In the balance

As the dust settled on last week's live arguments before the U.S. Supreme Court, even experts who supported the healthcare reform law said the question for the justices seemed to become not whether to invalidate parts of the law, but how much of it.

Much can happen during private discussions, however, before the justices release final opinions by June 29.

Conservative-leaning justices on the court brought out the long knives for the Obama administration's lawyers during the three days of oral arguments last week, openly criticizing the Patient Protection and Affordable Care Act as an unprecedented exercise of power and defying government attorneys to answer even basic inquiries such as defining the limits of Congress' power.

Put on the defensive, U.S. Solicitor General Donald Verrilli Jr. fell back on two well-trod arguments in favor of the law.

First, he said, the mandate to purchase insurance is simply a matter of regulating the timing of the purchase of healthcare, since every American will use it at some time in his or her life but some will shift their costs to others. And second, Verrilli said, expanding regulation in the interstate insurance market is clearly allowed by past Supreme Court precedents on the Constitution's commerce clause.

“I'm not sure that sold the day,” said William Petasnick, president and CEO of Froedtert Health in Milwaukee and a past guest lecturer in healthcare constitutional law at the University of Wisconsin at Madison.

Petasnick—who read the argument transcripts—said that despite the skeptical tone of some justices' arguments during the March 26-28 hearings, the justices will also have time for deeper deliberations about the long-term consequences of their ruling before issuing any opinions.

“If I were a betting person listening to the arguments and hearing the transcripts, I would come away and think they would throw out the mandate,” Petasnick said. “But I think there is some case law and precedent that might move them in a different way because of the consequences.”

Several observers said that questions during the arguments seemed to show that Justice Anthony Kennedy was the clear swing vote, though others have said Chief Justice John Roberts is likely to place himself on the winning side of the debate no matter which side wins, which would allow the chief justice to control who writes the majority opinion.

Only minutes into the week's main event, the Day Two debate over the individual mandate, Kennedy fired a dart at Verrilli that echoed the main criticism of the law's opponents: “Can you create commerce in order to regulate it?” Kennedy asked.

“That's not what's going on here, Justice Kennedy, and we are not seeking to defend the law on that basis,” Verrilli said.

Ilya Shapiro, a senior fellow on constitutional studies with the libertarian Cato Institute, which opposes the reform law, said he was heartened to watch from the audience as Kennedy started off with that line of questioning.

“Just seeing that, my heart began to race,” Shapiro said. “It was like: They're getting it, they're getting it.'”

Kennedy went on to ask Verrilli other pointed questions: “I understand that we must presume laws are constitutional, but, even so, when you are changing the relation of the individual to the government in this, what we can stipulate is, I think, a unique way, do you not have a heavy burden of justification to show authorization under the Constitution?”

And: “Well, then your question is whether or not there are any limits on the commerce clause. Can you identify for us some limits on the commerce clause?”

Joel Ario, former director of HHS' Office of Health Insurance Exchanges who now works in private industry for Manatt Health Solutions, believes the insurance mandate conforms to decades of court precedent, but he noted it would only take five justices' votes to change the precedent. The debate on severing other aspects of the law besides the insurance mandate struck him as more murky.

“Based on the oral arguments, you'd say the place where they were going to depart from precedent would be the mandate,” Ario said. “Where they talked about severing other parts of the act, that felt more like a political argument.”

Regarding insurance reform, the four main options before the court are:

• Do nothing.
• Strike down the individual mandate to purchase insurance.
• Strike down the mandate along with two closely related reforms prohibiting discrimination in issuing insurance.
• Invalidate the entire law, under the theory that doing so would create no unintended consequences.

The court heard arguments over whether a complex jurisdictional question involving an 1867 federal law called the Anti-injunction Act could delay consideration of the rule until after the insurance rules go into effect in 2014, though most observers said that seemed an unlikely outcome.

Finally, the court considered a related but separate question of whether Congress can force states to expand their eligibility criteria for Medicaid to 138% of the federal poverty level by threatening to revoke a state's massive federal Medicaid subsidies if they don't agree to the new terms.

Dr. Steve Mansfield, president and CEO of Methodist Health System in Dallas, said his optimism for the law's survival at the high court was slightly dampened after hearing the arguments.

Losing the individual mandate would leave the industry with the same broken system that already exists, he said, which is why the industry needs some direction from government to reform a healthcare delivery system that “has been patched and patched and … patched.”

