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Experts Tell BNA Predictions of Health Law's Demise in Supreme Court May Be Premature

Thursday, April 5, 2012
By Mary Anne Pazanowski

After three days of oral argument in the U.S. Supreme Court, most handicappers are predicting the death of a controversial health care reform law provision that requires individuals by 2014 to have health care insurance or pay a penalty.

Ilya Shapiro, a senior fellow in constitutional studies at the Cato Institute in Washington who helped write Cato's amicus curiae brief opposing the law, sees the three most conservative justices--Antonin Scalia, Clarence Thomas, and Samuel A. Alito Jr.--joining together to invalidate the Patient Protection and Affordable Care Act's individual mandate, with Chief Justice John G. Roberts Jr. and Justice Anthony M. Kennedy likely tagging along.

Other experts, however, are not so sure the law is history. Simon Lazarus, public policy counsel at the National Senior Citizens Law Center in Washington, told BNA that it is not clear that Roberts or Kennedy will vote to strike PPACA's individual mandate. Lazarus co-wrote an amicus brief supporting the law on behalf of several disease advocacy groups.

From March 26 to March 28, the justices peppered attorneys with questions about whether Congress had authority under the U.S. Constitution to enact a law that would require people to buy a product they may have no wish to purchase (58 HCDR, 3/27/12; 59 HCDR, 3/28/12; 60 HCDR, 3/29/12). The Obama administration argued that no fewer than three constitutional provisions--the commerce clause, the necessary and proper clause, and the taxing and spending clause--supported Congress's actions.

The parties challenging the law, 26 states and a group consisting of the National Federation of Independent Business and several individuals, claimed that nothing in the Constitution permits the federal government to compel citizens to purchase a product from a private provider.

Whole Law, Medicaid Provision in Danger?
According to some, if the mandate is declared invalid, the fate of the entire PPACA is unsure. The justices seemed to be “genuinely challenged” by whether the individual mandate, if unconstitutional, could be decoupled from the remainder of the law, Harvey Cotton, of Ropes & Gray in Boston, told BNA. Cotton advises employers on health care benefits issues.

Douglas Hallward-Driemeier, of Ropes & Gray's Washington office, said it was interesting to see how each side tried to “paint the other with the mantle of judicial activism,” referring to exchanges in which the justices debated whether striking PPACA as a whole would be more or less intrusive than striking just the mandate. Hallward-Driemeier leads the firm's appellate and Supreme Court practice.

Several experts said they were a bit surprised the justices did not simply dismiss the states' argument that PPACA's Medicaid expansion provision is unduly coercive. Timothy Jost, a health law professor at Washington and Lee University Law School in Lexington, Va., said the justices were much more favorable to the states' position than he expected.

Jost said a decision striking the Medicaid provision would “radically change” the federal-state cooperative system. It would be a “disaster,” he said.

AIA: Possible but Unlikely Out?
Everyone agreed on one issue: The high court is unlikely to dodge the question of the individual mandate's constitutionality by deciding that the tax anti-injunction act, 26 U.S.C. § 7421(a), is jurisdictional and bars it from deciding the case.
The individual mandate “is in deep trouble.”
--Stuart Gerson, Epstein Becker & Green, Washington

Hallward-Driemeier said the court has been careful to limit the AIA's reach, and the justices could take a middle ground and hold that the AIA simply does not apply here. That would be good for employers, who are “operating in a period of uncertainty” and “absolutely” want to have PPACA's validity settled now, Cotton added.

But Lazarus and Stuart Gerson, a former acting U.S. attorney general now with Epstein Becker & Green in Washington, told BNA there is a possibility the tax bar could come up as a bargaining chip during deliberations among the justices.

If there is trouble reaching a majority on the individual mandate issue, or if the only way for the court's more liberal wing to salvage it is to delay the vote, the justices could opt to apply the AIA and put the case off until at least 2015, Gerson said.

He emphasized, though, that that is just a “possibility.”

The possibility also occurred to Lazarus. If the court comes to an impasse during deliberations, “the AIA provides a respectable way of punting,” he said, though he does not see that as likely to happen.

Votes 'Still in Play'?
Moving to the merits, Lazarus told BNA that Kennedy and Roberts both indicated that their votes on whether to invalidate the individual mandate are “still in play.” It will either be 5-4 against the mandate or 6-3 for it, he said.

Gerson agreed that “it's hard to tell how it will come out.” Those predicting the mandate's demise may be “overestimating” their ability to prognosticate, he said. Still, Gerson thinks the individual mandate “is in deep trouble.”

Jost observed that Kennedy and Roberts lobbed “hard questions” at both sides. Enough doubt was shown by Kennedy and Roberts that it remains unclear how they will vote, he said. Jost cautioned that one “can't tell, just from the oral arguments, how the justices will end up.”

