Scalia's Death Has Limited Impact on Major Healthcare Cases
Justice Antonin Scalia's death apparently impacted only one of the four major healthcare cases pending before the United States Supreme Court this term. Although initially it was feared that his absence would mean that some of these cases could result in a 4-4 split decision, a considerable possibility given the politically charged nature of healthcare, that did not happen.
Healthcare Cases Pending Before the Supreme Court This Term
The Supreme Court decided four important healthcare cases this term that are laden with implications for insurers, providers and state healthcare reform efforts.
Whole Woman's Health v. Hellerstedt
On June 27, 2016, in a five-to-three decision, the Court upheld a challenge to a 2013 Texas law that plaintiffs alleged interfered with a woman's constitutional right to privacy as it affects her right to an abortion. The law imposed specific requirements on abortion clinics, including a mandate that doctors have admitting privileges at a hospital no more than 30 miles away from the clinic. It set clinic standards similar to those of surgical centers, including specific requirements on room and doorway sizes, staffing, and anesthesia, among other things. The Court held that the law, which according to the petitioners had already caused numerous abortion clinics throughout Texas to close, placed an "undue burden" on a woman's constitutional privacy rights. The Court had not heard a major abortion case since 2007.
Supporters of the Texas law claimed it was intended to protect women's health, as it allegedly brought health and safety standards for abortion clinics more in line with those of other medical facilities. Opponents argued the law was intended solely as a means to limit abortion. The lead plaintiff, an abortion provider called Whole Woman's Health, maintained that the law was not medically necessary, was demanding and expensive, and interfered with women's healthcare.
Before the decision was announced, commentators had expressed concern that, without Justice Scalia, a deadlocked decision was quite possible, which in turn would have automatically affirmed the Court of Appeals' ruling without giving reasons and without setting precedent. In this case, that outcome would have upheld the Texas law's restrictions, closing all but about 10 clinics in the state. It also likely would have given states within the Fifth Circuit (Louisiana, Texas and Mississippi) broad discretion to restrict abortion. Obviously, that didn't happen.
It is impossible to know with certainty that the presence of Justice Scalia's larger-than-life influence might not have impacted the outcome of Hellerstedt beyond the addition of a fourth dissenting vote. In all likelihood, however, had Justice Scalia lived, the result would have been the same but by a five-to-four margin in favor of striking the challenged law.
Zubik v. Burwell
On March 23, 2016, the Court heard oral argument on whether the contraception coverage requirement under the Affordable Care Act (ACA) applies to religious institutions, such as religious nonprofit hospitals, charities and colleges. Some of these religious institutions objected to the "accommodation" exception to the mandate, which permits them to opt out of the requirement on the grounds that the requirement makes them complicit in a process that is contrary to their religious views and therefore in violation of the Religious Freedom Restoration Act. That law states that the government may not substantially burden the exercise of religious beliefs and must regulate using the least restrictive means. The religious institutions here argued that the opt-out system is not the least restrictive method of accommodating their religious objections.
To date, every federal appeals court to consider the question—but one, the Eighth Circuit—had upheld the ACA's mandate that enables women to obtain health coverage for birth control even when their employer avoids paying for such coverage by opting out due to religious objections. In other words, those appeals courts found that even when women's employers object to providing contraception coverage based on religious beliefs, those women need not seek birth control coverage through a means other than their religious institution's sponsored health plan (e.g., health insurance exchange under the ACA or a separate government-sponsored plan).
Zubik v. Burwell is the only healthcare case this term in which Justice Scalia's absence almost certainly was determinative, given early indications suggesting that the Court was facing a 4-4 tie. On March 29, 2016, shortly after oral argument, the Court took the highly unusual step of issuing an order asking the parties to develop methods by which contraceptive coverage could be provided without any active involvement by the petitioners. In response to this directive, both the Obama administration and the religious nonprofits, colleges and schools challenging the accommodation confirmed that contraceptive coverage could be provided to the challengers' female employees, through the challengers' insurance companies, without any notice from the challengers. Accordingly, the decisions of the courts of appeals rejecting the challenge were vacated and remanded in an 8-0 vote.
The Court stated that given the gravity of the dispute and the "substantial clarification and refinement in the positions of the parties," the parties on remand should be afforded an opportunity to arrive at an approach going forward that accommodates the challengers' religious exercise while at the same time ensuring that women covered by the challengers' health plans receive full and equal health coverage, including contraceptive coverage. This appears to be the latest example of what some commentators call Chief Justice Roberts' penchant for pragmatic, commonsense outcomes that earlier Courts would not have considered.
