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If the Supreme Court strikes down the individual mandate, the justices will then decide whether or not the remainder of the health reform law is so intertwined with the insurance requirement that it too must be overturned as unconstitutional.
Or, if it can be severed, should the other provisions move forward. Severability could become the most critical aspect of the lawsuit before the Supreme Court.
The major question that the battling attorneys took up March 28 is whether Congress would have enacted the health reform law without the part that was found to be unconstitutional. At the same time, the justices’ questions indicated they didn’t want to have to interpret all the health reform law’s provisions.
The Patient Protection and Affordable Care Act (ACA) calls for dramatically increasing the number of Americans who will have access to health insurance, with the individual mandate pivotal to that. The justices are expected to rule in late June.
The 26 states led by Florida and the National Federation of Independent Business, which brought the lawsuit, argued that Congress would not have adopted ACA 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.”
According to the states, without the individual mandate, and the guaranteed issue and community rating that go along with it, “there is nothing left to the heart 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. “Would Congress want half a loaf?”
Clement said that “there are occasions where half a loaf is worse," 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 large, complex statute that affects many aspects of health care. The “lion’s share” of ACA does not depend on or relate to the individual mandate, he said.
Justice Antonin Scalia challenged, “Once you cut the guts out, who knows which of them were really desired by Congress on their own and which ones weren't?"
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, he said.
In addition to the state insurance exchanges, there are provisions related to small employer tax credit, incentives to increase physician practices in underserved areas, and support for breast-feeding and black lung disease. Some health reform provisions are already in effect, while the individual mandate wouldn’t take effect until 2014.
The final challenge of the states’ lawsuit explored whether the Medicaid expansion to assure health coverage is coercive to the states because the federal government sets conditions. ACA 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, a cooperative form of federalism.
Under ACA, however, HHS may threaten to cut all of a state’s Medicaid funds — its traditional program and newly eligible program — for those that do not participate in the Medicaid expansion. According to the states’ Clement, that could amount to $3.3 trillion over 10 years. States would have to recoup lost federal monies from other parts of their budgets to continue their pre-ACA 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.”
[Commentary: The blindness and brilliance of Obama’s individual mandate.]
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 is not a given. Justice Stephen Breyer added that that authority has been a part of Medicaid since 1965. However, it has not been carried out.
Verrilli said that typically HHS and states have sat down and worked out their differences related to Medicaid.
Arizona has submitted a letter to HHS for a waiver on the Medicaid expansion, however. Scalia asked if the secretary had threatened the state, cracking, “OK, go ahead and make my day,” again alluding to a movie, this time “Dirty Harry.”
Verrilli said, “It’s not what you take away, it’s what you offer.”
Over the years, states have increased the groups eligible to be enrolled and services provided, so that now 60 percent of Medicaid expenditures are based on those optional choices over and above the minimum that HHS requires, he said.
The transcripts and audio recordings of the three days of arguments are available at www.supremecourt.gov.