"Unsettled" Healthcare Law | Orthopedics This Week
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"Unsettled" Healthcare Law

Top Row: Judge George Caram Steeh and Judge Norman Moon. Second Row: Judge Michael Schneider and Judge Henry Hudson.

The score is now 2 to 1 in favor of the new healthcare law, as three federal judges have ruled on the constitutionality of the Affordable Care Act (Act).

After Clinton-appointed federal judges Norman Moon in Virginia and George Caram Steeh in Michigan, ruled the Act's requirement that people buy their own health insurance is constitutional, a third judge in Virginia, Henry E. Hudson, appointed by George H.W. Bush, ruled otherwise on December 13 in Cuccinelli v. Sebelius. We now have unsettled law.

There is a fourth case brought by Attorneys General from 20 states waiting to be decided in Florida by Judge Roger Vinson, a Reagan appointee. 

Settling Unsettled Law

The decisions will likely be pushed upstream to the Federal Appeals Court where the constitutional questions will be teed up for a Supreme Court decision, unless President Obama and a new Congress reach a new agreement on insurance coverage. No case before the Court will be more watched or politically charged since the Court decided the 2000 presidential election.

The Virginia case was the first one where the challenger was a state. The two previous cases were brought by private parties, one of whom was Jerry Falwell's Liberty University.

The Virginia challenge was brought by the Commonwealth's Attorney General, Kenneth Cuccinelli. Cuccinelli sued Kathleen Sebelius, the Secretary of the Department of Health and Human Services, challenging, among other things, the constitutionality of the "minimum essential" insurance requirement of the new law.

The Tyler Texas Rebels

There is however, another important constitutional challenge to the Act for physicians to watch and that's the Tyler, Texas, surgeons' challenge to the law's provision limiting the rights of physicians to own their own hospitals.

Scott Oostdyk, the constitutional lawyer representing the Tyler surgeons, including Mike Russell, M.D. and Charley Gordon, M.D. of the Texas Spine and Joint Hospital, told OTW that the parties expect to hear soon from the federal judge hearing the case. The government is asking the judge to summarily dismiss the physicians’ challenge because they failed to show that the ownership provision of the law violated a physician’s constitutional right to equal protection and due process.

Texas Spine and Joint Hospital
Oostdyk said Judge Michael Schneider has telegraphed that, so far, he has not been convinced by the physicians’ arguments. The chances for the Tyler rebels seem to be getting slimmer.

However, says Oostdyk, the Attorneys General's challenge in Florida may accomplish the same result if the judge rules against the Act.

In Oostdyk’s view the Florida decision, if decided for the challengers, could strike down the entire Act, as opposed to Hudson's decision in Virginia, which narrowly struck down the part of the Act which mandates insurance coverage. Judge Hudson "severed" part of the law, which Oostdyk believes was not intended by Congress when it passed the Act.

The Texas case is perhaps more important to physicians because it addresses the rights of physicians to participate in their own means of production, that is, owning the property which allows them to deliver services to patients. If they win in Texas, the equal protection and due process precedent will be there for future challenges to physician-owned distributorships, manufacturers and other healthcare delivery mechanisms.

Physician-owned hospitals are notoriously popular with patients and rate high on quality measurements, while physician-owned distributorships have shown an ability to squeeze costs out of the system. Of the 5, 815 hospitals in America, 265 are owned by physicians.

Oostdyk says his clients will make a decision about how to proceed depending on Judge Schneider's decision. He said that his clients have received widespread support from their colleagues around the country.

Policy Implications of Decision

Judge Hudson's ruling does not stop implementation of other provisions of the Act, like preventative care coverage and the mandate that adult children can stay in parents’ employer-sponsored plans until age 27. The ruling may, however, bear heavily on the financial underfooting of the Act.

The Act requires insurance companies to offer health insurance to anyone without regard to prior condition. If you are healthy and know that you can buy insurance anytime you get sick at the same price as everyone else, you are likely to hold off buying insurance. If that happens, supporters of the Act fear that only the sick will buy insurance at very high rates. 

