To Sever or Not to Sever? That is the question.

Today is the third and final day of oral argu­ments in the epic Supreme Court law­suits cov­er­ing the Patient Pro­tec­tion and Afford­able Care Act (PPACA, ACA or “Obamacare”).

There are two issues before the Court today, the last day of oral argu­ments in the case. The issue called “sev­er­abil­ity” will be dis­cussed for 90 min­utes in National Fed­er­a­tion of Inde­pen­dent Busi­ness v. Sebe­lius and Florida v. Depart­ment of Health and Human Ser­vices. After a lunch recess, the Court will hear one hour of argu­ment on the Med­ic­aid expan­sion issue in Florida v. Depart­ment of Health and Human Ser­vices.

Most Court observers find the sev­er­abil­ity issue the more inter­est­ing one, and so I’m going to basi­cally ignore the Med­ic­aid expan­sion issue and talk about sev­er­abil­ity in this blog post. If you’re inter­ested in Med­ic­aid expan­sion, feel free to read up on this excel­lent analy­sis and then come back here to dis­cuss it.

What is sev­er­abil­ity? Sim­ply put, it’s the idea that Con­gress can pass a law that has an uncon­sti­tu­tional pro­vi­sion inside of it, but that does not nec­es­sar­ily inval­i­date the remain­der of the law. With a law that weighs in at 2,700 pages, deter­min­ing the sev­er­abil­ity of the PPACA will be a mon­u­men­tal task.

Sev­er­abil­ity is essen­tially an argu­ment for judi­cial restraint and sep­a­ra­tion of pow­ers: the Supreme Court should respect Congress’s law­mak­ing author­ity and not do unnec­es­sary vio­lence to Congress’s cre­ations, even ugly ones like the PPACA. Remove the can­cer, the argu­ment goes, but don’t kill the patient.

One sur­real aspect of this whole enter­prise is that the Court is ask­ing a ques­tion that is a hypo­thet­i­cal on top of a hypo­thet­i­cal. The first hypo­thet­i­cal has been dis­cussed in our two pre­vi­ous arti­cles on Mon­day and Tues­day. The Supreme Court is being asked to strike down pro­vi­sions of a law that have yet to be imposed on any cit­i­zen. That’s the point of argu­ing about the Anti-​​Injunction Act, because if the indi­vid­ual man­date is a tax, then the Court can­not issue an injunc­tion against it before it is imple­mented in 2014. Now a fur­ther hypo­thet­i­cal is stacked on top of this: “Let’s assume we find the indi­vid­ual man­date uncon­sti­tu­tional. Does that inval­i­date the entire law?”

Befit­ting the unusual nature of this case, the Court has taken an unusual step. Along with accept­ing argu­ments and ami­cus briefs from those chal­leng­ing the law (the 26 states’ Attor­neys Gen­eral) and from the U.S. Government’s Solic­i­tor Gen­eral Don­ald B. Verelli defend­ing the law, they have opened up a third front in this legal war.

The states’ Attor­neys Gen­eral argue against sev­er­abil­ity (kill the law! stab it with knives!). They want the law thrown out in its entirety.

Solic­i­tor Gen­eral Verelli, like Rob­bie Robert­son, will argue that you should take what you need and leave the rest, but you should never have taken the very best. Verelli argued in his brief that if the man­date goes, then the preëx­ist­ing con­di­tion and the pre­mium increase limit clauses must also go. This posi­tion sup­ports the rumors of a Faus­t­ian bar­gain made by the Obama Admin­is­tra­tion: accord­ing to this the­ory, Obama and a Demo­c­ra­tic Con­gress sold the Amer­i­can peo­ple out in the ACA in order to get insur­ance com­pa­nies and Big Pharma on board and keep them from run­ning “Harry & Louise”-type ads.

Death Spi­ral

The eco­nomic argu­ment goes like this. The indi­vid­ual man­date is needed to main­tain a steady flow of cap­i­tal to the insur­ance com­pa­nies, in the form of healthy young peo­ple who will pay pre­mi­ums to sup­port the health care of the chron­i­cally ill and the elderly. Recall that about one-​​quarter of med­ical expenses are incurred dur­ing the last year of life. Sim­i­larly, ten per­cent of Medicare ben­e­fi­cia­ries con­sume two thirds of the Medicare dol­lars. Absent this guar­an­teed cash pipeline, the argu­ment goes, a “death spi­ral” will result that will kill the insur­ance indus­try. This is the essence of Verelli’s argument.

Bar­tow Farr’s grand­fa­ther, H. Bar­tow Farr, suc­cess­fully sued David O. Selznick on behalf of Vivien Leigh.

The Court has engaged H. Bar­tow Farr, III of Farr & Taranto, a pres­ti­gious Wash­ing­ton law firm, to argue a third posi­tion, one held by nei­ther the law’s oppo­nents nor its sup­port­ers. The third posi­tion is this: not only is the law sev­er­able, but the Court could kill the man­date by rul­ing it uncon­sti­tu­tional and let the rest of the law stand. That is, the dire pre­dic­tions of a death spi­ral if the man­date were removed are overblown.

As vet­eran Court watcher Lyle Den­ni­son said at SCOTUSblog,

As a final depar­ture from the posi­tions of the com­bat­ants, Farr dis­agreed that, if the man­date is nul­li­fied, a “death spi­ral” would set in that would bring down the entire new health care law because it would deprive the insur­ance com­pa­nies of the guar­an­teed pool of premium-​​payers and yet they would still have to cover the med­ical ser­vices that the unin­sured would need in the future. Con­gress, Farr said, has put into the ACA mech­a­nisms to head off that prospect.  There are incen­tives for the unin­sured to buy insur­ance before they are sick, he said, and there are gen­er­ous sub­si­dies to entice low-​​income peo­ple to go into the mar­ket for insur­ance even while they are in good health. There would be no “death spi­ral,” he argued.

Farr’s bot­tom line: if the Court strikes down the man­date, that and its attached penalty for not obtain­ing insur­ance, “and noth­ing more,” should be cast aside. “The Court should sel­dom inval­i­date statu­tory pro­vi­sions that are not them­selves uncon­sti­tu­tional,” he summed up.

Den­nis­ton believes that by call­ing in Farr, the Court has tipped its hand and is giv­ing a clue as to one pos­si­ble out­come: rul­ing the man­date uncon­sti­tu­tional, while keep­ing the remain­der of the law.

The Court, of course, has the com­plete option to accept, reject or ignore the argu­ments made by Farr, even though it invited him to make them. But the real­ity is that the Court is very care­ful in select­ing lawyers to per­form that unusual role, and it has a good deal of respect for what it hears from them.

The teenaged boy in me, who likes to see a pun­ish­ment meted out to big com­pa­nies who have caused so much suf­fer­ing, wants very much for this out­come to take place. The insur­ance indus­try has said all along that absent a man­date, they can’t sur­vive if they aren’t allowed to do busi­ness as before, drop­ping peo­ple like a bad habit if they get sick, or deny­ing peo­ple cov­er­age for hav­ing preëx­ist­ing con­di­tions like being female. This is the “death spi­ral” argu­ment. Farr argues in his brief — and I agree — that Con­gress built pro­tec­tions against such a “death spi­ral” into the Act, and that if the Court finds the man­date uncon­sti­tu­tional, the proper course is to leave the remain­der of ACA intact.

We’ll find out what hap­pens in June. Until then, let’s gather here to read the tea leaves from the oral arguments.

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