Justice Breyer’s Influence on America’s Health Care System

This week’s news that Justice Stephen Breyer would step down from the Supreme Court at the conclusion of the Court’s term definitely caught our attention here at the Medicaid and the Law Blog.  Our view is that Justice Breyer – who, for whatever reason, did not get a significant amount of attention from the mainstream media – had a monumental influence on the American health care system, and his departure is noteworthy.  We thought we’d highlight a few cases in which he had a decided effect on the Medicare and Medicaid programs.  If there’s one common theme that has come through over the years, it’s his respect for the role of the states in our health care system.

We want to begin with a case that he decided before he was appointed to the Supreme Court by President Clinton, when he was a judge on the U.S. Court of Appeals for the First Circuit.  It was actually a Medicare case, and although we don’t often write about Medicare here on our blog, we’re making an exception to better explain Justice Breyer’s health care jurisprudence.  The case, Massachusetts Medical Society v. Dukakis, 815 F.2d 790 (1st Cir. 1987) involved a law that Massachusetts had enacted prohibiting physicians who treated Medicare patients from “balance billing” them for the cost of their care – in other words, charging them an amount in excess of the Medicare payment amount.

Under the Medicare program, a beneficiary who receives a physician service has to pay coinsurance equal to 20% of the Medicare payment for the service.  Let’s say a physician assesses a patient with flu symptoms and the Medicare payment for that service is $100.  The Medicare program pays $80 and the beneficiary pays $20.  But what if the physician isn’t happy with the $100 payment, and feels that her services are worth $200.  Medicare is still only going to pay $80, but can the physician balance bill the patient for the $120 that Medicare did not pay?

In 1985, Massachusetts enacted a law prohibiting physicians from balance billing Medicare beneficiaries as a condition of licensure.  So in the example above, under the Massachusetts law, a physician in the state could lose her license if she billed the patient more than the $20 copayment.  But Medicare is a federal program.  Can a state regulate a physician’s conduct when she’s providing a service under a federal program subject only to federal rules?  That was the question before the court in the Massachusetts Medical Society case.

In reaching his decision, Judge Breyer explained the doctrine of pre-emption.  Under the Supremacy Clause of the Constitution, federal law is “the supreme law of the land” and a state’s ability to regulate in an area where the federal government has regulated is narrow or even non-existent.  Relying on the Supremacy Clause, the Massachusetts Medical Society argued that federal Medicare law pre-empted the Massachusetts Legislature’s ability to enact its balanced billing prohibition.

But then-Judge Breyer disagreed.  Pre-emption only applied, he explained, when the federal government had expressly prohibited a state from regulating in an area where the Congress wanted to preserve for federal regulation, or where preservation of federal regulation was implied.  In the case of balance billing, there was no express pre-emption; Congress had not prohibited states from acting in this area.  Moreover, Judge Breyer explained, pre-emption couldn’t be implied, either.  Congress’s regulation of physicians in the Medicare program wasn’t “pervasive” and it wasn’t impossible to comply with the federal Medicare law and the state law prohibiting balance billing.  As Judge Breyer noted, regulation of physician fees is typically a matter of state concern.  Finally, the Massachusetts law didn’t stand as an “obstacle” to the purposes and objectives of the Congress.  Congress had not created a right for physicians to balance bill, and as a result, the Massachusetts law was not an obstacle to Congress’s aims in enacting the Medicare program.  All that Massachusetts had done, Judge Breyer explained, was to create a rule of conduct for physicians licensed to practice in the state.  Rejecting the Medical Society’s Constitutional objection to the law, he said that “there is nothing irrational about a state’s saying that a doctor, entering the profession, must promise to follow the rules.”

This respect for the role of states in the American health care system carried over to Justice Breyer’s jurisprudence on the Supreme Court.  For example, he joined with Justice Kagan (appointed by President Obama) and the five Justices appointed by Republican Presidents in overturning a provision of the Affordable Care Act (ACA) that mandated that states expand their Medicaid programs under the terms of the ACA.

