Reply Brief — South Carolina Medical Ass'n v. Thompson

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/ nh ~~ Supreme Court, U.S.

(Ay) FILED

No. 03-114 OCT 1 - 2003

In The

Supreme Court of the Gnited States

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SOUTH CAROLINA MEDICAL ASSOCIATION, et ail.,

Petitioners,

v.

TOMMY G. THOMPSON, SECRETARY OF THE

U.S. DEPARTMENT OF HEALTH AND

HUMAN SERVICES, et al.,

Respondents.

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On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Fourth Circuit

REPLY BRIEF FOR THE PETITIONERS

+

TERRY E. RICHARDSON, JR.*

DANIEL S. HALTIWANGER

RICHARDSON, PATRICK, WESTBROOK

& BRICKMAN

P.O. Box 1368

Barnwell, South Carolina 29812

(803) 541-7850

RICHARD J. LAZARUS

GEORGETOWN UNIVERSITY LAW

CENTER

600 New Jersey Ave., N.W.

Washington, D.C. 20001

(202) 662-9129

Counsel for Petitioners

* Counsel of Record

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TABLE OF AUTHORITIES

Cases:

Bowen v. Georgetown Univ. Hospital,

oie ft | Pe eee erereTer Teer Tee iri e ee

Investment Company Institute v. Camp, 401 U.S. 617

(ag) 2 re ere rere rr rer Tr errr er tT 7

National Broad. C. v. United States, 319 U.S. 190

CO eee ere rer eer Tere rrr re 5

Whitman v. American Trucking Ass’n, 531 U.S. 457

+ | Peeerererer re Teer etter er eee ete 2, 3, 4-5

Statutes and Regulations:

Clean Air Act, 42 U.S.C. §§ 7407-7409 ............... 3

Health Insurance Portability and Accountability

Act of 1996, Pub. L. No. 104-191, 110 Stat.

ot eee er rere passim

eer rr rrr tee terre Terre Trt 8

SO ere rr re rer ere 6,7,8

Social Security Act, Title XI

DG r ee ie PROUD bn ns cece evunss ivcens 6,7

§ 1171(6), 42 US.C. § 1ISZ0d(@) ... ee veccccees 6

© UT7S, Gl USC. § TGR). ow ov ev cdcecenccves 4

§ 1173(a), 42 U.S.C. § 1320d-2(a)(1) ........... 6,7,8

§ 1173, 42 USC. § IS20d-2 note .... 2. eccsescces 6

(i)

sememee teeta |

Statutes and Regulations (continued): |

45 CFR. (2003) :

SIGGRD ccidcccteees ee eee 6-7 |

tL + er he ee 10

Miscellaneous:

65 Fed. Rew, SOROG GID) oc csc censnesasnsveenssds 9

67 Fed. Reg. SSZ26-S2 (GMD is civcsvenscninviesoss 10

(ii)

In the

Supreme Court of the United States

No. 03-114

SOUTH CAROLINA MEDICAL ASSOCIATION, et al.,

Petitioners,

V.

TOMMY G. THOMPSON, SECRETARY OF THE U.S.

DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Fourth Circuit

REPLY BRIEF FOR THE PETITIONERS

Respondents’ brief in opposition merely parrots the

opinion of the court of appeals below without making any

meaningful effort to answer the arguments set forth in the

petition explaining why the reasoning of that opinion is

multiply flawed. Accordingly, like the court of appeals,

respondents fundamentally misapprehend this Court's

nondelegation doctrine precedent and then misapply it to

the provisions of the Health Insurance Portability and

Accountability Act of 1996 (HIPAA), Pub. L. No. 104-191,

110 Stat. 1936 (1996), challenged in this case. So too,

respondents merely echo the court of appeals’ failure to

enforce Congress’s clear intent to confine the Secretary’s

y

rulemaking authority to promulgate medical privacy

standards to a series of specifically-listed electronic

transactions of medical records. Ignoring the plain

meaning of the statutory language that Congress actually

enacted, they propose in its place a sweeping claim of

inherent administrative agency authority to promulgate

any regulations that the Secretary can deem to be

“reasonably related” to statutory purposes.

Neither the nondelegation doctrine nor the plain

meaning of HIPAA, however, can be so blithely cast aside.

