Reform law litigation heats up
Law’s future uncertain; hospitals implementing plans
With split decisions in the lower courts virtually assuring that the U.S. Supreme Court will decide the fate of the Patient Protection and Affordable Care Act, hospital leaders say they have little choice but to continue implementation plans despite lurking uncertainty about the law’s future.
A Republican-appointed federal district judge in Richmond, Va., struck down a key provision in the law Dec. 13, ruling that the Constitution does not give Congress the legal right to force Americans to buy health insurance. A similarly critical decision is widely anticipated from a Florida judge based on comments he made from the bench Dec. 16 during oral arguments in a separate case.
Yet two federal judges appointed by Democratic administrations have already upheld the constitutionality of the law, ruling that Congress does have power to regulate personal health insurance decisions that can prevent the wholesale cost-shifting that occurs when large numbers of people choose to pay future expenses out of pocket rather than by obtaining coverage.
But since the Florida judge declined to issue an immediate injunction against the law, hospital executives say they don’t have the luxury of devoting their working hours to the finer academic and political points of the discussion over the reform law’s future.
“It’s a very interesting set of arguments. But in the meantime, we can’t sit and wait. We have to expect that it will be implemented as enacted,” said Leo Brideau, president and CEO of Columbia St. Mary’s, a two-campus hospital system in Milwaukee. “If you look at the kinds of things we have to do to be prepared, they are things that, irrespective of the mandate, need to happen anyway.”
The way President Barack Obama’s administration tells it, striking down the individual mandate to buy insurance would be like shooting out a tire on a car: All the machinery would still be there, but largely unable to function.
In practical terms, officials say taking out the mandate would actually give healthy people an economic incentive to drop their insurance, because they would know they could stop paying and then re-apply for coverage when they get sick. That would drive up plan costs, giving those with insurance even more reason to drop coverage—the so-called “death spiral” warned of by insurance-industry experts.
If the Supreme Court takes up the question of whether Congress can force Americans to buy health insurance, it will have a multibilliondollar question on its hands. In 2009, hospitals provided a record $39 billion in care to patients who did not pay for it, according to the latest American Hospital Association statistics.
Of the 32 million Americans who would receive healthcare coverage under the reform law, roughly half would get it through expanded Medicaid and the other half would get private coverage through state-run health insurance exchanges.
Ron Pollack, executive director of Families USA, which filed a friend-of-the-court brief in the Florida case, rejected claims from conservative critics who argued in court Dec. 16 that the individual mandate to buy insurance impinges on Americans’ freedom and liberty.
“There is a converse to that. There is also the freedom and liberty of people who did exercise their personal responsibility (to have insurance) and are having other people’s healthcare bill foisted upon them” through cost-shifting, he said.
However, Baker Hostetler attorney David Rivkin, who argued on behalf of reform law opponents in court Dec. 16, said it was stunning to see how far past established legal precedents law proponents were willing to go to accomplish their goals in the reform law.
“The statute inflicts more damage on the Constitution than any other statute in American history,” he said in an interview after the hearing. “It threatens to warp the very key
architectural elements of our constitutional system,” including undermining individual liberty and state sovereignty.
The case in Pensacola, Fla.—which featured 20 states as plaintiffs and another eight states, 47 interest groups and more than 70 legislators filing friend-of-the-court briefs—was different from the rest because the judge also heard arguments on whether Congress has the right to force states to expand their Medicaid programs. It’s not clear how U.S. District Judge Roger Vinson might rule on that aspect.
On Dec. 13, U.S. District Judge Henry Hudson of Richmond, Va., ruled that the law’s Minimum Essential Coverage Provision that requires Americans to buy insurance or pay a fine was not backed by any clear language in the Constitution or federal court precedent.
“Despite the laudable intentions of Congress in enacting a comprehensive and transformative health care regime, the legislative process must still operate within constitutional bounds,” Hudson wrote. “The Minimum Essential Coverage Provision is neither within the letter nor the spirit of the Constitution.”
The only other federal district court judges who have ruled directly on the question of constitutionality—in Detroit and Lynchburg, Va.—considered the same set of arguments and reduced the issue to the same essential question: whether the decision not to buy health insurance constitutes an economic “activity” that Congress can regulate under the Commerce Clause of the U.S. Constitution.
But with the case lacking any clear precedent, the judges in Detroit and Lynchburg reached opposite conclusions as Hudson, even though they worked from essentially the same set of facts.
“Far from inactivity, by choosing to forgo insurance (the uninsured) 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,” U.S. District Judge George Steeh of Detroit wrote Oct. 7. “The plaintiffs have not opted out of the health care services market because, as living, breathing beings … they cannot opt out of this market.”
Robert Zirkelbach, spokesman for America’s Health Insurance Plans, cited a study commissioned by the trade group in 2007 finding that in seven states that implemented insurance reforms without a personal mandate, consumers experienced market disruption and much higher costs.
Since the individual mandate provision doesn’t kick in until 2014, observers in the legal community say judges and advocates appear to have plenty of time to sort out the confusion.
Healthcare leaders would beg to differ.
Officials from 46 states gathered in Washington last week to discuss the best ways to establish the health-insurance exchanges (See story, p. 10). Health systems across the country have begun laying the lengthy groundwork to establish accountable care organizations, medical homes and other innovations in delivery described in the law. And insurers have been implementing rules that require expanded coverage for children on parents’ plans, among other reforms.
According to news accounts of the Dec. 16 hearing, even Vinson questioned how some of the provisions in the law could be overturned, such as one that gives nursing mothers lactation areas in the workplace. “How can you possibly undo some of these things?” Vinson asked in court.
With the case now heading to the Supreme Court by all signs, a central question has become whether the court’s Libertarian-minded swing vote, Justice Anthony Kennedy, would vote with liberals or conservatives. Kennedy was appointed by Ronald Reagan.
Each of the four key cases has broken along party lines, or appears highly likely to do so. If that pattern remained, conventional wisdom would hold that Obama’s administration faces an uphill battle in defending the reform law before a Supreme Court often described as a 5-4 conservative majority.
“If this case goes to the Supreme Court today, I think the Supreme Court invalidates key provisions of this law,” said Adam Winkler, the UCLA School of Law professor who penned an article last week titled, “The courts, not Congress, are the biggest threats to Obama’s agenda.”
The Associated Press has reported that although Virginia Gov. Robert McDonnell urged the Obama administration to ask the Supreme Court to take up the case immediately, officials with the Justice Department rejected that suggestion and urged the high court to follow the normal appeals process.
Brideau, the CEO at Columbia-St. Mary’s, said he still has faith that the Supreme Court will consider the case solely on its merits and not on partisan lines.
“The Supreme Court, at least historically, has been above that kind of political fray and has ruled on the Constitution. My hope would be that they would look to the precedent of the right of Congress to regulate interstate commerce,” he said. “That’s what they’re supposed to do, and that’s what I hope they will do.”
The AHA’s senior vice president for federal relations, Tom Nickels, also said he was not concerned that having a conservative majority on the court automatically means the justices will strike down Obama’s signature domestic initiative.
“There are a lot of 5-4 decisions going both ways,” Nickels said, adding that it’s not clear when the court might take up the case or whether the composition of the court would remain static over time: “This will be determined in the future.”
“Despite the laudable intentions of Congress in enacting a comprehensive and transformative healthcare regime, the legislative process must still operate within constitutional bounds.” —Henry Hudson, U.S. district judge