Stuart G. YEOMAN, M.D., et al., Appellants, v. COMMONWEALTH of Kentucky, Health Policy Board, et al., Appellees.
No. 97-SC-274-TG
Supreme Court of Kentucky.
Nov. 19, 1998.
983 S.W.2d 459
The statute provides the state with a simple and direct method of giving property owners the right to seek return of property previously condemned and later determined to be unneeded for the project.... A holding that any portion of the condemned land which is not developed by the state should be offered to the original property owner for repurchase is certainly not a burden on the state but is actually a benefit to both the Commonwealth and the citizen property owners which was clearly contemplated by the general assembly in adopting the statute.
We are persuaded that the rationale of Miles should be applied in this case. This Court has clearly established the right of a property owner to repurchase land declared as surplus by the Commonwealth in Miles. See also City of Covington v. Hardebeck, Ky.App., 883 S.W.2d 499 (1994).
The language of the statute is clear. It is not the act of condemnation which gives a former owner a right to repurchase, but rather the determination by the legislature in 1980 that such property shall be offered for sale to the current owner of the parcel from which the unused parcel had been acquired. It is the failure of the condemning authority to begin development within eight years, and not the condemnation, which entitles the current owner the opportunity to repurchase such surplus property.
It is the holding of this Court that the opinion of the Court of Appeals did not allow retroactive application of the statute in violation of
The decision of the Court of Appeals is affirmed and this action is remanded to the Pike Circuit Court for further proceedings in accordance with this opinion, as well as consideration of the Commonwealth‘s remaining affirmative defenses.
All concur.
Philip J. Edwards, Louisville, Kentucky, Edward D. Klatte, Cabinet for Health Services, Frankfort, Kentucky, Leonard G. Rowekamp, Wolnitzek, Rowekakmp, Bender & Bonar, P.S.C., Covington, Kentucky, Cathy Cravens Snell, Revenue Cabinet, Division of Legal Services, Frankfort, Kentucky, for appellees.
STEPHENS, Justice.
Appellants challenge the constitutionality of House Bill (“HB“) 250 (enacted April 15, 1994), which provides for wide-ranging health care reforms, including, but not limited to creation of a Health Policy Board, provider arbitration, certificate of need procedures, insurance reform, medical education and medical taxation.
Appellants’ challenge to HB 250 is based on the following grounds: First, the bill is special legislation passed in violation of
During the 1993 Second Extraordinary Session of the General Assembly, the issue of health care reform was extensively debated. As a result of that debate, HB 1 was enacted.1 HB 1 enacted a new health care provider tax which met federal standards in order for the Commonwealth of Kentucky to qualify for matching funds from the federal government. The constitutionality of HB 1 was challenged and subsequently upheld in Commonwealth, Revenue Cabinet v. Smith, Ky., 875 S.W.2d 873, cert. denied sub nom Yeoman v. Kentucky, 513 U.S. 1000, 115 S.Ct. 509, 130 L.Ed.2d 417 (1994).
As noted, in 1994, the Kentucky General Assembly (“General Assembly“) enacted HB 250, the legislation which is the subject of this appeal. On March 3, 1994, the Kentucky House of Representatives (“House“) passed HB 250 as it had been originally introduced with 21 separate sections. Later that same day, HB 250 was received by the Kentucky Senate (“Senate“). Following a review of HB 250, the Senate drafted two Senate Committee Substitute bills. The Senate ultimately passed the second Senate Committee Substitute Bill with 25 floor amendments. On March 23, 1994, the House received the Senate version of HB 250, but the House refused to concur in the amendments. The Senate was unwilling to modify its version of HB 250 and sent it back to the House for a second vote.
In order to resolve the differences between the two chambers, the House and Senate leadership appointed a Conference Committee, which was unable to concur on a compromise bill. The House and Senate leadership then appointed a Free Conference Committee.
The Free Conference Committee filed a report in both chambers, but only the Senate accepted it. The Senate passed the free Conference Committee version of HB 250 and on April 15, 1994, the House reconsidered the Free Conference Committee report and adopted it, thereby passing the present version of HB 250.
