Health reform heads for legal showdown

In a marathon week of oral arguments, the U.S. Supreme Court will consider constitutional challenges to the 2010 health system reform law.

By , — Posted March 23, 2012

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The Supreme Court, starting March 26, will hold three days of oral arguments on legal challenges to the Patient Protection and Affordable Care Act, a defining moment for the 2-year-old statute and a major factor in determining whether it will survive.

In November 2011, the high court agreed to take up health reform lawsuits brought by a coalition of states and a prominent small-business association, a widely expected move that likely sets up a June decision by the court in the middle of the presidential election campaign. Justices could decide that the law is constitutional, invalidate part or all of it on constitutional grounds, or effectively postpone a final determination by stating that the plaintiffs cannot challenge the law until it takes full effect in 2014.

Here's what the court is scheduled to consider each day.

Monday: The Anti-Injunction Act

The justices will hear from the Obama administration and a multistate coalition led by Florida on whether the Anti-Injunction Act renders moot the central challenge posed to the reform law by the states.

The act in question prohibits plaintiffs from suing over a tax that they have not yet been required to pay. Because the reform law's individual mandate requires individuals to obtain health coverage or pay a tax penalty starting in 2014, the administration argues that the states do not have standing to sue over the individual mandate. The states argue that the Anti-Injunction Act does not apply in this case, and that even if it did, it does not bar their challenge from proceeding.

If the justices decide that the act applies and blocks the state challenge, the ruling could leave the reform law intact for now but also leave open the door for a similar legal challenge after 2014.

Read update from Monday.

Tuesday: The individual mandate

The justices will hear from the Obama administration, the states and the National Federation of Independent Business on whether the requirement that individuals obtain health insurance starting in 2014 or pay a penalty is constitutional.

The administration argues that the mandate is an appropriate application of Congress' power to regulate interstate commerce under the U.S. Constitution because individuals' activities can have effects on the health system that transcend state borders. The states and the business association argue that because the mandate effectively requires people to engage in commerce by buying an insurance product — not just regulates those who choose to engage — the provision is an inappropriate and unprecedented application of federal power.

If the justices strike down the individual mandate on constitutional grounds, the ruling could imperil coverage and spending requirements on insurers that depend on guaranteeing a minimum level of individual insurance buy-in.

Read update from Tuesday.

Wednesday: Severability and Medicaid expansion

The justices will hear from the Obama administration, the states and the National Federation of Independent Business on whether the individual mandate can be separated from the rest of the reform law or if the entire statute must be struck down.

The administration argues that even if the individual mandate is found unconstitutional, the other provisions of the law can take effect as authorized. The states and the business association argue that because the mandate and the coverage expansions authorized by the law are intertwined, the entire statute must fail if the mandate cannot pass constitutional muster.

If the justices strike down the individual mandate and also decide that it is not severable, the entire reform statute will be voided. If they decide that severability does apply, only the mandate is invalidated, a ruling that could prompt Congress to revisit the law's coverage expansions to prevent costs from spiraling out of control as a result.

Later in the day, the justices will hear from the Obama administration and the states on whether the law's Medicaid expansion is constitutional.

The states argue that the Medicaid expansion, which eventually requires states to pay a portion of the health costs for the newly covered enrollees, represents federal coercion because states either must pay the additional costs or surrender all federal dollars that they receive to support the Medicaid program. The administration argues that the Constitution allows the federal government to set terms and conditions on the money it disburses to states, and that states are under no obligation to participate in the Medicaid program other than the political price they likely would pay for withdrawing from it.

Read update from Wednesday.

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Wednesday update from the court: If unconstitutional, what then?

On their final morning of arguments on the health system reform law, justices discussed which of the law's other provisions, if any, also must be invalidated if the court rules that the individual mandate requiring health coverage is an unconstitutional application of federal power. In their questioning, the majority of justices appeared at least somewhat accepting of the concept that they would leave the law's remaining provisions intact even if they decide to declare the mandate unconstitutional.

