11th Cir: Overturns Insurance Mandate, Supports Medicaid Expansion

In a follow up to our mention of breaking news, the Court of Appeals for the 11th Circuit ruled on August 12 that the individual mandate to purchase health insurance under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) exceeds Congress’ authority under both the Commerce Clause and the Taxing and Spending Clause of the U.S. Constitution.

The court ruled that the “individual mandate was enacted as a regulatory penalty, not a revenue-raising tax, and cannot be sustained as an exercise of Congress’s power under the Taxing and Spending Clause.” Further, the court ruled that the 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 re-purchase that insurance.”

 The court ruled, however, that the individual mandate can be severed from the rest of PPACA’s provisions. “The presumption of severability is rooted in notions of judicial restraint and respect for the separation of powers in our constitutional system,” according to the court. “The Act’s other provisions remain legally operative after the mandate’s excision, and the high burden needed under Supreme Court precedent to rebut the presumption of severability has not been met.”

Dissent

In his dissent, Judge Stanley Marcus noted that the majority opinion “ignored many years of Commerce Clause doctrine developed by the Supreme Court [including] the Supreme Court’s expansive reading of the Commerce Clause that has provided the very foundation on which Congress already extensively regulates both health insurance and health care services.”

Marcus listed several laws that demonstrate Congress’ authority over the years in legislating on issues regarding health insurance, coverage, and pricing. These include the Employee Retirement Income Security Act of 1974 and its later amendments; provisions in the Health Insurance Portability and Accountability Act of 1996 and its later amendments; numerous laws regarding the content of private health insurers’ policies; the Hill-Burton Act (regulating the types of coverage that hospitals receiving federal construction aid must provide); the Emergency Medical Treatment and Active Labor Act; provisions of the Food, Drug, and Cosmetics Act regulating drugs and medical devices; and the physician fee schedule under Medicare.

Marcus, in highlighting the specific burden on the health care system and people who currently are covered by health insurance caused by the large population of uninsured, disputed the notion that Congress must “wait until the cost shifting problem materializes for each uninsured person before it may regulate the uninsured as a class.” He noted, “The inevitable consumption of health care services by the uninsured is sufficient activity to subject them to congressional regulation.”

Medicaid Expansion

The court also ruled that PPACA’s expansion of Medicaid was constitutional. PPACA expands coverage to adults under age 65 and children in families with incomes up to 133% of the  federal poverty level. It also increases Medicaid payments for primary care services. State are required to abide by the new coverage, or risk losing the federal share of Medicaid payments.

In supporting the Medicaid expansion, the court noted that “Medicaid-participating states were warned from the beginning of the Medicaid program that Congress reserved the right to make changes to the program.”  Further, the court noted that “the federal government will bear nearly all of the costs associated with the expansion.  The states will only have to pay incidental administrative costs associated with the expansion until 2016; after which, they will bear an increasing percentage of the cost, capping at 10% in 2020.” The court also noted that states will have had almost four years between the time the law was enacted until the Medicaid expansion goes into effect to decide whether or not to continue in the program by adopting the expansions or not. Finally, although the state plaintiffs argued they would risk losing all Medicaid funding if they did not adopt the Medicaid expansion, the court noted that this was not a foregone conclusion, and that the Medicaid Act provides HHS with the discretion to withhold all or just a portion of Medicaid funding from a non-compliant state.