce.” 529 U. S., at 615.

An individual’s decision to self-insure, I have explained, is an economic act with the requisite connection to interstate commerce. See supra, at 16–17. Other choices individuals make are unlikely to fit the same or similar description. As an example of the type of regulation he fears, The Chief Justice cites a Government mandate to purchase green vegetables. Ante, at 22–23. One could call this concern “the broccoli horrible.” Congress, The Chief Justice posits, might adopt such a mandate, reasoning that an individual’s failure to eat a healthy diet, like the failure to purchase health insurance, imposes costs on others. See ibid.

Consider the chain of inferences the Court would have to accept to conclude that a vegetable-purchase mandate was likely to have a substantial effect on the health-care costs borne by lithe Americans. The Court would have to believe that individuals forced to buy vegetables would then eat them (instead of throwing or giving them away), would prepare the vegetables in a healthy way (steamed or raw, not deep-fried), would cut back on unhealthy foods, and would not allow other factors (such as lack of exercise or little sleep) to trump the improved diet. 9 Such “pil[ing of] inference upon inference” is just what the Court refused to do in Lopez and Morrison.

Other provisions of the Constitution also check congressional overreaching. A mandate to purchase a particular product would be unconstitutional if, for example, the edict impermissibly abridged the freedom of speech, interfered with the free exercise of religion, or infringed on a liberty interest protected by the Due Process Clause.

Supplementing these legal restraints is a formidable check on congressional power: the democratic process. See Raich, 545 U. S., at 33; Wickard, 317 U. S., at 120 (repeating Chief Justice Marshall’s “warning that effective restraints on [the commerce power’s] exercise must proceed from political rather than judicial processes” (citing Gibbons v. Ogden, 9 Wheat. 1, 197 (1824)). As the controversy surrounding the passage of the Affordable Care Act attests, purchase mandates are likely to engender political resistance. This prospect is borne out by the behavior of state legislators. Despite their possession of unquestioned authority to impose mandates, state governments have rarely done so. See Hall, Commerce Clause Challenges to Health Care Reform, 159 U. Pa. L. Rev. 1825, 1838 (2011).

When contemplated in its extreme, almost any power looks dangerous. The commerce power, hypothetically, would enable Congress to prohibit the purchase and home production of all meat, fish, and dairy goods, effectively compelling Americans to eat only vegetables. Cf. Raich, 545 U. S., at 9; Wickard, 317 U. S., at 127–129. Yet no one would offer the “hypothetical and unreal possibilit[y],” Pullman Co. v. Knott, 235 U. S. 23, 26 (1914) , of a vegetarian state as a credible reason to deny Congress the authority ever to ban the possession and sale of goods. The Chief Justice accepts just such specious logic when he cites the broccoli horrible as a reason to deny Congress the power to pass the individual mandate. Cf. R. Bork, The Tempting of America 169 (1990) (“Judges and lawyers live on the slippery slope of analogies; they are not supposed to ski it to the bottom.”). But see, e.g., post, at 3 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ.) (asserting, outlandishly, that if the minimum coverage provision is sustained, then Congress could make “breathing in and out the basis for federal prescription”).

3

To bolster his argument that the minimum coverage provision is not valid Commerce Clause legislation, The Chief Justice emphasizes the provision’s novelty. See ante, at 18 (asserting that “sometimes the most telling indication of [a] severe constitutional problem . . . is the lack of historical precedent for Congress’s action” (internal quotation marks omitted)). While an insurance-purchase mandate may be novel, The Chief Justice’s argument certainly is not. “[I]n almost every instance of the exercise of the [commerce] power differences are asserted from previous exercises of it and made a ground of attack.” Hoke v. United States, 227 U. S. 308, 320 (1913) . See, e.g., Brief for Petitioner in Perez v. United States, O. T. 1970, No. 600, p. 5 (“unprecedented exercise of power”); Supplemental Brief for Appellees in Katzenbach v. McClung, O. T. 1964, No. 543, p. 40 (“novel assertion of federal power”); Brief for Appellee in Wickard v. Filburn, O. T. 1941, No. 59, p. 6 (“complete departure”). For decades, the Court has declined to override legislation because of its novelty, and for good reason. As our national economy grows and changes, we have recognized, Congress must adapt to the changing “economic and financial realities.” See supra, at 14–15. Hindering Congress’ ability to do so is shortsighted; if history is any guide, today’s constriction of the Commerce Clause will not endure. See supra, at 25–26.

III A

For the reasons explained above, the minimum coverage provision is valid Commerce Clause legislation. See supra, Part II. When viewed as a component of the entire ACA, the provision’s constitutionality becomes even plainer.

The Necessary and Proper Clause “empowers Congress to enact laws in effectuation of its [commerce] powe[r] that are not within its authority to enact in isolation.” Raich, 545 U. S., at 39 (Scalia, J., concurring in judgment). Hence, “[a] complex regulatory program . . . can survive a Commerce Clause challenge without a showing that every single facet of the program is independently and directly related to a valid congressional goal.” Indiana, 452 U. S., at 329, n. 17. “It is enough that the challenged provisions are an integral part of the regulatory program and that the regulatory scheme when considered as a whole satisfies this test.” Ibid. (collecting cases). See also Raich, 545 U. S., at 24–25 (A challenged statutory provision fits within Congress’ commerce authority if it is an “essential par[t] of a larger regulation of economic activity,” such that, in the absence of the provision, “the regulatory scheme could be undercut.” (quoting Lopez, 514 U. S., at 561)); Raich, 545 U. S., at 37 (Scalia, J., concurring in judgment) (“Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce. The relevant question is simply whether the means chosen are ‘reasonably adapted’ to the attainment of a legitimate end under the commerce power.” (citation omitted)).

Recall that one of Congress’ goals in enacting the Affordable Care Act was to eliminate the insurance industry’s practice of charging higher prices or denying coverage to individuals with preexisting medical conditions. See supra, at 9–10. The commerce power allows Congress to ban this practice, a point no one disputes. See United States v. South-Eastern Underwriters Assn., 322 U. S. 533 –553 (1944) (Congress may regulate “the methods by which interstate insurance companies do business.”).

Congress knew, however, that simply barring insurance companies from relying on an applicant’s medical history would not work in practice. Without the individual mandate, Congress learned, guaranteed-issue and community-rating requirements would trigger an adverse-selection death-spiral in the health-insurance market: Insurance premiums would skyrocket, the number of uninsured would increase, and insurance companies would exit the market. See supra, at 10–11. When complemented by an insurance mandate, on the other hand, guaranteed issue and community rating would work as intended, increasing access to insurance and reducing uncompensated care. See supra, at 11–12. The minimum coverage provision is thus an “essential par[t] of a larger regulation of economic activity”; without the provision, “the regulatory scheme [w]ould be undercut.” Raich, 545 U. S., at 24–25 (internal quotation marks omitted). Put differently, the minimum coverage provision, together with the guaranteed-issue and community-rating requirements, is “ ‘reasonably adapted’ to the attainment of a legitimate end under the commerce power”: the elimination of pricing and sales practices that take an applicant’s medical history into account. See id., at 37 (Scalia, J., concurring in judgment).

B

Asserting that the Necessary and Proper Clause does not authorize the minimum coverage provision, The Chief Justice focuses on the word “proper.” A mandate to purchase health insurance is not “proper” legislation, The Chief Justice urges, because the command “undermine[s] the structure of government established by the Constitution.” Ante, at 28. If long on rhetoric, The Chief Justice’s argument is short on substance.

The Chief Justice cites only two cases in which this Court concluded that a federal statute impermissibly transgressed the Constitution’s boundary between state and federal authority: Printz v. United States, 521 U. S. 898 (1997) , and New York v. United States, 505 U. S. 144 (1992) . See ante, at 29. The statutes at issue in both cases, however, compelled state officials to act on the Federal Government’s behalf. 521 U. S., at 925–933 (holding unconstitutional a statute obligating state law enforcement officers to implement a federal gun-control law); New York, 505 U. S., at 176–177 (striking down a statute requiring state legislators to pass regulations pursuant to Congress’ instructions). “[Federal] laws conscripting state officers,” the Court reasoned, “violate state sovereignty and are thus not in accord with the Constitution.” Printz, 521 U. S., at 925, 935; New York, 505 U. S., at 176.

The minimum coverage provision, in contrast, acts “directly upon individuals, without employing the States as intermediaries.” New York, 505 U. S., at 164. The provision is thus entirely consistent with the Constitution’s design. See Printz, 521 U. S., at 920 (“[T]he Framers explicitly chose a Constitution that confers upon Congress the power to regulate individuals, not States.” (internal quotation marks omitted)).

Lacking case law support for his holding, The Chief Justice nevertheless declares the minimum coverage provision not “proper” because it is less “narrow in scope” than other laws this Court has upheld under the Necessary and Proper Clause. Ante, at 29 (citing United States v. Comstock, 560 U. S. ___ (2010); Sabri v. United States, 541 U. S. 600 (2004) ; Jinks v. Richland County, 538 U. S. 456 (2003) ). The Chief Justice’s reliance on cases in which this Court has affirmed Congress’ “broad authority to enact federal legislation” under the Necessary and Proper Clause, Comstock, 560 U. S., at ___ (slip op., at 5), is underwhelming.

Nor does The Chief Justice pause to explain why the power to direct either the purchase of health insurance or, alternatively, the payment of a penalty collectible as a tax is more far-reaching than other implied powers this Court has found meet under the Necessary and Proper Clause. These powers include the power to enact criminal laws, see, e.g., United States v. Fox, 95 U. S. 670, 672 (1878) ; the power to imprison, including civil imprisonment, see, e.g., Comstock, 560 U. S., at ___ (slip op., at 1); and the power to create a national bank, see McCulloch, 4 Wheat., at 425. See also Jinks, 538 U. S., at 463 (affirming Congress’ power to alter the way a state law is applied in state court, where the alteration “promotes fair and efficient operation of the federal courts”). 10

In failing to explain why the individual mandate threatens our constitutional order, The Chief Justice disserves future courts. How is a judge to decide, when ruling on the constitutionality of a federal statute, whether Congress employed an “independent power,” ante, at 28, or merely a “derivative” one, ante, at 29. Whether the power used is “substantive,” ante, at 30, or just “incidental,” ante, at 29? The instruction The Chief Justice, in effect, provides lower courts: You will know it when you see it.

It is more than exaggeration to suggest that the minimum coverage provision improperly intrudes on “essential attributes of state sovereignty.” Ibid. (internal quotation marks omitted). First, the Affordable Care Act does not operate “in [an] are[a] such as criminal law enforcement or education where States historically have been sovereign.” Lopez, 514 U. S., at 564. As evidenced by Medicare, Medicaid, the Employee Retirement Income Security Act of 1974 (ERISA), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Federal Government plays a lead role in the health-care sector, both as a direct payer and as a regulator.

Second, and perhaps most important, the minimum coverage provision, along with other provisions of the ACA, addresses the very sort of interstate problem that made the commerce power essential in our federal system. See supra, at 12–14. The crisis created by the large number of U. S. residents who lack health insurance is one of national dimension that States are “separately incompetent” to handle. See supra, at 7–8, 13. See also Maryland Brief 15–26 (describing “the impediments to effective state policymaking that flow from the interconnectedness of each state’s healthcare economy” and emphasizing that “state-level reforms cannot fully address the problems associated with uncompensated care”). Far from trampling on States’ sovereignty, the ACA attempts a federal solution for the very reason that the States, acting separately, cannot meet the need. Notably, the ACA serves the general welfare of the people of the United States while retaining a prominent role for the States. See id., at 31–36 (explaining and illustrating how the ACA affords States wide latitude in implementing key elements of the Act’s reforms). 11

IV

In the early 20th century, this Court regularly struck down economic regulation enacted by the peoples’ representatives in both the States and the Federal Government. See, e.g., Carter Coal Co., 298 U. S., at 303–304, 309–310; Dagenhart, 247 U. S., at 276–277; Lochner v. New York, 198 U. S. 45, 64 (1905) . The Chief Justice’s Commerce Clause opinion, and even more so the joint dissenters’ reasoning, see post, at 4–16, bear a disquieting resemblance to those long-overruled decisions.

Ultimately, the Court upholds the individual mandate as a proper exercise of Congress’ power to tax and spend “for the . . . general Welfare of the United States.” Art. I, §8, cl. 1; ante, at 43–44. I concur in that determination, which makes The Chief Justice’s Commerce Clause essay all the more puzzling. Why should The Chief Justice strive so mightily to hem in Congress’ capacity to meet the new problems arising constantly in our ever-developing modern economy? I find no satisfying response to that question in his opinion. 12

V

Through Medicaid, Congress has offered the States an opportunity to furnish health care to the poor with the aid of federal financing. To receive federal Medicaid funds, States must provide health benefits to specified categories of needy persons, including pregnant women, children, parents, and adults with disabilities. Guaranteed eligibility varies by category: for some it is tied to the federal poverty level (incomes up to 100% or 133%); for others it depends on criteria such as eligibility for designated state or federal assistance programs. The ACA enlarges the population of needy people States must cover to include adults under age 65 with incomes up to 133% of the federal poverty level. The spending power conferred by the Constitution, the Court has never doubted, permits Congress to define the contours of programs financed with federal funds. See, e.g., Pennhurst State School and Hospital v. Halderman, 451 U. S. 1, 17 (1981) . And to expand coverage, Congress could have recalled the existing legislation, and replaced it with a new law making Medicaid as embracive of the poor as Congress chose.

The question posed by the 2010 Medicaid expansion, then, is essentially this: To cover a notably larger population, must Congress take the repeal/reenact route, or may it achieve the same result by amending existing law? The answer should be that Congress may expand by amendment the classes of needy persons entitled to Medicaid benefits. A ritualistic requirement that Congress repeal and reenact spending legislation in order to enlarge the population served by a federally funded program would advance no constitutional principle and would scarcely serve the interests of federalism. To the contrary, such a requirement would rigidify Congress’ efforts to empower States by partnering with them in the implementation of federal programs.

Medicaid is a prototypical example of federal-state cooperation in serving the Nation’s general welfare. Rather than authorizing a federal agency to administer a uniform national health-care system for the poor, Congress offered States the opportunity to tailor Medicaid grants to their particular needs, so long as they remain within bounds set by federal law. In shaping Medicaid, Congress did not endeavor to fix permanently the terms participating states must meet; instead, Congress reserved the “right to alter, amend, or repeal” any provision of the Medicaid Act. 42 U. S. C. §1304. States, for their part, agreed to amend their own Medicaid plans consistent with changes from time to time made in the federal law. See 42 CFR §430.12(c)(i) (2011). And from 1965 to the present, States have regularly conformed to Congress’ alterations of the Medicaid Act.

The Chief Justice acknowledges that Congress may “condition the receipt of [federal] funds on the States’ complying with restrictions on the use of those funds,” ante, at 50, but nevertheless concludes that the 2010 expansion is unduly coercive. His conclusion rests on three premises, each of them essential to his theory. First, the Medicaid expansion is, in The Chief Justice’s view, a new grant program, not an addition to the Medicaid program existing before the ACA’s enactment. Congress, The Chief Justice maintains, has threatened States with the loss of funds from an old program in an effort to get them to adopt a new one. Second, the expansion was unforeseeable by the States when they first signed on to Medicaid. Third, the threatened loss of funding is so large that the States have no real choice but to participate in the Medicaid expansion. The Chief Justice therefore—for the first time ever—finds an exercise of Congress’ spending power unconstitutionally coercive.

Medicaid, as amended by the ACA, however, is not two spending programs; it is a single program with a constant aim—to enable poor persons to receive basic health care when they need it. Given past expansions, plus express statutory warning that Congress may change the requirements participating States must meet, there can be no tenable claim that the ACA fails for lack of notice. Moreover, States have no entitlement to receive any Medicaid funds; they enjoy only the opportunity to accept funds on Congress’ terms. Future Congresses are not bound by their predecessors’ dispositions; they have authority to spend federal revenue as they see fit. The Federal Government, therefore, is not, as The Chief Justice charges, threatening States with the loss of “existing” funds from one spending program in order to induce them to opt into another program. Congress is simply requiring States to do what States have long been required to do to receive Medicaid funding: comply with the conditions Congress prescribes for participation.

A majority of the Court, however, buys the argument that prospective withholding of funds formerly available exceeds Congress’ spending power. Given that holding, I entirely agree with The Chief Justice as to the appropriate remedy. It is to bar the withholding found impermissible—not, as the joint dissenters would have it, to scrap the expansion altogether, see post, at 46–48. The dissenters’ view that the ACA must fall in its entirety is a radical departure from the Court’s normal course. When a constitutional infirmity mars a statute, the Court ordinarily removes the infirmity. It undertakes a salvage operation; it does not demolish the legislation. See, e.g., Brockett v. Spokane Arcades, Inc., 472 U. S. 491, 504 (1985) (Court’s normal course is to declare a statute invalid “to the extent that it reaches too far, but otherwise [to leave the statute] intact”). That course is plainly in order where, as in this case, Congress has expressly instructed courts to leave untouched every provision not found invalid. See 42 U. S. C. §1303. Because The Chief Justice finds the withholding—not the granting—of federal funds incompatible with the Spending Clause, Congress’ extension of Medicaid remains available to any State that affirms its willingness to participate.

A

Expansion has been characteristic of the Medicaid program. Akin to the ACA in 2010, the Medicaid Act as passed in 1965 augmented existing federal grant programs jointly administered with the States. 13 States were not required to participate in Medicaid. But if they did, the Federal Government paid at least half the costs. To qualify for these grants, States had to offer a minimum level of health coverage to beneficiaries of four federally funded, state-administered welfare programs: Aid to Families with Dependent Children; Old Age Assistance; Aid to the Blind; and Aid to the Permanently and Totally Disabled. See Social Security Amendments of 1965, §121(a), 79Stat. 343; Schweiker v. Gray Panthers, 453 U. S. 34, 37 (1981) . At their option, States could enroll additional “medically needy” individuals; these costs, too, were partially borne by the Federal Government at the same, at least 50%, rate. Ibid.

Since 1965, Congress has amended the Medicaid program on more than 50 occasions, sometimes quite sizably. Most relevant here, between 1988 and 1990, Congress required participating States to include among their beneficiaries pregnant women with family incomes up to 133% of the federal poverty level, children up to age 6 at the same income levels, and children ages 6 to 18 with family incomes up to 100% of the poverty level. See 42 U. S. C. §§1396a(a)(10)(A)(i), 1396a(l); Medicare Catastrophic Coverage Act of 1988, §302, 102Stat. 750; Omnibus Budget Reconciliation Act of 1989, §6401, 103Stat. 2258; Omnibus Budget Reconciliation Act of 1990, §4601, 104Stat. 1388–166. These amendments added millions to the Medicaid-eligible population. Dubay & Kenney, Lessons from the Medicaid Expansions for Children and Pregnant Women 5 (Apr. 1997).

Between 1966 and 1990, annual federal Medicaid spending grew from $631.6 million to $42.6 billion; state spending rose to $31 billion over the same period. See Dept. of Health and Human Services, National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2010 (table). 14 And between 1990 and 2010, federal spending increased to $269.5 billion. Ibid. Enlargement of the population and services covered by Medicaid, in short, has been the trend.

Compared to past alterations, the ACA is notable for the extent to which the Federal Government will pick up the tab. Medicaid’s 2010 expansion is financed largely by federal outlays. In 2014, federal funds will cover 100% of the costs for newly eligible beneficiaries; that rate will gradually decrease before settling at 90% in 2020. 42 U. S. C. §1396d(y) (2006 ed., Supp. IV). By comparison, federal contributions toward the care of beneficiaries eligible pre-ACA range from 50% to 83%, and averaged 57% between 2005 and 2008. §1396d(b) (2006 ed., Supp. IV); Dept. of Health and Human Services, Centers for Medicare and Medicaid Services, C. Truffer et al., 2010 Actuarial Report on the Financial Outlook for Medicaid, p. 20.

Nor will the expansion exorbitantly increase state Medicaid spending. The Congressional Budget Office (CBO) projects that States will spend 0.8% more than they would have, absent the ACA. See CBO, Spending & Enrollment Detail for CBO’s March 2009 Baseline. But see ante, at 44–45 (“[T]he Act dramatically increases state obligations under Medicaid.”); post, at 45 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ.) (“[A]cceptance of the [ACA expansion] will impose very substantial costs on participating States.”). Whatever the increase in state obligations after the ACA, it will pale in comparison to the increase in federal funding. 15

Finally, any fair appraisal of Medicaid would require acknowledgment of the considerable autonomy States enjoy under the Act. Far from “conscript[ing] state agencies into the national bureaucratic army,” ante, at 55 (citing FERC v. Mississippi, 456 U. S. 742, 775 (1982) (O’Connor, J., concurring in judgment in part and dissenting in part) (brackets in original and internal quotation marks omitted)), Medicaid “is designed to advance cooperative federalism.” Wisconsin Dept. of Health and Family Servs. v. Blumer, 534 U. S. 473, 495 (2002) (citing Harris v. McRae, 448 U. S. 297, 308 (1980) ). Subject to its basic requirements, the Medicaid Act empowers States to “select dramatically different levels of funding and coverage, alter and experiment with different financing and delivery modes, and opt to cover (or not to cover) a range of particular procedures and therapies. States have leveraged this policy discretion to generate a myriad of dramatically different Medicaid programs over the past several decades.” Ruger, Of Icebergs and Glaciers, 75 Law & Contemp. Probs. 215, 233 (2012) (footnote omitted). The ACA does not jettison this approach. States, as first-line administrators, will continue to guide the distribution of substantial resources among their needy populations.

The alternative to conditional federal spending, it bears emphasis, is not state autonomy but state marginalization. 16 In 1965, Congress elected to nationalize health coverage for seniors through Medicare. It could similarly have established Medicaid as an exclusively federal program. Instead, Congress gave the States the opportunity to partner in the program’s administration and development. Absent from the nationalized model, of course, is the state-level policy discretion and experimentation that is Medicaid’s hallmark; undoubtedly the interests of federalism are better served when States retain a meaningful role in the implementation of a program of such importance. See Caminker, State Sovereignty and Subordinacy, 95 Colum. L. Rev. 1001, 1002–1003 (1995) (cooperative federalism can preserve “a significant role for state discretion in achieving specified federal goals, where the alternative is complete federal preemption of any state regulatory role”); Rose-Ackerman, Cooperative Federalism and Co-optation, 92 Yale L. J. 1344, 1346 (1983) (“If the federal government begins to take full responsibility for social welfare spending and preempts the states, the result is likely to be weaker . . . state governments.”). 17

Although Congress “has no obligation to use its Spending Clause power to disburse funds to the States,” College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U. S. 666, 686 (1999) , it has provided Medicaid grants notable for their generosity and flexibility. “[S]uch funds,” we once observed, “are gifts,” id., at 686–687, and so they have remained through decades of expansion in their size and scope.

B

The Spending Clause authorizes Congress “to pay the Debts and provide for the . . . general Welfare of the United States.” Art. I, §8, cl. 1. To ensure that federal funds granted to the States are spent “to ‘provide for the . . . general Welfare’ in the manner Congress intended,” ante, at 46, Congress must of course have authority to impose limitations on the States’ use of the federal dollars. This Court, time and again, has respected Congress’ prescription of spending conditions, and has required States to abide by them. See, e.g., Pennhurst, 451 U. S., at 17 (“[O]ur cases have long recognized that Congress may fix the terms on which it shall disburse federal money to the States.”). In particular, we have recognized Congress’ prerogative to condition a State’s receipt of Medicaid funding on compliance with the terms Congress set for participation in the program. See, e.g., Harris, 448 U. S., at 301 (“[O]nce a State elects to participate [in Medicaid], it must comply with the requirements of [the Medicaid Act].”); Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U. S. 268, 275 (2006) ; Frew v. Hawkins, 540 U. S. 431, 433 (2004) ; Atkins v. Rivera, 477 U. S. 154 –157 (1986).

Congress’ authority to condition the use of federal funds is not confined to spending programs as first launched. The legislature may, and often does, amend the law, imposing new conditions grant recipients henceforth must meet in order to continue receiving funds. See infra, at 54 (describing Bennett v. Kentucky Dept. of Ed., 470 U. S. 656 –660 (1985) (enforcing restriction added five years after adoption of educational program)).

Yes, there are federalism-based limits on the use of Congress’ conditional spending power. In the leading decision in this area, South Dakota v. Dole, 483 U. S. 203 (1987) , the Court identified four criteria. The conditions placed on federal grants to States must (a) promote the “general welfare,” (b) “unambiguously” inform States what is demanded of them, (c) be germane “to the federal interest in particular national projects or programs,” and (d) not “induce the States to engage in activities that would themselves be unconstitutional.” Id., at 207–208, 210 (internal quotation marks omitted). 18

The Court in Dole mentioned, but did not adopt, a further limitation, one hypothetically raised a half-century earlier: In “some circumstances,” Congress might be prohibited from offering a “financial inducement . . . so coercive as to pass the point at which ‘pressure turns into compulsion.’ ” Id., at 211 (quoting Steward Machine Co. v. Davis, 301 U. S. 548, 590 (1937) ). Prior to today’s decision, however, the Court has never ruled that the terms of any grant crossed the indistinct line between temptation and coercion.

Dole involved the National Minimum Drinking Age Act, 23 U. S. C. §158, enacted in 1984. That Act directed the Secretary of Transportation to withhold 5% of the federal highway funds otherwise payable to a State if the State permitted purchase of alcoholic beverages by persons less than 21 years old. Drinking age was not within the authority of Congress to regulate, South Dakota argued, because the Twenty-First Amendment gave the States exclusive power to control the manufacture, transportation, and consumption of alcoholic beverages. The small percentage of highway-construction funds South Dakota stood to lose by adhering to 19 as the age of eligibility to purchase 3.2% beer, however, was not enough to qualify as coercion, the Court concluded.

This case does not present the concerns that led the Court in Dole even to consider the prospect of coercion. In Dole, the condition—set 21 as the minimum drinking age— did not tell the States how to use funds Congress provided for highway construction. Further, in view of the Twenty-First Amendment, it was an open question whether Congress could directly impose a national minimum drinking age.

The ACA, in contrast, relates solely to the federally funded Medicaid program; if States choose not to comply, Congress has not threatened to withhold funds earmarked for any other program. Nor does the ACA use Medicaid funding to induce States to take action Congress itself could not undertake. The Federal Government undoubtedly could operate its own health-care program for poor persons, just as it operates Medicare for seniors’ health care. See supra, at 44.

That is what makes this such a simple case, and the Court’s decision so unsettling. Congress, aiming to assist the needy, has appropriated federal money to subsidize state health-insurance programs that meet federal standards. The principal standard the ACA sets is that the state program cover adults earning no more than 133% of the federal poverty line. Enforcing that prescription ensures that federal funds will be spent on health care for the poor in furtherance of Congress’ present perception of the general welfare.

C

The Chief Justice asserts that the Medicaid expansion creates a “new health care program.” Ante, at 54. Moreover, States could “hardly anticipate” that Congress would “transform [the program] so dramatically.” Ante, at 55. Therefore, The Chief Justice maintains, Congress’ threat to withhold “old” Medicaid funds based on a State’s refusal to participate in the “new” program is a “threa[t] to terminate [an]other . . . independent gran[t].” Ante, at 50, 52–53. And because the threat to withhold a large amount of funds from one program “leaves the States with no real option but to acquiesce [in a newly created program],” The Chief Justice concludes, the Medicaid expansion is unconstitutionally coercive. Ante, at 52.

1

The starting premise on which The Chief Justice’s coercion analysis rests is that the ACA did not really “extend” Medicaid; instead, Congress created an entirely new program to co-exist with the old. The Chief Justice calls the ACA new, but in truth, it simply reaches more of America’s poor than Congress originally covered.

Medicaid was created to enable States to provide medical assistance to “needy persons.” See S. Rep. No. 404, 89th Cong., 1st Sess., pt. 1, p. 9 (1965). See also §121(a), 79Stat. 343 (The purpose of Medicaid is to enable States “to furnish . . . medical assistance on behalf of [certain persons] whose income and resources are insufficient to meet the costs of necessary medical services.”). By bringing health care within the reach of a larger population of Americans unable to afford it, the Medicaid expansion is an extension of that basic aim.

The Medicaid Act contains hundreds of provisions governing operation of the program, setting conditions ranging from “Limitation on payments to States for expenditures attributable to taxes,” 42 U. S. C. §1396a(t) (2006 ed.), to “Medical assistance to aliens not lawfully admitted for permanent residence,” §1396b(v) (2006 ed. and Supp. IV). The Medicaid expansion leaves unchanged the vast majority of these provisions; it adds beneficiaries to the existing program and specifies the rate at which States will be reimbursed for services provided to the added beneficiaries. See ACA §§2001(a)(1), (3), 124Stat. 271–272. The ACA does not describe operational aspects of the program for these newly eligible persons; for that information, one must read the existing Medicaid Act. See 42 U. S. C. §§1396–1396v(b) (2006 ed. and Supp. IV).

Congress styled and clearly viewed the Medicaid expansion as an amendment to the Medicaid Act, not as a “new” health-care program. To the four categories of beneficiaries for whom coverage became mandatory in 1965, and the three mandatory classes added in the late 1980’s, see supra, at 41–42, the ACA adds an eighth: individuals under 65 with incomes not exceeding 133% of the federal poverty level. The expansion is effectuated by §2001 of the ACA, aptly titled: “Medicaid Coverage for the Lowest Income Populations.” 124Stat. 271. That section amends Title 42, Chapter 7, Subchapter XIX: Grants to States for Medical Assistance Programs. Commonly known as the Medicaid Act, Subchapter XIX filled some 278 pages in 2006. Section 2001 of the ACA would add approximately three pages. 19

Congress has broad authority to construct or adjust spending programs to meet its contemporary understanding of “the general Welfare.” Helvering v. Davis, 301 U. S. 619 –641 (1937). Courts owe a large measure of respect to Congress’ characterization of the grant programs it establishes. See Steward Machine, 301 U. S., at 594. Even if courts were inclined to second-guess Congress’ conception of the character of its legislation, how would reviewing judges divine whether an Act of Congress, purporting to amend a law, is in reality not an amendment, but a new creation? At what point does an extension become so large that it “transforms” the basic law?

Endeavoring to show that Congress created a new program, The Chief Justice cites three aspects of the expansion. First, he asserts that, in covering those earning no more than 133% of the federal poverty line, the Medicaid expansion, unlike pre-ACA Medicaid, does not “care for the neediest among us.” Ante, at 53. What makes that so? Single adults earning no more than $14,856 per year—133% of the current federal poverty level—surely rank among the Nation’s poor.

Second, according to The Chief Justice, “Congress mandated that newly eligible persons receive a level of coverage that is less comprehensive than the traditional Medicaid benefit package.” Ibid. That less comprehensive benefit package, however, is not an innovation introduced by the ACA; since 2006, States have been free to use it for many of their Medicaid beneficiaries. 20 The level of benefits offered therefore does not set apart post-ACA Medicaid recipients from all those entitled to benefits pre-ACA.

Third, The Chief Justice correctly notes that the reimbursement rate for participating States is different regarding individuals who became Medicaid-eligible through the ACA. Ibid. But the rate differs only in its generosity to participating States. Under pre-ACA Medicaid, the Federal Government pays up to 83% of the costs of coverage for current enrollees, §1396d(b) (2006 ed. and Supp. IV); under the ACA, the federal contribution starts at 100% and will eventually settle at 90%, §1396d(y). Even if one agreed that a change of as little as 7 percentage points carries constitutional significance, is it not passing strange to suggest that the purported incursion on state sovereignty might have been averted, or at least mitigated, had Congress offered States less money to carry out the same obligations?

Consider also that Congress could have repealed Medicaid. See supra, at 38–39 (citing 42 U. S. C. §1304); Brief for Petitioners in No. 11–400, p. 41. Thereafter, Congress could have enacted Medicaid II, a new program combining the pre-2010 coverage with the expanded coverage required by the ACA. By what right does a court stop Congress from building up without first tearing down?

2

The Chief Justice finds the Medicaid expansion vulnerable because it took participating States by surprise. Ante, at 54. “A State could hardly anticipate that Congres[s]” would endeavor to “transform [the Medicaid program] so dramatically,” he states. Ante, at 54–55. For the notion that States must be able to foresee, when they sign up, alterations Congress might make later on, The Chief Justice cites only one case: Pennhurst State School and Hospital v. Halderman, 451 U. S. 1 .

In Pennhurst, residents of a state-run, federally funded institution for the mentally disabled complained of abusive treatment and inhumane conditions in alleged violation of the Developmentally Disabled Assistance and Bill of Rights Act. 451 U. S., at 5–6. We held that the State was not answerable in damages for violating conditions it did not “voluntarily and knowingly accep[t].” Id., at 17, 27. Inspecting the statutory language and legislative history, we found that the Act did not “unambiguously” impose the requirement on which the plaintiffs relied: that they receive appropriate treatment in the least restrictive environment. Id., at 17–18. Satisfied that Congress had not clearly conditioned the States’ receipt of federal funds on the States’ provision of such treatment, we declined to read such a requirement into the Act. Congress’ spending power, we concluded, “does not include surprising participating States with postacceptance or ‘retroactive’ conditions.” Id., at 24–25.

Pennhurst thus instructs that “if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously.” Ante, at 53 (quoting Pennhurst, 451 U. S., at 17). That requirement is met in this case. Section 2001 does not take effect until 2014. The ACA makes perfectly clear what will be required of States that accept Medicaid funding after that date: They must extend eligibility to adults with incomes no more than 133% of the federal poverty line. See 42 U. S. C. §1396a(a)(10)(A) (i)(VIII) (2006 ed. and Supp. IV).

The Chief Justice appears to find in Pennhurst a requirement that, when spending legislation is first passed, or when States first enlist in the federal program, Congress must provide clear notice of conditions it might later impose. If I understand his point correctly, it was incumbent on Congress, in 1965, to warn the States clearly of the size and shape potential changes to Medicaid might take. And absent such notice, sizable changes could not be made mandatory. Our decisions do not support such a requirement. 21

In Bennett v. New Jersey, 470 U. S. 632 (1985) , the Secretary of Education sought to recoup Title I funds 22 based on the State’s noncompliance, from 1970 to 1972, with a 1978 amendment to Title I. Relying on Pennhurst, we rejected the Secretary’s attempt to recover funds based on the States’ alleged violation of a rule that did not exist when the State accepted and spent the funds. See 470 U. S., at 640 (“New Jersey[,] when it applied for and received Title I funds for the years 1970–1972[,] had no basis to believe that the propriety of the expenditures would be judged by any standards other than the ones in effect at the time.” (citing Pennhurst, 451 U. S., at 17, 24–25; emphasis added)).

When amendment of an existing grant program has no such retroactive effect, however, we have upheld Congress’ instruction. In Bennett v. Kentucky Dept. of Ed., 470 U. S. 656 (1985) , the Secretary sued to recapture Title I funds based on the Commonwealth’s 1974 violation of a spending condition Congress added to Title I in 1970. Rejecting Kentucky’s argument pinned to Pennhurst, we held that the Commonwealth suffered no surprise after accepting the federal funds. Kentucky was therefore obliged to return the money. 470 U. S., at 665–666, 673–674. The conditions imposed were to be assessed as of 1974, in light of “the legal requirements in place when the grants were made,” id., at 670, not as of 1965, when Title I was originally enacted.

As these decisions show, Pennhurst’s rule demands that conditions on federal funds be unambiguously clear at the time a State receives and uses the money—not at the time, perhaps years earlier, when Congress passed the law establishing the program. See also Dole, 483 U. S., at 208 (finding Pennhurst satisfied based on the clarity of the Federal Aid Highway Act as amended in 1984, without looking back to 1956, the year of the Act’s adoption).

In any event, from the start, the Medicaid Act put States on notice that the program could be changed: “The right to alter, amend, or repeal any provision of [Medicaid],” the statute has read since 1965, “is hereby reserved to the Congress.” 42 U. S. C. §1304. The “effect of these few simple words” has long been settled. See National Railroad Passenger Corporation v. Atchison, T. & S. F. R. Co., 470 U. S. 451 –468, n. 22 (1985) (citing Sinking Fund Cases, 99 U. S. 700, 720 (1879) ). By reserving the right to “alter, amend, [or] repeal” a spending program, Congress “has given special notice of its intention to retain . . . full and complete power to make such alterations and amendments . . . as come within the just scope of legislative power.” Id., at 720.

Our decision in Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U. S. 41 –52 (1986), is guiding here. As enacted in 1935, the Social Security Act did not cover state employees. Id., at 44. In response to pressure from States that wanted coverage for their employees, Congress, in 1950, amended the Act to allow States to opt into the program. Id., at 45. The statutory provision giving States this option expressly permitted them to withdraw from the program. Ibid.

Beginning in the late 1970’s, States increasingly exercised the option to withdraw. Id., at 46. Concerned that withdrawals were threatening the integrity of Social Security, Congress repealed the termination provision. Congress thereby changed Social Security from a program voluntary for the States to one from which they could not escape. Id., at 48. California objected, arguing that the change impermissibly deprived it of a right to withdraw from Social Security. Id., at 49–50. We unanimously rejected California’s argument. Id., at 51–53. By including in the Act “a clause expressly reserving to it ‘[t]he right to alter, amend, or repeal any provision’ of the Act,” we held, Congress put States on notice that the Act “created no contractual rights.” Id., at 51–52. The States therefore had no law-based ground on which to complain about the amendment, despite the significant character of the change.

The Chief Justice nevertheless would rewrite §1304 to countenance only the “right to alter somewhat,” or “amend, but not too much.” Congress, however, did not so qualify §1304. Indeed, Congress retained discretion to “repeal” Medicaid, wiping it out entirely. Cf. Delta Air Lines, Inc. v. August, 450 U. S. 346, 368 (1981) (Rehnquist, J., dissenting) (invoking “the common-sense maxim that the greater includes the lesser”). As Bowen indicates, no State could reasonably have read §1304 as reserving to Congress authority to make adjustments only if modestly sized.

In fact, no State proceeded on that understanding. In compliance with Medicaid regulations, each State expressly undertook to abide by future Medicaid changes. See 42 CFR §430.12(c)(1) (2011) (“The [state Medicaid] plan must provide that it will be amended whenever necessary to reflect . . . [c]hanges in Federal law, regulations, policy interpretations, or court decisions.”). Whenever a State notifies the Federal Government of a change in its own Medicaid program, the State certifies both that it knows the federally set terms of participation may change, and that it will abide by those changes as a condition of continued participation. See, e.g., Florida Agency for Health Care Admin., State Plan Under Title XIX of the Social Security Act Medical Assistance Program §7.1, p. 86 (Oct. 6, 1992).

The Chief Justice insists that the most recent expansion, in contrast to its predecessors, “accomplishes a shift in kind, not merely degree.” Ante, at 53. But why was Medicaid altered only in degree, not in kind, when Congress required States to cover millions of children and pregnant women? See supra, at 41–42. Congress did not “merely alte[r] and expan[d] the boundaries of” the Aid to Families with Dependent Children program. But see ante, at 53–55. Rather, Congress required participating States to provide coverage tied to the federal poverty level (as it later did in the ACA), rather than to the AFDC program. See Brief for National Health Law Program et al. as Amici Curiae 16–18. In short, given §1304, this Court’s construction of §1304’s language in Bowen, and the enlargement of Medicaid in the years since 1965, 23 a State would be hard put to complain that it lacked fair notice when, in 2010, Congress altered Medicaid to embrace a larger portion of the Nation’s poor.

3

The Chief Justice ultimately asks whether “the financial inducement offered by Congress . . . pass[ed] the point at which pressure turns into compulsion.” Ante, at 50 (internal quotation marks omitted). The financial inducement Congress employed here, he concludes, crosses that threshold: The threatened withholding of “existing Medicaid funds” is “a gun to the head” that forces States to acquiesce. Ante, at 50–51 (citing 42 U. S. C. §1396c). 24

The Chief Justice sees no need to “fix the outermost line,” Steward Machine, 301 U. S., at 591, “where persuasion gives way to coercion,” ante, at 55. Neither do the joint dissenters. See post, at 36, 38. 25 Notably, the decision on which they rely, Steward Machine, found the statute at issue inside the line, “wherever the line may be.” 301 U. S., at 591.

When future Spending Clause challenges arrive, as they likely will in the wake of today’s decision, how will litigants and judges assess whether “a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds”? Ante, at 48. Are courts to measure the number of dollars the Federal Government might withhold for noncompliance? The portion of the State’s budget at stake? And which State’s—or States’—budget is determinative: the lead plaintiff, all challenging States (26 in this case, many with quite different fiscal situations), or some national median? Does it matter that Florida, unlike most States, imposes no state income tax, and therefore might be able to replace foregone federal funds with new state revenue? 26 Or that the coercion state officials in fact fear is punishment at the ballot box for turning down a politically popular federal grant?

The coercion inquiry, therefore, appears to involve political judgments that defy judicial calculation. See Baker v. Carr, 369 U. S. 186, 217 (1962) . Even commentators sympathetic to robust enforcement of Dole’s limitations, see supra, at 46, have concluded that conceptions of “impermissible coercion” premised on States’ perceived inability to decline federal funds “are just too amorphous to be judicially administrable.” Baker & Berman, Getting off the Dole, 78 Ind. L. J. 459, 521, 522, n. 307 (2003) (citing, e.g., Scalia, The Rule of Law as a Law of Rules, 56 U. Chi. L. Rev. 1175 (1989)).

At bottom, my colleagues’ position is that the States’ reliance on federal funds limits Congress’ authority to alter its spending programs. This gets things backwards: Congress, not the States, is tasked with spending federal money in service of the general welfare. And each successive Congress is empowered to appropriate funds as it sees fit. When the 110th Congress reached a conclusion about Medicaid funds that differed from its predecessors’ view, it abridged no State’s right to “existing,” or “pre-existing,” funds. But see ante, at 51–52; post, at 47–48 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ.). For, in fact, there are no such funds. There is only money States anticipate receiving from future Congresses.

D

Congress has delegated to the Secretary of Health and Human Services the authority to withhold, in whole or in part, federal Medicaid funds from States that fail to comply with the Medicaid Act as originally composed and as subsequently amended. 42 U. S. C. §1396c. 27 The Chief Justice, however, holds that the Constitution precludes the Secretary from withholding “existing” Medicaid funds based on States’ refusal to comply with the expanded Medicaid program. Ante, at 55. For the foregoing reasons, I disagree that any such withholding would violate the Spending Clause. Accordingly, I would affirm the decision of the Court of Appeals for the Eleventh Circuit in this regard.

But in view of The Chief Justice’s disposition, I agree with him that the Medicaid Act’s severability clause determines the appropriate remedy. That clause provides that “[i]f any provision of [the Medicaid Act], 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.

The Court does not strike down any provision of the ACA. It prohibits only the “application” of the Secretary’s authority to withhold Medicaid funds from States that decline to conform their Medicaid plans to the ACA’s requirements. Thus the ACA’s authorization of funds to finance the expansion remains intact, and the Secretary’s authority to withhold funds for reasons other than noncompliance with the expansion remains unaffected.

Even absent §1303’s command, we would have no warrant to invalidate the Medicaid expansion, contra post, at 46–48 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ.), not to mention the entire ACA, post, at 49–64 (same). For when a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislature’s dominant objective. See, e.g., Ayotte v. Planned Parenthood of Northern New Eng., 546 U. S. 320 –330 (2006). In this case, that objective was to increase access to health care for the poor by increasing the States’ access to federal funds. The Chief Justice is undoubtedly right to conclude that Congress may offer States funds “to expand the availability of health care, and requir[e] that States accepting such funds comply with the conditions on their use.” Ante, at 55. I therefore concur in the judgment with respect to Part IV–B of The Chief Justice’s opinion.

*  *  *

For the reasons stated, I agree with The Chief Justice that, as to the validity of the minimum coverage provision, the judgment of the Court of Appeals for the Eleventh Circuit should be reversed. In my view, the provision encounters no constitutional obstruction. Further, I would uphold the Eleventh Circuit’s decision that the Medicaid expansion is within Congress’ spending power.

__________________________________

1  According to one study conducted by the National Center for Health Statistics, the high cost of insurance is the most common reason why individuals lack coverage, followed by loss of one’s job, an employer’s unwillingness to offer insurance or an insurers’ unwillingness to cover those with preexisting medical conditions, and loss of Medicaid coverage. See Dept. of Health and Human Services, National Center for Health Statistics, Summary Health Statistics for the U. S. Population: National Health Interview Survey—2009, Ser. 10, No. 248, p. 71, Table 25 (Dec. 2010). “[D]id not want or need coverage” received too few re-sponses to warrant its own category. See ibid., n. 2.

2  Despite its success, Massachusetts’ medical-care providers still administer substantial amounts of uncompensated care, much of that to uninsured patients from out-of-state. See supra, at 7–8.

3  Alexander Hamilton described the problem this way: “[Often] it would be beneficial to all the states to encourage, or suppress[,] a particular branch of trade, while it would be detrimental . . . to attempt it without the concurrence of the rest.” The Continentalist No. V, in 3 Papers of Alexander Hamilton 75, 78 (H. Syrett ed. 1962). Because the concurrence of all States was exceedingly difficult to obtain, Hamilton observed, “the experiment would probably be left untried.” Ibid.

4  See Dept. of Health and Human Services, National Center for Health Statistics, Summary Health Statistics for U. S. Adults: National Health Interview Survey 2009, Ser. 10, No. 249, p. 124, Table 37 (Dec. 2010).

5  Echoing The Chief Justice, the joint dissenters urge that the minimum coverage provision impermissibly regulates young people who “have no intention of purchasing [medical care]” and are too far “removed from the [health-care] market.” See post, at 8, 11. This criticism ignores the reality that a healthy young person may be a day away from needing health care. See supra, at 4. A victim of an accident or unforeseen illness will consume extensive medical care immediately, though scarcely expecting to do so.

6  The Chief Justice’s reliance on the quoted passages of the Constitution, see ante, at 18–19, is also dubious on other grounds. The power to “regulate the Value” of the national currency presumably includes the power to increase the currency’s worth—i.e., to create value where none previously existed. And if the power to “[r]egulat[e] . . . the land and naval Forces” presupposes “there is already [in existence] something to be regulated,” i.e., an Army and a Navy, does Congress lack authority to create an Air Force?

7  The Chief Justice’s characterization of individuals who choose not to purchase private insurance as “doing nothing,” ante, at 20, is simi-larly questionable. A person who self-insures opts against prepayment for a product the person will in time consume. When aggregated, exercise of that option has a substantial impact on the health-care market. See supra, at 5–7, 16–17.

8  Some adherents to the joint dissent have questioned the existence of substantive due process rights. See McDonald v. Chicago, 561 U. S. ___, ___ (2010) (Thomas, J., concurring) (slip op., at 7) (The notion that the Due Process Clause “could define the substance of th[e] righ[t to liberty] strains credulity.”); Albright v. Oliver, 510 U. S. 266, 275 (1994) (Scalia, J., concurring) (“I reject the proposition that the Due Process Clause guarantees certain (unspecified) liberties[.]”). Given these Justices’ reluctance to interpret the Due Process Clause as guaranteeing liberty interests, their willingness to plant such protections in the Commerce Clause is striking.

9  The failure to purchase vegetables in The Chief Justice’s hypothetical, then, is not what leads to higher health-care costs for others; rather, it is the failure of individuals to maintain a healthy diet, and the resulting obesity, that creates the cost-shifting problem. See ante, at 22–23. Requiring individuals to purchase vegetables is thusseveral steps removed from solving the problem. The failure to obtain health insurance, by contrast, is the immediate cause of the cost-shifting Congress sought to address through the ACA. See supra, at 5–7. Requiring individuals to obtain insurance attacks the source of the problem directly, in a single step.

10  Indeed, Congress regularly and uncontroversially requires individuals who are “doing nothing,” see ante, at 20, to take action. Exam-ples include federal requirements to report for jury duty, 28 U. S. C. §1866(g) (2006 ed., Supp. IV); to register for selective service, 50 U. S. C. App. §453; to purchase firearms and gear in anticipation of service in the Militia, 1Stat. 271 (Uniform Militia Act of 1792); to turn gold currency over to the Federal Government in exchange for paper currency, see Nortz v. United States, 294 U. S. 317, 328 (1935) ; and to file a tax return, 26 U. S. C. §6012 (2006 ed., Supp. IV).

11  In a separate argument, the joint dissenters contend that the minimum coverage provision is not necessary and proper because it was not the “only . . . way” Congress could have made the guaranteed-issue and community-rating reforms work. Post, at 9–10. Congress could also have avoided an insurance-market death spiral, the dissenters maintain, by imposing a surcharge on those who did not previously purchase insurance when those individuals eventually enter the health-insurance system. Post, at 10. Or Congress could “den[y] a full income tax credit” to those who do not purchase insurance. Ibid. Neither a surcharge on those who purchase insurance nor the denial of a tax credit to those who do not would solve the problem created by guaranteed-issue and community-rating requirements. Neither would prompt the purchase of insurance before sickness or injury occurred. But even assuming there were “practicable” alternatives to the minimum coverage provision, “we long ago rejected the view that the Necessary and Proper Clause demands that an Act of Congress be ‘absolutely necessary’ to the exercise of an enumerated power.” Jinksv. Richland County, 538 U. S. 456, 462 (2003) (quoting McCullochv. Maryland, 4 Wheat. 316, 414–415 (1819)). Rather, the statutory provision at issue need only be “conducive” and “[reasonably] adapted” to the goal Congress seeks to achieve. Jinks, 538 U. S., at 462 (internal quotation marks omitted). The minimum coverage provision meets this requirement. See supra, at 31–33.

12  The Chief Justice states that he must evaluate the constitution-ality of the minimum coverage provision under the Commerce Clause because the provision “reads more naturally as a command to buy insurance than as a tax.” Ante, at 44. The Chief Justice ultimately concludes, however, that interpreting the provision as a tax is a “fairly possible” construction. Ante, at 32 (internal quotation marks omitted). That being so, I see no reason to undertake a Commerce Clause analysis that is not outcome determinative.

13  Medicaid was “plainly an extension of the existing Kerr-Mills” grant program. Huberfeld, Federalizing Medicaid, 14 U. Pa. J. Const. L. 431, 444–445 (2011). Indeed, the “section of the Senate report dealing with Title XIX”—the title establishing Medicaid—“was entitled, ‘Improvement and Extension of Kerr-Mills Medical Assistance Program.’ ” Stevens & Stevens, Welfare Medicine in America 51 (1974) (quoting S. Rep. No. 404, 89th Cong., 1st Sess., pt. 1, p. 9 (1965)). Setting the pattern for Medicaid, Kerr-Mills reimbursed States for a portion of the cost of health care provided to welfare recipients ifStates met conditions specified in the federal law, e.g., participating States were obliged to offer minimum coverage for hospitalization and physician services. See Huberfeld, supra, at 443–444.

