Obama Health Care Bill Next Up for Appeals Court Challenge

June 7, 2011 -- A federal appeals court in Georgia Wednesday is poised to hear a challenge brought by 26 states to the Obama administration's health care law.

Although appeals courts in Ohio and Virginia have heard similar challenges to the constitutionality of the Affordable Care Act, Wednesday's case has drawn increased attention because of the number of states involved and because a lower court judge invalidated the entire law when he ruled against the Obama administration in January.

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.

Judge Roger Vinson of the U.S. District Court for the Northern District of Florida went further than any other judge in January and ruled that Congress had exceeded its authority in passing the mandate and concluded that the rest of the law could not stand without it.

"I must conclude that the individual mandate and the remaining provisions are all inextricably bound together in purpose and must stand or fall as a single unit," he said.

"In the final analysis, this act has been analogized to a finely crafted watch, and that seems to fit. It has approximately 450 separate pieces, but one essential piece (the individual mandate) is defective and must be removed."

Vinson's ruling won't take effect pending the resolution of the appeal. While an appellate court has yet to rule on the case, three lower court judges have upheld the law and two others have ruled against the Obama administration.

The issue is expected to ultimately reach the Supreme Court. Wednesday's case will include arguments by powerhouse Washington lawyers. Acting Solicitor General Neal Katyal will defend the law on behalf of the government while Paul Clement, the former solicitor general of the Bush administration, will argue on behalf of the states. Clement will be joined by Michael A. Carvin of Jones Day, who is representing two private parties, and the National Federation of Independent Business, which also opposes the law.

Katyal argues in court papers that Congress was well within its authority to pass the individual mandate because the Constitution give Congress the broad authority to regulate interstate commerce.

Katyal points to the historical astronomical costs of the uninsured -- $43 billion in 2008 -- and says that such costs are passed on to other participants across the country in the health services market.

The individual mandate, he argues, is meant to regulate the timing and method of payment for health care services.

"The tens of billions of dollars in annual health care costs that people without insurance fail to pay are passed on to other participants in the health care services market, a burden on interstate commerce that plainly qualifies as substantial."

Katyal stresses that individuals, at some point in their lives, will all need health care and this law is about how to finance it.

But Clement argues that the law forces individuals into a marketplace and "pushes even the most expansive conception of the federal government's constitutional powers past the breaking point."

"The Act," he writes, "imposes a direct mandate upon individuals to obtain health insurance, marking by all accounts the first time in our Nation's history that Congress had required individuals to enter into commerce as a condition of living in the United States."

Court to Hear Challenge to Health Care Law

He argues, "Congress has substantial power to regulate interstate commerce, but it may not compel individuals to enter into such commerce so that Congress may better regulate them."

At issue in this case is also the law's provision that expands the reach of Medicaid, a program enacted in 1965 in which the federal government provides financial assistance to the states so that they can serve the medical needs of low income individuals. 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.

But Clement argues that the law will add significant administrative expenses to the states and force them to eventually cover more citizens.

"The added burdens, costs and liabilities from this new requirement -- particularly in the face of federal projections of severe provider shortages -- are incalculable but sure to be substantial, underscoring that the ACA transforms Medicaid well beyond anything the States volunteered to implement," he writes.

"The only means by which a State may avoid the ACA's substantial new burden is by withdrawing entirely from the Medicaid program, which is simply not possible given the amount of money at stake," Clement says.

Although Vinson found that the individual mandate was unconstitutional, he rejected the states' argument on Medicaid, noting that the states have the right to withdraw from participation if they don't agree with the funding terms.

The randomly chosen panel hearing the case consists of Chief Judge Joel F. Dubina, nominated to the bench by President George H.W. Bush, Judge Frank M. Hull, a nominee of President Clinton and Judge Stanley Marcus, who was nominated to the appeals court by Clinton but had been nominated to the district court by President Reagan. At the district court level the judges who have upheld the law were all nominated by Democratic presidents, and those who have ruled against the Obama administration were nominated by Republican presidents.

While the mostly Republican attorneys general or governors of the 26 states are challenging the law, 10 other states have filed briefs in support of the law.

Elizabeth Wydra, chief counsel of the Constitutional Accountability Center, filed a brief on behalf of state legislators in favor of the law.

"Not all states are opposed to the law. While the 26 states claim to represent the rights of the states in general using Tea Party-friendly states rights rhetoric, the truth is that there are many state leaders who think the act is constitutional, and that it will strongly benefit their states and constituents."

Wydra notes that this is the first appeals court that will hear arguments on the Medicaid provision.

"The expansion of Medicaid in the Affordable Care Act will enable millions of people to access affordable health care and represents federalism at its best in the sense that it continues the long-standing partnership between the states and the federal government in providing care for those who cannot afford it," she said.