Universal Health Services v. United States ex rel. Escobar
On June 16, 2016, the Court decided the issue of when a knowing failure to comply with the law constitutes fraud against the government. Specifically, the issue was whether a party can be held liable for violating the federal False Claims Act (FCA) where that party has made a request for payment despite its noncompliance with applicable statutes, regulations or contract provisions that are material preconditions to payment, without explicitly making any false statement of fact. This case arguably had the most dollars at stake among the healthcare cases pending before the Court, as it had the potential to reduce or increase the number of FCA suits brought against providers and other companies—cases that come with high-dollar penalties. In 2015 alone, the Department of Justice recovered $1.9 billion in settlements and judgments from companies and individuals in the healthcare industry under the FCA.
In this case, the relator's daughter received state mental health benefits from a medical center, Universal Health, where counselors were not licensed by the state to provide mental health therapy, as was required by state regulations. Although Universal Health's invoices sought payment for services actually provided, the relator complained that the invoices were fraudulently submitted under the FCA because the services were provided by unlicensed counselors, in violation of state law.
Although the federal circuits were split on this issue, the Court's decision was unanimous. Some circuits had found that any knowing and material breach of a contract, statute, or regulation that can be viewed as a prerequisite to payment can give rise to liability, while others had rejected liability based on implied certification of compliance with regulations that are conditions of federal government program participation. The split had created confusion and uncertainty as to the circumstances for which fraud liability attaches.
The Court's unanimous opinion took the middle ground. The opinion, authored by Justice Clarence Thomas, held that the implied false certification theory can be a basis for FCA liability if a claim for payment makes specific representations about the services provided but fails to disclose noncompliance with material statutory, regulatory or contractual requirements that would render the claim for payment misleading. In spite of ruling that there is an implied certification theory that can serve as the basis of an FCA case, the Court specifically disagreed with the First Circuit's "extraordinarily expansive" interpretation of materiality under the FCA, instead explaining that the materiality standard here is "demanding," such that if the government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. (For a more detailed look at Escobar and its implications, see the second story in this issue, "The FCA: Escobar Means More Than You Think.")
Gobeille v. Liberty Mutual Insurance Co.
Finally, one other major decision impacting healthcare was decided after Justice Scalia's death, in which the outcome also appears to have been unaffected by his absence. Gobeille v. Liberty Mutual Insurance Company raised the issue of whether a self-funded insurer should have to turn over certain information—such as on claims and member eligibility—to the State of Vermont for its all-payer database. The state argued that it needed the data to improve the cost and effectiveness of healthcare and that a ruling against it could limit reform efforts in other states with similar databases. The insurer argued that obligating all health insurers to provide such data violates the Employee Retirement Income Security Act (ERISA), which preempts any state law that may "relate to" an ERISA plan.
This case was heard on December 2, prior to Justice Scalia's death, but the opinion was not issued until March 1, shortly after his death. The Justices held that ERISA preempts the Vermont law in a 6-2 decision written by Justice Kennedy, meaning that, here as well, Justice Scalia's absence had no impact on the outcome of this case (and, given prior decisions, he almost certainly would have joined the majority). Justices Thomas and Breyer filed concurring opinions. Justice Ginsburg filed a dissenting opinion, in which Justice Sotomayor joined. The key point of Justice Kennedy's decision is that the regulations "could" create wasteful burdens (even though Vermont's regulation called for data in a standardized format that the insurer already uses).
The practical importance of this case, as a matter of healthcare regulation, is that, despite Justice Scalia's insistence to the contrary at oral argument, Justice Breyer's concurring opinion leaves the door ajar for the Department of Labor (DOL) to adopt regulations requiring the production of healthcare data to further the goals of the ACA. If the DOL were to follow this path, however, insurers would have a road map for challenging the regulation: the Court has held that ERISA preempts state regulation of those databases, and some Justices probably share Justice Scalia's view that its decision necessarily bars any such regulation.
Conclusion
In sum, Justice Scalia's death appears to have impacted the result in only a single major healthcare case this term: the Zubik v. Burwell matter. However, although President Obama has nominated a new Supreme Court candidate, the Republican Senate has proclaimed that it will not vote on a nominee until after the presidential election, meaning it is unlikely the ninth seat will be filled until after the 2016-2017 Supreme Court term is well under way. Therefore, there may be healthcare decisions in the future that will be impacted by Justice Scalia's death.