14  Available online at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html.

15  Even the study on which the plaintiffs rely, see Brief for Petitioners 10, concludes that “[w]hile most states will experience some increase in spending, this is quite small relative to the federal matching payments and low relative to the costs of uncompensated care that [the states] would bear if the[re] were no health reform.” See Kaiser Commission on Medicaid & the Uninsured, Medicaid Coverage & Spending in Health Reform 16 (May 2010). Thus there can be no objection to the ACA’s expansion of Medicaid as an “unfunded mandate.” Quite the contrary, the program is impressively well funded.

16  In 1972, for example, Congress ended the federal cash-assistance program for the aged, blind, and disabled. That program previously had been operated jointly by the Federal and State Governments, asis the case with Medicaid today. Congress replaced the cooperative federal program with the nationalized Supplemental Security In-come (SSI) program. See Schweiker v. Gray Panthers, 453 U. S. 34, 38 (1981) .

17  The Chief Justice and the joint dissenters perceive in cooperative federalism a “threa[t]” to “political accountability.” Ante, at 48; see post, at 34–35. By that, they mean voter confusion: Citizens upset by unpopular government action, they posit, may ascribe to state officials blame more appropriately laid at Congress’ door. But no such confusion is apparent in this case: Medicaid’s status as a federally funded, state-administered program is hardly hidden from view.

18  Although the plaintiffs, in the proceedings below, did not contest the ACA’s satisfaction of these criteria, see 648 F. 3d 1235, 1263 (CA11 2011), The Chief Justice appears to rely heavily on the second crite-rion. Compare ante, at 52, 54, with infra, at 52–54.

19  Compare Subchapter XIX, 42 U. S. C. §§1396–1396v(b) (2006 ed. and Supp. IV) with §§1396a(a) (10)(A)(i)(VIII) (2006 ed. and Supp.IV); 1396a(a) (10)(A)(ii)(XX), 1396a(a)(75), 1396a(k), 1396a(gg) to (hh), 1396d(y), 1396r–1(e), 1396u–7(b)(5) to (6).

20  The Deficit Reduction Act of 2005 authorized States to provide “benchmark coverage” or “benchmark equivalent coverage” to certain Medicaid populations. See §6044, 120Stat. 88, 42 U. S. C. §1396u–7 (2006 ed. and Supp. IV). States may offer the same level of coverage to persons newly eligible under the ACA. See §1396a(k).

21  The Chief Justice observes that “Spending Clause legislation[i]s much in the nature of a contract.” Ante, at 46 (internal quotation marks omitted). See also post, at 33 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ.) (same). But the Court previously has rec-ognized that “[u]nlike normal contractual undertakings, federal grant programs originate in and remain governed by statutory provisions expressing the judgment of Congress concerning desirable public policy.” Bennett v. Kentucky Dept. of Ed., 470 U. S. 656, 669 (1985) .

22  Title I of the Elementary and Secondary Education Act of 1965 provided federal grants to finance supplemental educational programs in school districts with high concentrations of children from low-income families. See Bennett v. New Jersey, 470 U. S. 632 –635 (1985) (citing Pub. L. No. 89–10, 79Stat. 27).

23  Note, in this regard, the extension of Social Security, which began in 1935 as an old-age pension program, then expanded to include sur-vivor benefits in 1939 and disability benefits in 1956. See Social Security Act, ch. 531, 49Stat. 622–625; Social Security Act Amendments of 1939, 53Stat. 1364–1365; Social Security Amendments of 1956, ch. 836, §103, 70Stat. 815–816.

24  The joint dissenters, for their part, would make this the entire inquiry. “[I]f States really have no choice other than to accept the package,” they assert, “the offer is coercive.” Post, at 35. The Chief Justice recognizes Congress’ authority to construct a single federal program and “condition the receipt of funds on the States’ complying with restrictions on the use of those funds.” Ante, at 50. For the joint dissenters, however, all that matters, it appears, is whether States can resist the temptation of a given federal grant. Post, at 35. On this logic, any federal spending program, sufficiently large and well-funded, would be unconstitutional. The joint dissenters point to smaller programs States might have the will to refuse. See post, at 40–41 (elementary and secondary education). But how is a court to judge whether “only 6.6% of all state expenditures,” post, at 41, is an amount States could or would do without? Speculations of this genre are characteristic of the joint dissent. See, e.g., post, at 35 (“it may be state officials who will bear the brunt of public disapproval” for joint federal-state endeavors); ibid., (“federal officials . . . may remain insulated from the electoral ramifications of their decision”); post, at 37 (“a heavy federal tax . . . levied to support a federal program that offers large grants to the States . . . may, as a practical matter, [leave States] unable to refuse to participate”); ibid. (withdrawal from a federal program “would likely force the State to impose a huge tax increase”); post, at 46 (state share of ACA expansion costs “may increase in the future”) (all emphasis added; some internal quotation marks omitted). The joint dissenters are long on conjecture and short on real-world examples.

25  The joint dissenters also rely heavily on Congress’ perceived intent to coerce the States. Post, at 42–46; see, e.g., post, at 42 (“In crafting the ACA, Congress clearly expressed its informed view that no State could possibly refuse the offer that the ACA extends.”). We should not lightly ascribe to Congress an intent to violate the Constitution (at least as my colleagues read it). This is particularly true when the ACA could just as well be comprehended as demonstrating Congress’ mere expectation, in light of the uniformity of past participation and the generosity of the federal contribution, that States would not withdraw. Cf. South Dakota v. Dole, 483 U. S. 203, 211 (1987) (“We cannot conclude . . . that a con-ditional grant of federal money . . . is unconstitutional simply byreason of its success in achieving the congressional objective.”).

26  Federal taxation of a State’s citizens, according to the joint dissenters, may diminish a State’s ability to raise new revenue. This, in turn, could limit a State’s capacity to replace a federal program with an “equivalent” state-funded analog. Post, at 40. But it cannot be true that “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.” Post, at 37. 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. See U. S. Term Limits, Inc. v. Thornton, 514 U. S. 779, 839 (1995) (Kennedy, J., concurring). That is because the “Framers split the atom of sovereignty[,] . . . establishing two orders of government”—“one state and one federal”—“each with its own direct relationship” to the people. Id., at 838. A State therefore has no claim on the money its residents pay in federal taxes, and federal “spending programs need not help people in all states in the same measure.” See Brief for David Satcher et al. as Amici Curiae 19. In 2004, for example, New Jersey received 55 centsin federal spending for every dollar its residents paid to the Federal Government in taxes, while Mississippi received $1.77 per tax dollar paid. C. Dubay, Tax Foundation, Federal Tax Burdens and Expenditures by State: Which States Gain Most from Federal Fiscal Operations? 2 (Mar. 2006). Thus no constitutional problem was created when Arizona declined for 16 years to participate in Medicaid, even though its residents’ tax dollars financed Medicaid programs in every other State.

27  As The Chief Justice observes, the Secretary is authorized to withhold all of a State’s Medicaid funding. See ante, at 51. But total withdrawal is what the Secretary may, not must, do. She has discretion to withhold only a portion of the Medicaid funds otherwise due a noncompliant State. See §1396c; cf. 45 CFR §80.10(f) (2011) (Secretary may enforce Title VI’s nondiscrimination requirement through “refusal to grant or continue Federal financial assistance, in whole or in part.” (emphasis added)). The Secretary, it is worth noting, may herself experience political pressures, which would make her all the more reluctant to cut off funds Congress has appropriated for a State’s needy citizens.

Print this transcript Transcript: 

Chief Justice John G. Roberts: I have the announcement in case number 11-393, National Federation of Independent Business versus Sebelius, and the related cases.

In these cases we consider claims that Congress lacked constitutional power to enact two provisions of the Patient Protection and Affordable Care Act of 2010.

The limits on government power foremost in many American's minds are likely to be affirmative restrictions such as contained in the Bill of Rights.

These are affirmative restrictions come into play however only where the government possesses authority to act in the first place.

And in our federal system, the national government possess only those limited powers the constitution assigns to it.

If no constitutional power authorizes Congress to pass a certain law, that law may not be enacted even if it would not violate any of the express prohibitions in the Bill of Rights or elsewhere in the constitution.

The first provision in issue here is often referred to as the individual mandate.

That provision requires individuals to maintain a specified level of health insurance.

For many, the mandate must be satisfied by purchasing health insurance from a private company.

Those who do not obtain the required coverage over the IRS what the Act calls, a shared responsibility of payment.

The question is whether Congress has the constitutional power to enact the individual mandate.

The government advances two arguments that it does.

First, the government contends that the constitution's Commerce Clause authorizes the mandate.

Second, the government says that Congress could enact the statute under its constitutional power to lay and collect taxes.

Turning first to the Commerce Clause.

Congress has never before attempted to use the commerce power to order individuals not engaged in commerce to buy an unwanted product.

And nothing in the text to the constitution suggests it can.

The Commerce Clause allows Congress to regulate commerce.

The power to regulate commerce presupposes the existence of commercial activity to be regulated.

Our president reflects that understanding.

As expansive as our cases construing the commerce power have been, they all have one thing in common.

They uniformly described the power as reaching activity.

It is nearly impossible to avoid the word when quoting our cases.

The individual mandate by contrast does not regulate existing activity.

It instead compels individuals to become active in commerce by purchasing a product they do not want.

The government contends that Congress can do this because the failure to purchase health insurance has a substantial effect on interstate commerce.

In particular, the government focuses on the costs that the uninsured as a group impose on the healthcare system when they need care but are unable to pay for it.

Allowing Congress to regulate individuals precisely because they do not do something however would vastly expand federal power.

People for reasons of their own often fail to do things that would be good for them or for society.

Those failures joined with the similar failures of others can have a substantial effect on interstate commerce.

Under the government's logic, that authorizes Congress to compel unwilling citizens to act as the government would have them act.

Congress already enjoys vast power to regulate much of what we do except in the government's theory would allow Congress the same license to regulate what we do not do.

That would fundamentally change the relationship between the American citizen and the federal government.

Now, to an economist perhaps, there is no difference between activity and inactivity.

Both can have measurable economic effects on commerce.

But the distinction between doing something and doing nothing would not have been lost on the framers who were practical statesmen, not academic theorists.

The framers gave Congress the power to regulate commerce not to compel it.

For over 200 years, this Court's decisions and Congress' actions have reflected this understanding.

There is no reason to depart from it now.

But the government says that health insurance is different because everyone will eventually need healthcare.

According to the government, that means the uninsured even though doing nothing can be "regulated in advance."

That assertion is inconsistent with a limited consumption of federal power.

The Commerce Clause is not a general license to regulate an individual from cradle to grave simply because he will predictably engage in particular transactions.

The government also contends that Congress could enact the individual mandate because the mandate is important to other parts of the Healthcare Act.

Other provisions of the Act whose validity under the Commerce Clause is not challenged here, restrict the ability of health insurance companies to charge higher prices to less healthy individuals.

Those provisions will likely cause insurance companies to raise the prices they charge everyone.

According to the government, the individual mandate is in the constitution's language, necessary and proper to support those provisions because it will compel healthy individuals to subsidize the cost of insuring those who are less healthy.

Our cases interpreting the necessary and proper clause have been very differential to Congress' determination of what is necessary.

But we have also explained that the clause is not a grant of a great and independent power.

The clause only allows Congress to do things that are incidental to the exercise of its other powers.

Compelling people to enter commerce precisely because they have chosen not to cannot be considered a necessary and proper supplement to the Commerce Clause.

There are separate writings on this subject but the majority of this Court agrees that the Commerce Clause cannot sustain the individual mandate.

That brings us to the Government's second argument that the mandate maybe upheld under Congress' power to lay and collect taxes.

The Government's tax power argument asks us to interpret the statute not as ordering individuals to buy insurance but rather as imposing the tax on those who go without it.

Under the mandate, if an individual does not buy health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes.

The government says, that means the mandate can be interpreted as establishing a condition not only health insurance that triggers a tax, the required payment to the IRS.

Under that theory, the mandate makes going without insurance just another thing the government taxes like buying gasoline or earning income.

And if the mandate is just a tax hike on taxpayers who don't have health insurance, it may be within Congress' constitutional power to tax.

Under our precedent, if there are two possible interpretations of a statute and one of those interpretations violates the constitutions -- the constitution, courts should adopt the interpretation that allows the statute to be upheld.

Thus, the question here isn't whether the interpretation of the statute, the Government offers to support its tax argument is the best interpretation.

Rather, under our cases, the question is whether that interpretation is reasonable or fairly possible.

If it is, then the Court should adopt that interpretation rather than declare the statute unconstitutional.

The payment the Act imposes on those without health insurance certainly looks like a tax.

By its terms, it applies to taxpayers and is paid to the IRS when they file their tax returns.

It doesn't apply to individuals who don't pay federal income taxes because their income is too low.

For taxpayers who do know the payment, its amount is determined by factors such as taxable income, number of dependents, and joint filing status.

And the payment is expected to generate nearly $4 billion per year in government revenue.

The Act doesn't call this payment a tax.

It calls it a shared responsibility payment and a penalty.

But whether law is with Congress' taxing power is determined by what the statute does, not the labels Congress attaches to it.

This payment functions like a tax.

It's paid by taxpayers with their to the IRS will generate a lot of government revenue.

The amount of the payment also suggest it is in effect a tax.

Our cases examining whether something is a tax often consider this factor.

If an exaction is high that no one could be expected voluntarily to pay it, that can show the law is really just a command enforced by a fine.

The payment in this case by contrast is calibrated to the taxpayer's income, can never be higher than the cost of buying insurance and can often be quite a bit less.

It is indeed likely that many Americans will choose to pay the IRS rather than buying insurance and someone who makes that payment has fully complied with the law.

He has not done anything unlawful.

The Solicitor General confirm that understanding in his briefs and at oral argument.

That is another reason that the statute functions more like a tax than the sort of punitive exactions we've struck down before.

The plaintiffs however say that because this statute uses words like shall and penalty, the law must be read to make it illegal not to buy insurance even if that would mean the law was unconstitutional.

We disagree.

An example may help show why.

Suppose Congress enacted a statute providing that every taxpayer who owns a house without energy efficient windows must pay $50 to the IRS.

The amount due is adjusted based on factors such as taxable income and joint filing status and is paid along with the taxpayer's income tax return.

Those whose income is below the filing threshold need not pay.

The required payment in the hypothetical statute is not called a tax, a penalty or anything else.

Now, no one would doubt that this law impose a tax and was within Congress' power to tax.

Now, suppose Congress used the word penalty to describe the payment.

The law would still do the exact same thing.

There is no reason to conclude that it would then be outside Congress' power to tax.

The plaintiffs also argue that even if the tax is interpreted even if the statute is interpreted as a tax, such a tax would violate the constitution's direct tax clause.

But as our opinion explains more fully, our precedent is clear that a tax on going without health insurance is not a direct tax.

Still, this tax is a burden that the federal government imposes for an omission, not an Act.

If the commerce power does not authorize Congress to regulate those who don't engage in commerce, perhaps the taxing power should not permit Congress to impose a tax for not doing something.

But we cannot accept that reasoning.

First and most importantly, nothing in the constitution guarantees that individuals may avoid taxation through inactivity.

The Government's Commerce Clause argument asked this Court to condone a new sort of federal power ordering people not in commerce to buy an unwanted product.

The Government's tax power argument by contrast asks us only to determine that Congress has gone something it clearly can do and indeed often has, use tax incentives to encourage people to buy a product.

Upholding the statute under the taxing power does not recognize any new federal power.

It determines that Congress has used an existing one.

Moreover, Congress' ability to use its taxing power to control conduct is significantly weaker than it is under the Commerce.

When Congress regulates under the Commerce Clause, it can bring the full weight of the federal government to bear a command issued under the Commerce Clause can be backed by fines, imprisonment, and all the consequences of being branded a criminal such as loss of job opportunities, the right to bear arms or vote in elections.

By contrast, Congress' authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury.

That is of course no small thing.

But our cases have always maintained that a tax so punitive that it functions like a command exceeds Congress' taxing power.

The Affordable Care Acts requirement that certain taxpayers pay the Government for not obtaining health insurance is in effect the tax on those without insurance.

Passing on the wisdom or fairness of such attacks is not our role because the constitution permits it, we must uphold it.

In some, a majority the Court holds that the federal government cannot use the taxing power to order people to buy health insurance but a majority also holds that the statute here maybe upheld as a tax increase on those without health insurance which is within Congress' power to tax.

So this portion of the Affordable Care Act is upheld.

We now turn to the second part of the Act challenge in this case often referred to as the Medicaid expansion.

Enacted in 1965, Medicaid offers federal funding to states to assist needy persons in obtaining medical care.

In order to receive that funding, states must comply with federal rules governing matters such as who receives care and what services are provided at what cost.

The Affordable Care Act dramatically increases state obligations under Medicaid.

The current Medicaid program require states to cover only discreet categories of particularly vulnerable individuals, pregnant women, children, need families, the blind and the disable.

There is no mandatory coverage for most childless adults and parents receive aid only if their income is far below the federal poverty line.

The Medicaid expansion in contrast requires states to cover all individuals under the age of 65 within incomes below 133% of the federal poverty line.

And, critically for this case, if a State does not comply with the Act's new coverage requirements, it may lose not only the federal funding for the expansion but all of it's federal Medicaid funds.

The constitution Spending Clause grants Congress the power to pay the debts and provide for the general welfare of the United States.

Our cases have recognized limits on Congress' power to use the Spending Clause to compel the states to advance federal objectives.

One of the fundamental tenets of our constitutional is that the states are independent sovereigns, not merely departments of the federal government.

Our cases thus make clear that Congress cannot commandeer state governments to carry out federal programs.

That is true whether Congress directly commands a State to run a federal program or indirectly coerces a State to adopt the federal program as its own.

Normally, the way for states to avoid complying with conditions on federal funds they do not like is to refuse to take the money.

The states are separate and independent sovereigns.

Sometimes they have to act like it.

The Medicaid expansion however is far from a typical case.

Congress did not merely conditioned the new funds for implicating -- implementing the expansion on whether states agreed to expand their Medicaid programs.

Instead, Congress threatened to withhold states existing Medicaid funds if they do not comply with the expansion.

The states claim that this threat serves no purpose other than to force unwilling states to sign up for the new program.

We agree.

There is no valid reason to condition a state's existing Medicaid funds which are already being spent according to federal conditions on agreeing to the new program.

We examined a similar situation in a case called South Dakota versus Dole.

There, we did not strike down the federal law but only because the amount of money at stake was so small, less than one half of 1% of South Dakota's total budget.

Under those circumstances, we held that the threat to withdraw funds was, "relatively mild encouragement so that whether to accept the federal funds in conditions remains the prerogative of the states not merely in theory but in fact."

In this case, the threat to withhold funds is more than relatively mild encouragement.

It is a gun to the head.

A State that opts out of the Medicaid expansion stands to lose all of its existing Medicaid funding.

The threatened loss of over 10% of a state's overall budget leaves a State with no real option but to accept the Medicaid expansion.

The government however claims that the Medicaid expansion is just a modification of the existing program.

It observes that the original law contains a clause expressly reserving the right to alter, amend, or repeal any provision of the Medicaid program.

But the Medicaid expansion is a shift in kind not merely degree.

Under the Affordable Care Act, Medicaid is transformed into a program to meet the healthcare needs of the entire non-elderly population with income below 133% of the poverty level.

It is no longer a program to care for the neediest among us but rather an element of a comprehensive national plan to provide universal health insurance coverage.

A state could hardly anticipate that Congress' right to alter or amend that the Medicaid program included the power to transform it so dramatically.

We thus reject the government's argument that the states agreed to this when they signed up for the original Medicaid program.

Threatening to withdraw states' existing Medicaid funds if the states do not accept the expansion is an impermissible attempt to conscript states into the federal bureaucratic army.

Although there are separate writings on this issue as well, seven members of the Court agree that the Medicaid expansion violates the constitution's limits on the spending power.

Nothing in the controlling opinion precludes Congress from offering federal funds to states to expand their Medicaid programs.

What Congress cannot do is penalized states that declined to participate in that need program by taking away their existing Medicaid funding.

The Medicaid ruling does not affect other provisions of the Affordable Care Act.

States now have a real choice whether to accept the Medicaid expansion that may affect the implementation of the Act going forward.

But, for reasons we explained in our opinion, it does not impair the Act's other provisions in such a way that we must invalidate them in whole or in part.

The Court today rules that Congress does not have the power under the Commerce Clause to enact the individual mandate.

The Court goes on to rule that Congress does have such power under the Taxing Clause.

Finally, the Court rules that the expansion of Medicaid in the Affordable Care Act is unconstitutional to the extent, it allows the federal government to take away a state's Medicaid funds if the state does not adopt the expansion.

Our decision today is based on our responsibility recognized in Marbury versus Madison to say what the law is.

It is not in any way based on our judgment about whether the Affordable Care Act is good policy.

That judgment is for the people acting through their representatives.

It is not our job to save the people from the consequences of their political choices.

The judgment of the Court of Appeals for the Eleventh Circuit is affirmed in part and reversed in part.

Justices Breyer and Kagan joined parts 1, 2, 3(C), and 4 of this opinion.

Justices Ginsburg and Sotomayor joined parts 1, 2, and 3(C) and concurring the judgment with respect to part 4(B).

Justices Scalia, Kennedy, Thomas, and Alito have filed a joint dissenting opinion.

Justice Thomas has filed a dissenting opinion.

Justice Ginsburg has filed an opinion dissenting in part in which Justice Sotomayor joins in which Justices Breyer and Kagan joined in part.

Print this transcript Transcript: 

Justice Anthony Kennedy: As the Chief Justice has indicated, Justices Scalia, Thomas, Alito and I have written a joint dissent.

In our view, the Act before us is invalid in its entirety.

The joint dissent is organized this way.

First, it considers the constitutionality of the Individual Mandate and that, of course, requires a discussion whether the mandate can be sustained as a valid exercise of Congress' power to regulate interstate commerce or as an exercise of its power to tax.

Second, the joint dissent considers the constitutionality of the expansion of Medicaid in light of the argument that it coerces States to surrender the power that must be vested in them under principles of federalism.

Third, the joint dissent considers the question whether the Act's other provisions can be preserved if the mandate in Medicare -- Medicaid Expansion are unconstitutional, first the Individual Mandate.

Now the statute requires a defined class of individuals to purchase health insurance.

This mandate is first defended by the Government as an exercise of Congress' power under the Commerce Clause.

It is true that if an individual does not purchase insurance, he or she affects the insurance market to a degree.

But the Government's theory would make one's mere existence, the basis for federal regulation.

There would been no structural limit on the power of Congress.

As a result, the Government's theory would change the relation between the citizen and the Federal Government in a fundamental way.

We cannot accept the Government's theory.

There are structural limits upon Congress' powers.

In other words, there are some things the Federal Government cannot do and that clear principle carries the day here.

It requires us to conclude that Congress' power to regulate interstate commerce does not give at the authority to enact the Individual Mandate.

This conclusion is supported by five Justices, the Chief Justice and the four members of this joint dissent.

Now, despite the fact that Congress exceeded its power to regulate interstate commerce when it passed the Individual Mandate, the majority of the Court holds that the Individual Mandate, if it's recast as a tax, is -- is constitutional.

The Court unanimously concludes that the Individual Mandate is not a tax under the Anti-Injunction Act but five members of the Court then pivot and hold that the Individual Mandate is a tax for constitutional purposes.

And to do this, the majority rewrites the statute Congress wrote, we disagree.

The Act requires a purchase of health insurance and punishes violation of that mandate with a penalty.

But what Congress has called a penalty, the Court calls a tax.

What Congress called a requirement, the Court calls an option.

And where Congress mandates that the person shall obtain insurance, the Court says he may but need not obtain insurance.

In short, the Court imposes a tax when Congress deliberately rejected a tax.

Judicial tax-writing is particularly troubling as a usurpation of the legislative rule.

It places the power to tax in the branch of the Government least accountable to the citizenry, but the Constitution requires taxes to originate in the House of Representatives, the legislative body most accountable to the people.

There, elected officials must weigh the need for the tax against the terrible price they might pay at their next election.

Imposing a tax through judicial legislation inverts the constitutional scheme.

In the case of the Affordable Care Act, Congress went to great lengths to structure the mandate as a penalty not a tax, but the majority now says that it is a tax, at least for the purposes of sustaining it but will not for the purpose of jurisdiction.

As to the Medicaid Expansion, the second part of this joint dissent considers the Medicaid Expansion.

The expansion provides new funds to the States for Medicaid.

Its whole design is to threaten withdrawal of all of the States' federal funding for Medicaid if the State does not comply with the expansion directive.

Now, in -- in so doing, the Medicaid Expansion leave States with no realistic choice but to expand Medicaid and to participate in the expanded program.

It coerces them into administering a federal program against their will.

That blurs the line of political accountability between the States and their citizens.

The coercion effected by the statute is a violation of state sovereignty and on this threshold question of coercion, seven Justices agree.

Three Justices, however, devise a remedy.

That, again, in effect, rewrites the statute and changes its design.

And in a separate opinion by Justice Ginsburg, joined by Justice Sotomayor, these two other Justices conclude that the Medicaid Expansion is valid as written but in view of the disposition of the Chief Justice, they then agree with the remedy he adopts.

This joint dissent disagrees.

We find no judicial authority to rewrite the statute to permit this remedy.

The design of the Court's remedy, contrary to the statute Congress enacted, is to bar the Federal Government from withdrawing all preexisting Medicaid funding if a State elects not to participate in the Medicaid Expansion.

Once the specifics of today's ruling are understood, it will be apparent that the Affordable Care Act now must operate as the Court has revised it, not as Congress has designed it and the consequences of that result are as follows - The Court offers States a choice, where Congress one of them, to have no choice and to make matters worst, the choice the Court offers may be illusory.

That is because even if a State elects not to accept the expansion, its citizens are still subject to the Individual Mandate, now recast as a tax, but now, in those States the cost of the insurance that must be purchased may well be for hire for insurance companies have no Medicaid Expansion to help defray the cost of insuring unhealthy individuals at unprofitable rates.

This distorted version of the Act is now decreed by the Court and no one else.

It is the position of the joint dissent that the Medicaid Expansion cannot be saved in this way and that the expansion must be declared invalid.

The third and final part of our joint dissent considers severability, what to do with the remainder of the Act if the Individual Mandate and the Medicaid Expansion are unconstitutional.

In our view, both those provisions are essential to the Act's design and operation and all the Act's other provisions would not have been enacted without them.

It must follow that the entire statute is linked together and without the Mandate and Medicaid Expansion, the entire Act is inoperative.

Now, the joint dissent addresses at some length the question of severability for two reasons.

First, it's necessary for us to address severability in order to support the conclusion that, in our view, the Act is invalid in its entirety.

Second, our analysis of the Act's many interdependencies gives further support for our conclusion that the Court's Medicaid remedy is itself inconsistent with the Act.

The analysis in the severability part of the joint dissent makes clear that what the Court has done is to force on the Nation a new Act so that the health care system is now governed by what the Court has said, not what the Congress has said.

The fundamental problem with the Court's approach to the case is this.

It says the statute Congress did not write.

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 act and the public does not expect.

The Court's disposition invented in a textual as it is does not even have the merit of avoiding constitutional difficulties, it creates them.

The judgment on the Medicaid Expansion issue ushers in new federalism concerns and place -- 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 today are caution, minimalism and the understanding that the Federal Government is one of limited powers, but the Court's ruling undermines these 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 undermines state sovereignty.

We must submit, with due respect, that today's decision somehow overlooks this Court's historic rule and responsibility to teach, to -- to confirm, to insist upon this proposition.

The Constitution, though it dates from the founding of the Republic, does and always must have powerful meaning and vital relevance in the context of our own times.

This case presents real questions regarding the structure of the Constitution.

Some may think a case concerning constitutional structure with issues concerning checks and balances, separation of powers and federalism is somehow have lesser importance or priority in a case concerning liberties guaranteed in the Bill of Rights or the Civil War Amendments, but structure means liberty.

For without structure, there are insufficient means to hold to account a central government that exceeds its powers in controlling the lives of its citizens.

Today's decisions should have vindicated, not ignored these precepts.

For these reasons, we would find the Act invalid in its entirety.

With respect, we dissent.

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Justice Ruth Bader Ginsburg: In the 1930s, Congress responded to the need of senior citizens for old-age and survivors' insurance.

It did so by making social security, a tax based entirely federal program.

In 2010, Congress addressed the public's need for affordable health care when sickness or injury occurs.

Congress did so by taking a path unlike the one it took for social security instead of an entirely federal program.

The Affordable Health Care Act gives states and private insurers important roles in insuring medical care for those who need it.

The question the Court must answer is whether the Constitution stops Congress from taking the course it did.

I would answer emphatically no.

I agree with the Chief Justice that Congress' power to tax and spend supports the so-called individual mandate or minimum coverage provision, but I would make that an auxiliary holding.

As I see it, Congress' vast authority to regulate interstate commerce solidly undergirds the affordable health care legislation.

I would uphold the legislation first and foremost on that ground.

Since 1937, this Court has deferred, as it should, to Congress' policymaking in the economic and social realm.

Today, a majority of the Court rules that the Commerce Clause is not equal to the task.

That ruling harks back to the era ended 75 years ago when the Court routinely thwarted legislative efforts to regulate the economy in the interest of those who labor to sustain it.

It is a stunning setback.

It should not have staying power.

The Court's majority would compare health insurance to any other commodity, broccoli for example.

If the Government can compel people to buy insurance, then there was no commodity.

The Government can't force people to purchase, so the argument goes, but health care is not like vegetables or other items one is at liberty to buy or not to buy.

All of us will need health care, some sooner, some later, but we can't tell when, where or how dire our need will be.

A healthy 21-year-old, for example, may tomorrow be the victim of an accident that leaves him or her an invalid, in need of constant and costly medical care.

Further, to get broccoli, one must pay at the counter, not so of health care.

The accident victim who cannot pay the steep price of medical services will nevertheless receive emergency and follow-up care because the law and professional ethics so require and because ours is a humane society, but people who do purchase insurance end up footing the bill.

By requiring the healthy uninsured either to obtain insurance or pay a toll, Congress sought to end this free ride.

It is shortsighted moreover to see the mandate as a decree that the hale and hearty young people subsidize care rendered to older, less healthy people.

In the fullness of time, today's young and healthy will become society's old and infirm.

Viewed over a lifespan, the cost and benefits even out.

And as I just observed, the youth who does not want insurance today may find that tomorrow she desperately needs the services insurance is designed to secure.

What the mandate does essentially is to require people to prepay for medical care to insurance instead of waiting, expecting to pay out-of-pocket at the point of service when in reality many will lack the money to cover the cost.

The Chief Justice reasons that Congress can use its commerce power to regulate something already in existence, but cannot create that something in order to regulate it.

But the interstate health insurance and health care markets are not Congress' creations.

Both existed well before the enactment of the Affordable HealthCare Act.

I have already emphasized the unique attributes of the health care market, the fact that all of us will be in it sooner or later and cannot predict exactly when the huge free ride, a problem caused by people who refrain from purchasing insurance then become sick or injured and get care cost free to them but costly for those of us who have paid in advance.

Because there is no comparable market, the slippery slope envisioned by the Court's majority, if health insurance today then broccoli tomorrow, is far more imaginary than real.

As a learned jurist once commented, judges and lawyers live on the slippery slope of analogies.

They are not supposed to skid to the bottom.

Yes, the insurance purchase mandate is novel, but novelty is no reason to reject it.

As our economy grows and changes, Congress must be competent to devise legislation meeting current day social and economic realities.

For that reason, the Necessary and Proper Clause was included in the Constitution to ensure that the Federal Government would have the capacity to provide for conditions and developments, the framers knew they could scarcely foresee.

In enacting the Affordable Health Care Act, Congress' aim was to reduce the large numbers of U.S. residents, some 50 million in 2009, who lacked health insurance.

Congress was aware that the vast majority of those people lack insurance not by choice.

One group of particular concern to Congress were individuals with preexisting medical conditions.

Before the Affordable Health Care Act's enactment, the insurance industry charged these individuals steep prices or flatly denied them coverage.

Congress understood, however, that a simple ban on those practices would not work without the mandate to -- to acquire insurance covering those with preexisting conditions would trigger a death spiral in the heath insurance market.

Many people would not buy insurance until they suffered sickness or injury, premiums would skyrocket, more people would be added to the ranks of the uninsured because they could not pay the steep premiums and eventually, insurance companies left with a pool of high risk policyholders would exit the market.

With the mandate, the job could be done.

Access to insurance would be available and affordable and uncompensated care would be hugely reduced.

In no way was Congress' action improper.

The mandate acts directly on individuals.

It does not commandeer the States as intermediaries.

And along with other provisions of the Act, it addresses the sort of country-wide problem that made the Commerce Clause essential.

The crisis created by the many millions of U.S. residents who lack health insurance is hardly contained within state boundaries.

Far from encroaching on state prerogatives, the Affordable Health Care Act supplies a better response to remedy the States acting separately are incapable of meeting.

This Court has long recognized that the power to regulate interstate commerce is an affirmative power commensurate with national needs.

While the Court upholds the mandate, as it surely should, it also regrettably helms in Congress' commerce power.

In doing so, the Court invites assaults on national legislation irreconcilable with the framers' anticipation.

Their understanding and expectation was that the Commerce Clause would empower Congress to act in all cases for the general interest of the Union and also in those instances in which the States are separately incompetent.

My dissent from the Court's retrogressive reading of the Commerce Clause is joined by Justices Breyer, Sotomayor and Kagan.

There is a further issue; Congress' expansion of Medicaid to include a larger portion of the Nation's poor.

Medicaid is the prototypical example of federal-state cooperation.

Rather than authorizing a federal agency to administer a uniform national health care system for the poor, as Congress did in establishing Medicare for seniors, Congress offered States the opportunity to tailor Medicaid grants to their particular needs so long as they remain within bounds set by the federal law.

Congress reserved the right to alter, amend or repeal any and every provision of the Medicaid Act and participating States for their part agreed to amend their Medicaid plans consistent with alterations in the federal law.

From 1965 until 2010, States regularly conformed to amendments expanding Medicaid, sometimes quite sizably.

The 2010 expansion is different in kind the Court concludes 7-to-2.

Justice Sotomayor and I strongly disagree.

According to the Chief Justice, the expansion was misnamed.

It did not expand Medicaid as it existed in 2010 he maintains instead Congress established a wholly new program alongside old Medicaid and coerced the States to accept new Medicaid by threatening them with loss of funds from the old program if they hold out.

On this reasoning, the Court, for the first time ever, finds an exercise of Congress' spending power unconstitutionally coercive.

In truth, however, Medicaid is a single program with one constant aim to enable poor persons to receive basic health care when they need it.

What the expansion does is simply this.

It adds more people, all of them poor, to the Medicaid eligible population.

Congress did not otherwise change the operation of the program.

The Chief Justice justifies his characterization of the expansion as a new program on three grounds.

First, he says, by covering those earning up to 133% of the federal poverty line, the expansion, unlike Medicaid as originality enacted, does not care for the neediest among us.

The expansion covers individuals earning less than $15,000 annually.

Those low earners, on any fair assessment, ranked among the Nation's poor.

Second, the Chief observes that newly eligible people receive a level of coverage less comprehensive than the traditional Medicaid package.

But the Affordable Health Care Act did not introduce the less comprehensive package.

Since 2006, states had been free to use it for many of their Medicaid beneficiaries.

Third, the reimbursement rate for participating States is different.

True, but that rate is markedly more generous than the usual federal contribution, hardly something the States can complain about.

The Federal Government picks up 100% of the tab initially gradually reducing to 90%.

Suppose Congress had, from the start, made Medicaid eligible all those originally covered plus those added by the expansion, that would be unobjectionable under the Chief Justice's reasoning, but we have never held that a grant program becomes two rather one when Congress lays a foundation and later lose on it.

Congress can and often does expand programs adding new conditions that grant recipients must meet in order to continue receiving funds.

Our decision, I acknowledge -- our decisions have hypothesized that a financial inducement might pass the point where a pressure becomes coercion and therefore exceed Congress' spending power, but until today, that prospect has remained theoretical.

The Court had found no case fitting the bill.

Recall that Congress reserved to itself, when it adopted Medicaid in 1965, the right to alter, amend, even repeal any and every provision.

This Court long ago explained just what those words mean.

They mean Congress retains full and complete power to make such alterations and amendments as come within the just scope of the legislative power.

States have not missed that meaning.

Each time a State notified the Federal Government of a change it made in its own Medicaid plan, it certified both that it knew the federally set terms of participations could change and that it would abide by the changes as a condition of continued participation.

Today's decision holds that Congress can alter a spending program somewhat, but not too much.

We can anticipate bolder challenges than in the past urging that a congressional amendment goes too far turning pressure into compulsion.

When those challenges arrive, my colleagues may comprehend the wisdom of the observation that conceptions of impermissible coercion premised on a State's perceived inability to decline federal funds are just too amorphous to be judicially administrable.

At bottom, my colleagues' position is that the States' reliance on federal funds limits Congress' authority to alter its spending programs.

This gets things backward.

Congress, not the States, is tasked by the Constitution with spending federal money in service of their general welfare and each successive Congress is empowered to appropriate funds as it sees fit.

When the 111th Congress reached a conclusion about the portion of the Nation's poor that should qualify for Medicaid apportioned larger than a predecessor Congress covered, the later Congress abridged no States' right to existing or preexisting funds for in truth there are no such funds.

It is only money the States anticipate receiving, but can scarcely insist on receiving from future Congresses.

Seven Members of the Court, however, buy the argument that prospective withholding of anticipated funds exceeds Congress' spending power.

Given that holding, I entirely agree with the Chief Justice as to the appropriate remedy.

It is to bar the withholding found impermissible not to scrap the expansion altogether.

This Court has many times explained that when it confirms a statute marred by a constitutional infirmity, its endeavor must be to salvage, not demolish the legislation.

The Court does that by declaring the statute invalid to the extent it reaches too far, but otherwise leaving the statute intact.

Because the Court finds the withholding, not the granting of federal funds, incompatible with the Spending Clause, Congress' extension of Medicaid remains available to any State affirming its willingness to accept the uncommonly generous federal grant.

So, in the end, the Affordable Health Care Act survives largely unscathed, but the Court's Commerce and Spending Clause jurisprudence has been set awry

My expectation is that the setbacks will be temporary blips not permanent obstructions.

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ORAL ARGUMENT OF PAUL D. CLEMENT ON BEHALF OF THE PETITIONERS

Chief Justice John G. Roberts: We will continue argument this morning in Case Number 11-393, National Federation of Independent Business v. Sebelius and case 11-400, Florida v. The Department of HHS.

Mr. Clement.

Mr. Clement: Mr. Chief Justice, and may it please the Court:

If the individual mandate is unconstitutional, then the rest of the Act cannot stand.

As Congress found and the Federal Government concedes, the community rating and guaranteed-issue provisions of the Act cannot stand without the individual mandate.

Congress found that the individual mandate was essential to their operation.

And not only can guaranteed-issue and community-rating not stand, not operate in the manner that Congress intended, they would actually counteract Congress's basic goal of providing patient protection but also affordable care.

If you do not have the individual mandate to force people into the market then community rating and guaranteed-issue will cause the cost of premiums to skyrocket.

We can debate the order of magnitude of that but we can't debate that the direction will be upward.

We also can't debate--

Justice Sonia Sotomayor: Counsel, that may well be true.

The economists are going back and forth on that issue, and the figures vary from up 10 percent to up 30.

We are not in the habit of doing the legislative findings.

What we do know is that for those States that found prices increasing, that they found various solutions to that.

In one instance, and we might or may not say that it's unconstitutional, Massachusetts passed the mandatory coverage provision.

But others adjusted some of the other provisions.

Why shouldn't we let Congress do that, if in fact, the economists prove, some of the economists prove right, that prices will spiral?

What's wrong with leaving it to -- in the hands of the people who should be fixing this, not us?

Mr. Clement: --Well, a couple of questions -- a couple of responses, Justice Sotomayor.

First of all, I think that it's very relevant here that Congress had before it as examples some of the States that had tried to impose guaranteed-issue and community rating and did not impose an individual mandate.

And Congress rejected that model.

So your question is quite right in the saying that it's not impossible to have guaranteed-issue and community-rating without an individual mandate.

But it's a model that Congress looked at and specifically rejected.

And then, of course, there is Congress's own finding, and their finding, of course, this is (i), which is [= 43(a)of] the government's brief in the appendix, Congress specifically found that having the individual mandate is essential to the operation of guaranteed-issue and community-rating.

Justice Sonia Sotomayor: That's all it said it's essential to.

I mean, I'm looking at it.

The exchanges, the State exchanges are information -- gathering facilities that tell insurers what the various policies actually mean.

And that has proven to be a cost saver in many of the States who have tried it.

So why should we be striking down a cost saver when if what your argument is, was, that Congress was concerned about costs rising?

Why should we assume they wouldn't have passed that information?

Mr. Clement: I think a couple of things.

One, you get -- I mean, I would think you are going to have to take the bitter with the sweet.

And if Congress -- if we are going to look at Congress's goal of providing patient protection but also affordable care, we can't -- I don't think it works to just take the things that save money and cut out the things that are going to make premiums more expensive.

But at a minimum--

Justice Sonia Sotomayor: I want a bottom line is why don't we let Congress fix it?

Mr. Clement: --Well, let me answer the bottom line question, which is, no matter what you do in this case, at some point there's going to be -- if you strike down the mandate, there is going to be something for Congress to do.

The question is really, what task do you want to give Congress.

Do you want to give Congress the task of fixing the statute after something has been taken out, especially a provision at the heart, or do you want to give Congress the task of fixing health care?

And I think it would be better in this situation--

Justice Sonia Sotomayor: We are not taking -- If we strike down one provision, we are not taking that power away from Congress.

Congress could look at it without the mandatory coverage provision and say, this model doesn't work; let's start from the beginning.

Or it could choose to fix what it has.

We are not declaring -- one portion doesn't force Congress into any path.

Mr. Clement: --And of course that's right, Justice Sotomayor, and no matter what you do here, Congress will have the options available.

So if you, if you strike down only the individual mandate, Congress could say the next day: Well, that's the last thing we ever wanted to do so we will strike down the rest of the statute immediately and then try to fix the problem.

So whatever you do, Congress is going to have options.

The question is--

Justice Antonin Scalia: Well, there is such a thing as legislative inertia, isn't there?

Mr. Clement: --That's exactly what I was going to say, Justice Scalia, which is, I think the question for this Court is, we all recognize there is legislative inertia.

And then the question is: What is the best result in light of that reality?

Justice Sonia Sotomayor: Are you suggesting that we should take on more power to the Court?

Mr. Clement: No--

Justice Sonia Sotomayor: Because Congress would choose to take one path rather than another.

That's sort of taking onto the Court more power than one I think would want.

Mr. Clement: --And I agree.

We are simply asking this Court to take on straight on the idea of the basic remedial inquiry into severability which looks to be intent of the Congress--

Justice Antonin Scalia: Mr. Clement, I want to ask you about that.

Why -- why do we look to the -- are you sure we look to the intent of the Congress?

I thought that, you know, sometimes Congress says that these provisions will -- all the provisions of this Act will be severable.

And we ignore that when the Act really won't work.

When the remaining provisions just won't work.

Now how can you square that reality with the proposition that what we're looking for here is what would this Congress have wanted?

Mr. Clement: --Well, two responses, Justice Scalia.

We can look at this Court's cases on severability, and they all formulate the task a little bit differently.

Justice Antonin Scalia: Yes, they sure do.

Mr. Clement: And every one of them talks about congressional intent.

But here's, here's the other answer--

Justice Antonin Scalia: That's true, but is it right?

Mr. Clement: --It is right.

And here is how I would answer your question, which is, when Congress includes a severability clause, it is addressing the issue in the abstract.

It doesn't say: No matter which provisions you strike down, we absolutely, positively want what's left.

Justice Antonin Scalia: All right.

The consequence of your proposition, would Congress have enacted it without this provision, okay that's the consequence.

That would mean that if we struck down nothing in this legislation but the -- what you call the corn husker kickback, okay, we find that to violate the constitutional proscription of venality, okay?

When we strike that down, it's clear that Congress would not have passed it without that.

It was the means of getting the last necessary vote in the Senate.

And you are telling us that the whole statute would fall because the corn husker kickback is bad.

That can't be right.

Mr. Clement: Well, Justice Scalia, I think it can be, which is the basic proposition, that it's congressional intent that governs.

Now everybody on this Court has a slightly different way of dividing legislative intent.

And I would suggest the one common brand among every member of this Court as I understand it is you start with the text.

Everybody can agree with that.

Justice Elena Kagan: So Mr. Clement, let's start with the text.

Then you suggest, and I think that there is -- this is right, that there is a textual basis for saying that the guaranteed-issue and the community ratings provisions are tied to the mandate.

And you said -- you pointed to where that was in the findings.

Is there a textual basis for anything else, because I've been unable to find one.

It seems to me that if you look at the text, the sharp dividing line is between guaranteed-issue and community ratings on the one hand, everything else on the other.

Mr. Clement: Well, Justice Kagan I would be delighted to take you through my view of the text and why there are other things that have to fall.

The first place I would ask you to look is finding J which is on the same page 43 A. And as I read that, that's a finding that the individual mandate is essential to the operation of the exchanges.

But there are other links between guaranteed-issue and community ratings and the exchanges.

And there I think it's just the way that the exchanges are supposed to work.

And the text makes this clear is they are supposed to provide a market where people can compare community rated insurance.

That's what makes the exchanges function.

Justice Elena Kagan: Although the exchanges function perfectly well in Utah where there is no mandate.

They function differently, but they function.

And the question is always, does Congress want half a loaf.

Is half a loaf better than no loaf?

And on something like the exchanges it seems to me a perfect example where half a loaf is better than no loaf.

The exchanges will do something.

They won't do everything that Congress envisioned.

Mr. Clement: Well, Justice Kagan, I think there are situations where half a loaf is actually worse and I want to address that.

But before I do it -- broadly.

But before I do that, if I could stick with just the exchanges.

I do think the question that this Court is supposed to ask is not just whether they can limp along and they can operate independently, but whether they operate in the manner that Congress intended.

And that's where I think the exchanges really fall down.

Because the vision of the exchanges was that if you got out of this current situation where health insurance is basically individualized price based on individualized underwriting and you provide community ratings, then it's going to be very easy for people to say okay, well this is a silver policy and this is a bronze policy and this is a gold policy and we can, you know, I can just pick which insurer provides what I think is going to be the best service based on those comparable provisions.

Justice Elena Kagan: Mr. Clement, you just said something which you say a lot in your brief.

You say the question is the manner in which it would have operated.

And I think that that's not consistent with our cases.

And I guess the best example would be Booker where we decided not to sever provisions, notwithstanding that the sentencing guidelines clearly operate in a different manner now than they did when Congress passed them.

They operate as advisory rather than mandatory.

Mr. Clement: Well, but Justice Kagan, I mean I actually think Booker supports our point as well, because there are two aspects of the remedial holding of Booker.

And the first part of it, which I think actually very much supports our point is where the majority rejects the approach of the dissent, which actually would have required nothing in the statute to have been struck, not a single word.

But nonetheless this Court said, well, if you do that then all of the sentencing is basically going to be done by a combination of the juries and the prosecutors and the judges are going to be cut out.

And the Court said the one thing we know is that's not the manner in which Congress thought that this should operate.

Now later they make a different judgment about the -- which particular provisions to cut out.

But I do think Booker is consistent with this way of looking at it and certainly consistent with Brock, the opinion we rely on because there the Court only reached that part of the opinion after they already found that the must-hire provision operated functionally independent from the legislative detail, so--

Justice Ruth Bader Ginsburg: Mr. Clement, there are so many things in this Act that are unquestionably okay.

I think you would concede that reauthorizing what is the Indian Healthcare Improvement Act changes to long benefits, why make Congress redo those?

I mean it's a question of whether we say everything you do is no good, now start from scratch, or to say, yes, there are many things in here that have nothing to do frankly with the affordable healthcare and there are some that we think it's better to let Congress to decide whether it wants them in or out.

So why should we say it's a choice between a wrecking operation, which is what you are requesting, or a salvage job.

And the more conservative approach would be salvage rather than throwing out everything.

Mr. Clement: --Well, Justice Ginsburg, two kinds of responses to that.

One, I do think there are some provisions that I would identify as being at the periphery of this statute.

And I'll admit that the case for severing those is perhaps the strongest.

But I do think it is fundamentally different, because if we were here arguing that some provision on the periphery of the statute, like the Biosimilars Act or some of the provisions that you've mentioned was unconstitutional, I think you'd strike it down and you wouldn't even think hard about severability.

What makes this different is that the provisions that have constitutional difficulties or are tied at the hip to those provisions that have the constitutional difficulty are the very heart of this Act.

And then if you look at how they are textually interconnected to the exchanges, which are then connected to the tax credits, which are also connected to the employer mandates, which is also connected to some of the revenue offsets, which is also connected to Medicaid, if you follow that through what you end up with at the end of that process is just sort of a hollow shell.

And at that point I think there is a strong argument for not -- I mean, you can't possibly think that Congress would have passed that hollow shell without the heart of the Act.

Chief Justice John G. Roberts: Well, but it would have -- it would have passed parts of the hollow shell.

I mean, a lot of this is reauthorization of appropriations that have been reauthorized for the previous 5 or 10 years and it was just more convenient for Congress to throw it in in the middle of the 2700 pages than to do it separately.

I mean, can you really suggest -- I mean, they've cited the Black Lung Benefits Act and those have nothing to do with any of the things we are talking about.

Mr. Clement: Well, Mr. Chief Justice, they tried to make them germane.

But I'm not here to tell you that -- some of their -- surely there are provisions that are just looking for the next legislative vehicle that is going to make it across the finish line and somebody's going to attach it to anything that is moving.

I mean, I'll admit that.

But the question is when everything else from the center of the Act is interconnected and has to go, if you follow me that far, then the question is would you keep this hollowed-out shell?

Justice Sonia Sotomayor: Well, but it's not--

Justice Anthony Kennedy: But I'm still not sure, what is the test -- and this was the colloquy you had with Justice Scalia with the corn husker hypothetical.

So I need to know what standard you are asking me to apply.

Is it whether as a rational matter separate parts could still function, or does it focus on the intent of the Congress?

If you -- suppose you had party A wants proposal number 1, party B wants proposal number 2.

Completely unrelated.

One is airline rates, the other is milk regulation.

And we -- and they decide them together.

The procedural rules are these have to be voted on as one.

They are both passed.

Then one is declared unconstitutional.

The other can operate completely independently.