Shapiro agreed that Kennedy's questions indicated that he has not quite made up his mind on the issue of the individual mandate's constitutionality, though it looks as if he will vote to strike the provision. “My confidence level on whether Kennedy will vote to strike the mandate went from 55 to 60 percent before the argument, to 65 to 70 percent afterwards,” Shapiro said.

“My confidence level on whether Kennedy will vote to strike the mandate went from 55 to 60 percent before the argument, to 65 to 70 percent afterwards.” --Ilya Shapiro, Cato Institute, Washington

Shapiro noted that Kennedy was the first to ask U.S. Solicitor General Donald B. Verrilli Jr. whether the government could compel commerce in order to regulate it. Also, he said, Kennedy noted that the court must presume the validity of congressional enactments, but added that sometimes the federal government has a high burden of justification.

No Good Answer on Limits
Kennedy also pressed the administration to identify limits on Congress's power under the commerce clause. Everyone BNA interviewed agreed that Verrilli did not give the court the answer it was seeking.

Shapiro posited that this may be because there “is no good answer.” It is hard to believe, given how often this question came up in the lower courts, that Verrilli did not have a “polished” prepared response, he said.

Gerson, who participated in several moot court events on the case, said the government “made a terrible showing” when it came to defining the commerce clause's limiting principles. The justices on both wings of the court were “begging” Verrilli to come up with something, he said.

Lazarus would have preferred for the government to argue against the need to define limits. Congress's commerce clause power is very broad, he said. A federal regulation enacted pursuant to this power must affect commerce and deal with an issue faced by more than one state. There is no other limiting principle in either the text of the Constitution or Supreme Court precedent, he said.

Uniqueness of Market May Save Mandate
Despite his quest for defined limits, Kennedy's comments suggested that he is “carefully weighing” the argument that health care should be treated differently from other markets because it is “unique” in the way in which it externalizes costs, Hallward-Driemeier said.

Lazarus agreed. While both Kennedy and Roberts appeared to have “strong caveats” about the extent of Congress's commerce clause power, both took “seriously” the argument that the health care market's challenges required a unique solution that would not set a precedent for other markets, he said.

Cotton thought the government could have done better on this point. His partner, Hallward-Driemeier, said the Obama administration would have been more effective had it created a narrative emphasizing the facts supporting the need for two related PPACA provisions, the guaranteed issue and community rating sections. He said the government could have put more into its defense of the individual mandate by arguing that Congress has the right to help people who want health insurance but cannot get or afford it due to insurer practices that those two provisions were designed to end.

No Help From Scalia
Justices inclined to favor the government's position on the mandate are going to have to help it out during internal high court deliberations on the case if the mandate is to be saved, Gerson said. He does not, however, expect to see any of that help come from Scalia.

In a concurring opinion in Gonzales v. Raich, 545 U.S. 1 (2005), Scalia recognized the existence of a broad commerce clause power. Speculation that the concurrence signaled the justice's support for the mandate fell away as Scalia left no doubt about his opposition to the mandate, Gerson said.

Lazarus put it more bluntly. It seems Scalia has forgotten what he wrote in Raich, he said. Shapiro added that “it's obvious” Scalia will not follow his opinion in that case, given his “breathtaking barrage” of questions on the individual mandate.

Dividing Lines Emerging
The parties' attorneys did “a good job of demonstrating just how complex” the severability issue is--that is, whether, if the individual mandate falls, the remainder of PPACA can be saved, Cotton said.

Shapiro said the justices struggled to define the proper standard to apply to decide the question. Was the standard whether Congress would have enacted PPACA without the individual mandate, or was it whether the health reform law could operate as Congress intended without the mandate?

Regardless of which test the court ultimately decides to apply, most of the attorneys told BNA they do not believe the court will strike the whole statute.

Regardless of which test the court ultimately decides to apply, most of the attorneys told BNA they do not believe the court will strike the whole statute. They pointed out that several of the justices noted that the individual mandate is just one provision in a 2,700-page law and that most of the remaining sections have no relation to that provision.

Paul D. Clement, of Bancroft PLLC in Washington, represented 26 states that challenged PPACA. He repeatedly called the individual mandate the “heart” of the law and said that PPACA would be a “hollow shell” without it. Experts contacted by BNA questioned whether this strategy was effective in convincing the justices to strike the entire statute.

Jost said Clement's argument reflected how “extraordinarily successful” the challengers' “propaganda campaign” has been. PPACA's sponsors in Congress would not have identified the individual mandate as the statute's heart, he said.

