SCOTUS wraps healthcare law hearings

On the third and final day of the healthcare law hearings at the U.S. Supreme Court Wednesday, the major question the battling attorneys took up was whether Congress would have enacted the health reform law without the part that may be found to be unconstitutional.

If the Supreme Court strikes down the individual mandate – the healthcare law’s requirement that most Americans purchase health insurance – the justices will then decide whether or not the remainder of the law is so intertwined with the mandate that the whole law also must be overturned as unconstitutional or that the law can stand without it.

The severability issue could become the most critical aspect of the lawsuit before the Supreme Court.

[See also: Supreme Court health law hearings begin and Justices search other areas of commerce to frame individual mandate.]

The 26 states led by Florida and the National Federation of Independent Business, which brought the lawsuit, argued that Congress would not have adopted the Patient Protection and Affordable Care Act (PPACA) without the individual mandate because the provisions are “designed to ensure a supply adequate to meet the demand created by the mandate or the cost-savings provisions designed to counterbalance the expensive supply-side provisions.”

Without the individual mandate and the guaranteed issue and community rating that go along with it, “you have nothing left of the ACA,” said Paul Clement, the attorney for the states. “It is not just a tool. It is the essential tool to pay for it."

Severability of the remaining provisions of the law depends upon congressional intent.

Clement recommended that Congress fix the residual of the law or “start over with a clean slate.”

Justice Elena Kagan said the health reform law seemed to be made up of the individual mandate and then everything else, like the health insurance exchanges. “Wouldn’t Congress want half a loaf instead of no loaf?”

Clement said that “there are occasions where half a loaf is worse than no loaf,” commenting that other provisions may not be able to operate as Congress intended. And without the mandate, “the fallback is a hollowed out shell,” he said.

The federal government argued that except for the guaranteed issue and the community rating provisions, the remainder of the act is severable and should remain even if the individual mandate is thrown out. The court should not strike down any more of a law than is necessary to comply with the Constitution, said Edwin Kneedler, deputy solicitor general.

Although the individual mandate attracts the most attention, the health reform law is a large, complex statute that affects many aspects of healthcare. The “lion’s share” of PPACA does not depend on or relate to the individual mandate, he said.

Justice Antonin Scalia challenged, “Once you cut the guts out, how do you know which ones Congress wanted to keep?”

Kneedler said that other provisions would still advance Congress’ core goals of expanding coverage, improving public health, and controlling costs even if the minimum coverage provision were held unconstitutional. Additionally, some health reform provisions are already in effect, even though the individual mandate will not take effect until 2014.

The hearings wrapped up Wednesday afternoon with the final challenge of the states’ lawsuit exploring whether the Medicaid expansion to assure health coverage is coercive to the states because the federal government sets conditions.

PPACA expands Medicaid coverage to individuals with incomes up to 133 percent of poverty level, and the federal government will pay 100 percent of it initially but gradually decrease it to 90 percent by 2020.
Medicaid has been a joint voluntary program between the states and the Department of Health and Human Services.

Under PPACA, however, HHS may threaten to cut all of a state’s Medicaid funds – its traditional and newly eligible programs – for those that do not participate in the Medicaid expansion. According to the states’ Clement, states not participating would have to recoup lost federal monies from other parts of their budgets to continue their pre-PPACA Medicaid program.

Scalia compared the situation to someone holding a gun to a person’s head, demanding “your money or your life.” “You’ve been given an offer you can’t refuse,” he said, referencing “The Godfather.”

Clement said that the statue is “uniquely coercive.” If you don’t take the money, you will lose all your Medicaid money. It’s a strange form of federalism to give an offer you can’t refuse.”

Solicitor General Donald Verrilli Jr., arguing for the federal government, said that the HHS secretary has the discretion to cut Medicaid funds when states don’t participate. It was noted that the secretary’s discretionary authority regarding Medicaid funding has been a part of the program since 1965 but has not been carried out.

Verrilli said that typically HHS and states have sat down and worked out their differences related to Medicaid.

The transcripts and audio recordings of the three days of arguments are available here.

The justices are expected to announce their ruling in June.