I. ARE APPELLANTS BARRED BY THE DOCTRINE OF RES JUDICATA FROM BRINGING THE INSTANT SUIT?
Before addressing appellants’ arguments, we must first resolve the issue of whether appellants are precluded as res judicata by this Court‘s ruling in Commonwealth, Revenue Cabinet v. Smith, Ky., 875 S.W.2d 873, cert. denied sub nom Yeoman v. Kentucky, 513 U.S. 1000, 115 S.Ct. 509, 130 L.Ed.2d 417 (1994), in which a similar health care bill was challenged and found to be constitutional, from challenging HB 250. Res judicata is the Latin term for “a matter adjudged.”
The doctrine of res judicata is that an existing final judgment rendered upon the merits, without fraud or collusion, by a court of competent jurisdiction, is conclusive of causes of action and of facts or issues thereby litigated, as to the parties and their privies, in all other actions in the same оr any other judicial tribunal of concurrent jurisdiction.
46 AmJur 2d § 514.
The rule of res judicata is an affirmative defense which operates to bar repetitious suits involving the same cause of action. The doctrine of res judicata is formed by two subparts: 1) claim preclusion and 2) issue
For claim preclusion to bar further litigation, certain elements must be present. First, there must be identity of the parties. Newman v. Newman, Ky., 451 S.W.2d 417, 419 (1970). Second, there must be identity of the causes of action. Id. Third, the action must have been resolved on the merits. Id. The rule that issues which have been once litigated cannot be the subject matter of a later action is not only salutary, but necessary to the speedy and efficient administration of justice.
We find that appellants are not barred by claim preclusion from challenging the health care provider tax of HB 250 by this Court‘s previous adjudication in Smith, 875 S.W.2d at 873. While HB 250 contains certain provisions which are similar to HB 1, they are not identical bills. HB 1 only contains a provider tax and the guidelines for collecting this tax. On the other hand, HB 250 is a complex health reform bill made up of 21 subparts, only one of which was the provider tax. For claim preclusion to apply, the subject matter of the subsequent suit must be identical. Since it is clear that the challenged portions of HB 1 and HB 250 are not identical, claim preclusion does not apply in the instant case.
For issue preclusion to operate as a bar to further litigation, certain elements must be found to be present. First, the issue in the second case must be the same as the issue in the first case. Restatement (Second) of Judgments § 27 (1982). Second, the issue must have been actually litigated Id. Third, even if an issue was actually litigated in a prior action, issue preclusion will not bar subsequent litigation unless the issue was actually decided in that action. Id. Fourth, for issue preclusion to operate as a bar, the decision on the issue in the prior action must have been necessary to the court‘s judgment. Id.
The only issue which appellants might be precluded from arguing in this case is whether the provider tax is unconstitutional under
II. IS HB 250 SPECIAL LEGISLATION UNDER § 59 OF THE KENTUCKY CONSTITUTION?
Appellants contend that HB 250 is special legislation which violates
Appellants assert that “the Robert Wood Johnson Foundation (“RWJF“) was actively involved, through grant-making and otherwise, in the process leading to the drafting and passage of HB 250. As a result, HB 250 has sections relating to agreements with a grantor of funds and contracts with an independent third party. RWJF was granted special governmental privileges and emoluments4 purely in exchange for money.” Appellants’ assert that the impropriety in HB 250 is that the legislation was designed to benefit RWJF and its affiliates. Appellants thus express a misunderstanding of what is special legislation.
Some commentators have suggested that the primary driving force behind the adoption of the 1891 Constitution was the fact that special interests were perceived as having carte blanche with the General Assembly to achieve whatever legislation they desired. Sheryl G. Snyder & Robert M. Ireland, The Separation of Governmental Powers Under the Constitution of Kentucky: A Legal and Historical Analysis of L.R.C. v. Brown, 73 Ky.L.J. 165 (1984-85),
The primary purpose of Kentucky Constitution,
The test as to whether legislation is special was formulated by this Court in Schoo v. Rose, Ky., 270 S.W.2d 940 (1954). In order for legislation to be permissible under
In Schoo, at issue was a law which required that prior to receiving a vehicle registration receipt or a license plate, a motorist must produce proof to the County Court Clerk that she had paid her personal property taxes due to the Commonwealth and the relevant local taxing districts. The law exempted all carriers of persons for hire who operated vehicles which carried eight or more passengers. The Commonwealth defended the law on the basis that the exempted parties were not licensed by the Clerks of the County Courts, but rather they fell within the ambit of
This Court held that the classification at issue was whether there was a valid reason to distinguish between the method by which licenses and registrations were issued for the vehicles of large carriers of persons and the vehicles of all other persons. The basis for this ruling was that the law in question was a revenue measure since proof оf payment of taxes was required to receive the license or registration. Accordingly, whether the large carriers were controlled by the Commonwealth‘s police powers was not relevant to making a determination of the validity of the classification. This Court found that the only difference between the large carriers and everyone else was to whom the large carriers paid their taxes.5 This alone was not found to be a sufficient nexus on which to base the classification in question. As a result the law was found to be unconstitutional.