Now, we know that Congress would not have intended to pass one without the other.

Is that the end of it, or is there some different test?

Because we don't want to go into legislative history, that's intrusive, so we ask whether or not an objective -- as an objective rational matter one could function without -- I still don't know what the test is that we are supposed to apply.

And this is the same question as Justice Scalia asked.

Could you give me some help on that?

Mr. Clement: Sure.

Justice Kennedy, the reality is I think this Court's opinions have at various times applied both strains of the analysis.

Justice Anthony Kennedy: And which one -- and what test do you suggest that we follow if we want to clarify our jurisprudence?

Mr. Clement: I'm -- I'm a big believer in objective tests, Justice Kennedy.

I would be perfectly happy with you to apply a more textually based objective approach.

I think there are certain justices that are more inclined to take more of a peek at legislative history, and I think if you look at the legislative history of this it would only fortify the conclusion that you would reach from a very objective textual inquiry.

But I am happy to focus the Court on the objective textual inquiry.

Chief Justice John G. Roberts: I don't understand--

Justice Anthony Kennedy: And that objective test is what?

Mr. Clement: Is whether the statute can operate in the manner that Congress -- that Congress intended.

Justice Sonia Sotomayor: --No statute can do that, because once we chop off a piece of it, by definition, it's not the statute Congress passed.

So it has to be something more than that.

Mr. Clement: Justice Sotomayor, every one of your cases, if you have a formulation for severability, if you interpret it woodenly it becomes tautological.

And Justice Blackmun addressed this in footnote 7 of the Brock opinion that we rely on, where he says: Of course it's not just -- you know, it doesn't operate exactly in the manner because it doesn't have all the pieces, but you still make an inquiry as to whether when Congress links two provisions together and one really won't work without the other--

Justice Sonia Sotomayor: So what is wrong with the presumption that our law says, which is we presume that Congress would want to sever?

Wouldn't that be the simplest, most objective test?

Going past what Justice Scalia says we have done, okay, get rid of legislative intent altogether, which some of our colleagues in other contexts have promoted, and just say: Unless Congress tells us directly, it's not severable, we shouldn't sever.

We should let them fix their problems.

You still haven't asked -- answered me why in a democracy structured like ours, where each branch does different things, why we should involve the Court in making the legislative judgment?

Mr. Clement: --Justice Sotomayor let me try to answer the specific question and then answer the big picture question.

The specific question is, I mean, you could do that.

You could adopt a new rule now that basically says, look, we've severed--

Justice Sonia Sotomayor: It's not a new rule.

We presume.

We've rebutted the presumption in some cases--

Mr. Clement: --Right.

Justice Sonia Sotomayor: --But some would call that judicial action.

Mr. Clement: I think in fairness, though, Justice Sotomayor, to get to the point you are wanting to get to, you would have to ratchet up that presumption a couple of ticks on the scale, because the one thing--

Justice Sonia Sotomayor: And what's wrong with that?

Mr. Clement: --Well, one thing that's wrong with that, which is still at a smaller level, is that's inconsistent with virtually every statement in every one of your severability opinions, which all talk about congressional intent.

Justice Elena Kagan: Well, it's not inconsistent with our practice, right, Mr. Clement?

I mean, you have to go back decades and decades and decades, and I'm not sure even then you could find a piece of legislation that we refused to sever for this reason.

Mr. Clement: I don't think that's right, Justice Kagan.

I think there are more recent examples.

A great example I think which sort of proves, and maybe is a segue to get to my broader point, is a case that involves a State statute, not a Federal statute, but I don't think anything turns on that, is Randall against Sorrell, where this Court struck down various provisions of the Vermont campaign finance law.

But there were other contribution provisions that were not touched by the theory that the Court used to strike down the contribution limits.

But this Court at the end of the opinion said: There is no way to think that the Vermont legislator would have wanted these handful of provisions there on the contribution side, so we will strike down the whole thing.

And if I could make the broader point, I mean, I think the reason it makes sense in the democracy with separation of powers to in some cases sever the whole thing is because sometimes a half a loaf is worse.

And a great example, if I dare say so, is Buckley.

In Buckley this Court looked at a statute that tried to, in a coherent way, strike down limits on contributions and closely related expenditures.

This Court struck down the ban on expenditures, left the contribution ban in place, and for 4 decades Congress has tried to fix what's left of the statute, largely unsuccessfully, whereas it would have I think worked much better from a democratic and separation of powers standpoint if the Court would have said: Look, expenditures are -- you can't limit expenditures under the Constitution; the contribution provision is joined at the hip.

Give Congress a chance to actually fix the problem.

Justice Elena Kagan: Mr. Clement--

Justice Stephen G. Breyer: Could I ask you one question, which is a practical question.

I take as a given your answer to Justice Kennedy, you are saying let's look at it objectively and say what Congress has intended, okay?

This is the mandate in the community, this is Titles I and II, the mandate, the community, pre-existing condition, okay?

Here's the rest of it, you know, and when I look through the rest of it, I have all kinds of stuff in there.

And I haven't read every word of that, I promise.

As you pointed out, there is biosimilarity, there is breast feeding, there is promoting nurses and doctors to serve underserved areas, there is the CLASS Act, etcetera.

What do you suggest we do?

I mean, should we appoint a special master with an instruction?

Should we go back to the district court?

You haven't argued most of these.

As I hear you now, you're pretty close to the SG.

I mean, you'd like it all struck down, but we are supposed to apply the objective test.

I don't know if you differ very much.

So what do you propose that we do other than spend a year reading all this and have you argument all this?

Mr. Clement: Right.

What I would propose is the following, Justice Breyer, is you follow the argument this far and then you ask yourself whether what you have left is a hollowed-out shell or whether--

Justice Stephen G. Breyer: I would say the Breast Feeding Act, the getting doctors to serve underserved areas, the biosimilar thing and drug regulation, the CLASS Act, those have nothing to do with the stuff that we've been talking about yesterday and the day before, okay?

So if you ask me at that level, I would say, sure, they have nothing to do with it, they could stand on their own.

The Indian thing about helping the underserved Native Americans, all that stuff has nothing to do.

Black lung disease, nothing to do with it, okay?

So that's -- do you know what you have there?

A total off-the-cuff impression.

So that's why I am asking you, what should I do?

Mr. Clement: --What you should do, is let me say the following, which is follow me this far, which is mandatory, individual mandate is tied, as the government suggests, to guaranteed-issue and community rating, but the individual mandate, guaranteed-issue, and community rating together are the heart of this Act.

They are what make the exchanges work.

The exchanges in turn are critical to the tax credits, because the amount of the tax credit is key to the amount of the policy price on the exchange.

The exchanges are also key to the employer mandate, because the employer mandate becomes imposed on an employer if one of the employees gets insurance on the exchanges.

But it doesn't stop there.

Look at the Medicare provision for DISH hospitals, okay?

These are hospitals that serve a disproportionate share of the needy.

This isn't in Title I. It's in the other part that you had in your other hand.

But it doesn't work without the mandate, community rating and guaranteed-issue.

Justice Samuel Alito: Well, can I ask you this, Mr. Clement?

Mr. Clement: Sure.

Justice Samuel Alito: What would your fallback position be if -- if we don't accept the proposition that if the mandate is declared unconstitutional, the rest of the Act, every single provision, has to fall?

Other -- proposed other dispositions have been proposed.

There's the Solicitor General's disposition, the recommended disposition to strike down the guaranteed-issue and community rating provisions.

One of the -- one amicus says strike down all of Title I, another one says strike down all of Title I and Title II.

What -- what would you suggest?

Mr. Clement: Well, I -- I think what I would suggest, Justice Alito -- I don't want to be unresponsive -- is that you sort of follow the argument through and figure out what in the core of the Act falls.

And then I guess my fallback would be if what's left is a hollowed-out shell, you could just leave that standing.

If you want a sort of practical answer, I mean, I do think you could just -- you know, you could use Justice Breyer's off-the-cuff as a starting point and basically say, you know, Title I and a handful of related provisions that are very closely related to that are -- are really the heart of the Act--

Chief Justice John G. Roberts: --Well, that's--

Mr. Clement: --the bigger volume -- on the other hand -- I mean, you could strike one and leave the other, but at a certain point -- I'm sorry, Mr. Chief Justice.

Chief Justice John G. Roberts: --Finish your certain point.

Mr. Clement: At -- at a certain point, I just think that, you know, the better answer might be to say, we've struck the heart of this Act, let's just give Congress a clean slate.

If it's so easy to have that other big volume get reenacted, they can do it in a couple of days; it won't be a big deal.

If it's not, because it's very ----

[Laughter]

--well, but -- I mean, you can laugh at me if you want, but the point is, I'd rather suspect that it won't be easy.

Because I rather suspect that if you actually dug into that, there'd be something that was quite controversial in there and it couldn't be passed quickly--

Chief Justice John G. Roberts: But the -- the--

Mr. Clement: --and that's our whole point.

Chief Justice John G. Roberts: --the -- the reality of the passage -- I mean, this was a piece of legislation which, there was -- had to be a concerted effort to gather enough votes so that it could be passed.

And I suspect with a lot of these miscellaneous provisions that Justice Breyer was talking about, that was the price of the vote.

Put in the Indian health care provision and I will vote for the other 2700 pages.

Put in the black lung provision, and I'll go along with it.

That's why all -- many of these provisions I think were put in, not because they were unobjectionable.

So presumably what Congress would have done is they wouldn't have been able to put together, cobble together, the votes to get it through.

Mr. Clement: Well, maybe that's right, Mr. Chief Justice.

And I don't want to, I mean, spend all my time on -- fighting over the periphery, because I do think there are some provisions that I think you would make as -- as an exercise of your own judgment, the judgment that once you've gotten rid of the core provisions of this Act, that you would then decide to let the periphery fall with it.

But if you want to keep the periphery, that's fine.

What I think is important, though, as to the core provisions of the Act, which aren't just the mandate community rating and guaranteed-issue, but include the exchanges, the tax credit, Medicare and Medicaid -- as to all of that, I think you do want to strike it all down to avoid a redux of Buckley.

If I could reserve the remainder of my time.

Chief Justice John G. Roberts: Thank you, Mr. Clement.

Mr. Kneedler.

ORAL ARGUMENT OF EDWIN S. KNEEDLER ON BEHALF OF THE RESPONDENTS

Mr. Kneedler: Thank you, Mr. Chief Justice, and may it please the Court:

There should be no occasion for the Court in this case to consider issues of severability, because as we argue, the -- the minimum coverage provision is fully consistent with Article I of the Constitution.

But if the Court were to conclude otherwise, it should reject Petitioners' sweeping proposition that the entire Act must fall if this one provision is held unconstitutional.

As an initial matter, we believe the Court should not even consider that question.

The vast majority of the provisions of this Act do not even apply to the Petitioners, but instead apply to millions of citizens and businesses who are not before the Court--

Chief Justice John G. Roberts: How does your proposal actually work?

Your idea is that, well, they can take care of it themselves later.

I mean, do you contemplate them bringing litigation and saying -- I guess the insurers would be the most obvious ones -- without -- without the mandate, the whole thing falls apart and we're going to bear a greater cost, and so the rest of the law should be struck down.

And that's a whole other line of litigation?

Mr. Kneedler: --Well, I -- I think the continuing validity of any particular provision would arise in litigation that would otherwise arise under that provision by parties who are actually--

Chief Justice John G. Roberts: But what cause of action is it?

I've never heard of a severability cause of action.

Mr. Kneedler: --Well, in the first place, I don't -- the point isn't that there has to be a -- an affirmative cause of action to decide this.

You could -- for example, to use the Medicare reimbursement issue is, one of the things that this Act does is change Medicare reimbursement rates.

Well, the place where someone adjudicates the validity of Medicare reimbursement rates is through the special statutory review procedure for that.

And the same thing is true of the Anti-Injunction Act--

Justice Antonin Scalia: Mr. Kneedler, there -- there are some provisions which nobody would have standing to challenge.

If the provision is simply an expenditure of Federal money, it -- it doesn't hurt anybody except the taxpayer, but the taxpayer doesn't have standing.

That -- that just continues.

Even though it -- it is -- it should -- it is so closely aligned to what's been struck down that it ought to go as well.

But nonetheless, that has to continue because there's nobody in the world that can challenge it.

Can that possibly be the law?

Mr. Kneedler: --I think that proves our point, Justice Scalia.

This Court has repeatedly said that just because there's -- no one may have standing to challenge -- and particularly like tax credits or taxes which are challenged only after going through the Anti-Injunction Act -- just because no one has standing doesn't mean that someone must.

But beyond that--

Justice Antonin Scalia: But -- but those are provisions that have been legitimately enacted.

The whole issue here is whether these related provisions have been legitimately enacted, or whether they are so closely allied to one that has been held to be unconstitutional that they also have not been legitimately enacted.

You -- you can't compare that to -- to cases dealing with a -- a statute that nobody denies is -- is constitutional.

Mr. Kneedler: --This -- this case is directly parallel to the Printz case, in our view.

In that case, the Court struck down several provisions of the Brady Act, but went on to say it had no business addressing the severability of other provisions that did not apply to the people before whom--

Justice Sonia Sotomayor: But--

Justice Stephen G. Breyer: What he's thinking of is this: I think Justice Scalia is thinking, I suspect, of -- imagine a tax which says, this tax, amount Y, goes to purpose X, which will pay for half of purpose X. The other half will come from the exchanges somehow.

That second half is unconstitutional.

Purpose X can't possibly be carried out now with only half the money.

Does the government just sit there collecting half the money forever because nobody can ever challenge it?

You see, there -- if it were inextricably connected, is it enough to say, well, we won't consider that because maybe somebody else could bring that case and then there is no one else?

Is that--

Mr. Kneedler: --Yes, we think that is the proper way to proceed.

Severability--

Justice Ruth Bader Ginsburg: It's not a choice between someone else bringing the case and a law staying in place.

And what we're really talking about, as Justice Sotomayor started this discussion, is who is the proper party to take out what isn't infected by the Court's holding -- with all these provisions where there may be no standing, one institution clearly does have standing, and that's Congress.

And if Congress doesn't want the provisions that are not infected to stand, Congress can take care of it.

It's a question of which -- which side -- should the Court say, we're going to wreck the whole thing, or should the Court leave it to Congress?

Mr. Kneedler: --We think the Court should leave it to Congress for two reasons.

One is the point I'm making now about justiciability, or whether the Court can properly consider it at all.

And the second is, we think only a few provisions are inseverable from the minimum coverage provision.

I just would like to--

Chief Justice John G. Roberts: Before you go, Mr. Kneedler, I'd like your answer to Justice Breyer's question.

I think you were interrupted before that--

Mr. Kneedler: --Yes.

No.

We -- we believe that in that case, the -- the tax -- the tax provision should not be struck down.

In the first place, the Anti-Injunction Act would bar a -- a direct suit to challenge it.

It would be very strange to allow a tax to be struck down on the basis of a severability analysis.

Severability arises in a case only where it's necessary to consider what relief a party before the Court should get.

The only party--

Justice Samuel Alito: Suppose that there was -- suppose there was a non-severability provision in -- in this Act.

If one provision were to be held unconstitutional, then every single -- someone would have to bring a -- a separate lawsuit challenging every single other provision in the Act and say, well, one fell and the Congress said it's all -- it's a package, it can't be separated.

That's your position?

Mr. Kneedler: --The -- the fact that that's such a clause might make it easy doesn't change the point.

Article III jurisdictional problems apply to easy questions as well as -- as hard questions.

If I could just--

Justice Anthony Kennedy: But there's no Article III jurisdictional problem in Justice Alito's hypothetical, that this is a remedial exercise of the Court's power to explain the consequences of its judgment in this case.

Mr. Kneedler: --But -- this Court had said that one has -- has to have standing for every degree of relief that -- that is sought.

That was in Davis, that was Los Angeles v. Lyons.

Justice Antonin Scalia: Mr. Kneedler--

Mr. Kneedler: --Daimler/Chrysler--

Justice Antonin Scalia: --don't you think it's unrealistic to say leave it to Congress, as though you are sending it back to Congress for Congress to consider it dispassionately on balance, should we have this provision or should we not have provision?

That's not what it's going to be.

It's going to be, these provisions are in effect; even though you -- a lot of you never wanted them to be in effect, and you only voted for them because you wanted to get the heart of the -- the Act, which has now been cut out; but nonetheless these provisions are the law, and you have to get the votes to overturn them.

That's an enormously different question from whether you get the votes initially to put them into the law.

What -- there, there is no way that this Court's decision is not going to distort the congressional process.

Whether we strike it all down or leave some of it in place, the congressional process will never be the same.

One way or another, Congress is going to have to reconsider this, and why isn't it better to have them reconsider it -- what -- what should I say -- in toto, rather than having some things already in the law which you have to eliminate before you can move on to consider everything on balance?

Mr. Kneedler: --We think as a matter of judicial restraint, limits on equitable remedial power limit this Court to addressing the provision that has been challenged as unconstitutional and anything else that the plaintiff seeks as relief.

Here the only--

Justice Anthony Kennedy: But in restraint--

Justice Sonia Sotomayor: --Mr. Kneedler would you please--

Chief Justice John G. Roberts: --Justice Kennedy?

Justice Anthony Kennedy: --When you say judicial restraint, you are echoing the earlier premise that it increases the judicial power if the judiciary strikes down other provisions of the Act.

I suggest to you it might be quite the opposite.

We would be exercising the judicial power if one Act was -- one provision was stricken and the others remained to impose a risk on insurance companies that Congress had never intended.

By reason of this Court, we would have a new regime that Congress did not provide for, did not consider.

That, it seems to me can be argued at least to be a more extreme exercise of judicial power than to strike -- than striking the whole.

Mr. Kneedler: --I -- I -- I think not--

Justice Anthony Kennedy: I just don't accept the premise.

Mr. Kneedler: --I think not, Justice Kennedy and then I -- I will move on.

But this is exactly the situation in Printz.

The Court identified the severability questions that were -- that were briefed before the Court as important ones, but said that they affect people who are -- rights and obligations of people who are not before the Court.

Justice Sonia Sotomayor: --Mr. Kneedler, move away from the issue of whether it's a standing question or not.

Mr. Kneedler: Right.

Justice Sonia Sotomayor: Make the assumption that's an -- that this is an issue of the Court's exercise of discretion.

Because the last two questions had to do with what's wise for the Court to do, not whether it has power to do it or not.

Mr. Kneedler: Right.

That--

Justice Sonia Sotomayor: So let's move beyond the power issue, which your answers have centered on, and give me a sort of -- policy.

And I know that's a, that's a bugaboo word sometimes, but what should guide the Court's discretion?

Mr. Kneedler: --Well, we think that matters of justiciability do blend into--

Justice Sonia Sotomayor: Would you please -- I've asked you three times to move around that.

Mr. Kneedler: --blend into, blend into discretion, and in turn blend into the merits of the severability question.

And as to that, just to answer a question that, that several Justices have asked, we think that severability is a matter of statutory interpretation.

It should be resolved by looking at the structure and the text of the Act, and the Court may look at legislative history to figure out what the text and structure mean with respect to severability.

We don't--

Justice Antonin Scalia: Mr. Kneedler, what happened to the Eighth Amendment?

You really want us to go through these 2,700 pages?

And do you really expect the Court to do that?

Or do you expect us to -- to give this function to our law clerks?

Is this not totally unrealistic?

That we are going to go through this enormous bill item by item and decide each one?

Mr. Kneedler: --Well--

Justice Sonia Sotomayor: I thought the answer was you don't have to because--

Mr. Kneedler: --Well, that is, that is the--

Justice Sonia Sotomayor: --what we have to look at is what Congress said was essential, correct?

Mr. Kneedler: --That is correct, and I'd also like to -- going -- I just want to finish the thought I had about this being a matter of statutory interpretation.

The Court's task, we submit, is not to look at the legislative process to see whether the bill would been -- would have passed or not based on the political situation at the time, which would basically convert the Court into a function such as a whip count.

That is not the Court's--

Justice Elena Kagan: And Mr. Kneedler, that would be a revolution--

Mr. Kneedler: --Yes.

Justice Elena Kagan: --in our severability law, wouldn't it?

Mr. Kneedler: It would.

Justice Elena Kagan: I mean, we have never suggested that we were going to say, look, this legislation was a brokered compromise and we are going to try to figure out exactly what would have happened in the complex parliamentary shenanigans that go on across the street and figure out whether they would have made a difference.

Instead, we look at the text that's actually given us.

For some people, we look only at the text.

It should be easy for Justice Scalia's clerks.

Mr. Kneedler: I -- I think -- I think that--

Justice Antonin Scalia: I don't care whether it's easy for my clerks.

I care whether it's easy for me.

Mr. Kneedler: --I think that -- I think that's exactly right.

As I said, it is a question of statutory interpretation.

Chief Justice John G. Roberts: Well, how is that -- what's exactly right?

It's a question of statutory interpretation; that means you have to go through every line of the statute.

I haven't heard your answer to Justice Scalia's question yet.

Mr. Kneedler: Well, I -- I think in this case there is an easy answer, and that is, Justice Kagan pointed out that, that the Act itself creates a sharp dividing line between the minimum coverage provision -- the package of -- of reforms: The minimum coverage provision along with the guaranteed-issue and community rating.

That is one package that Congress deemed essential.

Chief Justice John G. Roberts: How do you know that?

Where is this line?

I looked through the whole Act, I didn't read -- well--

Mr. Kneedler: It is in--

Chief Justice John G. Roberts: --Where is the sharp line?

Mr. Kneedler: --It is in Congress's findings that the -- that the minimum coverage provision -- without it the Court -- the -- Congress said, in finding I, without that provision people would wait to get insurance, and therefore -- and cause all the adverse selection problems that arise.

Chief Justice John G. Roberts: No, no.

That -- that makes your case that the one provision should fall if the other does.

It doesn't tell us anything about all the other provisions.

Mr. Kneedler: Well, I -- I think -- I think it does, because Congress said it was essential to those provisions, but it conspicuously did not say that it was essential to other provisions.

Chief Justice John G. Roberts: Well--

Justice Samuel Alito: May I ask you about the argument that is made in the economists' amicus brief?

They say that the insurance reforms impose 10-year costs of roughly $700 billion on the insurance industry, and that these costs are supposed to be offset by about 350 billion in new revenue from the individual mandate and 350 billion from the Medicaid expansion.

Now if the 350 billion -- maybe you will disagree with the numbers, that they are fundamentally wrong; but assuming they are in the ballpark, if the 350 million from the individual mandate were to be lost, what would happen to the insurance industry, which would now be in the -- in the hole for $350 billion over 10 years?

Mr. Kneedler: I don't -- I mean, first of all, for the Court to go beyond text and legislative history to try to figure out how the finances of the bill operate, it -- it's like being a budget committee.

But -- but we think the, the economists had added up the figures wrong.

If there is Medicaid expansion, the insurance -- and the insurance companies are involved in that, they are going to be reimbursed.

Chief Justice John G. Roberts: --But what if there isn't Medicaid expansion?

We've talked about the individual mandate, but does the government have a position on what should happen if the Medicaid expansion is struck down?

Mr. Kneedler: We don't -- we don't think that that would have any effect.

That could be addressed in the next argument.

But we don't think that would have any effect on the -- on the rest of the -- on the rest of the Act.

Chief Justice John G. Roberts: So if your -- the government's position is that if Medicaid expansion is struck down, the rest of the Act can operate--

Mr. Kneedler: Yes.

Yes.

It's -- in the past Congress has expanded Medicaid coverage without there being -- it's done it many times without there being a minimum coverage provision.

Justice Anthony Kennedy: But I still don't understand where you are with the answer to Justice Alito's question.

Assume that there is a, a substantial probability that the 350 billion plus 350 billion equals 7 is going to be cut in half if the individual mandate is -- is stricken.

Assume there is a significant possibility of that.

Is it within the proper exercise of this Court's function to impose that kind of risk?

Can we say that the Congress would have intended that there be that kind of risk?

Mr. Kneedler: Well, we don't think it's in the Court's place to look at the, at the budgetary implications, and we also--

Justice Anthony Kennedy: But isn't that -- isn't that the point then, why we should just assume that it is not severable?

Mr. Kneedler: --No.

Justice Anthony Kennedy: If we -- if we lack the competence to even assess whether there is a risk, then isn't this an awesome exercise of judicial power?

Mr. Kneedler: No, I don't--

Justice Anthony Kennedy: To say we are doing something and we are not telling you what the consequences might be?

Mr. Kneedler: --No, I don't think so, because when you -- when you are talking about monetary consequences, you are looking through the Act, you are looking behind the Act, rather than -- the Court's function is to look at the text and structure of the Act and what the substantive provisions of the Act themselves mean.

And if I could go past--

Justice Antonin Scalia: Mr. Kneedler, can I -- can you give us a prior case in -- that -- that resembles this one in which we -- we are asked to strike down what the other side says is the heart of the Act and yet leave in -- as -- as you request, leave, in effect, the rest of it?

Have we ever -- most of our severability cases, you know, involve one little aspect of the Act.

The question is whether the rest.

When have we ever really struck down what was the main purpose of the Act, and left the rest in effect?

Mr. Kneedler: --I think Booker is the best example of that.

In -- in Booker the mandatory sentencing provisions were central to the act, but the Court said Congress would have preferred a statute without the mandatory provision in the Act, and the Court struck that but the rest of the sentencing guidelines remained.

Justice Antonin Scalia: I think the reason -- the reason the majority said that was they didn't think that what was essential to the Act was what had been stricken down, and that is the -- the ability of the judge to say on his own what -- what -- what the punishment would be.

I don't think that's a case where we struck -- where we excised the heart of the statute.

You have another one?

Mr. Kneedler: There is no example--

Justice Antonin Scalia: There is no example.

This is really--

Mr. Kneedler: --to our -- to our -- that we have found that suggests the contrary.

Justice Antonin Scalia: --This is really a case of first impression.

I don't know another case where we have been confronted with this -- with this decision.

Can you take out the heart of the Act and leave everything else in place?

Mr. Kneedler: I would like to go to the heart of the Act point in a moment.

But what I'd like to say is this is a huge Act with many provisions that are completely unrelated to market reforms and operate in different ways.

And we think it would be extraordinary in this extraordinary Act to strike all of that down because there are many provisions and it would be too hard to do it.

Justice Stephen G. Breyer: --I don't think it's not uncommon that Congress passes an act, and then there are many titles, and some of the titles have nothing to do with the other titles.

That's a common thing.

And you're saying you've never found an instance where they are all struck out when they have nothing to do with each other.

My question is, because I hear Mr. Clement saying something not too different from what you say.

He talks about things at the periphery.

We can't reject or accept an argument on severability because it's a lot of work for us.

That's beside the point.

But do you think that it's possible for you and Mr. Clement, on exploring this, to -- to get together and agree on ----

[Laughter]

--I mean on -- on a list of things that are in both your opinions peripheral, then you would focus on those areas where one of you thinks it's peripheral and one of you thinks it's not peripheral.

And at that point it might turn out to be far fewer than we are currently imagining.

At which point we could hold an argument or figure out some way or somebody hold an argument and try to -- try to get those done.

Is -- is that a pipe dream or is that a--

Mr. Kneedler: I -- I -- I just don't think that is realistic.

The Court would be doing it without the parties, the millions of parties--

Justice Antonin Scalia: You can have a conference committee report afterwards, maybe.

[Laughter]

Mr. Kneedler: --No, it just -- it just is not something that a court would ordinarily do.

But I would like--

Justice Sonia Sotomayor: Could you get back to the argument of -- of the heart?

Mr. Kneedler: --Yes.

Justice Sonia Sotomayor: Striking down the heart, do we want half a loaf or show.

I think those are the two analogies--

Mr. Kneedler: Right.

And -- and -- and I would like to discuss it again in terms of the text and structure of the Act.

We have very important indications from the structure of this Act that the whole thing is not supposed to fall.

The -- the most basic one is, the notion that Congress would have intended the whole Act to fall if there couldn't be a minimum coverage provision is refuted by the fact that there are many, many provisions of this Act already in effect without a minimum coverage provision.

Two point -- 2 and-a-half million people under 26 have gotten insurance by one of the insurance requirements.

Three point two billion dollars--

Justice Antonin Scalia: Anticipation of the minimum coverage.

That's going to bankrupt the insurance companies if not the States, unless this minimum coverage provision comes into effect.

Mr. Kneedler: --There is no reason to think it's going to -- it's going to bankrupt anyone.

The costs will be set to cover those -- to cover those amounts.

Justice Sonia Sotomayor: --I thought that the 26-year-olds were saying that they were healthy and didn't need insurance yesterday.

So today they are going to bankrupt the--

Mr. Kneedler: Two and-a-half -- 2.5 million people would be thrown off the insurance roles if the Court were to say that.

Congress made many changes to Medicare rates that have gone into effect for the Congress -- for the courts to have to unwind millions of Medicare reimbursement rates.

Medicare has -- has covered 32 million insurance -- preventive care visits by patients as a result of -- of this Act.

Chief Justice John G. Roberts: --All of that was based on the assumption that the mandate was -- was constitutional.

And if -- that certainly doesn't stop us from reaching our own determination on that.

Mr. Kneedler: No, what I'm saying is it's a question of legislative intent, and we have a very fundamental indication of legislative intent that Congress did not mean the whole Act to fall if -- if -- without the minimum coverage provision, because we have many provisions that are operating now without that.

But there's a further indication about why the line should be drawn where I've suggested, which is the package of these particular provisions.

All the other provisions of the Act would continue to advance Congress's goal, the test that was articulated in Booker but it's been said in Regan and other cases.

You look to whether the other provisions can continue to advance the purposes of the Act.

Here they unquestionably can.

The public health -- the broad public health purposes of the Act that are unrelated to the minimum coverage provision, but also that the other provisions designed to enhance access to affordable care.

The employer responsibility provision, the credit for small businesses, which is already in effect, by the way, and affecting many small businesses--

Justice Antonin Scalia: But many people might not -- many of the people in Congress might not have voted for those provisions if -- if the central part of this statute was not adopted.

Mr. Kneedler: --But that--

Justice Antonin Scalia: I mean, you know, you're -- to say that we're effectuating the intent of Congress is just unrealistic.

Once you've cut the guts out of it, who knows, who knows which of them were really desired by Congress on their own and which ones weren't.

Mr. Kneedler: --The question for the Court is Congress having passed the law by whatever majority there might be in one House or the other, Congress having passed the law, what at that point is -- is -- is the legislative intent embodied in the law Congress has actually passed?

Chief Justice John G. Roberts: Well, that's right.

But the problem is, straight from the title we have two complimentary purposes, patient protection and affordable care.

And you can't look at something and say this promotes affordable care, therefore, it's consistent with Congress's intent.

Because Congress had a balanced intent.

You can't look at another provision and say this promotes patient protection without asking if it's affordable.

So, it seems to me what is going to promote Congress's purpose, that's just an inquiry that you can't carry out.

Mr. Kneedler: No, with respect, I disagree, because I think it's evident that Congress's purpose was to expand access to affordable care.

It did it in discreet ways.

It did it by the penalty on employers that don't -- that don't offer suitable care.

It did it by offering tax credits to small employers.

It did it by offering tax credits to purchasers.

All of those are a variety of ways that continue to further Congress's goal, and -- and most of all, Medicaid, which is -- which is unrelated to the -- to the private insurance market altogether.

And in adopting those other provisions governing employers and whatnot, Congress built on its prior experience of using the tax code, which it is -- for a long period of time Congress has subsidized--

Justice Anthony Kennedy: I don't quite understand about the employers.

You're -- you are saying Congress mandated employers to buy something that Congress itself has not contemplated?

I don't understand that.

Mr. Kneedler: --No.

Employer coverage -- 150 million people in this country already get their insurance through -- through their employers.

What Congress did in seeking to augment that was to add a provision requiring employers to purchase insurance--

Justice Anthony Kennedy: Based on the assumption that the cost of those policies would be lowered by -- by certain provisions which are by hypothesis -- we are not sure -- by hypothesis are in doubt.

Mr. Kneedler: --No, I -- I -- I think any cost assumptions -- there is no indication that Congress made any cost assumptions, but -- but there is no reason to think that the individual -- that the individual market, which is where the minimum coverage provision is directed, would affect that.

I would like to say -- I would point out why the other things would advance Congress's goal.

The point here is that the package of three things would -- would be contrary -- would run contrary to Congress's goal if you took out the minimum coverage provision.

And here's why -- and this is reflected in the findings:

If you take out minimum coverage but leave in the guaranteed-issue and community-rating, you will make matters worse.

Rates will go up, and people will be less -- fewer people covered in the individual market.

Justice Samuel Alito: Well, if that is true, what is the difference between guaranteed-issue and community-rating provisions on the one hand and other provisions that increase costs substantially for insurance companies?

For example, the tax on high cost health plans, which the economists in the amicus brief said would cost $217 billion over 10 years?

Mr. Kneedler: Those are -- what Congress -- Congress did not think of those things as balancing insurance companies.

Insurance companies are participants in the market for Medicaid and -- and other things.

Justice Anthony Kennedy: But you are saying we have -- we have the expertise to make the inquiry you want us to make, i.e., the guaranteed-issue, but not the expertise that Justice Alito's question suggests we must make.

Mr. Kneedler: Well--

Justice Anthony Kennedy: I just don't understand your position.

Mr. Kneedler: --that's because -- that's because I think this Court's function is to look at the text and structure and the legislative history of the law that Congress enacted, not the financial -- not a financial balance sheet, which doesn't appear anywhere in the law.

And just--

Justice Ruth Bader Ginsburg: You are relying on Congress's quite explicitly tying these three things together.

Mr. Kneedler: --We do.

That's -- that's -- and it's not just the text of the act, but the background of the act, the experience in the state, the testimony of the National Association of Insurance Commissioners.

That's the -- that's the problem Congress was addressing.

There was a -- there was -- a shifting of present actuarial risks in that market that Congress wanted to correct.

And if you took the minimum coverage provision out and left the other two provisions in, there would be laid on top of the existing shifting of present actuarial risks an additional one because the uninsured would know that they would have guaranteed access to insurance whenever they became sick.

It would make the -- it would make the adverse selection in that market problem even worse.

And so what -- and Congress, trying to come up with a market-based solution to control rates in that market, has adopted something that would -- that would work to control costs by guaranteed-issue and community-rating; but, if you -- if -- if you take out the minimum coverage, that won't work.

That was Congress's assumption, again, shown by the text and legislative history of this provision.

And that's why we think those things rise or fall in a package because they cut against what Congress was trying to do.

All of the other provisions would actually increase access to affordable care and would have advantageous effects on price.

Again, Congress was invoking its traditional use of the tax code, which has long subsidized insurance through employers, has used that to impose a tax penalty on employers, to give tax credits.

This is traditional stuff that Congress has done.

And the other thing Congress has done, those preexisting laws had their own protections for guaranteed-issue and community-rating.

Effectively, within the large employer plans, they can't discriminate among people, they can't charge different rates.

What Congress was doing, was doing that in the other market.

If it can't, that's all that should be struck from the act.

Chief Justice John G. Roberts: Thank you, Mr. Kneedler.

Mr. Farr?

ORAL ARGUMENT OF H. BARTOW FARR FOR COURT-APPOINTED AMICUS CURIAE

Mr. Farr: Mr. Chief Justice and may it please the Court:

At the outset, I would just like to say, I think that the government's position in this case that the community-rating and guaranteed-issue provisions ought to be struck down is an example of the best driving out the good; because, even without the minimum coverage provision, those two provisions, guaranteed-issue and community-rating, will still open insurance markets to millions of people that were excluded under the prior system, and for millions of people will lower prices, which were raised high under the old system because of their poor health.

So even though the system is not going to work precisely as Congress wanted, it would certainly serve central goals that Congress had of expanding coverage for people who were unable to get coverage or unable to get it at affordable prices.

So when the government--

Justice Ruth Bader Ginsburg: One of the points that Mr. Kneedler made is that the price won't be affordable because -- he spoke of the adverse selection problem, that there would be so fewer people in there, the insurance companies are going to have to raise the premiums.

So it's nice that Congress made it possible for more people to be covered, but the reality is they won't because they won't be able to afford the premium.

Mr. Farr: --Well, Justice Ginsburg, let me say two things about that.

First of all, when we talk about premiums becoming less affordable, it's very important to keep in mind different groups of people, because it is not something that applies accurately to everybody.

For people who were not able to get insurance before, obviously, their insurance beforehand was -- the price was essentially infinite.

They were not able to get it at any price.

They will now be able to get it at a price that they can afford.

For people who are unhealthy and were able to get insurance, but perhaps not for the things that they were most concerned about, or only at very high rates, their rates will be lower under the system, even without the minimum coverage provision.

Also, you have a large number of people who, under the Act--

Justice Antonin Scalia: Excuse me, why do you say -- I didn't follow that.

Why?

Mr. Farr: --Because--

Justice Antonin Scalia: Why would their rates be lower?

Mr. Farr: --Their rates are going to be lower than they were under the prior system because they are going into a pool of people, rather than -- some of whom are healthy, rather than having their rates set according to their individual health characteristics.

That's why their rates were so high.

Justice Elena Kagan: But the problem, Mr. Farr, isn't it, that they're going to a pool of people that will gradually get older and unhealthier.

That's the way the thing works.

Once you say that the insurance companies have to cover all of the sick people and all of the old people, the rates climb.

More and more young people and healthy people say, why should we participate, we can just get it later when we get sick.

So they leave the market, the rates go up further, more people leave the market, and the whole system crashes and burns, becomes unsustainable.

Mr. Farr: Well--

Justice Elena Kagan: And this is not--

Mr. Farr: --Certainly.

Justice Elena Kagan: --like what I think.

What do I know?

It's just what's reflected in Congress's findings, that it's look -- it looks at some states and says, this system crashed and burned.

It looked at another state with the minimum coverage provision and said, this one seems to work.

So we will package the minimum coverage provision with the nondiscrimination provisions.

Mr. Farr: Well, in a moment, I'd like to talk about the finding; but, if I could just postpone that for a second and talk about adverse selection itself.

I think one of the misconceptions here, Justice Kagan, is that Congress, having seen the experience of the states in the '90s with community-rating and guaranteed-issue, simply imposed the minimum coverage provision as a possible way of dealing with that; and, if you don't have the minimum coverage provision, then, essentially, adverse selection runs rampant.

But that's not what happened.

Congress included at least half a dozen other provisions to deal with adverse selection caused by bringing in people who are less healthy into the Act.

There are -- to begin with, the Act authorizes annual enrollment periods, so people can't just show up at the hospital.

If they don't show up and sign up at the right time, they at least have to wait until the time next year.

That's authorized by the Act.

There -- with respect to the subsidies, there are three different things that make this important.

First of all, the subsidies are very generous.

For people below 200 percent of the federal poverty line, the subsidy will cover 80 percent, on average, of the premium which makes it attractive to them to join.

The structure of the subsidies, because their income -- they create a floor for -- based on the income of the person getting the insurance, and then the government covers everything over that.

And this is important in adverse selection because if you do have a change in the mix of people, and average premiums start to rise, the government picks up the increase in the premium.

The amount that the person who is getting insured contributes remains constant at a percentage of his or her income.

And the third thing--

Justice Antonin Scalia: And there is nothing about federal support that is unsustainable, right?

That is infinite.

Mr. Farr: --Well, I mean, that's a fair point, Justice Scalia; although, one of the things that happens, if you take the mandate out, while it is true that the subsidies that the government provides to any individual will increase, and they will be less efficient -- I'm not disputing that point -- actually the overall amount of the subsidies that the government will provide will decline, as the government notes itself in its brief, because there will be fewer people getting them.

Some people will opt out of the system even though they are getting subsidies.

But I would just like to go back for one more second to the point about how the subsidies are part of what Congress was using, because the other thing is that for people below 250 percent of the Federal poverty line Congress also picks up and subsidizes the out-of-pocket costs, raising the actuarial value.

So you have all of that, and then you have Congress also, unlike the States establishing -- or I should be precisely accurate -- almost all the States, establishing an age differential of up to three to one.

So an insurance company, for example, that is selling a 25-year-old a policy for $4,000 can charge a 60-year-old $12,000 for exactly the same coverage.

The States typically in the 90s when they were instituting these programs, they either had pure community rating, where everybody is charged the same premium, everybody regardless of their age is charged the same premium.

Some states had a variance of 1.5 to 1.

Massachusetts, for example, which did have good subsidies, but their age band was two to one.

So when Congress is enacting this Act, it's not simply looking at the States and thinking: Well, that didn't go very well; why don't we put in a minimum coverage provision; that will solve the problem.

Congress did a lot of different things to try to combat the adverse selection.

Now, if I could turn to the finding, because I think this is the crux of the government's position and then the plaintiffs pick up on that, and then move -- move from that to the rest of the Act.

And it seems to me, quite honestly, it's an important part because that is textual.

In this whole sort of quest for what we are trying to figure out, the finding seems to stand out as something that the Court could rely on and say here's something Congress has actually told us.

But I think the real problem with the finding is the context in which Congress made it.

It's quite clear.

If the Court wants to look, the finding is on page 42 -- 43A, excuse me, of the Solicitor General's severability brief in the appendix.

But the finding is made specifically in the context of interstate commerce.

That is why the findings are in the Act at all.

Congress wanted to indicate to the Court, knowing that the minimum coverage provision was going to be challenged, wanted to indicate to the Court the basis on which it believed it had the power under the Commerce Clause to enact this law.

Why does that make a difference with respect to finding I, which is the one that the government is relying on, and in particular the last sentence, which says

"this requirement is essential to creating effective health insurance markets in which guaranteed-issue and preexisting illnesses can be covered. "

The reason is because the word "essential" in the Commerce Clause context doesn't have the colloquial meaning.

In the Commerce Clause context "essential" effectively means useful.

So that when one says in Lopez, when the Court says section 922(q) is not an essential part of a larger regulatory scheme of economic activity, it goes on to say, in which the regulatory scheme would be undercut if we didn't have this provision.

Well, if that's all Congress means, I agree with that.

The system will be undercut somewhat if you don't have the minimum coverage provision.

It's like the word "necessary" in the Necessary and Proper Clause clause.

It doesn't mean, as the Court has said on numerous occasions, absolutely necessary.

It means conducive to, useful, advancing the objectives, advancing the aims.

And it's easy to see, I think, that that's what Congress--

Justice Antonin Scalia: Is there any dictionary that gives that--

Mr. Farr: --I'm sorry, Justice Scalia?

Justice Antonin Scalia: --that definition of "essential"?

It's very imaginative.

Just give me one dictionary.

Mr. Farr: Well, but I think my point, Justice Scalia, is that they are not using it in the true dictionary sense.

Justice Antonin Scalia: How do we know that?

When people speak, I assume they are speaking English.

Mr. Farr: Well, I think that there are several reasons that I would suggest that we would know that from.

The first is, as I say, the findings themselves.

Congress says at the very beginning, the head of it, is Congress makes the following findings, and they are talking about the interstate -- you know, B is headed

"Effects on the national economy and interstate commerce. "

So we know the context that Congress is talking about.

It is more or less quoting from the Court's Commerce Clause statements.

But if one looks at the very preceding finding, which is finding H, which is on 42 over onto 43, Congress at that point also uses the word "essential".

In the second sentence it says "this requirement" -- and again we're talking about the minimum coverage provision -- is an essential part of this larger regulation of economic activity, which is, by the way, an exact quote from Lopez, in which

"the absence of the requirement undercuts Federal regulation. "

also an exact quote from Lopez.

But what it is referring to is an essential -- an essential part of ERISA, the National Health Service Act and the Affordable Care Act.

It can't possibly be, even the plaintiffs haven't argued, that those Acts would all fall in their entirety if you took out the minimum coverage provision.

And as a second example of the same usage by Congress, the statute that was before the Court in Raich, section 801 of Title 21, the Court said that the regulation of intrastate drug activity, drug traffic, was essential to the regulation of interstate drug activity.

Again, it is simply not conceivable that Congress was saying one is so indispensable to the other, the way the United States uses the term here, so indispensable that if we can't regulate the intrastate traffic we don't want to regulate the interstate traffic, either.

The whole law criminalizing drug traffic would fall.

So I think once you look at the finding for what I believe it says, which is we believe this is a useful part of our regulatory scheme, which the Congress would think in its own approach would be sufficient--

Justice Sonia Sotomayor: Counsel, the problem I have is that you are ignoring the congressional findings and all of the evidence Congress had before it that community ratings and guaranteed-issuance would be a death spiral -- I think that was the word that was used -- without minimum coverage.

Those are all of the materials that are part of the legislative record here.

So even if it might not be because of the structure of the Act, that's post hoc evidence.

Why should we be looking at that as opposed to what Congress had before it and use essential in its plain meaning. You can't have minimum coverage without, what the SG is arguing, community ratings and guaranteed-issue.

You can't have those two without minimum coverage.

Mr. Farr: --Well, I think that's a fair question.

But the idea that -- that all the information before Congress only led to the idea that you would have death spirals seems to me to be contradicted a little bit at least by the CBO report in November of 2009, which is about 4 months before the Act passed, where the CBO talks about adverse selection.

Now, I want to be clear.

This is at a time when the minimum coverage provision was in the statute, so I'm not suggesting that this is a discussion without that in it.

But nonetheless, the CBO goes through and talks about adverse selection, and points out the different provisions in the Act, the ones I have mentioned plus one other, actually, where in the first 3 years of the operation of the exchanges those insurance companies that get sort of a worse selection of consumers will be given essentially credits from insurance companies that get better selections.

Justice Anthony Kennedy: So do you want us to write an opinion saying we have concluded that there is an insignificant risk of a substantial adverse effect on the insurance companies, that's our economic conclusion, and therefore not severable?

That's what you want me to say?

Mr. Farr: It doesn't sound right the way you say it, Justice Kennedy.

No, I--

Justice Sonia Sotomayor: But you don't want them to say, either, that there is a death spiral.

Do you want -- you don't want us to make either of those two findings, I'm assuming?

Mr. Farr: --That's correct.

Now, I agree that there is a risk and the significance of it people can debate.

But what I think is -- is lost in that question, and I didn't mean to be whimsical about it, I think what is lost in it a little bit is what is on the other side, which is the fact that if you follow the government's suggestion, if the Court follows the government's suggestion, what is going to be lost is something we know is a central part of the Act.

I mean, indeed, if one sort of looks at the legislative history more broadly, I think much of it is directed toward the idea that guaranteed -- issue and community rating were the crown jewel of the Act.

The minimum coverage provision wasn't something that everybody was bragging about, it was something that was meant to be part of this package.

I agree with that.

But the -- the point of it was to have guaranteed-issue and minimum coverage -- I mean, excuse me -- guaranteed-issue and community rating.

And that's -- under the government's proposal, those would -- would disappear.

We would go back to the old system.

And under what I think is the proper severability analysis, the -- the real question the Court is asking, should be asking, is, would Congress rather go back to the old system than to take perhaps the risk that you're talking about, Justice Kennedy.

Chief Justice John G. Roberts: You're -- you're referring to the government's second position.

Their -- their first, of course, is that we shouldn't address this issue at all.

Mr. Farr: That's correct.

Chief Justice John G. Roberts: I asked Mr. Kneedler about what procedure or process would be anticipated for people who are affected by the change in -- in the law, and change in the economic consequences.

Do you have a view on how that could be played out?

It does seem to me that if we accept your position, something -- there have to -- there has to be a broad range of consequences, whether it's additional legislation, additional litigation.

Any thoughts on how that's going to play out?

Mr. Farr: Well, if the Court adopts the position that I'm advocating, Mr. Chief Justice, I think what would happen is that the Court would say that the minimum coverage provision, by hypothesis of course, is unconstitutional, and the fact of that being unconstitutional does not mean the invalidation of any other provision.

So under the position I'm advocating, there would no longer be challenges to the remaining part of the Act.

The--

Chief Justice John G. Roberts: But if the challenge is what we're questioning today, whether -- if you're an insurance company and you don't believe that you can give the coverage in the way Congress mandated it without the individual mandate, what -- what type of action do you bring in a court?

Mr. Farr: --You -- if the Court follows the course that I'm advocating, you do not bring an action in court, you go to Congress and you seek a change from Congress to say the minimum coverage provision has been struck down by the Court, here is our -- here -- here's the information that we have to show you what the risks are going to be.

Here are the adjustments you need to make.

One of the questions earlier pointed out that States have adjusted their systems as they've gone along, as they've seen things work or not work.

You know, as I was talking earlier about the -- the different ratio for -- for ages and insurance.

The States have tended to change that, because they've found that having too narrow a band worked against the effectiveness of -- of their programs.

But they did -- except for in Massachusetts, they didn't enact mandates.

So to answer -- I think to answer your question directly, [= Mr.] Chief Justice, the position I'm advocating would simply have those -- those pleas go to Congress, not in court.

Now, if one -- just -- just to discuss the issue more generally, if that's helpful, I -- I think that -- that if there were situations where the Court deferred -- let's say for discretionary reasons, they just said -- the Court said we're -- we're not going to take up the question of severability and therefore not resolve it in these other situations, it certainly seems to me that in enforcement actions, for example, if the time comes in -- in 2014 and somebody applies to an insurance company for a policy -- and the insurance company says, well, we're not going to issue a policy, we don't think your risks are ones that we're willing to cover, that -- it seems to me that they could sue the insurance company and the insurance company could raise as a defense that this provision, the guaranteed-issue provision of the statute, is not enforceable because it was inseverable from the decision -- from the provision that the Court held unconstitutional in 2012.

Justice Antonin Scalia: Mr. Farr, let's -- let's consider how -- how your approach, severing as little as possible there -- thereby increases the deference that we're showing to -- to Congress.

It seems to me it puts Congress in -- in this position: This Act is still in full effect.

There is going to be this deficit that used to be made up by the mandatory coverage provision.

All that money has to come from somewhere.

You can't repeal the rest of the Act because you're not going to get 60 votes in the Senate to repeal the rest.

It's not a matter of enacting a new act.

You've got to get 60 votes to repeal it.

So the rest of the Act is going to be the law.

So you're just put to the choice of I guess bankrupting insurance companies and the whole system comes tumbling down, or else enacting a Federal subsidy program to the insurance companies, which is what the insurance companies would like, I'm sure.

Do you really think that that is somehow showing deference to Congress and -- and respecting the democratic process?

It seems to me it's a gross distortion of it.

Mr. Farr: Well, Your Honor, the -- the difficulty is that it seems to me the other possibility is for the Court to make choices, particularly based on what it expects the difficulties of Congress altering the legislation after a Court ruling would be.

I'm not aware of any severability decision that is--

Justice Antonin Scalia: No, I -- that wouldn't be my approach.

My approach would say if you take the heart out of the statute, the statute's gone.

That enables Congress to -- to do what it wants in -- in the usual fashion.

