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Supreme Court Upholds Health Care Law in 5-4 Decision

By Jane Norman, CQ HealthBeat Associate Editor

The Supreme Court upheld the constitutionality of the 2010 health care law last week in a decision affirming the government's power to require that Americans have health insurance or pay a financial penalty.

The justices also ruled, however, that states may opt out of the law's significant expansion of the Medicaid health care program without losing all of their federal Medicaid funds.

It was a major victory for President Obama's signature accomplishment in office and for congressional Democrats and supporters of the law, even with the swipe at the Medicaid provision that in its original form was projected to enroll 16 million uninsured Americans.

Chief Justice John G. Roberts Jr., who led the 5-4 majority upholding the "individual mandate," spent 50 minutes reading the long-awaited opinion in a packed courtroom. "It is not our job to save the people from the consequences of their electoral choices," Roberts said. Justice Antonin Scalia, who led the dissent, leaned back in his chair and appeared unhappy.

The majority wrote: "We do not consider whether the act embodies sound policies. That judgment is entrusted to the nation's elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions."

The law is a sweeping effort to bring millions of Americans into the health insurance system and Medicaid. But critics argued that the law's requirement that people have a minimum level of health insurance coverage exceeded congressional powers under the Commerce Clause of the Constitution.

The majority agreed that the law does not pass muster under the Commerce Clause. But the justices noted that failure to have health insurance is not made a crime. The majority found the mandate and the penalty fee constitutional under Congress' power to levy taxes. The penalty would be collected by the IRS through individual tax returns.

"The federal government does not have the power to order people to buy health insurance," Roberts wrote for the majority. "Section 5000A would therefore be unconstitutional if read as a command. The federal government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional because it can reasonably be read as a tax."

Obama said during a White House appearance that illness should not lead to financial ruin in a nation as wealthy as the United States. "Today's decision was a victory for people all over this country whose lives will be more secure because of this law and the Supreme Court's decision to uphold it," he said.

Republican congressional leaders vowed to continue their efforts to repeal the law. But with Obama in the White House and Democrats controlling the Senate, those efforts will not get very far unless Republicans make major gains in the November elections.

"Today's ruling underscores the urgency of repealing this harmful law in its entirety," House Speaker John A. Boehner, R-Ohio, said in a written statement.

"Republicans won't let up whatsoever in our determination to repeal this terrible law," said Senate Minority Leader Mitch McConnell, R-Ky.

"We pass a lot of terrible laws around here that the courts find constitutional," McConnell added.

Republican presidential candidate Mitt Romney said during a noon appearance in front of the Capitol that he agrees with the dissenting justices.

Romney said if the law is to be repealed, he must be elected president. "Obamacare was bad policy yesterday; it's bad policy today," he said, adding that reducing the cost of health care must be part of any change in the health insurance system.

The National Federation of Independent Business, 26 states and four individuals argued that the law's individual mandate represented an unprecedented and unconstitutional attempt by the government to force Americans to engage in commerce and buy a private company's product.

Medicaid Expansion Provision

The states—which filed suit immediately after the law was enacted—challenged as unduly coercive the expansion of the state-federal Medicaid program to adults younger than 65 who have not previously been eligible.

Roberts agreed, writing in the 7-2 majority on the Medicaid question that it would be "economic dragooning" to penalize states that do not participate in the expansion by taking away their existing Medicaid funding, which makes up a significant portion of state budgets. "A state could hardly anticipate that Congress' reservation of the right to 'alter' or 'amend' the Medicaid program included the power to transform it so dramatically," Roberts wrote.

But the chief justice also wrote that the problem could be "fully remedied" by barring the Department of Health and Human Services from taking away Medicaid funding.

And Roberts made clear that the defective Medicaid provision should not invalidate other parts of the law. "Congress would have wanted the rest of the act to stand, had it known that states would have a genuine choice whether to participate in the Medicaid expansion," he wrote.

The court's decision, especially with Roberts leading the majority, should reduce the uncertainty that has hung over implementation of the health care overhaul (PL 111-148, PL 111-152). The Obama administration largely prevailed in the court's ruling, although the court's conservative bloc expressed serious doubts about the law during six and a half hours of oral arguments March 26-28.

Walter Dellinger, a former acting solicitor general in the Clinton administration, called the ruling an "enormous vindication" for Solicitor General Donald Verrilli, whose performance in oral arguments was widely criticized.

Plaintiffs in the case said they were disappointed but did not regret launching their challenge. Florida Attorney General Pam Bondi, whose state was the leader in the 26-state suit, said in a written statement that "we fought for the principle that the Constitution limits Congress's power to direct the lives of our people, and on that point, we won." And the court agreed that the federal government couldn't force an "unacceptable choice" between losing all Medicaid benefits or accepting the expansion, she said.

Dan Danner, CEO and president of NFIB, told reporters that the ruling was a "bit of a bait and switch" since Congress had avoided using the word "tax" in the law as it applied to the mandate, so as to avoid political fallout.

"It's been a long two-year effort but I think certainly from where I am, we'd do it again in a heartbeat," said Danner. "There needs to be a line in the sand as to how far government can go in our lives."

Effect on the States

For states, the ruling means that those that have been sitting on the fence will be under growing pressure to get to work to implement their main portion of the law: setting up health benefit exchanges. At least a third of the states have made little progress setting up the new marketplaces, which means either the federal government will run their exchanges or they will take part in a state-federal partnership. States face a Nov. 16 deadline to file for federal approval of their health exchanges, which will serve the individual and small-group insurance markets.

The decision also means the law's complex framework remains intact. Employers with 50 workers or more will be required to provide health insurance or pay penalties. Insurers will be unable to discriminate against sick people. Subsidies to help pay for insurance will be extended to people earning up to 400 percent of the federal poverty level. Insurance companies will be forced to meet standards for how much money they spend on health care as opposed to administrative costs. Young adults up to age 26 will be able to remain on their parents' health insurance policies. And the Medicare prescription drug coverage gap known as the doughnut hole will eventually disappear.

The high court also rejected an argument that the Anti-Injunction Act, a tax law dating from the 1860s, applied to the health care law. If it had, a lawsuit could not be considered until the penalty actually was collected.

"The Affordable Care Act describes the payment as a "penalty," not a "tax." That label cannot control whether the payment is a tax for purposes of the Constitution, but it does determine the application of the Anti-Injunction Act," said the majority opinion.

The ruling may leave open one very contentious question, however: whether groups with religious affiliations such as hospitals and universities must comply with a rule developed under the health care law that requires that they cover birth control as a preventive service. The administration offered a modification that shifted the burden of payment to insurers. But it was not sufficient for the 56 plaintiffs who have brought at least 23 First Amendment cases in federal district courts nationwide.

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