Central provisions of the Act don't take effect until 2014. By then the Supreme Court will likely have weighed in with a decision.

The White House insisted a day after Hudson's ruling that the implementation of the Act will not be affected by a negative federal court ruling, and the Justice Department said it would appeal.

"There's no practical impact at all as states move forward in implementing...the law that Congress passed and the president signed, " White House press secretary Robert Gibbs told reporters.

Mandate Lite

As controversial as the mandated insurance requirement is, Daniel McLaughlin writes in a University of St. Thomas (St. Paul, Minnesota) blog on December 14 that Medicare has had an insurance mandate for Medicare Part D (the drug benefit) since 2005.

When you are eligible for Medicare, you must enroll in Part D or pay a penalty. This penalty applies when you do obtain Part D coverage and it is an additional payment for those months you do not have Part D. However, if you continue to work and can demonstrate “creditable coverage” for drug coverage through your employer-based insurance, the penalty does not apply.

"Technically, the Part D penalty is not a mandate, " write McLaughlin, "but it comes pretty close." He believes if the Supreme Court ultimately sides with Judge Hudson, the Health Insurance Exchange enrollments may unravel as more healthy and young individuals defer purchasing insurance until they are sick.

If this happens, McLaughlin looks for Congress, supported strongly by the health plans, to enact a Part D-style penalty for those who do not buy insurance. "For those in the policy business creative solutions are almost always required—this case will not be an exception, " concluded McLaughlin.

A Medicare type requirement is a "mandate lite, " said economist Gail Wilensky, who ran Medicare for President George H.W. Bush, in a December 16 AP story. "A modification of what is done with seniors on Medicare would be a much more powerful tool. You don't have to buy insurance. But if you don't, the first time you come in, we're going to add a penalty that you'll have to pay for the next four or five years."

The same AP article pointed out that requiring individual responsibility was the Republican alternative during the 1990s healthcare debate. Most Republicans no longer take that position, but Wilensky told the AP she has no problems with the concept.

"As a society, we have made a commitment not to let people die in the street because of lack of medical care, " she said, noting that hospital emergency rooms have to accept the uninsured. "It's not unreasonable to say that people be required to carry some sort of coverage."


Massachusetts enacted an individual requirement in 2006, after a compromise between then-Republican Governor Mitt Romney and Democratic state legislators. As a candidate, President Obama opposed the individual requirement as too costly for the average household. He accepted it after it became the only approach that could pass both the House and Senate.

New York Times writer Sheryl Gay Stolberg wrote on December 14 that the Florida and Virginia challenges were filed in courthouses where conservative judges prevail, and where appeals would flow to the country’s most conservative circuits.

"Although the science is imprecise and often disputed, some scholars have found patterns of partisan divisions at all levels of the federal judiciary, based on the appointing president. At the district court level, there is generally a high degree of consensus among judges in similar cases, except when they confront polarizing constitutional questions like abortion, campaign finance and now health care, ” added Stolberg.

“When the law is fairly clear, politics don’t matter much, ” said Mark A. Hall, a professor of law and public health at Wake Forest University in the Times article. “But when the law is unsettled, inchoate, undeveloped, let’s say, it’s natural that judges’ political, social and economic views will shape how they see things.”

Public Policy and the Constitution

A day after Judge Hudson's ruling, U.S. Attorney General Eric Holder and Secretary Sebelius wrote in a Washington Post editorial:

"The majority of Americans who have health insurance pay a higher price because of our broken system. Every insured family pays an average of $1, 000 more a year in premiums to cover the care of those who have no insurance.

"Everyone wants health care to be affordable and available when they need it. But we have to stop imposing extra costs on people who carry insurance, and that means everyone who can afford coverage needs to carry minimum health coverage starting in 2014."

But as the Tyler rebels reminded us in their challenge, Justice Oliver Wendell Holmes drew a line in the sand…when he wrote, “[A] strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.”


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