Clues to How the Supreme Court Might Rule on Health Reform

by Anthony Wilson and Santosh Rao, California Healthline Contributing Editors

Ever since President Obama signed the Affordable Care Act about two years ago, it has faced legal challenges. After winding through several lower courts, the law has made its way to the Supreme Court. Oral arguments in the case begin next week.

The high court will consider four major issues:

  1. Whether the individual mandate, requiring nearly all U.S. residents to have health coverage, is permissible under the Constitution;
  2. If the individual mandate is unconstitutional, whether the remainder of the law should be permitted to stand;
  3. Whether the Medicaid expansion in the overhaul is overly coercive to states; and
  4. Whether the tax anti-injunction act permits the Supreme Court to rule on the case before the penalty for not obtaining health coverage is imposed in 2015.

In the U.S. legal system, judges often base their decisions on previous rulings. Although the high court in Central Green Co. v. United States (2001) noted that such precedents "'may be followed if sufficiently persuasive' but are not binding," they often are the only clues by which observers can predict how the court will rule.

California Healthline consulted with several health policy and legal experts to uncover clues about what might influence justices' thinking as they consider the case. Here's eight Supreme Court decisions to keep in mind as oral arguments begin.

1. Individual Mandate: Cases Support Both Sides of Argument

The 26 states challenging the overhaul argue in a brief that the law's individual mandate violates the Constitution by "compelling individuals to engage in commerce in order to more effectively to regulate commerce." The states reference two high court cases in their brief.

United States v. Lopez (1995)

Relevance: United States v. Lopez was the first Supreme Court case since the New Deal to set limits on Congress' power under the commerce clause in the Constitution.

Why it matters: In the Supreme Court's majority decision, Justice Anthony Kennedy wrote, "depending on the level of generality, any activity can be looked upon as commercial." Kennedy noted that to rule in favor of the federal government in the case "would require us to conclude that the Constitution's enumeration of powers does not presuppose something not enumerated ... and that there never will be a distinction between what is truly national and what is truly local."

United States v. Morrison (2000)

Relevance: The high court in United States v. Morrison reaffirmed limits on Congress' power under the commerce clause.

Why it matters: Although the high court in its 5-4 ruling in Morrison noted that Congress over the years had developed "greater latitude" under the commerce clause, it referenced United States v. Lopez, noting, "even under our modern, expansive interpretation of the Commerce Clause, Congress' regulatory authority is not without effective bounds."

Meanwhile, the Department of Justice countered in a brief  that Congress acted within its power in regard to the individual mandate. DOJ referenced two prior Supreme Court cases.

Wickard v. Filburn (1942)

Relevance: The Supreme Court in Wickard v. Filburn recognized the federal government's power to regulate economic activity by establishing limits on wheat production. The high court established that "Congress can regulate purely intrastate activity that is not itself 'commercial' ... if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity."

Why it matters: The high court also declared, "Once an economic measure of the reach of the power granted to Congress in the Commerce Clause is accepted, questions of federal power cannot be decided simply by finding the activity in question to be 'production' nor can consideration of its economic effects be foreclosed by calling them 'indirect.'"

Gonzales v. Raich (2005)

Relevance: The Supreme Court decision in Gonzales v. Raich affirmed that Congress could apply its laws to states that have conflicting rules.

Why it matters: The high court noted that the "similarities between this case and [Wickard v. Filburn] are striking." In both cases, "the regulation is squarely within Congress' commerce power because production of the commodity ... has a substantial effect on supply and demand in the national market for that commodity." The high court also noted, "The conflicts of economic interest between the regulated and those who advantage by (regulation)" should be governed by Congress "under its more flexible and responsible legislative process."

2. Severability: Without a Mandate, Can the Rest of the Overhaul Stand?

If the Supreme Court rules that the individual mandate is unconstitutional, the justices must decide whether the remaining provisions of the overhaul will remain. 

Perry v. Perez (2012)

Relevance: Though it is unlikely the justices will consult with their recent ruling in Perry v. Perez, the case does present an unusual angle for health reform, in that it could mean the court determines the next steps for the individual mandate.  

Why it matters: Mike Dorf, a professor of law at Cornell University School of Law, told California Healthline that the case could ultimately relate to the ruling on the overhaul. As Dorf explained, a tenet in constitutional law is that when a court finds a law unconstitutional, it should attempt to maintain those portions of the law that are legal by severing the illegal portions and leaving the rest intact. Dorf noted that in Perry v. Perez, the high court attempted to preserve most of an invalid congressional district map by redrawing it. By analogy, he suggested that if the justices were to find the individual mandate invalid, they should try to preserve the balance of the overhaul by recasting the provision as a tax.

3. Medicaid Expansion: Coercive or Copacetic?

The plaintiffs in the multistate suit against the overhaul have argued that the reform law's Medicaid expansion coerces states to participate in the program.

South Dakota v. Dole (1987)

Relevance: In South Dakota v. Dole, the high court held that under Congress' power of taxation (Article I, Section 8, Clause 1), it "may attach conditions on the receipt of federal funds." However, the justices ruled that those conditions must stay within certain restrictions, including that the conditions are "not so coercive as to pass the point at which pressure turns into compulsion."

