(Reuters) – The fate of President Barack Obama’s healthcare overhaul will be on the line on Wednesday when the Supreme Court considers whether the entire law must fall without its centerpiece insurance mandate.
Completing three days of historic arguments, the nine justices will hear arguments on whether the rest of the law, Obama’s signature domestic accomplishment, can survive should the court decide Congress exceeded its powers by requiring all Americans buy insurance by 2014.
The Obama administration faced skeptical questioning on Tuesday from the court’s five-member conservative majority on the insurance requirement. But it was unclear whether it would strike it down or let it stand.
A ruling on the mandate that most people obtain health insurance or face a penalty appeared likely to come down to Chief Justice John Roberts and Justice Anthony Kennedy, two conservatives who pummeled the administration’s lawyer with questions.
If even one of the five conservative Republican appointees joins the four liberal Democratic appointees on the court, the law would be upheld. If the five conservatives remain unified, the law would fall. A ruling is expected by late June.
The justices on will also look at whether Congress had the power under the U.S. Constitution to require that the states dramatically expand the Medicaid healthcare program for the poor, providing coverage for an estimated 17 million Americans.
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The stakes could not be higher, financially, legally and politically.
The law, which constitutes the U.S. healthcare system’s biggest overhaul in nearly 50 years, seeks to provide health insurance to more than 30 million previously uninsured Americans and to slow down soaring medical costs.
The law has wide ramifications for company costs and for the health sector, affecting insurers, drugmakers, device companies and hospitals.
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The healthcare investment bank Leerink Swann said in a research note that Wednesday’s session was more important for managed care stocks and whether the individual mandate – requiring most people to buy coverage by 2014 or face a penalty – can be separated from the rest of the law.
For hospital stocks, it said the loss of expanded coverage, through the Medicaid program or through the individual mandate, would he a negative development.
Annual U.S. healthcare spending totals $2.6 trillion, about 18 percent of the annual gross domestic product. That translates to $8,402 per person every year.
For the Supreme Court, the Wednesday arguments will complete a thorough legal and constitutional review of the law, the most important piece of social legislation in decades. Each of the three days of arguments, crowds of supporters and opponents have gathered outside, chanting and carrying signs.
The challengers, 26 states and a small business trade group, will be represented by Paul Clement, a former solicitor general during George W. Bush’s presidency.
Clement argued in written briefs that the insurance mandate was at the heart of the law and so critical to its operation that all of it must be invalidated if the requirement to buy health insurance is stripped from it.
He also argued that the Medicaid expansion was unconstitutional and the entire law should be declared invalid on those grounds as well.
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Solicitor General Donald Verrilli, the Obama administration’s top courtroom lawyer, will also argue on Wednesday. He has defended the Medicaid expansion on the grounds Congress clearly has the power to set the terms under which the federal government disburses funds to the states.
Also arguing on Wednesday will be Deputy Solicitor General Edwin Kneedler, advocating the administration’s position that if the insurance mandate is struck down, then only two other provisions would have to fall.
Those provisions bar insurers from refusing coverage because of a person’s pre-existing medical condition and from charging more due to a person’s medical history.
The court has appointed an outside private lawyer, H. Bartow Farr III, to argue that all other provisions can survive without the insurance mandate. That was the ruling last year by a U.S. court of appeals in Atlanta.
A Supreme Court decision striking down the law would be a huge political and legal defeat for Obama ahead of the November 6 election, when he seeks another four-year term.
A ruling upholding the law would be a major vindication for Obama, but could make healthcare an even bigger issue in the presidential and congressional elections. Republican presidential candidates all oppose it and could fight even harder to repeal if the court leaves in place the entire law.
The Supreme Court cases are National Federation of Independent Business v. Sebelius, No. 11-393; U.S. Department of Health and Human Services v. Florida, No. 11-398; and Florida v. Department of Health and Human Services, No. 11-400.
(Additional reporting by Jeremy Pelofsky and Lewis Krauskopf in New York; editing by Todd Eastham)