By: Kevin E. Raphael
On June 28, 2012, a sharply divided United States Supreme Court decided that The Patient Protection and Affordable Care Act (“PPACA”) is constitutional. National Federation of Independent Business, et. al. v. Sebelius, et al., 567 U.S. __ (2012) (cites here to Slip Opinion). Three separate Opinions - by Chief Justice Roberts (writing for the Court), Justice Ginsberg (a concurring opinion), and Justice Scalia (a dissent) - offer three contrasting, and occasionally acerbic, views of how the Constitution should be interpreted. This article will briefly summarize the reasoning behind all three Opinions. More important to healthcare providers, this article will briefly detail the strong Fraud Abuse and Waste provisions in the PPACA. Increased communication between, and use of, government databases, ever more sophisticated data mining, and stronger False Claims Act and Anti-Fraud Abuse and Waste provisions, will have direct impacts on all health care providers.
The Supreme Court Opinion
The Supreme Court’s Opinion reviewed two integral components of the PPACA: 1) the requirement that individual states expand the medical benefits to a larger group of people, including all adults with incomes up to 133% of the federal poverty level, or risk losing the entire federal government’s contribution to the state’s Medicaid budget; and 2) the “individual mandate,” that requires those who do not have health insurance to pay a “penalty.”
The Expansion of Medicaid
The first issue was handled with little rancor. The Court, by a 7 – 2 vote, held that Congress could not strip a state of all federal dollars provided to that state for its entire Medicaid program, solely because that state refused to expand its Medicaid program as required by the PPACA. The Court recognized that the concept of federalism does not permit Congress to compel the individual states to implement federal policy:
Permitting the federal government to force the states to implement a federal program would threaten the political accountability key to our federal system. “Where the Federal Government directs the states to regulate, it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision . . .” (citation omitted) . . . Spending clause programs do not pose this danger when a state has a legitimate choice whether to accept the federal conditions in exchange for federal funds . . .But when the state has no choice, the federal government can achieve its objectives without accountability. . .” Opinion (C. J. Roberts) at 48.
The "Individual Mandate"
The Supreme Court, however, was deeply divided on the constitutionality of the second issue, the “individual mandate.” The debate raged over two questions: First, does the compelled purchase of health care insurance fall with the definition of “commerce,” so that Congress has the power to regulate? Second, should the penalty that individuals are forced to pay be defined as a tax?
1. The Majority Refuses To Uphold The Individual Mandate Pursuant To The Commerce Clause
Chief Justice Roberts’ Opinion resoundingly found that the mandated purchase of health care insurance is not “commerce” which can be regulated by Congress. While Chief Justice Roberts’ Opinion offers several supporting arguments, the opinion is best summed up by this provision:
The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Every day individuals do not do an infinite number of things. In some cases they decided not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and – under the Government’s theory – empower Congress to make those decisions for him. Opinion (C. J. Roberts) at 20.
Justice Scalia’s dissenting Opinion, in which he was joined by Justices Kennedy, Thomas and Alito, took a more hostile view of Congress’ imposition of the “individual mandate” justified by the Commerce Clause. The mandate, the dissent concluded, was not the regulation of Commerce, it was the creation of commerce: “To be sure, purchasing insurance is commerce, but one does not regulate commerce that does not exist by compelling its existence.” Opinion (J. Scalia) at 4.
The dissenting Justices also refused to accept the government’s argument that the “individual mandate” is constitutional because Congress can “regulate any activities having a substantial relation to interstate commerce.” Id. at 10. The government argued that the individual mandate regulated how individuals financed their participation in the health care market, which, unlike any other market, is one that everyone eventually enters. The dissent acknowledged the truth that everyone consumes health care at some point, but found this insufficient to justify federal government regulation mandating participation in that market.
Justice Ginsberg, joined by Justice Santomyer, Breyer and Kegan, concluded that the “Commerce” and the “Necessary and Proper” clauses of the Constitution permitted Congress to impose the “individual mandate.” This Opinion spends significant time discussing the complexity of the health care market and examining the truth that all people, by choice or not, enter the health care market due to unexpected illness or injury. Further, the Justices discuss in depth the problem the individual mandate is meant to avoid: the cost-shifting of health care caused by those who choose not to purchase health care insurance. This Justice’s reasoning is summarized best as follows:
Not only do those without insurance consume a large amount of health care each year; critically, as earlier explained, that consumption drives up market prices, foists costs on other consumers, and reduces market efficiency and stability (citation omitted) . . . Given these far reaching effects on interstate commerce, the decision to forego insurance is hardly inconsequential or equivalent to “doing nothing” . . ., it is instead an economic decision Congress has the authority to address under the Commerce Clause. Opinion (J. Ginsberg) at 17.
2. Can The Individual Mandate Be a Tax If Congress Called It A Penalty?
Were the Commerce Clause the only basis for upholding the “individual mandate,” it would have been found unconstitutional. However, the government also relied on Congress’ authority to tax and spend. Chief Justice Roberts, in the Court’s Opinion, first noted precedent that required the Court, when faced with a question of statutory interpretation, to adopt the interpretation that will save the legislation. Opinion (C. J. Roberts) at 31.
Accordingly, the Court held that the “individual mandate’ was a tax, fully within the constitutional authority of Congress: “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” Id. at 44.
The dissent, authored by Justice Scalia, was unambiguously hostile to the majority’s decision. Citing the “mountain of evidence” that Congress intended the mandate to be a penalty, the dissent concluded:
. . . to say that the Individual Mandate merely imposed a tax is not to interpret the statute but to rewrite it. Judicial tax-writing is particularly troubling. . . Imposing a tax through judicial legislation inverts the Constitutional scheme, and places the power to tax in the branch of government least accountable to the citizenry. Opinion (J. Scalia) at 25.
The Fraud Abuse and Waste Provisions in the PPACA
The PPACA has had, and will continue to have, a significant impact on data collection and data mining as tools for detection, investigation and prosecution of fraud, abuse and waste (“FAW”). The provisions that will continue to have the most impact are the following: (1) the National Practitioner Data Bank is now the repository for all health care fraud and abuse data and for information concerning certain final adverse criminal and licensing actions; (2) states are required to report greater amounts of information concerning final adverse actions against providers, in addition to billing information and FAW concerns; and, (3) law enforcement, including HHS-OIG and the Attorney General, will also have access to claims and payment databases for purposes of conducting law enforcement and oversight activities.
Further, the PPACA expands existing FAW laws. For instance, the PPACA revised the criminal intent requirement of the Anti-Kickback Statute (“AKS”). The PPACA provides that, with respect to violations of the AKS, a person need not have actual knowledge of the AKS or specific intent to commit a violation of the AKS.
Also, the PPACA establishes a Self-Referral Disclosure protocol (SRDP) for actual or potential Stark violations. Under the SRDP, providers and suppliers may report existing or potential Stark violations to HHS. The SRDP disclosures must describe the potential Stark issue, a legal analysis for why the disclosing party believes there was a Stark violation, the circumstances under which the potential Stark violation was discovered, the potential financial impact, and any remedial actions taken by the disclosing party.
Now that the PPACA is declared constitutional, the uncertainties surrounding its implementation are gone. The Government will continue to aggressively use its tools, along with existing FAW programs, to identify, pursue, and recover monies that it claims were paid improperly.
This article is reprinted with permission; it first appeared in the August 2012 issue of the Bulletin, official membership magazine of the Allegheny County Medical Society.