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News & Developments

 

July 11, 2011

Sixth Circuit Court of Appeals Upholds Constitutionality of Health Care Reform

On June 29, 2011, the United States Court of Appeals for the Sixth Circuit in the case of Thomas More Law Center v. Obama ruled that the Patient Protection and Affordable Care Act (the health-care law) is a constitutionally sound legislative act by Congress under the Commerce Clause. The opinion by the Sixth Circuit is the first opinion by a U.S. Court of Appeals on the constitutionality of the health-care law championed by the administration of President Obama.  The Fourth Circuit and the Eleventh Circuit have heard oral arguments on constitutional challenges to the health-care law but have not issued rulings. The U.S. Court of Appeals for the D.C. Circuit and the Ninth Circuit have oral arguments scheduled in cases challenging the law. According to the petitioner, the ruling of the Sixth Circuit will be appealed to the U.S. Supreme Court.

The health-care law includes a mandate that individuals buy health insurance, which complies with the act's minimum level of coverage or the individual is subject to a penalty. The focus of the Sixth Circuit's opinion is whether the individual health insurance requirement regulates economic activity with a substantial effect on interstate commerce and thereby constitutes a permissible constitutional act pursuant to the Commerce Clause. The Sixth Circuit ruled that the government had a rational basis for concluding that the individual mandate was essential to the act’s attempt to regulate the national health-care market.

The issue that has split district courts is whether Congress, pursuant to the Commerce Clause, may constitutionally regulate an individual's inactivity. The Sixth Circuit in Thomas More focused on the broader economic implications of an individual’s failure to purchase health insurance. In assessing the economic effect of an uninsured individual on health-care expenditures, two realities were important to the court’s analysis: (1) at some point in their lifetime, everyone will access health care; and (2) pursuant to federal law, everyone is entitled to medical treatment regardless of their ability to pay. The court determined that the government reasonably concluded that the failure of individuals in the aggregate to purchase health insurance will result in unpaid medical expenses. The government reasonably concluded that unpaid medical expenses shifts costs to the government and to the private sector. Therefore, the court ruled that the government had a rational basis to conclude that the aggregate expense of uncompensated health-care costs from the uninsured has a substantial economic effect on the health-care delivery system throughout the country. As a result, the court concluded the act was constitutional.

—Erik H. Olson, The Olson Law Firm, LLC, Atlanta, GA

December 16, 2010

Key Provision in Health Care Reform Ruled Unconstitutional

On December 13, 2010, a federal district judge in Virginia ruled that a key provision of the new health-care reform law—the Minimum Essential Coverage Provision, otherwise known as the individual mandate—is unconstitutional. U.S. District Judge Henry E. Hudson held that Congress exceeded its constitutional powers under the Commerce Clause, or associated Necessary and Proper Clause, by requiring each citizen to arrange for the purchase of health insurance. Virginia v. Sebelius, E.D. of VA Case No. 3:10-cv-188-HEH, court opinion linked here.

Judge Hudson, who was appointed by George W. Bush, is the first judge in the country to invalidate any part of the new health-care reform law the Patient Protection and Affordable Care Act (PPACA). See www.hernblawg.com/wp-admin/post-new.php#_ftn1. (Two courts, one in Virginia and one in Michigan, have already dismissed lawsuits challenging the constitutionality of PPACA.) In siding with Virginia Attorney General Kenneth T Cuccinelli, II, the judge observed that his survey of case law “yielded no reported decisions from any federal appellate courts extending the Commerce Clause or General Welfare Clause to encompass regulation of a person’s decision not to purchase a product, not withstanding its effect on interstate commerce or role in a global regulatory scheme.” In other words, an individual’s personal decision to purchase—or not to purchase—health insurance from a private provider is beyond the historical reach of the U.S. Constitution.

—Don A. Hernandez and Jennifer Tsao, Hernandez Schaedel & Associates, Pasadena, CA

October 15, 2010

U.S. District Court Issues Ruling on the Health Care Reform Act

On Thursday, October 7, in Thomas More Law Center v. Obama, Judge George Caram Steeh of the U.S. District Court for the Eastern District of Michigan issued the first in what promises to be a series of rulings on the Patient Protection and Affordable Care Act (Health Care Reform Act or Act). The ruling upheld the Act, finding that the plaintiffs' claims were not barred for lack of standing or under the Anti-Injunction Act; rather, they failed under the Commerce Clause and General Welfare Clause.