Another case with instructive value with regard to
We held that this statute was not what it purported to be. Under the “no action” law, a party who has the misfortune to suffer an injury five years after the completion of a given building project misses the alleged “statute of limitations.” Accordingly, this Court held that the statute was not one of limitation of time, but rather one of limitation of liability to certain selected persons. Since no social or economic basis was presented to justify why those parties should have their liability limited in this fashion, the only apparent basis for the “no-action” law was to protect the parties’ economic self-interest. The result of the “no-action” law was that the protection of the general public was subordinated to the interest of a special group. In striking down the law, this Court held that
In performing an analysis under
When asserting the validity of a classification, the burden is on the party claiming the validity of the classification to show that there is a valid nexus between the classification and the purpose for which the statute in question was drafted. There must be substantially more than merely a theoretical basis for a distinction. Rather, there must be a firm basis in reality.
Examining HB 250 under the standards enumerated above, we find that it clearly is not special legislation as defined by
The fact that representatiоns were made to the RWJF that it would have the right to select certain governmental officials might well be improper, but it does not render HB 250 unconstitutional. Nothing in HB 250 impermissibly favors the RWJF in terms of granting it the power to select governmental officials.7 If the executive branch acted impermissibly in the execution of HB 250, then appellants may have a claim against the executive branch for that activity; however, for reasons upon which we shall not speculate, no such evidence of the RWJF actually receiving this authority was offered to us. More importantly, appellants have claimed that HB 250 was unconstitutional as enacted, not as executed.
Unlike the legislation in the cases discussed above in which
Appellants also assert that HB 250 is special legislation because the provider tax is based on irrational and arbitrary distinctions. We think this argument is also devoid of merit. Appellants appear to feel that they have been singled “out to bear a burden which must properly be borne by all the citizens of the Commonwealth.” Appellants may indeed be correct in that they have been singled out to bear this burden in an immoral, unethical or simply wrong decision, but appellants have not shown this Court any
Applying the test to determine if a statute is special legislation, we find that the health care provider tax of HB 250 passes this test and is constitutional. The clear intent of HB 250 was to promote health care and health care reform in general and to secure matching federal funds through a provider tax in particular. HB 250‘s provider tax operates against eight classes of health care items and services. These are the exact same items as those enumerated by federal law.
Although, as discussed above, appellants are not barred from bringing the instant claim by our previous adjudication in Commonwealth, Revenue Cabinet v. Smith, Ky., 875 S.W.2d 873, cert. denied sub nom, Yeoman v. Kentucky, 513 U.S. 1000, 115 S.Ct. 509, 130 L.Ed.2d 417 (1994), the precedent that case established does bind this Court. Unlike some jurisdictions, stare decisis hаs real meaning to this Court. Given the fact that Smith was decided in 1994, we can find no reason that is adequate to overcome the burden imposed by stare decisis. The provider tax in HB 1 is virtually the same as that in HB 250.8 See, Kathryn L. Moore, Taxation, 86 Ky.L.J. 875, 889-90 (1997–98). Since the issue was resolved so recently by this Court in Smith, we find no compelling reason to suddenly change our decision in this matter.9
III. DOES THE PROVIDER TAX IN HB 250 VIOLATE THE EQUAL PROTECTION OF THE LAWS DOCTRINE?
Appellants assert that HB 250 violates the Equal Protection Clause of the United States and Kentucky Constitutions by creating a provider tax. Since the analysis for each is identical, we discuss the contention. Because the challenged provisions do
With this standard in mind, we find that nothing in HB 250 is so irrational as to warrant a finding of unconstitutionality. Appellants argue that it is irrational and arbitrary to tax one sub-group of health care providers and not another. We do not find this argument compelling. The rational review standard is not hard for a legislature to meet. It merely requires one to postulate that the legislature could have envisioned that HB 250 would promote a legitimate state purpose—any legitimate state purpose. Commonwealth, Revenue Cabinet v. Smith, Ky., 875 S.W.2d 873, cert. denied sub nom Yeoman v. Kentucky, 513 U.S. 1000, 115 S.Ct. 509, 130 L.Ed.2d 417 (1994). Appellants’ argument is essentially that this tax is unfair and therefore unconstitutional. This is not the correct standard. While this Court is loathe to engage in such platitudes as “life is not fair“, the essence of our decision in this matter is that the legislature is not required to be fair or even reasonable in matters of taxation. It is simply barred from behaving irrationally or arbitrarily.
