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Does California Ruling Help Handicap ACA in High Court?

Editor’s note: This is the first of two

California Healthline stories examining what the Supreme Court’s ruling in a California Medicaid case might mean for the Affordable Care Act and what the ACA ruling may mean for California. The second story will post Thursday.

The Supreme Court’s consideration of back-to-back health care issues with potentially significant ramifications for California makes it tempting to look for connections.

Last month, the Supreme Court essentially sidestepped the question of whether Medicaid providers and beneficiaries can sue a state if they believe the state is violating federal law. The decision to send Douglas v. Independent Living Centers back to California courts leaves several doors open for more legal questions — or the same ones, asked differently.

This month, the court will hear oral arguments in a much anticipated challenge of the Affordable Care Act’s requirement that individuals obtain health insurance.

Two main questions come to mind:

  • Does the California decision announced last month provide any insight into how the Supreme Court may rule in the national reform case to be heard this month?
  • Will the majority and/or minority opinions in the California case have any impact on oral arguments in the ACA case on either side?

The short answers, according to several experts, are:

  • Maybe, a little.
  • Probably not. The cases are too dissimilar.

California Case’s Road to Supreme Court … And Back

In 2008 and 2009, hoping to narrow a wide and growing budget deficit, California approved and began implementing reductions in reimbursements to physicians, hospitals and other providers who care for those enrolled in Medicaid — known as Medi-Cal in California. Several health care providers and beneficiaries sued, arguing that the payment cuts violated federal law that requires Medicaid rates to be “sufficient to enlist enough providers” so beneficiaries can get care as easily as the general population.

The 9th U.S. Circuit Court of Appeals in San Francisco ruled that beneficiaries could sue under the U.S. Constitution’s supremacy clause, which says federal law takes precedence over state law. California appealed to the U.S. Supreme Court.

The case the Supreme Court considered was a consolidated set of three separate lawsuits filed by providers and beneficiaries.

Before the Supreme Court issued its ruling, CMS approved California’s Medicaid cuts.

In last month’s 5-4 decision, the Supreme Court sent the case back to the 9th Circuit, saying the circumstances surrounding the case had fundamentally changed after the federal government approved California’s plan. The court did not rule one way or the other regarding the supremacy clause, nor did the ruling affirm the 9th circuit’s decision to block the payment cuts.

Predicting an ACA Outcome?

While punting the issue back to a lower court doesn’t do much to settle some issues, it may offer an indication of the court’s leanings, some experts said.

Chief Justice John Roberts wrote the minority dissent in Douglas v. Independent Living Centers, explaining why he and justices Samuel Alito, Antonin Scalia and Clarence Thomas believed the court should have ruled that the supremacy clause does not provide a legal basis for lawsuits. The court’s four conservative judges said Medicaid was created as a partnership between states and the federal government, and as such, spending decisions should be made by those entities, not through the courts.

“I think the fact that Justice Roberts could only get four justices to take a position that the supremacy clause doesn’t apply — that individuals can’t take direct actions under the supremacy clause — indicates not only that that question is terribly important, but also how the court may be thinking in the bigger picture,” said Tim Jost, professor at Washington and Lee University School of Law, Health Affairs blogger and author of “Health Law” and several other books dealing with health care and the law.

“The fact that Roberts was unable to pick up a fifth judge I think is interesting and may be telling,” Jost said.

Justice Stephen Breyer, writing the majority decision, said the issue had changed midstream when CMS approved the rate reductions, vacated the 9th circuit court decision and gave it back to the California court system.

Breyer and Justices Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor — considered the four “moderates” on the court by Jost and many other experts — were joined in the majority decision by Anthony Kennedy, often considered the swing vote between the moderates and conservatives.

“This was a case about individual vs. state’s rights, about enforceability of spending provisions, about deference to state interpretations of the law. All of those are sort of involved in the ACA case,” Jost said.

“The fact that five justices weren’t really inclined to deal directly with all those might tell us where the ACA case will go. The issues are really different, but there may be some indications — probably very small — about inclinations in there,” Jost said.

Decision Demonstrates ‘Factions of the Court’

Mark Reagan – a partner at the law firm Hooper, Lundy & Bookman, which is representing several organizations challenging California’s cutbacks in Medi-Cal reimbursements – said the decision is somewhat illuminating.

“The Douglas decision does demonstrate some of the clear factions of the court,” Reagan said in an email response to questions from California Healthline.

By punting the supremacy clause issue back to the ninth circuit, “the ‘center-left’ majority of the court is siding with providers and beneficiaries against the state,” Reagan said.

“On the other hand, the ‘right’ dissenters of the court side with the state, placing its interest ahead of the beneficiaries/providers,” Reagan said.

Hooper, Lundy & Bookman represents the California Medical Association and the California Hospital Association in one case challenging California’s Medi-Cal cutbacks and the California Pharmacists Association in another.

Reagan, counsel for the California Association of Health Facilities, which also is waging legal battles against Medi-Cal cuts, said he expects justices to “line up ‘left’ and ‘right’ in the ACA case with the decision rendered by the ‘center.'”

Jordan Keville, another partner at Hooper, Lundy & Bookman, agreed.

“I would be hesitant to say that the Douglas decision was a clear sign of anything with the ACA case,” Keville said. “But I wouldn’t be surprised to see the same 4-4 vote with Kennedy being the deciding vote again. I’m not going to predict which way that vote might go,” Keville added.

Answers That Don’t Look Like ‘Yes’ or ‘No’

Alan Weil, executive director of the National Academy for State Health Policy, said the California decision is a sobering reminder that “there are a lot of answers that don’t look like ‘yes’ or ‘no.'”

“I think there is a general feeling that the ACA case should make clear that an individual mandate is OK or it’s not — yes or no,” Weil said. “But it’s perfectly within the realm of possibility that the court will rule somewhere in between. We’ve been concerned about this in planning and thinking about how states can respond. The polar opposites are manageable, but the middle ground — the gray area — is much harder to prepare for.”

Although both sides in the ACA case will pay close attention to majority and minority decisions in the California case, most experts don’t expect Douglas v. Independent Living Centers to have much of an impact on ACA arguments, which center on the law’s provisions requiring individuals to obtain health insurance.

“The only possible Medicaid connection results from the court recently adding oral argument for the states’ alternative argument (different than the mandate theory) that the ACA is ‘coercive’ by requiring the states to provide services to an ever-expanding group of Medicaid beneficiaries but not appropriately reimbursing them for that burden,” Reagan said.

“That is the only place where Medicaid is part of the ACA case,” Reagan added.

No matter what the Supreme Court decides in the ACA case, it will have an impact in California, where health care reform efforts are full steam ahead. On Thursday, a California Healthline story will examine potential effects of the Supreme Court’s action on ACA.

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