From the Bench — The Fate of the PPACA Lies in the Hands of the Judiciary
The Self-Insurer Volume 30 February 2011
By: Michael Friedman & John Eggertsen
With the onset of the new Congress, and the Republicans pressing to repeal the Patient Protection and Affordable Care Act (“PPACA”), an effort which most pundits –whether they applaud or deplore it—agree is not likely to succeed, the fate of the PPACA may well lie in the hands of the judiciary.
While it is clear that no definitive determination of the PPACA’s fate will be known for some time (likely years as the various cases wend their way up to the United States Supreme Court), we nevertheless thought it might be helpful to our readers to sort out the scope of the main arguments and summarize the scorecard to date. It is not our intention here to provide a detailed analysis of every decision, nor provide an exhaustive, detailed recounting of all the arguments and defenses raised. We would also caution that whether the PPACA will achieve the goals its proponents claim or lead to the disastrous results predicted by its opponents, is not the issue in these lawsuits. Rather, the key issue to be decided by the courts if whether the PPACA in its present form passes constitution muster i.e., whether it is good law, not whether it is good policy. That said, our intention here is to provide a general overview of how the debate has been joined and some sense of how the courts have responded. We are still in the early rounds of this battle, and in the words of baseball’s famous prophet Mr. Yogi Berra, “It ain’t over ‘til its over.” So on those cautionary notes, we will begin.
There have been at least 16 cases filed that have challenge the constitutionality of the PPACA, and several of its major provisions, on a variety of grounds. There have been to date three district courts that have reached a decision on the merits, one that may have done so by the time you are reading this. Several have dismissed the cases on procedural grounds, and several that have refused to dismiss some or all of the claims, but have not yet decided the merits of those claims that survived. The rest are still waiting to be heard from.
Overview of the Arguments
Does the Individual Mandate Violate the Commerce Clause?
The opponents have focused their attack on three main fronts. First, the plaintiffs contend that the individual mandate—i.e., the requirement that from 2014 going forward every individual will be required to obtain health insurance, either through their employer, a state or federally established health exchange, privately or under a government-sponsored program like Medicare or Medicaid – is an impermissible extension of Congressional authority under the Constitution’s Commerce Clause because that clause only grants Congress the right to “regulate Commerce with foreign Nations, and among the various States and with the Indian Tribes.” Article I, Section 8, Clause 3. While the Supreme Court’s Commerce Clause jurisprudence has extended this power to include any activity that affects interstate commerce, the opponents contend that the individual mandate, by penalizing the decision to not buy insurance, aims at non-economic activity or simply “inactivity,” and so is beyond Congress’s Commerce Clause authority.
The government’s response here is that health insurance is a multi-billion industry that is well within Congress’s Commerce Clause powers to regulate, and that the individual mandate is an important element in the broader regulatory scheme to extend insurance coverage to the millions of persons who are currently excluded from this market. As for the opponent’s argument that many persons are not “excluded” from the market, but merely choose not to participate, and this choice is beyond Congress’s power to regulate. The government responds that the health care market is somewhat unique in that every person at some point will need health care and whether they decide to obtain coverage through insurance, government programs or by paying out of pocket, they are market participants. Since other federal laws require that health care providers cannot refuse to treat patients because they are unable to pay (e.g., the Emergency Medical Treatment and Active labor Act of 1086, “EMTALA”), individuals who fail to obtain coverage to pay for medical services increase the costs of those services to other market participants. In short, the conduct regulated here is activity that affects interstate commerce directly, and is not non-economic “inactivity,” as the opponents contend.
Is the Fee Imposed For Non-Compliance With the Individual Mandate Unconstitutional?
Second, opponents challenge the fee imposed by the PPACA on individuals who fail to become insured. A good part of the debate is whether this fee can properly be called a “tax,” or whether it is more correctly deemed a “penalty.” If it is a penalty, opponents challenge it as an impermissible regulatory device untethered to any Commerce Clause authority, and hence, not justified under the Necessary and Proper Clause. If it is a tax, the opponents challenge it as an unapportioned capitation or a direct tax prohibited under Article I, Section 9, Clause 4, which provides that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” We would not that this Constitutional provision would prohibit the income tax were it not for the Sixteenth Amendment which expressly provides for it, but the tax (if that is what it is) imposed under the individual mandate provisions of the PPACA, opponents point out, has no express constitutional amendment allowing it.