The states and employers suing the Obama administration over the statute said the entire law must become null and void if the centerpiece mandate disappears. They argued that because lawmakers did not include so-called severability instructions in the 2010 law, striking the minimum coverage requirement invalidates the remainder of the law, which includes federal subsidies for purchasing insurance, new state marketplaces for health plans and a major Medicaid expansion.

The administration disagreed, saying that the only provisions that rely on the individual mandate are requirements that insurers enroll people regardless of any preexisting conditions and limits on how much health plans may increase out-of-pocket costs for certain enrollees with higher medical costs. Insurers insist that without the individual mandate guaranteeing that enough healthier people will sign up for insurance, the costs associated with taking care of sicker people — including those who sign up for coverage after they become ill — would bankrupt the insurance system.

Paul Clement, an attorney for the states challenging the law, said it makes the most sense to give Congress a clean slate if the crux of its statute is overturned. “If the individual mandate is unconstitutional, then the rest of the act cannot stand.”

Clement noted that even the administration acknowledges that two key provisions of the law cannot survive without the mandate. “And not only can guaranteed issue and community rating not stand, not operate in the manner that Congress intended, they would actually counteract Congress' basic goal of providing patient protection but also affordable care.”

But Justice Sonia Sotomayor questioned whether the court should be the one deciding which additional provisions must be invalidated.

“A bottom line is why don't we let Congress fix it?” she asked, later adding that making the decisions for Congress would be “sort of taking onto the court more power than one I think would want.”

Justice Ruth Bader Ginsburg also disputed the contention that the court would need to invalidate some or all of the law's other provisions. “Why should we say it's a choice between a wrecking operation, which is what you are requesting, or a salvage job?” she asked Clement.

Deputy U.S. Solicitor General Edwin Kneedler, arguing for the administration, pointed out that several of the law's provisions already are in effect, indicating that they can operate even if the mandate is struck down. Moreover, he said, “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,” later adding that “severability arises in a case only where it's necessary to consider what relief a party before the court should get.”

But Justice Antonin Scalia, after initially acknowledging the difficulty that the court would face in deciding which additional provisions to invalidate, indicated that if the court let any of the rest of the law stand, the statute might cause significant negative consequences by staying on the books.

“Most of our severability cases ... involve one little aspect of the act. ... When have we ever really struck down what was the main purpose of the act and left the rest in effect?” he asked. He later said, “My approach would say if you take the heart out of the statute, the statute's gone.”

If justices determine that the individual mandate is unconstitutional, they may leave the rest of the law intact, invalidate just some of the remaining provisions or strike down the entire statute. If the court eliminates the mandate but leaves in place provisions that depend on the mandate, Congress likely will find itself under great pressure to revisit those parts of the statute through additional legislation.

On Wednesday afternoon, justices were scheduled to hear the final oral arguments in their marathon week of health reform law consideration. The question for that session is whether the law's Medicaid expansion, a portion of which states are required to fund if they want to stay in the program, represents unconstitutional federal coercion on states. Lower courts have ruled that the federal government is allowed to impose terms and conditions on the funding that it provides to states.

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Tuesday update from the court: A mandate under fire

In their second day of arguments on the health system reform law, justices dove directly into what many observers consider to be the central constitutional issue surrounding the statute: Can the federal government compel individuals to obtain health coverage or pay a penalty?

Using such hypothetical situations as the government requiring people to purchase broccoli or electric cars, justices searched for examples with which to compare the reform law's individual mandate, the main focus of attack by states and small businesses asking the court to invalidate the law. In their presentation of those analogies, justices largely appeared split along conservative-liberal lines on whether the federal government has the power to force individuals to buy health insurance. At least four of the nine justices seemed to suggest in their lines of questioning that upholding the mandate also would authorize Congress to have sweeping regulatory control over a vast number of other industries.

The Obama administration argues that because a person who does not obtain health coverage but who still accesses care has economic effects on the system that transcend state lines, Congress has the power under the Commerce Clause of the Constitution to impose the mandate. States and businesses opposing the reform law say that's a federal overreach, because it aims to regulate people who have chosen not to participate in a market by purchasing an insurance product. Some of the justices seemed swayed by the states' arguments.

