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From Health Law Daily, March 10, 2014

ACA tax not a “taking” of private property without just compensation

By Harold M. Bishop, JD

The D.C. Court of Appeals has affirmed the dismissal of claims brought by the Association of American Physicians & Surgeons, Inc. (AAPS) and the Alliance for Natural Health-USA (ANH-USA) (collectively “Appellants”) challenging: (1) the constitutionality of the individual health insurance mandate of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), (2) the implementation of Medicare, and (3)  the failure of the Social Security Commissioner and Secretary of HHS to provide an accounting of the financial condition of the Social Security and Medicare programs. The U.S. District court for the District of Columbia dismissed the challenges for lack of jurisdiction or for failure to state a claim upon which relief could be granted (Association of American Physicians and Surgeons v Sebelius, March 7, 2014, Williams, S).

Background.  The district court case was stayed while the National Federal of Independent Business v Sebelius (NFIB) lawsuit wound its way through the Supreme Court.  After the Supreme Court decided the NFIB case, the district court lifted the stay and dismissed the AAPS/ANH-USA action.

Constitutional challenges. Appellants challenge 26 U.S.C. sec. 5000A, the ACA’s individual health insurance mandate, which was sustained by the U.S. Supreme Court as a valid exercise of the taxing power in NFIB.  They argue that the tax violates both the Fifth Amendment’s prohibition of the taking of private property without just compensation and the origination clause (U.S. Constitution, Article I, section 7, clause 1), which provides that “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.”

With regard to their takings clause challenge, the appellants argue that the tax requires healthy private individuals to support unhealthy private individuals and that this redistributive purpose makes this a confiscation of private property. Agreeing with the district court, the court of appeals would not strain to reach that conclusion.

The appellants further claim that though the ACA originated in the House of Representatives, it was not, as it left the House, a revenue bill. It only became a revenue bill, according to the appellants, after amendment in the Senate. The appellants, however, only raised this origination argument after the district court invited supplemental pleadings after the Supreme Court decided NFIB, which was well after the appellants filed their opposition to the government’s motion to dismiss. The district court found the origination argument waived by virtue of the fact that it was not raised in opposition to the government’s motion to dismiss.  The D.C. Circuit agreed for two reasons. First, the NFIB briefings and the lower court decision in NFIB clearly raised the origination argument before the NFIB decision was rendered. Second, the district court’s call for supplemental briefing was only to determine if NFIB required the dismissal of any counts. It did not invite a briefing on the impact of NFIB.

Medicare implementation claims. The appellants’ first Medicare implementation claim is an objection to provisions in a Social Security Administration (SSA) handbook, the Social Security Program Operations Manual System (POMS), explaining that individuals entitled to social security benefits are automatically entitled to Medicare Part A benefits. The appellants argue that the handbook provisions exceed the SSA’s statutory authority and that their adoption should have been preceded by notice-and-comment rulemaking. The D.C. Circuit affirmed the district court’s dismissal of this claim because prior decisions of the Circuit have held that the statutory text establishing Medicare Part A precludes any option not to be entitled to its benefits, even though eligible persons are free not to exercise their entitlement.

The appellants’ second Medicare implementation claim attacks an interim final rule (75 FR 24437, May 5, 2010) and certain change requests to the Medicare Claims Processing Manual, which govern the process by which physicians may “opt out” of participation in Medicare Part B, but may nonetheless refer patients for services covered by Part B. The D.C. Circuit found that this claim was moot due to a superseding final rule (77 FR 25284, April 27, 2012) promulgated after the suit was filed.

Accounting claim.  Finally, appellants claim that the Social Security Commissioner and the Secretary Sebelius have violated their fiduciary and equitable duties by failing to provide an honest accounting of the financial situation facing Social Security and Medicare. Because the appellants could not cite a statute, the Constitution, or any case law for the foundation of these alleged fiduciary duties, the D.C. Circuit concurred with the district court’s dismissal of this claim.

The case number is 13-5003.

Attorneys: Lawrence J. Joseph (Law Office of Lawrence J. Joseph) for Assoc. of American Physicians and Surgeons and Alliance for Natural Health USA. Dana Lydia Kaersvang, US Dept. of Justice, for Kathleen Sebelius, Secretary of Health and Human Services, Michael James Astrue, Commissioner of the Social Security Administration, Jacob J. Lew, Secretary of the Treasury, and the USA.

Companies: Assoc. of American Physicians and Surgeons; Alliance for Natural Health USA; USA

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