The government’s response here is that imposing a financial penalty for failing to purchase health care insurance is well within Congress’s Commerce Clause authority and is fully justified under the “Necessary and Proper” clause which states that Congress shall have the power “To make all laws which shall be necessary and proper for carrying into Execution the foregoing Powers [those set forth in Article I, Section 8], and all other Powers vested by this Constitution in the Government of the united States, or in any Department or Office thereof.” Article I, Section 8, Clause 18. If this fee is deemed to be a tax it is a valid tax under Congress’s taxing power under Article I, Section 8, Clause I – “The Congress shall have Power To Lay and collect Taxes. Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” Further, as a tax, the courts are barred from hearing such challenges under the Anti-Injunction Act.
Do the Changes to Medicaid and the Creation of Health Care Exchanges Represent Overly Coercive Intrusions on State Authority?
Third, opponents challenge PPACA, not on the basis of the individual mandate, but on the basis that the many changes to the Medicaid program imposed by the PPACA (some challengers also include the imposition of health care exchanges on the states here as well) are overly coercive and violate both the Spending Clause of the Constitution—Article I, Section 8, Clause I – and the Ninth and Tenth Amendments. The Spending Clause grants Congress very broad spending powers, and it has been construed to allow Congress to attach various conditions on the federal funds it grants to the states. Opponents do not necessarily challenge Congress’s authority to modify the Medicaid requirements, but rather assert that the PPACA requirements are just too onerous, forcing states to cover too many people at too great a cost, and the extreme consequences of the new requirements are sufficient grounds to find that Congress have overreached here. The opponents’ Ninth and Tenth Amendment arguments contend that these new Medicaid requirements and/or the regime for requiring states to establish health care exchanges by 2014 impose such onerous obligations and burdens on the states that they are, in effect, being forced to carry out this Congressional scheme, thus having Congress intrude on the powers reserved to the states under the Tenth Amendment, or reserved to the people under the Ninth Amendment.
The government’s response is that states are not required to participate in the Medicaid program or to establish health care exchanges. Since Medicaid is a voluntary program, and mostly paid for by the federal government in any event, claims that states are being coerced by these new requirements are overblown and misplaced. No court has ever found a federal regulation to be so coercive as to violate Congress’s spending powers, and only one circuit has even maintained that such a coercion theory is even viable, while many have questioned its viability. In short, these requirements represent hard political choices, but are not so severe as to be the Hobson’s choice that opponents characterize it. Indeed, some states have even threatened to withdraw from Medicaid, so the impossibility of such choice may be greatly exaggerated. We should note here that given the server budgetary squeeze felt by many states, it cannot be assumed that such “facts on the ground” will have no influence on the current jurisprudence and could lead courts to different conclusions about the viability of this argument. We are not predicting that this will happen, only that is inserts a bit of an unknown factor into the analysis.
Other Issues
We would note also that a number of these lawsuits do raise other issues, but not as consistently. Some of the plaintiffs allege that the PPACA violates rights to freedom of expression and association under the First and Fifth Amendments, due process and equal protection under the Fifth Amendment, rights to privacy and medical autonomy under the First and Ninth Amendments and under the Constitution generally, and the Free Exercise clause of the First Amendment 9based on their contention that the PPACA allows federal funds to be used for abortions). For the most part, these challenges have not been the focus of judicial consideration, though a case filed in Arizona by the Goldwater Institute, Coons, et al. v. Geithner et al., may well require that a court address some of these issues.
The Current State of the Litigation Landscape
Standing, Ripeness and the Jurisdiction of the Court
As in all litigation, the best strategy for winning is to convince the court that whatever the merits of the opponents’ arguments, the court has no authority to hear the case, and thus, it should be dismissed. The governments has, therefore, challenges all plaintiffs on the questions of “standing” and “ripeness.” Article III provides that federal courts only have jurisdiction over “cases or controversies,” and standing is the legal concept that a party must have a valid case or controversy in order to be heard in court. To have standing a plaintiff must: (i) have suffered an “injury in fact” – i.e., an injury that is concrete and particular, that is actual or imminent, and is not simply hypothetical – (ii) there must be a casual connection between the injury suffered and the conduct complained of, and (iii) it must be likely, as opposed to speculative, that the injury will be redressed by a favorable decision. Ripeness is something of a corollary to standing, sort of an offshoot of the “injury in fact” requirement, that demands that the issue has been clearly defined enough to be judiciable and whether a decision can in fact resolve the issue and not be undermined by future uncertainties. There is considerable overlap between these two concepts.