“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?” Chief Justice John Roberts asked Solicitor General Donald Verrilli, who represented the Obama administration in its defense of the law.

Justice Samuel Alito Jr., compared the mandate provision to requesting that healthy, young people buy burial insurance because it's inevitable that they will die.

“I don't see the difference,” Alito said. “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.”

Verrilli rejected the comparisons, saying none of them pose the same type of situation as the health law's coverage requirement. In approving the law, Congress was not creating commerce simply so it could regulate it, it was regulating the method of financing health care, which is through insurance coverage.

The difference in the broccoli example, for instance, “is that health insurance is the means of payment for health care ... and broccoli is not the means of payment for anything else.”

But Justice Antonin Scalia did not seem to accept the government's line of defense. Under the reasoning presented by Verrilli, “if I'm in any market at all, my failure to purchase something in that market subjects me to regulation.”

During his argument time, Washington attorney Paul Clement, who represented the 26 states challenging the reform statute, said Congress was wrong in insisting that uninsured individuals effectively are already in the health insurance market and that it merely seeks to regulate their activity. “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,” he said.

But Justice Ruth Bader Ginsburg reminded Clement about the creation of Social Security and suggested that system is similar to mandating that people buy health insurance, even if they would rather not.

“Congress, in the '30s, saw a real problem of people needing to have old age and survivor's insurance. ... 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.”

Justice Anthony Kennedy has the reputation as a defender of states' rights, but he nevertheless hinted at the end of his questioning that the health insurance system might present a special case in which the federal government does have the power to step in as authorized by the reform law.

“I think it is true that if most questions in life are matters of degree, in the insurance and health care world ... 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,” Kennedy said in his questioning of Michael Carvin, a Washington attorney speaking for the National Federation of Independent Business.

In their second day of arguments, justices appeared more aggressive in their questioning of attorneys, frequently interrupting the lawyers before they could provide full responses. The court set aside a full two hours for oral argument on the mandate's constitutionality, more time than it has reserved for each of the other three health reform questions before the court.

As it was the first day, courtroom seats were at capacity, with press officials adding extra chairs to accommodate the more than 100 reporters covering the hearings. Included in the audience were Health and Human Services Secretary Kathleen Sebelius and Sens. Chuck Grassley (R, Iowa), Max Baucus (D, Mont.), and Patrick Leahy (D, Vt.), three lawmakers who played large roles on both sides of the 2010 health reform debate.

For the second day, demonstrators for and against the health law lined the sidewalk outside the court, holding signs and chanting. Shortly before the arguments began, advocates for each side spoke to the crowd at podiums below the court's steps. Shouts of “Hey, ho, Obamacare has got to go,” could be heard intermingled with chants supporting the reform law.

Michael Newman, MD, an internist from Washington who was among the crowd outside the court, said the provisions at stake in the courtroom would greatly impact how doctors practice medicine.

“Like most physicians, I can tell you that our current system of health care isn't working,” he said. “As it should, the Affordable Care Act changes the paradigm.”

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Monday update from the court: Scrutiny over a tax law

In their first day of arguments weighing lawsuits against the nation's historic health system reform law, U.S. Supreme Court justices meticulously dissected the language of a 145-year-old tax law to determine whether that statute could postpone a final decision on the pending lawsuits. Several justices appeared skeptical that the tax law applies in this case and that they cannot proceed to the main challenges to the reform statute right away.

The court on March 26 heard roughly 90 minutes worth of oral arguments on whether the federal Anti-Injunction Act bars the pending legal challenges against the Patient Protection and Affordable Care Act. The Anti-Injunction Act stipulates that a person may not sue over a tax that has not yet been paid. If the justices determine that it applies in this case, that could postpone a ruling on the constitutional merits of the challenges until after 2014, when a federal penalty first will apply to eligible individuals who do not obtain health coverage.