Mansfield, who supports the law, said the debate over severability left the court looking overly worried about hamstringing Congress and other real-world considerations. “That's very different from seeing the theory and kind of the constitutional interpretation of the law, which is more typically what you see from the court,” Mansfield said.

The 906-page reform act was approved following a full year of debate by both chambers of Congress, without a single Republican vote in favor of the final law, and signed by President Barack Obama on March 23, 2010. The law contained hundreds of provisions, from establishing demonstration programs for accountable care organizations to extending assistance for rural doctors, expectant mothers and sufferers of black lung disease.

A wave of litigation ensued in federal courts across the country, with the first lawsuits filed literally minutes after the ink from Obama's pen dried on the presidential signature line.

One lawsuit, filed in U.S. District Court in Pensacola, Fla., eventually had 26 state governments join as plaintiffs, along with two private citizens and the National Federation of Independent Business. Four legal questions arising out of that lawsuit were granted oral arguments before the Supreme Court.

As the legal challenges percolated through the lower courts, the most controversial aspect proved to be the requirement for nearly all Americans to purchase health insurance or face a penalty on their income taxes effective in 2014. The only people exempted from the insurance mandate were illegal immigrants, incarcerated prisoners and certain religious objectors.

Reforming the way healthcare was dispensed and funded had been a political goal of liberals and conservatives for decades.

However, the Affordable Care Act became law at a time of peaking partisan acrimony in the U.S., provoking critics to issue statements in grave terms, like one last week from Louisiana Attorney General James Caldwell: “This bill requires that every person, every month, pay a private insurance company until they die,” Caldwell intoned at a news conference inside the Florida House, across the street from the Supreme Court, on March 26. “This will literally help shut down this country.”

A more moderate Republican, Ohio Attorney General Mike DeWine, said at the same news conference that while Americans favor some part of the bill, they didn't favor the mandate. He urged Congress to immediately begin work on a new bipartisan bill: “The climate is there, the climate for change,” DeWine said.

Throughout the three days of Supreme Court arguments critics and supporters alike crowded the sidewalk in front of the high court, waving signs with messages such as “Hands off my health care” and spawning rally cries like, “Hey hey/Ho ho/Obamacare has got to go.”

Richard Umbdenstock, president and CEO of the American Hospital Association, said his organization supports the law—including a $155 billion reduction in Medicare payment increases over 10 years—because it seeks to expand the number of patients with insurance to pay their medical bills by 32 million.

Umbdenstock said the association won't change its plans until the Supreme Court rules. “We're just going to stay the course and assume that this is what we are working toward, until we know otherwise,” Umbdenstock said in an interview. “There were some things (in the law) that we weren't happy with, but it was a good first step to reform. It wasn't the last step to reform.”

The group positioned squarely at the center of the debate are the 50 million Americans who the U.S. Census Bureau said lacked insurance coverage in 2010. During the arguments, both critics and supporters of the law claimed they were speaking out for the rights of people who do not have insurance.

Verrilli opened his statements about the insurance mandate with an observation about their rights: “For more than 80% of Americans, the insurance system does provide effective access,” he said. “But for more than 40 million Americans who do not have access to health insurance either through their employer or through government programs such as Medicare or Medicaid, the system does not work. Those individuals must resort to the individual market, and that market does not provide affordable health insurance.”

But Paul Clement, attorney for the 26 states that sued the HHS, said the young and healthy are seen as the “golden geese” who would pay for the insurance reforms.

“One of the things Congress sought to accomplish here was to force individuals into the insurance market to subsidize those that are already in it, to lower the rates,” Clement said. “And that's just not my speculation, that's Finding 1 at 43A of the government's brief … that's one of the clear findings.”

Karen Ignagni, president and CEO of insurer trade group America's Health Insurance Plans, said in an interview that insurance companies aren't arguing for or against the constitutionality of the mandate as a stand-alone question.

Rather, her interest is in making sure that if the mandate for young and healthy people to buy coverage is tossed out, then so too should the requirement that insurers offer policies to any older and sicker patients who apply—reforms known as guaranteed-issue and community rating.

She cited a revised study AHIP released last week that found eight states that enacted guaranteed issue and community ratings laws in the 1990s without coverage mandates saw rising insurance prices, which ended up eventually driving down enrollment.

“In every state, the cost spiraled up because the younger and the healthier people thought it was getting too costly to participate, so you ended up in a death spiral in those states,” Ignagni said.

“That doesn't help anyone if that's the cycle that is unleashed,” she said. “And we've been spending a great deal of time making sure people understand that, because nothing trumps the state experience.”

—with Ashok Selvam