A number of courts have agreed with the government that since the individual mandate does not become effective until 2014, individual plaintiffs cannot show any current injury in fact to have resulted from its inclusion in the PPACA, and this it is speculative whether any of the particular plaintiffs in the cases in questions could definitively asset they would be forced to obtain insurance in 2014 or be penalized for failing to do so. Whether these courts reached this result because the Complaint did not allege sufficient facts on which to argue that a particularized current injury has occurred, the judge believed the government’s argument were more persuasive, or that finding a lack of standing is an efficient way to clear the docket and avoid wading into difficult and complex determinations cannot be known.
While we would never accuse any judge of taking the easy way out, the certainty that these cases were brought in multiple jurisdictions by a plethora of plaintiffs and will almost certainly not be decided before the Supreme court has a chance to weigh in, might have made it easier for some courts to dismiss the claims, knowing that these vital issues would eventually be fully addressed and adjudicated. As Judge Dowd, in U.S. Citizens Assoc., et al. v. Kathleen Sebelius, et al., (N.D. OH 2010), in dismissing some, but not all, of plaintiff’s claims, said: “[T]his Court does not intend to write a lengthy opinion with respect to the defendant’s motion to dismiss because the Court’s decision will, in all likelihood, be without relevance by the time this case reaches the Supreme Court.”
On the other hand, in State of Florida, et al. v. U.S. Department of Health and Human Services, et al., (N.D. FL 2010), Judge Vinson issues an elaborately reasoned decision (from which Judge Dowd quotes generously) in which he dismissed plaintiff’s claims challenging the individual mandate as violating the due process provisions of the Fifth Amendment, the penalty for failing to comply with the individual mandate as an impressible tax, and requiring states as employers to comply with the statute violates state sovereignty under Article I and the Ninth and Tenth Amendments, but did not dismiss plaintiff’s claims alleging that the individual mandate exceeded Congress’s Commerce Clause powers and violates Article I and the ninth and Ten Amendment, and their claim that the new expanded Medicaid requirements are coercive and also violate Article I and the Ninth and Ten Amendments.
Though noting in this decision that “I have not attempted to determine whether the line between Constitutional and extraconstitutional government has been crossed. That will be decided on the basis of the parties’ expected motions for summary judgment, which I will have the benefit of additional argument and all evidence in the record that may bear on the outstanding issues I am only saying that (with respect to two of the particular causes of action discussed above) the plaintiffs have at least states a plausible claim that the line has been crossed,” at least with respect to the individual mandate, judge Vinson clearly communicated his current leaning that the mandate will not pass muster – “The power that the individual mandate seeks to harness is simply without prior precedent.”
The Three Decisions on the Merits
Of the three courts that to date have reached the merits, two found the individual mandate to be constitutional and one did not. Were Judge Vinson to decide in favor of the plaintiffs on summary judgment on one or both of the remaining claims, the scorecard would be even – at least until other district courts weigh in.
The “It is Constitutional” Decision
In Thomas More Law Center et al. v. President Obama et al. (E.D MI 2010) and Liberty University, et al. v. Geithner et al. (W.D. VA 2010), both of which found the individual mandate to be constitutional, each found that while the mandate was not to be imposed until 2014, there was a reasonable certainty that it would be imposed and that plaintiffs would need to plan for and accommodate this requirement by making current financial decisions. As noted by the Liberty University Court, “The present or near-future costs of complying with a statute that has not yet gone into effect can be an injury in fact sufficient to confer standing.”
Neither court, however, accepted the government’s Anti-injunction Act defense to plaintiffs allegations that the financial consequences of failing to comply individual mandate was improper penalty or tax. The Thomas More Law Center Court side-stepped the issue somewhat by saying that there is no authority for applying the Anti-Injunction Act where the IRS has made no effort to collect the funds in questions, and, moreover, the Act does not bar the Court from considering the declaratory relief requested by plaintiffs. The Liberty University Court, after a lengthy discussion of whether the exaction was properly deemed a penalty or a tax, determined that it was a penalty, not subject to the Anti-Injunction Act’s strictures against challenging a tax levy.
As for the key issue of whether the individual mandate exceeded the Commerce Clause authority, however, both Courts rejected plaintiff’s claims that the mandate represented an attempt to regulate only inactivity (or conduct that is not economic in nature) and sought to impose requirements on an individual’s conduct merely on the basis that the person existed as a U.S. citizen. Plaintiffs allege that allowing Congress Commerce Clause powers of this kind would grant it unlimited police powers in violation of the Constitution.
In support of their position, the plaintiffs relied on two Supreme Court decisions. In U.S. v. Lopez (1995), the Supreme Court rejected Congress’s authority in the Gun-Free School Zone Act to criminalize possession of a gun within a defined school zone because such conduct was not economic activity within the scope of the Commerce Clause. In the U.S. v. Morrison, (2000), the Court invalidated the cause of action created in the Violence Against Women Act on similar grounds, i.e., the conduct prohibited did not amount to economic activity. Plaintiff’s argue that an individual’s decision not to purchase insurance is also a non-economic activity, indeed, they would say it is not activity at all, and thus cannot be regulated by Congress under its Commerce Clause authority.