HB 250 creates a two percent (2%) provider tax on certain health care providers. The persons who are classified so as to be within the tax are those categories as designated by the federal government.
In this case the legislature made a distinction between those health care providers who were subject to the Provider Tax of HB 250 and those who were not. Appellants have not even begun to satisfy their burden in terms of showing that the tax in question was arbitrary or irrational. As was noted in Regan v. Taxation with Representation of Washington, 461 U.S. 540, 546, 103 S.Ct. 1997, 2002, 76 L.Ed.2d 129 (1983), “Legislatures have especially broad latitude in creating classifications and distinctions in tax statutes.” Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 359, 93 S.Ct. 1001, 1003, 35 L.Ed.2d 351 (1973); Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526-527, 79 S.Ct. 437, 440, 3 L.Ed.2d 480 (1959); Madden v. Kentucky, 309 U.S. 83, 60 S.Ct. 406, 84 L.Ed. 590 (1940); Heritage Cablevision v. Board of Supervisors, 436 N.W.2d 37, 38 (Iowa 1989); Revenue Cabinet v. Estate of Marshall, Ky.App., 746 S.W.2d 408, 411 (1988).
IV. IS HB 250 A REVENUE RAISING MEASURE WHICH ORIGINATED IN THE SENATE OF THE KENTUCKY GENERAL ASSEMBLY IN VIOLATION OF § 47 OF THE KENTUCKY CONSTITUTION?
Appellants also claim HB 250 is constitutionally infirm in that it was conceived in the Senate, which is the wrong chamber of the General Assembly and thus was violative of
Under the Kentucky Constitution, “[a]ll bills for raising revenue shall originate in the House of Representatives, but the Senate may propose amendments thereto: provided no new matter shall be introduced under color of amendment, which does not relate to raising revenue.”
A bill which includes a taxation scheme as an incidental part of its overall purpose is outside the realm of
The purpose of
Appellants’ alternate argument is that the provider tax should be struck because the amendments made in the Senate were not related to revenue. Accepting, arguendo, appellants’ claim that these amendments were improper, it is the amendments which are then constitutionally infirm, not the provider tax, which was part of the original bill. Farris v. Shoppers Village Liquors, Inc., Ky., 669 S.W.2d 213 (1984). However, appellants have not attacked any of the amendments, but rather the provider tax, accordingly, the matter of the constitutionality of the amendments is not properly before this Court.
V. DOES HB 250 IMPERMISSIBLY PERMIT THE DELEGATION OF EXECUTIVE AUTHORITY IN VIOLATION OF § 27?
The Kentucky Constitution creates three separate and distinct branches of government. Appellаnts argue that HB 250 violates the principle of separation of powers. Appellants claim that HB 250 improperly
Two sections of the Kentucky Constitution discuss the separation of powers and its operation in the government of the Commonwealth:
The powers of the Government of the Commonwealth of Kentucky shall be divided into three distinct departments, and each of them be confined to a separate body of the magistracy, to wit: Those which are legislative, to one; those which are executive, to another; and those which are judicial, to another.
No person, or collection of persons being of one of those departments, shall exercise any power properly belonging to either of the others, except in the instances hereinafter expressly directed or permitted.
