THE HOSPITAL & HEALTHSYSTEM ASSOCIATION OF PENNSYLVANIA, GEISINGER HEALTH SYSTEM, ST. VINCENT HEALTH CENTER AND ABINGTON MEMORIAL HOSPITAL
THE COMMONWEALTH OF PENNSYLVANIA, THE DEPARTMENT OF INSURANCE, THE TREASURY DEPARTMENT, AND THE OFFICE OF THE BUDGET OF THE COMMONWEALTH OF PENNSYLVANIA; APPEAL OF: COMMONWEALTH OF PENNSYLVANIA, THE DEPARTMENT OF INSURANCE AND THE OFFICE OF THE BUDGET OF THE COMMONWEALTH OF PENNSYLVANIA; THE PENNSYLVANIA MEDICAL SOCIETY, ON BEHALF OF ITSELF AND ALL OF ITS MEMBERS
THE COMMONWEALTH OF PENNSYLVANIA; THE DEPARTMENT OF INSURANCE, THE TREASURY DEPARTMENT, AND THE OFFICE OF THE BUDGET OF THE COMMONWEALTH OF PENNSYLVANIA; APPEAL OF: COMMONWEALTH OF PENNSYLVANIA, THE DEPARTMENT OF INSURANCE AND THE OFFICE OF THE BUDGET OF THE COMMONWEALTH OF PENNSYLVANIA
Argued September 14, 2011
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Appeal from the Order of the Commonwealth Court at No. 522 MD 2009 dated April 15, 2010. Other Court Judges: Dan Pellegrini, Renee Cohn Jubelirer, Robert E. Simpson, Johnny J. Butler, Patricia A. McCullough, JJ.
Appeal from the Order of the Commonwealth Court at No. 523 MD 2009 dated April 15, 2010. Other Court Judges: Dan Pellegrini, Renee Cohn Jubelirer, Robert E. Simpson, Johnny J. Butler, Patricia A. McCullough, JJ.
For The Senate of the Commonwealth of PA, AMICUS CURIAE: Jonathan F. Bloom, Esq. Stradley, Ronon, Stevens & Young, L.L.P., Thomas Walter Dymek, Esq. Stradley, Ronon, Stevens & Young, L.L.P., Karl Stewart Myers, Esq. Stradley, Ronon, Stevens & Young, L.L.P.
For Treasury Department, PARTICIPANTS: Christopher B. Craig, Esq., Karen Spencer Kelly, Esq. PA Department of Treasury.
For PA Medical Society; Peter Daloni, M.D.; Karen Rizzo, M.D.; Martin Trichtinger, M.D., PARTICIPANTS: Kevin James McKeon, Esq. Hawke McKeon & Sniscak, L.L.P., Scott Thomas Wyland, Esq. Hawke McKeon & Sniscak, L.L.P.
For Department of Insurance, APPELLANT: Amy Griffith Daubert, Esq. PA Department of Insurance.
For Commonwealth of PA, Dept of Insurance, Office of the Budget of the Commonwealth, APPELLANT: Gregory Eugene Dunlap, Esq. PA Office of General Counsel.
For Commonwealth of Pennsylvania, APPELLANT: Barbara J. Holland, Esq. PA Governor's Office of General Counsel, Kathleen Granahan Kane, Esq. PA Office of Attorney General.
For Office of the Budget of the Commonwealth of Pennsylvania, APPELLANT: James Daniel Neilson, Esq. PA Governor's Office of General Counsel.
For Commonwealth of Pennsylvania, APPELLANT: Robert L. Pratter, Esq. PA Governor's Office of General Counsel.
For Rep. Todd A. Eachus, Majority Leader of the PA House of Rep., APPELLANT AMICUS CURIAE: Tara Lynn Smith, Esq. PA House of Representatives, Nora Winkelman, Esq.
For Hospital & Healthsystem Assoc of PA; Geisinger Healthsystem; St. Vincent Health Ctr.; Abington Mernor, APPELLEE: Philip H. Lebowitz, Esq. Duane Morris, L.L.P., David Edwin Loder, Esq. Duane Morris, L.L.P., Nina L. Russakoff, Esq. Duane Morris, L.L.P.
