Constitutional challenge to IPAB dismissed, but could return

August 19

The U.S. Court of Appeals for the Ninth Circuit dismissed as unripe a challenge to the Independent Payment Advisory Board (IPAB).  This Board was created by the PPACA to help control health care costs.  Specifically, IPAB is authorized to develop self-executing recommendations for limits on Medicare reimbursement rates and other cost controls should the rate of Medicare spending growth exceed a specified target.  In this case the plaintiffs argued that IPAB violates the non-delegation doctrine.

The district court had ruled against the plaintiffs on the merits, but on August 7, in Coons v. Lew, the Ninth Circuit held resolution of this constitutional challenge was premature.  According to the court, it was possible that future actions by IPAB could injure the plaintiffs.  One of the plaintiffs was a doctor who sees Medicaid patients and fears lower reimbursement rates.  Yet the IPAB has not been constituted yet, and its first cost-cutting recommendations (once they are made) will not become effective for several years from now, at the earliest.  Thus, the court concluded, the plaintiffs were only alleging a potential future injury of the sort that is not justiciable under Article III.  On this basis, the court concluded the challenge was unripe and should be dismissed  for lack of jurisdiction.  This strikes me as the correct result. (The plaintiffs also raised other constitutional challenges to other parts of the PPACA, all of which were rejected on the merits.)

Timing was a problem here, but I also suspect the substantive line of attack in Coons was an uphill battle.  The plaintiffs in Coons, represented by the Goldwater Institute, claimed that IPAB violates the non-delegation doctrine.  The problem is that no federal statute has been struck down on non-delegation grounds in over 75 years.  There’s a serious argument that the delegation to IPAB goes farther, and is less constrained, than those upheld in cases like Whitman v. American Trucking Assns, but I’m not sure federal courts will see it that way, at least not in isolation.  If non-delegation arguments are to be effective, I think they have to be combined with other constitutional attacks or framed as reasons why a court should construe a statute narrowly, as suggested by Cass Sunstein in his paper on “Non-Delegation Canons.”  

Even if non-delegation arguments are totally unavailing, this doesn’t mean IPAB is immune from constitutional challenge.  Other aspects of IPAB are quite problematic.  IPAB is not dependent upon annual appropriations from Congress, need not follow traditional administrative processes, and is not subject to judicial review. As if that were not enough, the PPACA provides that Congress may dissolve IPAB only if it follows a specified procedure during a seven-month period in 2017 — a statutory provision even the Obama administration has acknowledged could not hold up in court. Even Tim Jost, one of the PPACA’s most vociferous defenders, has suggested that IPAB is vulnerable to constitutional challenge, and he has been dismissive of most other PPACA legal challenges to date.

Once IPAB is operational, and begins to take actions constraining Medicare reimbursement rates, expect new legal challenges to emerge.  It’s not clear when this might be as, at present, the rate of Medicare growth has been slower than some anticipated.  Nonetheless, barring legislative revision to the IPAB provisions, it would seem to be only a matter of time before IPAB acts, and only a matter of time before IPAB gets its day in court.

For more on why we will see legal challenges to the PPACA for years to come, see this paper.

Jonathan H. Adler teaches courses in constitutional, administrative, and environmental law at the Case Western University School of Law, where he is the inaugural Johan Verheij Memorial Professor of Law and Director of the Center for Business Law and Regulation.
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