Trish Neely, CFCI

Want to know who won the health care reform arguments before the Supreme Court?

Despite the tendency to want to tick off wins and losses, according to constitutional attorneys we have listened to it is difficult to determine the position any Justice will take based on questioning from the bench, or predict the outcome by the eloquence (or lack of) of an attorneys delivery of an argument.

Now that the oral arguments have concluded, the Court will settle in with the written briefs and it will be the persuasiveness of those briefs and the ideology of the Justices that determine the outcome. The historic nature of the issue will also play an uncertain role.

We won’t know the final outcome before June at the earliest; however, blogs are buzzing with conversation so we’ll add our two cents and hopefully provide you a framework to follow the debates.

Before we begin with a summary of the arguments and some of the interesting questions, a little more information about the ideology of the nine Justices is in order. You may hear or read that in their questioning, the Justices demonstrated the typical split between the four liberal and four conservative Justices.

Below is a table that shows the makeup of the 2012 Supreme Court, including the nominating President and the year each Justice joined the court.

Health care reform, also called the Patient Protection and Affordable Care Act (PPACA) or the Affordable Care Act, is President Obama’s signature legislation; it is also referred to by detractors as Obamacare. The law introduces new consumer protections and encourages market innovations intended to improve the quality of care as well as lower health care costs. Multiple lawsuits have made their way through Appellate Courts with four courts ruling in favor of PPACA and two against ( click here for details). The allotted six hours of oral arguments before the US Supreme Court concluded on March 28, 2012.

Overview of the Arguments

In addition to the nine Supreme Court Justices, the players included:

• Solicitor General Donald Verrilli arguing for PPACA on behalf of the Justice Department
  Former Solicitor General Paul Clement arguing against PPACA on behalf of the 26 states, lead by Florida
• Attorney Michael Carvin arguing against PPACA on behalf of NFIB and individual challengers
• Attorney Robert Long appointed by an Appellate Court to argue that the Justices cannot rule under the Anti-Injunction Act
• Attorney H. Barton Farr appointed by a Circuit Court to argue the mandate is severable against any other provision of PPACA

Keeping in mind that the purpose of oral arguments is to clarify the issues and to give the Justices an opportunity to probe the various positions and arguments of the parties, three days were allotted to cover four different topics summarized below:
March 26, Day 1 – Anti-Injunction Act (AIA).

The arguments here centered on a Supreme Court case from the 1880s in which the Court decided that a tax could not be judged on a constitutional basis until it had actually been levied and paid. Were the Justices to decide AIA applies, the Court has no standing to issue a decision until 2015 when 2014 tax returns are filed. But is the mandate a tax? Even if it is, the Court could recognize the government’s waiver of the AIA’s application and proceed anyway.

My educated guess and most commentators agree is that the Justices will rule now and not wait.

March 27, Day 2 – Individual Mandate.

The specific argument before the Court asks whether the federal government has the authority under the Commerce Clause of the US Constitution to regulate interstate commerce by mandating that individuals purchase insurance. The Department of Justice argued that all individuals participate in the market for health services, and that the mandate was simply a way to require individuals to pay their fair share of healthcare costs. The 26 plaintiff states, represented by Paul Clement, a former Solicitor General argued that the mandate was an overreach of federal power and that Congress could not compel any individual to purchase a product.

I don’t have an educated guess here but Kennedy could swing this to the conservatives and in favor of the states.

March 28, Day 3 – Severability and Medicaid Expansion

The severability clause will become an issue only if the Court finds the individual mandate unconstitutional. The inclusion of a severability clause in the language for most new legislation is typically standard practice; in fact most contracts have this clause as well. It just means that the balance of a law or a document will remain in force in the event any provision is challenged, deemed unconstitutional, or illegal.
The Justice Department argued that if the mandate is struck down other parts of the law should remain. Attorney Clement argued on behalf of the states that the law should not be severable, and if the mandate goes, the entire law should go.

My educated guess here is that the Justices will rule the mandate is severable and send it back to Congress to figure it out.

Does PPACA’s 2014 Medicaid expansion provision amount to coercion against the states? The Justice Department argued that states have the option to drop out of the program if they do not want to participate, but this would eliminate a huge source of healthcare funding for the poor. The federal government will fund 100 percent of new Medicaid enrollees, gradually reducing to 90 percent in 2020. The states argued that the expansion will coerce states into complying by providing a large financial incentive to expand their programs and pull funds if they do not expand.

My educated guess is that the Justices did not buy the argument that the expansion is coercion, nor did any of the lower courts.

Questions and Commentary

From Day 1 – The Anti-Injunction Act (AIA) argument came from one of the lower Appellate Courts which heard the case earlier. It was the Appellate Court’s appointed attorney Robert Long who argued this position before the Justices. Neither the Justice Department, the states, nor the NFIB argued that the Anti-Injunction Act would apply. In fact they were anxious to move the arguments forward to what they considered the real meat – the constitutionality of the individual mandate and PPACA as a whole.

The Administration, through Solicitor General Verrilli, was in the difficult position of having to argue on Day 1 that AIA does not apply (mandate is not a tax), and then argue on Day 2 that PPACA is a valid extension of Congress’ ability to tax under the Commerce Act.

Attorney Long argued that AIA mandates a “pay first, litigate later rule” that forces the Court to delay its ruling. The Justices’ questions might indicate that they doubt AIA would bar the Court’s review; conservative Justice Scalia’s comments may be the most telling. However, keep in mind my opening caveat that questioning does not determine the final position of the Court.

