Virginia@: Healthcare Case: Day 3

Dear Fellow Virginians and Friends,

Today was the third and final day of the three-day healthcare hearing in the U.S. Supreme Court, and as promised, I wanted to offer you my reflections on today's hearing.

Today's arguments were divided into two separate sessions. The Court heard arguments regarding severability first. In a separate session, the Court heard the States' claim that PPACA's Medicaid expansion represented unconstitutional coercion of the States under the spending power of the constitution. I will address each session in turn.

SEVERABILITY

As those of you who have been following the various challenges know, the severability issue will only come into play if the Court finds a portion of the law unconstitutional. If the Court finds that the individual mandate is unconstitutional, it will strike that portion of the law. When it does so, the Court must also determine if the remainder of the law (or at least certain pieces of it) must also be struck down. To the extent that the Court allows other portions of the law to stand, they are said to have "severed" the unconstitutional portion of the law from what it lets stand as law.

Interestingly, as it did regarding the AIA on Monday, the Court did not just hear from lawyers representing the States and the federal government. The Court appointed a lawyer to argue that if the individual mandate is struck down the rest of the law should be allowed to continue in full force and effect.

The appointment of a lawyer to make this argument was necessary because the federal government has made a significant concession regarding severability. The federal government conceded in the all of the cases prior to the Supreme Court that, if the mandate were held unconstitutional, PPACA's provisions regarding community rating and guaranteed issue (essentially that the insurance companies have to insure someone no matter what problems they have or what risks they face) must also fall because they cannot work without the individual mandate. Interestingly, the first time the federal government made this concession was in our case here in Virginia.

So there were three basic positions argued. The States argued that individual mandate is so central to the law that the whole law must be struck down if the mandate is unconstitutional. The federal government argued that, if the mandate is unconstitutional, the mandate and the community rating and guaranteed issue provisions must be struck down, but the rest of the law may stand. Finally, Mr. Farr, the lawyer appointed by the Court, argued that, if the mandate is unconstitutional, only the mandate should be struck down.

Monday's argument about the Anti-Injunction Act was about legal procedure. Tuesday was about constitutional theory and the relationship between citizens and the federal government. Today's arguments regarding severability were all about practical, real world effects. If the Court finds the individual mandate unconstitutional, what happens next? What's the proper remedy?

From the beginning, it was clear that the justices were interested in the practical effect of striking down the mandate.

The best example of a justice being concerned with the practical effect of a ruling may have been Justice Kagan, who noted that if the mandate is found unconstitutional, but the community rating and guaranteed issue provisions are left in place, that creates a large problem. She said: "Once you say that the insurance companies have to cover all of the sick people and all of the old people, the rates climb. More and more young people and healthy people say, why should we participate, we can just get it later when we get sick. So they leave the market, the rates go up further, more people leave the market, and the whole system crashes and burns, becomes unsustainable."

While it's always dicey to try and guess the outcome from questions at oral argument, all of the justices who asked questions seemed to have this same basic concern over just striking the mandate and leaving the rest of the law in place. However, there seemed to be a difference of opinion as to whether that meant that, in addition to the mandate, just the community rating and guaranteed issue provisions should be struck down or whether the whole law should be struck down.

In asking their questions about severability, all of the justices agreed that the Court must respect Congressional prerogatives, but their questions suggested two very different views of how best to do that.

Some of the justices, particularly Justices Sotomayor and Ginsburg, seemed to suggest that the best way to show respect to Congress was to only strike limited portions of PPACA and nothing else.

Others suggested that, to truly show deference to Congress, the Court would need to strike the entire law because, to do otherwise, would be to leave Congress with a law they never passed or even intended to pass. Justice Kennedy said that if the Court struck down the mandate, but left the rest of the law standing, "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."

Justice Scalia seemed to echo this view, stating that "My approach would say if you take the heart out of the statute, the statute's gone. That enables Congress. . . . to do what it wants . . . . It seems to me it reduces our options the most and increases Congress's the most."

Justice Scalia also pointed out that the severability issue in this case was unlike any case that had come before the Court previously. He noted that the previous severability cases did not deal with the primary purposes of a statute, but generally, dealt with ancillary issues. However, he said that there is no case where the Court has found the "heart" of a law unconstitutional and left the remainder standing, stating: "This is really a case of first impression. I don't know another case where we have been confronted . . . with this decision."