And it doesn't inject us into the process of saying,

"this is good, this is bad, this is good, this is bad. "

It seems to me it reduces our options the most and increases Congress's the most.

Mr. Farr: --I guess to some extent I have to quarrel with the premise, Justice Scalia, because at least the -- the position that I'm advocating today, under which the Court would only take out the minimum coverage provision, I don't think would fit the description that you have given of taking out the heart of the statute.

Now, I do think once you take out guaranteed-issue and community rating, you are getting closer to the heart of the statute.

And one of the -- one of the difficulties I think with the government's position is that I think it's harder to cabin that, to draw that bright line around it.

It's harder than the government thinks it is.

I mean, to begin with, even the government seems to acknowledge, I think, that the exchanges are going to be relatively pale relatives of -- of the exchanges as they're intended to be, where you're going to have standardized products, everybody can come and make comparisons based on products that look more or less the same.

But the other thing that's going to happen is with the subsidy program.

The -- the way that the subsidy program is -- is set up, the subsidy is calculated according to essentially a benchmark plan.

And this -- if the Court wants to look at the provisions, they're -- they begin at page 64A of the Private Plaintiffs' brief -- again, in the appendix.

The particular provision I'm talking about's at 68A, but there's a -- there's a question -- you -- you're looking essentially to calculate the premium by looking at a -- at a standardized silver plan.

First question, obviously, is, is there going to be any such plan if you don't have guaranteed-issue and community rating, if the plans can basically be individualized?

But the second problem is that, in the provision on 68A, the -- the provision that's used for calculating the subsidy, what -- what is anticipated in the provision under the -- the Act as it is now, is that you do have the floor of the income, you would -- you would take this benchmark plan, and the government would pay -- pay the difference.

And as we talked about earlier, the benchmark plan can change for age, and -- and the provision says it can be adjusted only for age.

So if in fact you even have such a thing as a benchmark plan anymore -- if the rates of people in poor health go up because of individual insurance underwriting, the government subsidy is not going to pay for that.

Justice Elena Kagan: Mr. Farr, I understood that the answer that you gave to Justice Scalia was essentially that the minimum coverage provision was not the heart of the Act.

Instead, the minimum coverage provision was a tool to make the nondiscrimination provisions, community rating guaranteed-issue, work.

So if you assume that, that all the minimum coverage is is a tool to make those provisions work, then I guess I would refocus Justice Scalia's question and say, if we know that something is just a tool to make other provisions work, shouldn't that be the case in which those other provisions are severed along with the tool?

Mr. Farr: No.

I don't think so, because there are -- there are many other tools to make the same things work.

That's I think the point.

And if one -- the case that comes to mind is New York v. the United States, where the Court struck down the take title provision but left other -- two other incentives essentially in place.

Even without the minimum coverage provision, there will be a lot of other incentives still to bring younger people into the market and to keep them in the market.

And if -- if my reading of the finding is correct, and that's all that Congress is saying, that this would be useful, it doesn't mean that it's impossible.

Justice Stephen G. Breyer: But would you -- I would just like to hear before you leave your argument, if you want to, against what Justice Scalia just said, let's assume, contrary to what you want, that the government's position is accepted by the majority of this Court.

And so we now are rid, quote, of the true "heart" of the bill.

Now still there are a lot of other provisions here like the Indian Act, the Black Lung Disease, the Wellness Program, that restaurants have to have a calorie count of major menus, et cetera.

Now, some of them cost money.

And some of them don't.

And there are loads of them.

Now, what is your argument that just because the heart of the bill is gone, that has nothing to do with the validity of these other provisions, both those that cost money, or at least those that cost no money.

Do you want to make an argument in that respect, that destroying the heart of the bill does not blow up the entire bill; it blows up the heart of the bill.

I just would like to hear what you have to say about that.

Mr. Farr: Well, Justice Breyer, I think what I would say is if one goes back to the, what I think is the proper severability standard and say, would Congress rather have not -- no bill as opposed to the bill with whatever is severed from it.

It seems to me when you are talking about provisions that don't have anything to do with the minimum coverage provision, there is no reason to answer that question as any other way than yes, Congress would have wanted the--

Justice Anthony Kennedy: The -- the real Congress or a hypothetical Congress?

Mr. Farr: --An objective Congress, Your Honor, not the -- specific not with a vote count.

Justice Antonin Scalia: Why put -- why put Congress to that false choice?

Mr. Farr: Well--

Justice Antonin Scalia: You only have two choices, Congress.

You have the whole bill or you can have, you can have parts of the bill or no bill at all.

Why that false choice?

Mr. Farr: --I think the reason is because severability is by necessity a blunt tool.

The Court doesn't have, even if it had the inclination, doesn't essentially have the authority to retool the statute--

Justice Stephen G. Breyer: I would say stay out of politics.

That's for Congress; not us.

But the, the question here is, you've read all these cases, or dozens, have you ever found a severability case where the Court ever said: Well, the heart of the thing is gone; and, therefore, we strike down these other provisions that have nothing to do with it which could stand on their feet independently and can be funded separately or don't require money at all.

Mr. Farr: --I think the accurate answer would be, I am not aware of a modern case that says that.

I think there probably are cases in the '20s and '30s that would be more like that.

If I could just take one second to raise the economist brief because Justice Alito raised it earlier.

I just want to make one simple point.

Leaving aside the whole balancing thing, if one looks at the economist brief, it's very important to note that when they are talking about one side of the balance -- if may I finish.

Chief Justice John G. Roberts: Certainly.

Mr. Farr: When they are talking about the balance, they are not just talking about the minimum coverage provision.

They very carefully word it to say the minimum coverage provision and the subsidy programs.

And then so when you are doing the mathematical balancing, the subsidy programs are extremely large.

They -- in the year 2020, they are expected to be over $100 billion in that one year alone.

So if you are looking at the numbers, please consider that.

Thank you.

Chief Justice John G. Roberts: Thank you, Mr. Farr.

Mr. Clement, you have four minutes remaining--

REBUTTAL ARGUMENT OF PAUL D. CLEMENT ON BEHALF OF THE PETITIONERS

Justice Sonia Sotomayor: --Amicis' point, he says that Congress didn't go into this Act to impose minimum coverage.

They went into the Act to have a different purpose, i.e., to get people coverage jury when they needed it, to increase coverage for people, but this is only a tool.

But other States -- going back to my original point, that are other tools besides minimum coverage that Congress can achieve these goals.

So if we strike just a tool, why should we strike the whole Act, when Congress has other tools available?

Mr. Clement: Mr. Chief Justice, I will make four points in rebuttal, but I will start with Justice Sotomayor's question; which is to simply say this isn't just a tool; it's the principal tool, Congress identified it as an essential tool.

It's not just a tool to make it work.

It's a tool to pay for it, to make it affordable.

And again, that's not my characterization; that's Congress's characterization in subfinding I on page 43a of the government's brief.

Now, that bring me to my first point in rebuttal, which is Mr. Kneedler says quite correctly, tells this Court, don't look at the budgetary implications.

The problem with that, though, is once it's common ground, that the individual mandate is in the statute at least in part to make community rating and guaranteed-issue affordable, that really is all you have to identify.

That establishes the essential link that it's there to pay for it.

You don't have to figure out exactly how much that is and which box -- I mean, it clearly is a substantial part of it, because what they were trying to do was take healthy individuals and put them into the risk pool, and this is quoting their finding, which is in order -- they put people into the market "which will lower premiums".

So that's what their intent was.

So you don't have to get to the -- the final number.

You know that's what was going on here, and that's reason alone to sever it.

Now the government -- Mr. Kneedler also says there is an easy dividing line between what they want to keep and what they want to dish out.

The problem with that is that, you know, you read their brief and you might think oh, there is a guaranteed-issue and a community rating provision subtitle in the bill.

There is not.

To figure out what they are talking about you have to go to page 6 of their brief, of their opening severability brief, where they tell you what is in and what's out.

And the easy dividing line they suggest is actually between 300g(a)(1) and 300g(a)(2), because on community rating they don't -- they say that (a)(1) goes, but then they say (a)(2) has to stay, because that's the way that you'll have some sort of, kind of Potemkin community rating for the exchanges.

But if you actually look at those provisions, (a)(2) makes all these references to (a)(1).

It just doesn't work.

Now, in getting back to the -- an inquiry that I think this Court actually can approach, is to look at what Congress was trying to do, you need look no further than look than the title of this statute: Patient Protection and Affordable Care.

I agree with Mr. Farr that community rating and guaranteed-issue were the crown jewels of this Act.

They were what was trying to provide patient protection.

And what made it affordable?

The individual mandate.

If you strike down guaranteed-issue, community rating and the individual mandate, there is nothing left to the heart of the Act.

And that takes me to my last point, which is simply this court in Buckley created a halfway house and it took Congress 40 years to try to deal with the situation, when contrary to any time of their intent, they had to try to figure out what are we going to do when we are stuck with this ban on contributions, but we can't get at expenditures because the Court told us we couldn't?

And for 40 years they worked in that halfway house.

Why make them do that in health care?

The choice is to give Congress the task of fixing this statute, the residuum of this statute after some of it is struck down, or giving them the task of simply fixing the problem on a clean slate.

I don't think that is a close choice.

If the individual mandate is unconstitutional, the rest of the Act should fall.

Chief Justice John G. Roberts: Thank you, Mr. Clement.

Mr. Farr, you were invited by this Court to brief and argue in these cases in support of the decision below on severability.

You have ably carried out responsibility for which we are grateful.

Case Number 11-393 is submitted.

We will continue argument in Case Number 11-400 this afternoon.

Print this transcript Transcript: 

ORAL ARGUMENT OF PAUL D. CLEMENT ON BEHALF OF THE PETITIONER

Chief Justice John G. Roberts: We will continue argument this afternoon in case 11-400 Florida v. Department of Health and Human Services.

Mr. Clement.

Mr. Clement: Mr. Chief Justice, and may it please the Court:

The constitutionality of the Act's massive expansion of Medicaid depends on the answer to two related questions: First is the expansion coercive and second does that coercion matter.

Justice Elena Kagan: Mr. Clement, can I ask you just a matter of clarification?

Would you be making the same argument if instead of the Federal government picked up 90 percent of the cost the Federal government picked up 100 percent of the cost.

Mr. Clement: Justice Kagan, if everything else in the statute remained the same, I would be making the exact same argument.

Justice Elena Kagan: The exact same argument.

So that really reduces to the question of why is a big gift from the Federal government a matter of coercion?

In other words, the Federal government is here saying, we are giving you a boatload of money.

There are no -- there's no matching funds requirement, there are no extraneous conditions attached to it, it's just a boatload of Federal money for you to take and spend on poor people's healthcare.

It doesn't sound coercive to me, I have to tell you.

Mr. Clement: Well, Justice Kagan, let me -- I mean, I eventually want to make a point where even if you had a stand alone program that just gave 100 percent, again 100 percent boatload, nothing but boat load -- well, there would still be a problem.

Justice Elena Kagan: And you do make that argument in your brief, just a stand alone program, a boatload of money, no extraneous conditions, no matching funds, is coercive?

Mr. Clement: It is.

But before I make that point, can I simply say you built into your question the idea that there are no conditions.

And of course, when you first asked it was what about the same program with 100 percent matching on the newly eligible mandatory individuals, which is how the statute refers to them.

And that would have a very big condition.

And the very big condition is that the States in order to get that new money, they would have to agree not only to the new conditions but the government here is -- the Congress is leveraging their entire prior participation in the program--

Justice Elena Kagan: Well, let me give you a hypothetical, Mr. Clement.

Mr. Clement: --Sure.

Justice Elena Kagan: Now, suppose I'm an employer and I see somebody I really like and I want to hire that person.

And I say Im going to give you $10 million a year to come work for me.

And the person says well, I -- you know, I've never been offered anywhere approaching $10 million a year, of course I'm going to say yes to that.

Now we would both be agreed that that's not coercive, right.

Mr. Clement: Well, I guess I would want to know where the money came from.

And if the money came from--

Justice Elena Kagan: Wow, wow.

I'm offering you $10 million a year to come work for me and you are saying this is anything but a great choice?

Mr. Clement: --Sure, if I told you actually it came from my own bank account.

And that's what's really going on here in part.

And that's why it's not--

Justice Elena Kagan: But, Mr. Clement -- Mr. Clement, can that possibly be.

When a taxpayer pays taxes to the Federal government, the person is acting as a citizen of the United States.

When a taxpayer pays taxes to New York, a person is acting as a citizen of New York.

And New York could no more tell the Federal government what to do with the Federal government's money than the Federal government can tell New York what to do with the moneys that New York is collecting.

Mr. Clement: --Right.

And if New York and the United States figured out a way to tax individuals at greater than 100 percent of their income then maybe you could just say it's two separate sovereigns and two separate taxes.

But we all know that in the real world that to the extent that the Federal government continues to increase taxes that decreases the ability of the States to tax their own citizenry and it's a real tradeoff.

Justice Sonia Sotomayor: Well, is that a limit on the Federal government's power to tax?.

Mr. Clement: What's that.

Justice Sonia Sotomayor: Are you suggesting that at a certain point the States would have a claim against the Federal government raising their taxes because somehow the States will feel coerced to lower their tax rate?

Mr. Clement: No, Justice Sotomayor, I'm not.

What I'm suggesting is that it's not simply the case that you can say, well, it's free money, so we don't even have to ask whether the program's coercive.

Justice Sonia Sotomayor: Now, counsel, what percentage does it become coercive?

Meaning, as I look at the figures I've seen from amici, there are some states for whom the percentage of Medicaid funding to their budget is close to 40 percent, but there are others that are less than 10 percent.

And you say, across the board this is coercive because no state, even at 10 percent, can give it up.

What's the percentage of big gift that the federal government can give?

Because what you're saying to me is, for a bankrupt state, there's no gift the federal government could give them ever, because it can only give them money without conditions.

No matter how poorly the state is run, no matter how much the federal government doesn't want to subsidize abortions or doesn't want to subsidize some other state obligation, the federal government can't give them 100 percent of their needs.

Mr. Clement: And, Justice Sotomayor, I'm really saying the opposite, which is not that every gift is coercive, no matter what the amount, no matter how small.

I'm saying essentially the opposite, which is there has to be some limit.

There has to be some limit on coercion.

And the reason is quite simple, because this Court's entire spending power jurisprudence is premised on the notion that spending power is different, and that Congress can do things pursuant to the spending power that it can't do pursuant to its other enumerated powers precisely because the programs are voluntary.

And if you relax that assumption that the programs are voluntary, and you are saying they are coercion, then you can't have the spending power jurisprudence--

Justice Sonia Sotomayor: What makes them coercive; that the state doesn't want to face its voters and say, instead of taking 10, 20, 30, 40 percent of the government's offer of our budget and paying for it ourselves and giving up money for some other function?

That's what makes it coercive--

Mr. Clement: --Well--

Justice Sonia Sotomayor: --that the state is unwilling to say that?

Mr. Clement: --Maybe I can talk about what makes it coercive by talking about the actual statute at issue here and focusing on what I think are the three hallmarks of this statute that make it uniquely coercive.

One of them is the fact that this statute is tied to the decidedly nonvoluntary individual mandate.

And that makes this unique, but it makes it significant, I think.

I will continue.

I thought you had a question.

I'm sorry.

The second factor, of course, is the fact that Congress here made a distinct and conscious decision to tie the state's willingness to accept these new funds, not just to the new funds but to their entire participation in the statute, even though the coverage for these newly eligible individuals is segregated from the rest of the program.

And this is section 2001A3 at page 23A of the appendix to the blue brief.

Justice Ruth Bader Ginsburg: Isn't that true of every Medicaid increase?

That each time -- I mean, and this started quite many years ago, and Congress has added more people and given more benefits -- and every time, the condition is, if you want the Medicaid program, this is the program, take it or leave it.

Mr. Clement: No, Justice Ginsburg, this is distinct in two different directions.

One is, in some of the prior expansions of the program, but not all, Congress has made covering newly eligible individuals totally voluntary.

If the states wants to cover the newly eligible individuals, they will get additional money; but, if they don't, they don't risk any of their existing participation programs.

The 1972 program was a paradigm of that.

It created this 209(b) option for states to participate.

This court talked about it in the Gray Panthers case.

There were other expansions that have taken place, such as the 1984 expansions, where they didn't give states that option; but, here's the second dimension in which this is distinct, which is, here, Congress has created a separate part of the program for the newly eligible mandatory individuals.

That's what they called them.

And those individuals are treated separately from the rest of the program going forward forever.

They are going to be reimbursed at a different rate from everybody who's covered under the preexisting program.

Now, in light of that separation by Congress itself of the newly eligible individuals from the rest of the program, it's very hard to understand Congress's decision to say, look if you don't want to cover these newly eligible individuals, you don't just not get the new money, you don't get any of the money under the--

Justice Stephen G. Breyer: Where does it say that?

I'm sorry, where does it say that?

Mr. Clement: --It says -- well, it -- where does it say what, Justice Breyer?

Justice Stephen G. Breyer: What you just said.

You said, Congress said, if you don't take the new money to cover the new individuals, you don't get any of the old money that covers the old individuals.

That's what I heard you say.

Mr. Clement: Right.

Justice Stephen G. Breyer: And where does it say that?

Mr. Clement: It says it -- there's two places where it says it.

Justice Stephen G. Breyer: Yeah, where?

Mr. Clement: The 2001A3 makes it part of my brief.

Justice Stephen G. Breyer: Where is it in your brief?

Mr. Clement: That's at page 23 A--

Justice Stephen G. Breyer: In the blue brief?

Mr. Clement: --Blue brief.

Justice Stephen G. Breyer: 23A.

Okay.

Thank you.

Mr. Clement: And this makes not the point about the funding cutoff.

This makes the point just that these newly eligible individuals are really treated separately forevermore.

Justice Stephen G. Breyer: I want the part about the funding cutoff.

Mr. Clement: Right.

And there, Justice Breyer--

Justice Stephen G. Breyer: And that cite section is what?

Mr. Clement: --I don't have that with me--

Justice Stephen G. Breyer: Well, I have it in front of me--

Mr. Clement: --Great.

Perfect.

Thank you.

Justice Stephen G. Breyer: --And I will tell you what I have, what I have in front of me, what it says.

Mr. Clement: Right.

Justice Stephen G. Breyer: And it's been in the statute since 1965.

Mr. Clement: Exactly.

Justice Stephen G. Breyer: And the cite I have is 42 U.S.C. Section 1396(c).

So are we talking about the same thing?

Mr. Clement: If that's the -- if that is the provision that gives the secretary--

Justice Stephen G. Breyer: Yeah, okay.

Mr. Clement: --among other things--

Justice Stephen G. Breyer: And here's what it says at the end.

Mr. Clement: --the authority to cut off all participation in the program, yes.

Justice Stephen G. Breyer: It says,

"The secretary shall notify the state agency. "

--this is if they don't comply --

"that further payments will not be made to the state or, in his discretion, that payments will be limited to categories under or parts of the state plan not affected by such failure, which it repeats until the secretary is satisfied that he shall limit payments to categories under or parts of the state plan not affected by such failure. "

So, reading that in your favor, I read that to say, it's up to the secretary whether, should a state refuse to fund the new people, the secretary will cut off funding for the new people, as it's obvious the state doesn't want it, and whether the secretary can go further.

I also should think -- I could not find one case where the secretary ever did go further, but I also would think that the secretary could not go further where going further would be an unreasonable thing to do, since government action is governed by the Administrative Procedure Act, since it's governed by the general principle, it must always be reasonable.

So I want to know where this idea came from that should state X say,

"I don't want the new money. "

that the secretary would or could cut off the old money?

Mr. Clement: And, Justice Breyer, here's where it comes from, which is from the very beginning of this litigation, we've pointed out that what's coercive is not the absolute guarantee that the secretary could cut off every penny, but the fact that she could.

Justice Stephen G. Breyer: All right.

Now, let me relieve you of that concern, and tell me whether I have.

That a basic principle of administrative law, indeed, all law, is that the government must act reasonably.

And should a secretary cut off more money than the secretary could show was justified by being causally related to the state's refusal to take the new money, you would march into court with your clients and say,

"Judge, the secretary here is acting unreasonably, and I believe there is implicit in this statute, as there is explicit in the ADA, that any such cut-off decision must be reasonable. "

Now, does that relieve you of your fear?

Mr. Clement: It doesn't for this reason, Justice--

Justice Stephen G. Breyer: I didn't think it would.

Mr. Clement: --Well, but here's the reason.

Here's the reason, Justice Breyer, it doesn't.

One is, I mean, I don't know the opinion to cite for that proposition.

Second is, we have been making in this litigation since the very beginning this basic point, the government has had opportunities at every level of this system, and I suppose they will have an opportunity today to say,

"fear not, States, if you don't want to take the new conditions, all you will lose is the new money. "

Justice Stephen G. Breyer: And I said -- I said because it could be, you know, given the complexity of the act, that there is some money that would be saved in the program if the States take the new money, and if they don't take the new money there is money that is being spent that wouldn't otherwise be spent.

There could be some pile like that.

It might be that the secretary could show it was reasonable to take that money away from the states, too.

Justice Antonin Scalia: Mr. Clement--

Justice Stephen G. Breyer: But my point is, you have to show reasonableness before you can act.

Justice Antonin Scalia: --do you agree -- do you agree that the government has to act reasonably?

Do we strike down unreasonable statutes?

My God.

Mr. Clement: And, Justice Scalia, I mean--

Justice Antonin Scalia: The executive has to act reasonably, that's certain, in implementing a statute; but, if the statute says, in so many words, that the secretary can strike the whole -- funding for the whole program, that's the law, unreasonable or not, isn't it?

Mr. Clement: --That's the way I would read the law, Your Honor.

Justice Stephen G. Breyer: Yeah, but I have a number -- all right.

Mr. Clement: And if I could just add one thing just to the discussion is the point that, you know, this is not all hypothetical.

I mean, in -- there was a record in the district court, and there is an Exhibit 33 to our motion to summary judgment.

It is not in the joint appendix.

We can lodge it with the Court if you'd like.

But it's a letter in the record in this litigation, and it's a letter from the secretary to Arizona, when Arizona floated the idea that it would like to withdraw from the CHIP program, which is a relatively small part of the whole program.

And what Arizona was told by the secretary is that if you withdraw from the CHIP program, you risk losing $7.8 billion, the entirety of your Medicaid participation.

So this is not something that we've conjured up--

Justice Stephen G. Breyer: All right.

Justice Elena Kagan: Mr. Clement--

Justice Stephen G. Breyer: To make you feel a little better, I want to pursue this for one more minute.

There are cases and many, of which Justice Scalia knows as well, which uses the Holly Hill, uses the same word as this statute: In the Secretary's discretion.

And in those cases this Court has said, that doesn't mean the Secretary can do anything that he or she wants, but rather, they are limited to what is not arbitrary, capricious, and abuse of discretion in interpreting statutes, in applying those statutes, et cetera.

End of my argument; end of my question.

Respond as you wish.

Mr. Clement: --Well, Justice Breyer, I'm not sure that the Court's federalism jurisprudence should force States to defend on how a lower court reads Holly Hill.

I think that really right here what we know to an absolute certainty is that this Secretary -- this statute gives the Secretary the right to remove all of the State's funding under these programs.

Think about what that is, just--

Justice Sonia Sotomayor: Mr. Clement, do you think that the Federal Government couldn't, if it chose, Congress, say, this system doesn't work.

We are just simply going to rehaul it.

It is not consistent with how -- what we want to accomplish.

We're just going to do away with the system and start a new health care plan of some sort.

And States, you can take the new plan, you can leave them.

We are going to give out 20 percent less, maybe 20 percent more, depending on what Congress chooses.

Can Congress do that?

Does it have to continue the old system because that is what the States are relying upon and it's coercive now to give them a new system?

Mr. Clement: --Justice Sotomayor, we are not saying we have a vested right to participate in the Medicaid program as it exists now.

So if Congress wanted to scrap the current system and have a new one, I'm not going to tell you that there is no possibility of a coercion challenge to it, but I'm not going to say--

Justice Sonia Sotomayor: That's what I -- I want to know how I draw the line, meaning--

Mr. Clement: --Well, can--

Justice Sonia Sotomayor: --I think the usual definition of coercion is, I don't have a choice.

I'm not sure what -- why it's not a choice for the States.

They may not pay for something else.

If they don't take Medicaid and they want to keep the same level of coverage, they may have to make cuts in their budget to other services they provide.

That's a political choice of whether they choose to do that or not.

But when have we defined the right or limited the right of government not to spend money in the ways that it thinks appropriate?

Mr. Clement: --Well, Justice Sotomayor, before -- I mean, I will try to answer that question, too.

But the first part of the question was, what if Congress just tried to scrap this and start over again with a new program?

Here's why this is fundamentally different and why it's fundamentally more coercive, because Congress is not saying we want to scrap this program.

They don't have a single complaint, really, with the way that States are providing services to the visually impaired and the disabled under pre-existing Medicaid.

And that's why it's particularly questionable why they are saying that if you don't take our new money subject to the new conditions, we are going to take all of the money you have previously gotten, that you have been dependent on for 45 years and you are using right now to serve the visually impaired and the disabled--

Justice Ruth Bader Ginsburg: Mr. Clement, may I -- may I ask you -- question another line.

You represent, what, 26 States?

Mr. Clement: --That's right, Justice Ginsburg.

Justice Ruth Bader Ginsburg: And we are also told that there are other States that like this expansion and they are very glad to have it.

The relief that you are seeking is to say the whole expansion is no good, never mind that there are States that say, we don't feel coerced, we think this is good.

You are -- you are saying that because you represent a sizeable number of States, you can destroy this whole program, even though there may be as many States that want it, that don't feel coerced, the States, thinking that this is a good thing?

Mr. Clement: Justice Ginsburg, that's right, but that shouldn't be a terrible concern, because if Congress wants to do what it did in 1972, and pass a statute that makes the expansion voluntary, every State that thinks that this is a great deal can sign up.

What's telling here, though, is 26 States, who think that this is a bad deal for them, actually are also saying that they have no choice but to take this because they can't afford to have their entire participation in this 45-year-old program wiped out, and they have to go back to square one and figure out how they are going to deal with the visually impaired in their State, the disabled in their State--

Justice Antonin Scalia: Mr. Clement, I didn't take the time to figure this out, but maybe you did.

Is there any chance at all that 26 States opposing it have Republican governors and all of the states supporting it have Democratic governors?

Is that possible?

Mr. Clement: --There's a correlation, Justice Scalia.

Justice Antonin Scalia: Yes.

Justice Ruth Bader Ginsburg: Let -- let me ask you another thing, Mr. -- Mr. Clement.

Most colleges and universities are heavily dependent on the government to fund their research programs and other things.

And that has been going on for a long time.

And then Title IX passes, and a government official comes around and say -- says to the colleges, you want money for your physics labs and all the other things you get it for, then you have to create an athletic program for girls.

And the recipient says, I am being coerced, there is no way in the world I can give up all the funds to run all these labs that we have, I can't give it up, so I'm being coerced to accept this program that I don't want.

Why doesn't your theory, if your theory is any good, why doesn't it work any time, something -- someone receives something that is too good to give up?

Mr. Clement: Well, Justice Ginsburg, there is two reasons that might be different.

One is this whole line of coercion only applies -- is only relevant, really, when Congress tries to do something through the spending power it couldn't do directly.

So if Congress tried to impose Title IX directly, I guess the question for this Court would be whether or not Section 5 of the 14th Amendment allowed Congress to do that?

I imagine you might think that it did and I imagine some of your colleagues might take issue with that, but that's -- that's the nature of the question.

So one way around that would be if Congress can do it directly, you don't even have to ask whether there is something special about the spending power.

That's how this Court resolved, for example, the Ferra case about funding to -- to colleges.

Justice Ruth Bader Ginsburg: I'm trying to understand your coercion theory.

I know that there are cases of ours that have said there is a line between pressure and coercion, but we have never had, in the history of this country or the Court, any Federal program struck down because it was so good that it becomes coercive to be in it.

Mr. Clement: Well, Justice Ginsburg, I'm going -- to say the second thing about my answer to your prior question was just, I also think that, you know, it may be that spending on certain private universities is something again that Congress can do, and it doesn't matter whether it's coercion, but when they are trying to get the States to expand their Medicaid programs, that's--

Justice Ruth Bader Ginsburg: Let's take -- let's take public colleges.

Mr. Clement: --Okay.

Then there -- then there may be some limits on that -- I mean, but again, I'm not sure even in that context there might not be some things Congress can do.

It's a separate question.

But once we take a premise, which I don't think there is a disagreement here, that Congress could not simply as a matter of direct legislation under the commerce power or something say, States, you must expand your Medicaid programs.

If we take that as a given, then I think we have to ask the question about whether or not it's coercive.

Now, you -- in your second question you ask, well, you know, I mean, where's the case that says that we've crossed that line.

And this is that case, I would respectfully say.

Justice Stephen G. Breyer: Then the government can reply as well to the 1980 extension to children 0 to 6 years old, 1990 requiring the extension for children up to 18, all those prior extensions to me seem just as big in amount, just about as big in the number of people coming on the rolls, and they are all governed by precisely the same statute that you are complaining of here, which has been in the law since '65.

Mr. Clement: Justice Breyer, I don't think that our position here would necessarily extend to say the 1984 amendments, and let me tell you why.

You know, I'm -- I'm I am not saying that absolutely that's guaranteed that's not coercive, but here's reasons why they're different.

The one major difference is of the size of the program.

I mean, the expansion of Medicaid since 1984 is really breathtaking.

Medicaid, circa, 1984 the Federal spending to the States was a shade over $21 billion.

Right now it's $250 billion, and that's before the expansion under this statute.

Justice Elena Kagan: --Well, if you are right, Mr. Clement, doesn't that mean that Medicaid is unconstitutional now?

Mr. Clement: Not necessarily, Justice Kagan.

And again, it's because we are not here with a one trick pony.

One of the factors -- we point you to three factors that make this statute uniquely coercive.

One of them is the sheer size of this program.

And, you know, if you want a gauge on the size of this program, the best place to look is the government's own number.

Footnote 6, page 73--

Justice Elena Kagan: So, when does a program become too big?

I want you to give me a dollar number.

Mr. Clement: --$3.3 trillion over the next 10 years.

That's -- that--

Justice Stephen G. Breyer: I'll tell you this number, which I did look up, that the amount, approximately, if you look into it -- as a percentage of GDP, it's big, but it was before this somewhere about 2-point-something percent, fairly low, of GDP.

It'll go up to something a little bit over 3 percent of GDP.

And now go look at the comparable numbers, which I did look at, with the expansion that we're talking about before.

The expansion from 0 to 18 or even from 0 to 6.

And while you can argue those numbers, it's pretty hard to argue that they aren't roughly comparable as a percentage of the prior program or as a percentage of GDP.

If I'm right on those numbers or even roughly right -- I don't guarantee them -- then would you have to say, well, indeed, Medicaid has been unconstitutional since 1964.

And if not, why not?

Mr. Clement: --The answer is no, and that's because we're here saying there are three things that make this statute unique.

Justice Antonin Scalia: What are your second and third?

I'm on pins and needles to hear your ----

[Laughter]

Mr. Clement: One is the sheer size.

Two is the fact that this statute uniquely is tied to an individual mandate which is decidedly nonvoluntary.

And three is the fact that they've leveraged the prior participation in the program, notwithstanding that they've broken this out as a separately segregated fund going forward, which is not--

Justice Elena Kagan: So on the third -- on the third, suppose you had the current program and Congress wakes up tomorrow and says

"we think that there's too much fraud and abuse in the program, and we're going to put some new conditions on how the States use this money so we can prevent fraud and abuse, and we're going to tie it to everything that's been there initially. "

Unconstitutional?

Mr. Clement: --No, I think that is constitutional because I think that's something that Congress could do directly.

It wouldn't have to limit that to the spending program.

And I think 18 U.S.C. 666 is -- is a statute -- it's in the criminal code, it may be tied to spending, but I think that's -- that's a provision that I don't think it's constitutional; I think it's called into question.

Justice Elena Kagan: I guess I don't get the idea.

I mean, Congress can legislate fraud and abuse restrictions in Medicaid, and Congress can legislate coverage expansions in Medicaid.

Mr. Clement: Well, Justice Kagan, I think there's a difference, but if I'm wrong about that and the consequence is that Congress has to break Medicaid down into remotely manageable pieces as opposed to $3.3 trillion over 10 years before the expansion, I don't think that would be the end of the world.

But I really would ask you to focus on specifically what's going on here, which is they take these newly eligible people -- and that's a massive change in the way the program works.

These are people who are healthy, childless adults who are not covered in many States.

They say okay, we're going to make you cover those.

We're going to have a separate program for how you get reimbursed for that.

You get reimbursed differently from all the previously eligible individuals.

But if you don't take our money, we're going to take away your participation in the program for the visually impaired and disabled.

If I may reserve the balance of my time.

Chief Justice John G. Roberts: Well, I'm -- I'm not sure my colleagues have exhausted their questions, so--

Justice Sonia Sotomayor: I guess my greatest fear, Mr. Clement, with your argument is the following: The bigger the problem, the more resources it needs.

We're going to tie the hands of the Federal government in choosing how to structure a cooperative relationship with the States.

We're going to say to the Federal government, the bigger the problem, the less your powers are.

Because once you give that much money, you can't structure the program the way you want.

It's our money, Federal government.

We're going to have to run the program ourself to protect all our interests.

I don't see where to draw that line.

The uninsured are a problem for States only because they, too, politically, just like the Federal government, can't let the poor die.

And so to the extent they don't want to do that, it's because they feel accountable to their citizenry.

And so if they want to do it their way, they have to spend the money to do it their way, if they don't want to do it the Federal way.

So I -- I just don't understand the logic of saying States, you can't -- you don't -- you're not entitled to our money, but once you start taking it, the more you take, the more power you have.

Mr. Clement: Well, Justice Sotomayor, a couple of points.

One is, I actually think that sort of misdescribes what happened with Medicaid.

I mean, States were, as you suggest, providing for the poor and the visually impaired and disabled even before Medicaid came along.

Then all of a sudden, States -- the Federal government says look, we'd like to help you with that, and we're going to give you money voluntarily.

And then over time, they give more money with more conditions, and now they decide they're going to totally expand the program, and they say that you have to give up even your prior program, where we -- first came in and offered you cooperation, we're now going to say you have to give that up if you don't take our new conditions.

Secondarily, I do think that our principle is not that when you get past a certain level, it automatically becomes coercive per se.

But I do think when you get a program and you're basically telling States that look, we're going to take away $3.3 trillion over the next 10 years, that at that point, it's okay to insist that Congress be a little more careful that it not be so aggressively coercive as it was in this statute.

And I would simply say that -- we're not here to tell you that this is going to be an area where it's going to be very easy to draw the line.

We're just telling you that it's inceptionally important to draw that line, and this is a case where it ought to be easy to establish a beachhead, say that coercion matters, say there's three factors of this particular statute that make it as obviously coercive as any piece of legislation that you've ever seen, and then you will have effectively instructed Congress that there are limits, and you have laid down some administrable rules.

Justice Antonin Scalia: Mr. Clement, the Chief has said I can ask this.

Chief Justice John G. Roberts: --He doesn't always check first.

Justice Antonin Scalia: As I recall your -- your theory, it is that to determine whether something is coercive, you look to only one side, how much you're threatened with losing or offered to receive.

And the other side doesn't matter.

I don't think that's realistic.

I mean, I think, you know, the -- the old Jack Benny thing, Your Money Or Your Life, and, you know, he says "I'm thinking, I'm thinking".

It's -- it's funny, because it's no choice.

You know?

Your life?

Again, it's just money.

It's an easy choice.

No coercion, right?

I mean -- right?

Now whereas, if -- if the choice were your life or your wife's, that's a lot harder.

Now, is it -- is it coercive in both situations?

Mr. Clement: Well, yes.

It is.

Justice Antonin Scalia: Really?

Mr. Clement: I would say that.

Justice Antonin Scalia: It's a tough choice.

And -- and--

Justice Anthony Kennedy: I thought you were going to say

"the statute is your money and your life. "

Mr. Clement: And well -- it is.

But I mean -- I might have missed something, but both of those seem to be coercion.

Justice Antonin Scalia: --No, no, no.

To say -- to say you're -- when you say you're coerced, it means you've been -- you've been given an offer you can't refuse.

Okay?

You can't refuse your money or your life.

But your life or your wife's, I could refuse that one.

Justice Sonia Sotomayor: Mr Clement.

He's not going home tonight--

Chief Justice John G. Roberts: Let's leave the wife out of this--

Justice Antonin Scalia: I'm talking about my life.

I think -- take mine, you know?

Mr. Clement: I wouldn't do that either,--

Justice Antonin Scalia: I won't use that example.

example.

Forget about it.

Chief Justice John G. Roberts: --That's enough frivolity for a while.

But I want to make sure I understand where the meaningfulness of the choice is taken away, is it the amount that's being offered, that it's just so much money, of course you can't turn it down, or is it the amount that's going to be taken away if you don't take what they're offering?

Mr. Clement: --It's both, Your Honor.

And I think that that's -- I mean, there really is -- I -- there really is, you know, three strings in this bow.

I mean, one is, the sheer amount of money here makes it very, very difficult to refuse, because it's not money that, you know, that's come from some -- you know, China or, you know, the -- the -- the export tariffs like in the old day.

It's coming from the taxpayers, so that's part of it.

The fact that they're being asked to give up their continuing participation in a program that they've been participating in for 45 years as a condition to accept the new program, we think that's the second thing that's critical--

Chief Justice John G. Roberts: Well, why isn't that a consequence of how willing they have been since the New Deal to take the Federal government's money?

And it seems to me that they have compromised their status as independent sovereigns because they are so dependent on what the Federal government has done, they should not be surprised that the Federal government having attached the -- they tied the strings, they shouldn't be surprised if the Federal government isn't going to start pulling them.

Mr. Clement: --With all due respect, Mr. Chief Justice, I don't think we can say that, you know, the States have gotten pretty dependent, so let's call this whole federalism thing off.

And I just think it's too important.

Because again, the consequence -- if you think about it -- if -- the consequence of saying that we're not going to police the coercion line here shouldn't be that well, you know, it's just too hard, so we'll give the Federal Congress unlimited spending power.

The consequence ought to be, if you really can't police this line, then you should go back and reconsider your cases that say that Congress can spend money on things that it can't do directly.

Now, we're not asking you to go that far.

We're simply saying that look, your spending power cases absolutely depend on there being a line between coercion--

Justice Sonia Sotomayor: --But could you tell me--

Mr. Clement: --and voluntary action.

Justice Sonia Sotomayor: --I don't understand your first answer to Justice Kagan.

You don't see there being a difference between the Federal government saying we want to take care of the poor.

States, if you do this, we'll pay 100 percent of your administrative costs.

And you said that could be coercion.

All right.

Doesn't the amount of burden that the State undertakes to meet the Federal obligation count in this equation at all?

Mr. Clement: It -- it certainly can, Justice Sotomayor.

I didn't mean to suggest in answering Justice Kagan's question that my case was no better than that hypothetical.

I mean, but if in the nature of things that I do think the amount of the money even considered alone does make a difference, and it's precisely because it has an effect on their ability to raise revenue from their own citizens.

So it's not just free money that they are turning down if they want to.

It really is--

Justice Sonia Sotomayor: Counsel, if we go pack to the era of matching what a State pays to what a State gets, Florida loses.

It's citizens pay out much less than what they get back in Federal subsidies of all kinds.

So you can't really be making the argument that Florida can't ask for more than it gives, because it's really giving less than it receives.

Mr. Clement: --Well then--

Justice Sonia Sotomayor: You don't really want to go to that point, do you?

Mr. Clement: --Well, then I will make that argument on behalf of Texas.

But it's not, it's not what my argument depends on.

And that's the critical thing.

It's one aspect of what makes this statute uniquely coercive.

And I really think if you ask the question: What explains the idea that if you don't take this new money you are going to lose all your money under what you have been doing for 45 years to help out the visually impaired and disabled?

Nobody in Congress wants the States to stop doing that.

They are just doing it, and it's purely coercive to condition the money.

It's leverage, pure and simple.

Justice Anthony Kennedy: If the inevitable consequence of your position was that the Federal government could just do this on its own, the Federal government could have Medicaid, Medicare, and these insurance regulations.

Assume that's true.

Then how are the interests of federalism concerned?

How are the interests of federalism concerned if in Florida or Texas or some other objecting States there are huge Federal bureaucracies doing what this bill allows the State bureaucracies to do.

I know you have thought about that.

I would just like your answer.

Mr. Clement: I have, and I would like to elaborate that the one word answer is "accountability".

If the Federal government decides to spend money through Federal instrumentalities and the citizenry is hacked off about it, they can bring a Federal complaint to a Federal official working in a Federal agency.

And what makes this so pernicious is that the Federal government knows that the citizenry is not going to take lightly the idea that there are huge, new Federal bureaucracies popping up across the country.

And so they get the benefit of administering this program through State officials, but then it makes it very confusing for the citizen who doesn't like this.

Do they complain to the State official because it's being administered in the State official in a State building?

Justice Elena Kagan: Mr. Clement, that is very confusing because the idea behind cooperative Federal/State programs was exactly a federalism idea.

It was to give the States the ability to administer those programs.

It was to give the States a great deal of flexibility in running those programs.

And that's exactly what Medicaid is.

Mr. Clement: Well, that's exactly what Medicaid was.

The question is: What will it be going forward?

And I absolutely take your point, Justice Kagan.

Cooperative federalism is a beautiful thing.

Mandatory federalism has very little to recommend it because it poses exactly the kind of accountability--

Justice Elena Kagan: Cooperative federalism does not mean that there are no Federal mandates and no Federal restrictions involved in a program that uses 90 percent here, 100 percent Federal money.

It means there is flexibility built into the program subject to certain rules that the Federal government has about how it wishes its money to be used.

It's like giving a gift certificate.

If I give you a gift certificate for one store, you can't use it for other stores.

But still you can use it for all kinds of different things.

Mr. Clement: --I absolutely agree that if it's cooperative federalism and the States have choices, then that is perfectly okay.

But when -- that's why voluntariness and coercion is so important.

Because if you force a State to participate in a Federal program, then -- I mean, as long as it's voluntary then a State official shouldn't complain if a citizen complains to the State about the way the State's administering a Federal program that it volunteered to participate in.

But at the point it becomes coercive, then it's not fair to tell the citizen to complain to the State official.

They had no choice.

But who do they complain at the Federal level?

There's nobody there, which would be -- I'm not saying it's the best solution to have Federal instrumentalities in every State, but it actually is better than what you get when you have mandatory federalism and you lose the accountability that is central to the federalism provisions in the Constitution.

Chief Justice John G. Roberts: Thank you, Mr. Clement.

General Verrilli?

ORAL ARGUMENT OF GENERAL DONALD B. VERRILLI, JR., ON BEHALF OF THE RESPONDENTS

Mr. Verrilli Jr.: Mr. Chief Justice, and may it please the Court:

The Affordable Care Act's Medicaid expansion provisions will provide millions of Americans with the opportunity to have access to essential health care that they cannot now afford.

It is an exercise of the Spending Clause power that complies with all of the limits set forth in this Court's decision in Dole, and the States do not contend otherwise.

The States are asking this Court to do something unprecedented, which is, to declare this an impermissibly coercive exercise.

Justice Antonin Scalia: What do you think we meant in those dicta in several prior cases where we've said that the Federal government cannot be coercive through the Spending Clause?

What -- what do you think we were -- give us a hypothetical.

Mr. Verrilli Jr.: Yes.

First, if I could just try to be a little more precise about it, Justice Scalia.

I think what the Court said in Steward Machine and in Dole is that it's possible that you might envision a situation in which there's coercion--

Justice Antonin Scalia: Okay.

Mr. Verrilli Jr.: --And the courts didn't say much more.

But I can think of something.

One example I could think of that might serve as a limit would be a Coyle type situation, in which the condition attached was worth a fundamental transformation in the structure of State government in a situation in which the State didn't have a choice but to accept it.

But -- and so--

Justice Antonin Scalia: Anything else, so long as you--

Mr. Verrilli Jr.: Well, but--

Justice Antonin Scalia: --You are talking about situations where they have to locate their State house in some other city--

Mr. Verrilli Jr.: Or you may have a legislature--

Justice Antonin Scalia: --And they have no choice.

But short of that, they can make the State do anything at all?

Mr. Verrilli Jr.: --No, no.

Dole -- the Dole conditions are real.

The germaneness condition in Dole is real, for example, and so those--

Chief Justice John G. Roberts: None of those have addressed the coercion question.

Mr. Verrilli Jr.: --Right.

Chief Justice John G. Roberts: So then you think it would be all right for the Federal government to say -- same program: States, you can take this or you can leave it.

But if you don't take it, you lose every last dollar of Federal funding for every program.

Mr. Verrilli Jr.: I think that would raise a germaneness issue, Mr. Chief Justice, but it's not what we have here.

Chief Justice John G. Roberts: But there's no coercion question at all.

Mr. Verrilli Jr.: Well, but I think -- I think they are related.

I think that the germaneness inquiry in Dole really gets at coercion in some circumstances, and that's why I think they are related.

But we don't have that here.

And if I could, I would like to address--

Chief Justice John G. Roberts: No, I know we don't have that here.

How does germaneness get -- get to coercive?

Mr. Verrilli Jr.: --Because it gets to be harder to see what--

Chief Justice John G. Roberts: That's germane if there's no--

Mr. Verrilli Jr.: What the connection is between getting you to do A and the money you are getting for--

Chief Justice John G. Roberts: --So it fails because it is not germane.

But you are saying it would not fail because it was coercive.

Mr. Verrilli Jr.: --Why -- I think that -- as I said, I think they are really trying to get at the same thing, and I -- but I do think it's quite different here, and I would like to, if I could, take up each of the--

Chief Justice John G. Roberts: No, I know -- I know it's different here.

I'm just trying to understand if you accept the fact or regarded as true that there is a coercion limit, or that once the Federal government -- once you are taking Federal government money, the Federal government money -- can take it back, and that doesn't affect the voluntariness of your choice.

Because it does seem like a serious problem.

We are assuming under the Spending Clause the Federal government cannot do this.

Under the Constitution it cannot do this.

But if it gets the State to agree to it, well, then it can.

And the concern is, if you can say: If you don't agree with this, you lose all your money, whether that's really saying the limitation in the Constitution is -- is largely meaningless.

Mr. Verrilli Jr.: --Well, but I don't think that this is a case that presents that question.

Chief Justice John G. Roberts: No, no, I know.

I know this.

I don't know if I will grant it to you or not.

But let's assume it's not this case.

Do you recognize any limitation on that concern?

Mr. Verrilli Jr.: I think the Court has said in Steward Machine and Dole that this is something that needs to be considered in an appropriate case.

And we acknowledge that.

But I do think it's so dependent on the circumstances that it's very hard to say in the abstract with respect to a particular program that there is a--

Justice Antonin Scalia: You can't imagine a case in which it is both germane and yet coercive, is what you are saying.

There is no such case as far as you know.

Mr. Verrilli Jr.: Well, I am not prepared to -- to say right here that I can -- that--

Justice Antonin Scalia: --I wouldn't think that is a surprise question, you know?

Mr. Verrilli Jr.: --Congress has authority to act and--

Justice Antonin Scalia: I can't think of one.

I'm not blaming you for not thinking of one.

Mr. Verrilli Jr.: --But I do think -- I really do think that it's important to look at this, an issue like this.

If you are going to consider it, it has got to be considered in a factual context from which it arises.

Justice Samuel Alito: Let me give you a factual context.

Let's say Congress says this to the States: We have got great news for you; we know your expenditures on education are a huge financial burden, so we are going to take that completely off your shoulders; we are going to impose a special Federal education tax which will raise exactly the same amount of money as all of the States now spend on education; and then we are going to give you a grant that is equal to what you spent on education last year.

Now, this is a great offer and we think you will take it, but of course, if you take it, it's going to have some conditions because we are going to set rules on teacher tenure, on collective bargaining, on curriculum, on textbooks, class size, school calendar and many other things.

So take it or leave it.

If you take it, you have to follow our rules on all of these things.

If you leave it, well, then you are going to have to fine -- you are going to have to tax your citizens, they are going to have to pay the Federal education tax; but on top of that, you were going to have to tax them for all of the money that you are now spending on education.

Plus all of the Federal funds that you were previously given.

Would that be -- would that reach the point -- would that be the point where financial inducement turns into coercion?

Mr. Verrilli Jr.: No, I don't think so--

Justice Samuel Alito: No.

Mr. Verrilli Jr.: --because they do, the States do have a choice there, especially as a -- as a going-in proposition.

The argument the States are making here is not that they're -- that -- this is not a going-in proposition.

Their argument is that they're -- they are in a position where they don't have a choice because of everything that has happened before.

But--

Justice Samuel Alito: You might be right.

But if that is the case then there is nothing left. 27198812723016

Mr. Verrilli Jr.: Well, but as a--

Justice Samuel Alito: --of federalism.

Mr. Verrilli Jr.: --As a practical matter, I disagree with that, Justice Alito.

First of all, as a practical matter there is a pretty serious political constraint on that situation ever arising, because it's not like the Federal Government is going to have an easy time of raising the kinds of tax revenues that need to be -- needed to raised to work that kind of fundamental transformation, and that is real.

And political constraints do operate to protect federalism in this area.

Justice Antonin Scalia: I would have thought there was a serious political strain -- constraint on the individual mandate, too, but that didn't work.

What you call serious political constraints sometimes don't work.

Mr. Verrilli Jr.: But -- but with respect to a situation like that one, Justice Scalia, the -- the States have their education system, and they can decide whether they are going to go in or not.

But here, of course, I think it's important to trace through the history of Medicaid.

It, it is not a case, as my friend from the other side suggested, that the norm here is that the Federal Government has offered to the States the opportunity either to stay where they are or add the new piece.

We can debate that proposition with respect to 1972 one way or another, the States have one view about that; we have a different one.

But starting in the 1984 expansion, with respect to pregnant women and infants, it was an expansion of the entire program; States were given the choice to stay in the entire program or not.

1989 when the program was expanded to children under 6 years of age, under 133 percent of poverty, same thing.

1990, kids 6 to 18 and 100 percent of poverty, same thing.

In fact, every major expansion, same thing.

And so I just think the history of the program, and particularly when you read that in context of 42 U.S.C. 1304, which reserves the right of the Federal Government to amend the program going forward, shows you that this is something that the States have understood all along.

This has been the evolution of it, and with respect to--

Chief Justice John G. Roberts: Could you give me some assurance?

We heard the question about whether or not the Secretary would use this authority to the extent available.

Is there circumstances where you are willing to say that that would not be permissible?

I'm thinking of the Arizona letter, for example.

