Bloomberg News

Court Opens Health-Care Clash With Law That May End Case

March 26, 2012

A demonstrator holding a sign that reads "don't deny healthcare, protect the law" walks in front of the Supreme Court building in Washington on March 26, 2012. Photographer: Andrew Harrer/Bloomberg

A demonstrator holding a sign that reads "don't deny healthcare, protect the law" walks in front of the Supreme Court building in Washington on March 26, 2012. Photographer: Andrew Harrer/Bloomberg

The U.S. Supreme Court opened its historic hearings on President Barack Obama’s health-care overhaul with several justices suggesting they’ll brush aside an argument that they can’t rule until the law takes full effect.

Justices including Stephen Breyer and Ruth Bader Ginsburg today suggested they didn’t view an 1867 law as barring them from ruling immediately on the law’s requirement that Americans either get insurance or pay a penalty. The 1867 law blocks suits over taxes that haven’t been imposed, and Ginsburg questioned whether health-care penalties would be taxes.

“This is not a revenue-raising measure,” Ginsburg said. “If it’s successful, nobody will pay the penalty and there will be no revenue to raise.”

The questions hint that the high court for the first time will rule on a president’s signature legislative achievement in the middle of his re-election campaign. The law would extend coverage to 32 million people and transform a $2.6 trillion industry.

The justices heard arguments for 90 minutes before a packed courtroom of about 500 people, including dozens of spectators in adjacent hallways that offer obstructed views. Those attending included Attorney General Eric Holder, Secretary of Health and Human Services Kathleen Sebelius and Senator Jeff Sessions, an Alabama Republican on the Senate Judiciary Committee.

Law’s Challengers

The health law is being challenged by 26 states and the National Federation of Independent Business, an advocacy group. The court probably will rule by late June, months before the November presidential election.

The six hours of planned debate is the most on a case in 44 years. The justices tomorrow will consider the main issue: whether the government had power to enact the health-care law under its constitutional authority to regulate interstate commerce.

Even as today’s session began, the line for the following day’s argument stretched around the street corner. Outside the court, demonstrators shouted dueling slogans, with opponents of the law crying, “socialist,” and supporters yelling, “We love Obamacare!”

Santorum Appears

Republican presidential candidate Rick Santorum appeared and attacked Mitt Romney, saying his rival for the nomination is “the worst person” to debate the health care law with Obama. Republican presidential candidates -- including Romney, who signed a similar health-insurance mandate while he was governor of Massachusetts -- are campaigning against the law.

The four justices appointed by Democrats all aimed skeptical questions today at Robert Long, a lawyer the court appointed to argue that the Anti-Injunction Act made the case premature.

Breyer said he had a “problem” with Long’s argument. The justice said the health-care lawsuits didn’t prevent the Internal Revenue Service from collecting taxes -- something he said was the primary goal of the Anti-Injunction Act.

“An advance attack on this does not interfere with the collection of revenues,” he said.

Later, Breyer said Congress “did not use the word ‘tax,’” in enacting the health-care law.

Justice Sonia Sotomayor said that on at least seven occasions the court had found a way around the Anti-Injunction Act. “Isn’t the fairer statement that Congress has accepted that, in the extraordinary case, we will hear the case?” she asked.

Long’s Response

Long pointed to a provision in the health-care law that says the penalties “shall be assessed and collected in the same manner” as a tax. He said that opponents shouldn’t be allowed to go to court until the first penalties are imposed in 2015.

“The Anti-Injunction Act imposes a pay-first, litigate- later rule that is central to federal tax assessment and collection,” Long argued.

The Supreme Court appointed Long to make the argument because the Obama administration and the law’s challengers say the Anti-Injunction Act isn’t an obstacle to a Supreme Court ruling on the law.

Long’s contentions drew little traction. No justice suggested the act should apply. The justices’ questions indicated any differences among them will turn on the legal reasoning, rather than the conclusion that they can proceed to consider the substance of the health-care law.

Justices ‘Seem Skeptical’

“Most of the justices seem skeptical that the mandate and penalty are a tax,” said Randy Barnett, a lawyer representing the National Federation of Independent Business, in an e-mail statement. “They seem ready, willing and able to reach the merit of the commerce clause claim.”

One issue for the justices is whether the law strips federal courts of any power to hear tax challenges -- so that even the federal government couldn’t agree to let a lawsuit go forward. Chief Justice John Roberts said the Supreme Court had “gone back and forth” on that issue.

Ginsburg offered a way around that issue, asking U.S. Solicitor General Donald Verrilli, who argued for the Obama administration, whether the court could avoid deciding the question by simply concluding the Anti-Injunction Act didn’t apply. Verrilli said that is “exactly our position.”

The Standard & Poor’s Supercomposite Managed Health Care Index of 12 insurance companies closed 2.8 percent higher amid broader gains in stocks today after comments from Federal Reserve Chairman Ben Bernanke.

Tomorrow’s Issues

Today’s session at times slid into a discussion of issues the court will take up tomorrow. Justice Samuel Alito suggested the Obama administration’s position on the Anti-Injunction Act was inconsistent with its contention that Congress could enact the law through its constitutional power to impose taxes.

“Today you are arguing that the penalty is not a tax,” Alito said. “Tomorrow, you are going to be back, and you will be arguing that the penalty is a tax.”

On the third day of debate, the court will hear arguments on what would happen to the rest of the law if the insurance requirement is struck down, and whether the law’s expansion of Medicaid unconstitutionally coerces the states into spending more on health care for the poor.

Young Adults

The health-care law, being phased in over several years, imposes new taxes on the highest wage earners, calls for fees on health-care companies and provides hundreds of billions in Medicare savings. Already in effect are provisions closing a gap in prescription-drug coverage, allowing 2.5 million young adults to stay on their parents’ insurance until age 26, and providing free mammograms, colonoscopies and flu shots.

Obama and Democrats in Congress enacted the law over Republican opposition that helped fuel the rise of the Tea Party movement. Senate Minority Leader Mitch McConnell, a Kentucky Republican who wants to repeal the law, said March 23 that what his party calls “Obamacare” is a metaphor “for all of the excess of this administration.”

One of the four federal appeals courts to have ruled on the health-care law said the Anti-Injunction Act required dismissal of legal challenges.

The 1867 law says “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.” It stems from President Abraham Lincoln’s 1862 approval of the nation’s first income tax to raise money to pay for the Civil War.

Americans filed lawsuits in federal courts challenging the government’s right to tax them. Congress responded with the law that requires Americans to pay their tax bills before suing the government.

The health-care cases are National Federation of Independent Business v. Sebelius, 11-393; Department of Health and Human Services v. Florida, 11-398; and Florida v. Department of Health and Human Services, 11-400.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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