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Obama’s Health-Care Overhaul Upheld by U.S. Supreme Court

Photographer: Mark Wilson/Getty Images

Obamacare supporters after the U.S. Supreme Court's decision to uphold President Obama's health care law on June 28, 2012, in Washington. Close

Obamacare supporters after the U.S. Supreme Court's decision to uphold President... Read More

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Photographer: Mark Wilson/Getty Images

Obamacare supporters after the U.S. Supreme Court's decision to uphold President Obama's health care law on June 28, 2012, in Washington.

The U.S. Supreme Court affirmed the core of President Barack Obama’s health-care overhaul in an opinion that held two surprises: Chief Justice John Roberts was the deciding vote, and his legal reasoning was unanticipated.

The 5-4 ruling yesterday gave Obama an election-year triumph by declaring that Congress had the power to make Americans obtain insurance or pay a penalty. That requirement is at the center of the measure and of a political debate over the appropriate role of government in health care that showed no signs of abating with the court’s decision.

Republicans, including presidential candidate Mitt Romney, vowed to redouble their efforts to repeal “Obamacare,” while the president sought to portray the fight as over.

“The highest court in the land has now spoken,” he said from the White House.

Briefs and oral arguments had focused primarily on whether Congress overreached its authority to regulate interstate commerce when it approved the insurance mandate as part of the Patient Protection and Affordable Care Act. Roberts, who wrote the majority opinion, declared that it did and then upheld the provision on the administration’s fallback argument: that the penalty was within congressional power to tax.

It was the first time Roberts had joined with the court’s four Democratic appointees in a 5-4 majority.

Limiting Medicaid

Along with the mandate and its accompanying penalty, the court left intact features that force insurers to cover people with pre-existing medical conditions, keep adult children on their parents’ health plans until age 26 and remove lifetime caps from policies. The justices limited the law’s extension of the Medicaid program for the poor by saying the federal government can’t threaten to withhold existing funds from states that don’t fully comply.

Speculation before the decision had focused on Justice Anthony Kennedy as the likely deciding vote on a court divided between four Democratic appointees and five justices named by Republican presidents, including Roberts.

“Justice Kennedy is the axis around which the court spins in a case like this,” Tom Goldstein, an appellate lawyer, said two weeks ago. Goldstein’s Scotusblog website is sponsored by Bloomberg Law.

Barry Friedman, a New York University Law professor, said he was surprised that Kennedy wound up in the minority. “To the extent they were going to uphold the law, I always believed the chief justice would be a vote to do so,” Friedman said. “But I thought Justice Kennedy would also be in that group.”

Focus on Commerce

The administration’s legal brief in support of the law devoted three times as much space to discussing the commerce power as it did to the tax issue. Yet it was the secondary argument that carried the day.

While the federal government “does not have the power to order people to buy health insurance,” Roberts wrote, “the federal government does have the power to impose a tax on those without health insurance.” The law “is therefore constitutional because it can reasonably be read as a tax.”

Roberts said that, for most Americans, the amount of the penalty will be far less than the cost of insurance.

“It may often be a reasonable financial decision to make the payment rather than purchase insurance,” he wrote. “Although the payment will raise considerable revenue, it is plainly designed to expand health-insurance coverage. But taxes that seek to influence conduct are nothing new.”

Republican Ammunition

That line of reasoning gave Republicans what they portrayed as a powerful new argument against the health plan: that it is a tax increase.

“Now we will let the American people decide if they want this huge tax burden,” said Representative Joe Walsh, of Illinois, one of 87 Republican freshmen elected in 2010.

“The president’s health-care law is hurting our economy by driving up health costs and making it harder for small businesses to hire,” House Speaker John Boehner, an Ohio Republican, said in a statement.

Obama pledged, “We will continue to implement this law” and search for improvements. “What we won’t do, and what the country can’t afford to do, is re-fight the political battles of two years ago or go back to the way things were,” he said in his televised statement.

Republicans vowed to do just that, with House leaders saying they would hold a vote to repeal the act on July 11, though there’s no chance they can succeed as long as Democrats control the Senate and the president is there to veto a bill.

Romney Threat

Romney said he would make overturning the law a top priority in the White House.

“What the court did not do on its last day in session, I will do on my first day if elected president of the United States. And that is: I will act to repeal Obamacare,” Romney said in Washington.

Obama’s health-care law “puts the federal government between you and your doctor,” Romney told reporters. Though he pushed through a similar plan when he was Massachusetts governor, he has said such a law isn’t wise nationally.

In a USAToday/Gallup poll yesterday, 46 percent agreed with the court’s ruling and 46 percent disagreed. With 79 percent of Democrats supporting the decision and 83 percent of Republicans opposing it, independent voters split 45 percent in favor and 42 percent against the decision. The survey had a 4 percentage- point error margin.

Longest Arguments

For a moment, Obama, waiting with every other American for the momentous decision, thought he had lost. He saw an inaccurate television report that the law had been struck down. A staff member quickly relayed word that it had been upheld, said an administration official who asked for anonymity to describe the private meeting.