Respondents are no doubt correct that serious

nondelegation problems rarely arise. But the validity of

that threshold proposition does not detract from the very

serious constitutional problems created when, as here,

Congress plainly transgresses those boundaries. When,

moreover, the Secretary compounds Congress’s

constitutional error by promulgating sweeping medical

privacy rules that declare for the first time national

standards for disclosing the intimate details of a person’s

health, this Court should not condition plenary review on

the subsequent development of a circuit conflict. Such a

profound challenge to separation of powers’ principles on

a sensitive and fundamentally important issue of federal |

law warrants review without further postponement. |

1. Contrary to the respondents’ claim (Br. in Opp. 8), |

we do not contend that Congress cannot vest rulemaking

authority on subject matter that is “controversial.” We

repeat only what this Court has itself made recently clear,

which is that “the degree of agency discretion varies

according to the scope of the power congressionally

conferred” and that for “setting * * * standards that affect

the entire national economy,” such as the Secretary’s

medical privacy standards,” Congress “must provide

substantial guidance.” Whitman v. American Trucking

Ass'n, 531 U.S. 457, 475 (2001).

|

As described in the petition, HIPAA fails to provide

even the most minimal guidance, let alone the “substantial

guidance” constitutionally required. Respondents try

mightily to glean from the statute some relevant guidance,

but at the end of the day their efforts utterly fail for one

simple reason. No such statutory guidance exists within

the four corners of HIPAA. Completely absent from the

statute is even the most minimal guidance concerning

what factors should be considered in assessing the privacy

concerns implicated by particular medical records or what

factors should be relevant in assessing the social policy

objectives allegedly favoring disclosure of those records.

The brief in opposition, like the court of appeals

opinion, argues otherwise, but only by obfuscating the

essential distinction between Congress’s imposing some

outerbounds on the Secretary’s rulemaking authority with

the legislature’s failure to provide the requisite intelligible

principle for the exercise of that authority within those

bounds. The nondelegation doctrine is not satisfied by the

former without any regard to the latter. Indeed, were the

rule otherwise, the Clean Air Act provisions recently at

issue in American Trucking Ass’n, would have passed

constitutional muster on the ground that Congress had

instructed the Environmental Protection Agency to enact

“national ambient air quality standards” without any

additional guidance. But this Court’s opinion makes clear

that the Constitution does require more, which is why the

Court rejected the nondelegation doctrine challenge only

upon concluding that Congress had sufficiently cabined

EPA’s rulemaking authority by instructing that national

air quality standards must be set “at the level that is

‘requisite’ -- that is, not lower or higher than is necessary --

to protect the public health with an adequate margin of

safety.” 531 U.S. at 475-76.

The degree of congressional guidance necessary for the

4

establishment of national medical privacy standards must

be at least as great as that necessary for national ambient

air quality standards. Indeed, it is hard to imagine very

many social issues that touch upon the personal lives and

privacy of individual Americans as does the potential

disclosure of their medical records. Yet, as described in

the petition (Pet. 16-19), none of the HIPAA provisions

cited by the court of appeals (or the brief in opposition)

bears any direct relation to the Secretary’s exercise of

lawmaking in setting the medical privacy standards

challenged in this case. HIPAA’s statement of purpose to

“encourage, rather than discourage, the use of electronic

data transmission” (Br. in Opp. 9) provides no “substantial

guidance” on the content of the medical privacy rules, or

even purports directly to address the issue at all. Nor

does HIPAA’s provision that rules “must ‘be consistent

with the objective of reducing the administrative costs of

providing and paying for health care’” (Br. in Opp. 10,

guoting 42 U.S.C. §1320d-1(b)). Both these generic

legislative policy statements concern matters largely

incidental to the propriety of disclosure of individual

medical records. Neither remotely seeks to instruct the

Secretary regarding how to address the difficult and

complex privacy issues underlying the sweeping national

medical privacy standards ultimately promulgated.

Respondents ultimately seek defense (Br. in Opp. 10-

11) in the fact that this Court has previously rejected

nondelegation challenges to federal statutes that contain

only broadly-worded guidance to an agency for the

exercise of its delegated lawmaking authority. As this

Court made clear in American Trucking Ass’n, however,

there is no merit to respondents’ apparent assumption that

the Court applies a “one size fits all” approach in

nondelegation doctrine cases. “[T]he degree of agency

discretion that is acceptable varies according to the scope

5

of the power congressionally conferred.” 531 U.S. at 475.

For that reason, respondents’ reliance on the Court's

upholding of laws containing broad delegation of

lawmaking authority in other statutory contexts is entirely

misplaced.