The plaintiffs, who sought a preliminary injunction and a declaration that Congress lacked the constitutional authority to pass the Act, included the Thomas Moore Law Center, a public interest law firm, and various uninsured individuals. In response to the government's argument that they lacked standing, plaintiffs claimed to suffer economic hardships under the Act's minimum coverage provision. [The minimum coverage provisions mandate that every U.S. citizen not falling within certain exceptions maintain "minimum essential coverage" for health care each month beginning in the year 2014. If an individual fails to comply with this requirement, the Act imposes a penalty to be included with a taxpayer's return.] The court, however, found that the plaintiffs did in fact have standing to assert their claims. The court reasoned that, although the Act's minimum coverage provisions go into effect in 2014, the future mandates imposed present budgeting constraints on the plaintiffs thus satisfying the standing requirement of a redressable injury. The court similarly rejected the government’s arguments under the Anti-Injunction Act, stating that, unlike other such cases, the declaratory relief sought had nothing to do with immediate tax collection by the IRS but with "the statutory requirement that individuals obtain health insurance coverage as provided."

—Ardith Bronson, Weil, Gotshal & Manges, Miami, FL

August 5, 2010

Pennsylvania Appellate Court Expands Corporate Liability to Nursing Homes

On July 24, 2010, a Pennsylvania Superior Court panel in the case, Scampone v. Grane Healthcare Co., issued a precedential decision when it ruled that nursing homes may be held corporately liable for patient neglect. Previously, nursing homes were viewed as being more akin to a “physician’s outpatient office,” which does not have corporate liability exposure. As such, the nursing home’s corporate entity was usually dismissed from these types of lawsuits. However, in the instant case, the court reasoned that “[e]xcept for the hiring of doctors, a nursing home provides comprehensive and continual physical care for its patients . . . [thus] the degree of involvement in the care of patients of skilled nursing home facilities is markedly similar to that of a hospital.” Based on those findings, the court determined that corporate negligence was a supportable cause of action against Grane Healthcare considering that the entity managed all aspects of the operation of the nursing facility.

 

—Joanne Snow, Hanson Peters NYE

April 6, 2010

Court Upholds Denial of Hospital's Property Tax Exemption

In a highly anticipated opinion issued March 18, 2010, the Illinois Supreme Court upheld an administrative agency’s denial of a nonprofit hospital system’s application for a charitable exemption under the state’s property tax code. Provena Covenant Medical Center v. Department of Revenue, Docket No. 107328.

The hospital system, Provena Hospitals, sought an exemption from 2002 property taxes for its hospital properties based on Illinois’ statutory charitable exemption. [Provena also sought a religious exemption. That exemption was also denied at the administrative level and in the Supreme Court. The focus of the opinion, and this case note, is the Court’s decision on the charitable exemption.] The local administrative agency denied the application and the state Department of Revenue upheld that denial. Provena appealed the administrative agency’s ruling in circuit court and eventually in the Illinois Appellate Court and the Supreme Court.

The Court, applying a “significantly deferential” standard of review, upheld the administrative decision denying the exemption. It held that Provena failed to demonstrate either that it was a charitable institution or that its properties were being used for a charitable use.

—Jacy T. Rock, Faegre & Benson, Denver, CO

March 23, 2010

Court Declares Non-Economic Damages Caps to Be Unconstitutional

On March 22, 2010, the Georgia Supreme Court held that caps on noneconomic damages violate the Georgia Constitution. Atlanta Oculoplastic Surgery v. Nestlehutt, 2010 WL 1004996.

The damages caps were passed in 2005 as part of Georgia’s Tort Reform Act, which was designed to “promote predictability and improvement in the provision of quality health care services and the resolution of health care liability claims and . . . thereby assist in promoting the provision of health care liability insurance by insurance providers.” Ga. L.2005, p. 2.

In the trial court, a jury found for the plaintiff and awarded the plaintiff noneconomic damages of $900,000 for pain and suffering and $250,000 for loss of consortium. The plaintiff then moved to have O.C.G.A. § 51-13-1, the damages cap statute, declared unconstitutional. The trial court granted the motion and entered judgment in the full amount awarded by the jury.

The Georgia Supreme Court held that the statute violated the right to a jury trial contained in the Georgia Constitution. The Court held that the right to a jury trial for claims involving the negligence of a health care provider, along with the right to an award of the full measure of damages, including noneconomic damages, as determined by the jury, had existed since the time the state constitution was adopted. A cap on noneconomic damages clearly violates that right, the Court continued, because by requiring a court to reduce a damages award determined by a jury, the statute “nullifies the jury's findings of fact regarding damages and thereby undermines the jury's basic function.” Nestlehutt, 2010 WL 1004996 at *4. The ruling is retroactive, meaning that the statute was null and void as of the date it was passed.

— Chad Graddy, Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Memphis, TN