story by Greg Stohr
Editor’s note: The story is updated with new information and comments throughout.
BLOOMBERG — The U.S. Supreme Court upheld the core of President Barack Obama’s health-care overhaul, giving him an election-year triumph and preserving a law that would expand insurance to millions of people and transform an industry that makes up 18 percent of the nation’s economy.
The justices, voting 5-4, said Congress has the power to make Americans carry insurance or pay a penalty. That requirement is at the center of the law, which also forces insurers to cover people with pre-existing medical conditions. The court modified the law’s extension of the Medicaid program for the poor by saying the federal government can’t threaten to withhold existing money from states that don’t fully comply.
The ruling frames the health-care issue for this year’s elections and is a victory of symbolism as well as substance for Obama. Chief Justice John Roberts, a Republican appointee, joined four Democratic-selected justices to give Obama a majority on a law that has divided the country along ideological and partisan lines throughout his presidency.
Roberts, writing for the court, said Congress had the authority to impose the insurance requirement under its power to levy taxes.
“Because the Constitution permits such a tax, it is not our role to forbid it or to pass upon its wisdom or fairness,” he wrote.
“The highest court in the land has now spoken,” Obama said afterward in a televised statement from the White House.
“We will continue to implement this law,” and search for improvements, Obama said. “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.”
The decision on the Patient Protection and Affordable Care Act is the climax to an epic legal fight that featured the longest courtroom 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 Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito dissented, saying they would have struck down the entire statute.
“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 SINCE MEDICARE
The law marks 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.
Republicans, including presidential candidate Mitt Romney, have called for its repeal, and House Majority Leader Eric Cantor, a Virginia Republican, scheduled a vote on that effort for the week of July 9.
Romney said he disagreed with the Supreme Court’s decision. He said what the justices failed to do he would “do on my first day if elected president of the United States.”
Obama’s health-care legislation “puts the federal government between you and your doctor,” Romney told reporters in Washington. Though he pushed through a similar plan when he was governor of Massachusetts, he has said such a measure isn’t applicable nationally.
“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.
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.
Roberts accepted the Republicans’ commerce argument, while voting to uphold the mandate under Congress’s taxing power.
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.”
The ruling will shape Roberts’ 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.
The Medicaid expansion was designed to extend eligibility to those with incomes up to 138 percent of the federal poverty line. States that didn’t comply with the new expansion would have lost all or part of their share of federal Medicaid funding.
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.”
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. 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 from the expansion, as will insurers that focus on managing states’ Medicaid programs, including Amerigroup Corp. and Centene Corp.
Hospital companies led by HCA Holdings Inc. jumped in New York trading, and Medicaid insurers paced by Molina Healthcare Inc. rose. Commercial carriers such as WellPoint Inc. fell in the face of the law’s new regulations. HCA, the biggest U.S. hospital chain, rose 9.1% to $29.03 at 12:28 p.m., after the Nashville, Tenn.-based company earlier climbed as much as 12%.
Tenet Healthcare Corp., the third-biggest chain, jumped as much as 13%, while Long Beach, Calif.-based Molina rose as much as 9%. Indianapolis-based WellPoint, the second-largest U.S. health insurer, declined 4.9% to $64.58.
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. The measure passed the House by a 219-212 tally.
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. A Bloomberg National Poll conducted in March found that 37% of respondents said the law should be repealed, 11% said it should be left alone and 46% said it may need small modifications.