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March 23‚ 2012
Florida v. HHS Raises Key Constitutional
Issues Related to Health Care Reform
By Gary E. Bacher,
Joshua Booth, Robert C. Skinner, and Stephanie D. Willis
The Affordable Care Act (ACA) has garnered significant
national attention. It makes several fundamental reforms to the nation’s
health care system — including major changes affecting the country’s health
insurance markets. Reflecting considerable controversy over the law,
opponents have fought vigorously since its passage to have it declared
unconstitutional by the courts.
Path to the
Supreme Court
The Supreme Court will hear oral arguments addressing these
issues on March 26, 27, and 28. While it usually takes several years for
cases to get to the Supreme Court, many of the courts at the lower levels
have fast-tracked cases relating to the ACA because some of the law’s most
controversial reforms are being implemented over the next 22 months and
have the potential to have wide-ranging effects on the states and U.S.
citizens. So as the ACA celebrates its two-year anniversary, issues key to
its survival will be argued in front of the Supreme Court.
Justices of the Supreme Court
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Justice
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Appointing
President
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John Roberts (Chief Justice)
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George W. Bush (2005)
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Antonin Scalia
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Ronald Reagan (1986)
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Anthony Kennedy
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Ronald Reagan (1988)
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Clarence Thomas
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George H.W. Bush (1991)
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Ruth Bader Ginsburg
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Bill Clinton (1993)
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Stephen Breyer
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Bill Clinton (1994)
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Samuel Alito
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George W. Bush (2006)
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Sonia Sotomayor
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Barack Obama (2009)
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Elena Kagan
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Barack Obama (2009)
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Over 20 cases have been filed challenging the
constitutionality of the ACA for one reason or another. The seven cases
shown in the chart below have received particular focus from commentators
and the media.
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Key Court Decisions
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District Court
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Appellate Courts
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Supreme Court
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Baldwin v.
Sebelius
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Dismissed
(8/27/2010)
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Dismissed
(8/17/2011)
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Thomas More Law Center
v. Obama
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Upheld (10/7/2010)
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Upheld (6/29/2011)
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Liberty
University v. Geithner
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Upheld (11/30/2010)
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Dismissed (9/8/2011)
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New Jersey
Physicians v. President
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Unconstitutional
(12/8/2010)
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Dismissed (8/3/2011)
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Virginia v.
Sebelius
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Unconstitutional
(12/13/2010)
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Dismissed (9/8/2011)
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Florida v. HHS
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Unconstitutional
(1/31/2011)
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Unconstitutional
(8/12/2011)
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Will hear 3/26/12
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Seven-Sky v.
Holder
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Upheld (2/22/2011)
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Upheld (11/8/2011)
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The case currently before the Court,
Florida v. HHS, is a consolidation of two separate lawsuits from the
11th Circuit Court of Appeals: The National Federation of Independent
Businesses [NFIB] v. Sebelius and Florida et al. v. HHS. In the
first case, two individuals and the NFIB, a nonprofit organization that
represents small businesses, sued the Secretary of Health and Human
Services, Kathleen Sebelius, arguing that the Constitution does not give
Congress the authority to enact the individual mandate provisions of the
ACA. In the second case, Florida and twenty-five other states sued, arguing
that the ACA’s Medicaid expansion is unconstitutionally coercive on state
governments.
The United States Department of Justice, the states’
Attorneys General, and the NFIB have written briefs detailing their legal
arguments and will argue the issue in front of the Supreme Court in late
March. Numerous other parties who are interested in the outcome have also
written briefs as “friends of the court” or amici
curiae to help persuade the Supreme Court justices to side one way or
another.
Key Issues in
the Case
The Supreme Court is set to address a number of questions
before it. Even before getting to the fundamental merits questions, the
Court must decide whether it is appropriate at this time to decide the
question of the constitutionality of the individual mandate. In all, the
Supreme Court has agreed to hear arguments related to four separate issues.
