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. >> 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? >> 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. >> 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? >> 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. >> under what theory wouldn't it be? >> well, i do think that >> 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.

>> 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 >> 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% of those people visit emergency care or other care, which we are paying for. and 22% 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 >> we'll get to those questions in inverse order. >> 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? >> well, justice breyer, let me start at the beginning of your question with mcculloch. mcculloch was not a commerce power case. >> it was both? >> 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 >> 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. >> 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. >> well, doesn't that seem a little bit, mr. clement, cutting the bologna thin? 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. >> 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. of so it's not just a matter 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 >> 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? >> 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 >> 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? >> 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 >> 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. >> 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 >> 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. >> 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. >> 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 >> of course not >> -- and we don't know which? >> 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. >> 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. >> well, justice kagan, once again, it depends on which market we're talking about. if we're talking about the health care insurance market >> well, we are talking about the health insurance market, which is designed to access the health care market. >> 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 >> but they are in the market in the sense that they are creating a risk that the market must account for. >> 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. >> 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. >> 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 >> 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. >> 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. >> 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 >> 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 >> 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% 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. >> 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 >> 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. >> i agree 100 percent, and i 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. >> i would like hear you address justice breyer's other, other two principles. >> 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. >> and now maybe return to justice sotomayor's question. >> 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 >> would you tell me, do you think the states could pass this mandate. >> i represent 26 states. i do think the states could pass this mandate, but i >> 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? >> 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. >> thank you, mr. clement. 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 market. 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. >> well, surely >> i'm sorry. >> 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. >> 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 >> 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. >> 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% 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 >> yet we don't know who they are. >> 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 >> 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. >> which is >> 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. >> 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 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 >> well, mr. carvin >> because -- i'm sorry. >> please. >> 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. >> in your view, right there -- in your view right there >> justice breyer -- >> can i just -- >> i'm sorry.

>> i'm just picking on something. epidemic sweeping the united states, and we couldn't say that more than 40% or 50% -- 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. >> well, in all candor, i think morrison must have decided that issue, right? >> is your answer to that yes or>> oh, i'm sorry, my answer is no, they couldn't do it, because morrison >> no, they could not do it. >> yes. >> 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. >> may >> may i just please explain why? >> yes. >> 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.

health care costs by >> i agree with you that >> -- that it had huge negative effects but the majority thought that was a local matter. >> i think that's his point. [laughter] having i don't know why 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 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 >> 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. >> justice alito, that is exactly the government's argument. illogical argument. just change my example under pressure >> -- and say that in fact it turns out that 90% of all automobiles driving interstate without certain equipment put up pollution, which travels interstate -- not 100%, maybe only 60%. does the epa have the power then to say you've got to have an antipollution device? it's statistical. >> what they can't do -- yes, if you have a car, they can

require you to have an anti- pollution >> then you're not going on statistics, you're going on something else which is what i'd like to know what it is. >> it's this. they can't require you to buy a car with an anti-pollution device. marketu've entered the 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. >> 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? >> 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. 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 >> i see the point. you can go back to, go back to justice kagan. don't forget her question. >> i've forgotten my question. [laughter] >> i -- i was facing the same dilemma, justice kagan. >> let me -- let me ask a question i asked mr. clement. it just seems junior justice? [laughter] >> 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. >> well i don't think the test 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 >> 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. >> 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 market. 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. >> 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 carebut 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? >> 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. >> 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. >> 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 >> i mean, but that's true of

almost every product. >> i've sorry? >> 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. >> 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 >> they force me to buy >> i'm sorry. >> 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

>> 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. >> 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. >> i fully agree with you, justice sotomayor. but i think >> so how is that different from saying you are self-insuring insurance? why isn't that a predecessor to the need that you're eventually going to have? >> the cases you referred to i think effectively eliminated the distinction between participants in the intrastate market vis-à-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 >> 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? >> 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. >> 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? >> the guaranteed-issue. >> yes. that that is legitimate commerce clause legislation? >> 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. >> 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. >> 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 >> but the sick people, why would they insure early if they had to be protected if they get insurance late? >> 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 >> 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 >> one of the most >> they had an allergic reaction and a simple shot would have saved the child? >> 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 >> i'm sorry, did you say the penalty's okay but not the

mandate? i'm sorry. maybe i've misheard you. >> 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. 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. >> so the >> -- and that -- that is the fundamental problem here. >> 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. >> yes. >> that would be okay. >> yes. tax power is >> okay. >> i would accept that. >> 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? >> there may have been some

confusion in prior colloquy. i fully agree with my brother clement that a direct tax wouldi 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 >> 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? >> 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 >> i think -- i think that's what's happening, isn't it? >> no. not >> 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. >> right. and everyone understands >> i think everybody recognizes

that it's all taxation for the purposes of dissuading you to buy it. >> that's precisely my point. and everyone intuitively understands that that system is dramatically different than saying cigarettes tomorrow are illegal. it is different. >> 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. yourat's the part of argument i'm not hearing. >> let me >> please. >> 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% or whoever among the uninsured as a leverage to regulate the 100% of the uninsured. >> i agree -- i agree that that's what's happening here. >> okay. >> 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. >> 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% of the population to the unhealthy 5%. 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%. 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. >> 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? >> 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. >> 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? >> 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. >> thank you, mr. carvin. general verrilli, you have four minutes remaining. >> 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. >> thank you, general. counsel, we'll see you tomorrow. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> and this supreme court will issue its decision on the affordable care act this morning. we will have live coverage of the high court beginning at 10:00 a.m. eastern on c-span3 with phone calls. here on c-span we will be discussing the health-care law on this morning's "washington journal." this is followed by a session of u.s. house, expected to vote on a contempt decision before attorney general eric holder. attorney general eric holder.