For its part, the government arguing the individual mandate falls squarely within Congress’s Commerce Clause authority, relies on two different Supreme Court decisions. In Wickard v. Filburn (1942), the Court upheld a penalty imposed on wheat grown only for home consumption that was never intended to be marketed on the basis that such actions in the aggregate could undermine the efficacy of the federal price stabilization scheme being challenged. In Gonzels v. Raich (2005), the Court sustained Congress’s authority to prohibit the growing of marijuana intended solely for personal consumption under the Controlled Substances Act because there existed a significant commercial market for marijuana and allowing such home grown efforts would undermine the government’s ability to regulate that market. In both cases, the Court found that the choice not to participate in the commercial market was insufficient to remove the activities as issue from Congress’s Commerce Clause Authority.
The question for all the courts here is how the decision not to buy health insurance should be characterized? Is it simply outside the universe of economic activity – or as emphasized by the plaintiff’s, not activity at all—or is it an individual decision that has in the aggregate significant effects on the market that would undermine Congress’s reasonable efforts to regulate the health care and health insurance markets (which, under HIPAA, Congress had determined were inextricably linked and sought to regulate as a single system). Both the Thomas More Law Center and Liberty University Courts, held the individuals who elected not to purchase health insurance were, nevertheless, market participants, and that such decisions in the aggregated substantially affect the interstate health care market. As explained by Judge Steeh in the Thomas More Law Center decision:
“The health care market is unlike other markets. No one can guarantee his or her health, or ensure that he or she will never participate in the health care market. Indeed, the opposite is nearly always true. The question is how participates in the health care market pay for medical expenses – through insurance, or thought an attempt to pay out of pocket with a backstop of uncompensated care funded by third parties. This phenomenon of cost-shifting is what makes the health care market unique. Far from “inactivity”, by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services, later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $3 billion of 2008, onto other market participants. As this cost-shifting is exactly what the health Care Reform act was enacted to address, there is no need for the metaphysical gymnastics of the sort proscribed by Lopez.
The plaintiffs have not opted out of the health care services market because, as living, breathing beings, who do not oppose medical services on religious grounds, they cannot opt out this market. As inseparable and integral members of the health care services market, plaintiffs have made a choice regarding the method of payment for the services they expect to receive. The government makes the apropos analogy of paying by credit card rather than by check. How participants in the health care services market pay for such services has a documented impact an interstate commerce. Obviously this market reality forms the rational basis for Congressional action designed to reduce the number of insureds.”
The “It is not Constitutional” Decision
Judge Hudson, in Commonwealth of Virginia et al. v. Kathleen Sibelius, et al. (E.D. VA 2010) looked at the conduct at issue here and the Supreme Court cases relied on by both the plaintiffs and the government cited above, and reached the diametrically opposite conclusion from that reached by Judge Steeh in Thomas More Law Center and Judge Moon in Liberty University. In assessing both the Supreme Court’s Wickard and Raich decisions, Judge Hudson found that in each case the individuals had each undertaken some activity—either growing wheat or marijuana—and thus had “voluntary placed themselves within the stream of interstate commerce.” In contrast, he saw the individuals here as having made a different choice – ie., a decision not to purchase a product, such as health insurance, and he concluded that such a decision is simply not an economic activity. Judge Hudson rejected the government’s contention that requiring the purchase of insurance based upon a future contingency is an activity that will inevitably affect interstate commerce by saying “This broad definition of economic activity subject to congressional regulation lacks logical limitation and is unsupported by Commerce Clause jurisprudence . . . Neither the Supreme Court nor an federal court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.” While invalidating the individual mandate, however, Judge Hudson did not find the entire PPACA to be unconstitutional, as plaintiffs had requested, though all parties had agreed to the centrality of the individual mandate in Congress’s overall regulatory scheme.
Where Things Stand
This is where the dispute is joined and currently stands. How other district courts will line up is, of course, unknown. How the various circuits will weigh in remains to be seen. What the Supreme Court is likely to decide can only be the subject of speculation. By the time this matter comes before the Supreme Court, at least a year from now (if not two or more years), there will be a lot of changes in the economic and political landscape, and many steps will have had to be taken in preparation for the state-sponsored health care exchanges and other matters that will become effective in 2014. In short, this story is far from over. More updates from the front will follow as developments warrant.
Comments