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U.S. Supreme Court – Day Three of Oral Arguments on the Affordable Care Act

Today, morning oral arguments in the Supreme Court focused on the issue of “severability,” that is, if the Court decides that the individual mandate (the subject of Day Two oral arguments) is unconstitutional, can the rest of the Patient Protection and Affordable Care Act (ACA) survive?  Paul D. Clement, arguing on behalf of twenty-six states challenging the law, began by stating that if the individual mandate is unconstitutional, then none of the other provisions in the ACA should stand because the law would just be a “hollow shell.”  Citing congressional findings, he characterized the individual mandate, in combination with the community rating and guaranteed issue provisions, as the very heart of the law and argued that the better course would be for Congress to start over to craft an entirely new law rather than for the Court to give it the task of fixing the law without these provisions.

The Court then weighed in with a series of questions on whether their duty was to examine congressional intent or the actual text of the ACA to determine whether other parts of the law could still function if the individual mandate was found unconstitutional.  Mr. Clement argued that the objective test for the Court was, without the individual mandate, whether the law could operate in the manner that Congress intended, but Justice Sotomayor asked why shouldn’t the Court presume that Congress would want to sever these provisions and let the rest of the ACA stand.

Justices Ginsburg and Breyer pointed to other sections of the law, like the Indian Healthcare Improvement Act, or provisions for doctors and nurses to work in underserved areas, or health care for victims of Black Lung disease and asked why they should also be affected if the Court determined that the individual mandate was unconstitutional?  Chief Justice Roberts noted that many of these provisions were put in the bill because its backers needed votes for the overall legislation.

Justice Kagan stated that although she could understand how the individual mandate, community rating, and guaranteed issue were all related, there was a dividing line between those provisions and other provisions in the law.  Mr. Clement argued, however, that other provisions in the law, including the operation of health insurance exchanges, hinged on the individual mandate.

Justice Scalia asked more generally whether if any provision in a law, even some of the more obscure provisions, was found to be unconstitutional, would that always mean that an entire statute would fall?  He noted “[t]hat can’t be right.”  When Justice Alito asked what Mr. Clement’s fallback position would be if the Court declared the individual mandate unconstitutional, he replied that the Court could leave the hollowed-out shell of the law standing but that, at a certain point, the better course would be to give Congress a clean slate to begin again to address health reform.

Edwin Kneedler, Deputy Solicitor General, argued for the government that there should be no need for the Court to even consider the issue of severability because the individual mandate is constitutional, but that if the Court were to conclude otherwise, it should keep other provisions in the law.  Justice Scalia appeared to agree that the other provisions had been legitimately enacted and should be allowed to stand.  However, when Justice Ginsburg asked Deputy General Kneedler whether the Court should “wreck” the whole law if the individual mandate was found to be unconstitutional or leave it to Congress to debate new legislation on that issue, Justice Scalia asked why it wouldn’t be better to have Congress reconsider the whole law.  He drew laughter when he asked whether the government expected the Court to go through the entire 2700 pages of the ACA item by item and decide which parts should stay and which should go.  Deputy General Kneedler responded that Justice Kagan’s point that the ACA creates a sharp dividing line between the individual mandate-related provisions and the rest of the law made sense.  Justice Scalia asked had the Court ever struck down the main purpose of a law and allowed the remainder to stay in effect and commented that this was really a case of first impression because he did not know of another case where the Court was confronted with a decision like this.

At the Court’s request, H. Bartow Farr, III argued that the individual mandate was severable from the rest of the law and that all other provisions, including community rating and guaranteed issue should survive if the individual mandate was struck down.   In that case, he stated that the ACA would not operate precisely as Congress intended but still would serve the central goals of the law.

He called the individual mandate a “tool” to make community rating and guaranteed issue work, and said that there could be other incentives that could draw healthy young adults into the insurance market.  He argued that Congress would want other, unrelated provisions in ACA to stand.  In rebuttal, Mr. Clement stated that if the individual mandate is found unconstitutional, the rest of the ACA should fail.

Afternoon oral arguments centered on whether the ACA’s Medicaid expansion provisions (to cover adults with incomes up to 133 percent of the Federal Poverty Level) violated principles of federalism by coercing the states to participate.  Paul D. Clement, again arguing for the states that have challenged the law, argued that the Medicaid expansion provision was coercive, but Justice Kagan inquired how he could claim the provision was coercive when the federal government was picking up 90 to 100 percent of the cost of the expansion.  She asked “why is a big gift from the government a matter of coercion?”  Mr. Clement claimed that states would be coerced because if they did not accept federal funds to expand Medicaid, they risked losing federal funding for their entire Medicaid program, funding that they had been dependent on for over 45 years.  He also argued that the federal dollars to fund this provision came from federal tax dollars that then limited the states’ ability to increase taxes.

