Judge to Rule Within Month on Virginia Lawsuit to Block Health Reform Bill

A federal judge is considering whether to throw out Virginia’s lawsuit challenging the health- care overhaul signed by President Barack Obama after hearing arguments over whether the state has jurisdiction to sue.

U.S. District Judge Henry Hudson today in Richmond said he would decide within 30 days on the federal government’s request to dismiss the case. Virginia claims that a requirement for people buy health insurance exceeds Congress’s powers under the Constitution, while the U.S. counters that provision is allowed under its commerce powers because of the $43 billion in unpaid medical bills absorbed by the market each year.

Taxpayers are “left holding the bag,” Ian Gershengorn, an attorney for the U.S. Justice Department, told Hudson in court. “The uninsured are being asked to bear their own costs.”

The U.S. argues that Virginia doesn’t have standing to sue and that no one has suffered any injury, because the insurance requirement doesn’t take effect until 2014.

Duncan Getchell, an attorney for Virginia, said the state should be allowed to pursue its case now because a legal clash is “inevitable, and therefore it is ripe.”

During the two-hour hearing, Hudson questioned the reach of the legislation, wondering whether the government could go so far as to force citizens to join a health club.

“If you allow this under the necessary and proper clause, are there any boundaries to the necessary and proper clause?” he asked.

Hurting Economy

Congress has a right to regulate people who hurt the economy when they become sick or injured and seek health care without insurance, Gershengorn said. Because the federal government covers part of the cost-shifting, it has authority to require health-care coverage of the uninsured even if they don’t want it.

“You can’t guarantee you can opt out,” he said. “You can’t guarantee you won’t be hit by a bus.”

Many of the changes enacted by the bill, included requirements for most people to have health insurance and for employers to provide coverage, will take at least two years to go into effect.

Part of the courtroom debate today hinged on whether the health-care law falls within the government’s power to tax. Getchell said the law’s purpose is to ensure people buy health care and not to raise revenue, so it shouldn’t be classified as a tax.

Taxable Commerce?

Hudson questioned whether people who don’t buy health care can be considered to be actively participating in commerce and can be taxed for it. The U.S. said the possibility of being injured and an inability to pay one’s medical bills are enough to draw a link between commerce and taxation.

“This is an attempt to regulate beyond the outer bounds of the commerce power,” Getchell told Hudson, referring to such a person who declines to buy insurance. “You cannot draft him into commerce so you can regulate him.”

Allowing Virginia to opt out of federal law would set a precedent that could lead to refusing to follow U.S. tax law, the USA Patriot Act or any other law the state may not favor, the U.S. claims.

“Congress wouldn’t want to create such a gaping hole,” Gershengorn said. There should be “no pre-enforced restrictions on gathering of revenue. This would turn it on its head.”

Florida, joined by 19 other states, filed a separate lawsuit claiming the health-reform law is unconstitutional and that the legislation places a fiscal burden on its cash-strapped budget by expanding state-run Medicaid programs. Virginia’s suit, brought by Attorney General Ken Cuccinelli, is only on behalf of itself. The lawsuits were filed moments after Obama signed the legislation in March.

Americans Divided

Public sentiment on the health-care legislation remains divided. In a USA Today/Gallup Poll taken from June 11 to June 13, 49 percent of the 1,014 respondents said it was good thing that Congress passed the measure, while 46 percent said it was a bad thing and 5 percent were unsure.

Cuccinelli, a Republican, attended today’s hearing without participating in arguments.

Arguments were made before a packed courtroom, with dozens more watching through closed-circuit television monitors. Protesters planted signs outside claiming they were “Denied Healthcare By Cuccinelli.”

If the lawsuit survives jurisdictional arguments over Virginia’s right to bring the suit, Hudson scheduled an Oct. 18 hearing on the merits of the case.

“If I find no subject matter jurisdiction, I say no more,” Hudson said.

The case is Commonwealth of Virginia v. Sebelius, 10-cv-00188, U.S. District Court, Eastern District of Virginia (Richmond).

To contact the reporter on this story: William McQuillen in Washington at bmcquillen@bloomberg.net.

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