If the Affordable Care Act’s (ACA) individual mandate provision is deemed unconstitutional, which parts – if any – of the law can survive without it? That was the first question the Supreme Court considered during the third and final day of oral argument on the constitutionality of the health care law. Members of the Court also debated whether the ACA’s Medicaid expansion – which is expected to add an additional 16 million individuals into the healthcare fold – is an unlawful exercise of Congressional spending power.
During the morning session, former Bush administration Solicitor General Paul Clement, representing 26 state attorneys general, the National Federation of Independent Business and four private individuals, argued that if the requirement that most individuals purchase minimal essential health coverage or pay a penalty – commonly referred to as the individual mandate – is removed from the law, the remainder falls. According to Clement, the mandate is integral to the entire health care law: “If you do not have the individual mandate to force people into the market then community rating and guaranteed-issue will cause the cost of premiums to skyrocket.” He explained further that all of the main pieces of the law are tied together:
the individual mandate, guaranteed-issue, and community rating together are the heart of this Act. They are what make the exchanges work. The exchanges in turn are critical to the tax credits, because the amount of the tax credit is key to the amount of the policy price on the exchange. The exchanges are also key to the employer mandate, because the employer mandate becomes imposed on an employer if one of the employees gets insurance on the exchanges. But it doesn't stop there.
Thus, if the mandate is struck down, Clement advocates that Congress be given “a clean slate.”
Justice Sotomayor seemed unconvinced by this “clean slate” approach. According to her, Congress would be in a better position to restructure the law: “What's wrong with leaving it . . . in the hands of the people who should be fixing this, not us? Why don't we let Congress fix it?”
Clement responded by asking: “what task do you want to give Congress? Do you want to give Congress the task of fixing the statute after something has been taken out, especially a provision at the heart, or do you want to give Congress the task of fixing health care?”
Justice Scalia made the point that given the state of legislative “inertia,” handing the law back to Congress might not necessarily be a viable option. In response, Clement stated: “we all recognize there is legislative inertia. And then the question is: What is the best result in light of that reality?”
Given his perceived disfavor of the individual mandate, Justice Scalia framed the question of severability accordingly: “The whole issue here is whether these related provisions have been legitimately enacted, or whether they are so closely allied to one that has been held to be unconstitutional that they also have not been legitimately enacted.”
Justice Kagan appeared to support the idea that other portions of the law could survive the individual mandate: “It seems to me that if you look at the text, the sharp dividing line is between guaranteed-issue and community ratings on the one hand, everything else on the other.” She brought up the fact that insurance exchanges
function perfectly well in Utah where there is no mandate. They function differently, but they function. And the question is always, does Congress want half a loaf. Is half a loaf better than no loaf? And on something like the exchanges it seems to me a perfect example where half a loaf is better than no loaf. The exchanges will do something. They won't do everything that Congress envisioned.
Justice Ginsburg also seemed amendable to this idea, saying that a “salvage job” is preferable to a “wrecking operation.” Chief Justice Roberts appeared similarly unconvinced by Clement’s suggestion that certain “periphery” portions of the ACA would amount to a “hollow shell” without the mandate.
As a practical matter, Justice Kennedy asked for more direction on what rule to apply regarding which parts of the law to separate: “So I need to know what standard you are asking me to apply. Is it whether as a rational matter separate parts could still function, or does it focus on the intent of the Congress?” Clement suggested that the applicable rule is whether the statute can operate in the manner that Congress intended, although Justice Sotomayor did not seem persuaded.
Deputy Solicitor General Edwin Kneedler, advocating on behalf of the government, followed Clement. His main argument is that in the event the individual mandate is ruled unconstitutional, most of the law should stand. He claimed, however, that certain provisions would not be sustainable without the individual mandate: the requirement that insurers cover pre-existing conditions, and the requirement that they not charge higher premiums for individuals with health problems (the community-rating provisions). According to Kneedler, many provisions have already been implemented, which indicates that there are many aspects of the law that can survive without the individual mandate: “the notion that Congress would have intended the whole Act to fall if there couldn't be a minimum coverage provision is refuted by the fact that there are many, many provisions of this Act already in effect without a minimum coverage provision.”
Kneedler emphasized that it should be left up to Congress to decide how to rework the law should the mandate be ruled unconstitutional.
At one point Justice Kennedy suggested that leaving certain portions intact could be considered a greater exercise of judicial power than striking the entire law:
We would be exercising the judicial power if one . . . provision was stricken and the others remained to impose a risk on insurance companies that Congress had never intended. By reason of this Court, we would have a new regime that Congress did not provide for, did not consider. That, it seems to me can be argued at least to be a more extreme exercise of judicial power than . . . striking the whole.
When Kneedler once again claimed that the issue of severability “is a matter of statutory interpretation,” and that “it should be resolved by looking at the structure and the text of the Act,” Justice Scalia jested that asking the Court to review the 2,700-page law would be a violation of the Eighth Amendment’s prohibition on cruel and unusual punishment. Justice Kagan claimed that the Court need not examine the “complex parliamentary shenanigans” that went into crafting the ACA, but rather the text itself, which is a task that “should be easy for Justice Scalia's clerks.”
With respect to the potential economic fallout of excising the individual mandate, Justice Kennedy asked Kneedler that assuming the projected costs of the insurance reforms are not offset by the revenue raised by the insurance mandates, “is it within the proper exercise of this Court's function to impose that kind of risk? Can we say that the Congress would have intended that there be that kind of risk?” Kneedler answered that he did not think it is the Court’s place to look at the budgetary implications. “I think this Court's function is to look at the text and structure and the legislative history of the law that Congress enacted, not the financial -- not a financial balance sheet, which doesn't appear anywhere in the law.”