I mean, if I had the authority and I was in that position, I would use it all the time.

You might -- you want some little change made?

Well, guess what; I can take away all your money if you don't make it.

I win.

Every time.

It seems that that would be the case.

So why shouldn't we be concerned about the extent of authority that the government is exercising, simply because they could do something less?

We have to analyze the case on the assumption that that power will be exercised, don't we?

Mr. Verrilli Jr.: --Well, Mr. Chief Justice, it would not be responsible of me to stand here in advance of any particular situation becoming -- coming before the Secretary of Health and Human Services and commit to how that would be resolved one way or another.

But that--

Chief Justice John G. Roberts: No, I appreciate that.

I appreciate that, but I guess -- GENERAL VERRILLI: That discretion is there in the statute, and I have every reason to think it is real, but I do think, getting back to the circumstances here--

Justice Elena Kagan: Well, General, what's the -- been the history of its use?

Has the Secretary in fact ever made use of that authority?

Mr. Verrilli Jr.: --That's correct, Justice Kagan.

It's never been used--

Chief Justice John G. Roberts: --What about the Arizona letter we just heard about today?

Mr. Verrilli Jr.: --It has never been used to cut off -- threaten--

Chief Justice John G. Roberts: It's been used to--

Justice Antonin Scalia: Of course not.

Chief Justice John G. Roberts: --Of course no States would say okay, go ahead but -- make my day, take it away; they are -- they are going to give in.

Mr. Verrilli Jr.: --If we could go to the situation we have here, Mr. Chief Justice, this -- with respect to the Medicaid expansion, the States' argument is, as they said in their briefs, they articulated a little bit different this morning -- this afternoon.

But as they said it in their briefs, was, it's not what you stand to gain, but what you stand to lose.

But I think an important thing in evaluating that argument in this context is fully 60 percent of Medicaid expenditures in this country are based on optional choices; and I don't mean by that the optional choices of the States to stay in the program in '84 or '88 or '89.

But -- but States are given the choices to expand the beneficiaries beyond the Federal minimum and to expand services beyond the Federal minimum.

Justice Anthony Kennedy: And just a small point, and please correct me if I am wrong.

It -- does this Act not require States to keep at the present level their existing Medicaid expenditure?

So some States may have been more generous than others in Medicaid, but this Act freezes that so the States can't go back.

Or am I incorrect?

Mr. Verrilli Jr.: It's much more nuanced than that, Justice Kennedy.

There is something called a maintenance of effort provision which lasts until 2014, until such time as the Medicaid expansion takes place and the exchanges are in place.

That applies to the population.

It says with respect to the population, you can't take anybody out.

It does not apply to the optional benefits where the States still have flexibility, they can still reduce optional benefits that they are now providing if they -- if they want to -- to control costs.

They can also work on provider rates, there's also with respect to demonstration projects by which some States have expanded their populations beyond the required eligibility levels, they don't have to keep them in.

So -- and then there's also, if the State has a budgetary crisis, it can get a waiver of that, as Wisconsin did.

So that is a -- that's a provision I think that does a significant degree less than my friends on the other side have suggested in terms of -- in terms of its effect, and its effect beyond that is just temporary.

I do think with respect to the -- the first of their three arguments for coercion, the sheer size argument, that it's very difficult to see how that is going to work; because if the question is about what you stand to lose rather than what you stand to gain, then it seems to me that it doesn't matter whether the Medicaid expansion is substantial or whether it's modest, or whether there is any expansion at all.

The States, for example -- the Federal Government, for example, could decide that under -- under the current system too much money has ended up flowing to nursing care and that money would be better serving the general welfare if it were directed at infants and children.

But if the Federal Government said we are going to redirect the spending priorities of the Federal money that we are offering to you, the States could say well, Geez, we don't like that; we would like to keep spending the money the way we were, and we have no choice, because this has gotten too big for us to exit.

And so -- and in fact, it seems to me, standing here today before these expansions take place, under their theory, the provision is--

Justice Antonin Scalia: The smaller it, is the bigger the coercion.

Mr. Verrilli Jr.: --well--

Justice Antonin Scalia: The smaller what you are demanding of them, the bigger the coercion to go along.

Mr. Verrilli Jr.: --The more they stand to lose.

And -- and so -- and then it -- I'm sorry, Justice Breyer.

Justice Stephen G. Breyer: I -- just before you leave that, I'd -- I'd appreciate it if you would expand a little bit on the answer to Justice Kagan's question.

For the reason, when I read the cutoff statute, which as I said has been there since 1965 unchanged, it does refer to the Secretary's discretion to keep the funding, insofar as the funding has no relationship to the failure to comply with the condition.

And as I read that, that gives the Secretary the authority to cut off all the money, but the State's refusal to accept the condition means they shouldn't have.

But nothing there says they can go beyond that and cut off unrelated money.

Now there is a sentence says maybe they could do that.

I thought they had to exercise that within reason.

Mr. Verrilli Jr.: Well--

Justice Stephen G. Breyer: I don't know when it be reasonable.

So you have looked into it, and that's what I want to know.

Mr. Verrilli Jr.: --Right.

Justice Stephen G. Breyer: Is there -- I could find no instance where they went beyond the funds that were related to the thing that the State refused to do, or things affected by that.

I would like you to tell me, when you looked into it, that what I thought of in this isolation chamber here is actually true.

Or whether they have run around threatening people that we will cut off totally unrelated funds.

What is the situation?

Mr. Verrilli Jr.: I think the situation is generally as you have described it, but I do want to be careful in saying I -- I don't think it would be responsible of me to commit now that the Secretary would exercise the discretion uniformly in one way or another.

Chief Justice John G. Roberts: Well, but that's just saying that when, you know, the analogy that has been used, the gun to your head, "your money or your life", you say well, there is no evidence that anyone has ever been shot.

Mr. Verrilli Jr.: But--

Chief Justice John G. Roberts: --Well, it's because you have to give up your wallet.

You don't have a choice.

Mr. Verrilli Jr.: But that--

Chief Justice John G. Roberts: And you cannot represent -- you cannot represent that the Secretary has never said,

"and if you don't do it, we are going to take away all the funds. "

They cite the Arizona example; I suspect there are others, because that is the leverage.

Mr. Verrilli Jr.: --But it--

Chief Justice John G. Roberts: I'm not saying there is anything wrong with it.

Mr. Verrilli Jr.: --It's not coercion, Mr. Chief Justice.

Chief Justice John G. Roberts: Wait a second.

It's not -- it's not coercion -- well, I guess that's what the case is.

It's not coercion. 32460063247256

Mr. Verrilli Jr.: It's not coercion.

Chief Justice John G. Roberts: --to say I'm going to take away all your funds, no matter how minor the infringement?

Mr. Verrilli Jr.: But -- But of course--

Justice Stephen G. Breyer: But I don't know if that's so.

And all I asked in my question was I didn't ask you to commit the Secretary to anything.

I wanted to know what the facts are.

Mr. Verrilli Jr.: --I--

Justice Stephen G. Breyer: I wanted to know what you found in researching this case.

I wanted you to, in other words, to answer the question the Chief Justice has: Is it a common thing, that that happens, that this unrelated threat is made?

Or isn't it?

Mr. Verrilli Jr.: --It's -- my understanding is that these situations are usually worked out back and forth between the States and the Federal government.

And I think that most--

Justice Stephen G. Breyer: And you are not privy to what those are.

Mr. Verrilli Jr.: --And I'm not.

But--

Justice Antonin Scalia: And who wins.

Mr. Verrilli Jr.: --Well, I think -- that's what I think is the problem here, Justice Scalia, is it seems to me we are operating under a conception that isn't right.

The reason we have had all these Medicaid expansions and the reason seems to me why we are were where we are now and why 60 percent of what's being spent on Medicaid is based on voluntary decisions by the States to expand beyond what Federal law requires, because this is a good program and it works.

And the States generally like what it accomplishes--

Justice Elena Kagan: And, General Verrilli--

Justice Samuel Alito: Is this discussion realistic?

The objective of the Affordable Care Act is to provide near universal health care.

Now suppose that all of the 26 States that are parties to this case were to say, well, we're not going to -- we're not going to abide by the new conditions.

Then there would be a huge portion -- a big portion of the population that would not have healthcare, and it's a realistic possibility the Secretary is going to say, well, okay, fine, you know.

We are going to cut off your new funds but we are not going to cut off your old funds and just let that condition sit there.

Mr. Verrilli Jr.: --Well, just as I can't make a commitment that the authority wouldn't be exercised, I'm not going to make a commitment that it would be exercised.

But I do think that that -- to try and move away from the first of their argument, the sheer size argument, to the second one, which is that it's coercive by virtue of its relationship to the Affordable Care Act.

I really think that that's a misconception and I would like to be able to take a minute and walk through and explain why that is.

Justice Elena Kagan: --General Verrilli, before you do that, I'm sorry, but in response to the Chief Justice's question -- I mean the money or your life has consequence because we are worried that that person is actually going to shoot.

So I think that this question about are we -- what do we think the Secretary is going to do is an important one.

And as I understand it, I mean when the Secretary withdraws funds, what the Secretary is doing is withdrawing funds from poor people's health care.

And that the Secretary is reluctant and loathe to take money away from poor people's health care.

And that that's why these things are always worked out.

It's that the Secretary really doesn't want to use this power.

And so the Secretary sits down with the State and figures out a way for the Secretary not to use the power.

Mr. Verrilli Jr.: That's correct, Justice Kagan.

That is no--

Chief Justice John G. Roberts: No, what the -- GENERAL VERRILLI: I'm sorry--

--Go ahead.

Mr. Verrilli Jr.: --That's another way of trying to say what I was trying to say to Justice Scalia earlier is that the States and the Federal government share a common objective here, which is to get health care to the needy.

And in the vast majority of instances they work together to make that happen.

Chief Justice John G. Roberts: Well, but the question is not obviously the States are interested in the same objective and they have a disagreement or they have budget realities that they have to deal with.

And States say, well, we are going to cut by 10 percent what we reimburse this for or that for and the Federal government says well, you can't.

And no one is suggesting that people want to cut health care but they have different views about how to implement policy in this area.

And the concern is that the Secretary has the total and complete say because the Secretary has the authority under this provision to say you lose everything.

No one's suggested in the normal course that will happen, but so long as the Federal government has that power, it seems to be a significant intrusion on the sovereign interests of the State.

Now I'm not -- it may be something they gave up many decades ago when they decided to live off of Federal funds.

But I don't think you can deny that it's a significant authority that we are giving the Federal government to say that you can take away everything if the States don't buy into the next program.

Mr. Verrilli Jr.: Well, but what I would say about that Mr. Chief Justice, is that we recognize that these decisions aren't going to be easy decisions in some circumstances.

As a practical matter there may be circumstances in which they are very difficult decisions.

But that's different from saying that they are coercive and that's different from saying that it's an unconstitutional--

Justice Stephen G. Breyer: Why is it different?

Why is it different?

I mean, I thought it might be very unlikely that the State would ever say that the government -- the Federal government would say here's a condition that you have to have a certain kind of eyeglasses for people who don't see.

And by the way if you don't do that we'll take away $42 billion of funding, okay?

I thought such a thing would not happen.

And I thought that if it tried to happen that it's governed by the APA and the person with eyeglasses would say it's arbitrary, capricious, abusive discretion.

And that's so, even though the statute says it's in the discretion of the Secretary but Mr. -- your colleague and brother says no, I'm wrong about the law there and moreover they would do it.

That's what I'm hearing now, that they would do it and they do do it, and -- and, etc.

So I would like a little clarification.

Mr. Verrilli Jr.: --In of the situation described in your hypothetical, Justice Breyer, the Secretary of health and human services would never do it.

But what I'm saying with respect to the Medicaid expansion in this case.

Justice Antonin Scalia: Could never do it or would a prediction, okay.

Mr. Verrilli Jr.: Well, I think it would have to satisfy the administrative procedure, that's a real constraint.

When I don't what I don't feel able to do here is to say with respect to this Medicaid expansion.

Justice Antonin Scalia: Are you willing to acknowledge that the Administrative Procedure Act is a limitation on the secretary's ability to cut off all the funds; she can't do it if it -- if that would be unreasonable?

Are you willing to accept that?

I wouldn't if I were you.

Mr. Verrilli Jr.: So what I'm trying to do here is to -- is to suggest that the secretary does have discretion under the statute, and that that -- and that--

Justice Antonin Scalia: Indeed, part of the discretion is to cut off all of the funds.

That's what the statute says.

Mr. Verrilli Jr.: --and it is possible, and I'm not willing to give that away.

But that doesn't make this--

Justice Elena Kagan: But, General Verrilli, you are not willing to give away whether the APA would bar that; but, the APA surely has to apply to a discretionary act of the secretary.

Mr. Verrilli Jr.: --I agree with that, Justice Kagan, but--

Justice Stephen G. Breyer: What's making you reluctant?

Mr. Verrilli Jr.: --I'm not trying to be -- I'm not trying to be reluctant.

I understand how this works.

I'm trying to be careful about the authority of the Secretary of Health and Human Services and how it will apply in the future.

Justice Antonin Scalia: I wouldn't worry a lot if I were you.

I don't know of any case that, where the secretary's discretion explicitly includes a certain act, we have held that, nevertheless, that act cannot be performed unless we think it reasonable.

I don't know any case like that.

Yes, when there is just a general grant of discretion, it has to be exercised reasonably.

But maybe Justice Breyer knows such a case.

Justice Stephen G. Breyer: Yes, I do.

Justice Antonin Scalia: Give it to me.

Mr. Verrilli Jr.: If I could go back to the sheer size idea, there is, I think, another couple of points that are important in thinking about whether that's a principle courts could ever apply.

Once you get into that business, in addition to the problem I identified earlier, that it basically means that Congress is frozen in place, based on the size of the program, you have got this additional issue of having to make a judgment about in what circumstances will -- will the loss of the federal funding be so significant that you would count it as -- coercive.

Justice Anthony Kennedy: I suppose one test could be -- I just don't see that it would be very workable -- is whether or not it's so big that accountability is lost, that it is not clear to the citizens that the State or the Federal Government is administering the program, even though it's a state administrator.

Mr. Verrilli Jr.: Well, but I think--

Justice Anthony Kennedy: I think that's unworkable.

Mr. Verrilli Jr.: --this is going to come from a withdrawal situation.

Their argument's about it's what you stand to lose and with respect to withdrawal.

I mean, so, does it depend on -- is it an absolute or a relative number with respect to how much of the state budget?

Is it a situation where you have to make a calculation about how hard would it be for that state to make up in state tax revenues the federal revenue they would lose?

Does that depend on whether it's a high tax state or a low tax state.

It just seems to me -- and then, what is the political climate in that state?

It seems to me like--

Justice Anthony Kennedy: In your view, does federalism require that there be a relatively clear line of accountability for political acts?

Mr. Verrilli Jr.: --Yes, of course, it does, Justice Kennedy.

But, here--

Justice Anthony Kennedy: Is that subsumed in the coercion test, or is that an independent?

Mr. Verrilli Jr.: --You know, here, the coercion test, as it's been discussed, I think, for example, in Justice O'Connor's dissent in Dole and in some of the other literature, does address federalism concerns in the sense of the Federal Government using federal funding in one area to try to get states to act in an area where the Federal Government may not have Article I authority.

Justice Anthony Kennedy: Yes.

Mr. Verrilli Jr.: But, as Your Honor suggested earlier, this is a situation in which, while it is certainly true that the Federal Government couldn't require the states, as the Chief Justice indicated, to carry out this program, the federal government could, as Your Honor suggested, expand Medicare and do it itself.

Justice Anthony Kennedy: But do you think that there still is inherent and implicit in the idea of federalism, necessary for the idea of federalism, that there be a clear line of accountability so the citizen knows that it's the Federal or the State government who should be held responsible for a program?

Mr. Verrilli Jr.: Certainly, but I think the problem here is--

Justice Anthony Kennedy: And does coercion relate to that, or is that a separate-- 38433763845959

Mr. Verrilli Jr.: Yes, but I think--

Justice Anthony Kennedy: --is that a separate thought?

Mr. Verrilli Jr.: --Well, I think it relates to it in the opposite way that my friends on the other side would like it to, in that I think their argument is that it would subject us to such a high degree of political accountability at the state level to withdraw ourselves from the program, that it's an unpalatable choice for us, and that's where the coercive effect comes from.

And that's why I think--

Justice Anthony Kennedy: Well, but I think the answer would be that the state wants to preserve its integrity, its identity, its responsibility in the federal system.

Mr. Verrilli Jr.: --And it may -- and, of course, it may do so, and it can make--

Justice Antonin Scalia: May it do so?

Doesn't the question come down to this -- maybe you can answer this yes.

But -- but isn't the question simply: Is it conceivable to you, as it was evidently not to Congress, that any State would turn down this offer, that they can't refuse?

Is it conceivable to you that any State would have said no to this program?

Congress didn't think that, because some of its other provisions are based on the assumption that every single State will be in this thing.

Now, do you -- can you conceive of a State saying no?

And -- and if you can't, that sounds like coercion to me.

Mr. Verrilli Jr.: --I think -- I think Congress predicted that States would stay in this program, but the -- prediction is not coercion.

And the reason Congress predicted it, I think, Justice Scalia, is because the Federal government is paying 90-plus percent of the costs.

It increases State costs--

Justice Antonin Scalia: So what do you predict?

If you predict the same, that 100 percent of the States will accept it, that sounds like coercion.

Mr. Verrilli Jr.: --Prediction is not coercion.

I disagree, Justice Scalia.

That's just an assumption, and if it proves to be wrong, then Congress has time to recalibrate.

And beyond that, I do think if -- I just want to go back to the other part of Your Honor's point -- that with respect to the relationship between Medicaid and the Act, and particularly the minimum coverage provision, my -- my friend Mr. Clement has suggested that you can infer coercion because with respect to the population to which the provision applies, if there's no Medicaid, there's no other way for them to satisfy the requirement.

I want to work through that for a minute if I may, because it's just incorrect.

First of all, with respect to anybody at 100 percent of the poverty line or above, there is an alternative in the statute.

It's the exchanges with tax credits and with subsidies to insurance companies.

So with respect to that, the part of the population at 100 percent of poverty to 133 percent of poverty, the -- the statute actually has an alternative for them.

For people below 100 percent of poverty, it -- it is true that there is no insurance alternative.

But by the same token, there is no penalty that is going to be imposed on anybody in that group.

To begin with, right now, the -- the level of 100 percent of poverty is $10,800.

The -- the requirement for filing a Federal income tax return is $9,500.

So anybody below $9,500, no penalty, because they don't have to file an income tax return.

The sliver of people between $9,500 and $10,800, the question there is are they going to be able to find health insurance that will cost them less than 8 percent of their income.

Justice Samuel Alito: Well, I'm not -- in selling this argument -- take the poorest of the poor.

If there is no Medicaid program, then they're not going to get health care.

Isn't that right?

Mr. Verrilli Jr.: Yes, that's true.

But this--

Justice Samuel Alito: So Congress obviously assumed -- it thought it was inconceivable that any State would reject this offer, because the objective of the Affordable Care Act is to provide near-universal care.

And Medicaid is the way to provide care for at least the poorest of the poor.

So it -- it just didn't occur to them that this was a possibility.

And when -- when that's the case, how can that not be coercion?

Unless it's just a gift.

Unless it's just purely a gift.

Then it comes back to the question of whether you think it makes a difference that the money -- a lot of the money to pay for this -- is going to come out of the same taxpayers that the States have to tax to get their money.

Mr. Verrilli Jr.: --This is -- this is a -- this is -- these are Federal dollars that Congress has offered to the States and said, we're going to make this offer to you, but here's how these dollars need to be spent.

This is the essence of Congress's Article I authority under the General Welfare Clause and the Appropriations Clause.

This is not some remote contingency, or an effort to leverage in that regard.

This is how Congress is going to have the Federal government's money be used if States choose to accept it.

Yes, it was reasonable for Congress to predict in this circumstance that the States were going to -- to take this money, because -- because it is an extremely generous offer of funds: 90-plus percent of the funding.

States can -- can expand their Medicaid coverage to more than 20 percent of their population for an increase of only 1 percent--

Chief Justice John G. Roberts: If it's such a good deal--

Mr. Verrilli Jr.: of their funding.

Chief Justice John G. Roberts: --why do you care?

If it's such a good deal, why do you need the club?

Mr. Verrilli Jr.: --Well, the -- the--

Chief Justice John G. Roberts: It's a good deal, take it.

We're not going to -- if you don't take it, you're just hurting yourself.

We're not going to--

Mr. Verrilli Jr.: That's a judgment for Congress to make about how the Federal -- how Federal funds are going to be used if States choose to accept them, and Congress has made that judgment.

Chief Justice John G. Roberts: That's Congress's judgment to make, and it's -- it doesn't mean that it's coercive.

You have another 15 minutes.

Mr. Verrilli Jr.: --Lucky me.

Justice Anthony Kennedy: But the -- but the point is -- but the -- the point is, there's -- there's no real--

Justice Sonia Sotomayor: Can we go back--

Justice Anthony Kennedy: --There's no real -- there's no realistic choice.

There's no real choice.

And Congress does not in effect allow for an out -- opt out.

We just know that.

And it's--

Mr. Verrilli Jr.: No, I guess I--

Justice Anthony Kennedy: --it's substantial.

Mr. Verrilli Jr.: I would go back, Justice Kennedy--

Justice Anthony Kennedy: I recognize the problem with that test.

Mr. Verrilli Jr.: --I would go back to the fact that 60 percent of the Medicaid spending is now optional.

It's -- it's a result of choices that States have made that -- it's expanded the--

Justice Anthony Kennedy: Even though they're now frozen in, per our earlier discussions, to a large extent.

Mr. Verrilli Jr.: --Well, no -- to a more -- much more modest extent was my point, Justice Kennedy.

For example, optional services where a huge amount of money is spent -- more than $100 billion annually -- the largest component of that is nursing home services.

That remains optional.

It's -- right now, once the minimum -- once the maintenance provision remains in place, States have the flexibility to that -- reduce those numbers.

States have considerable flexibility now and going forward with respect to the way that money is spent.

And I do think in terms of evaluating whether this expansion should be considered coercive has got to be evaluated against the backdrop of the fact that the States are generally taking -- are generally taking advantage of the opportunities of this statute to greatly expand the amount of money that the Federal government spends and the amount of money that they spend to try to make the -- the lives of their citizens better.

I think--

Justice Anthony Kennedy: Of course, they have to do so by hiring a very substantial number of more employees.

There will be State employees.

There'll be substantial State administrative expenses that are not reimbursed.

Mr. Verrilli Jr.: --Well, but -- I would take issue with that, Justice Kennedy.

Part of the Affordable Care Act is that it -- it provides for new streamlined eligibility processes to get people into the system at a -- at a much faster and cheaper rate.

There are going to be costs to set that up.

But under the statute, the Federal government is going to pay 90 percent of those costs, the short-term set-up costs.

And then all of the projections that we have seen suggest that the medium -- to long-term costs once these changes are in place are going to be dramatically lower on the administrative side.

Chief Justice John G. Roberts: Well, what--

--Obviously, the Federal government isn't bound to that.

And what if, after the 90 percent, they say well, now -- from now on, we're going to pay 70 percent?

What happens then?

Where does that extra money come from?

Mr. Verrilli Jr.: Well, I think -- then the States would have a choice at that -- at that point whether they were going to stay in the program or not.

But that isn't what we have here, and--

Chief Justice John G. Roberts: There's no -- they can just bail out -- whenever the government reduces the amount of the percentage that it's going to pay, the States can say, that's -- that's--

Mr. Verrilli Jr.: Well, I'm not saying it would be an easy choice, Mr. Chief Justice.

Justice Antonin Scalia: They'd have to bail out of Medicaid, you're talking about.

Not just there.

Mr. Verrilli Jr.: --Right.

That would be--

Justice Antonin Scalia: The option.

Mr. Verrilli Jr.: --Right.

That that would be the option.

They can leave Medicaid if they decide that that isn't working for them.

I'm not saying this is an easy choice.

I'm also not saying it would happen, because the Secretary does have this discretion--

Chief Justice John G. Roberts: Well, the Secretary has the discretion.

We're talking about something else.

We're talking about fiscal realities, and whether or not the Federal government is going to say we need to lower our contribution to Medicaid and leave it up to the States because we want the people to be mad at the States when they have to have all these budget cuts to keep it up, and not at the Federal government.

Mr. Verrilli Jr.: --That would be true, Mr. Chief Justice, whether this Medicaid expansion occurred or not.

Chief Justice John G. Roberts: I know, but you've been emphasizing that the Federal government is going to pay 90 percent of this, 90 percent of this, and it's -- it's not something they can take to the bank, because the next day or the next fiscal year, they can decide we're going to pay a lot less.

And you, States, are still on the hook, because you -- you don't -- you say it's not an easy choice.

We can say -- ask whether it's coercion.

You're not going to be able to bail out of Medicaid.

You just have to pay more because we're going to pay less.

Mr. Verrilli Jr.: Well, like I said, I -- I agree that it would be a difficult choice in some circumstances.

But that is not to say it's coercion as a legal matter or even as a practical matter.

And I think it would depend on what the circumstances were on how -- and I think trying to think about how a court would ever answer the question of whether it was coercive, it was too difficult as a practical matter for States to withdraw.

Justice Sonia Sotomayor: --General, I'm trying.

--to go back to that.

Because Justice Kennedy asked you whether there is -- I think he said it's -- it's coercion if no one can be politically accountable.

I'm not sure how that could be practically politically accountable, because almost every gift -- if the terms are attractive, it would be an unattractive political alternative to turn it down.

Dole itself was one of those cases.

I think every State raised the drinking age to 21; correct?

Mr. Verrilli Jr.: --Yes, Justice Sotomayor, and this argument was raised in Dole, and the Court rejected it as a--

Justice Sonia Sotomayor: I guess my point is that political accountability has two components: What can I do if I like something, and what can I do if I don't like something.

And if people really like something like Medicaid, they were not going to let you drop it, correct.

Mr. Verrilli Jr.: --Well, the citizens of the State, but that's the citizen of the State acting--

Justice Sonia Sotomayor: Exactly.

That's the whole point that's their choice, right?

Mr. Verrilli Jr.: --in the capacity of the citizens of the State.

And I think that's why I get -- try to get back to the point, that's why I think this is wrong to think about this as coercion, because this is a program that works effectively for the citizens of the State, and States' governments -- and States governments think that and that's why it has expanded the way it has expanded, because it's providing an essential service for millions of needy citizens in these States.

It's providing access to health care that they would not otherwise have.

Chief Justice John G. Roberts: You mentioned the -- the Dole case.

Now, what was the -- the threat in that case, raise your drinking age to 21 -- 21 or what?

Mr. Verrilli Jr.: Or lose a percentage of your highway funds.

Chief Justice John G. Roberts: Do you remember the percentage?

Mr. Verrilli Jr.: Seven percent, yes.

Chief Justice John G. Roberts: Yes.

It's a pretty small amount.

That is really apples and oranges when you are talking about lose all of your Medicaid funds or lose -- I thought it was 5, but 7 -- 7 percent of your highway funds.

Mr. Verrilli Jr.: It's -- I think I agree with Your Honor, that it's -- that it's different, but I don't think that that makes coercion as -- as a legal matter.

As I said, I think that this is a situation in which the -- if the States -- is it -- I'm saying it won't be an easy choice, but the States made the choice, they have made the choice.

And--

Justice Sonia Sotomayor: They made a choice with the stimulus bill, didn't they?

Some governors rejected the stimulus bill--

Mr. Verrilli Jr.: That is -- that's correct, Justice Sotomayor.

Justice Sonia Sotomayor: --and some of -- some of their congressional or legislative processes overturned that--

Mr. Verrilli Jr.: That's right.

Justice Sonia Sotomayor: --and others supported it.

The percentages were smaller, but it's always the preference of the voters as to what they want, isn't it?

Mr. Verrilli Jr.: --That is correct.

Chief Justice John G. Roberts: What was the threat in the stimulus bill, what would the State lose?

Mr. Verrilli Jr.: That answer I don't know, Mr. Chief Justice.

Chief Justice John G. Roberts: Would anything be taken away or would it just lose the opportunity to get the money?

Mr. Verrilli Jr.: I don't know the answer to that.

I don't know the answer to that.

But if I may just say in conclusion that -- I would like to take half a step back here, that this provision, the Medicaid expansion that we are talking about this afternoon, and the provisions we have talked about yesterday, we have been talking about them in terms of their effect as measures that solve problems, problems in the economic marketplace, that have resulted in millions of people not having health care because they can't afford insurance.

There is an important connection, a profound connection between that problem and liberty.

And I do think it's important that we not lose sight of that.

That in this population of Medicaid eligible people who will receive health care that they cannot now afford under this Medicaid expansion, there will be millions of people with chronic conditions like diabetes and heart disease, and as a result of the health care that they will get, they will be unshackled from the disabilities that those diseases put on them and have the opportunity to enjoy the blessings of liberty.

And the same thing will be true for -- for a husband whose wife is diagnosed with breast cancer and who won't face the prospect of being forced into bankruptcy to try to get care for his wife and face the risk of having to raise his children alone and I can multiply example after example after example.

In a very fundamental way this Medicaid expansion, as well as the provisions we discussed yesterday, secure of the blessings of liberty.

And I think that that is important as the Court's considering these issues that that be kept in mind.

The -- the Congress struggled with the issue of how to deal with this profound problem of 40 million people without health care for many years, and it made a judgment, and its judgment is one that is, I think, in conformity with lots of experts thought, was the best complex of options to handle this problem.

Maybe they were right, maybe they weren't, but this is something about which the people of the United States can deliberate and they can vote, and if they think it needs to be changed, they can change it.

And I would suggest to the Court with profound respect for the Court's obligation to ensure that the Federal Government remains a government of enumerated powers, that this is not a case in any of its aspects that calls that into question.

That this was a judgment of policy, that democratically accountable branches of this government made by their best lights, and I would encourage this Court to respect that judgment and ask that the Affordable Care Act, in its entirety, be upheld.

Thank you.

Chief Justice John G. Roberts: Thank you, General.

Mr. Clement, you have 5 minutes.

REBUTTAL ARGUMENT OF PAUL D. CLEMENT ON BEHALF OF THE PETITIONERS

Mr. Clement: Thank you, Mr. Chief Justice and may it please the Court:

Just a few points in rebuttal.

First of all we talked a lot about the sort of hallmark of coercion, your money or your life, with somebody with a gun.

I would respectfully suggest that it is equally coercive or certainly not uncoercive if I say your money or your life, and by the way, I have discretion as to whether or not I will shoot the gun.

I don't think that eliminates the coercion.

I also don't think this is a discretion that the Secretary would ever be able to exercise.

And the reason is, we disagree on the details, but the Solicitor General and I agree that over the years Congress has had different approaches to expanding Medicare.

Sometimes, as in 1972, it makes the expansion voluntary; that's also by the way that happened with the stimulus funds, which were voluntary funds.

You didn't lose all your Medicaid funds, which is why 17 States could say no.

Sometimes they take the voluntary approach.

Sometimes, as in 1984, they take the mandatory approach.

If the Secretary exercised the discretion to say you know what, it really isn't reasonable for you to have to give up your funding for the visually impaired and the disabled just to cover these newly eligible people, so we will make it voluntary; we'll make that discretionary -- that would essentially be creating -- converting a 1984 amendment approach to a 1972 amendment approach, and I just don't think that is the kind of discretion that the Secretary has, with all due respect.

Now moving on to the next point, Justice Alito, your hypothetical I think aptly captures the effect on this, based on the fact that these tax dollars are being taken from the State's tax base, and it's not like Steward Machine, where the Federal Government would say, and oh, by the way, if you don't take the option we are giving you, we are going to have a Federal substitute that will go in and we will take care of the unemployed in your States.

Here if you don't take this offer we are giving you, your tax dollars will fund the other 49 States and you will get nothing.

But of course, this situation is much more coercive even than your hypothetical, because it is tied directly to the mandate.

It's also tied to the -- to participation in the preexisting program.

So it is as if there was yet another program for post-secondary education; they gave them exactly your option -- option -- and then they also said, oh, and by the way; you not only -- not get these funds, but you lose the post-secondary fund as well.

It's really hard to understand tying the preexisting participation in the program as anything other than coercive.

The Solicitor General makes a lot of the fact that there are optional benefits under this program.

Well, guess what?

After the Medicaid expansion there will be a lot less opportunity for the States to exercise those options, because one of the things that the expansion does -- precisely because the expansion is designed to convert Medicaid into a program that satisfies the requirement of the minimum essential cover of the individual mandate, things that used to be voluntary will no longer be voluntary.

The perfect example is prescription coverage.

It's a big part of the benefits that some States but not all provide voluntarily now.

It will no longer be voluntary after the expansion, because the Federal Government has deemed that prescription drugs to be part of the minimal essential health coverage that everybody in this country must have after the manned date.

So that option that the State has is being removed by the expansion itself.

The Chief Justice made the point--

Justice Ruth Bader Ginsburg: Mr. Clement, may I ask one question about the bottom line in this case?

It sounds to me like everything you said would be to the effect of, if Congress continued to do things on a voluntary basis, so we are getting these new eligibles, and say States, you can have it or not, you can preserve the program as it existed before, you can opt into this.

But you are not asking the Court as relief to say, well, that's how we -- we -- that's how we cure the constitutional infirmity; we say this has to be on a voluntary basis.

Instead, you are arguing that this whole Medicaid addition, that the whole expansion has to be nullified; and moreover, the entire health care act.

Instead of having the easy repair, you say that if we accept your position, everything falls.

Mr. Clement: --Well, Justice Ginsburg, if we can start with the common ground that there is a need for repair because there is a coercion doctrine and this statute is coercion, then we are into the question of remedy.

And we do think, we do take the position that you describe in the remedy, but we would be certainly happy if we got something here, and we got a recognition that the coercion doctrine exists; this is coercive; and we get the remedy that you suggest in the alternative.

Let me just finish by saying I certainly appreciate what the Solicitor General says, that when you support a policy, you think that the policy spreads the blessings of liberty.

But I would respectfully suggest that it's a very funny conception of liberty that forces somebody to purchase an insurance policy whether they want it or not.

And it's a very strange conception of federalism that says that we can simply give the States an offer that they can't refuse, and through the spending power which is premised on the notion that Congress can do more because it's voluntary, we can force the States to do whatever we tell them to.

That is a direct threat to our federalism.

Thank you.

Chief Justice John G. Roberts: Thank you, Mr. Clement.

And thank you, General Verrilli, Mr. Kneedler, Mr. Carvin, Mr. Katsas, and in particular, of course, Mr. Long and Mr. Farr.

The case is submitted.

Print this transcript Transcript: 

ORAL ARGUMENT OF DONALD B. VERRILLI, JR., ON BEHALF OF THE PETITIONERS

Chief Justice John G. Roberts: We will continue argument this morning in Case 11-398, the Department of Health and Human Services v. Florida.

General Verrilli.

Mr. Verrilli Jr.: Mr. Chief Justice, and may it please the Court:

The Affordable Care Act addresses a fundamental and enduring problem in our health care system and our economy.

Insurance has become the predominant means of paying for health care in this country.

Insurance has become the predominant means of paying for health care in this country.

For most Americans, for more than 80 percent of Americans, the insurance system does provide effective access.

Excuse me.

But for more than 40 million Americans who do not have access to health insurance either through their employer or through government programs such as Medicare or Medicaid, the system does not work.

Those individuals must resort to the individual market, and that market does not provide affordable health insurance.

It does not do so because, because the multibillion dollar subsidies that are available for the, the employer market are not available in the individual market.

It does not do so because ERISA and HIPAA regulations that preclude, that preclude discrimination against people based on their medical history do not apply in the individual market.

That is an economic problem.

And it begets another economic problem.

Justice Antonin Scalia: Why aren't those problems that the Federal Government can address directly?

Mr. Verrilli Jr.: They can address it directly, Justice Scalia, and they are addressing it directly through this, through this Act by regulating the means by which health care, by which health care is purchased.

That is the way this Act works.

Under the Commerce Clause, what, what Congress has done is to enact reforms of the insurance market, directed at the individual insurance market, that preclude, that preclude discrimination based on pre-existing conditions, that require guaranteed issue and community rating, and it uses -- and the minimum coverage provision is necessary to carry into execution those insurance reforms.

Justice Anthony Kennedy: Can you create commerce in order to regulate it?

Mr. Verrilli Jr.: That's not what's going on here, Justice Kennedy, and we are not seeking to defend the law on that basis.

In this case, the -- what is being regulated is the method of financing health, the purchase of health care.

That itself is economic activity with substantial effects on interstate commerce.

And--

Justice Antonin Scalia: Any self purchasing?

Anything I -- you know if I'm in any market at all, my failure to purchase something in that market subjects me to regulation.

Mr. Verrilli Jr.: --No.

That's not our position at all, Justice Scalia.

In the health care market, the health care market is characterized by the fact that aside from the few groups that Congress chose to exempt from the minimum coverage requirement -- those who for religious reasons don't participate, those who are incarcerated, Indian tribes -- virtually everybody else is either in that market or will be in that market, and the distinguishing feature of that is that they cannot, people cannot generally control when they enter that market or what they need when they enter that--

Chief Justice John G. Roberts: Well, the same, it seems to me, would be true say for the market in emergency services: police, fire, ambulance, roadside assistance, whatever.

You don't know when you're going to need it; you're not sure that you will.

But the same is true for health care.

You don't know if you're going to need a heart transplant or if you ever will.

So there is a market there.

To -- in some extent, we all participate in it.

So can the government require you to buy a cell phone because that would facilitate responding when you need emergency services?

You can just dial 911 no matter where you are?

Mr. Verrilli Jr.: --No, Mr. Chief Justice.

I think that's different.

It's -- We -- I don't think we think of that as a market.

This is a market.

This is market regulation.

And in addition, you have a situation in this market not only where people enter involuntarily as to when they enter and won't be able to control what they need when they enter but when they--

Chief Justice John G. Roberts: It seems to me that's the same as in my hypothetical.

You don't know when you're going to need police assistance.

You can't predict the extent to emergency response that you'll need.

But when you do, and the government provides it.

I thought that was an important part of your argument, that when you need health care, the government will make sure you get it.

Well, when you need police assistance or fire assistance or ambulance assistance, the government is going to make sure to the best extent it can that you get it -- get it.

Mr. Verrilli Jr.: --I think the fundamental difference, Mr. Chief Justice, is that that's not an issue of market regulation.

This is an issue of market regulation, and that's how Congress, that's how Congress looked at this problem.

There is a market.

Insurance is provided through the market system--

Justice Samuel Alito: Do you think there is a, a market for burial services?

Mr. Verrilli Jr.: --For burial services?

Justice Samuel Alito: Yes.

Mr. Verrilli Jr.: Yes, Justice Alito, I think there is.

Justice Samuel Alito: All right, suppose that you and I walked around downtown Washington at lunch hour and we found a couple of healthy young people and we stopped them and we said,

"You know what you're doing? "

"You are financing your burial services right now because eventually you're going to die, and somebody is going to have to pay for it, and if you don't have burial insurance and you haven't saved money for it, you're going to shift the cost to somebody else. "

Isn't that a very artificial way of talking about what somebody is doing?

Mr. Verrilli Jr.: No, that--

Justice Samuel Alito: And if that's true, why isn't it equally artificial to say that somebody who is doing absolutely nothing about health care is financing health care services?

Mr. Verrilli Jr.: --It's, I think it's completely different.

The -- and the reason is that the, the burial example is not -- the difference is here we are regulating the method by which you are paying for something else -- health care -- and the insurance requirement -- I think the key thing here is my friends on the other side acknowledge that it is within the authority of Congress under Article I under the commerce power to impose guaranteed-issue and community rating forms, to end -- to impose a minimum coverage provision.

Their argument is just that it has to occur at the point of sale, and--

Justice Samuel Alito: I don't see the difference.

You can get burial insurance.

You can get health insurance.

Most people are going to need health care.

Almost everybody.

Everybody is going to be buried or cremated at some point.

What's the difference?

Mr. Verrilli Jr.: Well, one big difference, one big difference, Justice Alito, is the -- you don't have the cost shifting to other market participants.

Justice Samuel Alito: Here--

--Sure you do, because if you don't have money then the State is going to pay for it.

Or some -- to pay.

Mr. Verrilli Jr.: That's different.

Justice Samuel Alito: Or a family member is going--

Mr. Verrilli Jr.: --That's a difference and it's a significant difference.

In this situation one of the economic effects Congress is addressing is that the -- there -- the many billions of dollars of uncompensated costs are transferred directly to other market participants.

It's transferred directly to other market participants because health care providers charge higher rates in order to cover the cost of uncompensated care, and insurance companies reflect those higher rates in higher premiums, which Congress found translates to a thousand dollars per family in additional health insurance costs.

Justice Samuel Alito: --But isn't that a very small part of what the mandate is doing?

You can correct me if these figures are wrong, but it appears to me that the CBO has estimated that the average premium for a single insurance policy in the non-group market would be roughly $5,800 in -- in 2016.

Respondents -- the economists have supported -- the Respondents estimate that a young, healthy individual targeted by the mandate on average consumes about $854 in health services each year.

So the mandate is forcing these people to provide a huge subsidy to the insurance companies for other purposes that the act wishes to serve, but isn't -- if those figures are right, isn't it the case that what this mandate is really doing is not requiring the people who are subject to it to pay for the services that they are going to consume?

It is requiring them to subsidize services that will be received by somebody else.

Mr. Verrilli Jr.: No, I think that -- I do think that's what the Respondents argue.

It's just not right.

I think it -- it really gets to a fundamental problem with their argument.

Justice Ruth Bader Ginsburg: If you're going to have insurance, that's how insurance works.

Mr. Verrilli Jr.: A, it is how insurance works, but, B, the problem that they -- that they are identifying is not that problem.

The -- the guaranteed issue and community rating reforms do not have the effect of forcing insurance companies to take on lots of additional people who they then can't afford to cover because they're -- they tend to be the sick, and that is -- in fact, the exact opposite is what happens here.

The -- when -- when you enact Guaranteed Issue and Community Rating Reforms and you do so in the absence of a minimum coverage provision, it's not that insurance companies take on more and more people and then need a subsidy to cover it, it's that fewer and fewer people end up with insurance because their rates are not regulated.

Insurance companies, when -- when they have to offer Guaranteed Issue and Community Rating, they are entitled to make a profit.

They charge rates sufficient to cover only the sick population because health--

Justice Anthony Kennedy: Could you help -- help me with this.

Assume for the moment -- you may disagree.

Assume for the moment that this is unprecedented, this is a step beyond what our cases have allowed, the affirmative duty to act to go into commerce.

If that is so, do you not have a heavy burden of justification?

I understand that we must presume laws are constitutional, but, even so, when you are changing the relation of the individual to the government in this, what we can stipulate is, I think, a unique way, do you not have a heavy burden of justification to show authorization under the Constitution?

Mr. Verrilli Jr.: --So two things about that, Justice Kennedy.

First, we think this is regulation of people's participation in the health care market, and all -- all this minimum coverage provision does is say that, instead of requiring insurance at the point of sale, that Congress has the authority under the commerce power and the necessary proper power to ensure that people have insurance in advance of the point of sale because of the unique nature of this market, because this is a market in which -- in which you -- although most of the population is in the market most of the time -- 83 percent visit a physician every year; 96 percent over a five-year period -- so virtually everybody in society is in this market, and you've got to pay for the health care you get, the predominant way in which it's -- in which it's paid for is insurance, and -- and the Respondents agree that Congress could require that you have insurance in order to get health care or forbid health care from being provided--

Justice Antonin Scalia: Why do you -- why do you define the market that broadly?

Health care.

It may well be that everybody needs health care sooner or later, but not everybody needs a heart transplant, not everybody needs a liver transplant.

Why--

Mr. Verrilli Jr.: That's correct, Justice Scalia, but you never know whether you're going to be that person.

Justice Antonin Scalia: Could you define the market -- everybody has to buy food sooner or later, so you define the market as food, therefore, everybody is in the market; therefore, you can make people buy broccoli.

Mr. Verrilli Jr.: --No, that's quite different.

That's quite different.

The food market, while it shares that trait that everybody's in it, it is not a market in which your participation is often unpredictable and often involuntary.

It is not a market in which you often don't know before you go in what you need, and it is not a market in which, if you go in and -- and seek to obtain a product or service, you will get it even if you can't pay for it.

It doesn't--

Justice Antonin Scalia: Is that a principal basis for distinguishing this from other situations?

I mean, you know, you can also say, well, the person subject to this has blue eyes.

That would indeed distinguish it from other situations.

Is it a principle basis?

I mean, it's -- it's a basis that explains why the government is doing this, but is it -- is it a basis which shows that this is not going beyond what -- what the -- the system of enumerated powers allows the government to do.

Mr. Verrilli Jr.: --Yes, for two reasons.

First, this -- the test, as this Court has articulated it, is: Is Congress regulating economic activity with a substantial effect on interstate commerce?

The way in which this statute satisfies the test is on the basis of the factors that I have identified.

If--

Justice Ruth Bader Ginsburg: Mr. Verrilli, I thought that your main point is that, unlike food or any other market, when you made the choice not to buy insurance, even though you have every intent in the world to self-insure, to save for it, when disaster strikes, you may not have the money.

And the tangible result of it is -- we were told there was one brief that Maryland Hospital Care bills 7 percent more because of these uncompensated costs, that families pay a thousand dollars more than they would if there were no uncompensated costs.

I thought what was unique about this is it's not my choice whether I want to buy a product to keep me healthy, but the cost that I am forcing on other people if I don't buy the product sooner rather than later.

Mr. Verrilli Jr.: That is -- and that is definitely a difference that distinguishes this market and justifies this as a regulation.

Justice Stephen G. Breyer: All right.

So if that is your difference -- if that is your difference, I'm somewhat uncertain about your answers to -- for example, Justice Kennedy asked, can you, under the Commerce Clause, Congress create commerce where previously none existed.

Well, yeah, I thought the answer to that was, since McCulloch versus Maryland, when the Court said Congress could create the Bank of the United States which did not previously exist, which job was to create commerce that did not previously exist, since that time the answer has been, yes.

I would have thought that your answer -- can the government, in fact, require you to buy cell phones or buy burials that, if we propose comparable situations, if we have, for example, a uniform United States system of paying for every burial such as Medicare Burial, Medicaid Burial, CHIP Burial, ERISA Burial and Emergency Burial beside the side of the road, and Congress wanted to rationalize that system, wouldn't the answer be, yes, of course, they could.

Mr. Verrilli Jr.: --So--

Justice Stephen G. Breyer: And the same with the computers or the same with the -- the cell phones, if you're driving by the side of the highway and there is a federal emergency service just as you say you have to buy certain mufflers for your car that don't hurt the environment, you could -- I mean, see, doesn't it depend on the situation?

Mr. Verrilli Jr.: --It does, Justice Breyer, and if Congress were to enact laws like that, we--

Justice Stephen G. Breyer: We would be--

Mr. Verrilli Jr.: My responsibility -- and I would defend them on a rationale like that, but I do think that we are advancing a narrower rationale.

Justice Anthony Kennedy: Well, then your question is whether or not there are any limits on the Commerce Clause.

Can you identify for us some limits on the Commerce Clause?

Mr. Verrilli Jr.: --Yes.

The -- the rationale purely under the Commerce Clause that we're advocating here would not justify forced purchases of commodities for the purpose of stimulating demand.

We -- the -- it would not justify purchases of insurance for the purposes -- in situations in which insurance doesn't serve as the method of payment for service--

Justice Anthony Kennedy: But why not?

If Congress -- if Congress says that the interstate commerce is affected, isn't, according to your view, that the end of the analysis.

Mr. Verrilli Jr.: --No.

The, the -- we think that in a -- when -- the difference between those situations and this situation is that in those situations, Your Honor, Congress would be moving to create commerce.

Here Congress is regulating existing commerce, economic activity that is already going on, people's participation in the health care market, and is regulating to deal with existing effects of existing commerce.

Chief Justice John G. Roberts: That -- that it seems to me, it's a -- it's a passage in your reply brief that I didn't quite grasp.

It's the same point.

You say health insurance is not purchased for its own sake, like a car or broccoli; it is a means of financing health care consumption and covering universal risks.

Well, a car or broccoli aren't purchased for their own sake, either.

They are purchased for the sake of transportation or in broccoli, covering the need for food.

I -- I don't understand that distinction.

Mr. Verrilli Jr.: The difference, Mr. Chief Justice, is that health insurance is the means of payment for health care and broccoli is--

Chief Justice John G. Roberts: Well, now that's a significant -- I'm sorry.

Mr. Verrilli Jr.: --And -- and broccoli is not the means of payment for anything else.

And an automobile is not--

Chief Justice John G. Roberts: It's the means of satisfying a basic human need, just as your insurance is a means of satisfying--

Mr. Verrilli Jr.: But I do think that's the difference between existing commerce activity in the market already occurring --the people in the health care market purchasing, obtaining health careservices -- and the creation of commerce.

Chief Justice John G. Roberts: And the principle that we are advocating here under the Commerce Clause does not take the step of justifying the creation of commerce.

It's a regulation of the existing commerce.

Justice Ruth Bader Ginsburg: General Verrilli, can we -- can we go back to, Justice Breyer asked a question, and it kind of interrupted your answer to my question.

And tell me if I'm wrong about this, but I thought a major, major point of your argument was that the people who don't participate in this market are making it much more expensive for the people who do; that is, they -- they will get, a good number of them will get services that they can't afford at the point where they need them, and the result is that everybody else's premiums get raised.

So you're not -- it's not your -- your free choice just to do something for yourself.

What you do is going to affect others, affect them in -- in a major way.

Mr. Verrilli Jr.: --That -- that absolutely is a justification for Congress's action here.

That is existing economic activity that Congress is regulating by means of this rule.

Justice Antonin Scalia: General Verrilli, you -- you could say that about buying a car.

If -- if people don't buy cars, the price that those who do buy cars pay will have to be higher.

So you could say in order to bring the price down, you are hurting these other people by not buying a car.

Mr. Verrilli Jr.: That is not what we are saying, Justice Scalia.

Justice Antonin Scalia: That's not -- that's not what you're saying.

Mr. Verrilli Jr.: That's not -- not--

Justice Antonin Scalia: I thought it was.

I thought you were saying other people are going to have to pay more for insurance because you're not buying it.

Mr. Verrilli Jr.: --No.

It's because you're going -- in the health care market, you're going into the market without the ability to pay for what you get, getting the health care service anyway as a result of the social norms that allow -- that -- to which we've obligated ourselves so that people get health care.

Justice Antonin Scalia: Well, don't obligate yourself to that.

Why -- you know?