For American Medical Association, APPELLEE AMICUS CURIAE: Robert B. Hoffman, Esq. Eckert Seamans Cherin & Mellott, LLC.
For Hospital & Healthsystem Assoc of PA; Geisinger; St. Vincent; Abington Memorial Hospital, PARTICIPANTS: Philip H. Lebowitz, Esq. Duane Morris, L.L.P., David Edwin Loder, Esq. Duane Morris, L.L.P., Nina L. Russakoff, Esq. Duane Morris, L.L.P.
For Pennsylvania Medical Society, APPELLEE: Kevin James McKeon, Esq. Hawke McKeon & Sniscak, L.L.P., Scott Thomas Wyland, Esq. Hawke McKeon & Sniscak, L.L.P.
BEFORE: MR. JUSTICE SAYLOR. CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ. Former Justice Orie Melvin did not participate in the decision of this case. Mr. Chief Justice Castille and Messrs. Justice Eakin and McCaffery join the opinion. Mr. Justice Baer files a dissenting opinion. Madame Justice Todd files a dissenting opinion.
[621 Pa. 267] MR. SAYLOR,
In this direct appeal, we determine the constitutionality of legislation mandating a one-time transfer of money from the Medical Care Availability and Reduction of Error Fund to Pennsylvania's General Fund.
In 2002, the General Assembly enacted the Medical Care Availability and Reduction of Error Act (the " MCARE Act" ), which requires health care providers to maintain a minimum level of professional liability insurance. The MCARE Act also created the Medical Care Availability and Reduction of Error Fund (the " MCARE Fund" ), which is designated as a " special fund" within the state treasury. 40 P.S. § 1303.712(a). The MCARE Fund is administered by the Insurance Department of Pennsylvania. See id. § 1303.713(a).
[621 Pa. 268] Under the MCARE Act, Pennsylvania physicians, hospitals, and certain other health care providers, as a condition of practicing in Pennsylvania, are required to purchase medical professional liability insurance (or provide self-insurance) in the amount of $500,000 per occurrence or claim, and to participate in the MCARE Fund. See 40 P.S. § 1303.711(a), (d)(2), (e). The MCARE Fund provides a secondary layer of liability coverage to providers by paying, subject to the fund's liability limits, damages awarded in medical malpractice actions in excess of the required minimum level of professional liability coverage. See id. § 1303.711(g). Presently, the fund's liability limit is $500,000 per occurrence. See id. § 1303.712(c). The MCARE Fund is funded by annual assessments levied upon health care providers based on a statutory formula, and loans secured, when needed, from other state funds, such as the Catastrophic Loss Benefits Continuation Fund. See id. § § 1303.712(d), 1303.713(c).
Although the MCARE Fund is similar to a supplemental insurance carrier, there are differences, the main one for present purposes being that there is no risk transfer in exchange for premiums. Rather, the statutory formula for assessments levied against health care providers is designed to: (i) reimburse the fund for the payment of reported claims that became final during the preceding year; (ii) pay expenses of the fund incurred during the preceding year; (iii) pay principal and interest on monies that the fund borrowed; and (iv) create a reserve that is ten percent of the sum of (i)-(iii) above. See 40 P.S. § 1303.712(d). At any time there may be unfunded liability arising from unreported or unresolved claims. If and when the Insurance Commissioner determines that the private insurance market has the capacity to satisfy professional liability requirements, the MCARE Fund will cease providing coverage for new liability. See id. § § 1303.712(c)(2), 1303.711(d)(4). The fund will not immediately [621 Pa. 269] terminate, however, as it will still be responsible for excess coverage on unreported or unresolved claims stemming from events that occurred during coverage years. Because assessments are based on the claims paid in the prior year, the MCARE Fund will continue to collect assessments until all claims for which it is responsible have been satisfied. The fund's actuaries have projected that it may continue to pay claims -- and thus, collect assessments -- for forty years after the fund ceases to provide coverage. At that time, monies remaining in the fund are to be distributed to health care providers in proportion to their assessments during the preceding year. See id. § 1303.712(k).