Justice Scalia emphasized during argument that “this is really a case of first impression. I don't know another case where we have been confronted with . . . this decision. Can you take out the heart of the Act and leave everything else in place?” Overall, Scalia and Kennedy appeared unpersuaded that portions of the law could stand absent the individual mandate.
The Court appointed lawyer H. Bartow Farr III to present the argument that all of the remaining provisions could survive the loss of the individual mandate. To this end, Farr began his argument by disagreeing with the government’s position:
I think that the government's position in this case that the community-rating and guaranteed-issue provisions ought to be struck down is an example of the best driving out the good; because, even without the minimum coverage provision, those two provisions, guaranteed-issue and community-rating, will still open insurance markets to millions of people that were excluded under the prior system, and for millions of people will lower prices, which were raised high under the old system because of their poor health. So even though the system is not going to work precisely as Congress wanted, it would certainly serve central goals that Congress had of expanding coverage for people who were unable to get coverage or unable to get it at affordable prices.
According to Farr, “severability is by necessity a blunt tool. The Court doesn't have, even if it had the inclination, doesn't essentially have the authority to retool the statute.”
During the afternoon session, the parties debated the extent to which Congress may dictate the terms and conditions attached to federal dollars. While seemingly minor, this issue could have broader implications on other federally-funded programs.
According to Clement, who once again represented the 26 states in this lawsuit, the ACA’s expansion of the federally-funded state Medicaid program exceeds Congress’s limits. Specifically, ACA will require states to cover approximately 16 million more low-income people under Medicaid in 2014. For the first year of this expansion, the federal government will cover 100 percent of the cost of the new enrollees. This subsidy will gradually taper off until 2020, where it will stay at 90 percent. States are protesting that Congress is overstepping its legislative authority in requiring states to enroll more people in the program as a condition of receiving federal funds. Although the Medicaid program is voluntary, the states argue that since Medicaid funding is the largest source of funding provided to states, failing to participate is not a viable option, and therefore attaching conditions to such large funding is unduly coercive.
During the beginning of this argument, Justice Kagan voiced her skepticism of this position:
Why is a big gift from the Federal government a matter of coercion? In other words, the Federal government is here saying, we are giving you a boatload of money . . . there's no matching funds requirement, there are no extraneous conditions attached to it, it's just a boatload of Federal money for you to take and spend on poor people's healthcare. It doesn't sound coercive to me, I have to tell you.
Justice Ginsburg was also not buying the coercion argument, and likened the conditioning of Medicaid program funds to Title IX, which requires federally-funded schools to offer athletic programs for women. Clement, in turn, argued that the Medicaid scenario is different because the coercion argument is relevant only “when Congress tries to do something through the spending power it couldn't do directly.”
Justice Breyer brought up the point that the government has expanded the Medicaid program several times throughout its 45-year history. For example, in the 1980s Congress extended the program to children age 0 to 6 years, and later extended the program to children up to age 18. Clement replied that one distinguishing factor of the current expansion is its sheer scale. He also contended that the expansion is coercive because “this statute uniquely is tied to an individual mandate which is decidedly nonvoluntary.”
Justice Sotomayor asked where the line must be drawn between coercive and not coercive:
The uninsured are a problem for States only because they, too, politically, just like the Federal government, can't let the poor die. And so to the extent they don't want to do that, it's because they feel accountable to their citizenry. And so if they want to do it their way, they have to spend the money to do it their way, if they don't want to do it the Federal way. I just don't understand the logic of saying States, . . . you're not entitled to our money, but once you start taking it, the more you take, the more power you have.
Justice Scalia seemed similarly unconvinced about how the states were defining coercive: “Your theory . . . is that to determine whether something is coercive, you look to only one side, how much you're threatened with losing or offered to receive. And the other side doesn't matter. I don't think that's realistic.”
Justice Kagan once again spoke critically about Clement’s position, saying: “the idea behind cooperative Federal/State programs was exactly a federalism idea. It was to give the States the ability to administer those programs. It was to give the States a great deal of flexibility in running those programs. And that's exactly what Medicaid is.”
U.S. Solicitor General Donald Verrilli Jr. argued on behalf of the administration that since Medicaid is a voluntary program, states are free to opt out of the program if they so choose, and that Congress has the power to attach conditions to federal spending “in order to further federal policy objectives.” He began his argument by stating that the states in this case “are asking this Court to do something unprecedented” by seeking a declaration that Congress’s use of its spending clause power to expand the Medicaid program is “an impermissibly coercive exercise.”
While some of the Justices seemed reluctant to believe that the Medicaid expansion amounts to coercion, Chief Justice Roberts raised the concern that
the Secretary has the total and complete say because the Secretary has the authority under this provision to say you lose everything. No one's suggested in the normal course that will happen, but so long as the Federal government has that power, it seems to be a significant intrusion on the sovereign interests of the State. . . . It may be something they gave up many decades ago when they decided to live off of Federal funds. But I don't think you can deny that it's a significant authority that we are giving the Federal government to say that you can take away everything if the States don't buy into the next program.
Several of the justices pressed Verrilli to come up with a scenario that he believed would be considered a coercive use of Congress’s spending power, which he was unable to do. By the same token, Justice Scalia asked him whether he could envision a state declining to participate in the Medicaid expansion: “Can you conceive of a State saying no? And . . . if you can't, that sounds like coercion to me.”
Verrilli concluded his argument with an impassioned plea for the Court to uphold the ACA in its entirety:
[the ACA] is something about which the people of the United States can deliberate and they can vote, and if they think it needs to be changed, they can change it. . . . this was a judgment of policy, that democratically accountable branches of this government made by their best lights, and I would encourage this Court to respect that judgment and ask that the Affordable Care Act, in its entirety, be upheld.