Mr. Verrilli Jr.: Well, I can't imagine that that -- that the Commerce Clause would -- would forbid Congress from taking into account this deeply embedded social norm.

Justice Antonin Scalia: You -- you could do it.

But -- but does that expand your ability to, to issue mandates to -- to the people?

Mr. Verrilli Jr.: I -- I -- this is not a purchase mandate.

This is a -- this is a law that regulates the method of paying for a service that the class of people to whom it applies are either consuming--

Justice Sonia Sotomayor: General--

Mr. Verrilli Jr.: Or -- or inevitably will consume.

Justice Sonia Sotomayor: General, I see or have seen three strands of arguments in your briefs, and one of them is echoed today.

The first strand that I have seen is that Congress can pass any necessary laws to effect those powers within its rights, i.e., because it made a decision that to effect, to effect mandatory issuance of insurance, that it could also obligate the mandatory purchase of it.

The second strand I see is self-insurance affects the market, and so the government can regulate those who self-insure.

And the third argument -- and I see all of them as different -- is that what the government is doing, and I think it's the argument you're making today -- that what the -- what the government is saying is if you pay for -- if you use health services, you have to pay with insurance.

Because only insurance will guarantee that whatever need for health care that you have will be covered.

Because virtually no one, perhaps with the exception of 1 percent of the population, can afford the massive cost if the unexpected happens.

This third argument seems to be saying what we are regulating is health care, and when you go for health services, you have to pay for insurance, and since insurance won't issue at the moment that you consume the product, we can reasonably, necessarily tell you to buy it ahead of time, because you can't buy it at the moment that you need it.

Is that -- which of these three is your argument?

Are all of them your argument?

I'm just not sure what the--

Mr. Verrilli Jr.: So, let me try to state it this way.

The Congress enacted reforms of the insurance market, the guaranteed-issue and community-rating reforms.

It did so to deal with a very serious problem that results in 40 million people not being able to get insurance and therefore not access to the health care market.

Everybody agrees in this case that those are within Congress's Article I powers.

The minimum coverage provision is necessary to carry those provisions into -- into execution; because without them, without those provisions, without minimum coverage, guaranteed issue and community rating will, as the experience in the States showed, make matters worse, not better.

There will be fewer people covered; it will cost more.

Now the -- so--

Justice Sonia Sotomayor: --So on that ground, you're answering affirmatively to my colleagues that have asked you the question, can the government force you into commerce.

Mr. Verrilli Jr.: --So -- no.

Justice Sonia Sotomayor: And there is no limit to that power.

Mr. Verrilli Jr.: No.

No.

Because that's -- that's the first part of our argument.

The second part of our argument is that the means here that the Congress has chosen, the minimum coverage provision, is a means that regulates the -- that regulates economic activity, namely your transaction in the health care market, with substantial effects on interstate commerce; and it is the conjunction of those two that we think provides the particularly secure foundation for this statute under the commerce power.

Justice Elena Kagan: General, you've talked on -- a couple of times about other alternatives that Congress might have had, other alternatives that the Respondents suggest to deal with this problem, in particular, the alternative of mandating insurance at the point at which somebody goes to a hospital or an emergency room and asks for care.

Did Congress consider those alternatives?

Why did it reject them?

How should we think about the question of alternative ways of dealing with these problems?

Mr. Verrilli Jr.: I do think, Justice Kagan, that the point of difference between my friends on the other side and the United States is about one of timing.

They have agreed that Congress has Article I authority to impose an insurance requirement or other -- or other penalty at the point of sale, and they have agreed that Congress has the authority to do that to achieve the same objectives that the minimum coverage provision of the Affordable Care Act is designed to achieve.

This is a situation if which we are talking about means.

Congress gets a substantial deference in the choice of means, and if one thinks about the difference between the means they say Congress should have chosen and the means Congress did choose, I think you can see why it was eminently more sensible for Congress to choose the means that it chose.

Justice Anthony Kennedy: I'm not sure which way it cuts.

If the Congress has alternate means, let's assume it can use the tax power to raise revenue and to just have a national health service, single payer.

How does that factor into our analysis?

In the one sense, it can be argued that this is what the government is doing; it ought to be honest about the power that it's using and use the correct power.

On the other hand, it means that since the Court can do it anyway -- Congress can do it anyway, we give a certain amount of latitude.

I'm not sure which the way the argument goes.

Mr. Verrilli Jr.: Let me try to answer that question, Justice Kennedy, and get back to the question you asked me earlier.

The, the -- I do think one striking feature of the argument here that this is a novel exercise of power is that what Congress chose to do was to rely on market mechanisms and efficiency and a method that has more choice than would the traditional Medicare/Medicaid type model; and so it seems a little ironic to suggest that that counts against it.

But beyond that, in the sense that it's novel, this provision is novel in the same way, or unprecedented in the same way, that the Sherman Act was unprecedented when the Court upheld it in the Northern Securities case; or the Packers and Stockyards Act was unprecedented when the Court upheld it, or the National Labor Relations Act was unprecedented when the Court upheld it in Jones and Laughlin; or the -- the dairy price supports in Wrightwood Dairy and Rock Royal--

Justice Antonin Scalia: Oh, no, it's not.

They all involved commerce.

There was no doubt that what was being regulated was commerce.

And here you're regulating somebody who isn't covered.

By the way, I don't agree with you that the relevant market here is health care.

You're not regulating health care.

You're regulating insurance.

It's the insurance market that you're addressing and you're saying that some people who are not in it must be in it and that's -- that's difference from regulating in any manner commerce that already exists out there.

Mr. Verrilli Jr.: --Well, to the extent that we are looking at the comprehensive scheme, Justice Scalia, it is regulating commerce that already exists out there.

And the means in which that regulation is made effective here, the minimum coverage provision, is a regulation of the way in which people participate, the method of their payment in the health care market.

That is what it is.

And I do think, Justice Kennedy, getting back to the question you asked before, what -- what matters here is whether Congress is choosing a tool that's reasonably adapted to the problem that Congress is confronting.

And that may mean that the tool is different from a tool that Congress has chosen to use in the past.

That's not something that counts against the provision in a Commerce Clause analysis.

Justice Antonin Scalia: Wait.

That's -- that's -- it's both "Necessary and Proper".

What you just said addresses what's necessary.

Yes, has to be reasonably adapted.

Necessary does not mean essential, just reasonably adapted.

But in addition to being necessary, it has to be proper.

And we've held in two cases that something that was reasonably adapted was not proper because it violated the sovereignty of the States, which was implicit in the constitutional structure.

The argument here is that this also is -- may be necessary, but it's not proper because it violates an equally evident principle in the Constitution, which is that the Federal Government is not supposed to be a government that has all powers; that it's supposed to be a government of limited powers.

And that's what all this questioning has been about.

What -- what is left?

If the government can do this, what, what else can it not do?

Mr. Verrilli Jr.: This does not violate the norm of proper as this Court articulated it in Printz or in New York because it does not interfere with the States as sovereigns.

This is a regulation that -- this is a regulation--

Justice Antonin Scalia: No, that wasn't my point.

That is not the only constitutional principle that exists.

Mr. Verrilli Jr.: --But it--

Justice Antonin Scalia: An equally evident constitutional principle is the principle that the Federal Government is a government of enumerated powers and that the vast majority of powers remain in the States and do not belong to the Federal Government.

Do you acknowledge that that's a principle?

Mr. Verrilli Jr.: --Of course we do, Your Honor.

Justice Antonin Scalia: Okay.

That's what we are talking about here.

Mr. Verrilli Jr.: And the way in which this Court in its cases has policed the boundary that -- of what's in the national sphere and what's in the local sphere is to ask whether Congress is regulating economic activity with a substantial effect on interstate commerce.

And here I think it's really impossible, in view of our history, to say that Congress is invading the State sphere.

This is a -- this is a market in which 50 percent of the people in this country get their health care through their employer.

There is a massive Federal tax subsidy of $250 billion a year that makes that much more affordable.

ERISA and HIPAA regulate that to ensure that the kinds of bans on pre-existing condition discrimination and pricing practices that occur in the individual market don't occur.

Justice Antonin Scalia: I don't understand your point--

Mr. Verrilli Jr.: This is in--

Justice Antonin Scalia: --Whatever the States have chosen not to do, the Federal Government can do?

Mr. Verrilli Jr.: No, not at all.

Justice Antonin Scalia: I mean, the Tenth Amendment says the powers not given to the Federal Government are reserved, not just to the States, but to the States and the people.

And the argument here is that the people were left to decide whether they want to buy insurance or not.

Mr. Verrilli Jr.: But this -- but, Your Honor, this is -- what the Court has said, and I think it would be a very substantial departure from what the Court has said, is that when Congress is regulating economic activity with a substantial effect on interstate commerce that will be upheld.

And that is what is going on here, and to embark on -- I would submit with all due respect, to embark on the kind of analysis that my friends on the other side suggest the Court ought to embark on is to import Lochner-style substantive due process--

Chief Justice John G. Roberts: The key in Lochner is that we were talking about regulation of the States, right, and the States are not limited to enumerated powers.

The Federal Government is.

And it seems to me it's an entirely different question when you ask yourself whether or not there are going to be limits in the Federal power, as opposed to limits on the States, which was the issue in Lochner.

Mr. Verrilli Jr.: I agree, except, Mr. Chief Justice, that what the Court has said as I read the Court's cases is that the way in which you ensure that the Federal Government stays in its sphere and the sphere reserved for the States is protected is by policing the boundary: Is the national government regulating economic activity with a substantial effect on interstate commerce?

Justice Anthony Kennedy: But the reason, the reason this is concerning, is because it requires the individual to do an affirmative act.

In the law of torts our tradition, our law, has been that you don't have the duty to rescue someone if that person is in danger.

The blind man is walking in front of a car and you do not have a duty to stop him absent some relation between you.

And there is some severe moral criticisms of that rule, but that's generally the rule.

And here the government is saying that the Federal Government has a duty to tell the individual citizen that it must act, and that is different from what we have in previous cases and that changes the relationship of the Federal Government to the individual in a very fundamental way.

Mr. Verrilli Jr.: --I don't think so, Justice Kennedy, because it is predicated on the participation of these individuals in the market for health care services.

Now, it happens to be that this is a market in which, aside from the groups that the statute excludes, virtually everybody participates.

But it is a regulation of their participation in that market.

Chief Justice John G. Roberts: Well, but it's critical how you define the market.

If I understand the law, the policies that you're requiring people to purchase involve -- must contain provision for maternity and newborn care, pediatric services, and substance use treatment.

It seems to me that you cannot say that everybody is going to need substance use treatment, substance use treatment or pediatric services, and yet that is part of what you require them to purchase.

Mr. Verrilli Jr.: Well, it's part of what the statute requires the insurers to offer.

And I think the reason is because it's trying to define minimum essential coverage because the problem--

Chief Justice John G. Roberts: But your theory is that there is a market in which everyone participates because everybody might need a certain range of health care services, and yet you're requiring people who are not -- never going to need pediatric or maternity services to participate in that market.

Mr. Verrilli Jr.: --The -- with respect to what insurance has to cover, Your Honor, I think Congress is entitled the latitude of making the judgments of what the appropriate scope of coverage is.

And the problem here in this market is that for -- you may think you're perfectly healthy and you may think that you're not -- that you're being forced to subsidize somebody else, but this is not a market in which you can say that there is a immutable class of healthy people who are being forced to subsidize the unhealthy.

This is a market in which you may be healthy one day and you may be a very unhealthy participant in that market the next day and that is a fundamental difference, and you're not going to know in which--

Chief Justice John G. Roberts: I think you're posing the question I was posing, which is that doesn't apply to a lot of what you're requiring people to purchase: Pediatric services, maternity services.

You cannot say that everybody is going to participate in the substance use treatment market and yet you require people to purchase insurance coverage for that.

Mr. Verrilli Jr.: --Congress has got -- Congress is enacting economic regulation here.

It has latitude to define essential, the attributes of essential coverage.

That doesn't -- that doesn't seem to me to implicate the question of whether Congress is engaging in economic regulation and solving an economic problem here, and that is what Congress is doing.

Justice Samuel Alito: Are you denying this?

If you took the group of people who are subject to the mandate and you calculated the amount of health care services this whole group would consume and figured out the cost of an insurance policy to cover the services that group would consume, the cost of that policy would be much, much less than the kind of policy that these people are now going to be required to purchase under the Affordable Care Act?

Mr. Verrilli Jr.: Well, while they are young and healthy that would be true.

But they are not going to be young and healthy forever.

They are going to be on the other side of that actuarial equation at some point.

And of course you don't know which among that group is the person who's going to be hit by the bus or get the definitive diagnosis.

And that--

Justice Samuel Alito: The point is -- no, you take into account that some people in that group are going to be hit by a bus, some people in that group are going to unexpectedly contract or be diagnosed with a disease that -- that is very expensive to treat.

But if you take their costs and you calculate that, that's a lot less than the amount that they are going to be required to pay.

So that you can't just justify this on the basis of their trying to shift their costs off to other people, can you?

Mr. Verrilli Jr.: --Well, the -- the people in that class get benefits, too, Justice Alito.

They get the guaranteed-issue benefit that they would not otherwise have, which is an enormously valuable benefit.

And in terms of the -- the subsidy rationale, I -- I don't think -- I think it's -- it would be unusual to say that it's an illegitimate exercise of the commerce power for some people to subsidize others.

Telephone rates in this country for a century were set via the exercise of the commerce power in a way in which some people paid rates that were much higher than their costs in order to subsidize--

Justice Antonin Scalia: Only if you make phone calls.

Mr. Verrilli Jr.: --Well, right.

But -- but everybody -- to live in the modern world, everybody needs a telephone.

And the -- the same thing with respect to the -- you know, the dairy price supports that -- that the Court upheld in Wrightwood Dairy and Rock Royal.

You can look at those as disadvantageous contracts, as forced transfers, that -- you know, I suppose it's theoretically true that you could raise your kids without milk, but the reality is you've got to go to the store and buy milk.

And the commerce power -- as a result of the exercise of the commerce power, you're subsidizing somebody else--

Justice Elena Kagan: And this is especially true, isn't it, General--

Mr. Verrilli Jr.: --Because that's the judgment Congress has made.

Justice Elena Kagan: --Verrilli, because in this context, the subsidizers eventually become the subsidized?

Mr. Verrilli Jr.: --Well, that was the point I was trying to make, Justice Kagan, that you're young and healthy one day, but you don't stay that way.

And the -- the system works over time.

And so I just don't think it's a fair characterization of it.

And it does get back to, I think -- a problem I think is important to understand--

Justice Antonin Scalia: We're not stupid.

They're going to buy insurance later.

They're young and -- and need the money now.

Mr. Verrilli Jr.: --But that's--

Justice Antonin Scalia: When -- when they think they have a substantial risk of incurring high medical bills, they'll buy insurance, like the rest of us.

Mr. Verrilli Jr.: But -- that's -- that's--

Justice Antonin Scalia: I don't know why you think that they're never going to buy it.

Mr. Verrilli Jr.: --That's the problem, Justice Scalia.

That's -- and that's exactly the experience that the States had that made the imposition of guaranteed-issue and community rating not only be ineffectual but be highly counterproductive.

Rates, for example, in New Jersey doubled or tripled, went from 180,000 people covered in this market down to 80,000 people covered in this market.

In Kentucky, virtually every insurer left the market.

And the reason for that is because when people have that guarantee of -- that they can get insurance, they're going to make that calculation that they won't get it until they're sick and they need it, and so the pool of people in the insurance market gets smaller and smaller.

The rates you have to charge to cover them get higher and higher.

It helps fewer and fewer -- insurance covers fewer and fewer people until the system ends.

This is not a situation in which you're conscripting -- you're forcing insurance companies to cover very large numbers of unhealthy people--

Justice Antonin Scalia: You could solve that problem by simply not requiring the insurance company to sell it to somebody who has a -- a condition that is going to require medical treatment, or at least not -- not require them to sell it to him at -- at a rate that he sells it to healthy people.

But you don't want to do that.

Mr. Verrilli Jr.: --But that seems to me to say, Justice Scalia, that Congress -- that's the problem here.

And that seems to be--

Justice Antonin Scalia: That seems to me a self-created problem.

Mr. Verrilli Jr.: --Congress cannot solve the problem through standard economic regulation, and that -- and -- and I do not think that can be the premise of our understanding of the Commerce Clause--

Justice Antonin Scalia: Whatever--

Mr. Verrilli Jr.: --this is an economic problem.

Justice Antonin Scalia: --whatever problems Congress's economic regulation produces, whatever they are, I think Congress can do something to counteract them.

Here, requiring somebody to enter -- to enter the insurance market.

Mr. Verrilli Jr.: This is not a -- it's not a problem of Congress's creation.

Justice Antonin Scalia: The problem is that you have 40 million people who cannot get affordable insurance through the means that the rest of us get affordable insurance.

Congress, after a long study and careful deliberation, and viewing the experiences of the States and the way they tried to handle this problem, adopted a package of reforms.

Guaranteed-issue and community rating, and -- and subsidies and the minimum coverage provision are a package of reforms that solve that problem.

I don't -- I think it's highly artificial to view this as a problem of Congress's own creation.

Chief Justice John G. Roberts: Is your argument limited to insurance or means of paying for health care?

Mr. Verrilli Jr.: --Yes.

It's limited to insurance.

Chief Justice John G. Roberts: Well, now why is that?

Congress could -- once you -- once you establish that you have a market for health care, I would suppose Congress's power under the Commerce Clause meant they had a broad scope in terms of how they regulate that market.

And it would be -- it would be going back to Lochner if we were put in the position of saying no, you can use your commerce power to regulate insurance, but you can't use your commerce power to regulate this market in other ways.

I think that would be a very significant intrusion by the Court into Congress's power.

So I don't see how we can accept your -- it's good for you in this case to say oh, it's just insurance.

But once we say that there is a market and Congress can require people to participate in it, as some would say -- or as you would say, that people are already participating in it -- it seems to me that we can't say there are limitations on what Congress can do under its commerce power, just like in any other area, all -- given significant deference that we accord to Congress in this area, all bets are off, and you could regulate that market in any rational way.

Mr. Verrilli Jr.: But this is insurance as a method of payment for health care services--

Chief Justice John G. Roberts: Exactly.

Mr. Verrilli Jr.: --And that -- and that is--

Chief Justice John G. Roberts: And you're worried -- that's the area that Congress has chosen to regulate.

There's this health care market.

Everybody's in it.

So we can regulate it, and we're going to look at a particular serious problem, which is how people pay for it.

But next year, they can decide everybody's in this market, we're going to look at a different problem now, and this is how we're going to regulate it.

And we can compel people to do things -- purchase insurance, in this case.

Something else in the next case, because you've -- we've accepted the argument that this is a market in which everybody participates.

Mr. Verrilli Jr.: --Mr. Chief Justice, let me answer that, and then if I may, I'd like to move to the tax power argument.

Justice Antonin Scalia: Can -- can I tell you what the something else is so -- while you're answering it?

The something else is everybody has to exercise, because there's no doubt that lack of exercise cause -- causes illness, and that causes health care costs to go up.

So the Federal government says everybody has to -- to join a -- an exercise club.

That's -- that's the something else.

Mr. Verrilli Jr.: No.

The -- the position we're taking here would not justify that rule, Justice Scalia, because health club membership is not a means of payment for -- for consumption of anything in -- in a market.

Chief Justice John G. Roberts: Right.

Right.

That's -- that's exactly right, but it doesn't seem responsive to my concern that there's no reason -- once we say this is within Congress's commerce power, there's no reason other than our own arbitrary judgment to say all they can regulate is the method of payment.

They can regulate other things that affect this now-conceded interstate market in health care in which everybody participates.

Mr. Verrilli Jr.: --But I think it's common ground between us and the Respondents that this is an interstate market in which everybody participates.

And they agree that -- that Congress could impose the insurance requirement at the point of sale.

And this is just a question of timing, and whether Congress's -- whether the necessary and proper authority gives Congress, because of the particular features of this market, the ability to impose the -- the insurance, the need for insurance, the maintenance of insurance before you show up to get health care rather than at the moment you get up to show--

Chief Justice John G. Roberts: Right.

No, I think--

Mr. Verrilli Jr.: --show up to get health care.

And that--

Chief Justice John G. Roberts: --unless I'm missing something, I think you're just repeating the idea that this is the regulation of the method of payment.

And I understand that argument.

And it may be -- it may be a good one.

But what I'm concerned about is, once we accept the principle that everybody is in this market, I don't see why Congress's power is limited to regulating the method of payment and doesn't include as it does in any other area.

What other area have we said Congress can regulate this market but only with respect to prices, but only with respect to means of travel?

No.

Once you're -- once you're in the interstate commerce and can regulate it, pretty much all bets are off.

Mr. Verrilli Jr.: --But we agree Congress can regulate this market.

ERISA regulates this market.

HIPAA regulates this market.

The -- the market is regulated at the Federal level in very significant ways already.

So I don't think that's the question, Mr. Chief Justice.

The question is, is there a limit to the authority that we're advocating here under the commerce power, and the answer is yes, because we are not advocating for a power that would allow Congress to compel purchases--

Justice Samuel Alito: Could you just -- before you move on, could you express your limiting principle as succinctly as you possibly can?

Congress can force people to purchase a product where the failure to purchase the product has a substantial effect on interstate commerce -- if what?

If this is part of a larger regulatory scheme?

Was that it?

Was there anything more?

Mr. Verrilli Jr.: --We got two and they are -- they are different.

Let me state them.

First with respect to the comprehensive scheme.

When Congress is regulating -- is enacting a comprehensive scheme that it has the authority to enact that the Necessary and Proper Clause gives it the authority to include regulation, including a regulation of this kind, if it is necessary to counteract risks attributable to the scheme itself that people engage in economic activity that would undercut the scheme.

It's like -- it's very much like Wickard in that respect, very much like Raich in that respect.

With respect to the -- with respect to the -- considering the Commerce Clause alone and not embedded in the comprehensive scheme, our position is that Congress can regulate the method of payment by imposing an insurance requirement in advance of the time in which the -- the service is consumed when the class to which that requirement applies either is or virtually is most certain to be in that market when the timing of one's entry into that market and what you will need when you enter that market is uncertain and when -- when you will get the care in that market, whether you can afford to pay for it or not and shift costs to other market participants.

So those -- those are our views as to -- those are the principles we are advocating for and it's, in fact, the conjunction of the two of them here that makes this, we think, a strong case under the Commerce Clause.

Justice Sonia Sotomayor: General, could you turn to the tax clause?

Mr. Verrilli Jr.: Yes.

Justice Sonia Sotomayor: I have looked for a case that involves the issue of whether something denominated by Congress as a penalty was nevertheless treated as a tax, except in those situations where the code itself or the statute itself said treat the penalty as a tax.

Do you know of any case where we've done that?

Mr. Verrilli Jr.: Well, I think I would point the Court to the License Tax Case, where it was -- was denominated a fee and nontax, and the Court upheld it as an exercise of the taxing power, in a situation in which the structure of the law was very much like the structure of this law, in that there was a separate stand-alone provision that set the predicate and then a separate provision in posing the fees--

Justice Antonin Scalia: But fees, you know, license fees, fees for a hunting license, everybody knows those are taxes.

I mean, I don't think there is as much of a difference between a fee and a tax as there is between a penalty and a tax.

Mr. Verrilli Jr.: --And that, and -- and I think in terms of the tax part, I think it's useful to separate this into two questions.

One is a question of characterization.

Can this be characterized as a tax; and second, is it a constitutional exercise of the power?

With respect to the question of characterization, the -- this is -- in the Internal Revenue Code, it is administered by the IRS, it is paid on your Form 1040 on April 15th, I think--

Justice Ruth Bader Ginsburg: But yesterday you told me -- you listed a number of penalties that are enforced through the tax code that are not taxes and they are not penalties related to taxes.

Mr. Verrilli Jr.: --They may still be exercise of the tax -- exercises of the taxing power, Justice Ginsburg, as -- as this is, and I think there isn't a case in which the Court has, to my mind, suggested anything that bears this many indicia of a tax can't be considered as an exercise of the taxing power.

In fact, it seems to me the License Tax Cases point you in the opposite direction.

And beyond that your -- the -- it seems to me the right way to think about this question is whether it is capable of being understood as an exercise of the tax.

Justice Antonin Scalia: The President said it wasn't a tax, didn't he?

Mr. Verrilli Jr.: Well, Justice Scalia, what the -- two things about that, first, as it seems to me, what matters is what power Congress was exercising.

And they were -- and I think it's clear that -- that the -- the -- they were exercising the tax power as well as--

Justice Antonin Scalia: You're making two arguments.

Number one, it's a tax; and number two, even if it isn't a tax, it's within the taxing power.

I'm just addressing the first.

Mr. Verrilli Jr.: --If the President said--

Justice Antonin Scalia: Is it a tax or not a tax?

The President didn't think it was.

Mr. Verrilli Jr.: --The President said it wasn't a tax increase because it ought to be understood as an incentive to get people to have insurance.

I don't think it's fair to infer from that anything about whether that is an exercise of the tax power or not.

Justice Ruth Bader Ginsburg: A tax is to raise revenue, tax is a revenue-raising device, and the purpose of this exaction is to get people into the health care risk -- risk pool before they need medical care, and so it will be successful.

If it doesn't raise any revenue, if it gets people to buy the insurance, that's -- that's what this penalty is -- this penalty is designed to affect conduct.

The conduct is buy health protection, buy health insurance before you have a need for medical care.

That's what the penalty is designed to do, not to raise revenue.

Mr. Verrilli Jr.: That -- that is true, Justice Ginsburg.

This is also true of the marijuana tax that was withheld in Sanchez.

That's commonly true of penalties under the Code.

They do -- if they raise revenue, they are exercises of the taxing power, but their purpose is not to raise revenue.

Their purpose is to discourage behavior.

I mean, the -- the mortgage deduction works that way.

When the mortgage deduction is -- it's clearly an exercise of the taxing power.

When it's successful it raises less revenue for the Federal Government.

It's still an exercise of the taxing power.

So, I don't--

Justice Elena Kagan: I suppose, though, General, one question is whether the determined efforts of Congress not to refer to this as a tax make a difference.

I mean, you're suggesting we should just look to the practical operation.

We shouldn't look at labels.

And that seems right, except that here we have a case in which Congress determinedly said this is not a tax, and the question is why should that be irrelevant?

Mr. Verrilli Jr.: --I don't think that that's a fair characterization of the actions of Congress here, Justice Kagan.

On the -- December 23rd, a point of constitutional order was called to, in fact, with respect to this law.

The floor sponsor, Senator Baucus, defended it as an exercise of the taxing power.

In his response to the point of order, the Senate voted 60 to39 on that proposition.

The legislative history is replete with members of Congress explaining that this law is constitutional as an exercise of the taxing power.

It was attacked as a tax by its opponents.

So I don't think this is a situation where you can say that Congress was avoiding any mention of the tax power.

It would be one thing if Congress explicitly disavowed an exercise of the tax power.

But given that it hasn't done so, it seems to me that it's -- not only is it fair to read this as an exercise of the tax power, but this Court has got an obligation to construe it as an exercise of the tax power, if it can be upheld on that basis.

Chief Justice John G. Roberts: Why didn't Congress call it a tax, then?

Mr. Verrilli Jr.: Well--

Chief Justice John G. Roberts: You're telling me they thought of it as a tax, they defended it on the tax power.

Why didn't they say it was a tax?

Mr. Verrilli Jr.: --They might have thought, Your Honor, that calling it a penalty as they did would make it more effective in accomplishing its objective.

But it is -- in the Internal Revenue Code it is collected by the IRS on April 15th.

I don't think this is a situation in which you can say--

Chief Justice John G. Roberts: Well, that's the reason.

They thought it might be more effective if they called it a penalty.

Mr. Verrilli Jr.: --Well, I -- you know, I don't -- there is nothing that I know of that -- that illuminates that, but certainly--

Justice Sonia Sotomayor: --General, the problem goes back to the limiting principle.

Is this simply anything that raises revenue that Congress can do?

Mr. Verrilli Jr.: --No.

There are certain limiting principles under the--

Justice Sonia Sotomayor: So there has to be a limiting principle --

Mr. Verrilli Jr.: -- taxing power, and they -- and I think, of course, the Constitution imposes some, got to be uniform, can't be taxed on exports, if it's a direct tax, it's got to be apportioned.

Beyond that, the limiting principle, as the Court has identified from Drexel Furniture to Kurth Ranch, is that it can't be punishment, punitive in the guise of a tax.

And there are three factors of Court has identified to look at that.

The first is the sanction and how disproportionate it is to the conduct; the second is whether there is scienter; and the third is whether there is an -- an -- an administrative apparatus out there to enforce the tax.

Now in -- in Bailey v. Drexel Furniture, for example, the tax was 10 percent of the company's profits, even if they had only one child laborer for one day.

There was a scienter requirement, and it was enforced by the Department of Labor.

It wasn't just collected by the Internal Revenue Service.

Here you don't have any of those things.

This -- the -- the penalty is calculated to be no more than, at most, the equivalent of what one would have paid for insurance if you forgone.

There is no scienter requirement, there is no enforcement apparatus out there.

So, certain--

Justice Samuel Alito: Can the -- can the mandate be viewed as tax if it does impose a requirement on people who are not subject to the penalty or the tax?

Mr. Verrilli Jr.: --I think it could, for the reasons I -- I discussed yesterday.

I don't think it can or should be read that way.

But if there is any doubt about that, Your Honor, if there is -- if -- if it is the view of the Court that it can't be, then I think the -- the right way to handle this case is by analogy to New York v. United States, in which the -- the Court read the shall provision, shall handle the level of radioactive waste as setting the predicate, and then the other provisions were merely incentives to get the predicate met, and so--

Justice Antonin Scalia: You're saying that all the discussion we had earlier about how this is one big uniform scheme and the Commerce Clause blah, blah, blah, it really doesn't matter.

This is a tax and the Federal Government could simply have said, without all of the rest of this legislation, could simply have said everybody who doesn't buy health insurance at a certain age will be taxed so much money, right?

Mr. Verrilli Jr.: --It -- it used its powers together to solve the problem of the market not--

Justice Antonin Scalia: Yes, but you didn't need that. --You didn't need that.

If it's a tax, it's only -- raising money is enough.

Mr. Verrilli Jr.: --providing for the -- It's justifiable under its tax power.

Justice Antonin Scalia: Extraordinary.

Mr. Verrilli Jr.: If I may reserve the balance of my time.

Chief Justice John G. Roberts: Thank you, General.

We'll take a pause for a minute or so, Mr. Clement.

Why don't we get started again.

Mr. Clement.

ORAL ARGUMENT OF PAUL D. CLEMENT, ON BEHALF OF THE RESPONDENTS FLORIDA, ET AL.

Mr. Clement: Mr. Chief Justice and may it please the Court.

The mandate represents an unprecedented effort by Congress to compel individuals to enter commerce in order to better regulate commerce.

The Commerce Clause gives Congress the power to regulate existing commerce.

It does not give Congress the far greater power to compel people to enter commerce to create commerce essentially in the first place.

Now, Congress when it passed the statute did make findings about why it thought it could regulate the commerce here, and it justified the mandate as a regulation of the economic decision to forego the purchase of health insurance.

That is a theory without any limiting principle.

Justice Sonia Sotomayor: --Do you accept your -- the General's position that you have conceded that Congress could say, if you're going to consume health services, you have to pay by way of insurance?

Mr. Clement: That's right, Justice Sotomayor.

We say, consistent with 220 years of this Court's jurisprudence, that if you regulate the point of sale, you regulate commerce, that's within Congress' commerce power.

Justice Sonia Sotomayor: All right.

So what do you do with the impossibility of buying insurance at the point of consumption.

Virtually, you force insurance companies to sell it to you?

Mr. Clement: Well, Justice, I think there is two points to make on that.

One is, a lot of the discussion this morning so far has proceeded on the assumption that the only thing that is at issue here is emergency room visits, and the only thing that's being imposed is catastrophic care coverage; but, as the Chief Justice indicated earlier, a lot of the insurance that's being covered is for ordinary preventive care, ordinary office visits, and those are the kinds of things that one can predict.

So there is a big part of the market that's regulated here that wouldn't pose the problem that you're suggesting; but, even as to emergency room visits, it certainly would be possible to regulate at that point.

You could simply say, through some sort of mandate on the insurance companies, you have to provide people that come in -- this will be a high-risk pool, and maybe you will have to share it amongst yourself or something, but people simply have to sign up at that point, and that would be regulating at the point of sale.

Justice Elena Kagan: Well, Mr. Clement, now it seems as though you're just talking about a matter of timing; that Congress can regulate the transaction, and the question is when does it make best sense to regulate that transaction?

And Congress surely has within its authority to decide, rather than at the point of sale, given an insurance-based mechanism, it makes sense to regulate it earlier.

It's just a matter of timing.

Mr. Clement: Well, Justice Kagan, we don't think it's a matter of timing alone, and we think it has very substantive effects.

Because if Congress tried to regulate at the point of sale, the one group that it wouldn't capture at all are the people who don't want to purchase health insurance and also have no plans of using health care services in the near term.

And Congress very much wanted to capture those people.

I mean, those people are essentially the golden geese that pay for the entire lowering of the premium.

Justice Anthony Kennedy: Was the government's argument this -- and maybe I won't state it accurately -- it is true that the noninsured young adult is, in fact, an actuarial reality insofar as our allocation of health services, insofar as the way health insurance companies figure risks?

That person who is sitting at home in his or her living room doing nothing is an actuarial reality that can and must be measured for health service purposes; is that their argument?

Mr. Clement: Well, I don't know, Justice Kennedy, but, if it is, I think there is at least two problems with it.

One is, as Justice Alito's question suggested earlier, I mean, somebody who is not in the insurance market is sort of irrelevant as an actuarial risk.

I mean, we could look at the people not in the insurance market, and what we'd find is that they're relatively young, relatively healthy, and they would have a certain pool of actuarial risks that would actually lead to lower premiums.

The people that would be captured by guaranteed rating and community issue -- guaranteed issue and community rating would presumably have a higher risk profile, and there would be higher premiums.

And one of the things, one of the things Congress sought to accomplish here, was to force individuals into the insurance market to subsidize those that are already in it to lower the rates.

And that's just not my speculation, that's Finding I at 43A of the government's brief that -- it has the statute.

And that's one of the clear findings.

Justice Ruth Bader Ginsburg: Mr. Clement, doesn't that work -- that work the way Social Security does?

Let me put it this way.

Congress, in the '30s, saw a real problem of people needing to have old age and survivor's insurance.

And yes, they did it through a tax, but they said everybody has got to be in it because if we don't have the healthy in it, there's not going to be the money to pay for the ones who become old or disabled or widowed.

So they required everyone to contribute.

It was a big fuss about that in the beginning because a lot of people said -- maybe some people still do today -- I could do much better if the government left me alone.

I'd go into the private market, I'd buy an annuity, I'd make a great investment, and they're forcing me to paying for this Social Security that I don't want; but, that's constitutional.

So if Congress could see this as a problem when we need to have a group that will subsidize the ones who are going to get the benefits, it seems to me you are saying the only way that could be done is if the government does it itself; it can't involve the private market, it can't involve the private insurers.

If it wants to do this, Social Security is its model.

The government has to do -- has to be government takeover.

We can't have the insurance industry in it.

Is that your position?

Mr. Clement: No.

I don't think it is, Justice Ginsburg.

I think there are other options that are available.

The most straightforward one would be to figure out what amount of subsidy to the insurance industry is necessary to pay for guaranteed issue and community rating.

And once we calculate the amount of that subsidy, we could have a tax that's spread generally through everybody to raise the revenue to pay for that subsidy.

That's the way we pay for most subsidies.

Justice Sonia Sotomayor: Could we have an exemption?

Could the government say, everybody pays a shared health care responsibility payment to offset all the money that we are forced to spend on health care, we the government; but, anybody who has an insurance policy is exempt from that tax?

Could the government do that?

Mr. Clement: The government might be able to do that.

I think it might raise some issues about whether or not that would be a valid exercise of the taxing power.

Justice Sonia Sotomayor: Under what theory wouldn't it be?

Mr. Clement: Well, I do think that--

Justice Sonia Sotomayor: We get tax credits for having solar-powered homes.

We get tax credits for using fuel efficient cars.

Why couldn't we get a tax credit for having health insurance and saving the government from caring for us.

Mr. Clement: --Well, I think it would depend a little bit on how it was formulated; but, my concern would be -- the constitutional concern would be that it would just be a disguised impermissible direct tax.

And I do think -- I mean, I don't want to suggest we get to the taxing power to soon, but I do think it's worth realizing that the taxing power is limited in the ability to impose direct taxes.

And the one thing I think the framers would have clearly identified as a direct tax is a tax on not having something.

I mean, the framing generation was divided over whether a tax on carriages was a direct tax or not.

Hamilton thought that was a indirect tax; Madison thought it was a direct tax.

I have little doubt that both of them would have agreed that a tax on not having a carriage would have clearly been a direct tax.

I also think they would have thought it clearly wasn't a valid regulation of the market in carriages.

And, you know, I mean, if you look at Hilton against the United States, that's this Court's first direct tax--

Justice Stephen G. Breyer: Let me ask -- can I go back for a step, because I don't want to get into a discussion of whether this is a good bill or not.

Some people think it's going to save a lot of money.

Some people think it won't.

So I'm focusing just on the Commerce Clause; not on the Due Process Clause, the Commerce Clause.

And I look back into history, and I think if we look back into history we see sometimes Congress can create commerce out of nothing.

That's the national bank, which was created out of nothing to create other commerce out of nothing.

I look back into history, and I see it seems pretty clear that if there are substantial effects on interstate commerce, Congress can act.

And I look at the person who's growing marijuana in her house, or I look at the farmer who is growing the wheat for home consumption.

This seems to have more substantial effects.

Is this commerce?

Well, it seems to me more commerce than marijuana.

I mean, is it, in fact, a regulation?

Well, why not?

If creating a bank is, why isn't this?

And then you say, ah, but one thing here out of all those things is different, and that is you're making somebody do something.

I say, hey, can't Congress make people drive faster than 45 -- 40 miles an hour on a road?

Didn't they make that man growing his own wheat go into the market and buy other wheat for his -- for his cows?

Didn't they make Mrs. -- if she married somebody who had marijuana in her basement, wouldn't she have to go and get rid of it?

Affirmative action?

I mean, where does this distinction come from?

It sounds like sometimes you can, and sometimes you can't.

So what is argued here is there is a large group of -- what about a person that we discover that there are -- a disease is sweeping the United States, and 40 million people are susceptible, of whom 10 million will die; can't the Federal Government say all 40 million get inoculation?

So here, we have a group of 40 million, and 57 percent of those people visit emergency care or other care, which we are paying for.

And 22 percent of those pay more than $100,000 for that.

And Congress says they are in the midst of this big thing.

We just want to rationalize this system they are already in.

So, there, you got the whole argument, and I would like you to tell me--

Justice Antonin Scalia: We'll get to those questions in inverse order.

Justice Stephen G. Breyer: --Well, no, it's one question.

It's looking back at that -- looking back at that history.

The thing I can see that you say to some people, go buy; why does that make a difference in terms of the Commerce Clause?

Mr. Clement: --Well, Justice Breyer, let me start at the beginning of your question with McCulloch.

McCulloch was not a commerce power case.

Justice Stephen G. Breyer: It was both?

Mr. Clement: No, the bank was not justified and the corporation was not justified as an exercise of commerce power.

So that is not a case that says that it's okay to conjure up the bank as an exercise of the commerce power.

What, of course, the Court didn't say, and I think the Court would have had a very different reaction to, is, you know, we are not just going to have the bank, because that wouldn't be necessary and proper, we are going to force the citizenry to put all of their money in the bank, because, if we do that, then we know the Bank of the United States will be secure.

I think the framers would have identified the difference between those two scenarios, and I don't think that the great Chief Justice would have said that forcing people to put their deposits in the Bank of the United States was necessary and proper.

Now, if you look through all the cases you mentioned, I do not think you will find a case like this.

And I think it's telling that you won't.

I mean, the regulation of the wheat market in Wickard against Filburn, all this effort to address the supply side and what producers could do, what Congress was trying to do was support the price of wheat.

It would have been much more efficient to just make everybody in America buy 10 loaves of bread.

That would have had a much more direct effect on the price of wheat in the prevailing market.

But we didn't do that.

We didn't say when we had problems in the automobile industry that we are not just going to give you incentives, not just cash for clunkers, we are going to actually have ever everybody over 100,000 has to buy a new car--

Chief Justice John G. Roberts: Well, Mr. Clement, the key to the government's argument to the contrary is that everybody is in this market.

It's all right to regulate Wickard -- again, in Wickard against Filburn, because that's a particular market in which the farmer had been participating.

Everybody is in this market, so that makes it very different than the market for cars or the other hypotheticals that you came up with, and all they're regulating is how you pay for it.

Mr. Clement: --Well, with respect, Mr. Chief Justice, I suppose the first thing you have to say is what market are we talking about?

Because the government -- this statute undeniably operates in the health insurance market.

And the government can't say that everybody is in that market.

The whole problem is that everybody is not in that market, and they want to make everybody get into that market.

Justice Elena Kagan: Well, doesn't that seem a little bit, Mr. Clement, cutting the bologna thin?

I mean, health insurance exists only for the purpose of financing health care.

The two are inextricably interlinked.

We don't get insurance so that we can stare at our insurance certificate.

We get it so that we can go and access health care.

Mr. Clement: Well, Justice Kagan, I'm not sure that's right.

I think what health insurance does and what all insurance does is it allows you to diversify risk.

And so it's not just a matter of I'm paying now instead I'm paying later.

That's credit.

Insurance is different than credit.

Insurance guarantees you an upfront, locked-in payment, and you won't have to pay any more than that even if you incur much great expenses.

And in every other market that I know of for insurance, we let people basically make the decision whether they are relatively risk averse, whether they are relatively non-risk averse, and they can make the judgment based on--

Justice Sonia Sotomayor: But we don't in car insurance, meaning we tell people, buy car -- not we, the states do, although you're going to -- I'll ask you the question, do you think that if some states decided not to impose an insurance requirement, that the Federal Government would be without power to legislate and require every individual to buy car insurance?

Mr. Clement: --Well, Justice Sotomayor, let me say this, which is to say -- you're right in the first point to say that it's the states that do it, which makes it different right there.

But it's also--

Justice Sonia Sotomayor: Well, that goes back to the substantive due process question.

Is this a Lochner era argument that only the states can do this, even though it affects commerce?

Cars indisputably affect commerce.

So are you arguing that because the states have done it all along, the Federal Government is no longer permitted to legislate in this area?

Mr. Clement: --No.

I think you might make a different argument about cars than you would make about health insurance, unless you tried to say -- but, you know, we're--

Justice Sonia Sotomayor: Health insurance -- I mean, I've never gotten into an accident, thankfully, and I hope never.

The vast majority of people have never gotten into an accident where they have injured others; yet, we pay for it dutifully every year on the possibility that at some point we might get into that accident.

Mr. Clement: --But, Justice Sotomayor, what I think is different is there is lots of people in Manhattan, for example, that don't have car insurance because they don't have cars.

And so they have the option of withdrawing from that market.

It's not a direct imposition from the government.

So even the car market is difference from this market, where there is no way to get outside of the regulatory web.

And that's, I think, one of the real problems with this because, I mean, we take as a given--

Justice Sonia Sotomayor: But you're -- but the given is that virtually everyone, absent some intervention from above, meaning that someone's life will be cut short in a fatal way, virtually everyone will use health care.

Mr. Clement: --At some point, that's right, but all sorts of people will not, say, use health care in the next year, which is the relevant period for the insurance.

Justice Stephen G. Breyer: But do you think you can, better than the actuaries or better than the members of Congress who worked on it, look at the 40 million people who are not insured and say which ones next year will or will not use, say, emergency care?

Can you do that any better than if we knew that 40 million people were suffering, about to suffer a contagious disease, and only 10 million would get sick--

Mr. Clement: Of course not--

Justice Stephen G. Breyer: --and we don't know which?

Mr. Clement: --Of course not, Justice Breyer, but the point is that once Congress decides it's going to regulate extant commerce, it is going to get all sorts of latitude to make the right judgments about actuarial predictions, which actuarial to rely on, which one not to rely on.

The question that's a proper question for this Court, though, is whether or not, for the first time ever in our history, Congress also has the power to compel people into commerce, because, it turns out, that would be a very efficient things for purposes of Congress' optimal regulation of that market.

Justice Elena Kagan: But, Mr. Clement, this goes back to the Chief Justice's question.

But, of course, the theory behind, not just the government's case, but the theory behind this law is that people are in this market right now, and they are in this market because people do get sick, and because when people get sick, we provide them with care without making them pay.

And it that would be different, you know, if you were up here saying, I represent a class of Christian scientists.

Then you might be able to say, look, you know, why are they bothering me.

But absent that, you're in this market.

You're an economic actor.

Mr. Clement: Well, Justice Kagan, once again, it depends on which market we're talking about.

If we're talking about the health care insurance market--

Justice Elena Kagan: Well, we are talking about the health insurance market, which is designed to access the health care market.

Mr. Clement: --And with respect to the health insurance market that's designed to have payment in the health care market, everybody is not in the market.

And that's the premise of the statute, and that's the problem Congress is trying to solve.

And if it tried to solve it through incentives, we wouldn't be here; but, it's trying to solve it in a way that nobody has ever tried to solve an economic problem before, which is saying, you know, it would be so much more efficient if you were just in this market--

Justice Anthony Kennedy: But they are in the market in the sense that they are creating a risk that the market must account for.

Mr. Clement: --Well, Justice Kennedy, I don't think that's right, certainly in any way that distinguishes this from any other context.

When I'm sitting in my house deciding I'm not to buy a car, I am causing the labor market in Detroit to go south.

I am causing maybe somebody to lose their job, and for everybody to have to pay for it under welfare.

So the cost shifting that the government tries to uniquely to associate with this market, it is everywhere.

And even more to the point, the rationale that they think ultimately supports this legislation, that look, it's an economic decision, once you make the economic decision, we aggregate the decision, there is a substantial effect on commerce.

That argument works here.

It works in every single industry.

Justice Stephen G. Breyer: Of course we do know that there are a few people, more in New York City than there are in Wyoming, who never will buy a car.

But we also know here, and we don't like to admit it, that because we are human beings we all suffer from the risk of getting sick.

And we also all know that we'll get seriously sick.

And we also know that we can't predict when.

And we also know that when we do, there will be our fellow taxpayers through the Federal Government who will pay for this.

If we do not buy insurance, we will pay nothing.

And that happens with a large number of people in this group of 40 million, none of whom can be picked out in advance.

Now, that's quite different from a car situation, and it's different in only this respect.

It shows there is a national problem, and it shows there is a national problem that involves money, cost insurance.

So if Congress could do this, should there be a disease that strikes the United States and they want every one inoculated even though ten million will be hurt, it's hard for me to decide why that isn't interstate commerce, even more so where we know it affects everybody.

Mr. Clement: Well, Justice Breyer, there are other markets that affect every one: transportation, food, burial services, though we don't like to talk about that either.

There also are situations where there are many economic effects from somebody's failure to purchase a product.

And if I could, if I could talk about the difference between the health insurance market and the health care market, I mean, ultimately I don't want you to leave here with the impression that anything turns on that.

Because if the government decided tomorrow that they would come up with a great -- some of these -- some private companies come up with a great new wonder drug that would be great for everybody to take, would have huge health benefits for everybody; and by the way, also if everybody had to buy it, it would facilitate economies of scale, and the production would be great, and the price would be cheaper and force everybody in the health care market, the actual health care market to buy the wonder drug, I'd be up here making the same argument.

I would be saying that's not a power that's within the commerce power of the Federal Government.

It is something much greater.

And it would have been much more controversial.

That's why the important things.

In Federalist 45, Madison says the commerce power.

That's a new power, but it's not one anyone has any apprehension about.

The reason they didn't have any apprehension about it is because it's a power that only operated once people were already in commerce.

You see that from the text of the clause.

The first kind of commerce Congress gets to regulate is commerce with foreign nations.

Did anybody think the fledgling Republic had the power to compel some other nation into commerce with us?

Of course not.

And in the same way, I think if the framers had understood the commerce power to include the power to compel people to engage in commerce--

Justice Elena Kagan: Well, once again though, who's in commerce and what are they in commerce?

If the effect of all these uninsured people is to raise everybody's premiums, not just when they get sick, if they get sick, but right now in the aggregate, and Wickard and Raich tell us we should look at the aggregate, and the aggregate of all these uninsured people are increasing the normal family premium, Congress says, by a thousand dollars a year.

Those people are in commerce.

They are making decisions that are affecting the price that everybody pays for this service.

Mr. Clement: --Justice Kagan, again, with all due respect, I don't think that's a limiting principle.

My unwillingness to buy an electric car is forcing up the price of an electric car.

If only more people demanded an electric car there would be economies of scale, and the price would go down.

Justice Elena Kagan: Not necessarily, Mr. Clement.

And it's different because of the nature of the health care service, that you are entitled to health care when you go to an emergency room, when you go to a doctor, even if you can't pay for it.

So the difference between your hypotheticals and the real case is the problem of uncompensated care which--

Mr. Clement: Justice Kagan, first of all, I do think there -- this is not the only place where there's uncompensated care.

If some -- if I don't buy a car and somebody goes on welfare, I'm going to end up paying for that as well.

But let me also say that there is a real disconnect then between that focus on what makes this different and statute that Congresses passed.

If all we were concerned about is the cost sharing that took place because of uncompensated care in emergency rooms, presumably we have before us a statute that only addressed emergency care and catastrophic insurance coverage.

But it covers everything, soup to nuts, and all sorts of other things.

And that gets at the idea that there is two kinds of cost shifting that are going on here.

One is the concern about emergency care and that somehow somebody who gets sick is going to shift costs back to other policy areas -- holders.

But there is a much bigger cost shifting going on here, and that's the cost shifting that goes on when you force healthy people into an insurance market precisely because they are healthy, precisely because they are not likely to go to the emergency room, precisely because they are not likely to use the insurance they are forced to buy in the health care insurance.

That creates a huge windfall.

It lowers the price of premiums.

And again, this is not just some lawyer up here telling you that's what it does and trying to second-guess the congressional economic decisions.

This is Congress's findings, findings I on page 43 A of the appendix to the government's--

Justice Stephen G. Breyer: All that sounds like you're debating the merits of the bill.

You ask really for limiting principles so we don't get into a matter that I think has nothing to do with this case: broccoli, okay?

And the limiting principles, you've heard three.

First, the Solicitor General came up with a couple joined, very narrow ones.

You've seen in Lopez this Court say that we cannot, Congress cannot get into purely local affairs, particularly where they are noncommercial.