In NFIB v. Sebelius, 567 U.S. 519 (2012), the Supreme Court considered a Constitutional challenge to the ACA’s Medicaid expansion.  Prior to the ACA, eligibility for Medicaid was tethered to an individual’s categorical basis for eligibility:  receipt of cash welfare payments; pregnancy; parenthood; disability or age.  The ACA dramatically simplified Medicaid eligibility by making anyone with income below 133% of the federal poverty level eligible for the program.  But if a state refused to adopt the expansion, they would lose all federal funding for their program.

In a 7-2 decision, the Supreme Court ruled that penalty went too far.  It was, in Chief Justice Roberts’ words, “a gun to the head.”  The ACA’s penalty “commandeered” state decision-making and was impermissible under our federalist system of government under which the states are co-sovereign entities.  Although Justice Breyer did not write separately, his and Justice Kagan’s concurrence with Chief Justice Roberts’ opinion created a 7-2 majority that made the Medicaid expansion optional (as of the date of our blog post, 39 states have adopted the ACA expansion).  Again, we see Justice Breyer’s respect for states’ role in our health care system.

The third and final decision we want to address similarly demonstrates Justice Breyer’s fidelity to the role of states.  It also demonstrates how his skill as a mediator between liberal and conservative wings of the court has preserved the entitlement to Medicaid.

We have written before about the ongoing saga involving the ability of an aggrieved party to challenge a denial of Medicaid benefits.  Although the Supreme Court ruled in 1990 that an individual could seek to challenge their denial of benefits under Medicaid in federal court, that decision has been weakened over the past 30 years.  In a case called Armstrong v. Exceptional Child Center, 575 U.S. 320 (2015), Justice Breyer’s concurring opinion with then-Justice Scalia in a 5-4 decision enabled him to mediate an outcome that preserved the right to challenge a denial of Medicaid benefits in federal court.

The Armstrong case involved an Idaho law that set rates for home care services at a rate that the providers of those services argued was too low.  Federal Medicaid law requires that payment rates for services be set at a level “sufficient to enlist enough providers so that care and services are available under the plan.”  42 U.S.C. 1396a(a)(30)(A).  So what recourse did those aggrieved providers have?

They argued that because federal law – here, the Medicaid program – was the “supreme law of the land” under the Supremacy Clause, and that the state of Idaho had violated that law by setting payment rates for home care services at an “[in]sufficient” level, the federal courts had the ability to correct that violation.  For his part, Justice Scalia would have simply said that the federal courts can never enforce the provisions of the Medicaid program.  But he could only attract three other justices to that way of thinking.

Here’s where Justice Breyer’s mastery as a mediator comes in.  He agreed to join Justice Scalia’s opinion, but only insofar as it pertained to challenging Medicaid rate regulation under the Supremacy Clause.  The federal courts, explained Justice Breyer, did not have the expertise to determine what a “sufficient” payment rate is in a particular state.  In Justice Breyer’s view, a Medicaid rate challenge could be addressed in at least two other ways.  First, CMS could penalize a state that set rates too low and thus violated the statute.  Second, an aggrieved party could sue CMS for permitting a state to set rates too low.

In our view, Justice Breyer accomplished two things with his concurring opinion in Douglas.  First, he preserved the ability of an individual to use the federal court system to challenge a denial of benefits under the Medicaid program that did not involve payment rates.  Second, he demonstrated his belief – as he has throughout his career as a federal judge going back to the 1970s, before his appointment to the Supreme Court – that under our system of government, the states have a crucial role to play in the American health care system.

At the White House last week, when he formally announced his retirement from the Court, Justice Breyer described our system of government as an “experiment” and he quoted George Washington and Abraham Lincoln to reinforce that point.  He quoted the great thinkers in Europe from the 18th century who were convinced that the American experiment would fail.  And he closed with these words:

It’s an experiment that’s still going on.  You know who will see whether that experiment works?  It’s you, my friend.  It’s you, mister high school student.  It’s you, mister college student, it’s you mister law school student.  It’s us, but it’s you.  It’s that next generation and the one after that.  My grandchildren and their children.  They’ll determine whether the experiment still works.  I’m an optimist.  I’m pretty sure that it will.

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