September 9th, 2012
Although National Federation of Independent Business v. Sebelius finally decided the most contested constitutional questions raised by the Affordable Care Act—the constitutionality of the individual responsibility requirement and of the Medicaid expansions—it by no means put an end to ACA litigation. In the wake of the June 28, 2012 decision, the courts continue to decide ACA cases and new cases continue to be filed.
A challenge to the ACA’s expanded self-referral prohibitions. On August 16, 2012, the Fifth Circuit federal court of appeals dismissed the plaintiffs’ complaint in Physician Hospitals v. Sebelius. This case had challenged the constitutionality of a provision in the ACA that extended to physician-owned hospitals the Stark self-referral prohibition, which bans Medicare payment for services ordered by a physician that has an investment or compensation arrangement with the provider that delivers the service.
The ACA provision prohibits Medicare payment for services ordered by physician-owners provided by hospitals that were first licensed after December 31, 2010 or, subject to certain exceptions, that expanded after that date. The plaintiffs in the case were an association of physician-owned hospitals and a physician-owned hospital that had planned an expansion that would have been completed after 2010.
The plaintiffs argued that the ACA provision violated their due process rights, took their property without just compensation, and was unconstitutionally vague. The district court rejected each of these arguments and held the statute was constitutional. On review, the Fifth Circuit dismissed the case for lack of jurisdiction, holding that the plaintiffs must first present their arguments through the Medicare appeal process before they can challenge the law in court. For now, therefore, the issue remains unsettled.
Challenging the Independent Payment Advisory Board. Another case, Coons v. Geithner, decided August 31, 2012 by the United States District Court for the District of Arizona, raised a number of constitutional challenges to the ACA, including a challenge to the constitutionality of the Independent Payment Advisory Board. The plaintiffs claimed that the ACA unconstitutionally delegated legislative authority to the IPAB. In delegation cases, however, courts require only that Congress articulate “intelligible principles” to guide agency discretion. The court held that Congress had clearly enacted intelligible principles to guide the IPAB.
The plaintiffs in Coons also claimed that the individual responsibility provision violated substantive due process and was preempted by the Arizona Constitution and Health Care Freedom Act. The court expressed skepticism as to whether these arguments were viable given that the Supreme Court interpreted the mandate as only imposing a tax, but held off on dismissing the case to give the plaintiffs a chance to argue these issues.
A privacy-based assault on the individual mandate. On August 23, the United States District Court for the Southern District of Mississippi dismissed Walters v. Holder, yet another individual mandate challenge, this one based on an alleged unconstitutional violation of the plaintiffs’ right to privacy. The plaintiffs claimed that they would have to reveal confidential medical information to comply with the mandate. The court held that some of the plaintiffs could not challenge the mandate because they were already insured and thus not affected by it, and that the remaining defendants had not demonstrated that they would in fact have to disclose confidential information.
The case was, therefore, not ripe for adjudication. The plaintiffs will be able to refile their case if at some point in the future they can demonstrate that constitutionally protected privacy rights have been violated.
More in the battle over contraceptive coverage under the ACA. On August 24, 2012 the United States District Court for the District of Columbia dismissed yet another of the cases that have been brought by religious institutions challenging the requirement that insurers cover contraceptives. This case was brought by Wheaton College, an evangelical college that apparently does not object to coverage of all contraceptives but rather to specific “morning after” or “week after” contraceptives that it views as abortifacients.
At the time the case was filed, it was unclear whether Wheaton fell within the regulatory safe harbor, which delays enforcement of the rule against certain religious institutions until August 2013, because of the fact that it did not object to all contraceptives. An amended guidance issued in August, however, covers Wheaton. The court held, therefore, that Wheaton did not have a present dispute, since it falls within the enforcement safe harbor, and that resolution of the legality of the application of the contraceptive rule to religious institutions was premature since HHS has not reached a final conclusion as to how it will apply the rule to religious institutions.
Maine seeks to extend the coercion doctrine to the ACA’s Medicaid maintenance-of-effort requirement. Finally, on September 4, 2012, the State of Maine filed a new case in the First Circuit Federal Court of Appeals requesting that the court order HHS to approve three Medicaid plan amendments Maine has proposed to remove Medicaid coverage for three eligibility categories presently covered by Medicaid. The ACA requires states to maintain current Medicaid eligibility levels 1) for adults until the exchanges are operational in 2014, and 2) for children until 2019.
Maine has requested that HHS approve its request remove eligibility for three categories of Medicaid enrollees. In each category its coverage exceeds federal minimum eligibility requirements, but the maintenance of effort provisions apply to optional as well as mandatory coverage as long as the coverage was in effect at the time the ACA was adopted. HHS is currently considering Maine’s plan amendment, but Maine requested that the court enjoin HHS from refusing it.
Maine argues that the maintenance of effort requirement is unconstitutional under the Medicaid portion of the Supreme Court’s NFIB decision. It claims that it is unconstitutionally coerced by the ACA into maintaining its current eligibility standards under threat of the loss of all Medicaid funds, and that for budgetary reasons it must reduce Medicaid coverage. But the NFIB decision extends only to the ACA’s Medicaid expansion to cover adults up to age 26, expressly because the expansion changed Medicaid coverage. It does not, at least explicitly, apply to a requirement that the current program be maintained. The full ramifications of the application of the NFIB ruling to state spending programs remain to be seen, but extending the NFIB holding to the maintenance of effort provision would be a radical expansion of the Supreme Court’s decision.
Fortunately, it is unlikely that the court will have to reach this question. First, Maine has not yet availed itself of the administrative remedies that are available to it, and it is quite likely that the court will instruct it to do so. Second, there is an explicit exception to the ACA’s maintenance of effort provisions for states that offer coverage to non-pregnant, nondisabled adults with incomes above 133 percent of poverty if the state has a budget deficit. This exception would seem to cover Maine’s situation and is likely to obviate a court ruling on the constitutional question.
ACA litigation is unlikely to end soon. Many of the contraceptive cases remain pending, and a handful of the pre-NFIB cases are still being litigated as well. Moreover, if Governor Romney is elected president and follows through on his promise to waive compliance with the ACA, a whole new round of cases are likely to be filed challenging his constitutional authority to do so. The ACA should keep lawyers employed for the foreseeable future.Email This Post Print This Post