• Justices Breyer and Ginsburg were of the opinion that the purpose of the Anti-Injunction Act is to prevent interference with the revenue stream to the Federal Government and the penalty associated with the individual mandate is not a revenue stream. Further, that although the penalty is “being collected in the same manner of a tax doesn’t automatically mean it’s a tax.”
• Anticipating what problems or issues might arise, Justice Sotomayor asked, “What is the parade of horribles” that would result if the Court ruled that AIA did not apply.
• Justice Scalia offered, “Unless it’s clear, courts are not deprived of jurisdiction. And I find it hard to think that this is clear.“

From Day 2 – The Justice Department argued that the individual mandate is designed to address an economic problem and the purchase of health insurance is economic activity with substantial effect on interstate commerce. Since the heart of the argument is that Congress has the authority to regulate healthcare under the Commerce Clause, much of the questioning probed whether the purchase of healthcare is in fact commerce.

The counter argument is that the Commerce Clause grants Congress the authority to regulate existing commerce, “it does not give Congress the far greater power to compel people to enter commerce to create commerce in the first place.” Thus, the individual mandate is not a valid exercise of Congress’ tax power. Justice Kennedy’s comments and questioning have generated the most buzz. As the swing vote, if his line of questioning is reflective of his doubts of the constitutionality of the mandate then he may be the 5th vote to overturn the individual mandate.

• Justice Kennedy asked Solicitor General Verrilli, “Do you not have a heavy burden of justification under the Constitution” to have such unfettered power? Later Justice Kennedy offered, “The reason this is concerning is because it requires the individual to do an affirmative act…that is different from what we have said in previous cases and that changes the relationship of the federal government to the individual in a very fundamental way.”
• In apparent support of the mandate, Justice Ginsburg argued, “The people who don’t participate in this market are making it much more expensive for those that do.”
• To an argument by Solicitor General Verrilli that the distinguishing feature of the healthcare market is that individuals cannot control when they enter or what services will be needed Chief Justice Roberts told Verrilli the same could be said for emergency services, and asked if the government had the authority to require individuals to buy cell phones in order to facilitate emergency responses.

From Day 3 – There were two separate issues discussed on day three – severability and Medicaid expansion. On the issue of severability and only if the direction of the Court was to declare the mandate unconstitutional, the Justice Department argued that only certain insurance reforms are interconnected to the mandate, including: community rating rules and guaranteed-issue provisions – the rest of PPACA’s provisions could function independently. Through its appointed counsel H. Barton Farr, the 11th Circuit Court argued the mandate is severable against any other provision of PPACA (including community-rating and guaranteed-issue rules). Plaintiffs argued that the individual mandate is central to the law. Justices’ questioning explored if or how to go about severing the individual mandate from other provisions of the law (which would not be appropriate for their law clerks to do); or to strike PPACA in its entirety and let Congress do over.

• Justice Ruth Bader Ginsburg offered in considering the better choice between “a wrecking operation and a salvage job, a more conservative approach would be a salvage job.”
• Justice Kagan expressed similar sentiments with “half a loaf is better than no loaf.”
• Chief Justice Roberts stated that the various provisions of PPACA were the “price of the vote.”
• In responding to the Justice Department’s plea for the court to exercise judicial restraint, Justice Kennedy expressed concern that not striking down the entire law, and instead just striking down the mandate could have a negative impact on insurance companies and stated, “We would be exercising the judicial power, if one provision was stricken and the others remained, to impose a risk on insurance companies that Congress had never intended.”

As to the issue of whether Medicaid expansion is coercion, the Justices expressed their doubts. Chief Justice Roberts suggested that the coercion the states complain about is a “consequence of how willing they have been since the New Deal to take the federal government’s money.”

• Justice Kagan, who reminded Clement that the government is picking up most of the cost, asked, “Why is a big gift from the federal government a matter of coercion?”
• Justice Breyer asked Attorney Clement to show where in the law HHS threatens to pull all funds if a state does not expand its Medicaid program (this is why states are declaring the expansion coercion), and then added that although the Secretary has the discretion to pull funds, she could not do so in an arbitrary or capricious manner.
• Chief Justice Roberts stated that the states “have compromised their status as independent sovereigns because they are so dependent on what the federal government has done, and should not be surprised that the federal government having attached the strings isn’t going to start pulling them.”

Background to the Court Challenges

Shortly after passage, more than half of all of the states challenged the constitutionality of the law, stating that the individual mandate violates the constitutional rights of citizens and the sovereignty of the states. Over 30 lawsuits were filed challenging various aspects of the law. A number were heard in District and Circuit Courts and six were decided at the Circuit Court (Appellate) level with an outcome of four courts upholding the constitutionality of the law and two declaring it unconstitutional.

On September 28, 2011, the US Department of Justice filed a Petition for a Writ of Certiorari asking the Supreme Court to review the 2-1 decision of the Court of Appeals for the 11th Circuit striking down a portion of the Affordable Care Act and stating in part: “The court of appeals’ contrary decision is fundamen¬tally flawed and denies Congress the broad deference it is due in enacting laws to address the Nation’s most pressing economic problems and set tax policy.” Oral arguments were scheduled and heard in March 2012.

Possible Outcomes

The Court may determine under the Anti-injunction Act that until the tax is actually paid there is no legal standing to challenge the constitutionality of the individual mandate. If the Court determines that there is legal standing, then with regard to the two issues:
a) Whether Congress had the power to enact the individual mandate, and
b) Whether Congress exceeded its power and acted coercively regarding expanded Medicaid coverage, then:
The Court could find either or both issues constitutional, or
The Court could find either or both issues unconstitutional.

For a copy of the US Department of Justice Writ of Certiorari, click here.

For an excellent and well-balanced summary of the proceedings from our outside law firm is available by clicking here.

For additional information contact Trish Neely at tneely@fbmc.com.

Tagged Health Care Reform, PPACA, Quarterly Review

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