Justices wrestle with whether health-care overhaul should be all or nothing

WASHINGTON - One day after a torrent of skeptical questions from conservative Supreme Court justices about the government's power to compel citizens to carry health insurance, the legal battle over President Obama's health-care overhaul turned Wednesday to the issue of what happens if the requirement is found unconstitutional.

In its final day of arguments over the Patient Protection and Affordable Care Act, the Supreme Court heard assertions from 26 states and the National Federation of Independent Business that the entire act must be thrown out if that feature is found unconstitutional.

The ideological divide on the nine-member court, split between four Democratic and five Republican appointees, didn't seem as evident Wednesday as the day before, when the Republicans seemed to be leaning toward striking the central requirement of the law, that nonexempt citizens purchase health insurance or pay a penalty to the IRS.

But a divide emerged nonetheless.

"That would be my approach," said Justice Antonin Scalia, a Republican appointee, of proposals that the entire law be scrapped. "If you take out the heart of the statute, the statute is gone."

But U.S. Deputy Solicitor General Edwin S. Kneedler argued that Congress had intended for many other provisions of the law to remain in effect, even if the insurance requirement were found unconstitutional.

"There are many provisions of the act that are already in effect," he said.

And he seemed to receive support for that idea from an Obama appointee, Justice Elena Kagan.

"The question is, is a half a loaf better than no loaf?" Kagan said. "And it seems to me that in the case of the exchanges [health-insurance markets designed to help individuals and businesses shop for coverage], half a loaf is better than no loaf at all."

The issue is important because the law contains many elements that are separate from its central requirements that individual citizens carry health insurance and insurance companies be barred from refusing to sell policies to people in poor health, or charging them more because of it.

The law imposes new taxes on medical-device makers, calls for the establishment of insurance exchanges, permits parents to carry adult children on their health policies until the age of 26, and even requires restaurants to post the calorie content of menu items.

It also greatly expands Medicaid, the joint program of the federal and state governments, to provide health insurance to individuals and families who currently earn too much to qualify for the program but not enough to afford health insurance.

The Obama administration contends many of these programs can stand on their own, without the insurance mandate, and has urged the court to keep them in place.

The business federation and the states - including Pennsylvania, where Gov. Corbett decided to join the litigation when he was attorney general - argue that each of these provisions is inextricably linked to the insurance requirement and therefore the entire law must be thrown out. The government has argued in defense of the law that many provisions can stand on their own, and that it is the duty of the court, if it finds aspects to be unconstitutional, to strike only those and go no further.

The government agreed with the challengers on one point: It says that two provisions of the law - a requirement that all insured be charged the same rates, regardless of health condition, and that insurers must agree to provide coverage to people regardless of their health - should not stand if the insurance requirement is found unconstitutional. Without the requirement that everyone have health coverage, the government says, health insurers would suffer catastrophic losses.

"Once you say that the insurance companies have to cover all of the sick people and all of the old people, the rates climb," Kagan said at one point during Wednesday's hearing. "More and more young people and healthy people say, Why should we participate, we can just get it later when we get sick?' So they leave the market . . . and the whole system crashes and burns."

The justices also scheduled an hour of argument in the afternoon on the equally crucial issue of whether a huge expansion of Medicaid improperly pressures the states to participate.

Under the plan, the federal government will pay 100 percent of the cost of expanding Medicaid eligibility to people with incomes of 133 percent of the federal poverty level, dropping its contribution eventually to 90 percent.

The issue has gotten relatively little attention in advance of the hearings but could play a critical role.

Because lower courts had reviewed the planned program and raised no objections, some constitutional experts believe the court, in deciding to take up the issue, could be leaning toward striking the expansion. Since the Medicaid expansion is a main vehicle in the Obama plan for extending care to the uninsured, a decision to strike the expansion also would be a heavy blow to the law.

Yet liberal justices on Wednesday seemed inclined to keep the expansion on the books, even if other parts of the program are struck down. Kagan, probing the states' argument that the expansion would be coercive, seemed unconvinced in light of the fact that the government would pay the bulk of the costs.

"Why is a big gift from the federal government coercion?" Kagan asked. "It is a boatload of money. That doesn't seem coercive to me."

Paul Clement, representing the states challenging the law, said the states, under the Affordable Care Act, also risked the loss of all of their Medicaid funds if they failed to go along with the expansion.

But Justice Stephen G. Breyer suggested Clement's reading of the law was incorrect. Breyer said the secretary of health and human services had the option of reducing those payments but was not required to make cuts.