Justice Breyer focused on the statutory provision, in existence since 1965, that the states claim would allow the Secretary of the Department of Health and Human Services to deny Medicaid funds to states that did not expand their Medicaid population to this new group.  He pointed out that the Secretary, in fact, had the discretion to deny funds but that states certainly could bring an administrative law action against the Secretary should she deny Medicaid funds unreasonably because agencies are prohibited from acting in an arbitrary or capricious manner and cannot abuse their discretion in interpreting a statute.  Justice Scalia, however, stated that the provision itself is unreasonable.

Justice Ginsburg noted that while there are twenty-six states that believe this provision is coercive, the remainder of the states like the Medicaid expansion and are happy to have the federal funds.  Justice Scalia again drew laughter when he asked whether “there is any chance at all that twenty-six states opposing it have Republican governors and all of the other states supporting it have Democratic governors,” to which Mr. Clement responded, “[t]here’s a correlation, Justice Scalia.” Justice Ginsburg then stated that in the history of the Court, they had never had a federal program struck down because it was so good that it becomes coercive to be in it.

Chief Justice Ginsburg noted it is not surprising that the federal government would attach strings to funds it provides to the states.  Mr. Clement insisted, however, that it was purely coercive to condition the money.  Justice Kagan stated that the type of cooperative federalism that has characterized the relationship between the federal government and state Medicaid programs does not mean that there are no federal mandates or no federal restrictions, but rather that the federal government could have certain rules about how it spends its money.

Solicitor General Donald B. Verrilli, Jr. argued for the government that the Medicaid expansion is an exercise of Congress’ power under the Spending Clause and that the states were asking the Court to do something unprecedented, that is, to declare the Medicaid expansion provision as impermissibly coercive.  When pressed by Chief Justice Roberts though, he was not willing to say that the Secretary would never chose to exercise her discretion to withhold federal funds for a state’s Medicaid program if the state refused to comply with the expansion of Medicaid coverage to this newly eligible adult population.  Chief Justice Roberts then noted that as long as the federal government has the power to cut off funding, that is a significant intrusion on the sovereign interests of the state.  In rebuttal, Mr. Clement stated that the only way to cure this defect in ACA would be to allow the states to expand their Medicaid programs on a voluntary basis.

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U.S. Supreme Court – Day Two of Oral Arguments on the Affordable Care Act

Today’s Supreme Court oral arguments centered on the Patient Protection and Affordable Care Act’s (ACA) “individual mandate” (also known as the “minimal coverage provision”), the requirement, beginning in 2014, for all Americans to either obtain health insurance or pay a penalty.  The question is whether Congress can use its authority under the Commerce Clause of the Constitution to regulate interstate commerce in order to enact such a requirement.

Solicitor General Donald B. Verrilli began by describing a U.S. health care system in which 40 million people are uninsured and the costs of their uncompensated care drive up health insurance costs for those who are insured.  He explained that Congress used its authority under the Commerce Clause to enact two key reforms to the insurance market, “guaranteed issue” and “community rating” (a position that none of the parties disputes), but that these reforms could not exist without Congress also creating a minimal coverage provision, thereby assuring that individuals would have insurance in advance of any actual need for health care services.  He argued that there is no temporal limit to the Commerce Clause, that everyone subject to the regulation is or will eventually be in the health care market and they are just being regulated in advance.

Chief Justice Roberts and Justices Scalia and Breyer at once began to question whether Congress could create commerce where previously none existed in order to regulate it. General Verrilli responded that, rather than creating commerce, Congress actually was regulating existing economic activity – people’s participation in the health care market, where health insurance is a means of paying for health care. Justice Scalia insisted that the provision regulates health insurance, not health care.  Chief Justice Roberts expressed his concerns that if the Court accepted the principle that everyone was in the insurance market, he didn’t see why Congress’ power would be limited to only the method of payment

Justice Kennedy stated that this issue goes beyond what the Court’s cases have allowed and, because of that, the government has a heavy burden to show that the individual mandate is authorized under the Constitution.  He posed the question whether Congress could have chosen alternative means, for example, using its taxing authority to create a national health service. General Verrilli responded that Congress had chosen a tool that was reasonably adapted to the problem it confronted.  Justice Scalia and General Verrilli then engaged in a lengthy exchange in which Justice Scalia noted that while the provision might have been reasonable, it was not proper because the federal government’s powers are not unlimited.