The decision on the law is the climax to a legal fight that featured the longest high court arguments in 44 years, a record number of briefs and extraordinary public interest in a Supreme Court case. The case tested both the constitutional powers of Congress and the willingness of the Roberts court to overrule the other two branches of the federal government.

Republican-appointed Justices Kennedy, Antonin Scalia, Clarence Thomas and Samuel Alito dissented, saying they would have struck down the entire statute.

‘Liberty at Peril’

“The fragmentation of power produced by the structure of our government is central to liberty, and when we destroy it, we place liberty at peril,” the dissenters wrote. “Today’s decision should have vindicated, should have taught, this truth; instead, our judgment today has disregarded it.”

Among the majority, Justices Ruth Bader Ginsburg and Sonia Sotomayor voted to uphold the entire statute. Justices Stephen Breyer and Elena Kagan agreed with Roberts in limiting the Medicaid expansion.

Kennedy and Ginsburg each took the unusual step of reading a summary of their opinion from the bench. All told, the justices took more than an hour to announce the ruling before a packed courtroom that included members of Congress, retired Justice John Paul Stevens and Solicitor General Donald Verrilli, the Obama administration lawyer whose defense of the law drew criticism.

The dispute marked the first time the Supreme Court had considered a president’s defining legislative accomplishment in the middle of his re-election campaign. The court hadn’t taken up a law of comparable scope since the justices overturned part of the National Industrial Recovery Act in 1935 during President Franklin Roosevelt’s New Deal.

Biggest Change

The law represents the biggest change to the U.S. health system since Medicare and Medicaid were established in 1965. It was designed to expand coverage to at least 30 million people -- primarily by expanding Medicaid and setting up online markets where consumers could buy insurance -- while controlling the soaring costs of health care.

The law was challenged by 26 Republican-controlled states and a small-business trade group. They contended the measure exceeded Congress’s constitutional powers to regulate interstate commerce and impose taxes.

The challenge focused on the insurance mandate, which requires Americans to get coverage by 2014 or pay a penalty. The concept was championed by Republicans years ago as an alternative to Democratic proposals for a single government-run health system.

The ruling will shape Roberts’s legacy as much as Obama’s. The 57-year-old chief justice -- whose 2005 nomination Obama opposed as a senator -- has been a leader of the court’s conservative wing on other issues.

Withholding Funds

The Medicaid expansion was designed to extend eligibility to those with incomes up to 133 percent of the federal poverty line. States that didn’t comply with the new expansion would have lost all or part of their federal Medicaid funds.

Roberts said Congress can require states to meet conditions to receive new Medicaid money, though it can’t take away existing funding. He said Medicaid spending accounts for more than 20 percent of the average state’s total budget, with the federal government covering at least half those costs.

“The financial ‘inducement’ Congress has chosen is much more than ‘relatively mild encouragement’ -- it is a gun to the head,” Roberts wrote. “What Congress is not free to do is to penalize states that choose not to participate in that new program by taking away their existing Medicaid funding.”

Industry Uncertainty

The ruling removes some of the uncertainty the health industry had faced about the future of government policy. By upholding the individual mandate, the court left intact a provision that will give insurers such as UnitedHealth Group Inc. (UNH) millions of relatively healthy, low-cost policyholders.

Other parts of the law will help the drug industry, including the Medicaid expansion and the system of online insurance markets that will make it easier for people to buy policies. Hospitals also may benefit, as will insurers that focus on managing states’ Medicaid programs, including Amerigroup Corp. (AGP) and Centene Corp. (CNC)

Hospital companies led by HCA Holdings Inc. (HCA) jumped in New York trading yesterday, and Medicaid insurers paced by Molina Healthcare Inc. (MOH) rose. Commercial carriers such as WellPoint Inc. (WLP) fell in the face of the law’s new regulations. Today, HCA, the biggest U.S. hospital chain, rose 3.3 percent to $30.43 at the close of New York trading.

Tenet Healthcare Corp. (THC), the third-biggest chain, closed today with 0.2 percent decline after gaining 5.4 percent yesterday. Long Beach, California-based Molina rose 1.3 percent. Indianapolis-based WellPoint, the second-largest U.S. health insurer, fell 3.2 percent to close at $63.79.

Prescription Drugs

Some parts of the law have already gone into effect, including provisions that close a gap in prescription-drug coverage under Medicare, allow 2.5 million young adults to stay on their parents’ insurance until age 26, and provide free mammograms, colonoscopies and flu shots.

The health-care measure’s enactment in March 2010 marked the culmination of decades of efforts by Democrats and Republicans alike to put in place a universal health-care program. For Obama, congressional approval marked a victory that had eluded presidents from Harry Truman to Bill Clinton.

Passage in the Democratic-controlled Congress came only after months of lobbying, deal-making and parliamentary maneuvering. In the end, not a single Republican voted in favor of the law.

From the beginning, the law divided the public, with opposition fueling the Tea Party movement and helping produce the 2010 Republican takeover of the House.

An Associated Press-GfK Poll taken before the Supreme Court vote showed that 47 percent of respondents opposed the health- care law and 33 percent supported it, with only 21 percent of political independents backing the measure. The survey of 1,007 adults, taken June 14-18, had a margin of error of plus or minus 4 percentage points.

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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