1. The Initial
Barrier – the Anti-Injunction Act
Before even getting to the other issues, the Court must
determine whether it can lawfully make a decision on the individual mandate
at this time. The key question is whether the financial penalty taxpayers
must pay if they do not comply with the mandate is a “tax.” The Tax
Anti-Injunction Act (AIA), a little-known law dating back to the 1800s,
provides that the legality of a tax cannot be challenged in court until
after the tax has been assessed. Thus, if the Court decides that the
penalty under the ACA falls within the definition of a “tax,” it could be
prohibited from hearing the case until the first penalties were imposed —
which would not occur until 2014.
It is worth noting that both sides of the case — the
plaintiffs and the government — have argued that the Court should hear and
decide the case now. However, the Supreme Court has, at its own initiative,
raised this as an important issue and even appointed special counsel to
argue the issue.
It is also worth noting that the briefs and question posed by
the Court on the issue of the application of the AIA appear focused around
the individual mandate, but do not appear to address directly the question
of what would happen with the other issues before the Court if the AIA
applies.
2. The Individual Mandate – Can the Government Require
Individuals to Get Health Insurance?
The ACA requires people to obtain health care insurance
coverage by 2014 or face a financial penalty. Opponents of the ACA have
argued that the Constitution does not give Congress the authority to enact
such a requirement. The Constitution defines the federal government as a
government of “enumerated powers.” That is, the Constitution gives a list
of specific powers to Congress. For any law Congress wishes to enact, it
must first determine that it has authority under the Constitution to enact
the law. If the law is not based on one of Congress’s enumerated powers, it
can be invalidated by the courts.
The government has argued that Congress has the authority to
impose this requirement under two separate Constitutional clauses — the
Constitution’s “Commerce Clause” and its power to “Tax and Spend” for the
“general welfare.”
The Commerce Clause gives to Congress the authority to
regulate “interstate commerce.” Another clause of the Constitution gives
Congress the authority to enact laws that are “Necessary and Proper” for
carrying out this authority. Taking these two clauses together, the Supreme
Court has previously ruled that Congress can regulate virtually any
activity, even activity that is not “interstate” itself, that has an effect
on interstate commerce. Because of this broad interpretation, Congress has
used the Commerce Clause to enact a wide range of regulation, some of it
arguably only remotely related to interstate commerce. Historically, such
regulation has been almost universally upheld by the Supreme Court —
although more recently the Court has begun to draw some lines around what
constitutes interstate commerce.
The government’s argument is that, because health care
insurance has such a large economic impact on Americans, nearly all
individuals utilize health care at one time or another such that those with
coverage subsidize those without, and because the economic impact can cross
state boundaries, Congress has the authority to regulate it under the
Commerce Clause. But the challengers argue that a mandate requiring
individuals to purchase a product from a private entity is outside of the
Commerce Clause’s reach. A decision not to purchase insurance is not
economic activity subject to regulation; rather, it is “inactivity.”
Opponents also argue that such a use of the Commerce Clause violates
principles of individual liberty and opens the door for the government to
force people to buy things that they do not want or need.
The government has also made a second argument supporting
Congress’s authority to implement the mandate. This argument points out
that the penalty under the mandate is structured essentially as a tax.1 Congress has
broad power to tax individuals. Rather than “mandating” that individuals
purchase coverage, the rule can be seen as imposing a tax that can be
avoided by taking certain actions. So far, none of the courts that have
heard this issue have agreed with the government’s position, largely
because the language of the ACA indicates that Congress did not see it as a
“tax” but as an obligation with a penalty attached.
3. Severability — Can the Rest of the ACA (In Whole or
In Part) Stay Intact if the Individual Mandate Fails?
The Supreme Court has ruled that, when the courts strike down
one part of a large statute as violating the Constitution, they should, if
at all possible, preserve other parts of the law that do not violate the
Constitution. There are times, however, when multiple parts of a law are so
“inextricably intertwined” that a court will find them to be
“non-severable” — and all of these
provisions must fall together.