But, in all events, even those other statutes purported

atleast to address the substantive factors to be considered

and offered some suggestion as to how the agency should

strike the balance between competing factors. Without

conceding that the “public convenience, interest, or

necessity” standard applicable to the Federal

Communications Commission (see National Broad. C. v.

United States, 319 U.S. 190, 215, 225 (1943)) would have

been sufficient to sustain a delegation of authority to the

Secretary to promulgate national medical privacy

standards, even that general standard offers far more of an

intelligible principle than does HIPAA, which provides no

standard applicable to privacy at all. Certainly, the

substantive criteria set forth by respondents (Br. in Opp.

11) from the Occupational Safety and Health Act of 1970,

instructing the agency to set a standard for toxic materials

“to the extent feasible” and capable of ensuring that “no

employee will suffer any impairment of health” provides

several orders of magnitude more guidance than does

HIPAA. The former statute addresses the substance of the

rules to be promulgated, describes the extent of protection

to be provided (guarding against “any impairment of

health”), and emphasizes the need for “feasible” limits.

HIPAA never offers any comparable guidance concerning

the extent to which personal privacy should be

safeguarded or how the relevant tradeoffs between

competing policy concerns should be considered and

determined.

The legislative record also makes clear that the absence

of any substantial guidance in HIPAA is no happenstance.

ae

6

As described in the petition (Pet. 11-14), Congress created

this extreme result in a failed effort to force its own

legislative hand on difficult policy issues that members of

Congress and the President all understood required such

substantial guidance. But, whatever the reasons for that

effort or its failure, they cannot cure or otherwise excuse

the fundamental constitutional defect thereby created

when the Secretary agreed to carry through the

congressional threat of providing no guidance at all.

2. Similarly lacking in merit is respondents’ defense of

the Secretary’s decision to promulgate medical privacy

standards applicable to all personal medical records

regardless of their form or method of transmission. As set

forth in the petition (Pet. 20-26), the relevant statutory

language in HIPAA Section 264(c)(1) expressly limits the

Secretary's standard setting authority “to the privacy of -

individually identifiable health information transmitted in

connection with the transactions described in section

1173(a) of the Social Security Act.” 42 U.S.C. § 1320d-2

note. Section 1173(a) of the Social Security Act in turn

describes in detail nine specific transactions and limits the

Secretary’s rulemaking authority to the setting of

standards “to enable health information to be exchanged

electronically.” 42 U.S.C § 1320d-2(a)(1). An unbridgeable

gulf, therefore, exists between the plain meaning of the

statutory language and the Secretary’s decision in the final

regulations to issue privacy standards applicable to

personal medical records “transmitted or maintained in

any ... form or medium” 45 C.F.R. § 160.103 (2003).

Here too respondents repeat (Br. in Opp. 13) the court

of appeals’ error that the Secretary’s action can be

sustained because HIPAA defines “health information” for

use throughout the statute as including “any information,

whether oral or recorded in any form or medium.” 42

U.S.C. § 1320d(4). The short answer, of course, is that

7

Section 264(c)(1)’s conferral of rulemaking authority on the

Secretary does not refer simply to “health information”

but instead only to “health information transmitted in

connection with the transactions described in section

1173(a) of the Social Security Act.”

Respondents alternatively seek to avoid HIPAA’s plain

meaning by offering for the first time their own

construction of the statutory reference to “health

information transmitted ‘in connection with’ the

transactions described in Section 1173.” Br. in Opp. 14.

According to respondents (id.), “in connection with”

means “related in some way to” the statutorily specified

transactions. We believe that “in connection with” means

just what it says, which is that the health information must

be transmitted in connection with one of the electronic

transactions referred to in the statute. Respondents

plairny cannot substitute their own preferred language for

that actually appearing in HIPAA. Nor can their litigating

counsel in any event proffer a new interpretation before

this Court for the first time and claim entitlement to

judicial deference. See Investment Company Institute v.

Camp, 401 U.S. 617, 628 (1971) ("Congress has delegated to

the administrative official and not to appellate counsel the

responsibility for elaborating and enforcing statutory

commands."); Bowen v. Georgetown Univ. Hospital, 488

U.S. 204, 212 (1988).

Without a doubt, however, respondents’ most

sweeping claim is their embracing of the court of appeals’

ruling that the Secretary possesses inherent authority to

enact any regulations that the Secretary deems are

“reasonably related to the larger purposes of HIPAA.’”

