What the Supreme Court is Hearing Today: Wednesday – Severability and Medicaid

Update (12:45 PM ET): Audio and transcript from this morning’s arguments is available here.

Update (3:12 PM ET): Audio from the afternoon arguments is available here.

Over the last few days we have posted brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”). As the audio of the oral arguments is released, we will post links to the audio here. Go to our prior posts for some background and a discussion of Monday’s and Tuesday’s arguments. As with Tuesday’s arguments, the individuals challenging the law are joined by the National Federation of Independent Businesses (“NFIB”). Additionally, similar to the arguments over the AIA described in Monday’s post, the Court appointed a special counsel to argue in favor of complete severability of the Individual Mandate.

Today, they will hear a total of two and a half hours of argument: 90 minutes on the issue of Severability, a break for lunch, and then 1 hour on PPACA’s expansion of Medicaid. We will take each argument separately.


What are they arguing about? If the Court determines that the Individual Mandate is unconstitutional (as discussed in yesterday’s post), then can the Mandate be removed from the law by itself with the rest of the law intact (i.e., can it be “severed”)? If the Mandate cannot be severed, then the entirety of PPACA must be invalidated. Severability is an issue of Congressional intent (to the extent 535 people can be said to have a single intent) as expressed in the text of the legislation, its purposes, and the path the legislation took to becoming a law.

What does the U.S. Government say? First, the Court does not even have to go here because the Individual Mandate is constitutional (we’re paraphrasing, but that’s the gist). But since that would have been a short brief, they go on to argue first that the individuals and states cannot challenge provisions of the law that do not impact them, so the Court can only consider the Individual Mandate and Medicaid provisions that are being challenged. If the Court nevertheless decides to conduct a severability analysis, only the community rating and guarantee issue provisions should be struck down (see yesterday’s post for more detail on those provisions). All the other provisions of PPACA, they argue, operate independently of the Individual Mandate and therefore can be left alone.

What do the Individual Parties/NFIB say? The issue could not be more clear. The version of PPACA passed by the House contained language that expressly said any part of the law that is unconstitutional can be severed from the rest of it (this language is sometimes, but not always, included in legislation). However, the final version of PPACA that was signed by the President did not contain any such clause; it was deleted. This means Congress considered the issue and decided that the law could not function without all of its provisions and, in particular, the Individual Mandate.

Furthermore, the Individual Mandate is so essential to PPACA’s stated purposes of lowering insurance costs and increasing coverage that to remove just the Mandate without striking down the whole law would cause a radical increase in premiums and the potential for insurers to exit the health insurance market. Additionally, based on the deal-making necessary to get the law passed, it is clear that it would not have been passed by both Houses of Congress without an Individual Mandate. Therefore, it is so integral to the law that to remove it alone, or to remove only some provisions with it, would not reflect Congressional intent. Finally, if the Court severs more than the Mandate, but does not strike down the whole law, it is essentially rewriting the law and substituting its judgment for that of Congress, which is not within the scope of constitutional powers reserved for the Court. In short, the entire Act must be declared invalid! [That whole Berlin Wall thing doesn’t do it for me. Besides, RR probably would have liked some provisions of the law! Sorry.]

What do the State Parties say? They make many of the same arguments as the Individual Parties/NFIB, but in different ways. As an interesting twist, they characterize PPACA’s reforms as falling into two buckets: “demand-side” reforms (i.e., the Individual Mandate to increase demand) and “supply-side” reforms (i.e., the community rating and guarantee issue provisions, other insurance reforms, and the Medicaid expansion). To remove only the demand-side reforms without removing the supply-side reforms would frustrate Congress’ intent to enact comprehensive health insurance reform.

What does the Special Counsel say? He argues that the mandate is severable. He points out, correctly, that the Court’s presumption is in favor of severability. He argues that the correct analysis is whether Congress would prefer (1) a PPACA without an Individual Mandate or (2) no PPACA at all and that it is clear that the broad-sweeping reforms have independent purpose from the Individual Mandate. He further argues that the absence of a severability clause is a poor indicator of Congressional intent.

Why does this matter? If the Individual Mandate is severable, then only it will be removed and the rest of PPACA will stand. However, all parties to the litigation concede that the removal of the mandate, without the removal of the community rating and guaranteed issue provisions, would result in a significant cost increase for health insurance. On the other hand, if the Mandate is not severable, all of PPACA may be struck down and then Congress will have to go back to the drawing board (and, by the way, all of the time, energy, and money spent preparing for the law will have been for naught, and there will be added confusion with respect to those items that have already gone into effect).


What are they arguing about? They are debating whether the expansion of the Medicaid program in PPACA is coercive to the States and thus tramples on their rights as independent sovereign entities. Briefly, by way of background, Medicaid is a federal program which is run by the States. The Federal Government provides certain matching funds provided that the States make Medicaid available to certain groups. States, however, have traditionally had substantial (although not complete) flexibility in setting rules for eligibility within the framework established by Congress.

What Does the U.S. Government Say? Congress’ spending power allows it to put conditions on the money that it disperses to the States for Medicaid. Therefore, the conditions in PPACA are a reasonable exercise of that authority. States are still free to opt out of the Medicaid program; the U.S. Government is not compelling them to continue in it. Furthermore, even if this expansion is unconstitutional, it should not invalidate the rest of PPACA.

What do the State Parties say? PPACA is now going to require them to cover everyone, without exception, who has income below 138% of the Federal poverty level, thus effectively mandating eligibility for a State-run program and removing the State’s traditional right to determine eligibility. Additionally, PPACA requires increases in the levels and types of benefits States must offer so that the coverage constitutes minimum essential coverage that satisfies the Individual Mandate, which was not previously required. PPACA also locks states into their current benefit levels and eligibility standards, even if the levels and standards were more generous than what Medicaid previously required. Furthermore, under prior Medicaid expansions, States could choose not to participate in the expansion. However, the PPACA expansion is mandatory for any State that participates in Medicaid. This means States have to accept the expansion or forfeit all Medicaid funds from the U.S. Government. In short, because Congress could not pass a law compelling States to participate in Medicaid, it should not be allowed to achieve the same result by effectively coercing States to take on the administrative burden (and some of the cost) of the massive Medicaid expansion or choose to exit Medicaid altogether.

Why does this matter? It matters to the States for several reasons. However, for benefits professionals, it matters for a couple of reasons as well. If the States are successful in challenging the Medicaid expansion, it may result in a “back door” invalidation of PPACA. The Court could possibly conclude that the Medicaid expansion is not severable from the rest of PPACA and therefore the entire statute is invalidated, regardless of the constitutional propriety of the Individual Mandate. Furthermore, if the Court rules against the U.S. Government on both the Individual Mandate and the Medicaid expansion, it makes the case for striking down the whole of PPACA stronger because it is more difficult to concede that Congress would have enacted the law without both pieces.

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