U.S. Supreme Court Upholds Health Care Act - Individual Mandate Is Constitutional, Medicaid Expansion Is Limited

U.S. Supreme Court Upholds Health Care Act - Individual Mandate Is Constitutional, Medicaid Expansion Is Limited

WASHINGTON, D.C. - (Mealey's) In a sweeping opinion covering four issues addressed over three days of oral argument, the U.S. Supreme Court on June 28 found that the Anti-Injunction Act (AIA) does not bar challenges to the Patient Protection and Affordable Care Act (PPACA), that the individual mandate contained in the act is constitutional and that the federal government can expand Medicaid but cannot withhold existing funding from the states for noncompliance with the expansion (Department of Health and Human Services, et al. v. State of Florida, et al., No. 11-398, U.S. Sup.; National Federation of Independent Business v. Kathleen Sebelius, et al., No. 11-393; State of Florida, et al. v. Department of Health and Human Services, et al., No. 11-400, U.S. Sup.). 

(Opinion available to Lexis subscribers. Document #31-120704-008Z.)

In a 5-4 opinion, Chief Justice John G. Roberts Jr. and Justices Ruth Bader Ginsburg, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan found the individual mandate to be constitutional.  Justices Antonin Scalia, Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito Jr. found the individual mandate to be unconstitutional and nonseverable from the act.   

The challenges to the PPACA stem from States of Florida, et al. v. Department of Health and Human Services (enhanced version available to lexis.com subscribers), in which the U.S. District Court for the Northern District of Florida held that the individual mandate contained in the PPACA is an unconstitutional regulation of commerce and that because the PPACA contains no severance clause, the entire law must fail.  A split 11th Circuit U.S. Court of Appeals panel affirmed that the individual mandate is unconstitutional but reversed the holding that the provision is not severable from the rest of the act.  The 11th Circuit also affirmed that the act's expansion of Medicaid is constitutional. 

Constitutional Power

The majority, in an opinion written by Chief Justice Roberts, held that the AIA does not bar the suit, saying that the act "does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act." 

However, the majority went on to hold that Congress was within its power under the taxing clause of the U.S. Constitution in implementing the individual mandate.  The act describes the payment for failure to obtain insurance as a "penalty" and not a "tax," but that label "does not determine whether the payment may be viewed as an exercise of Congress's taxing power," the majority said. 

"While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful.  Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS," the majority said.  "[I]f someone chooses to pay rather than obtain health insurance, they have fully complied with the law."  

The court held, however, that the mandate was not a valid exercise of Congress' powers under the commerce and necessary and proper clauses, saying that that the "power to regulate commerce presupposes the existence of commercial activity to be regulated." 

"The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity.  Such a law cannot be sustained under a clause authorizing Congress to 'regulate Commerce,'" the court said. 

Ginsburg Concurrence

Justice Ginsburg wrote separately, agreeing with Justice Roberts that the AIA does not bar consideration of the case and that the mandate is a proper exercise of Congress' taxing power.  She wrote separately to say that she would also hold that the commerce clause authorizes Congress to enact the minimum coverage provision and that the spending clause permits the Medicaid expansion as Congress enacted it.   

Justice Sotomayor joined Justice Ginsburg's opinion, and Justices Breyer and Kagan concurred in parts and dissented in parts to Justice Ginsburg's opinion. 

Statute 'Inoperative'

Justice Kennedy wrote the dissenting opinion, saying that the PPACA "exceeds federal power both in mandating the purchase of health insurance and in denying nonconsenting States all Medicaid funding." 

"Whatever the conceptual limits upon the Commerce Clause and upon the power to tax and spend, they cannot be such as will enable the Federal Government to regulate all private conduct and to compel the States to function as administrators of federal programs," the dissenting justices said. 

"These parts of the Act are central to its design and operation, and all of the Act's other provisions would not have been enacted without them.  In our view it must follow that the entire statute is inoperative," they said. 

Justice Thomas wrote a separate dissenting opinion to address the commerce clause argument.  "I adhere to my view that 'the very notion of a "substantial effects" test under the Commerce Clause is inconsistent with the original understanding of Congress' powers and with this Court's early Commerce Clause cases,'" Justice Thomas said.   

"[T]he Court's continued use of that test 'has encouraged the Federal Government to persist in its view that the Commerce Clause has virtually no limits,'" Justice Thomas said.  "The Government's unprecedented claim in this suit that it may regulate not only economic activity but also inactivity that substantially affects interstate commerce is a case in point," he added. 

