Health Care Law: Appeals Court Seems Skeptical of Obama Administration's Argument

VIDEO: One Third of Employers May Drop Health
WATCH One Third of Employers May Drop Health Coverage

A lawyer for the Obama administration told a panel of federal judges on Wednesday that health care is a "universal feature of our existence" and that Congress was well within its authority in passing a sweeping health care law.

But the judges seemed, at times, skeptical of some of the key arguments made by Acting Solicitor General Neal Katyal on behalf of the government.

Twenty-six states are challenging the constitutionality of the law, the Affordable Care Act, and arguing that it should be struck down.

At the heart of the case is the key provision of the law, the individual mandate, that requires individuals, with few exceptions, to buy health insurance by 2014 or pay a tax penalty.

The case was heard by three judges from the 11th Circuit Court of Appeals, the third appellate court to hear a challenge to the law considered the signature legislative achievement of the Obama administration.

Paul Clement, representing the states, said that Congress exceeded its authority in passing the individual mandate because it forces people into the market place.

Clement said the case turns on "whether or not the federal government can compel an individual to engage in commerce."

The judges began by asking the government whether the case is unprecedented.

"I can't find any case that is just like this," said Chief Judge Joel G. Dubina.

Dubina asked the government whether there would be any limits to Congress' reach if the court upheld the individual mandate.

Katyal said that health care is a unique market because "every single person can't guarantee that they won't need health care," adding that the mandate was "all about financing" how health care could be paid for.

Judge Stanley Marcus pressed again on the issue of precedent.

"Is there any case out there," he asked, that involves the power "to compel the purchase of a product on the open market?"

Katyal said the case wasn't about the government forcing someone to buy a product. It was about how to regulate the payment of a product that every American will eventually need.

He noted that in 2008 the cost of the uninsured was $43 billion, and those costs were shifted to other participants in the health care system across the country. He said that the commerce clause of the Constitution empowers Congress to regulate such interstate commerce.

Clement argued that although Congress may have the right to regulate interstate commerce, it doesn't have the authority to "compel people to engage."

Judge Frank M. Hull challenged Clement's notion that a person choosing not to buy health insurance is involved in economic "inactivity," and thus outside of Congress' reach.

"The whole inactivity discussion doesn't get me very far" she said, noting that someone's choice to not participate in the market is still an "economic decision."

But Hull asked a long series of questions that would be of concern to the government regarding whether the law would be able to survive if its key provision, the individual mandate, was struck down.

The only way the court would need to reach the so called "severability" argument is if it threw out one or more provisions of the law.

Clement said that the individual mandate is the "driving force" behind the entire law and suggested the court should uphold the lower court decision that threw out the entire law after finding the individual mandate was unconstitutional.

Hull also questioned whether other parts of the law could solve some of the health care problems addressed by the individual mandate.

Katyal reacted sharply by saying it would be a "deep, deep" mistake to say that some of the problems could be solved through other mechanisms in the law.

Former Acting Solicitor General Walter Dellinger, who attended the arguments and believes the law is constitutional, said Wednesday's panel of judges asked "more skeptical questions of each side and, perhaps, asked more skeptical questions of the government" than a panel of judges who heard a similar case in Virginia. The panel in that case was comprised of three judges who were nominated to the bench by Democratic presidents and they seemed openly skeptical of the arguments of those challenging the health care law.

Judge Dubina was appointed by President George H.W. Bush, while Hull and Marcus were both Clinton nominees.

The arguments also marked the first time an appellate court has heard a challenge to another provision of the law that expands the reach of Medicaid.

Clement argued that the government had gone too far in asking the states to add significant administrative expenses and force them to eventually cover more citizens through Medicaid.

According to the law, the federal government will initially fund 100 percent of the expanded benefits. State participation in the program has always been voluntary.

Judge Dubina seemed receptive to Clement's argument.

Elizabethe Wydra, the chief counsel of the Constitutional Accountability Center who filed a brief in defense of the law, noted that this is the third appellate court to hear arguments.

"Many of the judges, whether considered to be conservative or liberal, recognize that the decision not to buy health insurance is, in fact, an economic decision," she said. "Supreme Court precedent makes clear that Congress has authority to regulate such economic activity."

But Florida's attorney general, Pam Bondi , who attended the arguments and is opposed to the law, said afterwards, "The federal government could not rebut our argument that the individual mandate is an unprecedented intrusion on individual liberty.

The issue is expected ultimately to reach the Supreme Court.