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Health Lawyers Discuss Oral Arguments on PPACA

On Monday, April 2 and Wednesday, April 4, 2012, the American Health Lawyers Association (AHLA) held a two-part webinar series discussing the oral arguments before the U.S. Supreme Court last week on the Patient Protection and Affordable Care Act (PPACA). Part I focused on analyzing the substance of the arguments, while Part II focused on the impact of the Court’s decisions on the health care system. For background on the arguments, check out our posts here from March 26th, 27th, and 28th.

Part I of the series featured Elizabeth Papez, a former U.S. Supreme Court law clerk for Justice Clarence Thomas; John Elwood, a partner at Vinson & Elkins, and Lyle Denniston from SCOTUSBlog, a legal journalist who has been covering the U.S. Supreme Court for fifty-four years, with Mark Hall, a Professor of Law at Wake Forest University, moderating.

After oral arguments took place, the justices held an initial conference on Wednesday and another conference on Friday. Denniston explained that the Friday conferences are generally brief, and the length of the conference on Friday indicates that the justices are likely very engaged on these issues. He also speculated that the Wednesday conference may have been a vote on upholding the Anti-Injunction Act (AIA), and because the justices proceeded to a Friday conference, they may have decided the AIA did not apply to this case. He cautioned, however, that the justices may return to the AIA as a reason to postpone making a decision if they cannot get together a 5 justice majority for a conclusive vote. 

Chief Justice Roberts and Justice Kennedy are seen as the swing votes on the constitutionality of the mandate. Papez explained that Justice Kennedy expressed concern that the mandate requires an “affirmative act” that would change the relationship of the federal government to individual in “fundamental” way, and the U.S. Supreme Court does not like to make fundamental changes. Some of the justices, including Justice Kennedy, focused on the idea of limiting principle – if we agree that Congress can make people buy insurance, what’s next? Papez thought that the mandate’s best chance of survival was through the idea that the health care marketplace is indeed unique. This would allow the U.S. Supreme Court to issue a narrow opinion upholding the mandate while ensuring that it would not set a precedent for a dramatic increase in congressional power over individuals’ lives. 

Many commentators and experts were baffled when the U.S. Supreme Court decided to take up the issue of whether the Medicaid expansion was constitutional. Elwood referred to the case of South Dakota v. Dole, where the U.S. Supreme Court ruled that the federal government could condition the receipt of highway funds on states changing their drinking age to 21. They acknowledged, however, “…that, in some circumstances, the financial inducement offered by Congress might be so coercive as to pass the point at which ‘pressure turns into compulsion.’” If this instance of the Medicaid expansion does not run afoul of the limitations in Dole, suggested Elwood, then maybe nothing will. Most do not believe the U.S. Supreme Court will actually strike down the expansion, though Elwood suggested that there was a “decent chance” it could happen.

All the panelists agreed that the U.S. Supreme Court is somewhat sensitive about the way it is perceived by the public. Papez stated that Chief Justice Roberts in particular does not want the U.S. Supreme Court to be seen as a five person “super-legislature” that is empowered to make broad policy decisions. This concern could also impact the U.S. Supreme Court’s ultimate decision on severability. Denniston stated that the U.S. Supreme Court was unlikely to “pick and choose” which provisions needed to be struck down along with the mandate, while Papez thought it might be less of a “judicial overreach” to strike the entire law. 

Part II was moderated by BPC’s Julie Barnes, and featured Timothy Jost, Professor of Law at Washington and Lee University, Paula Stannard, Counsel at Alston & Bird, and Peter Urbanowicz, Managing Director at Alvarez & Marsal.

The panelists discussed several possible scenarios and their potential consequences. If the entire law is upheld, Jost said that some states may still wait for the results of the November elections before moving forward with implementation. With the U.S. Supreme Court expected to issue a decision in late June and the deadline for health insurance exchange certification just around the corner, it seems likely that many state individual and small group health insurance markets will be run by the federal government rather than the states. Providers and insurers will likely breathe a sigh of relief that no major regulatory upheavals are imminent, and health system implementing new models of care delivery under the law (such as ACOs) don’t have to worry about disruption. Stannard stated that this might not be the end of legal challenges to the law, as future litigation could address pieces of the law or specific regulations (such as contraception coverage or the Independent Payment Advisory Board). Stannard stated that some contracts created because of PPACA could be grandfathered – any work performed on the contact already can stand, but no subsequent work can be done. Federal agencies created by the law, such as the Innovation Center and the Federal Coordinated Health Care Office at CMS, might survive, as federal agencies do have some authority to create new departments to carry out their duties.

If the law is struck down in its entirety, rolling back the work that has gone into implementation so far will be complicated. Urbanowicz pointed out that a great deal of the law deals with Medicare and Medicaid reform, not insurance, and other laws, such as campaign finance reform, have proceeded while some of their pieces were struck down.  He also suggested that if the law was struck down, there would be no authority for the money paid out of the Treasury for PPACA. Jost pointed out that Medicare payment regulations were changed under PPACA, and striking down the law could lead to a disruption in provider payments. This would also cause disruption for states, some of whom have specifically altered their state laws to enforce PPACA. 

If only the mandate is struck down, Stannard brought up the idea that insurers may be able to bring a suit against the federal government under the Takings Clause. This type of action would address the ability of regulated entities (like health insurers) to receive a reasonable “return” without the individual mandate in place. Urbanowicz stated that it was possible the U.S. Supreme Court would allow for re-argument on what other provisions of PPACA absolutely must go if they rule the mandate is severable.

If the Medicaid expansion is struck down, it would have a significant impact on legal precedent, as well as on providers, insurers, and individuals. So far, no Supreme Court has ruled federal spending unconstitutional on the grounds that it is too coercive to states. As Jost pointed out, many large insurers have more Medicaid or Medicare business than regular commercial insurance, so losing the expansion would be a significant loss. Providers would also continue to struggle with the costs of uncompensated care for uninsured patients. 

Many experts caution against making too many predictions based on oral arguments, but these webinars shed some light on how the U.S. Supreme Court may rule.

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If the law is struck down altogether, rolling back the work implemented to date will be complicated

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