Medicaid

The majority also held that the act's expansion of Medicaid is unconstitutional but that the violation is remedied by precluding the Department of Health and Human Services from withdrawing existing Medicaid funds for failure to comply with the expansion's requirements.  The PPACA expands the federal-state Medicaid insurance program for the poor to cover people with incomes up to 133 percent of the federal poverty level and to cover childless adults for the first time, starting in 2014. 

The states argued that the expansion is coercive because it is tied to the nonvoluntary individual mandate.  The government countered that Congress could fix the terms on which it appropriates federal funds and that Congress expressly reserved the right to amend the Medicaid statute, which it has done repeatedly over the years. 

"Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use.  What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding," the majority said.  

Counsel

Deputy Solicitor General Edwin S. Kneedler,  U.S. Solicitor General Donald Verrilli, Assistant Attorney General Tony West, Deputy Assistant Attorney General Beth S. Brinkmann, Assistant to the Solicitor General Joseph R. Palmore and attorneys Mark B. Stern, Alisa B. Klein, Samantha L. Chaifetz and Dana Kaersvang, all of the U.S. Department of Justice; George W. Madison of the Department of Treasury; M. Patricia Smith of the Department of Labor; William B. Schultz, acting general counsel, and Kenneth Y. Choe, of the Department of Health and Human Services, all in Washington, represent the government. 

Greg Kastas of Jones Day in Washington, Florida Attorney General Pamela Jo Bondi, Florida Solicitor General Scott D. Makar and Louis F. Hubener, Timothy D. Osterhaus and Blaine H. Winshop of the Florida Attorney General's Office, all in Tallahassee, Fla.; Paul D. Clement and Erin E. Murphy of Bancroft in Washington; Texas Attorney General Greg Abbott and Texas Deputy Attorney General Bill Cobb, both in Austin, Texas; South Carolina Attorney General Alan Wilson in Columbia, S.C.; Alabama Attorney General Luther Strange in Montgomery, Ala.; Michigan Attorney General Bill Schuette in Lansing, Mich.; Nebraska Attorney General Jon Bruning and Katherine J. Spohn, of Nebraska's Attorney General's Office, both in Lincoln, Neb.; Utah Attorney General Mark L. Shurtleff in Salt Lake City; Louisiana Attorney General James D. "Buddy" Caldwell in Baton Rouge, La.; Colorado Attorney General John W. Suthers in Denver; Washington Attorney General Robert M. McKenna in Olympia, Wash.; Pennsylvania Gov. Thomas W. Corbett Jr. and Pennsylvania Attorney General Linda L. Kelly, both in Harrisburg, Pa.; South Dakota Attorney General Marty J. Jackley in Pierre, S.D.; Indiana Attorney General Gregory F. Zoeller in Indianapolis; Georgia Attorney General Samuel S. Olens in Atlanta; Idaho Attorney General Lawrence G. Wasden in Boise, Idaho; Arizona Attorney General Tom Horne and Joseph Sciarrotta Jr. and Janice K. Brewer of the Arizona Attorney General's Office, all in Phoenix; Nevada Gov. Brian Sandoval in Carson City, Nev.; Alaska Attorney General Michael C. Geraghty in Juneau, Ala.; Ohio Attorney General Michael DeWine and David B. Rivkin and Lee A. Casey of Baker & Hostetler, all in Columbus, Ohio; Wyoming Gov. Matthew Mead in Cheyenne, Wyo.; Maine Attorney General William J. Schneider in Augusta, Maine; Iowa Gov. Terry Brandstad in Des Moines, Iowa; Michael B. Wallace of the Mississippi governor's office and Phil Bryant of Wise Carter Child & Caraway, both in Jackson, Miss.; Kansas Attorney General Derek Schmidt in Topeka, Kan.; and Wisconsin Attorney General J.B. Van Hollen in Madison, Wis.; represent the states. 

The National Federation of Independent Business is represented by Karen R. Harned of the National Federation of Independent Business, Professor Randy E. Barnett of Georgetown University Law Center and Michael A. Carvin, Gregory G. Katsas, C. Kevin Marshall and Hashim M. Mooppan of Jones Day, all in Washington.

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(Lexis.com subscribers may access Supreme Court briefs for case No. 11-393; case No. 11-400).

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Like Your Health Plan? You Can Keep It (Maybe)

David L. Bacon, David S. Foster, Peter H. Durant and Regina S. Rockefeller on the Dramatic Constitutional Challenges to the Patient Protection and Affordable Care Act

PPACA's Adult Child Coverage Mandate

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