Supreme Court Declines To Hear Appeal Challenging the Independent Payment Advisory Board

By: Stuart I. Silverman, Esq.

On March 30, 2015, the U.S. Supreme Court declined to grant a writ of certiorari in an appeal of the Ninth Circuit’s decision in Nick Coons and Eric N. Novack, M.D. v. Jacob L. Lew, et al.,[i] rendered by the appellate court on August 7, 2014. The Ninth Circuit affirmed the lower court’s decision dismissing constitutional challenges to the individual mandate under the Patient Protection and Affordable Care Act (PPACA). The court of appeals also vacated the district court’s decision and remanded with instructions to dismiss a constitutional challenge brought against the Independent Payment Advisory Board (IPAB) enacted as part of PPACA. The Supreme Court denied certiorari, without explanation as is its usual practice.

Plaintiffs brought suit in the U.S. District Court for the District of Arizona, contending that the individual mandate enacted as part of the PPACA violated their constitutional rights to medical autonomy and informational privacy, asserting substantive due process protections under the U.S. Constitution. Plaintiff’s also sought a declaratory judgment that the Arizona Health Care Freedom Act was not preempted by the PPACA. That Arizona statute amended the State’s constitution, and made it lawful for individuals to decline to purchase health insurance without the payment of penalty for doing so. Lastly, in their complaint, plaintiffs argued that the IPAB was an impermissible delegation of legislative authority, and thus violated Article I. § 1 of the U.S. Constitution. The district court[ii] dismissed the counts pertaining to the substantive due process challenges, and also ruled that the Arizona Health care Freedom Act was preempted by PPACA. The lower court ruled on the plaintiffs’ challenge to the IPAB on the merits, concluding that the provision for the IPAB under the PPACA did not run afoul of the “anti-delegation doctrine” and thus, withstood scrutiny as a legitimate exercise of Congress’ legislative powers. The Ninth Circuit affirmed the district court’s judgment in favor or the defendants, except as it related to the court’s decision on the IPAB. Regarding plaintiffs’ count challenging the IPAB, the court of appeals concluded that the lower court lacked jurisdiction to hear the case.

The Independent Payment Advisory Board

The provision for the IPAB is codified at 42 U.S.C. § 1395kkk. By establishing the IPAB as part of the PPACA, Congress established an administrative board with the duties to monitor the growth of Medicare spending. The provision specifies a scheme with designated roles for government officials. If actual growth exceeds projected growth, then the IPAB is directed to develop recommendations to reduce the growth rate to meet the “savings target” set by the Chief Actuary of the Centers for Medicare & Medicaid Services.[iii] It is the duty of the Chief Actuary, in the first instance, to determination when the actual growth exceeds projected growth of Medicare spending. Where the Chief Actuary makes such determination, then the IPAB must make recommendations to reduce the rate of growth for a given year that the Secretary of Health and Human Services (“Secretary”) is mandated to put into effect in the absence of congressional veto. In the event that the IPAB does not make the required recommendations, then the Secretary must assume the responsibility to do so. Recommendations made by the IPAB under section 1395kkk are to be submitted to Congress and the President. In the event that the Secretary makes recommendations, then they are submitted to the President. The President must then submit them to Congress within two days. Section 1395kkk also provides for Congress to consider and vote on the recommendations, or enact superseding legislation. Where Congress does not enact superseding legislation, then the Secretary is bound to implement the recommendations submitted to Congress and the President.

The Challenge to the Independent Payment Advisory Board

In the lawsuit, plaintiffs mounted a facial constitutional challenge against the IPAB. They contended that the establishment of the IPAB under the PPACA violated the non-delegation principle under Article I § 1 of the U.S. Constitution. Article I § 1 reads: “All legislative Powers herein granted shall be vested in a Congress of the United States.”

The Ninth Circuit explained that it needed to first address whether the constitutional claims pressed by the plaintiffs satisfied the requirement of ripeness and plaintiffs’ standing to sue under Article III. The court of appeals viewed the analysis of ripeness and standing as “essentially the same.”[iv] On these points, the court of appeals determined that the court lacked jurisdiction to entertain plaintiffs’ challenge against the IPAB. One of the plaintiffs, Dr. Eric N. Novack, is a physician whose practice consists of Medicare patients for whom he receives reimbursement under that federal healthcare program. Dr. Novack argued that the authority vested in the IPAB, to make recommendations on Medicare reimbursement rates, will lead to financial harm against his interests. The Ninth Circuit was not convinced that the legal challenged pressed against the IPAB met the requirements of Article III. It was on that basis that the court of appeals found that there was no court jurisdiction to entertain the challenge against the IPAB. For Article III purpose, the court of appeals wrote that there needs to be an injury that is “concrete, particularized, and actual or imminent. . .   .”[v] The Ninth Circuit concluded that the alleged harm to Dr. Novack’s financial interests was simply too speculative, and too remote, to past scrutiny under the commands of Article III. It was observed that the challenge lodged against the IPAB was based on speculation about potential rate reductions “wholly contingent upon. . .unforeseeable events.” Additionally, citing 42 U.S.C. § 1395 kkk(c)(2)(A)(iii), the court of appeals observed that under the statutory scheme, the IPAB could not render a recommendation to reduce Medicare rates until after 2019.

Accordingly, district court’s judgment on the merits that upheld the IPAB as constitutionally permissible was vacated and remanded, with instructions to dismiss the court challenge for lack of court jurisdiction.

[i] 762 F.3d 891 (9th Cir. 2014).

[ii] 2012 U.S. Dist. LEXIS 180306 (D. Ariz. Dec. 19, 2012)

[iii] The statute also directs the IPAB to consider, as part of its recommendations, other issues “to the extent feasible,” including, but not limited to, issues (i) to extend Medicare solvency; (ii) to improve delivery of health care via various models that would lead to enhanced efficiencies and health outcomes; and (iii) to protect and improve access to evidence-based items and services. 42 U.S.C. § 1395kkk(c)(2)(B).

[iv] 762 F.3d 891, 897.

[v] Id.

Biography of Stuart Silverman, Esq.

Stuart Silverman is an attorney with the Medicaid Fraud Control Unit in the District of Columbia Office of the Inspector General (OIG). He has been designated as a Special Assistant United States Attorney and a Special Assistant Attorney General for the District of Columbia. Mr. Silverman is also an Adjunct Professor with the Washington College of Law. Mr. Silverman has practiced health care law for most of his professional life. Prior to joining the OIG, Mr. Silverman was in private practice with Greenberg Traurig, and was also with the Office of the General Counsel for the U.S. Department of Health and Human Services (HHS). During his law firm association, Mr. Silverman provided counsel to health care clients on fraud and abuse, managed care, Medicare reimbursement as well as long term care issues. While with HHS, he represented the Health Care Financing Administration in federal court and before administrative tribunals on issues arising under the Medicare and Medicaid programs. Early in his career, Mr. Silverman was an attorney with the U.S. Environmental Protection Agency, and a Special Assistant United States Attorney for the Eastern District of Virginia.

Disclaimer

The views and opinions expressed herein by the author are his own, and cannot be attributed to the Office of the Inspector General for the District of Columbia Government.

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