Justice Antonin Scalia is “itching” to strike the whole statute.
--Simon Lazarus, National Senior Citizens Law Center, Washington

Gerson agreed. Why consider the individual mandate the “heart” of PPACA, he asked. At the heart of the statute are the provisions that ensure individuals have access to affordable care, he said.
Economic Concerns Surface
Lazarus added that striking the mandate, while keeping the guaranteed issue and community rating provisions--the option advocated by court-appointed attorney H. Bartow Farr III, of Farr & Taranto in Washington--would not present the economic problems raised by Alito.

Alito suggested during oral argument that without the mandate, there would be no money to help insurers cope with the changes required by the guaranteed issue and community rating provisions.

There is a “very powerful” argument that states that have implemented similar programs, without a corresponding individual mandate, have solved the funding problems the individual mandate was designed to avoid, he said.

Still, Lazarus observed, Scalia is “itching” to strike the whole statute. Moreover, he said, Scalia demonstrated a “cavalier attitude” about possible “legislative paralysis” that would impede reauthorization of parts of the statute should the court vote to strike the entire PPACA. Scalia's awareness that, whatever the court does, Congress probably will not be able to do anything about it, is “disturbing,” Lazarus said.

Cotton sees the severability debate in practical terms. His employer clients have made changes to implement PPACA provisions already in effect, incurring administrative expenses along the way. A decision striking the entire law would “have a very significant impact on employers,” he told BNA, and even a decision striking only the mandate would “instantly” be reflected in costs to both employers and employees.

A decision striking the entire law would “have a very significant impact on employers,” and even striking only the mandate would “instantly” be reflected in costs to both employers and employees. --Harvey Cotton, Ropes & Gray, Boston

Cotton said he was not sure anyone has been thinking “in concrete terms” as to what the business community will face if the court decides against severability.

State Coercion: More Attention Than Merited?
Experts told BNA that the states' argument that the court should invalidate PPACA's Medicaid expansion provision received more attention than they expected. The states argued that the provision is unconstitutionally coercive because it conditions their receipt of all federal Medicaid funds on their agreement to abide by new program conditions that call for them to significantly increase their Medicaid rolls.

The states have never won this argument, Cotton told BNA. In fact, the court has never applied the coercion doctrine to strike down a federal regulation, he said. But Shapiro said the court's decision to grant review of the provision was not a “random occurrence.” Clearly, the question “troubles the court,” he said.

Nevertheless, Gerson said he still believe the court will not uphold the states' position.

Lazarus agreed. The Medicaid issue presents a “theoretical problem,” he said. The provision does not say states that refuse to comply with the new conditions will lose their Medicaid funding. Rather, he said, the provision says that the decision of whether to continue to fund programs in states that have refused to comply falls within the discretion of the secretary of health and human services.

Justice Stephen G. Breyer's observation during oral argument that the secretary's decision to cut a state's Medicaid funding likely would be found to violate the Administrative Procedure Act could lead the court to uphold the provision, Lazarus said. Gerson added that Breyer “is not wrong” that the APA imposes a limitation on the secretary's authority in this area. Additional limitations are posed by political constraints, Lazarus said.

Swing Vote(s)
BNA's experts agreed that there are four solid votes to uphold the individual mandate: Justices Ruth Bader Ginsburg, Breyer, Sonia M. Sotomayor, and Elena Kagan. There also are three solid votes to strike the provision: Scalia, Thomas, and Alito.

That leaves Kennedy and Roberts to cast the deciding votes, and neither clearly telegraphed their intentions during oral argument, the attorneys said.

Shapiro said he “couldn't imagine” that Roberts would vote to uphold the mandate if Kennedy votes to strike it. But Kennedy cannot be counted on to say the mandate is unconstitutional, Lazarus said. There have been a number of important cases in which Kennedy has taken a more balanced approach to resolving an issue than his colleagues, Lazarus said. He added that he did not believe the more liberal branch of the court would have a problem with a very narrow opinion.

One thing is clear, Lazarus said. If the court declares the individual mandate unconstitutional, it will have made a decision to go back to an era in which Congress's commerce clause power was viewed as being decidedly weaker than it has been since the New Deal. “Roberts is aware of this,” and has tried to avoid it, Lazarus added. But Scalia seems “bent on transforming the court into a far more progressive force in conservative ways,” he said.

Jost used stronger language: “If the five Republican appointees on the court strike the law in its entirety, then the legitimacy of the Supreme Court is done,” he said. The court will have turned itself into a “superlegislature, deciding cases strictly along political lines.”

By Mary Anne Pazanowski


Full text of the transcripts of the oral arguments are at
/uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/3-23-oral-arg(1).pdf (3/26--AIA);
/uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/11-398-Tuesday(1).pdf (3/27--individual mandate);
/uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/11-393-severability-transcript(1).pdf
(3/28--severability); and /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/11-400-medicaid-transcript(1).pdf(3/28--Medicaid expansion).

 

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