The Worst-Case Scenario for the Medical Device Industry in the Supreme Court Healthcare Reform Case

Of the decisions the Supreme Court could issue on the healthcare reform law, a ruling to strike down the minimum coverage and Medicaid expansion provisions while allowing the rest of the legislation to stand would be the worst-case scenario for the medical device industry.

The minimum coverage provision of the Patient Protection and Affordable Care Act (ACA) requires Americans to buy health insurance or face a penalty. Set to go into effect in 2014, it would effectively expand the market for medical device products, says Renee Landers, professor of law in Suffolk University Law School's Health and Biomedical Law Concentration. A ruling by the court to strike down the mimimum coverage provision but not the rest of the statute, which includes a 2.3% excise tax on medical devices, would be a double whammy for the industry.

“Not only would you have the tax, but you wouldn’t have the market expansion that the minimum coverage provision might provide,” Landers says.

Even worse would be the loss of the provision extending Medicaid to Americans under the age of 65 who are at or below 133% of the federal poverty level, says Richard Figueroa, director of health and human services at the California Endowment. Medicare recipients tend to have higher than average medical risk and are thus more likely to use the healthcare system, he says.

“If they also strike down the Medicaid provisions, that would reduce the healthcare market expansion quite a bit more severely,” Figueroa says.

The Supreme Court heard three days of arguments on the ACA back in March. The key questions before the court are:

Severability is the most important issue for the device industry, Landers says. If the individual mandate is declared unconstitutional and the justices rule it can be severed from the statute, the rest of the law, including the device tax, will remain in place. A ruling against severability would bring down the entire act—and the device tax with it.

“The court has a range of options, from nothing going down to just some of it,” Landers says. “How much goes down with the minimum coverage provision is anyone’s guess.”

Still, experts heard some clues in the justices’ questioning.

“[Antonin] Scalia, through his questioning seemed to be suggesting that he thinks if the individual mandate is unconstitutional, the entire law should be invalidated,” says Daniel O. Conkle, Robert H. McKinney professor of law at the Indiana University Maurer School of Law. “Other justices, for example justice [Ruth Bader] Ginsberg, seemed to be saying that the court should be very slow to … invalidate the entire law.”

Landers says Scalia was the only justice who seemed to hint that the mandate could not be severed from the rest of the act. Striking down the ACA entirely would be seen as a radical, activist move that would be hard for the court to justify, she says.

Alison Barnes, professor of law at Marquette University School of Law, also believes it’s unlikely that the court will invalidate the entire law.

“I don’t see the tax going down,” she says.

Neither AdvaMed nor the Medical Device Manufacturer’s Association, the medical device industry’s main trade groups, filed briefs in the case. AdvaMed spokesman Gary Karr says the organization hasn’t taken a formal position in the case.

“We really aren’t involved in this case at all,” he says, adding that while AdvaMed opposes the medical device tax, it supports other provisions of the ACA. AdvaMed’s efforts continue to focus on urging legislators to repeal the device tax, Karr says.

Jamie Hartford is the associate editor of MD+DI and MED. Follow her on Twitter at @readMED.