Due to a revenue shortfall, the Commonwealth faced a budget impasse for the 2009-10 fiscal year that lasted approximately 100 days. An interim budget was passed in early August of 2009, and the impasse was finally resolved on October 9, 2009, when the Governor approved a supplemental appropriations bill, as well as implementing legislation making amendments to Pennsylvania's Fiscal Code. See Act of Oct. 9, 2009, P.L. 537, No. 50 (" Act 50" ). One of Act 50's provisions designed to balance the budget directed that $100 million be transferred from the MCARE Fund to the General Fund. See 72 P.S. § 1717.1-K(1). That provision is at the center of this case.
On October 13, 2009, Appellees filed petitions for review in the nature of complaints for declaratory judgment and injunctive relief in the Commonwealth Court's original jurisdiction. The petitions named as respondents the Commonwealth of Pennsylvania, the Insurance Department, the Treasury Department, [621 Pa. 270] and the Office of the Budget (collectively, the " Commonwealth" ), and sought a declaration that: (1) the transfer of $100 million from the MCARE Fund to the General Fund extinguished vested rights or constituted an illegal taking in violation of the due process guarantees contained in Article I, Section 1 of the Pennsylvania Constitution and the Fourteenth Amendment to the U.S. Constitution (Count I); and (2) the transfer violated the Uniformity Clause of the Pennsylvania Constitution (Count II). The petitions also requested injunctive relief to prevent the transfer of funds or remediate any unlawful action taken pursuant to Act 50.
Concerned that the Commonwealth might effectuate the transfer and dissipate the funds, Appellees filed an application for preliminary injunctive relief in the nature of a temporary restraining order. They alleged that the only way to preserve the status quo pending the outcome of the litigation would be to retain the monies in the MCARE Fund, since there was no guarantee that the Commonwealth could reconstitute the funds from any other source. The Commonwealth responded that a preliminary injunction was unwarranted because, inter alia, it was not needed to prevent immediate and irreparable harm. See generally Warehime v. Warehime, 580 Pa. 201, 209-10, 860 A.2d 41, 46-47 (2004) (reciting the six prerequisites that a party must establish to obtain preliminary injunctive relief, including a showing that such relief is necessary to prevent immediate and irreparable harm). The Commonwealth suggested, in this regard, that it could " make [Appellees] whole" by depositing $100 million back into the MCARE Fund in the event of an adverse judgment. Commonwealth's Memorandum in Opposition to Petitioners' Application for Special Relief in the Nature of a Temporary Restraining Order at 15, reproduced in R.R. 202a. By order dated October 19, 2009, the Commonwealth Court expressed agreement with the Commonwealth's
position in this regard, and denied the requested relief. The court noted, in particular, that Appellees based their irreparable-harm assertion on an assumption [621 Pa. 271] that the Commonwealth would not honor a final judicial order, which amounted to " pure speculation." HAP v. Commonwealth, 522 & 523 M.D. 2009, Order at 6 (Pa. Cmwlth. Oct. 19, 2009), reproduced in R.R. 216a. Thereafter, the Treasury Department effectuated the $100 million transfer on October 30, 2009.
The petitions were eventually consolidated, whereupon Appellees filed an application for summary relief. See Pa.R.A.P. 1532(b). On April 15, 2010, the Commonwealth Court granted Appellees' request in a published opinion, holding that the transfer of monies from the MCARE Fund to the General Fund was unlawful in that it impaired Appellees' vested rights. See Hosp. & Healthsystem Ass'n of Pa. v. Commonwealth, 997 A.2d 392, 401 (Pa. Cmwlth. 2010) (en banc) (" HAP I" ).
First, the court disagreed with the Commonwealth's assertion that Appellees were not entitled to summary relief because there were material facts in dispute and discovery remained outstanding, reasoning that the issue before the court regarding the lawfulness of the $100 million transfer was a question of law that needed no additional factual development. See id. at 396-97 & n.9. Next, the court rejected the Commonwealth's contention that Appellees did not have standing to bring their respective actions. Finding that the transfer [621 Pa. 272] of $100 million from the MCARE Fund diverted those monies from their intended purpose of providing insurance coverage to participating health care providers and prevented them from ultimately being refunded to those providers upon the MCARE Fund's termination, the court concluded that Appellees were aggrieved and had standing to bring the present legal challenge. See id. at 397-98.
