Bloomberg News

Health Law in Jeopardy After Justices' Questions

March 26, 2012

A protester with the Patient Protection and Affordable Care Act in front of the U.S. Supreme Court on March 26, 2012 in Washington. PHotographer: Mark Wilson/Getty Images

A protester with the Patient Protection and Affordable Care Act in front of the U.S. Supreme Court on March 26, 2012 in Washington. PHotographer: Mark Wilson/Getty Images

The U.S. Supreme Court opened today its historic review of President Barack Obama’s health-care law, three days of arguments that might result in the president’s premier legislative achievement being found unconstitutional in the middle of his re-election campaign.

The court will determine the fate of a measure designed to extend insurance to about 32 million people and revamp an industry that accounts for 18 percent of the U.S. economy.

The six hours of planned debate that began this morning is the most on a case in 44 years. The core dispute -- the law’s upcoming mandate that uninsured people purchase coverage --comes on the second day.

First, the justices today hear arguments on a seemingly arcane question: Does the penalty for failing to get insurance amount to a tax?

“There is at least some doubt about it,” Justice Antonin Scalia told attorney Robert Long, who argued that the court should not decide the case. “I find it hard to think this is clear.”

A 145-year-old law, the Anti-Injunction Act, says courts can’t rule on the legality of federal taxes until they are imposed. For the no-insurance penalty in the 2010 health care law, which takes effect in stages, that comes in 2015. The justices may decide it’s too soon to rule on the health law’s constitutionality.

1867 Law

It’s “the sleeper issue of the health-care case,” said Adam Winkler, a constitutional law professor at the University of California at Los Angeles School of Law. “The great constitutional controversy over Obamacare could end with a whimper rather than a bang.”

The 90-minute debate on the 1867 law will serve as a prelude for the court’s arguments tomorrow over the marquee issue: whether the Constitution lets government require Americans to either get insurance or pay the penalty.

The mandate is a primary tool the government uses to expand insurance coverage. The question for the court is whether it falls within the scope of Congress’ constitutional authority to regulate interstate commerce.

On the third day of arguments, the justices will hear debate about what should happen to the rest of the law if the insurance requirement is voided. The court also will take up whether the law, by expanding the Medicaid program, unconstitutionally coerces the states into spending more on health care for the poor.

Political Decision Expected

The case marks the first time the high court has considered striking down a president’s signature legislative achievement in the midst of his re-election campaign. Republican candidates, including former Massachusetts Governor Mitt Romney, are campaigning against the measure, saying it should be repealed.

A Bloomberg National Poll earlier this month found that three-quarters of Americans say the Supreme Court will be influenced by politics when it rules, probably in June, less than five months before the presidential election.

The sentiment crosses party lines and is especially held by independents, 80 percent of whom said the court will not base its ruling solely on legal merits. More Republicans than Democrats, by 74 percent to 67 percent, said politics will play a role.

Debate began outside the court before the lawyers inside.

In front of the court steps, supporters of the law stood beside two men holding an American flag and another with the “Don’t Tread on Me” rattlesnake symbol of the Tea Party.

‘Super Bowl’

“This is the Super Bowl,” said Ilya Shapiro, a senior fellow at the Cato Institute in Washington, which advocates for limited government. Shapiro, who wore a black tie decorated with red images of the scales of justice, said it was “the most significant case about the relationship between the government and the governed.”

Americans “don’t want to go re-fight this battle,” Senior Obama adviser David Plouffe said yesterday that on CNN’s “State of the Union” program.

Both the Obama administration and the law’s challengers -- 26 states and National Federation of Independent Business, an advocacy group -- say the Anti-Injunction Act doesn’t apply.

The justices may not be convinced. They took the unusual step of appointing an outside lawyer, Long of Covington & Burling LLP, to argue before them that the Anti-Injunction Act strips the court of the ability to consider the insurance mandate now. Long had 40 of the 90 minutes of argument today.

Jurisdictional Issue

“Courts take jurisdictional issues very seriously,” Winkler said. “Procedure is often more important than substance.”

The court won’t immediately decide whether the Anti- Injunction Act applies and will continue to hear the arguments on other issues.

The law 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. Courts started preventing taxes from being collected while the litigation was considered, according to the journal Health Affairs. Congress responded with the Anti-Injunction Act.

Income taxes were later repealed, and then reimposed.

The act took on a prominent role in the health-care fight in September when a federal appeals court in Richmond, Virginia, said the measure required rejection of two challenges to the health law, known as the Affordable Care Act.

Appeals Courts Differ

The appeals court said judges couldn’t address attacks on the insurance requirement until a penalty had been assessed. Another appellate judge on a different court later reached a similar conclusion. Four appeals courts have ruled on the health-care law so far.

The high court hasn’t directly considered the Anti- Injunction Act since 1974, when it ruled that Bob Jones University had to wait to challenge the Internal Revenue Service’s revocation of the South Carolina college’s tax-exempt status. The IRS took that step because Bob Jones refused to admit blacks. None of today’s justices were on the court then.

The Anti-Injunction Act is frequently invoked by the U.S. government when Americans challenge laws that involve payments to the government, said Alan Morrison, a professor at George Washington University Law School in Washington. Morrison filed a brief urging the Supreme Court to apply the Anti-Injunction Act and throw out the health-care challenge.

Penalty or Tax?

At issue in the health-care case are both detailed questions over the Anti-Injunction Act’s language and broader issues about the proper moment for courts to get involved in constitutional cases. 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.”

The Obama administration and the challengers to the law contend that the penalties in the Affordable Care Act don’t qualify as a “tax” for purposes of the Anti-Injunction Act. U.S. Solicitor General Donald Verrilli points to Congress’ decision to use the term “penalty,” rather than “tax” in the health-care law.

“The precise labels Congress chooses are highly relevant,” Verrilli argued in court papers.

The government makes that argument even as it contends in a different aspect of the case that Congress had power to enact the insurance requirement through its constitutional authority to impose taxes. Verrilli contends the analysis for that constitutional issue is different, focusing on the practical operation of the disputed provision rather than its wording.

‘Broadly Construed’ Meaning

The administration’s position is further complicated by its own change of position on the issue. The government at an early stage in the litigation argued that the Anti-Injunction Act barred challenges to the health-care law.

Long, the lawyer appointed by the Supreme Court, points to a provision in the health-care care law that says the penalties “shall be assessed and collected in the same manner” as a tax. And he says past Supreme Court cases support his position.

“The court has broadly construed the term ‘tax’ in applying the Anti-Injunction Act,” Long argued in court papers.

The states and business group also contend the law shouldn’t apply because their real target is the insurance requirement, not the penalties for noncompliance.

In addition, the states say they aren’t bound by the Anti- Injunction Act because they aren’t a “person.” The states say that’s a sensible reading because, unlike individual taxpayers, they won’t ever have an opportunity to press a refund suit.

Avoiding Questions

In the background are fundamental questions about the role of the courts. Long points to a longstanding Supreme Court practice of avoiding constitutional questions when possible.

Morrison says that principle makes particular sense given the prominence of health care as a campaign issue this year.

“If the Republicans win, and one of the things they’re campaigning on is to get rid of the individual mandate, we may never see anyone being subjected to it because the law may be changed,” Morrison said.

Even so, the justices may find it difficult use the Anti- Injunction Act to throw out the case, said attorneyShapiro of the Cato Institute.

The Anti-Injunction Act is “meant to facilitate the government’s collection of taxes and the operation of the government,” he said. “The government here is saying, ‘This doesn’t apply. We don’t need this.’”

The court, he said “is likely to defer” to the government’s view.

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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