However, appellants’ argument that either of those sections is implicated is simply incorrect. Assuming, arguendo, that appellants are correct in that HB 250 does allocate executive branch authority to RWJF, then there is still no violation of
If a law grants executive branch authority to either the judicial branch, legislative branch or a non-governmental person, natural or otherwise, it is in clear violation of
Nowhere in the statute is RWJF given the authority to appoint members of the HPB or Health Purchasing Alliance (“HPA“). The fact that the Governor offered a veto to a third party has nothing to do with the constitutionality of HB 250. The governor is free to solicit advice from whomever he wishes and to do with it whatever he may choose. Appellants would require the Governor not to interact with any of his constituents or other parties in making any executive choices, since it would be an abdication of his authority to do so. The Governor is free to solicit advice from whomever he or she sees fit.11
Appellants are absolutely correct in stating that decisions of the Supreme Court of Pennsylvania, when interpreting provisions of the Pennsylvania Constitution similar to that of the Kentucky Constitution, are very persuasive to the Courts of the Commonwealth and should be given as much deference as any non-binding authority receives. Commonwealth v. Wasson, Ky., 842 S.W.2d 487, 498 (1992). However, this doctrine has no application to the instant case, because HB 250 is fаcially valid and no further authority is required to make this determination. Accordingly, we find no impermissible delegation of executive authority.
VI. DOES HB 250 VIOLATE THE PRIVACY RIGHTS OF THE CITIZENS OF THE COMMONWEALTH?
Under HB 250, certain data are collected by the Health Policy Board (“HPB“) and used for various purposes. Appellants claim that such collection and dissemination constitutes an impermissible violation of a patient‘s constitutional right to privacy. There is a threshold issue here in that physician-appellants are not claiming that their own privacy rights have been violated or that they would be forced to violate the privacy rights of the citizens of the Commonwealth, but rather that the government would violate the privacy rights of the citizens of the Commonwealth. This immediately raises the question of whether appellants have standing to challenge HB 250 on this issue.
In order to have standing in a lawsuit “a party must have a judicially recognizable interest in the subject matter of the suit.” Healthamerica Corp. v. Humana Health Plan, Ky., 697 S.W.2d 946 (1985). The interest of a plaintiff must be a present or substantial interest as distinguished from a mere expectancy. Winn v. First Bank of Irvington, Ky.App., 581 S.W.2d 21, 23 (1979). The issue of standing must be decided on the facts of each case. Rose v. Council for Better Education, Inc., Ky., 790 S.W.2d 186 (1989)(emphasis added); City of Louisville v. Stock Yards Bank & Trust, Ky., 843 S.W.2d 327 (1992). Simply because a plaintiff may be a citizen and a taxpayer is not in and of itself sufficient basis tо assert standing. There must be a showing of a direct interest resulting from the ordinance. Cf. Carrico v. City of Owensboro, Ky., 511 S.W.2d 677 (1974); York v. Chesapeake & Ohio Railroad Co., 240 Ky. 114, 41 S.W.2d 668 (1931). City of Ashland v. Ashland F.O.P # 3, Inc., Ky., 888 S.W.2d 667, 668 (1994)(emphasis added). An individual is not allowed to bring a challenge to a law unless that party is allegedly being injured by the law. Winn v. First Bank of Irvington, Ky.App., 581 S.W.2d 21, 23 (1979) (holding that a “party plaintiff must have a real, direct, present and substantial right or interest in the subject matter of the controversy“). The misuse of the taxpayers’ funds is one form of an alleged injury that can take place. Accordingly, any taxpayer of the Commonwealth is permitted to sue on this basis. However, since the privacy interest advanced by appellants is not directly related to the generation or expenditure of state funds, appellants do not have standing as taxpayers to challenge HB 250. Gillis v. Yount, Ky., 748 S.W.2d 357 (1988); Second Street Properties v. Fiscal Court of Jefferson County, Ky., 445 S.W.2d 709, 716 (1969).
Appellant Joseph Janes is a patient of one of the physicians who is also an appellant in this suit. Accordingly, since as a patient under HB 250 certain information could be collected, Mr. Janes possesses the necessary alleged injury to be permitted to challenge HB 250 on privacy grounds.
The Commonwealth has a long judicial tradition of leaving its citizens alone. Brents v. Morgan, 221 Ky. 765, 299 S.W. 967 (1927); Lewis v. Commonwealth, 197 Ky. 449, 247 S.W. 749 (1923); Commonwealth v. Smith, 163 Ky. 227, 173 S.W. 340 (1915); Adams Express Co. v. Commonwealth, 154 Ky. 462, 157 S.W. 908 (1913); Douglas v. Stokes, 149 Ky. 506, 149 S.W. 849 (1912); Hershberg v. City of Barbourville, 142 Ky. 60, 133 S.W. 985 (1911); Foster-Milburn Co. v. Chinn, 134 Ky. 424, 120 S.W. 364 (1909); Commonwealth v. Campbell, 133 Ky. 50, 117 S.W. 383 (1909);. Most recently this Court in Commonwealth v. Wasson, Ky., 842 S.W.2d 487, 491-92 (1992), made clear that the privacy rights guaranteed by the Kentucky Constitution exceed those granted by the United States Constitution. Accordingly, this Court takes very seriously the right of the citizens of the Commonwealth to be left alone, particularly in circumstances that involve governmental exercises of power. However, we find no such intrusion here.
