Federal Health Reform: Supreme Court Summary

U.S. Supreme Court

March 30, 2012

Six Plus Hours Over Three Days and Now We Wait

This week the U.S. Supreme Court heard oral arguments on constitutional challenges to the Patient Protection and Affordable Care Act (PPACA). The challenge was brought by the attorney general of Florida and of 25 other states, and the National Federation of Independent Business.

A major section of the PPACA is devoted to expanding access to affordable health care coverage to most U.S. citizens. The law seeks to achieve this goal by:

  • Requiring most citizens to have health insurance.
  • The “individual mandate.”
  • Insurance reforms, including guaranteed issue and community-rating.
  • Federal premium and cost-sharing subsidies for individuals with incomes up to 400 percent of the federal poverty level.
  • The establishment of health insurance exchanges to facilitate enrollment in health plans for individuals and small businesses.
  • Employer responsibility provisions to encourage employers to provide coverage to their employees.

The PPACA also includes many provisions that are unrelated to health reform. Those include significant funding for public health programs, funding to states for innovative projects to provide improved services to seniors and people with disabilities and improved health services for Native Americans. There also are amendments to the Medicaid and Medicare programs that are address the ongoing operation of the programs.

There were four issues before the court last week:

  • The applicability of the Anti-Injunction Act.
  • Constitutionality of the individual mandate.
  • Severability of the individual mandate provisions from other provisions of the PPACA.
  • Constitutionality of the Medicaid expansion

Day 1- March 26, 2012: Applicability of the Anti-Injunction Act

The Anti-Injunction Act (AIA) is a federal law that precludes, with certain exceptions, an individual from suing the federal government to stop a tax from being assessed or collected. The issue here is whether the suit can go forward since the tax is not yet in effect.  In this case, the court had to determine whether the penalty an individual is assessed for failing to obtain health insurance as provided for under the “individual mandate” is a tax penalty, and subject to the provisions of the act. If it is found to be a tax and subject to the act, the court, in most instances, would be precluded from hearing the case until such time as a penalty has been assessed and paid. This would not occur under current law until the individual mandate provisions become effective in January 2014. No penalty would be assessed until 2015 when 2014 taxes are filed. In other words, if the court were to determine the penalty is a tax, it could delay consideration of the constitutionality of the “individual mandate” until 2015. There are some ways the court could determine the penalty is a tax and still consider the constitutionality of the individual mandate. During oral arguments there was extensive discussion about whether the penalty was a tax and whether the AIA applies in this case.

Day 2 – March 27, 2012: Constitutionality of the Individual Mandate

The question before the court on Day 2 was whether the individual mandate is within the powers relegated to Congress under the Commerce Clause or under its taxing authority. The Commerce Clause gives broad authority to the Congress on matters of interstate commerce and foreign trade. The taxing powers are separate from the Commerce Clause. The PPACA requires most citizens to obtain health care coverage or to pay a penalty for the failure to do so. This individual mandate is a key part of the health reforms in the PPACA and has been one of the most controversial provisions. There was a vigorous discussion of the Commerce Clause and if upholding the individual mandate would expand the authority of Congress too far. If the court determines the individual mandate is unconstitutional, the next step is to determine whether all or part of the PPACA can stand without it.

Day 3 – March 28, 2012: Severability, Constitutionality of the Medicaid Expansion

During the final day of oral arguments, the morning was devoted to discussing the issue of severability. If the individual mandate is found to be unconstitutional, what if any other part of the PPACA can or should stand on its own? Which provisions are too intricately related to the individual mandate to stand alone? How would these issues be determined? How would severability be executed? The discussion was lively. The justices were keenly aware of the complexities of choosing the provisions that stay and those that would not, and, alternatively, of striking the entire law including provisions already been implemented that have no constitutionality issues. The administration argued that if the individual mandate is found to be unconstitutional, then the PPACA provisions that require community rating and guaranteed issue should also be removed, while all other provisions would be retained in the law.

The afternoon was all about Medicaid, the expansion scheduled to occur in January 2014 and whether or not the mandatory expansion is significant enough to be considered “unconstitutional coercion” on the states by the federal government. The question before the justices was at what point do grant conditions imposed on states by the federal government cross the line or, in the case of Medicaid, involve such a large part of a state’s economy that participation in the program and the associated conditions are no longer voluntary. It was noted that in the past the court has  suggested that there are limits to the federal government’s “spending powers.” It has never, however, found a law to be “unconstitutionally coercive” or established a test to determine if a law is unconstitutionally “coercive.” A fair amount of time was spent attempting to define “coercion” and drawing a line between choice and coercion. There was also some discussion about whether Medicaid was substantially different than other federal grant programs because of the amount of funding.

The Morning, Days, Weeks and Months After

The three days of oral arguments have given everyone a lot to chew on, particularly the nine justices. After the three days, most pundits are not sure where they think the court will come down. The stakes are certainly high, but for now, the PPACA is law. In June, we will all review what the court has done and determine how to move forward.