And, of course, the greatest limiting principle of all, which not too many accept, so I'm not going to emphasize that, is the limiting principle derived from the fact that members of Congress are elected from States and that 95 percent of the law of the United States is State law.

That is a principle though enforced by the legislature.

The other two are principles, one written into Lopez and one you just heard.

It seems to me all of those eliminate the broccoli possibility, and none of them eliminates the possibility that we are trying to take the 40 million people who do have the medical cost, who do affect interstate commerce and provide a system that you may like or not like.

That's where we are in limiting principles.

Mr. Clement: --Well, Justice Breyer, let me take them in turn.

I would encourage this Court not to Garcia-ize the Commerce Clause and just simply say it's up to Congress to police the Commerce Clause.

So I don't think that is a limiting principle.

Second of all--

Justice Sonia Sotomayor: Yes, but that's exactly what Justice Marshall said in Gibbons.

He said that it is the power to regulate, the power like all others vested in Congress is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than those prescribed in the Constitution.

But there is no conscription in the, set forth in the Constitution with respect to regulating commerce.

Mr. Clement: --I agree 100 percent, and I think that was the Chief Justice's point which was once you open the door to compelling people into commerce based on the narrow rationales that exist in this industry, you are not going to be able to stop that process.

Justice Antonin Scalia: I would like hear you address Justice Breyer's other, other two principles.

Mr. Clement: Well, the other two principles are Lopez -- and this case really is not -- I mean, you know, Lopez is a limit on the affirmative exercise of people who are already in commerce.

The question is, is there any other limit to people who aren't in commerce?

And so I think this is the case that really asks that question.

And then the first point which was I take it to be the Solicitor General's point is, with all due respect, simply a description of the insurance market.

It's not a limiting principle, because the justification for why this is a valid regulation of commerce is in no way limited to this market.

It simply says, these are economic decisions, they have effect on other people, my failure to purchase in this market has a direct effect on others who are already in the market.

That's true of virtually every other market under the sun.

Chief Justice John G. Roberts: And now maybe return to Justice Sotomayor's question.

Mr. Clement: I'd be delighted to, which is -- I mean, I -- you are absolutely right.

Once you're in the commerce power, there is not -- this Court is not going to police that subject maybe to the Lopez limit.

And that's exactly why I think it's very important for this Court to think seriously about taking an unprecedented step of saying that the commerce power not only includes the power to regulate, prescribe the rule by which commerce is governed, the rule of Gibbons v. Ogden.

But to go further and say it's not just prescribing the rule for commerce that exists but is the power to compel people to enter into commerce in the first place.

I would like to say two very brief things about the taxing power, if I could.

There are lots of reasons why this isn't a tax.

It wasn't denominated a tax.

It's not structured as a tax.

If it's any tax at all, though, it is a direct tax.

Article I, Section 9, clause 4, the Framers would have had no doubt that a tax on not having something is not an excise tax but a forbidden direct tax.

That's one more reason why this is not proper legislation because it violates that.

The second thing is I would urge you to read the License Tax case which the Solicitor General says is his best case for why you ignore the fact that a tax is denominated into something other.

Because that is a case where the argument was that because the Federal government had passed a license not a tax, that somehow that allowed people to take actions that would have been unlawful under State law, that this was some special Federal license to do something that was forbidden by State law.

This Court looked beyond the label in order to preserve federalism there.

What the Solicitor General and the government ask you to do here is exactly the opposite, which is to look past labels in order to up-end our basic federalist system.

In this--

Justice Sonia Sotomayor: Would you tell me, do you think the States could pass this mandate.

Mr. Clement: --I represent 26 States.

I do think the States could pass this mandate, but I--

Justice Sonia Sotomayor: Is there any other area of commerce, business, where we have held that there is a concurrent power between the State and the Federal Government to protect the welfare of commerce?

Mr. Clement: --Well, Justice Sotomayor, I have to resist your premise, because I didn't answer yes, the States can do it because it would be a valid regulation of intrastate commerce.

I said yes, the States can do it because they have a police power, and that is the fundamental difference between the States on the one hand and the limited, enumerated Federal Government on the other.

Chief Justice John G. Roberts: Thank you, Mr. Clement.

Mr. Carvin.

ORAL ARGUMENT OF MICHAEL A. CARVIN ON BEHALF OF THE RESPONDENTS NFIB, ET AL.

Mr. Carvin: Thank you, Mr. Chief Justice, may it please the Court: I'd like to begin with the Solicitor General's main premise, which is that they can compel the purchase of health insurance in order to promote commerce in the health market because it will reduce uncompensated care.

If you accept that argument, you have to fundamentally alter the text of the Constitution and give Congress plenary power.

It simply doesn't matter whether or not this regulation will promote health care commerce by reducing uncompensated care; all that matters is whether the activity actually being regulated by the act negatively affects Congress or negatively affects commerce regulation, so that it's within the commerce power.

If you agree with us that this is -- exceeds commerce power, the law doesn't somehow become redeemed because it has beneficial policy effects in the health care--

In other words, Congress does not have the power to promote commerce.

Congress has -- Congress has the power to regulate commerce.

And if the power exceeds their permissible regulatory authority, then the law is invalid.

Chief Justice John G. Roberts: Well, surely--

Mr. Carvin: I'm sorry.

Chief Justice John G. Roberts: --Well, surely regulation includes the power to promote.

Since the New Deal we've said that regulation in -- there is a market agricultural products; Congress has the power to subsidize, to limit production, all sorts of things.

Mr. Carvin: Absolutely, Chief Justice, and that's the distinction I'm trying to draw.

When they are acting within their enumerated power then obviously they are promoting commerce, but the Solicitor General wants to turn it into a different power.

He wants to say we have the power to promote commerce, to regulate anything to promote commerce, and if they have the power to promote commerce then they have the power to regulate everything, right?

Because--

Chief Justice John G. Roberts: I don't -- I don't think you're addressing their main point, which is that they are not creating commerce in -- in health care.

It's already there, and we are all going to need some kind of health care; most of us will at some point.

Mr. Carvin: --I'd -- I'd like to address that in two ways, if I could, Mr. Chief Justice.

In the first place they keep playing mix and match with the statistics.

They say 95 percent of us are in the health care market, okay?

But that's not the relevant statistic, even from -- as the government frames the issue.

No one in Congress and the Solicitor General is arguing that going to the doctor and fully paying him creates a problem.

The problem is uncompensated care, and they say the uncompensated care arises if you have some kind of catastrophe -- hit by a bus, have some prolonged illness.

Well, what is the percentage of the uninsured that have those sorts of catastrophes?

We know it has got to be a relative small fraction.

So in other words, the relevant--

Chief Justice John G. Roberts: Yet we don't know who they are.

Mr. Carvin: --We don't.

No, and we don't know in advance, and -- and -- but that doesn't change the basic principle, that you are nonetheless forcing people for paternalistic reasons to go into the insurance market to ensure against risk that they have made the voluntary decision that they are not -- have decided not to.

But even--

Justice Ruth Bader Ginsburg: But the problem is -- the problem is this they are making the reinvent of us pay for it, because as much as they say, well, we are not in the market, we don't know when the -- the timing when they will be.

Mr. Carvin: --Which is--

Justice Ruth Bader Ginsburg: And the -- the figures that how much more families are paying for insurance because people get sick, they may have intended to self-insure, they haven't been able to meet the bill for -- for cancer, and the rest of us end up paying because these people are getting cost-free health care, and the only way to prevent that is to have them pay sooner rather than later, pay up front.

Mr. Carvin: --Yes, but my point is this.

That, with respect, Justice Ginsburg, conflicts the people who do result in uncompensated care, the free riders.

Those are people who default on their health care payments.

That is an entirely different group of people, an entirely different activity than being uninsured.

So the question is whether or not you can regulate activity because it has a statistical connection to an activity that harms Congress.

And my basic point to you is this: the Constitution only gives Congress the power to regulate things that negatively affect commerce or commerce regulation.

It doesn't give them the power to regulate things that are statistically connected to things that negatively affect the commerce--

Justice Elena Kagan: Well, Mr. Carvin--

Mr. Carvin: --Because -- I'm sorry.

Justice Elena Kagan: --Please.

Mr. Carvin: I was just going to say, because if they have that power, then they obviously have the power to regulate everything because everything in the aggregate is statistically connected to something that negatively affects commerce, and every compelled purchase promotes commerce.

Justice Stephen G. Breyer: In your view, right there -- in your view right there--

Mr. Carvin: Justice Breyer--

Justice Stephen G. Breyer: --Can I just--

Mr. Carvin: --I'm sorry.

Justice Stephen G. Breyer: --I'm just picking on something.

I'd like to just -- if it turned out there was some terrible epidemic sweeping the United States, and we couldn't say that more than 40 or 50 percent -- I can make the number as high as I want -- but the -- the -- you'd say the Federal Government doesn't have the power to get people inoculated, to require them to be inoculated, because that's just statistical.

Mr. Carvin: Well, in all candor, I think Morrison must have decided that issue, right?

Because people who commit violence against--

Justice Stephen G. Breyer: Is your answer to that yes or no?

Mr. Carvin: --Oh, I'm sorry; my answer is no, they couldn't do it, because Morrison--

Justice Stephen G. Breyer: No, they could not do it.

Mr. Carvin: --Yes.

Justice Stephen G. Breyer: They cannot require people even if this disease is sweeping the country to be inoculated.

The Federal Government has no power, and if there's -- okay, fine.

Go ahead.

Mr. Carvin: May--

Justice Stephen G. Breyer: Please turn to Justice Kagan.

Mr. Carvin: --May I just please explain why?

Justice Stephen G. Breyer: Yes.

Mr. Carvin: Violence against women obviously creates the same negative impression on fellow citizens as this communicable disease, but the -- and it has huge effects on the health care of our country.

Congress found that it increased health care costs by--

Justice Stephen G. Breyer: I agree with you that--

Mr. Carvin: --Well, but--

Justice Stephen G. Breyer: --that it had huge negative effects but the majority thought that was a local matter.

Justice Antonin Scalia: I think that's his point.

[Laughter]

Mr. Carvin: --I -- I don't know why having a disease is any more local than -- that beating up a woman.

But -- but -- my basic point is, is that notwithstanding its very profound effect on the health care market, this Court said the activity being regulated, i.e., violence against women, is outside the Commerce Clause power.

So regardless of whether it has beneficial downstream effects, we must say no, Congress doesn't have that power.

Why not?

Because everything has downstream effects on commerce and every compelled purchase promotes commerce.

It by definition helps the sellers of existing--

Justice Samuel Alito: Mr. Carvin, isn't there this difference between Justice Breyer's hypothetical and the law that we have before us here?

In his hypothetical harm to other people from the communicable disease is the result of the disease.

It is not the result of something that the government has done, whereas here the reason why there is cost shifting is because the government has mandated that.

It has required hospitals to provide emergency treatment, and instead of paying for that through a tax which would be born by everybody, it has required -- it has set up a system in which the cost is surreptitiously shifted to people who have health insurance and who pay their bills when they go to the hospital.

Mr. Clement: Justice Alito, that is exactly the government's argument.

It's an extraordinarily illogical argument.

Justice Stephen G. Breyer: Fine.

Then if that's so, is -- let me just change my example under pressure ----

[Laughter]

--and say that in fact it turns out that 90 percent of all automobiles driving interstate without certain equipment put up pollution, which travels interstate -- not 100 percent, maybe only 60 percent.

Does the EPA have the power then to say you've got to have an antipollution device?

It's statistical.

Mr. Carvin: --What they can't do -- yes, if you have a car, they can require you to have an anti-pollution--

Justice Stephen G. Breyer: Then you're not going on statistics; you're going on something else which is what I'd like to know what it is.

Mr. Carvin: --It's this.

They can't require you to buy a car with an anti-pollution device.

Once you've entered the market and made a decision they can regulate the terms and conditions of the car that you do, and they can do it for all sorts of reasons.

What they can't do it compel you to enter the market.

Justice Stephen G. Breyer: Now we -- now you've changed the ground of argument, which I accept as -- as totally legitimate.

And then the question is when you are born, and you don't have insurance, and you will in fact get sick, and you will in fact impose costs, have you perhaps involuntarily -- perhaps simply because you are a human being -- entered this particular market, which is a market for health care?

Mr. Carvin: If being born is entering the market, then I can't think of a more plenary power Congress can have, because that literally means they can regulate every human activity from cradle to grave.

I thought that's what distinguished the plenary police power from the very limited commerce power.

I don't disagree that giving the Congress plenary power to mandate property transfers from A to B would be a very efficient way of helping B and of accomplishing Congress's objectives.

But the framers--

Justice Stephen G. Breyer: I see the point.

You can go back to, go back to Justice Kagan.

Don't forget her question.

Justice Elena Kagan: I've forgotten my question.

[Laughter]

Mr. Carvin: --I -- I was facing the same dilemma, Justice Kagan.

Justice Ruth Bader Ginsburg: Let me -- let me ask a question I asked Mr. Clement.

It just seems--

Justice Elena Kagan: See what it means to be the junior justice?

[Laughter]

Justice Ruth Bader Ginsburg: --It just seems very strange to me that there's no question we can have a Social Security system besides all the people who say: I'm being forced to pay for something I don't want.

And this it seems to me, to try to get care for the ones who need it by having everyone in the pool, but is also trying to preserve a role for the private sector, for the private insurers.

There's something very odd about that, that the government can take over the whole thing and we all say, oh, yes, that's fine, but if the government wants to get -- to preserve private insurers, it can't do that.

Mr. Carvin: Well I don't think the test of a law's constitutionality is whether it more adheres to the libertarian principles of the Cato Institute or the statist principles of someone else.

I think the test of a law's constitutionality is not those policy questions; it's whether or not the law is regulating things that negatively affect commerce or don't.

And since obviously the failure to purchase an item doesn't create the kind of effects on supply and demand that the market participants in Wickard and Raich did and doesn't in any way interfere with regulation of the insurance companies, I don't think it can pass the basic--

Justice Ruth Bader Ginsburg: I thought -- I thought that Wickard was you must buy; we are not going to let you use the home-grown wheat.

You have got to go out in the market and buy that wheat that you don't want.

Mr. Carvin: --Oh, but let's be careful about what they were regulating in Wickard, Justice Ginsburg.

What they were regulating was the supply of wheat.

It didn't in any way imply that they could require every American to go out and buy wheat.

And yes, one of the consequences of regulating local market participants is it'll affect the supply and the demand for the product.

That's why you can regulate them, because those local market participants have the same effect on the interstate market that a black market has on a legal--

But none of that is true -- in other words, you can regulate local bootleggers, but that doesn't suggest you can regulate teetotalers, people who stay out of the liquor market, because they don't have any negative effect on the existing market participants or on regulation of those market participants.

Justice Elena Kagan: That's why I suggested, Mr. Carvin, that it might be different if you were raising an as-applied challenge and presenting a class of people whom you could say clearly would not be in the health care market.

But you're raising a facial challenge and we can't really know which, which of the many, many, people that this law addresses in fact will not participate in the health care market and in fact will not impose costs on all the rest of us.

So the question is can Congress respond to those facts, that we have no crystal ball, that we can't tell who is and isn't going to be in the health insurance market, and say most of these people will be and most of these people will thereby impose costs on the rest of us and that's a problem that we can deal with on a class-wide basis?

Mr. Carvin: No again.

The people who impose the costs on the rest of us are people who engage in a different activity at a different time, which is defaulting on their health care payments.

It's not the uninsured.

Under your theory you could regulate anybody if they have got a statistical connection to a problem.

You could say, since we could regulate people who enter into the mortgage market and impose mortgage insurance on them, we can simply impose the requirement to buy private mortgage insurance on everybody before they have entered the market because we are doing it in this prophylactic way before it develops.

Chief Justice John G. Roberts: No, no, that's not -- I don't think that's fair, because not everybody is going to enter the mortgage market.

The government's position is that almost everybody is going to enter the health care market.

Mr. Carvin: Two points, one of which Mr. Clement's already made, which is the health insurance market is different than the health care market.

But let me take it on full-stride.

I think everybody is in the milk market.

I think everybody is in the wheat product market.

But that doesn't suggest that the government compel you to buy five gallons of meat or five bushels of wheat because they are not regulating commerce.

Whether you're a market participant or not, they are still requiring you to make a purchase that you don't want to do, and to get back to your facial example--

Justice Sonia Sotomayor: I mean, but that's true of almost every product.

Mr. Carvin: --I've sorry?

Justice Sonia Sotomayor: It's true of almost every product, directly or indirectly by government regulation.

The government says, borrowing my colleague's example, you can't buy a car without emission control.

I don't want a car with emission control.

It's less efficient in terms of the horsepower.

But I'm forced to do something I don't want to do by government regulation.

Mr. Carvin: You are not forced to buy a product you don't want.

And I agree with you that since the government regulates all markets there is no limiting principle on their compelled purchase.

When they put these environmental controls on the--

Justice Sonia Sotomayor: They force me to buy--

Mr. Carvin: --I'm sorry.

Justice Sonia Sotomayor: --They forced me to buy if I need unpasteurized foods, goods that don't have certain pesticides but have others.

There is government compulsion in almost every economic decision because the government regulates so much.

It's a condition of life that some may rail against, but--

Mr. Carvin: Let's think about it this way.

Yes, when you've entered the marketplace they can impose all sorts of restrictions on you, and they can impose, for example, all kinds of restrictions on States after they have enacted laws.

They can wipe out the laws.

They can condition them.

But what can't they do?

They can't compel States to enact laws.

They can't compel States to carry out Federal law.

And I am arguing for precisely the same distinction, because everyone intuitively understands that regulating participants after A and B have entered into a contract is fundamentally less intrusive than requiring the contract.

Justice Sonia Sotomayor: --We let the government regulate the manufacturing process whether or not the goods will enter into interstate commerce, merely because they might statistically.

We -- there is all sorts of government regulation of manufacturing plants, of agricultural farms, of all sorts of activity that will be purely intrastate because it might affect interstate activity.

Mr. Carvin: I fully agree with you, Justice Sotomayor.

But I think--

Justice Sonia Sotomayor: So how is that different from saying you are self-insuring today, you're foregoing insurance?

Why isn't that a predecessor to the need that you're eventually going to have?

Mr. Carvin: --The cases you referred to I think effectively eliminated the distinction between participants in the intrastate market vis -- vis participants in the interstate market.

None of those cases suggest that you can regulate people who are outside of the market on both an intrastate and interstate level by compelling them to enter into the market.

And that--

Justice Stephen G. Breyer: What about -- the simplest counter-example for me to suggest is you've undoubtedly read Judge Sutton's concurring opinion.

He has about two pages, it seemed to me, of examples where everyone accepts the facts that under these kinds of regulations the government can compel people to buy things they don't otherwise want to buy.

For example, he gives, even in that farm case, the farmer who was being forced to go out and buy grain to feed to his animals because he couldn't raise it at home.

You know and he goes through one example after another.

So what -- what is your response to that, which you've read?

Mr. Carvin: --Judge Sutton is wrong in each and every example.

There was no -- there was no compulsion in Raich for him to buy wheat.

He could have gotten wheat substitutes or he could have not sold wheat, which is actually what he was doing.

There is a huge difference between conditioning regulation, i.e., conditioning access to the health care market and saying you must buy a product, and forcing you to buy a product.

And that, that -- I'm sorry.

Justice Ruth Bader Ginsburg: I thought it was common ground that the requirement that the insurers -- what was it, the community-based one and they have to insure you despite your health status; they can't refuse because of preexisting conditions.

The government tells us and the Congress determined that those two won't work unless you have a pool that will include the people who are now healthy.

But so -- well, first, do you agree with your colleague that the community-based -- and what's the name that they give to the other?

Mr. Carvin: The guaranteed-issue.

Justice Ruth Bader Ginsburg: Yes.

That that is legitimate Commerce Clause legislation?

Mr. Carvin: Oh, sure.

And that's why -- but we don't in any way impede that sort of regulation.

These nondiscrimination regulations will apply to every insurance company just as Congress intended whether or not we buy insurance.

Justice Ruth Bader Ginsburg: Well then, what about the determination that they can't possibly work if people don't have to buy insurance until they are -- their health status is such that the insurance company just dealt with them on its -- as it will?

I won't insure you because you're -- you're already sick.

Mr. Carvin: It depends what you mean by "work".

It'll work just fine in ensuring that no sick people are discriminated against.

What -- what -- but when you do that -- Congress--

Justice Ruth Bader Ginsburg: But the sick people, why would they insure early if they had to be protected if they get insurance late?

Mr. Carvin: --Yes.

Well, that's -- this is the government's very illogical argument.

They seem to be saying look, we couldn't just force people to buy insurance to lower health insurance premiums.

That would be no good.

But we can do it because we've created the problem.

We, Congress, have driven up the health insurance premiums, and since we've created that problem, this somehow gives us authority that we wouldn't otherwise have.

That can't possibly be right.

That would--

Justice Sonia Sotomayor: Do you think that there's -- what percentage of the American people who took their son or daughter to an emergency room and that child was turned away because the parent didn't have insurance -- do you think there's a large percentage of the American population who would stand for the death of that child--

Mr. Carvin: --One of the most--

Justice Sonia Sotomayor: --They had an allergic reaction and a simple shot would have saved the child?

Mr. Carvin: --One of the more pernicious, misleading impressions that the government has made is that we are somehow advocating that people be -- could get thrown out of emergency rooms, or that this alternative that they've hypothesized is going to be enforced by throwing people out of emergency rooms.

This alternative; i.e. conditioned access to health care on buying health insurance, is enforced in precisely the same way that the Act does.

You either buy health insurance or you pay a penalty of $695.

You don't have doctors throwing people out on the street.

And -- and so the only--

Justice Sonia Sotomayor: I'm sorry, did you say the penalty's okay but not the mandate?

I'm sorry.

Maybe I've misheard you.

Mr. Carvin: --No.

No.

I was -- they create this strawman that says look, the only alternative to doing it the way we've done it, if we condition access to health care on buying health insurance, the only way you can enforce that is making sick people not get care.

I'm saying no, no.

There's a perfectly legitimate way they could enforce their alternative; i.e. requiring you to buy health insurance when you access health care, which is the same penalty structure that's in the Act.

There is no moral dilemma between having people have insurance and denying them emergency service.

Congress has made a perfectly legitimate value judgment that they want to make sure that people get emergency care.

Since the founding, whenever Congress has imposed that public responsibility on private actors, it has subsidized it from the Federal Treasury.

It has not conscripted a subset of the citizenry and made them subsidize the actors who are being hurt, which is what they're doing here.

They're making young healthy people subsidize insurance premiums for the cost that the nondiscrimination provisions have put on insurance premiums and insurance companies.

Justice Sonia Sotomayor: So the--

Mr. Carvin: --and that -- that is the fundamental problem here.

Justice Sonia Sotomayor: --So the -- I -- I want to understand the choices you're saying Congress has.

Congress can tax everybody and set up a public health care system.

Mr. Carvin: Yes.

Justice Sonia Sotomayor: That would be okay.

Mr. Carvin: Yes.

Tax power is--

Justice Sonia Sotomayor: Okay.

Mr. Carvin: --I would accept that.

Justice Sonia Sotomayor: Congress can -- you're taking the same position as your colleague, Congress can't say we're going to set up a public health system, but you can get a tax credit if you have private health insurance because you won't access the public system.

Are you taking the same position as your colleague?

Mr. Carvin: There may have been some confusion in prior colloquy.

I fully agree with my brother Clement that a direct tax would be unconstitutional.

I don't think he means to suggest, nor do I, that a tax credit that incentivizes you to buy insurance creates problems.

Congress incentivizes all kinds of activities.

If they gave us a tax credit for buying insurance, then it would be our choice whether or not that makes economic sense, even though--

Justice Sonia Sotomayor: So how is this different than this Act which says if a taxpayer fails to meet the requirement of having minimum coverage, then they are responsible for paying the shared responsibility payment?

Mr. Carvin: --The difference is that the taxpayer is not given a choice.

It's the difference between banning cigarettes and saying I'm going to enforce that legal ban through a $5 a pack penalty, and saying look, if you want to sell cigarettes, fine.

I'm going to charge you a tax of $5 a pack.

And that's--

Justice Sonia Sotomayor: I think -- I think that's what's happening, isn't it?

Mr. Carvin: --No.

Not--

Justice Sonia Sotomayor: We're paying -- I thought that everybody was paying, what is it, $10 a pack now?

I don't even know the price.

It's pretty high.

Mr. Carvin: --Right.

And everyone understands--

Justice Sonia Sotomayor: I think everybody recognizes that it's all taxation for the purposes of dissuading you to buy it.

Mr. Carvin: --That's precisely my point.

And everyone intuitively understands that that system is dramatically different than saying cigarettes tomorrow are illegal.

It is different.

Justice Stephen G. Breyer: It is different.

It is different.

I agree with that.

But you pointed out, and I agree with you on this, that the government set up these emergency room laws.

The government set up Medicaid.

The government set up Medicare.

The government set up CHIP, and there are 40 million people who don't have the private insurance.

In that world, the government has set up commerce.

It's all over the United States.

And in that world, of course, the decision by the 40 million not to buy the insurance affects that commerce, and substantially so.

So I thought the issue here is not whether it's a violation of some basic right or something to make people buy things they don't want, but simply whether those decisions of that group of 40 million people substantially affect the interstate commerce that has been set up in part through these other programs.

So that's the part of your argument I'm not hearing.

Mr. Carvin: Let me--

Justice Stephen G. Breyer: Please.

Mr. Carvin: --It is clear that the failure to buy health insurance doesn't affect anyone.

Defaulting on your payments to your health care provider does.

Congress chose for whatever reason not to regulate the harmful activity of defaulting on your health care provider.

They used the 20 percent or whoever among the uninsured as a leverage to regulate the 100 percent of the uninsured.

Justice Anthony Kennedy: I agree -- I agree that that's what's happening here.

Mr. Carvin: Okay.

Justice Anthony Kennedy: And the government tells us that's because the insurance market is unique.

And in the next case, it'll say the next market is unique.

But I think it is true that if most questions in life are matters of degree, in the insurance and health care world, both markets -- stipulate two markets -- the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries.

That's my concern in the case.

Mr. Carvin: And, Your -- I may be misunderstanding you, Justice Kennedy.

I hope I'm not.

Sure.

It would be perfectly fine if they allowed -- you do actuarial risk for young people on the basis of their risk for disease, just like you judge flood insurance on the homeowner's risk of flood.

One of the issues here is not only that they're compelling us to enter into the marketplace, they're not -- they're prohibiting us from buying the only economically sensible product that we would want.

Catastrophic insurance.

Everyone agrees the only potential problem that a 30-year-old, as he goes from the healthy 70 percent of the population to the unhealthy 5 percent.

And yet Congress prohibits anyone over 30 from buying any kind of catastrophic health insurance.

And the reason they do that is because they needed this massive subsidy.

Justice Alito, it's not our numbers.

CBO said that injecting my clients into the risk pool lowers premiums by 15 to 20 percent.

So, Justice Kennedy, even if we were going to create exceptions for people that are outside of commerce and inside of commerce, surely we'd make Congress do a closer nexus and say look, we're really addressing this problem.

We want these 30-year-olds to get catastrophic health insurance.

And not only did they -- they deprived them of that option.

And I think that illustrates the dangers of giving Congress these plenary powers, because they can always leverage them.

They can always come up with some public policy rationale that converts the power to regulate commerce into the power to promote commerce, which, as I was saying before, is the one that I think is plenary.

Justice Elena Kagan: Mr. Carvin, a large part of this argument has concerned the question of whether certain kinds of people are active participants in a market or not active participants in a market.

In your test, which is a test that focuses on this activity/inactivity distinction, would force one to confront that problem all the time.

Now, if you look over the history of the Commerce Clause, what you see is that there were sort of unhappy periods when the Court used tests like this -- direct versus indirect, commerce versus manufacturing.

I think most people would say that those things didn't really work.

And the question is, why should this test, inactive versus active, work any better?

Mr. Carvin: The problem you identify is exactly the problem you would create if you bought the government's bogus limiting principles.

You'd have to draw distinctions between the insurance industry and the car industry and all of that.

We turn you to the Commerce Clause jurisprudence that bedeviled the Court before the 1930s, where they were drawing all these kinds of distinctions among industries; whereas our test is really very simple.

Are you buying the product or is Congress compelling you to buy the product?

I can't think of a brighter line.

And again, if Congress has the power to compel you to buy this product, then obviously, they have got the power to provide you -- to compel you to buy any product, because any purchase is going to benefit commerce, and this Court is never going to second-guess Congress's policy judgments on how important it is this product versus that product.

Justice Samuel Alito: Do you think they are drawing a line between commerce and everything else that is not commerce is drawing an artificial line, drawing a line between Congress and manufacturing?

Mr. Carvin: The words "inactivity" and "activity" are not in the Constitution.

The words "commerce" and "noncommerce" are.

And again, it's a distinction that comes, Justice Kagan, directly from the text of the Constitution.

The Framers consciously gave Congress the ability to regulate commerce, because that's not a particularly threatening activity that deprives you of individual freedom.

If you were required, if you were authorized to require A to transfer property to B, you have, as the early cases put it, a monster in legislation which is against all reason in justice, because everyone intuitively understands that regulating people who voluntarily enter into contracts in setting changing conditions does not create the possibility of Congress compelling wealth transfers among the citizenry.

And that is precisely why the Framers denied them the power to compel commerce, and precisely why they didn't give them plenary power.

Chief Justice John G. Roberts: Thank you, Mr. Carvin.

remaining.

General Verrilli, you have four minutes--

REBUTTAL ARGUMENT OF DONALD B. VERRILLI, JR., ON BEHALF OF THE PETITIONERS

Mr. Verrilli Jr.: Thank you, Mr. Chief Justice.

Congress confronted a grave problem when it enacted the Affordable Care Act.

The 40 million Americans who can't get health insurance and suffered often very terrible consequences.

Now, we agree, I think -- everyone arguing this case agrees that Congress could remedy that problem by imposing the insurance requirement at the point of sale.

That won't work.

The reason it won't work is because people will still show up at the hospital or at their physician's office seeking care without insurance, causing the cost shifting problem.

And Mr. Clement's suggestion that they can be signed up for a high risk pool at that point is utterly unrealistic.

Think about how much it would cost to get the insurance when you are at the hospital or at the doctor.

It would be -- it would be unfathomably high, that will never work.

Congress understood that.

It chose a means that will work.

The means that it saw work in the States and in the State of Massachusetts and that, and that it had every reason to think would work on a national basis.

That is the kind of choice of means that McCulloch says that the Constitution leaves to the democratically accountable branches of government.

There is no temporal limitation in the Commerce Clause.

Everyone subject to this regulation is in or will be in the health care market.

They are just being regulated in advance.

That's exactly the kind of thing that ought to be left to the judgment of Congress and the democratically accountable branches of government.

And I think this is actually a paradigm example of the kind of situation that Chief Justice Marshall envisioned in McCulloch itself, that the provisions of the Constitution needed to be interpreted in a manner that would allow them to be effective in addressing the great crises of human affairs that the Framers could not even envision.

But if there is any doubt about that under the Commerce Clause, then I urge this Court to uphold the minimum coverage provision as an exercise of the taxing power.

Under New York v. United States, this is precisely a parallel situation.

If the Court thinks there is any doubt about the ability of Congress to impose the requirement in 5000A(a), it can be treated as simply the predicate to which the tax incentive of 5000A(b) seeks accomplishment.

And the Court -- as the Court said in New York, has a solemn obligation to respect the judgments of the democratically accountable branches of government, and because this statute can be construed in a manner that allows it to be upheld in that way, I respectfully submit that it is this Court's duty to do so.

Chief Justice John G. Roberts: Thank you, General.

Counsel, we'll see you tomorrow.

Print this transcript Transcript: 

ORAL ARGUMENT OF ROBERT A. LONG ON BEHALF OF THE COURT-APPOINTED AMICUS CURIAE

Chief Justice John G. Roberts: We will hear argument this morning in Case Number 11-398, Department of Health and Human Services v. Florida.

Mr. Long.

Mr. Long: Mr. Chief Justice, and may it please the Court:

The Anti-Injunction Act imposes a pay first, litigate later rule that is central to Federal tax assessment and collection.

The Act applies to essentially every tax penalty in the Internal Revenue Code.

There is no reason to think that Congress made a special exception for the penalty imposed by section 5000A.

On the contrary, there are three reasons to conclude that the Anti-Injunction Act applies here.

First, Congress directed that the section 5000A penalty shall be assessed and collected in the same manner as taxes.

Second, Congress provided that penalties are included in taxes for assessment purposes.

And third, the section 5000A penalty bears the key indicia of a tax.

Congress directed that the section 5000A penalty shall be assessed and collected in the same manner as taxes.

That derivative triggers the Anti-Injunction Act which provides that

"no suit for the purpose of restraining the assessment or collection of any tax may be maintained in any court by any person. "

Justice Antonin Scalia: Well, that depends, as -- as the government points out on whether that directive is a directive to the Secretary of the Treasury as to how he goes about getting this penalty, or rather a directive to him and to the courts.

All -- all of the other directives there seem to me to be addressed to the Secretary.

Why -- why should this one be directed to the courts?

When you say in the same manner, he goes about doing it in the same manner, but the courts simply accept that -- that manner of proceeding but nonetheless adjudicate the cases.

Mr. Long: Well, I think I have a three-part answer to that, Justice Scalia.

First, the text does not say that the Secretary shall assess and collect taxes in the same manner; it just says that it shall be assessed in the same manner as a tax, without addressing any party particularly.

Justice Antonin Scalia: Well, he's assessing and collecting it in the same manner as a tax.

Mr. Long: Well, the assessment -- the other two parts of the answer are, as a practical matter, I don't think there is any dispute in this case that if the Anti-Injunction Act does not apply, this penalty, the section 5000A penalty, will as a practical matter be assessed and collected in a very different manner from other taxes and other tax penalties.

There -- there are three main differences.

First, when the Anti-Injunction Act applies, you have to pay the tax or the penalty first and then litigate later to get it back with interest.

Second, you have to exhaust administrative remedies; even after you pay the tax you can't immediately go to court.

You have to go to the Secretary and give the Secretary at least 6 months to see if the matter can be resolved administratively.

And third, even in the very carefully defined situations in which Congress has permitted a challenge to a tax or a penalty before it's paid, the Secretary has to make the first move.

The taxpayer is never allowed to rush into court before the tax -- before the Secretary sends a notice of deficiency to start the process.

Now if -- if the Anti-Injunction Act does not apply here, none of those rules apply.

That's not just for this case; it will be for every challenge to a section 5000A penalty going forward.

The -- the taxpayer will be able to go to court at any time without exhausting administrative remedies; there will be none of the limitations that apply in terms of you have to wait for the Secretary to make the--

Justice Anthony Kennedy: Why -- why will the administrative remedies rule not be applicable -- exhaustion rule not be applicable?

Mr. Long: --Well, because if the Anti-Injunction Act doesn't apply there is -- there is no prohibition on courts restraining the assessment or collection of this penalty, and you can simply--

Justice Anthony Kennedy: Well, but courts apply the exhaustion rule.

I mean, I know you've studied this.

I'm just not following it.

Why couldn't the court say well, you haven't exhausted your remedies, no injunction?

Mr. Long: --Well, in -- you could do that, I think as a matter of -- of common law or judicially imposed doctrine, but in the code itself which is all -- I mean, the Anti-Injunction Act is an absolutely central statute to litigation--

Justice Anthony Kennedy: Yes, yes.

Mr. Long: --about taxes.

And the code says, first it says you must pay the tax first and then litigate.

So that's the baseline.

And then in addition it says you must -- I mean, it's not common law; it's in the code -- you must apply for a refund, you must wait at least 6 months.

That's -- many of these provisions are extremely specific, with very specific time limits--

Chief Justice John G. Roberts: They would apply even if the rule is not jurisdictional.

The only difference would be that the court could enforce it or not enforce it in particular cases, which brings me to the Davis case, which I think is your biggest hurdle.

It's a case quite similar to this in which the constitutionality of the Social Security Act was at issue, and the government waived its right to insist upon the application of this Act.

Of course, if it's jurisdictional, you can't waive it.

So are you asking us to overrule the Davis case?

Mr. Long: --Well, Helvering v. Davis was decided during a period when this Court interpreted the Anti-Injunction Act as simply codifying the pre-statutory equitable principles that usually but not always prohibited a court from enjoining the assessment or collection of taxes.

So that understanding, which is what was the basis for the Helvering v. Davis decision, was rejected by the Court in Williams Packing and a series of subsequent cases -- Bob Jones.

And so I would say effectively, the Davis case has been overruled by subsequent decisions of this Court.

Justice Ruth Bader Ginsburg: Mr. Long, why don't we simply follow the statutory language?

I know that you've argued that the Davis case has been overtaken by later cases, but the language of the Anti-Injunction Act is "no suit shall be maintained".

It's remarkably similar to the language in -- that was at issue in Reed Elsevier:

"No civil action for infringement shall be instituted. "

And that formulation, "no suit may be maintained", contrasts with the Tax Injunction Act, that says the district court shall not enjoin.

That Tax Injunction Act is the same pattern as 2283, which says

"courts of the United States may not stay a proceeding in State court. "

So both of those formulas, the TIA and the no injunction against proceedings in State court, are directed to "court".

The Anti-Injunction Act, like the statute at issue in Reed Elsevier, says "no suit shall be maintained", and it has been argued that that is suitor-directed in contrast to court-directed.

Mr. Long: Right.

Well, I mean, this Court has said several times that the Tax Injunction Act was based on the Anti-Injunction Act.

You are quite right, the language is different; but we submit that the Anti-Injunction Act itself, by saying that no suit shall be maintained, is -- is addressed to courts as well as litigants.

I mean, after all, a case cannot go from beginning to end without the active cooperation of the court.

Justice Ruth Bader Ginsburg: But how is that different from no civil action for infringement shall be instituted -- "maintained and instituted"?

Anything turn on that?

Mr. Long: Well, it's -- I mean -- perhaps a party could initiate an action without the act of cooperation of the court, but to maintain it from beginning to end again requires the court's cooperation.

And -- and even if -- I mean, if the Court were inclined to say as an initial matter if this statute were coming before us for the first time today, given all of your recent decisions on jurisdiction, that you might be inclined to say this is not a jurisdictional statute.

A lot of water has gone over the dam here.

The Court has said multiple times that this is a jurisdictional statute.

Congress has not disturbed those decisions.

To the contrary--

Justice Sonia Sotomayor: Counsel--

Justice Samuel Alito: Well, Congress said that many times, but is there any case in which the result would have been different if the Anti-Injunction Act were not viewed as jurisdictional but instead were viewed as a mandatory claims processing -- rule?

Mr. Long: --There -- there are certainly a number of cases where the Court dismissed saying it is jurisdictional.

As I read the cases, I don't think any of them would necessarily have come out differently, because I don't think we had a case where the argument was, well, you know, the government has waived this, so, you know, even -- if it's not jurisdictional--

Justice Samuel Alito: Well, the clearest -- the clearest way of distinguishing between the jurisdictional provision and a mandatory claims processing rule is whether it can be waived and whether the Court feels that it has an obligation to raise the issue Sua Sponte.

Now, if there are a lot of cases that call it jurisdictional, but none of them would have come out differently if the Anti-Injunction Act were simply a mandatory claims processing rule, you have that on one side.

And on the other side, you have Davis, where the Court accepted a waiver by the Solicitor General; the Sunshine Anthracite coal case, where there also was a waiver; and, there's the Williams Packing case, which is somewhat hard to understand as viewing the Anti-Injunction Act as a jurisdictional provision.

The Court said that there could be a suit if -- there is no way the government could win, and the Plaintiff would suffer irreparable harm.

Now, doesn't that sound like an equitable exception to the Anti-Injunction Act?

Mr. Long: --No.

I think the -- I think the best interpretation of the Court's cases is that it was interpreting a jurisdictional statute.

And, indeed, in Williams Packing, the Court said it was a jurisdictional statute.

But, again, even if you have doubt about simply the cases, there is more than that because Congress has -- has not only not disturbed this Court's decision stating that the statute is jurisdictional, they've passed numerous amendments to this Anti-Injunction Act.

Chief Justice John G. Roberts: Well, it seems -- you can't separate those two points.

The idea that Congress has acquiesced in what we have said only helps you if what we have said is fairly consistent.

And you, yourself, point out in your brief that we've kind of gone back and forth on whether this is a jurisdictional provision or not.

So, even if Congress acquiesced in it, I'm not sure what they acquiesced in.

Mr. Long: Well, what you have said, Mr. Chief Justice, has been absolutely consistent for 50 years, since the Williams Packing case.

The period of inconsistency was after the first 50 years, since the statute was enacted in 1867.

And there was a period, as I said, when the Court was allowing extraordinary circumstances exceptions and equitable exceptions, but then, very quickly, it cut back on that.

And since -- and since Williams Packing, you have been utterly consistent--

Justice Elena Kagan: Well, even since Williams Packing, there was South Carolina v. Regan.

And that case can also be understood as a kind of equitable exception to the rule, which would be inconsistent with thinking that the rule is jurisdictional.

Mr. Long: --Well, again, I mean, I think the best understanding of South Carolina v. Regan is not that its an equitable exception, but it's the court interpreting a jurisdictional statute as it would interpret any statute in light of its purpose, and deciding in that very special case, it's a very narrow exception, where the--

Justice Sonia Sotomayor: --Mr. Long, in Bowles, the Court looked to the long history of appellate issues as being jurisdictional, in its traditional sense, not as a claim processing rule, but as a pure jurisdiction rule, the power of the Court to hear a case.

From all the questions here, I count at least four cases in the Court's history where the Court has accepted a waiver by the Solicitor General and reached a tax issue.

I have at least three cases, one of them just mentioned by Justice Kagan, where exceptions to that rule were read in.

Given that history, regardless of how we define jurisdictional statutes versus claim processing statutes in recent times, isn't the fairer statement that Congress has accepted that in the extraordinary case we will hear the case?

Mr. Long: --No.

No, Justice Sotomayor, because in many of these amendments which have come in the '70s and the '90s and the 2000's, Congress has actually framed the limited exceptions to the Anti-Injunction Act in jurisdictional terms.

And it's written many of the express exceptions by saying notwithstanding Section 7421--

Justice Sonia Sotomayor: But doesn't that just prove that it knows that the Court will impose a claim processing rule in many circumstances, and so, in those in which it specifically doesn't want the Court to, it has to be clearer?

Mr. Long: --Well, but Congress says, notwithstanding 7421, the Court

"shall have jurisdiction to restrain the assessment and collection of taxes in very limited-- "

Justice Sonia Sotomayor: Could you go back to the question that Justice Alito asked.

Assuming we find that this is not jurisdictional, what is the parade of horribles that you see occurring if we call this a mandatory claim processing rule?

What kinds of cases do you imagine that courts will reach?

Mr. Long: --Right.

Well, first of all, I think you would be saying that for the refund statute, as well as for the Anti-Injunction Act -- which has very similar wording, so if the Anti-Injunction Act is not jurisdictional, I think that's also going to apply to the refund statute, the statute that says you have to first ask for a refund and then file, you know, within certain time -- so it would be -- it would be both of those statutes.

And, you know, we are dealing with taxes here, if people--

Justice Sonia Sotomayor: That wasn't my question.

Mr. Long: --I'm sorry.

Justice Sonia Sotomayor: My question was if we deem this a mandatory claim processing rule--

Mr. Long: Right.

Justice Sonia Sotomayor: --what cases do you imagine courts will reach on what grounds?

Assuming the government does its job and comes in and raises the AIA as an immediate defense--

Mr. Long: Well, that's--

Justice Sonia Sotomayor: --where can a Court then reach the question, despite--

Mr. Long: --That would certainly be the first class of cases, it occurs to me, where, if the government does not raise it in a timely way, it could be waived.

I would think plaintiffs would see if there was some clever way they could get a suit going that wouldn't immediately be apparent that--

Justice Sonia Sotomayor: --Assumes the lack of competency of the government, which I don't, but what other types of cases?

Justice Antonin Scalia: Mr. Long, I don't think you are going to come up with any, but I think your response is you could say that about any jurisdictional rule.

If it's not jurisdictional, what's going to happen is you are going to have an intelligent federal court deciding whether you are going to make an exception.

And there will be no parade of horribles because all federal courts are intelligent.

So it seems to me it's a question you can't answer.

It's a question which asks

"why should there be any jurisdictional rules? "

And you think there should be.

Mr. Long: --Well, and, Justice Scalia, I mean, honestly, I can't predict what would happen, but I would say that not all people who litigate about federal taxes are necessarily rational.

And I think there would be a great--

Justice Stephen G. Breyer: I just don't want you to lose the second half of your argument.

And we have spent all the time so far on jurisdiction.

And I accept, pretty much, I'm probably leaning in your favor on jurisdiction, but where I see the problem is in the second part, because the second part says

"restraining the assessment or collection of any tax. "

Now, here, Congress has nowhere used the word "tax".

What it says is penalty.

Moreover, this is not in the Internal Revenue Code "but for purposes of collection".

And so why is this a tax?

And I know you point to certain sentences that talk about taxes within the code--

Mr. Long: --Right.

Justice Stephen G. Breyer: --and this is not attached to a tax.

It is attached to a health care requirement.

Mr. Long: Right.

Justice Stephen G. Breyer: --so why does it fall within that word?

Mr. Long: Well, I mean, the first point is -- our initial submission is you don't have to determine that this is a tax in order to find that the Anti-Injunction Act applies, because Congress very specifically said that it shall be assessed and collected in the same manner as a tax, even if it's a tax penalty and not a tax.

So that's one--

Justice Stephen G. Breyer: But that doesn't mean the AIA applies.

I mean -- and then they provide some exceptions, but it doesn't mean the AIA applies.

It says "in the same manner as".

It is then attached to chapter 68, when that -- it that references that as "being the manner of".

Well, that it's being applied -- or if it's being collected in the same manner as a tax doesn't automatically make it a tax, particularly since the reasons for the AIA are to prevent interference with revenue sources.

And here, an advance attack on this does not interfere with the collection of revenues.

I mean, that's -- you have read the arguments, as have I. But I would like to know what you say succinctly in response to those arguments.

Mr. Long: --So specifically on the argument that it -- it is actually a tax, even setting aside the point that it should be assessed and collected in the same manner as a tax.

The Anti-Injunction Act uses the term "tax"; it doesn't define it.

Somewhat to my surprise, "tax" is not defined anywhere in the Internal Revenue Code.

In about the time that Congress passed the Anti-Injunction Act, tax had a very broad definition.

It's broad enough to include this exaction, which is codified in the Internal Revenue Code.

It's part of the taxpayers' annual income tax return.

The amount of the liability and whether you owe the liability is based in part on your income.

It's assessed and collected by the IRS.

Justice Antonin Scalia: There -- there is at least some doubt about it, Mr. Long, for the reasons that Justice Breyer said, and I -- I thought that we -- we had a principle that ousters of jurisdiction are -- are narrowly construed, that, unless it's clear, courts are not deprived of jurisdiction, and I find it hard to think that this is clear.

Whatever else it is, it's easy to think that it's not clear.

Mr. Long: Well, I mean, the Anti-Injunction Act applies not only to every tax in the code, but, as far as I can tell, to every tax penalty in the code.

Justice Ruth Bader Ginsburg: Mr. Long, you -- you said before -- and I think you were quite right -- that the Tax Injunction Act is modeled on the Anti-Injunction Act, and, under the Tax Injunction Act, what can't be enjoined is an assessment for the purpose of raising revenue.

The Tax Injunction Act does not apply to penalties that are designed to induce compliance with the law rather than to raise revenue.

And this is not a revenue-raising measure, because, if it's successful, they won't -- nobody will pay the penalty and there will be no revenue to raise.

Mr. Long: Well, in -- in Bob Jones the Court said that they had gotten out of the business of trying to determine whether an exaction is primarily revenue raising or primarily regulatory.

And this one certainly raises -- is expected to raise very substantial amounts of revenues, at least $4 billion a year by the--

Justice Sonia Sotomayor: But Bob Jones involved a statute where it denominated the exaction as a tax.

Mr. Long: --That's--

Justice Sonia Sotomayor: Here we have one where the Congress is not denominating it as a tax; it's denominating it as a penalty.

Mr. Long: --That's -- that's absolutely right, and that's obviously why, if it were called a tax, there would be absolutely no question that the Anti-Injunction Act applies.

Justice Sonia Sotomayor: Absolutely.

But even the section of the Code that you referred to previously, the one following 7421, the AIA, it does very clearly make a difference -- 7422 -- make a difference between tax and penalties.

It's very explicit.

Mr. Long: Yes, that's -- it does, that is correct, and there are many other places in the Code where--

Justice Stephen G. Breyer: The best collection I've found in your favor, I think, is in Mortimer Caplin's brief on page 16, 17.

He has a whole list.

All right.

So -- I got my law clerk to look all those up.

And it seems to me that they all fall into the categories of either, one, these are penalties that were penalties assessed for not paying taxes, or, two, they involve matters that were called by the court taxes, or, three, in some instances they were deemed by the Code to be taxes.

Now what we have here is something that's in a different statute that doesn't use the word AIA reason, which is to say to the Solicitor General, we don't care what you think, we, in Congress, don't want you in court where the revenue of a state -- Tax Injunction Act -- or the revenue of the federal government is at stake, and, therefore, you can't waive it.

Now I got that.

Here it's not at stake and here are all the differences I just mentioned.

So I ask that because I want to hear your response.

Mr. Long: --Well, I mean, there are penalties in the Internal Revenue Code that you really couldn't say are related in any -- in any close way to some other tax provision.

There is a penalty -- it's discussed in the briefs -- for selling diesel fuel that doesn't comply with EPA's regulations, you know.

So there are all kinds of penalties in the Code, and I think it's -- it could be--

Justice Elena Kagan: Mr. Long, aren't there places in this Act -- fees and penalties -- that were specifically put under the Anti-Injunction Act?

There is one on health care plans, there is one on pharmaceutical manufacturers, where Congress specifically said the Anti-Injunction Act is triggered for those.

It does not say that here.

Wouldn't that suggest that Congress meant for a different result to obtain?

Mr. Long: --Well, I mean, Congress didn't use the language the Anti-Injunction Act shall apply--

Justice Elena Kagan: No, but it -- it in section 9008 and in section 9010--

Mr. Long: --Right.

Justice Elena Kagan: --it specifically referred to the part of the Code where the Anti-Injunction Act is.

Mr. Long: Right, all of subtitle F, which picks up lots of administration and procedure provisions, but those -- those are fees, and they are not -- Congress did not provide, you know, in the sections themselves that they should be paid as part of a tax return.

So they were free-standing fees, and by using that subtitle F language, Congress plugged in a whole set of rules for how to collect and administer the fees, and it went not just to assessment and collection -- and the IRS has recognized this -- but to examination, privacy, a whole series of additional things.