In the instant case, the data is collected for legitimate governmental purposes, and all privacy interests of the individual are carefully shielded. Section 9(1)(a)-(b) of HB 250 specifically shields the privacy of patients by protecting all information relating to patient identity from disclosure. Unless a court issues an order, all information regarding the identity of a patient is held confidential. While in no way denigrating the importance of confidentiality of a patient‘s medical records, we hold that no violation of privacy rights occurs as long as the patient‘s identity is fully and totally shielded from public examination.
VII. DID THE HEALTH POLICY BOARD (“HPB“) MEET IN VIOLATION OF THE OPEN MEETINGS ACT?
Under the Open Meeting Act (“Act“),
Appellants allege that there were two specific violations of the Act by the Health Policy Board. The first occurred on August 29, 1994, in Frankfort, Kentucky, when officials of the RWJF came to conduct a site visit. The second occurred on September 28-30, 1994, in Princeton, New Jersey, at a national health care conference. For the reasons discussed below, it is rather obvious that neither instance rises to the level of a meeting within the meaning of the Act.
The first allegation of a violation of the Act is incorrect because at that point no member of the HPB had been confirmed by the Senate. Therefore, as a matter of law, no violation could have taken place because there were no members of the HPB. Unconfirmed nominees are not covered by the Act. The second allegation of a violation of the Act is similarly incorrect in that no public business was discussed at the conference. The mere fact that a quorum of members of a public agency are in the same place at the same time, without more, is not sufficient to sustain a claim of a violation of the Act.
For a meeting to take place within the meaning of the act, public business must be discussed or action must be taken by the agency. Public business is not simply any discussion between two officials of the agency. Public business is the discussion of the various alternatives to a given issue about which the board has the option to take action. Taking action is defined by the Act as “a collective decision, a commitment or promise to make a positive or negative decision, or an actual vote by a majority of the members of the governmental body.”
Appellants argue that HB 250 permits payment of the salaries of government officials by a party other than the Commonwealth. Appellants claim that RWJF is paying the salaries of state officials and that this payment violates
Public servants are just that—persons who hold governmental position acting on behalf of the public. Accordingly, they can only be paid by the public.
Claiming that giving a grant of money to a government to fund a program is the same as having a public official on a private organization‘s payroll is without basis. There is no prohibition against an organization donating money to the state, as long as the donation itself is not impermissible or for an improper purpose. The trial court made a specific finding that payments not made directly from RWJF to state employees, but rather from RWJF to state treasury to state employees. We see no reason to disturb the finding.
IX. DOES THE HEALTH CARE PROVIDER TAX OF HB 250 VIOLATE THE SUPREMACY CLAUSE OF THE UNITED STATES CONSTITUTION?
Among the provisions in HB 250 is a tax on health care providers.14 Specifically, HB 250 creates a two percent (2%) tax on the gross receipts of enumerated health care providers, including physicians; a two and a half percent (2.5%) tax on the gross receipts of hospitals; and a twenty-five cent (25¢) tax per prescription filled. Appellants claim that the provider tax is unconstitutional because it violates the principle of equаl protection of the laws and is special legislation in violation of
Appellants also claim that the provider tax of HB 250 violates the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991 (“Medicaid Amendments“), Pub.L. No. 102-234, codified at
The specific violation alleged of the Medicaid Amendments by the provider tax of HB 250 is that the tax fails to meet the following
As a preliminary issue, it should be noted that apparently when the United States Congress drafted the Medicaid Amendments, they considered the possibility that some states might not fully comply with its dictates. Accordingly, the law provides for the lowering of federal payments to those states. Thus, how appellants can argue that HB 250 should be stricken because it violates these amendments is beyond the comprehension of this Court. State laws that conflict with federal laws are indeed struck. However, state laws which do not conflict with federal laws are valid. In the instant case, there is no way that this Court could even begin to declare HB 250 invalid as violating the Medicaid Amendments, since it was obvious that Congress carved out a specific area for state laws to exist.