Because something is “being collected in the same manner as a tax doesn't automatically make it a tax,” Justice Stephen Breyer said to Robert Long, an attorney appointed by the Supreme Court to argue the AIA's significance for the court. Congress never uses the term “tax,” only the word “penalty,” in the health reform law, Breyer noted.

The Affordable Care Act clearly says the penalty will be assessed and collected like a tax, thus falling under the Anti-Injunction Act, Long replied. The AIA never has defined the word “tax,” he noted, but prior court decisions have allowed a broad reading of the term.

AIA “applies to essentially every tax penalty in the Internal Revenue Code,” Long said.

But the coalition of states that is challenging the individual mandate argued the tax law does not apply in this case because the penalty is not a tax, even though it will be assessed when people file their individual tax forms for the previous year. In addition, the states said, even if the Anti-Injunction Act did apply it would not bar the states — who are not persons — from proceeding with their central constitutional challenge of the mandate on Commerce Clause grounds.

The Obama administration also wants the court to rule on the constitutionality of the mandate and dismiss the states' lawsuit on those grounds. Solicitor General Donald Verrilli Jr., who represented the government, said the penalty is not a tax under the AIA, despite the fine being associated with Congress' taxing powers.

Justice Samuel Alito Jr. lightheartedly admonished Verrilli for being somewhat inconsistent in his arguments over the health law, noting that the administration is arguing that the individual mandate itself is an appropriate extension of federal power, along the same lines as the power of Congress to tax people.

“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,” Alito said, drawing laughter from the audience watching the proceedings.

Justice Ruth Bader Ginsburg focused on whether the states' lawsuit is over the individual mandate itself or the penalty. She disagreed with Long's interpretation that the mandate and the associated penalty are one and the same.

“This suit is not challenging the penalty,” she said. “This is a suit that is challenging the must-buy provision, and the argument is made that, if, indeed, 'must-buy' is constitutional, than these complainants will not resist the penalty.”

Regarding whether the Supreme Court has authority to review the central constitutional issues in the health reform lawsuits, Justice Antonin Scalia said courts' power generally wins out, except in rare instances. But he indicated the reform law's language is providing a big clue in this case.

“Unless it's clear, courts are not deprived of jurisdiction, and I find it hard to think that [the Affordable Care Act] is clear,” Scalia said. “Whatever else it is, it's easy to think that it's not clear.”

If the justices rule that the health reform lawsuits cannot be considered until the first individual is required to pay the penalty in early 2015, such a ruling would not be a total defeat for either side; it would keep the health reform statute intact for now but leave open the possibility that the mandate could be invalidated on the same constitutional question in several years.

During a March 26 news conference on the Supreme Court steps before the first of three days of oral arguments, physicians, nurses and patients convened by several patient advocacy organizations urged the court to go beyond the initial technical question and uphold the health reform law. They pointed out the benefits that the law already has provided through the provisions that have taken effect in the two years since enactment.

Physicians are frustrated when they have to tell patients that they are going to struggle with their medical costs because they have no affordable health insurance, something that will change with the full implementation of the law, said Alice Chen, MD. She's an internist from Los Angeles and executive director of Doctors for America, which supported the reform law's enactment. “This is not about politics; this is about people,” she said.

The doctors at the news conference said the law already is helping some of the most vulnerable patients, including seniors who are receiving additional assistance with their prescription drug costs and people with preexisting conditions who now have access to a special high-risk insurance pool. Insurers no longer can discriminate against children because they have costly medical conditions, said O. Marion Burton, MD, a pediatrician from Columbia, S.C., and immediate past president of the American Academy of Pediatrics. The health reform law “is working, and it's helping America's children,” he said.

Scores of demonstrators marched, chanted and sang outside the Supreme Court during the first day of arguments. Pro-reform law demonstrators appeared to outnumber those who oppose the law and want the justices to overturn it, but enough were present on both sides that competing chants and some heated arguments took place below the court's steps. Demonstrators and other onlookers were expected to be at the court all week.

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External links

The U.S. Supreme Court docket for the health system reform cases under review (link)

Supreme Court of the United States blog index of resources about the health system reform cases, briefs and past decisions (link)

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