Wednesday’s Bottom Line

Compared to Tuesday, the government seemed to fare much better, but that’s not saying much.  The government’s attorneys continued their struggle to clarify the reach of the Affordable Care Act (ACA), particularly whether any part of the law could survive if the mandate is unconstitutional, and whether the ACA coerces the states to participate in an expanded Medicaid program.

Even though the questioning appeared to be much more balanced than on Tuesday, with both sides subjected to challenging and probing questions, the outcome of the case remains very uncertain.  When combined with the difficulty the government experienced in defending the individual insurance mandate, there’s a reasonable chance that President Obama’s signature achievement will not survive a constitutional challenge.

As a caution, the nature of the questioning may not predict how the Justices will vote.  Even so, it is hard for defenders of the act to be confident that it will be upheld.

Overview of the Issues

The Court addressed two issues today in separate oral arguments.  As opposed to the broad philosophical questions that pervaded Tuesday’s argument, today’s cases were more technical in nature, if no less monumental.

First, if the individual insurance mandate is found to be unconstitutional, can the mandate be severed (removed) from the ACA, or must the entire act be declared unconstitutional?  Second, is the ACA’s substantial expansion of Medicaid, which is how the act would cover most of the nation’s uninsured population under 65, coercive to the states and hence a violation of Congress’s spending powers? 

As with Monday’s argument over whether the Supreme Court has jurisdiction to decide the case, the first issue raised technical legal questions about statutory interpretation.  Usually, federal laws contain a provision that if any portion of the statute is overturned, the remaining portions of the law can still be implemented.  

In the ACA, Congress, largely for political reasons, did not include the severability language.  That’s not a problem if the mandate is found to be constitutional.  But if the mandate goes down, what happens to the rest of the law?  Is the mandate so pivotal to the entire structure of the act that the other parts cannot survive independently?

In the second argument, 26 states challenged the Medicaid expansion as leaving the states no choice but to participate in the expanded enrollment, at considerable cost, or risk losing all Medicaid funding.  This, they argued, coerces the states because they cannot afford to lose their existing Medicaid funding.

While today’s cases lacked the excitement and political sexiness of the dispute regarding the individual mandate, they are no less important in determining the balance of power between the states and the federal government.  In some ways, as I’ll discuss below, the consequences of today’s arguments may even be greater than whether the mandate survives.

How the Oral Argument Proceeded

Severability

Two general aspects dominated the arguments on severability.  Do the core provisions of the act depend on the mandate?  In particular, what are the economic consequences to health insurers of implementing the act without the mandate?  Equally important, the Justices confronted the issue of how Congress might react if the mandate is severed (i.e., a separation of powers consideration)?

First, Paul Clement, representing the National Federation of Independent Business, framed the issue succinctly:  “If the individual mandate is unconstitutional, then the rest of the act cannot stand.”  The reason is that the mandate is essential to how the core provisions of the Act operate, especially the requirement that insurers cannot use pre-existing conditions to deny anyone health insurance and how the health insurance exchanges will be run. 

But should the Court throw out the entire act or let Congress fix the problems?  Throughout the argument, the Justices parried the question of congressional intent in several exchanges that went to the heart of the separation of powers questions.

JUSTICE SOTOMOYER:  We should let [Congress] fix their problems….[I]n a democracy…why should we involve the Court in making the legislative judgment?

MR. CLEMENT:  I think the reason it makes sense in the democracy with separation of powers to in some cases sever the whole thing is because sometimes a half a loaf is worse.

JUSTICE SCALIA:  One way or another, Congress is going to have to reconsider this, and why isn't it better to have them reconsider it…in toto, rather than having some things already in the law which you have to eliminate before you can move on to consider everything on balance?....Can you take out the heart of the act and leave everything else in place?

Both Chief Justice Roberts and Justice Scalia pushed the government’s attorney, Edwin Kneedler, to address why Congress would have enacted the law without the mandate. Kneedler never provided a convincing answer (despite the efforts of the Court’s usually liberal wing to help him).  At one point, Justice Kennedy said, “I just don’t understand your position.”  Neither do I. 

Later, H. Bartow Farr, appointed by the Court, argued that the mandate could be severed from all other provisions and Congress could be allowed to decide how to make it work.  This gained little traction with Justice Kennedy who expressed concern about a “death spiral” for health insurers absent the mandate. 