I caution everyone not to read too much into the questions that justices asked about severability in trying to predict whether or not the Court is likely to find the individual mandate unconstitutional. In its opinion, the Court will only reach the issue of severability if some portion of the law is held to be unconstitutional. Thus, all of the questions about severability necessarily assumed that some provision of the law will be found unconstitutional. So, you can't assume that a justice is leaning towards striking down the law simply because of the way he or she asked a question about severability.

MEDICAID COERCION

Today's second session dealt with the States' Medicaid coercion argument. The argument is that because States are so heavily invested in the Medicaid program they are forced or "coerced" to accept the Medicaid expansion in PPACA because, if they do not, Secretary Sebelius could stop them from receiving any Medicaid funds from the federal government, causing financial ruin for the States.

The coercion theory is grounded in a few Supreme Court cases, most recently South Dakota v. Dole, which was decided in the 1980s. The issue in that case was the federal government conditioning the States receiving a small portion (7 percent) of the federal highway dollars that they would otherwise receive on States raising their legal drinking age to 21. The Court held that this was a proper use of Congress's spending power because the States could keep their drinking age at 18 if they were willing to forego the federal money.

However, in issuing its decision, the Court noted that seven percent of the federal highway money was a relatively small amount. The Court, relying on cases dating back to the 1930s, noted that there might be a situation where the amount of money involved was so large that the States would be forced into accepting the conditions. If such a situation ever arose, the Court indicated that the law might constitute unconstitutional coercion of the States.

While the theory of unconstitutional coercion is well known, the modern Court has never found a situation where it actually existed. Today's argument was really about whether such a case could ever exist or is the theory of unconstitutional coercion an academic theory that will never have practical effect.

The questions from the justices pretty much covered all of the possibilities. Some of the justices clearly suggested that so long as the States have the right to refuse the federal money, they are not being coerced. Others seemed to suggest with their questions that, given how much States have come to depend on federal Medicaid dollars, we may have finally found a case where the coercion threshold had been met.

Justice Scalia asked the Solicitor General if the federal government could identify even a hypothetical example of what would constitute unconstitutional coercion. Citing a 1911 case about the location of Oklahoma's state capital, the Solicitor General indicated that Congress could not condition the receipt of federal funds on a State moving its capital. Wow.

Chief Justice Roberts also pressed the federal government on the coercion question, seeking examples of what would go too far. However, he was also critical of the States' position, noting that, to some extent, the States reliance on Medicaid is a problem of their own making. Justice Roberts said: "Well, why isn't that a consequence of how willing [the States] have been since the New Deal to take the Federal government's money? And it seems to me that [the States] have compromised their status as independent sovereigns because they are so dependent on what the Federal government has done, they should not be surprised that the Federal government having . . . tied the strings, they shouldn't be surprised if the Federal government isn't going to start pulling them." Again, wow. But this one hurts in part because of the truth in it.

For me, one of the most significant comments on the Medicaid issue came from Justice Alito. As those of you who have followed our efforts from the beginning know, I have repeatedly said that this case is not about health care, it's about liberty. The decision in this case will determine whether federalism - a bulwark of liberty - survives as a tool to preserve our liberty. While noting that the federal government might be correct in its argument, Justice Alito said that, if Congress can condition the receipt of all federal funds on accepting all federal strings no matter what those strings are, "then there is nothing left of federalism."

As I have said before, it is risky to try and guess the outcome based on the questions asked at oral argument (even three days worth of oral argument). The three days of argument have generated lots of things to think about, and I will be reflecting on all of it over the next few days. Once I have chewed on these last three days, I will probably write another Compass giving you my impressions of the whole week taken together.

While I still make no predictions on what the Court is likely to do, I have been cautiously optimistic since we filed the first challenge to PPACA. This week has left me more encouraged about our prospects then I have been to date. I still believe that the positions we have taken, and that our sister States have taken, are consistent with the Constitution and the foundational principles of this great nation.

You can hear my audio summary of today's hearings by clicking here.

I'll write on this subject again, but now we have three months to wait until we see the final order.

Finally, please, once again, encourage others to sign up for The Compass. We are trying to get over 5,000 new subscribers this week, and we're well on our way, but we need your help. So, please forward this on to others and encourage them to go to www.Cuccinelli.com to sign up for themselves!

Thanks so much!

Sincerely,