Why it matters: The justices must decide how to draw the line on where "coercion" morphs into "compulsion." In regard to health reform, states spend 21% of their budgets on Medicaid, and the federal government picks up about half the cost, or hundreds of billions of dollars. Though no court ever has decided that the federal government has crossed that line, the dollar figures are much higher in this case.

4. Tax Anti-Injunction Act: The Rule That Could Render All Others Moot

The high court, based on the tax anti-injunction act, might decide that it cannot legally rule on the case for several years.

Flora v. United States (1958, 1960)

Relevance: In Flora v. United States, the high court affirmed (and then re-affirmed two years later) the tax anti-injunction act, which -- put simply -- holds that the plaintiffs cannot sue until they have paid a tax.

Why it matters: In regard to health reform, the AIA means the plaintiffs in the case could not sue until they have paid the penalty for failing to purchase coverage under the individual mandate, meaning not until 2015. Further, if the court rules that it cannot rule on the case because of the AIA, it could reframe both sides of the arguments in the case, based on the fact that a court determined the penalty in the individual mandate is a tax. 

How Partisanship Could Come Into Play

Bush v. Gore (2000)

Relevance: Many believe the high court's ruling in Bush v. Gore stained its reputation with an ideologically driven, partisan ruling.

Why it matters: Chief Justice John Roberts might be compelled to try to avoid a 5-4 ruling against the overhaul, for fear of it being seen as partisan. Five of the current justices were selected by Republican presidents and four were selected by Democrats.

In a discussion with California Healthline, Bill McCollum, the former Florida attorney general who originally filed the multistate lawsuit against the overhaul, rejected the notion that justices will be swayed by ideology or politics. While on one hand, he hinted that the justices would consider something other than the legal merits in the case -- "I would suggest that the judges have their own independent viewpoints" -- he also said, "I don't think you can say it's politicized."

Lyle Denniston of SCOTUSblog, a longtime journalist often referred to as the "dean emeritus of the Supreme Court press corps," was more understated. He told California Healthline that the justices all have their own personal viewpoints, noting, "None of us can escape our own histories." However, he said that in his estimation, the justices are "so focused" on the merits of the case that they will "stay within the four corners of the case."

Recent reports have indicated that Roberts is wary of the court being seen as ideologically driven. In a recent New York Times profile of Roberts, Barry Friedman, a law professor at New York University who has filed a brief urging the court to uphold the law, said, "As chief justice, Roberts has been extremely careful with the institutional reputation of the court."

California Healthline will keep a close eye on the high court next week. In the meantime, here's a look at what else is happening in health reform.

Administration Actions

  • The Obama administration has altered its defense of the federal health reform law in preparation for oral arguments in the multistate lawsuit before the U.S. Supreme Court. Recent briefs filed by the Department of Justice indicate that the administration is changing the focus of its defense from the Constitution's commerce clause -- which gives Congress the power to regulate interstate commerce -- to the necessary and proper clause -- which gives Congress the power to make laws in order to carry out its other powers (Baker, "Healthwatch," The Hill, 3/15).

In the States

  • Mississippi is on schedule to establish a health insurance exchange by 2014, even though the state is involved in the multistate lawsuit against the federal health reform law. Former Gov. Haley Barbour (R) initiated efforts to establish an exchange before the law was enacted in 2010. In January, the Center for Mississippi Health Policy released a study suggesting that an exchange could help reduce the state's uninsured rate from 20% to 7% (Hess, Kaiser Health News, 3/14).

On the Hill

  • On Tuesday, House Budget Committee Chair Paul Ryan (R-Wis.) released the House GOP fiscal year 2013 budget proposal, which would repeal the federal health reform law and alter Medicare and Medicaid. The plan would cut $5.3 trillion in spending over the next 10 years and reduce revenue to the federal government by $4 trillion during that time (Wasson, "On the Money," The Hill, 3/20).
  • This week, the U.S. House could vote on a measure (HR 5) that would repeal the Independent Payment Advisory Board set up under the federal health reform law. The bill also would set a $250,000 cap on punitive damages in malpractice suits, limit lawyer fees and establish other ways to rein in lawsuits against physicians. According to Republicans, the bill would reduce health spending by $50 billion over 10 years (Kasperowicz, "Healthwatch," The Hill, 3/13). The American Association for Justice -- a lobbying group for trial lawyers -- opposes linking the IPAB repeal effort with the tort reform measure (Pecquet, "Healthwatch," The Hill, 3/12).

Rolling Out Reform

  • Many individuals with pre-existing conditions still face challenges obtaining health coverage despite the creation of the temporary high-risk insurance pools that were created by the federal health reform law to help them. In many states, the premiums for such pools can be prohibitive to the individuals. While some state government programs or not-for-profits help offset the cost of the premiums, others have set rules preventing third-party groups from paying for the premiums (Andrews, Kaiser Health News/Washington Post, 3/19).
  • At least five major provisions of the reform law are scheduled to be implemented this year. They include contraceptive coverage requirements in new health plans and new requirements on health insurers to provide clear and standardized information and descriptions about their plans that allow consumers to easily understand their benefits (Andrews, Kaiser Health News, 3/12).

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