While Justices Kagan, Ginsburg and Sotomayor repeatedly noted that requiring individuals to purchase insurance made sense because it diversifies the risk and eventually everyone will need health care, Justice Alito pointed out that healthy young adults would be forced to purchase health insurance that would result in them subsidizing services that would be received by everyone else. Justice Scalia said that young adults would purchase health insurance when they think they have a risk of incurring high medical costs, just as others do. Chief Justice Roberts noted that the minimum coverage provisions would require people to purchase insurance for services that they might never need, like pediatric or maternity services.

General Verrilli was asked to explain how the penalty for failure to obtain insurance was a “tax” and stated that because it is to be administered by the Internal Revenue Service, it is characterized as a tax.  When Justice Ginsburg pointed out that the previous day General Verrilli had argued that the penalty was not a tax, he replied that Congress clearly used its taxing authority to create the penalty provision. Justice Ginsburg held firm to her previously stated position that because the penalty would not generate revenue, but rather was designed to affect the purchase of health insurance, it is not a tax.

Paul D. Clement, the appellate attorney arguing for the respondents, stated that while the Commerce Clause gives Congress the power to regulate commerce, it does not give Congress the greater power to compel people to enter into commerce, to actually create commerce.  He explained that it is consistent with 220 years of the Court’s jurisprudence that regulating the point of sale (the purchase of health care services) is regulating commerce, but that Congress cannot force individuals to enter into commerce in the first place by requiring them to purchase health insurance.  He noted that Congress could have chosen an alternative mechanism, for example, tax credits for those who purchased insurance.  He also argued that the penalty is not a tax because it was neither labeled a tax in the ACA nor was it structured as a tax.

Michael A. Carvin, the appellate attorney arguing on behalf of an additional set of respondents, stated that Congress does not have the authority to promote commerce, only to regulate it once it exists.  In response to Justice Ginsburg’s comment that the only  way to assure that people could afford health care once they became sick was to have health insurance prior to the onset of an illness, he noted that the Commerce Clause does not give Congress the power “to regulate things that are statistically connected to things that negatively affect commerce.”  He also commented that Congress not only had compelled people to enter the insurance market, it also had prohibited anyone over age thirty from purchasing only catastrophic health insurance because the “subsidies” they provided were needed by others in the insurance pool.

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U.S. Supreme Court – Day One of Oral Arguments on the Affordable Care Act

The U.S. Supreme Court today heard the first of four sets of oral arguments challenging key provisions of the Patient Protection and Affordable Care Act (ACA) (Department of Health and Human Services, et al. v. Florida, et al.).  Today’s argument focused on an issue not challenged by either the government or the respondents.  At the Court’s request, appellate attorney Robert A. Long argued as an amicus that the federal Anti-Injunction Act (AIA), which dates from 1867, applies to ACA and, therefore, the Court is prevented from hearing a tax issue prior to the enforcement of the tax. The Act reads, in part, “…no suit for the purpose of restraining the assessment or collection of any tax may be maintained in any court by any person.”  Because ACA provides that these penalties will be collected “in the same manner as taxes,” Long argued that the penalties constitute a tax.  Lively questioning by eight of the nine Justices centered around two sets of issues:  (1) the jurisdictional issue of the power of the Court to hear the issue; and (2) whether the penalty starting with tax year 2014 for failure to become insured (the “individual mandate”) constitutes a “tax.”

Justice Sotomayor commented on cases in which the Court either accepted waivers from the Solicitor General to reach a tax issue or where the Court read an exception to the AIA into a statute.  She stated, given that history, Congress has accepted “in the extraordinary case” that the Court would hear the case.  Justice Ginsburg noted that the AIA is suitor-directed not court-directed.

The Court then turned to whether the penalty constituted a tax for purposes of the AIA, with Justice Breyer noting that nowhere in the ACA did Congress use the word “tax” to refer to the penalty and that the penalty was attached to a health insurance requirement.  He further noted that just because a penalty would be collected in the same manner as a tax did not automatically make it a tax.  Justice Ginsburg stated that the penalty is not a revenue raising measure but rather is designed to induce compliance with the law.  Justice Kagan noted that Congress clearly specified sections of the law in which the AIA applied but did not do so with the penalty provisions.

Respondents were represented by appellate attorney Gregory G. Katsas, who argued that the AIA did not apply because the purpose of the lawsuit was to challenge a legal requirement to buy health insurance and that requirement is not a tax. He noted that Congress had separated out mandate provisions from penalty provisions. Solicitor General Donald Verrilli, Jr. argued the government’s position that the AIA did not apply because the penalty is not a tax, to which Justice Alito commented “today you are arguing that the penalty is not a tax.  Tomorrow [when oral arguments will be heard on the constitutionality of the individual mandate] you are going to be back and you will be arguing that the penalty is a tax.”

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