Medicaid Expansion

The addition to the docket of whether the Medicaid expansion is constitutional surprised many observers.  Since the New Deal era, almost no federal program has been overturned as being coercive.  Medicaid is a cooperative program between the states and the federal government.  In the argument, the key question turned on whether the Medicaid expansion was voluntary, as is participation in Medicaid generally, or coercive. 

Arguing for the states, Clement said that because states could lose all Medicaid funding if they refused to participate in the expanded program, the ACA is coercive.  He cleverly tied the individual mandate to the program’s size to argue that states could simply not afford to accept the expansion. 

More importantly, he noted that the Secretary of the Department of Health and Human Services recently sent a letter to Arizona saying that the state risked losing its entire Medicaid allocation if it withdrew from the Children’s Health Insurance Program (CHIP).  Chief Justice Roberts subsequently used this line of reasoning in an exchange with Donald B. Virrilli Jr., the Solicitor General, with other Justices also involved.

CHIEF JUSTICE ROBERTS:  …you cannot represent that the Secretary has never said, "and if you don't do it, we are going to take away all the funds. " They cite the Arizona example; I suspect there are others, because that is the leverage.

GENERAL VERRILLI: But it -

CHIEF JUSTICE ROBERTS: I'm not saying there is anything wrong with it.

GENERAL VERRILLI: It's not coercion, Mr. Chief Justice.

CHIEF JUSTICE ROBERTS: Wait a second….It's not coercion…to say I'm going to take away all your funds, no matter how minor the infringement?

JUSTICE BREYER:  Is it a common thing, that that happens, that this unrelated threat is made? Or isn't it?

GENERAL VERRILLI: It's -- my understanding is that these situations are usually worked out back and forth between the States and the Federal government.

JUSTICS SCALIA:  Can you conceive of a State saying no? And -- and if you can't, that sounds like coercion to me.

GENERAL VERRILLI: I think…Congress predicted that States would stay in this program, but…prediction is not coercion.

And so it went.  It did not appear that any of the usually conservative Justices accepted Solicitor General Verrilli’s position, with Justice Kennedy saying, “there’s no real choice.”

Concluding Remarks

At the end of the day, both Verrilli and Clement offered a few eloquent closing remarks that I think are worth quoting without comment.  Verrilli spoke first about the health care marketplace problems that the Affordable Care Act was designed to solve. Then Clement spoke about individual liberty.

GENERAL VERRILLI:  …[P]roblems in the economic marketplace…have resulted in millions of people not having health care because they can't afford insurance.  There is an important connection, a profound connection between that problem and liberty. And I do think it's important that we not lose sight of that. That in this population of Medicaid eligible people who will receive health care that they cannot now afford under this Medicaid expansion, there will be millions of people with chronic conditions like diabetes and heart disease, and as a result of the health care that they will get, they will be unshackled from the disabilities that those diseases put on them and have the opportunity to enjoy the blessings of liberty.

....The Congress struggled with the issue of how to deal with this profound problem of 40 million people without health care for many years, and it made a judgment, and its judgment is one that is, I think, in conformity with lots of experts thought, was the best complex of options to handle this problem.

Maybe they were right, maybe they weren't, but this 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.

CLEMENT:   Let me just finish by saying I certainly appreciate what the Solicitor General says, that when you support a policy, you think that the policy spreads the blessings of liberty.  But I would respectfully suggest that it's a very funny conception of liberty that forces somebody to purchase an insurance policy whether they want it or not. And it's a very strange conception of federalism that says that we can simply give the States an offer that they can't refuse, and through the spending power which is premised on the notion that Congress can do more because it's voluntary, we can force the States to do whatever we tell them to. That is a direct threat to our federalism.

Observations

Despite a long day of serious and intense questioning, the hearings had their share of lighter moments.  Perhaps the most memorable came during the severability discussion when Kneedler encouraged the Court to read the Act to determine congressional intent.  Referring to the Constitution’s stricture against cruel and unusual punishment, Justice Scalia said “Mr. Kneedler, what happened to the Eighth Amendment?  You really want us to go through these 2700 pages?”  Laughter followed.

Although the government’s attorneys appeared to make crisper arguments today than yesterday and the usually liberal Justices forcefully questioned Clement, it was hard to see specifically any improvements in the government’s chances to capture support from potential swing Justices.  The questions and statements from the usually conservative Justices indicated little sympathy for the government’s contentions.

During their deliberations, it is entirely possible that the Justices will decide that despite their reservations, they should defer to Congress and uphold the act.  Upon further reflection, they may not be ready to undo the market reforms that the ACA put in motion.  In a subsequent post, I will discuss the most salient policy and legal issue to emerge from the hearings.