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New Health Care Overhaul Challenge Hinges on Origination Clause Test

A lawsuit pending in federal district court seeks to throw out the 2010 health care overhaul, contending the “tax” at the center of the law’s requirement that most Americans obtain health insurance did not originate in the House as the Constitution requires.

The lawsuit opens a new front in the conservative legal assault on the law, which the Supreme Court upheld in a 5-4 ruling June 28. At the same time, it raises broader questions about the Senate’s common practice of using unrelated House bills as vehicles for raising revenue.

The lawsuit was filed in September in U.S. District Court for the District of Columbia by Matt Sissel, an Iowa artist who opposes the insurance mandate. The Justice Department must respond to the lawsuit by Oct. 9, a lawyer for Sissel said.

Sissel, with support from the conservative Pacific Legal Foundation, argues that because the Supreme Court upheld the individual mandate as a “tax” — rather than as a legitimate exercise of government authority under the Commerce Clause — that tax now must be subject to the Constitution’s Origination Clause. The clause states that “all bills for raising revenue shall originate in the House of Representatives.”

The tax language of the health care overhaul did not originate in the House, so the entire statute should be struck down as unconstitutional, the lawsuit argues.

The high court’s ruling “raises new issues that the parties did not argue or brief, and that the Supreme Court had no occasion to consider,” according to the lawsuit, which has been assigned to Judge Beryl A. Howell, a 2010 appointee of President Obama.

The legislation that eventually became the heath care law (PL 111-148, PL 111-152) began as a House bill that would have changed a first-time home buyer tax credit for members of the armed services. The Senate took up the House bill, which was sponsored by New York Democrat Charles B. Rangel, stripped it of the tax credit language and inserted the health care overhaul language, including the financial penalty for not purchasing health insurance that formed the basis of the insurance mandate.

That parliamentary maneuver — the amendment of “shell” revenue bills that originate in the House — is regularly employed in the Senate as a way to advance a measure with a revenue provision while abiding by the Origination Clause. It is seen by the Senate as constitutional because of the clause’s second part, which says that “the Senate may propose or concur with amendments” to House revenue bills.

In this case, however, challengers say the Senate overstepped its constitutional authority by taking an unrelated, six-page bill on homeowner tax credits, removing its language and substituting it with a 2,700-page health care bill that raises an estimated $4 billion a year.

“We’re unaware of any instance in which the Senate went this far in abusing its prerogatives under the Origination Clause,” said Paul J. Beard II, the attorney handling the case for the Pacific Legal Foundation.

Uphill Battle

The lawsuit will face hurdles from the start. The district court will look to Supreme Court precedent on the Origination Clause, and the high court has followed two broad principles in evaluating whether laws violate the clause, according to a March 2011 Congressional Research Service report. The first is that “raising money must be the primary purpose of the [contested] measure, rather than an incidental effect,” and the second is that the resulting funds must not be for general federal expenses, but rather for “a single, specific purpose.”

Under the health care law, Beard says, the penalties paid by those without health insurance would go to the Treasury, rather than to a specific program associated with health care. That, he contends, makes the overhaul more vulnerable than other statutes upheld by the Supreme Court despite Origination Clause challenges.

It is different, for example, from a Senate-originated law that the court upheld in 1990. That statute required those guilty of federal misdemeanors to pay a “special assessment,” and the court found that the law did not run afoul of the Origination Clause because the revenue created by the assessment was not going to the Treasury but to a special Crime Victims Fund.

The harder task may be persuading a lower court that the primary purpose of the health care overhaul is to raise money for the government, rather than to insure more Americans.

In addition, the House can and does object when the Senate includes a revenue provision in a bill that did not originate in the House, an objection voiced by issuing what is known as a blue slip. The House has raised such objections in the current Congress, refusing to take up a Senate-passed reauthorization of a domestic violence prevention law (S 1925) because it contains a provision that increases immigrant visa fees.

No “blue slip” was issued during negotiations on the health care law, and there may be legal questions raised about why a law should be retroactively struck down for violating the Origination Clause when the House raised no such objection during the legislative process itself.

Eric M. Jensen, a tax law professor at Case Western University in Ohio, said another consideration for the court would be how to kill the health care law without endangering scores of other revenue measures that technically may not have originated in the House.

“This could call into question the legitimacy of a huge number of federal statutes, which I think is probably another reason why any reasonable court is going to try to duck the issue,” Jensen said.

Others, meanwhile, say that what happened in the case of the health care law — a total rewrite by the Senate of a House revenue bill — is hardly unprecedented. In 1982, for example, the Senate “amended a minor House bill reducing taxes with a several-hundred-page amendment increasing taxes by about $100 billion,” according to an analysis of Origination Clause practice by Michael W. Evans, a former chief counsel to the Senate Finance Committee.

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