The 11th Circuit Court of Appeals ruled that the individual
mandate was unconstitutional, but that the rest of the ACA could be
implemented without it.2 The
26 states and NFIB, however, argue on appeal that the individual mandate is
inextricably intertwined with the ACA’s other provisions, so the entire law
must be overturned if the Court invalidates the mandate. The government
argues that most of the law is severable from the individual mandate and
thus should remain in place, even if the mandate is struck down. The
government’s position, however, is that the insurance market reform
provisions of the law — including provisions requiring insurers to issue
coverage to all applicants and limiting insurers’ ability to vary premiums
based on health status and other related factors — are so closely tied to
the individual mandate that they must also be invalidated and struck from
the statute should the mandate be found to be unconstitutional.
Other courts that have found the individual mandate to be
unconstitutional have ruled differently than the 11th Circuit on the issue
of severability. Thus far, only Judge Vinson in Northern District of
Florida3 has
ruled that the mandate is unconstitutional and completely non-severable
such that the entire ACA must fall. Judge Conner of the Middle District of
Pennsylvania has found the individual mandate to be unconstitutional and
partially severable, such that the “guarantee issue” and “adjusted
community rating” insurance market reform
provisions mentioned above must also be struck from the ACA.4
4. Medicaid Expansion –
Can the Government Require States to Expand Medicaid as a Condition of
Receiving Federal Health Care Funding?
The final issue is whether the Constitution allows the
federal government to require states to adopt the ACA’s eligibility
expansions to Medicaid in order to remain eligible for federal Medicaid
funds. The Constitution does not allow the federal government to require
state governments to take specific actions. Congress can, however, make the
receipt of federal funds dependent on the states’ complying with certain
conditions, and thus indirectly incentivize certain actions. For example,
the Court has found that, although Congress cannot require states to pass
laws raising the drinking age to 18, it can make a
state’s eligibility for federal highway funds conditional on having such
laws. Thus, Congress cannot coerce states, but it can incentivize states.
With purely federal programs, this is not an issue. For
example, Medicare is run entirely by the federal government and requires
essentially no participation by the states. Medicaid, on the other hand, is
a joint federal-state program. While much of the funding comes from the
federal government with states matching a percentage of the funding, most
of the implementation is done at the state level. The federal government
sets certain rules about whom the states must cover and what services must
be provided. This has been considered constitutional because state
participation in Medicaid is voluntary. Although all states currently have
Medicaid programs, they could, theoretically, drop their programs at any
time — if they were willing to forego federal funding.
While the Supreme Court has ruled that, in general, such
spending incentives are allowed, it has also stated that there may be a
point when the spending program is so large that it effectively “coerces”
the state into participating. That is what the states argue is happening
here. Under the ACA, states are required to greatly expand Medicaid
eligibility. States not complying with the expansion risk losing all
federal Medicaid funds. Furthermore, a state’s residents with household
incomes below 100% of the Federal Poverty Level do not qualify under the
ACA for premium tax credits offered in conjunction with exchange coverage,
because the ACA anticipates that these individuals with receive coverage
through Medicaid.
The states challenging the ACA contend that Medicaid has
become such a fundamental part of states’ health care systems that it is no
longer truly “voluntary.” Although states can, in theory, opt out, the loss
of federal funding would be so massive that no state would — or could —
ever do so. Thus, by requiring states to expand their coverage in order to
get federal funding, the government is, in effect, coercing the states.
All of the District and Circuit Courts of Appeals have
rejected this argument, and many scholars were surprised that the Supreme
Court agreed to hear the argument at all. It is not clear why the Court
accepted the case. This could indicate that the Court takes the argument
very seriously and could find that the Medicaid expansion is invalid,
though many scholars think that is improbable. It could also be that the
Court does not intend to invalidate the expansion in this case, but hopes
to use this as an opportunity to set some clear “ground rules” for what
does or does not constitute coercion.