Br. in Opp. 14, quoting Pet. App. Al4. No agency,

however, possesses any such inherent rulemaking

authority. It cannot be gainsaid that the Secretary’s

rulemaking authority is strictly confined to that expressly

8

conferred upon the Secretary by Congress. With regard to

the medical privacy standards at issue in this case,

moreover, the clear beginning and end of the Secretary’s

authority is that provided for by HIPAA Section 264(c)(1).

No broader inherent rulemaking authority exists that

permits the Secretary to ignore Section 264(c)(1)’s

limitation on the Secretary’s rulemaking authority to

promulgate medical privacy standards.

Finally, respondents do not even try to answer the

petition’s showing (Pet. 22) that a comparison of the

language of Section 264(c)(1) to Section 264(a) makes plain

the deliberateness of the narrow rulemaking authority set

forth in Section 264(c)(1). In Section 264(a), Congress did

not similarly limit the Secretary’s authority in describing

the scope of recommendations the Secretary should make

to Congress on medical privacy standards. Nor do

respondents make any effort to dispute the petition’s

further showing (Pet. 22-23) that the legislative record

reveals precisely why Congress made that policy decision

to limit the rulemaking authority to the nine transactions

specified in Section 1173(a): Congress was otherwise

promoting the electronic transmissions of those nine

transactions by establishing uniform standards and

therefore was aware of the concomitant need for some

interim rulemaking authority to establish medical privacy

standards for them.

Respondents offer no answer to the petition in any of

these respects because there is no effective response to be

made. The simple truth is that Congress conferred no

authority on the Secretary to promulgate sweeping

medical privacy standards applicable to all personal

medical records. The Secretary understood as much in

virtually all aspects of the Secretary’s implementation of

HIPAA, butas the previous Administration was in its final

days, the Secretary unilaterally decided to seize the last

9

remaining opportunity to impose the kinds of broad

standards that the Secretary concluded were warranted,

regardless of the existence of the statutory authority to do

so. Under our Constitution, however, the Secretary

possesses no such unilateral lawmaking authority,

whether or not the Secretary can argue that it is

“reasonably related” to a statute’s “larger purposes.”

3. Under this Court's rules, certiorari is warranted only

| for “compelling reasons.” S. Ct R. 10. Among the

| compelling reasons set forth by the Court's rule is that a

federal court of appeals “has decided an important

question of federal law that has not been, but should be,

settled by this Court.” Id. For the reasons set forth in the

petition (Pet. 26-29), none of which respondents contest,

the lawfulness of the Secretary’s medical privacy

standards present just such an important question of

federal law. As described by the Secretary herself, these

rules “establish[], for the first time, a set of basic national

privacy standards” and the Secretary’s rules “are likely the

largest single federal initiative to protect privacy.” 65 Fed.

Reg. 82468. At this very moment, the Secretary’s

standards are requiring thousands of medical providers to

change dramatically their busimess practices and

disclosure policies, thereby affecting the rights of millions

of Americans on core matters of personal privacy.

The absence of any legislative authority for these

standards, let alone the constitutionally-required

substantial congressional guidance for the exercise of such

authority, is no mere technical deficiency. With regard to

medical privacy standards in particular, there is

heightened reason to be wary of executive branch

usurpation of lawmaking authority in the absence of

legislation enacted by the democratically elected

repr sentatives. | As underscored by the disclosure

policies contained within the Secretary’s standards, which

10

allow in many circumstances for disclosure of personal

medical information to government agencies, including

law enforcement officers (see 45 C.F.R. § 164.512, 67 Fed.

Reg. 53226-32 (2002)), this is an area of law where the need

to adhere to the Framers’ careful design of lawmaking

checks and balances is absolutely essential. This is not

therefore the kind of case wherein it is proper to indulge

the normal practice of postponing further review until the

lower courts have the opportunity to consider further the

legal issues herein presented.

KKKKKE

For the foregoing reasons and those set forth in the

petition, it is respectfully submitted that the petition for a

writ of certiorari should be granted.

TERRY E. RICHARDSON, JR.*

DANIEL S. HALTIWANGER

RICHARDSON, PATRICK, WESTBROOK &

BRICKMAN

P.O. Box 1368

BARNWELL, SOUTH CAROLINA 29812

(803) 541-7850

RICHARD J. LAZARUS

GEORGETOWN UNIVERSITY

LAW CENTER

600 NEW JERSEY AVE., N.W.

WASHINGTON, D.C. 20001

(202) 662-9129

Counsel for Petitioners

* Counsel of Record

September 2003

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