PharmExec Blog

HCR and the Supreme Court: Three Important Days in March

The Supreme Court will open up deliberations on the constitutionality of three important parts of healthcare reform (HCR) this month.

by Tom Norton

After nearly two years of legal wrangling, on November 14, 2011 the Supreme Court (SCOTUS) determined that as a result of contradictory US Appellate Courts findings on the Patient Protection and Affordable Care Act, and given the obvious importance of the new law to all Americans, the issue would be taken up by SCOTUS in the spring of 2012.

A ruling from SCOTUS on key provisions of the healthcare reform law is likely to occur before July 4. Depending on how the Court comes down, the new law could either be fatally crippled; or, conversely, fully validated.  Either outcome is sure to be legally controversial and each carries enormous political significance. In advance of that high drama moment this summer, I want to focus here on three upcoming days in March that will officially begin this important SCOTUS review.  Remembering that I am not an attorney, I have taken my best shot at laying out a brief “layman’s” backgrounder as to how this will proceed.

The SCOTUS has dedicated 6 hours of deliberation (a very large chunk of the Court’s time) on four key issues the Court has determined warrants their attention:

  • March 26: Whether the Anti-Injunction Act (federal tax law) bars lawsuits that challenge the insurance coverage mandate before it goes into effect (1.5 hours).
  • March 27: Whether Congress has the power under Article 1 of the Constitution, the commerce clause, to regulate economic activity in order to mandate minimum coverage (2 hours).
  • March 28: Whether, if the Court decides that the individual mandate is unconstitutional, the mandate is “severable” from the rest of the law – allowing the remainder of HCR to survive.  On the other hand, if the mandate is found to be unconstitutional and not severable, will the entire HCR law be struck down? (1.5 hours)

Also, on the same day, SCOTUS will debate whether Congress exceeded its powers by forcing states to accept an expansion of Medicaid costs and administration under threat of losing Medicaid funding (1 hour).

Thoughts on Each Day

March 26: Anti-Injunction Act Day turns on whether or not an obscure 1867 federal tax law applies to HCR.  At issue is whether the new law is a “tax” or not?  If it is, under AIA, HCR cannot be revoked until it has been in place for one year.  Therefore, as the law doesn’t start until Jan. 1, 2014, the new “tax” can’t be challenged until Jan. 1 2015. Therefore, if AIA applies to HCR, this 2012 challenge is invalid.

This position was held by the Administration until February 7. Then the Attorney General’s office announced they were not going to contest this issue. However, they continued to reserve comment on the matter for March 26th, whatever that portends.   This is a rather amazing development, but one that does not negate consideration of AIA’s impact by the Supremes. The bet?  If SCOTUS determines the AIA is valid, that’s game, set, match as far as a legal challenge to HCR goes, at least until 2015.  If not, several other issues are in play.

March 27: SCOTUS will get to the primary issue: whether Congress has the power under Article 1 of the Constitution, the commerce clause, to regulate economic activity, in this case by creating a “mandate” for citizens to obtain health insurance.

Reviewing the Appellate findings on this question, SCOTUS must ponder clear differences in conclusions:

  • 11th Circuit, Atlanta: “This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them repurchase that insurance product every month for their entire lives.”
  • 6th Circuit, Cincinnati: “First, the provision regulates economic activity that Congress had a rational basis to believe has substantial effects on interstate commerce.  In addition, Congress had a rational basis to believe that the provision was essential to its larger economic scheme reforming the interstate markets in health care and health insurance.”

There is a very clear divergence, and it will be interesting to hear the questions posed by SCOTUS on March 27.  A 5-4 finding, either way, is easily conceivable.

March 28: We have a double header.  First up, arguments over “severability”, i.e., can the “mandate” be separated from the new law and still allow it go into effect? On Jan. 29th, the Administration filed the following statement in favor of severability and supporting the continuance of the new law if the “mandate” were removed:

“Many provisions of the act, focused on controlling costs, improving public health and other objectives, have no connection to insurance coverage at all. Congress directed that much of the act take effect several years before the minimum coverage provision’s effective date, further demonstrating that Congress intended those provisions to operate independently.”

Last year, however, U.S. District Judge Roger Vinson of the Northern District of Florida found that the individual mandate is not severable from the Affordable Care Act and, therefore, he ruled the entire law was unconstitutional.  Ultimately, he was overruled by the 11th Appellate Court, but his position has gained the notice of SCOTUS. Conclusion? Jump ball on “severability” as I read it.

And finally, the matter of Medicaid expansion being forced on the states.  The position of the states is pretty clear:

“The nation’s governors, Democrats as well as Republicans, voiced deep concern Sunday about the shape of the health care plan emerging from Congress, fearing that Washington was about to hand them expensive new Medicaid obligations without money to pay for them.”

The position in favor of state Medicaid expansion was taken by Families USA, telling Politico: “This really is an essential piece of the architecture for expanding coverage for those people who don’t have it.”

This one is clearly a philosophical question that goes to the heart of HCR.  However, it’s also one that presents huge potential financial consequences for all the states. In summary, probably with the exception of the AIA issue, any one of the other three could go either way.

What’s at stake?

Not only is the healthcare of every American on the line, so is the wellbeing of millions of foreign patients who are currently benefiting from American medical professionals, prescription drugs, implements and devices, and other healthcare services.

These three days in March may turn out to be the trip point that ultimately determines the future direction of global healthcare.  No doubt the members of the Supreme Court understand this very clearly.

That’s my view.  I would like to have your thoughts on the upcoming three days in March.

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