Oral Argument
and Briefs
Each side will present their
oral arguments regarding the issues between March 26-28, 2012, according to
the following schedule:
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Issue
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Date
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Time for Argument (6 hrs total)
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Anti-Injunction Act
(“Tax Versus Penalty”)
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March 26
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1.5 hours
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The Individual
Mandate
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March 27
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2 hours
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Severability
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March 28
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1.5 hours
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Medicaid Expansion
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March 28
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1 hour
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In addition to briefs from the
parties, the Supreme Court has also accepted over one hundred briefs from amici curiae (friends of the court), independent
parties who submitted briefs arguing for a particular outcome or
illustrating particular facts. Parties that have filed briefs include
hospitals, nonprofit organizations, political advocacy groups, state
legislators and executive officials, small businesses, trade organizations,
religious groups, U.S. congressional representatives, economists,
actuaries, and other parties.
Lower Court
Decisions and Potential Supreme Court Decisions
The lower courts have come to many different conclusions on
several of the issues before the Court. Of the seven cases to go to the
appeals court, two have held that the individual mandate is constitutional;
one has held that it is unconstitutional, one has
held that the lawsuit is barred by the Anti-Injunction Act, and three have
been dismissed for other reasons. None have held that the Medicaid
expansion is unconstitutional.5
There are numerous possible outcomes to the case. These
outcomes include:
·
The Court decides that it cannot address the merits of the
constitutionality of the individual mandate question until 2014 or 2015 because
it is barred by the Anti-Injunction Act.
·
The Court decides that the Medicaid expansion is unconstitutional,
but the rest of the ACA is constitutional.
·
The Court decides that the individual mandate is unconstitutional,
and that the mandate is fully severable from the rest of the ACA such that
the rest of the law may survive.
·
The Court decides that the individual mandate is unconstitutional,
and that some (or even all) of the ACA’s other provisions must also be
struck down because these provisions are inextricably linked to the
individual mandate (with particular focus on the insurance market reforms,
including those requiring guarantee issue and adjusted community rating).
It has been very difficult to predict how the Supreme Court
will rule. While some scholars attempt to guess what each justice will do
based on his or her previous voting record, nearly all agree that even the
most thoughtful of predictions are effectively speculative. Even in the
lower court decisions, judges who were considered reliably “conservative”
nevertheless voted to uphold the ACA.
With the wide range of opinions coming from the lower courts,
and given the national importance of these issues, the one safe bet is that
all eyes will be focused on the oral arguments made before the Court and
its ultimate decision expected this summer.
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» Addendum: Where to Read More About the Cases and Perspectives
Click here to view Mintz Levin’s Health Law
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1 Note
that the definition of a “tax” for the purposes of considering the
constitutionality of the mandate may be narrower than the definition of
“tax” for purposes of the Anti-Injunction Act, which has been interpreted
in past case law to include “penalties.” The Fourth Circuit court noted
that the “Supreme Court has concluded that the AIA uses the term ‘tax’ in
its broadest possible sense,” and that in recent years the Court has
reiterated that the term “tax” in the AIA encompasses penalties that
function as mere “regulatory measure[s] beyond the taxing power of
Congress” (citing Bob Jones Univ. v. Simon, 416 U.S. 725, 740). See
Liberty University, et al., v. Timothy Geithner,
et al., No. 10-2347. (4th Cir. Sept. 8, 2011), pp. 18-19.
2 Florida
v. HHS, 648 F.3d 1235 (2011).
3 Florida
ex rel Bondi v. HHS,
780 F. Supp. 2d 1256 (2011).
4 Goudy-Bachman
et al. v. HHS, 764 F. Supp. 2d 684 (2011).
5 The
ACA related question before the Court deals with Medicaid expansion, but in
Douglas v. Independent Living Center, 132 S.Ct.
72 (2012), the Supreme Court recently heard a case about reductions in
provider payments and related issues related to whether there is a private
right of action under the Constitution’s Supremacy Clause to challenge
state statutes as inconsistent with Federal Medicaid law. Because the Federal
government approved the reductions changing the posture of the case pending
its consideration by the Court, the Court in a 5-4 decision vacated the
judgments of the lower court and remanded the case to the Ninth Circuit
Court of Appeals so that the parties had the opportunity to address the
issue in the first instance in light of the changed circumstances.
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