When Congress regulates an entire area of law, it is said to have pre-empted the field and left no room for states to regulate. Accordingly, any state laws which attempt to regulate in that particular area are per se invalid because the field is full. However, when Congress has not pre-empted an area of law, either because it simply has not regulated the entire field, or as is the present case, when it specifically carves out space for state laws to operate, such laws are not unconstitutional.
X. IS THE TITLE OF HB 250 IN VIOLATION OF § 51 OF THE KENTUCKY CONSTITUTION BY BEING FALSE OR MISLEADING?
The final argument forwarded by appellants is that HB 250 is unconstitutional because it was not properly titled and thus violates
Construction of this section will be resolved in favor of the validity of the legislative action. Commonwealth, Ex.Rel. Armstrong v. Collins, Ky., 709 S.W.2d 437 (1986). As this Court stated previously in Smith, 875 S.W.2d at 873 “if the title [of an act] furnishes a ‘clue’ to the act‘s contents, it may pass constitutional muster.” Id. at 878. See Dawson v. Com, Dept. of Transp., Ky., 622 S.W.2d 212 (1981); Anderson v. Wayne Co., 310 Ky. 597, 221 S.W.2d 429 (1949); Talbott, Auditor of Pub. Accts. v. Laffoon, 257 Ky. 773, 79 S.W.2d 244 (1934); District Bd. of Tuberculosis Sanatorium of Fayette Co. v. Bradley, 188 Ky. 426, 222 S.W. 518 (1920). The purpose of
HB 250 was entitled “[a]n act relating to health care reform and providing funding therefor.” Appellants stated in a conclusory fashion that this title is improper;
CONCLUSION
For the reasons stated above, HB 250 is held to be constitutionally valid and the judgment of the Franklin Circuit Court is affirmed.
JOHNSTONE, J., and Special Justice RAYMOND OVERSTREET, concur.
COOPER, J., files a separate opinion concurring in result only.
WINTERSHEIMER, J., dissents and files a separate dissenting opinion. GRAVES and STUMBO, JJ., join in this dissenting opinion.
LAMBERT, C.J., not sitting.
COOPER, Justice, concurring.
I must disagree with the plurality opinion‘s conclusion that HB 250, which created the health provider tax, was not a revenue raising measure within the contemplation of
Accordingly, I concur in the result reached by the plurality opinion.
WINTERSHEIMER, Justice, dissenting.
I must respectfully dissent from that part of the majority opinion which affirms the imposition of a provider tax upon physicians which is in violation of the Kentucky Constitution because it is arbitrary and unreasonable.
The real question here is whether the method employed by the statute is fairly applied to all individuals who are required to pay the tax in a properly classified manner. As I noted in my dissent in Commonwealth, Revenue Cabinet v. Smith, Ky., 875 S.W.2d 873 (1994), the question of taxation is a peculiarly legislative function of government. The only role of the court is to review a specific tax on the grounds of arbitrariness or improper classification. Each case must be reviewed on a case-by-case approach.
“The power to tax involves the power to destroy,” noted Chief Justice John Marshall in McCulloch v. Maryland, 17 U.S. (4 Wheat) 316, 4 L.Ed. 579 (1819). The duty of the judiciary is to distinguish between constitutional error and proper deference to the legislature. Unequal treatment should not be acceptable under any circumstances.
This appeal concerns the provider tax imposed on physicians’ services pursuant to HB 250 and raises many of the same questions as Smith, supra. The legislation in question imposes a 2.5 percent tax on the gross receipts of hospitals, a 2 percent tax on the gross receipts of enumerated health care providers, including physicians, and a 25 cent tax per prescription filled. The taxes on health care providers fund, in part, the Kentucky Medical Assistance Program (Medicaid) which provides medical care to approximately 14 percent of the citizens of Kentucky who are indigent, aged, blind or disabled. Medicaid reimburses providers for the care of the medically needy without charge to the recipient of the service. Certainly the legislature is within its authority to provide for needy people through the use of properly appropriated tax funds.
The proper function of this Court is not to determine if this legislation is good or bad. We must confine our review to the equal and uniform application of the law and its constitutionality. We do not make policy, that is for the General Assembly. The most serious question presented by this type of appeal is the tendency to generalize. Each case must stand alone.