With respect to Appellees' argument that they have vested rights in the monies in the MCARE Fund, the majority acknowledged that the General Assembly is free to repeal and amend legislation, but observed that Section 1976 of the Statutory Construction Act, as well as the Remedies Clause of the Pennsylvania Constitution, protect vested rights and accrued causes of action from impairment by subsequent legislation. See Pa. Const. art. I, § 11 (" [E]very man for an injury done him . . . shall have remedy by due course of law[.]" ); 1 Pa.C.S. § 1976(a) (" The repeal of any civil provisions of a statute shall not affect or impair any . . . right existing or accrued . . .." ). The court indicated, first, that " the depletion of the MCARE
Fund leaves participating providers with a deficit they must make up in the
event that claims must be paid thereafter."
HAP I, 997 A.2d at 400. It then noted that Sections 712(a) and 712(k) of the MCARE Act guarantee that the monies in the MCARE Fund will be used for MCARE-related purposes or returned to contributing health care providers upon the fund's termination. Particularly in light of this latter observation, the Commonwealth Court ultimately held that Appellees have a vested entitlement -- rising above the level of a " mere expectation" -- to have the monies used for those purposes, and that such a right " cannot be extinguished by the addition of Section 1717.1-K of the Fiscal Code." Id. at 401.
As to Appellees' alternative argument, the court concluded that the transfer did not implicate uniformity concerns. See Pa. Const. art. VIII, § 1 (" All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws." ). The court reasoned that, because the assessments paid into the MCARE Fund are intended to [621 Pa. 273] reduce the high costs of medical liability insurance, are placed in a special fund within the state treasury, and do not raise revenue or generate interest income for the Commonwealth, the assessments are akin to license fees, rather than taxes that must conform to uniformity requirements. See HAP I, 997 A.2d at 402.
Judge (now President Judge) Pellegrini dissented, incorporating the dissent he filed in PAMS I. In that matter, he had concluded that: Appellees did not have vested rights to the monies at issue; there were disputed facts in need of resolution that precluded the grant of summary relief; the members of PAMS and HAP lacked standing; the Commonwealth was unable to comply with the majority's order and transfer funds from the General Fund to any other account without first obtaining express authorization from the General Assembly; the General Assembly was an indispensable party, and as such, its absence deprived the court of jurisdiction; and the entire matter was non-justiciable under the political question doctrine. See id. at 403 (Pellegrini, J., dissenting) (citing PAMS I, 994 A.2d at 46-53 (Pellegrini, J., dissenting)).
The Commonwealth appealed to this Court, raising threshold issues pertaining to justiciability and standing, arguing that Appellees had no vested interest in the money that was transferred to the General Fund, and contending that summary relief was premature because contested factual issues remained, requiring further discovery.
A. Political Question
One threshold question forwarded by the Commonwealth pertains to whether this case is non-justiciable under the political-question doctrine, a principle that derives from the separation of powers among the three coordinate branches of government. See Pa. Sch. Bds. Ass'n v. Commonwealth Ass'n of Sch. Adm'rs, 569 Pa. 436, 451, 805 A.2d 476, 484-85 (2002). The Commonwealth notes that, in Baker v. Carr, 369 U.S. 186, 211, 82 S.Ct. 691, 706, 7 L.Ed.2d 663 (1962), the Supreme Court determined that the judiciary should not reach the merits of a dispute, inter alia, where the actions being challenged [621 Pa. 274] are constitutionally committed to another branch of government. The Commonwealth maintains that Appellees are asking this Court to dictate how the General Assembly should budget and appropriate funds, and that such functions are constitutionally committed to the executive and
Appellees respond that, although this case may have financial implications for the Commonwealth, that is true of many judicial decisions involving the Commonwealth. They reason that courts should not shrink from their duty to protect citizens' constitutional rights, whether or not the dispute arises in a political context. Appellees also proffer ...