Day 3 SCOTUS Arguments: A “Wrecking Operation” Versus “a Salvage Job”

The third day of oral arguments before the U.S. Supreme Court was split into two sessions. First, the morning arguments addressed whether the individual mandate is severable from the other provisions in the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). Afternoon arguments focused on the 26 challenging states’ claim that they are being unconstitutionally coerced by the federal government to expand their Medicaid programs to comply with PPACA.

Severability of Mandate

Yesterday, the Justices heard arguments whether PPACA’s individual mandate requiring all Americans to purchase health insurance is constitutional. Given the level of skepticism demonstrated by the Court’s more conservative members in their questioning, it is not beyond the realm of possibility that the mandate will be struck down. That, of course, leads to the question: What then is the fate of the legislation’s hundreds of other provisions?

Can the remainder of PPACA stand without its centerpiece, the individual mandate?

Justice Ginsberg summed up the Court’s inquiry best: If the mandate fails, is the treatment of the remaining provisions “a wrecking operation” that dismantles the entire law or “a salvage job” that attempts to save the provisions that can operate independently of the mandate?

Attorney Paul Clement, who represents the states in this matter, contended that the remainder of the health reform law would be “a hollow shell” without the individual mandate, comparing it to a wheel that still had its spokes, but lacked the hub that connected them. He argued that Congress’ intent was for the rest of PPACA’s provisions to operate around the mandate, and that if the mandate was not enforced, the other provisions would be meaningless.

Justice Scalia seemed to agree with Clement, stating that, “My approach would be to say that if you take the heart out of this statute, the statute’s gone.” Scalia found it unrealistic to expect the Court to go through 2700 pages of legislation and evaluate each provision individually to determine whether it could operate independently of the mandate. Known for injecting humor into his questioning, Scalia even went as far as to invoke the Eighth Amendment barring cruel and unusual punishment.

Attorney Edwin Kneedler, who represented the Obama Administration, claimed that only two other provisions depended on the constitutionality of the individual mandate: (1) the prohibition of insurers from turning away applicants and (2) the prohibition of insurers from taking account of pre-existing conditions. He reasoned that insurance costs would increase otherwise because the insurance pool would be full of those who waited until they were sick to obtain coverage and would not contain the healthy individuals who were not required to obtain insurance.

Justice Kagan seemed to find this option favorable, stating that “half a loaf is better than no loaf.” Justice Roberts pointed out that many of PPACA’s provisions were added as incentives for lawmakers to go along with the politically unpopular mandate; however, he added that many of the law’s provisions are completely unrelated to the mandate.

In a third position, argued by private court-appointed counsel, the Court is also considering whether it could simply strike the mandate and return the law to Congress to let it sort out the legitimacy of the rest of the provisions. Justices Kennedy and Scalia acknowledged the sharply partisan-divided Congress that is currently in power and questioned whether it was capable of completing this task. Kennedy inquired whether this would be accomplished by “the real Congress or the hypothetical Congress.”

Scalia bluntly stated, “You’re not going to get 60 votes in the Senate to repeal the rest. It’s not a matter of enacting a new act. So you’re just put to the choice of I guess bankrupting insurance companies and the whole system comes tumbling down, or else enacting a federal subsidy program to the insurance companies, which is what the insurance companies would like, I’m sure.”

Medicaid Expansion

The implications of the Court’s decision on the Medicaid expansion issue may reach much further than health care reform and into other areas of federal regulation such as education and environment. Needless to say, federalists are watching this issue closely.

At issue is whether Congress exceeded its authority to require states to expand their Medicaid rolls with individuals that qualify under PPACA’s new criteria, which will include adults who make up to 133 percent of the federal poverty line.

The government cites Article I of the Constitution which gives Congress the power to “lay and collect . . . taxes to pay the debts and provide for the common defense and general welfare of the United States” and to “regulate commerce . . . among the several states.” No federal court has ever found that states have been unlawfully coerced when they accept conditions attached to federal money.

Clement argued that this law is fundamentally unique in comparison with past cases because participation in the Medicaid program is directly tied to a non-voluntary mandate and the state’s willingness to receive the extra federal funds may affect whether it can continue to receive existing federal Medicaid funds.

Justice Breyer challenged Clement by pointing out that PPACA does not affirmatively state that states would lose their pre-existing Medicaid funding if they elect not to expand their Medicaid enrollment. As the law stands, it would be left to the Department of Health and Human Services (HHS) Secretary’s discretion, and she is bound by existing administrative law, which requires her to act reasonably. If she does not act reasonably, he contended, the states can challenge her actions in federal court.

Clement countered that while PPACA does not guarantee that the Secretary would take away current funding from non-participating states, it does leave the possibility open. That possibility serves as coercion to the states to expand their programs or risk losing all federal funding for their Medicaid programs, which no state will be willing to do, he argued. He stated that the government has had numerous opportunities, since this case was introduced, to clarify that they would not take such action, but it has chosen not to.

Chief Justice Roberts seemed to side with Clement, adding that, “The concern is that the Secretary has total and complete say” whether to take away states’ Medicaid funding for refusing to expand programs . . . Why not be concerned about the authority the federal government is exercising?”

Justice Kennedy agreed that, essentially, states have “no realistic choice” but to expand their programs, indicating that he agrees the statute is coercive.

Justice Kagan had a different interpretation of the provision, asking, “Why is a big gift from the federal government a matter of coercion . . . there is no matching funds requirement . . . it’s just a boatload of federal money.” She pointed out that the federal government would pay for 90 percent of the cost of expansion.

Solicitor General Donald Verrilli similarly argued that providing hundreds of billions of dollars to states to expand health care for the poor was hardly coercive. Each state is merely expected to front 10 percent of the cost and administer the program.

Clement maintained that, despite the federal government’s “gift,” the power of the states was undermined by threatening the cut-off of all Medicaid funding.

Today was the final day of arguments, and the Justices will cast their first votes on the mandate issue this week, followed by up to 90 days of deliberations. With a Supreme Court appearing nearly as ideologically divided as our nation’s lawmakers, the fate awaiting the health reform law is anything but certain.