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Federal appeals court hears first health care law cases

By Deborah Elkins
Dolan Media

The legal battle over the federal health care act has made it to the next level.

The 4th U.S. Circuit Court of Appeals today heard arguments in the first two cases to advance from the trial court level to a federal appeals court, en route to a likely showdown in the U.S. Supreme Court.

The two cases from Virginia reached opposite results. From the Western District, a case decided by Senior U.S. District Judge Norman Moon upheld the new Patient Protection and Affordable Care Act. From the Eastern District, a case decided by U.S. District Judge Henry Hudson struck the law after finding parts of the act unconstitutional.

Today’s 4th Circuit panel, chosen at random, included three Democratic appointees: judges Diana Motz, Andre Davis and James Wynn Jr.

The key issue before the court: The new law’s “individual mandate” requiring individuals to buy a minimum amount of health insurance or face a tax penalty, starting in 2014.

Mathew Staver, the law school dean at Liberty University, a private Virginia school, argued the mandate is the first time in history Congress has tried to regulate “non-economic activity.” He said the act is an unconstitutional attempt to “redistribute wealth among private parties.”

Staver and Liberty represent two individual plaintiffs, Michele Waddell and Joanne Merrill, who do not want to buy the insurance and are appealing the Nov. 30 decision by Moon in Liberty University v. Geithner that upheld the individual mandate.

Motz, who presided over the argument, quickly took up a “crucial” theme for the morning: Is a decision not to buy health insurance an “activity” the government can regulate?

Asked to define “activity,” Staver said it means “some kind of active participation” or “doing something.” Motz said some courts have suggested “activity” can mean a mental process, or filing a tax return. She said the court was “trying to find that dividing line” for a process that could trigger a right to regulate.

Both Staver and U.S. Acting Solicitor General Neal Katyal, who argued for the government in both cases this morning, were working the boundaries among U.S. Supreme Court cases that frame how far Congress can go in regulating conduct that crosses state lines.

The government argued that people inevitably participate in the health care system even if they decide not to buy insurance. Even if a person plans never to visit a doctor, he or she may wind up receiving medical care as a victim of an accident. If that person does not pay, the costs are shifted to others in the private or public sector.

The individual mandate is a key part of the act’s comprehensive scheme based on congressional findings about the economic costs of the present health care system, the government said.

In his brief, Staver criticized the Lynchburg district court’s reliance on two cases: Wickard v. Filburn, 317 U.S. 111 (1942), which upheld the regulation of a farmer’s production of wheat that he grew for use on his own farm and never intended to sell, and Gonzales v. Raich, 545 U.S. 1 (2005), which said Congress had the authority to make it a crime to grow and use marijuana solely for personal medical purposes on a doctor’s recommendation.

Davis and Wynn asked about choices the parties made in those cases. Did the farmer’s choice to keep his wheat out of the market amount to activity? What if the marijuana grower had decided to share some with a neighbor? Isn’t receiving a gift an activity?

But the neighbor would have to take some action to either retain the gift or get rid of it, Staver said. He said the case law requires some act by an individual, such as production, growing, or consumption. Staver argued that under Raich, three elements were necessary to uphold regulation under the Commerce Clause: an activity; the production, distribution or consumption of a tangible product and an established interstate market.

“You seem to be describing a commodity clause, not the Commerce Clause,” Davis remarked.

Staver’s response struck a Puritan note: “Idleness, the choice not to engage in an economic transaction … goes beyond” previous Commerce Clause decisions.

“Wasn’t Raich flatly non-economic, non-commercial?” Davis asked. The difference, Staver said, was the marijuana grower there was “on the edge of being able to go into the stream of commerce at any time.”

“I’m surprised you haven’t brought up broccoli,” Motz said, introducing an extended discussion on Congress’s authority to make Americans do all manner of things that would be good for them such as forego trans fats, eat their vegetables or join a gym.

We’re trying to find a “line of demarcation,” Davis said.

Davis helped the government put flesh on its argument about the price everyone pays under the current system for financing health care. His hypothetical case described “four 20-somethings working here in Virginia, college graduates,” who take off for a weekend in Ocean City, Md. On their way to the beach, “the unthinkable happens.” There’s a wreck, Medevac helicopters take the victims to trauma centers and miraculously they all survive. The bill is hundreds of thousands of dollars, but they have no insurance.

Is it your position Congress has no authority to address in an appropriate manner what we know happens every day, Davis asked.

“It’s an emotionally compelling case,” Staver allowed, but he said seven states have experimented with similar programs and “it won’t work.”

Motz also pressed Katyal to define the “activity” at issue. Katyal said it’s how and when health care is paid for. Participating in that system is “virtually a universal feature of human existence.”

In Sebelius, Hudson said Dec. 13 that the individual insurance mandate was invalid under both the Commerce Clause and the federal government’s taxing power.

Katyal spent most of his time in Sebelius attacking Virginia’s standing to bring the suit challenging the federal law. In order to have standing to sue, a party must show a particularized injury.

The president had barely put down the last of the 22 pens used to sign the PPACA when Virginia Attorney General Kenneth Cuccinelli II filed suit in Richmond federal court. The AG’s office argued in Sebelius that it was suing to defend a Virginia statute that says Virginia residents cannot be forced to buy health insurance.

Virginia Solicitor General E. Duncan Getchell Jr. strongly disputed that the Virginia statute was passed to provide a ticket into federal court. He said the Virginia Health Care Act was passed by a bipartisan Virginia legislature and the state could act to enforce its legal code.

The contest in the Richmond-based 4th Circuit brings the two Virginia decisions before an appellate court that is about evenly divided between Democratic and Republican judicial appointees.

After the argument, Cuccinelli said Virginia has “buckled up for the ride.” He said the AG’s office knew the 4th Circuit is a “hot bench,” and the judges on the panel were “aggressive with both sides.” Noting the U.S. Supreme Court had denied an expedited review in the case, the AG expects the individual mandate issue to hit the high court within a few months.

Cases on the PPACA also are pending in two other federal appellate courts. A Michigan case, Thomas More Law Center v. Obama, is set for argument before the 6th U.S. Circuit Court of Appeals in Cincinnati on June 1. The 11th U.S. Circuit Court of Appeals will hear argument in Florida v. U.S. Dep’t of Health & Human Servs. on June 8 in Atlanta. The Florida case includes the attorneys general or governors of 26 states among the plaintiffs.

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