A careful examination must be made of the classifications made by the legislation. The problem of disparate treatment of members of a subclass is that it singles out those who do not participate in a particular program as having derived benefits therefrom. An extension of the benefits/burdens test employed by the majority in Smith can lead to future assignments of tax revenue from contractors, engineers and architects who could possibly benefit by providing construction for highway work. The same analysis could be applied to lawyers who benefit from the justice system. The list of potential troublesome, unequal сlassifications is endless.
The assertion that HB 250 is primarily a health care reform bill and as such, its manner of enactment is not a concern of constitutional magnitude, is lacking in merit. The provider tax is a critical portion of and the primary focus of the legislation. There is a listing of more than 18 other titles included in the lengthy health care reform bill but funding is essential to achieve any of the legitimate goals announced in the preamble. This situation is not one in which the statute merely raises revenue incidental to other purposes in the statute under review.
All classifications must be based upon reasonable and natural distinctions and must have a reasonable basis upon which to rest and not a merely arbitrarily declared one with no factual support. Cf. Priest v. State Tax Com‘n, 258 Ky. 391, 80 S.W.2d 43 (1935). As early as Commonwealth v. Payne Medicine Co., 138 Ky. 164, 127 S.W. 760 (1910), this Court held that disparate treatment of persons selling medicines was in violation of the Equal Protection Guaranties found in Section Three of the Kentucky Constitution.
Here, the provider tax system is arbitrary and discriminatory taxation prohibited by Sections One, Two, Three and Fifty-nine of the Kentucky Constitution. The statute imposes a tax on a certain very narrow subgroup of health care providers for the alleged purpose of improving federal participation. However, no additional tax is imposed on other members of the subclass. The burden of obtaining matching federal funds should be borne uniformly.
Under the statute, only pharmacy prescriptions, nursing facility services, intermediate care services for the mentally retarded, physician services and free-standing psychiatric hospitals, in certain circumstances, are required to make a forced contribution to general government revenues. See Webb‘s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 163, 101 S.Ct. 446, 452, 66 L.Ed.2d 358, 366 (1980). This legislation exempts from the provider tax many health care providers, the majority of which receive Medicaid reimbursement. The legislation arbitrarily discriminates both in favor of and against certain subgroups of health care providers.
In addition, the provider tax system of this statute differs from the provider tax system of HB 1, in that it taxes a subgroup of health care providers in a manner not coextensive with the federal statutes and regulations. In Smith, HB 1 taxed all health care providers permitted to be taxed under the federal statute and regulations which defined the class to be taxed. In this legislation, the federally defined class has been subdivided into two subclasses, one required to bear a heavy financial burden and the other exempt from that burden. There is no rational basis for dividing the class of health care providers
Many health care providers exempt from taxation under the system of HB 250 receive Medicaid funds and are not required to assume any of the burden of the provider tax. This is clearly an arbitrary classification of taxation and is in violation of the Kentucky Constitution.
GRAVES and STUMBO, JJ., join in this dissent.
Notes
“This great principle, stare decisis, so fundamental in our law, and so congenial to liberty, is peculiarly important in our popular governments, where the influence of the рassions is strong, the struggles for power are violent, the fluctuations of party are frequent, and the desire of suppressing opposition, or of gratifying revenge under the forms of law and by the agency of the courts, is constant and active.” Ex Parte Bollman and Ex Parte Swartwout, 4 Cranch 75, 89, 2 L.Ed. 554, 559 (1807).
While, perhaps, it is more important as to far-reaching juridical principles that the court should be right than merely in harmony with previous decisions, in the light of higher civilization, later and more careful examination of authorities, wider and more thorough discussion and more mature reflection upon the policy of the law, it nevertheless is vital that there be stability in the courts in adhering to decisions deliberately made after ample consideration. Parties should not be encouraged to seek re-examination of determined principles and to speculate on a fluctuation of the law with every change in the expounders of it. As to many matters of frequent occurrence, the establishment of some certain guide is of more significance than the precise form of the rule, and substantial justice may often be better promoted by adhering to an erroneous decision than by overthrowing a rule once established. Ballard County v. Kentucky County Debt Commission, 290 Ky. 770, 162 S.W.2d 771, 771 (1942)(emphasis added).
As long as it is the Governor who actually exercises the power in question, then no improper delegation can occur. There is no evidence in