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

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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.

 

Published In: Civil Remedies Updates, Constitutional Law Updates, Health Updates, Insurance Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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