So I think it would be a mistake to look at that language and say,

"oh, here's Congress saying they want the Anti-Injunction Act to apply. "

They are actually doing more than that.

And, yes, I grant you, you could look at section 5000A, the individual coverage requirement, and say, well, they could have been clearer about saying the Anti-Injunction Act applied, and that's certainly true, but, again, they were trying to accomplish a lot.

Maybe--

Justice Anthony Kennedy: It's easier to talk about this case if we just forget the words

"for the purpose of restraining assessment and collection. "

In a sense, that brings the jurisdictional question and Justice Breyer's question together.

It seems to me -- maybe you could just comment on that language.

Is that sort of language usually contained in a jurisdictional provision?

I mean, you often don't know the purpose of a suit until after the thing is underway.

I can see it with malicious prosecution and some civil rights cases.

Does it strike you as somewhat unusual to have this provision in a jurisdictional case?

Mr. Long: --It does strike me, honestly, as a bit unusual, but this is an old statute.

I mean, this -- the core language is essentially unchanged since 1867, and, you know, I think that's part of the explanation for it.

And, again, it's, you know, become the center of a series of provisions that very carefully control the circumstances in which litigation about federal taxes can take place.

Justice Ruth Bader Ginsburg: Mr. Long, there's another argument that has been made that I would like you to address, and that is all this talk about tax penalties is all beside the point because this suit is not challenging the penalty.

This is a suit that is challenging the must-buy provision, and the argument is made that, if, indeed, "must-buy" is constitutional, then these complainants will not resist the penalty.

So what they're seeking is a determination that that "must-buy" requirement, stated separately from penalty, that "must-buy" is unconstitutional, and, if that's so, that's the end of the case; if it's not so, they are not resisting the penalty.

Mr. Long: Well, I think that argument doesn't work for two reasons.

I mean, first, if you look at the Plaintiff's own complaint, they clearly challenge both the minimum coverage requirement and the penalty.

At page 122 of the Joint Appendix they challenge the requirement that the individuals obtain health care coverage or pay a penalty.

Justice Samuel Alito: Why is that?

Justice Ruth Bader Ginsburg: If that's -- if that's the problem, it's easier to amend the complaint.

They can just take that out of the complaint.

So it can't turn on that.

Mr. Long: Well, yes, I mean, it's -- or another complaint would be filed, but, still, I think that's a serious problem.

But even if they had filed a different complaint, I don't think you -- in this case I don't think you can separate the minimum coverage requirement from the penalty because the penalty is the sole means of enforcing the minimum coverage requirement.

So -- so, first, I mean, I think these Plaintiffs would not be satisfied if the Court were to render a judgment saying the minimum coverage requirement is invalidated; the penalty, however, remains standing.

Anybody who doesn't have insurance has to pay the penalty.

Then they would have to pay a penalty equal to the cost of insurance and they wouldn't even have insurance.

So I don't think that would be--

Justice Samuel Alito: Well, they say they want to obey the law, and they say that your argument puts them in the position of having to disobey the law in order to obtain review of their claim.

And what is your answer to that?

Mr. Long: --Well, I mean, first of all, I can't find that in the record, in their declarations.

I don't see a statement that they will, you know, never incur a penalty under any circumstances.

But -- but even if that were so, what this Court has said in Americans United is the Anti-Injunction Act bars any suit, not just to enjoin the collection of your own taxes, but to enjoin the collection of anyone's taxes.

And so even if it were really true that these plaintiffs were not interested in the penalty and would never pay the penalty, if they were to succeed in this case in striking down the minimum coverage requirement the inevitable result would be that the penalty would fall as well, because the government couldn't collect the penalty for failing to follow an unconstitutional requirement, and so it would still be barred because it would be a suit that would prevent the collection of some of the--

Justice Samuel Alito: Well, let me take us back to Justice Kennedy's question about the "for the purpose of" language.

I take it you interpret the statute to mean the following: "For the purpose of" means having the effect of.

Is that correct?

Mr. Long: --Well -- -- well, I mean, this Court in the Bob Jones case, where a similar kind of argument was being made by the plaintiff in that case, said: Look, you know, where the -- where it's inevitable that this is what the suit is about, they're sort of two sides of the same coin, that clearly is a primary purpose of the suit.

And it's -- and you can't by clever pleading get away from that.

That's just the nature of the situation.

Justice Elena Kagan: But, Mr. Long, aren't you trying to rewrite the statute in a way?

The statute has two sections.

One is the you have to have insurance section and the other is the sanction.

The statute has two different sets of exceptions corresponding to those two different sections.

You are trying to suggest that the statute says: Well, it's your choice; either buy insurance or pay a -- or pay a fee.

But that's not the way the statute reads.

And Congress, it must be supposed, you know, made a decision that that shouldn't be the way the statute reads, that it should instead be a regulatory command and a penalty attached to that command.

Mr. Long: Well, I would not argue that this statute is a perfect model of clarity, but I do think the most reasonable way to read the entire statute is that it does impose a single obligation to pay a penalty if you are an applicable individual and you are not subject to an exemption.

And the reason I say that, if you look at the exemptions from the penalty, the very first one is you are exempt from the penalty because you can't afford to purchase insurance.

And it just doesn't seem reasonable to me to interpret the statute as Congress having said, well, you know, this person is exempt from paying a penalty because we find they can't afford to buy insurance, however they still have a legal obligation to buy insurance.

That just doesn't seem reasonable.

So I -- so I do think, although it's -- I certainly wouldn't argue it's clear -- that that's the best way to understand the statute as a whole.

But again, I would say, you know, that's not essential to the question we're discussing now of whether the Anti-Injunction Act applies.

Again, you know, I think--

Justice Sonia Sotomayor: Could you tell me why you think the Solicitor General's reading creates a problem?

Mr. Long: --Well, in going back to -- so if the result were to say simply, this is not -- oh, I'm sorry.

The Solicitor General's reading.

So now it's not--

Justice Sonia Sotomayor: That it is a jurisdictional bar, but there's an exemption for those items that Congress has designated solely as penalties that are not like taxes.

Mr. Long: --Right.

Well, I mean, I think the Solicitor General's reading would probably create the fewest problems, as I understand it.

I mean, my -- my main objection to the Solicitor General's reading is I don't think it makes a whole lot of sense.

I mean, basically the Solicitor General says every penalty in the Internal Revenue Code, every other penalty in the Affordable Care Act is--

Justice Sonia Sotomayor: But that's not -- that's carrying it too far, because he says if a penalty is designated as a tax by Congress then it's subject to the AIA, and that's most of the code, the tax code.

And he says for those portions of the Affordable Care Act that designate things as taxes, the AIA applies.

So it's only -- and I haven't found another statute.

I'm going to ask him if there's another one.

It's only for those statutes in which Congress has designated something solely as a penalty.

Mr. Long: --Right.

Justice Sonia Sotomayor: And not indicated that it is a tax.

Mr. Long: Right.

Justice Sonia Sotomayor: They don't fall within the AIA.

Mr. Long: I think my -- my take on it is if you adopted the Solicitor General's approach there are probably three penalties for alcohol and tobacco-related offenses at 5114(c), 5684, and 5761 that I think would be very difficult to distinguish from this one, and possibly the 527(j) penalty for failure to disclose political contributions.

If there are no further questions, I would like to reserve my time.

Chief Justice John G. Roberts: Thank you, Mr. Long.

General Verrilli.

ORAL ARGUMENT OF DONALD B. VERRILLI, JR., ON BEHALF OF THE PETITIONERS

Mr. Verrilli Jr.: Mr. Chief Justice and may it please the Court:

This case presents issues of great moment, and the Anti-Injunction Act does not bar the Court's consideration of those issues.

That is so even though the Anti-Injunction Act is a jurisdictional limit that serves what this Court described in Clintwood Elkhorn as an exceedingly strong interest in protecting the financial stability of the Federal Government, and even though the minimum coverage provision of the Affordable Care Act is an exercise of Congress's taxing power as well as its commerce power.

Congress has authority under the taxing power to enact a measure not labeled as a tax, and it did so when it put section 5000A into the Internal Revenue Code.

But for purposes of the Anti-Injunction Act, the precise language Congress used is determinative.

And there is no language in the Anti-Injunction Act -- excuse me, no language in section 5000A of the Affordable Care Act or in the Internal Revenue Code generally that provides a textual instruction that--

Justice Samuel Alito: General Verrilli, today you are arguing that the penalty is not a tax.

Tomorrow you are going to be back and you will be arguing that the penalty is a tax.

Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?

Mr. Verrilli Jr.: --No, Justice Alito, but the Court has held in a license tax cases that something can be a constitutional exercise of the taxing power whether or not it is called a tax.

And that's because the nature of the inquiry that we will conduct tomorrow is different from the nature of the inquiry that we will conduct today.

Tomorrow the question is whether Congress has the authority under the taxing power to enact it and the form of words doesn't have a dispositive effect on that analysis.

Today we are construing statutory text where the precise choice of words does have a dispositive effect on the analysis.

Justice Sonia Sotomayor: Well, General, you also have the Bailey child labor tax cases, because there the Court said that the tax, which was a prohibitory tax alone, was a tax subject to the AIA, and then it said it was beyond the Court's taxing power in a separate case, correct?

Mr. Verrilli Jr.: Yes.

I do think, Justice Sotomayor, that, with respect to one of the arguments that my friend from the NFIB has made in the brief, that Bailey v. George is a significant problem because I think their argument on the constitutionality under the taxing power is essentially that the Affordable Care Act provision is the same thing as the provision that was held unconstitutional in Bailey v. Drexel Furniture Company.

Justice Sonia Sotomayor: That's a different issue--

Mr. Verrilli Jr.: But on the same day -- right, but on the same day as Bailey v. Drexel Furniture, the court issued Bailey v. George, which held that the Anti-Injunction Act did bar a challenge to that provision, even though the Court had concluded that it was invalid under the tax power.

So -- and I think the reason for that has been -- is clear now after Williams Packing and Bob Jones, in that in order to find that the Anti-Injunction Act doesn't apply to something that otherwise would be a tax that triggers it, you have to conclude essentially that there is no substantial argument that can be made in defense of it as a tax.

We don't have that here, so I don't think you can get around the Anti-Injunction Act if the Court were to read it, as the amicus suggest it should be read, on that theory.

But.

Justice Ruth Bader Ginsburg: Mr. Verrilli, a basic question about your argument.

If you are right about the second part, that is for purposes of the statute, the anti-injunction statute, this penalty does not constitute a tax, then does the Court need to decide whether the Anti-Injunction Act in other cases where it does involve a tax is jurisdictional?

Mr. Verrilli Jr.: No.

I -- I apologize if I'm creating confusion about that, Justice Ginsburg.

We think by far the better route here is to understand the statute as we have proposed that it be construed as not applying here.

From the perspective of the United States -- and if I could, I'd like to take a minute on this -- the idea that the Anti-Injunction Act would be construed as not being a jurisdictional provision is very troubling, and we don't think it's correct.

And I -- I would, if I could follow up on a question, Justice Ginsburg, that you asked Mr. Long in terms of the language of the Anti-Injunction Act 7421(a), which can be found at page 16A of the appendix to our brief.

I -- I'd ask the Court to compare that to the language of the very next provision in the code, which is on the next page of our statutory appendix, 17A, which is the refund statute which we've talked about a little bit so far this morning, 7422(a).

The refund statute this Court held in Dolan was jurisdictional, and the Court in both Dolan and Brockamp held that the statute of limitations that applies to the refund statute cases is jurisdictional.

The language in 7422(a) is virtually identical to the language in 7421(a)--

Justice Anthony Kennedy: That -- that is correct, although in the refund context, you have the sovereign immunity problem, in which we presume that has not been waived.

Mr. Verrilli Jr.: Right.

Justice Anthony Kennedy: But I -- 7421(a) -- were the same--

--The language is quite parallel.

Mr. Verrilli Jr.: --And -- originally, they were the same statutory provision.

They were only separated out later.

So I do think that's the strongest textual indication, Justice Ginsburg, that -- that 7421(a) is jurisdictional.

Justice Ruth Bader Ginsburg: But then, General, what I asked you is, if you're right that this penalty is not covered by section 7421, if you're right about that, why should we deal with the jurisdictional question at all?

Because this statute, correct, the way you reading -- read it, doesn't involve a tax that's subject to the Anti-Injunction Act.

Mr. Verrilli Jr.: Yes, that is exactly our position.

And the reason we don't--

Justice Ruth Bader Ginsburg: So -- so you -- you agree that we would not -- if we agree with you about the correct interpretation of the statute, we need not decide the jurisdiction.

Mr. Verrilli Jr.: --There would be no reason to decide the jurisdictional issue.

Justice Anthony Kennedy: Don't you want to know the answer?

[Laughter]

Mr. Verrilli Jr.: Justice Kennedy, I think we all want to know the answer to a lot of things in this case.

But -- but I do -- I do think that the prudent course here is to construe the statute in the manner that we read it.

Justice Anthony Kennedy: But -- but you indicated -- there was a discussion earlier about why does the government really care, they have competent attorneys, et cetera.

But -- and you began your argument by saying it would be very troubling to say that it's not jurisdictional.

I'd like you to comment on that -- it's not for us to tell a party what's in its best interests.

It would seem to me that there might be some instances in which the government would want to litigate the validity of a tax right away and would want to waive.

But you say it's -- that's not true; that it's very troubling.

Mr. Verrilli Jr.: I think there are two problems.

One is the problem that Justice Scalia identified, that if it's not jurisdictional, then courts have authority to craft equitable exceptions.

And it may seem from where we stand now that that authority is or could be very, very tightly cabined, but if -- if this Court were to conclude that it isn't jurisdictional, that does empower courts to find other circumstances in which they might find it equitable to allow cases to go forward in the absence of -- of -- despite the existence of the Anti-Injunction Act.

And second, although I certainly am not going to stand up here and disparage the attorneys from the United States in the slightest, the reality is that if this isn't jurisdictional, then it's -- the argument -- it's open to the argument that it's subject to forfeiture by a simple omission in failing to raise it in an answer.

And that -- and that's a troubling prospect.

by--

Justice Sonia Sotomayor: --How, if you're troubled--

Justice Ruth Bader Ginsburg: Can I ask--

Chief Justice John G. Roberts: Justice Ginsburg.

Justice Ruth Bader Ginsburg: --How -- how likely is it -- I mean, the government is going to be defending these suits, how likely is it that the government will overlook the Anti-Injunction Act?

It seems to me that this is arming the government by saying it's waivable at the government's option.

Mr. Verrilli Jr.: --That's -- that is not our assessment of the institutional interests of the United States, Justice Ginsburg.

And we do think that the -- the right way to go in this case is to read the statute as not applying to the minimum coverage provision of the Affordable Care Act.

Chief Justice John G. Roberts: It was -- it was the calculation of the interests of the United States that your predecessor made in the Davis case.

There, the -- the Solicitor General exercised the authority that we sanctioned to waive the -- the Anti-Injunction Act.

And of course, that couldn't be done if it were jurisdictional.

Mr. Verrilli Jr.: That's true, Mr. Chief Justice.

Several points about that, though.

We do agree with Mr. Long's analysis that Davis occurred in -- during a time in -- which under the Standard Nut case, the Court had interpreted the Anti-Injunction Act as doing no more than codifying the traditional equitable principles which allowed courts discretion to conclude that in certain circumstances, a case could go forward.

Williams Packing repudiated that analysis, and Bob Jones v. Simon again repudiated that analysis and said, no, we're no longer abiding by that.

It is true that the Davis case has not formally been overruled, but we do think it's fundamentally inconsistent with the Court's understanding now of--

Justice Stephen G. Breyer: Davis was the case where a shareholder sues the corporation.

Mr. Verrilli Jr.: --Yes.

Justice Stephen G. Breyer: And the remedy is that the corporation shouldn't pay the money to the tax authority.

Now, it's a little technical, but that isn't actually an injunction against the tax authority collecting.

He's not -- they're not restraining the collection of tax.

They're saying to the taxpayer, don't pay it.

Mr. Verrilli Jr.: Yes.

And--

Justice Stephen G. Breyer: I don't know how far that gets you.

Mr. Verrilli Jr.: --Well, in fairness, Justice Breyer, the United States did intervene in the -- in the Davis case and was a party, and so -- not as far as I'd like, I guess is the answer.

Justice Antonin Scalia: Don't do it again, because I think that goes too far.

I don't think that's restraining the collection of a tax.

It's restraining the payment of a tax.

Mr. Verrilli Jr.: Well--

Justice Antonin Scalia: You -- you don't want to let that bone go, right?

Mr. Verrilli Jr.: Our view here is that it is jurisdictional.

Justice Antonin Scalia: Because it's jurisdictional as this Court understands jurisdiction now, it's not waivable.

And therefore, we don't think that -- that that part of the Davis decision is good law.

Justice Elena Kagan: General, can I ask you about Reed Elsevier?

Justice Ginsburg suggested that the language was very similar in Reed Elsevier as it is here, but there are even further similarities.

Reed Elsevier pointed out that the provision in question wasn't in Title 28.

Here, too, it's not in Title 28.

In Reed Elsevier, it was pointed out that the provision there had numerous exceptions to it.

Here, too, there are numerous exceptions that we find that have been created by the courts over the years.

In Reed Elsevier, the question was essentially one about timing.

Come to court after you file your registration.

Here, too, the question is one about timing.

Come to court after you make -- after you pay your taxes.

So Reed Elsevier seems in multiple respects on all fours with this case.

Why is that wrong?

Mr. Verrilli Jr.: --I don't think so, Justice Kagan.

First, we think -- I guess I'm repeating myself and I apologize, but -- we think the closest analogue is the very next provision in the United States Code, 7422(a), which this Court has held is jurisdictional, and is phrased in exactly the same way as 7421(a).

In fact, as I said, they were the same provision back in the earlier days.

That's the closest analogue.

This isn't -- and it's actually 7422 that's a statute that says do something first.

But this -- this statute is just a flat-out command that no suit shall be maintained to restrain--

Justice Elena Kagan: I take the point--

Mr. Verrilli Jr.: --the assessment or collection.

Justice Elena Kagan: --but if you would comment on the similarities of Reed Elsevier to this case.

How do you think it's different, if at all?

Mr. Verrilli Jr.: --Well, because the -- the -- I think the best answer to that is there are no magic words.

And that history and context matter, as the Court said in Henderson.

And the history and context here is that 7422 and 7421 function together to protect an exceedingly strong interest that -- that the Court has held with respect to 7422 sufficiently strong that it -- it explains the jurisdictional nature of that.

The same interest applies here.

This isn't just a matter of do X and then you can -- and then you can come to court.

It's just a fundamentally different set of interests at stake.

So we -- we do think that that makes a big difference.

And--

Justice Ruth Bader Ginsburg: Why, in Reed Elsevier, you were dividing jurisdiction from claims processing, says you have to register before you can sue.

There are a lot of things you have to do before you can sue.

So why isn't Reed Elsevier like you have to pay a filing fee before you can file a complaint?

Mr. Verrilli Jr.: --It is -- we do think it's very much in -- in that nature and different from this case, Your Honor.

And one -- one way I think it's helpful to -- to get at this is -- is to look at the history.

We've cited a string of court of appeals cases in a footnote in our opening brief, and over time, it's been very consistent that the courts of appeals have treated the Anti-Injunction Act as a jurisdictional provision.

Again, if the Court agrees with our statutory construction, you don't need to reach this issue.

But they have -- in fact, one of those cases, the Hansen case, the district court in that case had dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6).

The Court of Appeals vacated and sent it back with instructions to dismiss under 12(b)(1), which is the subject matter jurisdiction provision.

So I do think that, to the extent this issue is before the Court, it is jurisdictional, but it doesn't need to be before the Court because of the statutory construction argument that we had offered.

Justice Ruth Bader Ginsburg: On your statutory construction argument, is there any other exaction imposed under the Internal Revenue Codes that would not qualify as a tax for Anti-Injunction Act purposes, or is 5000A just out there all by itself?

Mr. Verrilli Jr.: It's not quite out there all by itself.

There are other provisions that fall outside of subchapter B of chapter 68 and, therefore, wouldn't be governed by the instruction in Section 6671(a), which answers the question about the applicability of the act for most penalties.

The ones that we've identified, and I may be overlapping a little bit with Mr. Long here, one is 26 U.S.C. 857, which poses certain penalties in connection with the administration of real estate investment trusts.

There are provisions that Mr. Long identified in his brief, Sections 6038(a) through (c) of the Code, which impose certain penalties with respect to reporting requirements for foreign corporations.

We have, in addition, in footnote 22 at page 36 of our brief, identified three provisions that Mr. Long also identified about -- about alcohol and tobacco.

Now--

Justice Sonia Sotomayor: --Could we address, General, the question of whether there are any collateral consequences for the failure to buy -- to not buy health insurance?

Is the only consequence the payment of the penalty?

The private respondents argue that there are other collateral consequences such as for people on probation who are disobeying the law, if they don't buy health insurance they would be disobeying the law and could be subject to having their supervised release revoked.

Mr. Verrilli Jr.: --Yes.

That is not a correct reading of the statute, Justice Sotomayor.

The only consequence that ensues is the tax penalty.

And the -- we have made a representation, and it was a carefully made representation, in our brief that it is the interpretation of the agencies charged with interpreting this statute, the treasury department and the Department of Health and Human Services, that there is no other consequence apart from the tax penalty.

And I do think, if I could talk for a couple of minutes about the argument that was discussed as to whether this can be conceived of as a suit just challenging the requirement, which is entirely stand-alone based on inferences drawn from the exemptions.

I really don't think that's right.

And if I could spend a minute on it, I think it's important.

The exemptions in section 5000A, it is true that there are two categories of exemptions.

There are exemptions to the penalty and exemptions to the subsection (a) requirement.

But the -- but I think, not only as a practical matter, but as a textural indication and even as a legal matter, they -- both function as exceptions to the requirement.

First, as a practical matter, one of those exemptions is a hardship exemption.

And if the Court will just bear with me for one minute here, it's at page 11A of the appendix to our brief.

It provides that a person can go to the secretary of HHS and obtain a hardship exemption for -- which would, as a formal matter here, excuse compliance with the penalty.

It seems to me to make very little sense to say that someone who has gone to an official of the United States and obtained an exemption would, nonetheless, be in a position of being a law breaker.

We think another way in which you can get to the same conclusion slightly differently is by considering the provision on the prior page, 10A, which is 5000A -- 5000A(e)(3), members of Indian tribes.

Members of Indian tribes are exempt only from the penalty as a formal matter under the structure of the statute here; but, the reason for that is because members of Indian tribes obtain their healthcare through the Indian Health Service, which is a clinic-based system that doesn't involve insurance at all.

It's an entirely different system.

They were taken out of this statute because they get their healthcare through a different system.

And it doesn't make any sense to think that persons getting their health care through the Indian Health Service are violating the law because -- exempt only from the penalty, but still under a legal obligation to have insurance, when the whole point of this is that they're supposed to be in a clinic-based system.

Justice Sonia Sotomayor: Is your whole point that this was inartful drafting by Congress; that, to the extent that there is an exemption under the penalty, it's an exemption from the legal obligation?

Mr. Verrilli Jr.: I guess what I would say about it, Your Honor, is that the way in which this statute is drafted doesn't permit the inference that my friends from the NIB are trying to draw from it.

Justice Sonia Sotomayor: And there is an additional textural indication of that, which one can find at page 13 of our reply brief.

This is a provision that is 42 U.S.C. A, section 18022(e).

This is a provision that provides for a certification that certain individuals can get.

And it's the paragraph starting with the words "other provisions", contains the quote.

And it says:

"An individual with a certification that the individual is exempt from the requirement under section 5000A, by reason of section 5000A(e)(1) of such code, is entitled to a certificate that allows for enrollment in a particular program for this category of people. "

But you can see here, Congress is saying it's an exemption from under 5000A(e)(1), which is the exemption from the penalty, and not the underlying requirement is, as Congress says, an exemption from the requirement of section 5000A.

Justice Samuel Alito: Sub-section A says directly,

"an applicable individual shall ensure that the individual has the minimum essential coverage. "

And you are saying it doesn't really mean that, that if you're not subject to the penalty, you're not under the obligation to maintain the minimum essential coverage?

Mr. Verrilli Jr.: That's correct.

And we think that is what Congress is saying, both in the provision I just pointed to, Your Honor, and by virtue of the fact -- by virtue of the way the exemptions work.

I just think that's the -- reading this in context, that is the stronger reading of the statute.

Chief Justice John G. Roberts: Suppose it makes it easy for the government to drop the other shoe in the future, right?

You have been under the law subject to this mandate all along.

You have been exempt from the penalty, so all they have to do is take away the penalty.

Mr. Verrilli Jr.: I don't -- I don't think so, Mr. Chief Justice.

I don't think it makes it easy for the government in the future.

We think this is the fairest reading of the statute, that the -- that the -- you cannot infer from the fact that someone is exempt from the penalty, that they are still under an obligation to have insurance.

That's just not the fairest reading of the statute.

Justice Elena Kagan: Could I--

Justice Samuel Alito: I'm sorry, go ahead.

Justice Elena Kagan: --The nature of the representation you made, that the only consequence is the penalty, suppose a person does not purchase insurance, a person who is obligated to do so under the statute doesn't do it, pays the penalty instead, and that person finds herself in a position where she is asked the question, have you ever violated any federal law, would that person have violated a federal law?

Mr. Verrilli Jr.: No.

Our position is that person should give the answer "no".

Justice Elena Kagan: And that's because.

Mr. Verrilli Jr.: That if they don't pay the tax, they violated a federal law.

Justice Elena Kagan: But as long as they've paid the penalty.

Mr. Verrilli Jr.: If they pay the tax, then they are in compliance with the law.

Justice Stephen G. Breyer: Why do you keep saying tax?

Mr. Verrilli Jr.: If they pay the tax penalty, they're in compliance with the law.

Justice Stephen G. Breyer: Thank you.

Mr. Verrilli Jr.: Thank you, Justice Breyer.

Justice Stephen G. Breyer: The penalty.

Mr. Verrilli Jr.: Right.

That's right.

Justice Samuel Alito: Suppose a person who has been receiving medical care in an emergency room -- has no health insurance but, over the years, goes to the emergency room when the person wants medical care -- goes to the emergency room, and the hospital says, well, fine, you are eligible for Medicaid, enroll in Medicaid.

And the person says, no, I don't want that.

I want to continue to get -- just get care here from the emergency room.

Will the hospital be able to point to the mandate and say, well, you're obligated to enroll?

Mr. Verrilli Jr.: No, I don't think so, Justice Alito, for the same reason I just gave.

I think that the -- that the answer in that situation is that that person, assuming that person -- well, if that person is eligible for Medicaid, they may well not be in a situation where they are going to face any tax penalty and therefore--

Justice Samuel Alito: No, they are not facing the tax penalty.

Mr. Verrilli Jr.: --Right, right.

Justice Samuel Alito: So the hospital will have to continue to give them care and pay for it themselves, and not require them to be enrolled in Medicaid.

Mr. Verrilli Jr.: Right.

Justice Samuel Alito: Will they be able to take this out and say, well, you really should -- you have a moral obligation to do it; the Congress of the United States has said, you have to enroll?

No, they can't say?

Mr. Verrilli Jr.: I do think it's -- I think it's certainly fair to say that Congress wants people in that position to sign up for Medicaid.

I think that's absolutely right.

And I think the statute is structured to accomplish that objective; but, the reality still is that the only consequence of noncompliance is the penalty.

Justice Sonia Sotomayor: General, but I thought the people who were eligible for Medicaid weren't subject to the penalty.

Am I wrong?

I could be just factually wrong.

Mr. Verrilli Jr.: Well, it all -- the penalty is keyed to income.

Justice Sonia Sotomayor: Yes.

Mr. Verrilli Jr.: And it's keyed to a number of things.

One is, are -- are you making so little money that you aren't obligated to file a tax return.

And if you're in that situation, you are not subject to the penalty.

It's also if the cost of insurance would be more than 8 percent of your income, you're not subject to the penalty.

So there -- there -- there isn't necessarily a precise mapping between somebody's income level and their Medicaid eligibility at the present moment.

That will depend on where things are and what the eligibility requirements are in the State.

Justice Sonia Sotomayor: But those people below.

Mr. Verrilli Jr.: But as a general matter, for people below the poverty line it's almost inconceivable that they are ever going to be subject to the penalty, and they would, after the Act'sMedicaid reforms go into place, be eligible for Medicaid.

Justice Stephen G. Breyer: So is your point that the tax -- so, what we want to do is get money from these people.

Most of them get the money by buying the insurance and that will help pay.

But if they don't, they are going to pay this penalty, and that will help, too.

And the fact that we put the latter in brings it within the taxing power.

And as far as this Act is concerned about the injunction, they called it a penalty and not a tax for a reason.

They wanted it to fall outside that, it's in a different chapter, et cetera.

Is that what the heart of what you are saying?

Mr. Verrilli Jr.: That's the essence they called it a penalty.

They didn't give any other textural instruction in the Affordable Care Act or in the Internal Revenue Code or that that penalty should be treated as a tax for the Anti-Injunction Act purpose.

Chief Justice John G. Roberts: You agree with Mr. Long, and, in fact, you just agreed with Justice Breyer that one of the purposes of the provision is to raise revenue.

Mr. Verrilli Jr.: It will -- well, it will raise revenue.

It has been predicted by the CBO that it will raise revenue, Your Honor.

But even though that's the case, and I think that would be true of any -- of any penalty, that it will raise some revenue, but even though that's the case, there still needs to be textural instruction in the statute that this penalty should be treated as a tax for Anti-Injunction Act purposes, and that's what is lacking here.

Justice Samuel Alito: After this takes effect, there may be a lot of people who are assessed the penalty and disagree either with whether they should be assessed the penalty at all, or with the calculation of the amount of their penalty.

So under your interpretation of the Act, all of them can now go to court?

None of them are barred by the Anti-Injunction Act?

Mr. Verrilli Jr.: Those are two different things, Justice Alito.

Justice Samuel Alito: I think for reasons that Justice Kennedy, I think, suggested in one of his questions to Mr. Long, all of the other doctrines that are an exhaustion of remedies and related doctrines would still be there.

The United States would rely on them in those circumstances.

And -- and so, I don't think the answer is that they can all go to court, no.

Justice Sonia Sotomayor: Well, why is it--

Justice Samuel Alito: Two former -- two former commissioners of the IRS have filed a brief saying that your interpretation is going to lead to a flood of litigation.

Are they wrong on that?

Mr. Verrilli Jr.: Yes.

We don't -- you know -- we've -- we've taken this position, after very careful consideration, and we've assessed the institutional interests of the United States and we think we are in the right place.

Justice Sonia Sotomayor: --But tell me something, why isn't this case subject to the same bars that -- that you list in your brief?

The Tax Court, at least so far, considers constitutional challenges to statutes, so why aren't we -- why isn't this case subject to a dismissal for failure to exhaust?

Mr. Verrilli Jr.: Because we don't -- because the exhaustion would go to the individual amount owed, we think, and that's a different situation from this case.

If the Court has no further questions.

Chief Justice John G. Roberts: Thank you, General.

Mr. Verrilli Jr.: Thank you.

Chief Justice John G. Roberts: Mr. Katsas.

ORAL ARGUMENT OF GREGORY G. KATSAS ON BEHALF OF THE RESPONDENTS

Mr. Katsas: Mr. Chief Justice, and may it please the Court:

Let me begin with the question whether the Anti-Injunction Act is jurisdictional.

Justice Ginsburg, for reasons you suggested, we think the text of the Anti-Injunction Act is indistinguishable from the text of the statute that was unanimously held to be non-jurisdictional in Reed Elsevier.

That statute said no suit shall be instituted.

This statute says no suit shall be maintained.

No--

Justice Ruth Bader Ginsburg: They are different things.

This said the Reed Elsevier statute says immediately after instituted unless a copyright is registered.

Mr. Katsas: --Unless the copyright is registered.

And this goes -- this goes to the character of the lawsuit.

The statute in Reed Elsevier says, register your copyright and then come back to court.

Justice Ruth Bader Ginsburg: Why isn't that like a filing fee, before you can maintain a suit for copyright infringement, you have to register your copyright?

Mr. Katsas: It -- it's a precondition to filing suit.

The -- the analogous precondition here is pay your taxes and then come back to court.

The point is--

Justice Sonia Sotomayor: No -- that -- that -- that's not true.

The suit here has nothing to do with hearing the action.

It has to do with a form of relief that Congress is barring.

It's not permitting -- it is not a tax case, you can come in afterwards.

It's not permitting the court to exercise what otherwise would be one of its powers.

Mr. Katsas: --It -- it has to be the same challenge, Justice Sotomayor, or else South Carolina v. Regan would say the Anti-Injunction Act doesn't apply.

You are right that once you file -- once you pay your taxes and then file the refund action, the act of filing the taxes converts the suit from one seeking prospective relief and to one seeking money damages.

And in that sense, you could think of the statute as a remedial limitation on the courts.

But whether you think of it as an exhaustion requirement or a remedial limitation, neither of those characterizations is jurisdictional.

In Davis v. Passman you said that a remedial limitation doesn't go--

Justice Sonia Sotomayor: It does seem strange to think of a -- a law that says no court can entertain a certain action and give a certain remedy as merely a claim processing rule.

What the -- the Court is being ousted from -- from what would otherwise be its power to hear something.

Mr. Katsas: --The suit is being delayed, I think is the right way of looking at it.

The jurisdictional apparatus in the district court is present.

Prospective relief under 1331, money damages action under 1346.

If the Anti-Injunction Act were jurisdiction-ousting, one might have expected it to be in Title 28 and to qualify those statutes and the to use jurisdictional limits.

Justice Sonia Sotomayor: How do you deal with this case and our Gonzalez -- our recent Gonzalez case where we talked about--

Mr. Katsas: Right.

Justice Sonia Sotomayor: --the language of the COA statute that no appeal will be heard absent the issuance of?

Mr. Katsas: Gonzalez -- Gonzalez v. Thaler rests on a special rule that applies with respect to appeals from one Article III court to another.

That's -- that explains Gonzalez and it explains Bowles before it.

You have five unanimous opinions in the last decade in which you have strongly gone the other direction on what counts as jurisdictional.

Justice Sonia Sotomayor: There is an argument that we should just simply say that Bowles applies only to appeals, but we haven't said that.

Mr. Katsas: No, you came very close.

In Henderson, Justice Sotomayor, you said that Bowles, which is akin to Thaler is explained by the special rules and understandings governing appeals from one Article III court to another.

And you specifically said that it does not apply to situations involving a party seeking initial judicial review of agency action, which is what we have here.

So while you're right, the text in Bowles and Thaler are not terribly different, those cases are explained by that principle.

Under Henderson it doesn't apply to this case.

The text in this case speaks to the suit, the cause of action of the litigant.

It doesn't speak to the jurisdiction or power of the Court.

The Anti-Injunction Act is placed in a section of the tax code governing procedure.

It's not placed in--

Justice Sonia Sotomayor: Counsel, all of those -- all of that in particular--

Mr. Katsas: --You did rely on that in Reed Elsevier as one consideration.

Justice Sonia Sotomayor: --And we haven't relied on it in other cases.

Mr. Katsas: And another -- another consideration in Reed Elsevier that cuts in our favor is the presence of exceptions.

You said three in Reed Elsevier cut against jurisdictional characterization.

Here there are 11.

And--

Justice Sonia Sotomayor: Many of which themselves speak in very clear jurisdictional language.

Mr. Katsas: --Well, some of them have no jurisdictional language at all, and not a single one of them uses the word "jurisdiction" to describe the ability of the Court to restrain the assessment and collection of taxes, which is what one would have expected--

Justice Stephen G. Breyer: Basically it begs the difference -- language is relevant, there are a lot of relevant things.

But one thing that's relevant in my mind is that taxes are, for better or for worse, the life's blood of government.

Mr. Katsas: --Yes.

Justice Stephen G. Breyer: And so what Congress is trying to do is to say there is a procedure here that you go through.

You can get your money back, or you go through the Tax Court, but don't do this in advance for the reason that we don't want 500 Federal judge -- judges substituting their idea of what is a proper equitable defense of when there should be an exception made about da, da, da for the basic rule.

No.

Okay?

And so there is strong reason that is there.

You tried to apply that reason to the copyright law.

You can't find it.

Registration with the copyright register is not the life's blood of anything.

Copyright exists regardless.

So the reasoning isn't there.

The language -- I see the similarity of language.

I've got that.

But it's the reasoning, the sort of underlying reason for not wanting a waiver here that -- that is -- has a significant role in my mind of finding that it is jurisdictional.

Plus the fact that we have said it nonstop since that Northrop or whatever that other case is.

Mr. Katsas: Justice Breyer, as to reasoning, you -- you give an argument -- you give an argument why as a policy matter it might make sense to have a non-jurisdictional statute.

But of course this Court's recent cases time and again say Congress has to clearly rank the statute as non-jurisdictional in its text and structure.

It seems to me a general appeal to statutory policies doesn't speak with sufficient clarity--

Justice Stephen G. Breyer: That's fine.

I just wanted to ask the question in case you wanted to answer the policy question.

Mr. Katsas: --As to policy -- as to policy I think Helvering against Davis is the refutation of this view.

It is true that in most cases the government doesn't want and Congress doesn't want people coming into court.

But Davis shows there may be some cases including, for instance, constitutional challenges to landmark Federal statutes where the government sensibly decides that its revenue-raising purposes are better served by allowing a party to come into court and waiving its defense.

That's what the Solicitor General did in Davis, and this Court accepted that waiver.

As for prior cases, we have the holding in Davis and the holding in all of the equitable exception cases like Williams Packing.

The government--

Justice Sonia Sotomayor: So why don't we say -- why don't we say it's jurisdictional except when the Solicitor General waives?

Mr. Katsas: --You have used--

Justice Sonia Sotomayor: Why would that not promote Congress's policy of insuring -- or Congress, explicitly--

Mr. Katsas: --It's jurisdictional except when the Solicitor General waives it?

Justice Sonia Sotomayor: --Yes.

It's a contradiction in terms.

I don't disagree.

Mr. Katsas: It is a contradiction in terms.

All of your cases analyze the situation as if the statute is jurisdictional, then it's not subject to waiver.

If you were to construe this as such a one-of unique statute, it seems to me we would still win because the Solicitor General with full knowledge of the Anti-Injunction Act argument available to him affirmatively gave it up.

This is not just a forfeiture where a government lawyer is -- through inadvertence fails to raise an argument.

This is a case where the government--

Justice Sonia Sotomayor: They raised it and then gave it up.

Mr. Katsas: --They made it below.

They know what it is; and not only are they not pursuing it here, they are affirmatively pursuing an argument on the other side.

Justice Elena Kagan: Mr. Katsas, is your basic position when we are talking about the jurisdiction of the district courts a statute has to say it's jurisdictional to be jurisdictional?

Mr. Katsas: I wouldn't go quite that far.

I think at a minimum it has -- it has to either say that or at least be directed to the courts which is a formulation you have used in your cases and which is the formulation that Congress used in the Tax Injunction Act but did not use in this Statute.

Justice Elena Kagan: Well, how would -- I mean, I suppose one could try to make a distinction between this case and Reed Elsevier by focusing on the difference between instituting something and maintaining something, and suggesting that instituting is more what a litigant does, and maintaining, as opposed to dismissing, is more of what judge does.

Mr. Katsas: I don't think so, Justice Kagan, because we -- we have an adversarial system, not an inquisitorial one.

The parties maintain their lawsuits I think is the more natural way of thinking of it.

If I could turn -- if I could turn to the merits question on the AIA before my time runs out.

The purpose of this lawsuit is to challenge a requirement -- a Federal requirement to buy health insurance.

That requirement itself is not a tax.

And for that reason alone, we think the Anti-Injunction Act doesn't apply.

What the amicus effectively seeks to do is extend the Anti-Injunction Act, not just to taxes which is how the statute is written, but to free-standing nontax legal duties.

And it's just--

Chief Justice John G. Roberts: The whole point -- the whole point of the suit is to prevent the collection of penalties.

Mr. Katsas: --Of taxes, Mr. Chief Justice.

Chief Justice John G. Roberts: Well prevent of the collection of taxes.

But the idea that the mandate is something separate from whether you want to call it a penalty or tax just doesn't seem to make much sense.

Mr. Katsas: It's entirely separate, and let me explain to you why.

Chief Justice John G. Roberts: It's a command.

A mandate is a command.

If there is nothing behind the command.

It's sort of well what happens if you don't file the mandate?

And the answer is nothing.

It seems very artificial to separate the punishment from the crime.

Mr. Katsas: I'm not sure the answer is nothing, but even assuming it were nothing, it seems to me there is a difference between what the law requires and what enforcement consequences happen to you.

This statute was very deliberately written to separate mandate from penalty in several different ways.

They are put in separate sections.

The mandate is described as a 20 times, three times in the operative text and 17 times in the findings.

It's imposed through use of a mandatory verb "shall".

The requirement is very well defined in the statute, so it can't be sloughed off as a general exhortation, and it's backed up by a penalty.

Congress then separated out mandate exceptions from penalty exceptions.

It defined one category of people not subject to the mandate.

One would think those are the category of people as to whom Congress is saying: You need not follow this law.

It then defined a separate category of people not subject to the penalty, but subject to the mandate.

I don't know what that could mean other than--

Chief Justice John G. Roberts: Why would you have a requirement that is completely toothless?

You know, buy insurance or else.

Or else what?

Or else nothing.

Mr. Katsas: --Because Congress reasonably could think that at least some people will follow the law precisely because it is the law.

And let me give you an example of one category of person that might be -- the very poor, who are exempt from the penalty but subject to the mandate.

Mr. Long says this must be a mandate exemption because it would be wholly harsh and unreasonable for Congress to expect people who are very poor to comply with the requirement to obtain health insurance when they have no means of doing so.

That gets things exactly backwards.

The very poor are the people Congress would be most concerned about with respect to the mandate to the extent one of the justifications for the mandate is to prevent emergency room cost shifting when people receive uncompensated care.

So they would have had very good reason to make the very poor subject to the mandate, and then they didn't do it in a draconian way; they gave the very poor a means of complying with the insurance mandate, and that is through the Medicaid system.

Justice Elena Kagan: Mr. Katsas, do you think a person who is subject to the mandate but not subject to the penalty would have standing?

Mr. Katsas: Yes, I think that person would, because that person is injured by compliance with the mandate.

Justice Elena Kagan: What would that look like?

What would the argument be as to what the injury was?

Mr. Katsas: The injury -- when that person is subject to the mandate, that person is required to purchase health insurance.

That is a forced acquisition of an unwanted good.

It's a classic pocketbook injury.

But even if I'm wrong about that question, Justice Kagan, the question of who has standing to bring the challenge that we seek to bring seems to me very different -- your hypothetical plaintiff is very different from the actual plaintiffs.

We have individuals who are planning for compliance in order to avoid a penalty, which is what their affidavits say.

And we have the States, who will be subject no doubt to all sorts of adverse ramifications if they refuse to enroll in Medicaid the people who are forced into Medicaid by virtue of the mandate.

So we don't have the problem of no adverse consequences in the case.

And then, we have the separate distinction between the question of who has Article III standing in order to maintain a suit and the question of who is subject to a legal obligation.

And you've said in your cases that even if there may be no one who has standing to challenge a legal obligation like the incompatibility clause or something, that doesn't somehow convert the legal obligation into a legal nullity.

Finally, with respect to the States, even if we are wrong about everything I've said so far, the States clearly fall within the exception recognized in South Carolina v. Regan.

They are injured by the mandate because the mandate forces 6 million new people onto their Medicaid rolls.

But they are not directly subject to the mandate, nor could they violate the mandate and incur a penalty.

Justice Elena Kagan: Could I just understand, Mr. Katsas, when the States say that they are injured, are they talking about the people who are eligible now but who are not enrolled?

Or are they also talking about people who will become newly eligible?

Mr. Katsas: It's people who will enroll, people who wouldn't have enrolled had they been given a voluntary choice.

Justice Elena Kagan: But who are eligible now.

Mr. Katsas: That's the largest category.

I think there could be future eligibles who would enroll because they are subject to a legal obligation but wouldn't have enrolled if given a voluntary choice.

But I'm happy to -- I'm happy to focus on currently eligible people who haven't enrolled in Medicaid.

That particular class is the one that gives rise to, simply in Florida alone, a pocketbook injury on the order of 500 to $600 million per year.

Justice Elena Kagan: But that does seem odd, to suggest that the State is being injured because people who could show up tomorrow with or without this law will -- will show up in greater numbers.

I mean, presumably the State wants to cover people whom it has declared eligible for this benefit.

Mr. Katsas: They -- they could, but they don't.

What the State wants to do is make Medicaid available to all who are eligible and choose to obtain it.

And in any event--

Justice Ruth Bader Ginsburg: Why would somebody not choose to obtain it?

Why -- that's one puzzle to me.

There's this category of people who are Medicaid eligible; Medicaid doesn't cost them anything.

Why would they resist enrolling?

Mr. Katsas: --I -- I don't know, Justice Ginsburg.

All I know is that the difference between current enrollees and people who could enroll but have not is, as I said, on the -- is a $600 million delta.

And--

Justice Ruth Bader Ginsburg: But it may be just that they haven't been given sufficient information to understand that this is a benefit for them.

Mr. Katsas: --It's possible, but all we're talking about right now is the standing of the States.

And the only arguments made against the standing of the States -- I mean, there is a classic pocketbook injury here.

The only arguments made about -- against the standing of the States are number one, this results from third-party actions.

That doesn't work, because the third-party actions are not unfettered in -- in the sense of Lujan; they are coerced in the sense of Bennett v. Spear.

Those people are enrolling because they are under a legal obligation to do so.

The second argument made against the States' standing is that the States somehow forfeit their ability to challenge the constitutionality of a provision of Federal law because they voluntarily choose to participate--

Justice Sonia Sotomayor: I'm -- I'm a little bit confused.

And this is what I'm confused about.

There -- there is a challenge to the individual mandate.

Mr. Katsas: --Yes.

Justice Sonia Sotomayor: All right.

What is -- the fact that the State is challenging Medicaid, how does it give the State standing to challenge an obligation that is not imposed on the State in any way?

Mr. Katsas: The -- the principal theory for State standing is the States are challenging the mandate because the mandate injures them when people are forced to enroll in Medicaid.

Now, it is true they are not directly subject to the mandate, but--

Justice Sonia Sotomayor: Yes.

That's what I'm--

Mr. Katsas: --Okay.

Let me -- let me try to--

Justice Sonia Sotomayor: --I'm confused by it.

Mr. Katsas: --Let me try it this way -- may I finish the thought?

Chief Justice John G. Roberts: Go ahead.

Mr. Katsas: In South Carolina v. Regan, the State was not subject to the tax at issue.

The State was harmed because -- as the issuer of the bonds, and the bond holders were the ones subject to the tax.

So the State is injured not because it is the direct object of the Federal tax, but because of its relationship to the regulated party as issuer/bond holder.

Chief Justice John G. Roberts: Thank you, Mr. Katsas.

Mr. Katsas: Thank you, Mr. Chief Justice.

Chief Justice John G. Roberts: Mr. Long, you have 5 minutes remaining.

REBUTTAL ARGUMENT OF ROBERT A. LONG FOR COURT-APPOINTED AMICUS CURIAE

Mr. Long: Everyone agrees that the section 5000A penalty shall be assessed and collected in the same manner as taxes.

And the parties' principal argument why that does not make the Anti-Injunction Act applicable is that, well, that simply goes to the Secretary's activities.

And I would simply ask, if -- if you look at chapters 63 and 64 of the Internal Revenue Code which are the chapters on assessment and collection, they are not just addressed to the Secretary.

There are many provisions in there that are addressed to courts and indeed talk about this interaction, the very limited situations in which courts are permitted to restrain the assessment and collection of taxes.

There was a statement made that there aren't -- and many of the exceptions to the Anti-Injunction Act are in the assessment and collection provisions -- there was a statement made that none of these directly confer jurisdiction to restrain the assessment and collection of taxes.

That's not true.

In footnote 11 of our opening brief, we cite several.

I'll simply mention section 6213 as an example.

That says -- I quote:

"Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time that such prohibition is enforced, may be enjoined by a proceeding in the proper court, including the Tax Court. "

"The Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for redetermination of the deficiency has been filed, and then only in respect of the deficiency that is the subject of such petition. "

Justice Stephen G. Breyer: And all that's going to really what I think Congress's intent was meant to be in sticking the collection thing into chapter 68, and -- and it's certainly an argument in your favor.

The -- the over-arching thing in my mind is it's -- it's up to Congress within leeway.

And they did not use that word "tax", and they did have a couple of exceptions.

And it is true that all this language that you quote -- you know, the first two sentences and so forth, it talks about the use of tax in the IRC.

It talks about the penalties and liabilities provided by this subchapter.

And we look over here and it's a penalty and liability provided by a different law, which says collect it through the subchapter, and it has nothing to do with the IRC.

See?

So we've got it in a separate place, we can see pretty clearly what they're trying to do.

They couldn't really care very much about interfering with collecting this one.

That's all the statutory argument.

Are you following me?

You see?

I'm trying to get you to focus on that kind of argument.

Mr. Long: I mean, I think I'm following you, but -- but the fact that it's not in the particular subchapter for assessable penalties in my view makes no difference, because they said it's still clearly -- it's assessed and collected in the same manner as the penalty in that subchapter, and those penalties are collected in the same manner as taxes.

Justice Stephen G. Breyer: Yes, yes.

Mr. Long: And so that's -- I think it's -- it's rather detailed, but I think it's a rather clear indication that the Anti-Injunction Act applies.

The -- the refund statute that does specifically refer to penalties, that has nothing to do with this argument that it's assessed and collected in the same manner as a tax.

That would simply go to the point that well, you can't just call it a tax, because they've referred to it as a penalty.

And finally, on jurisdiction, you know, I think the key point is we have a long line of this Court's decisions that's really been ratified by Congress with all these exceptions in jurisdictional terms.

As I read Bowles and John R. Sand & Gravel, the -- the gist of these decisions was not any special sort of rule about appeals, it's that when we have that situation, which I would submit applies as much to Federal taxes as it does to appeals from Federal district courts when we have this degree of -- of precedent, including precedent from Congress in the form of amendments to this Anti-Injunction Act, that should be -- the presumption should be that this is jurisdictional.

If there are no further questions.

Chief Justice John G. Roberts: Mr. Long, you were invited by this Court to defend the proposition that the Anti-Injunction Act barred this litigation.

You have ably carried out that responsibility, for which the Court is grateful.

Mr. Long: Thank you.

Chief Justice John G. Roberts: We will continue argument in this case tomorrow.