Obamacare at the Supreme Court Again: Is a State a State?


Supreme Court building, from Wikipedia

Supreme Court building, from Wikipedia

Last week the Supreme Court heard oral arguments in King v. Burwell, on the issue of whether the Affordable Care Act authorizes the IRS to grant subsidies to people buying health insurance through the federal exchange, Healthcare.gov, or only to people buying health insurance through state-run exchanges. The debate focuses on Section 1401 of the Act, and in particular on the phrase that provides that subsidies are available to people who buy their insurance “through an Exchange established by the State.”

Does the quoted phrase mean only exchanges established by the state, or does it also mean exchanges established by the federal government? The plaintiffs argue for a plain meaning of the words—a state is a state. The government argues that Congress couldn’t possibly have intended to only help people who used state-run exchanges, particularly because it turned out that most states did not create their own health insurance exchanges. The government says the phrase is ambiguous and the IRS interpretation is reasonable.

However, one of the Senate bills leading up to passage of the ACA did condition exchange subsidies on state cooperation, and some House Democrats complained. Still, the plain meaning of the final language of the ACA appears to limit the subsidies to state-run exchanges.

Moreover, an early draft of the IRS regulations interpreting the subsidy provision originally restricted the subsidies to state-run exchanges. Only when the issue began to be publicized in 2011 did the IRS change their interpretation of this section.

It is likely that no Democrat would have passed a bill that kept citizens of more than half the states from getting subsidies on the federal exchange. It is likely that they never anticipated that more than half the states would decline to establish an exchange.

This is another example of why complex statutes almost always need technical corrections. The problem is that the Democrats don’t have the votes to pass the corrections they need.

Because of the way that the ACA was passed—with only Democrat votes in support, and all Republicans in Congress opposed—the law has no bipartisan underpinning to foster compromise. The Democrats are now reaping the effect of their actions in cramming the legislation down an unready nation’s throat.

So what will the Supreme Court decide in King v. Burwell?

Based on the oral arguments, it seems probable that four justices—Justices Breyer, Ginsburg, Kagan and Sotomayor—will vote to uphold the IRS interpretation and provide subsidies to people who used the federal exchange. It seems likely that three justices—Justices Alito, Scalia and Thomas—will vote to overturn the IRS interpretation.

As is often the case, Justice Kennedy is harder to read, but asked questions indicating he was uncomfortable with the practical result of overturning the IRS regulations. On the other hand, Justice Kennedy voted to overturn the individual mandate the last time Obamacare reached the Supreme Court, in National Federation of Independent Business v. Sebelius, decided in 2012.

Chief Justice Roberts said very little during the King v. Burwell oral argument on March 4.

My prediction is that we will either have a 6-3 vote to uphold the IRS interpretation, or we will have a 5-4 decision against the government. I think the Chief Justice will want to be in the majority on this case, so he can at least assign the opinion, and quite likely keep it for himself. That way, he can shape the future of the Affordable Care Act, as he did in National Federation of Independent Business v. Sebelius.

In that case, Chief Justice Roberts turned the individual mandate that the Democrat proponents of the ACA had very carefully not called a tax during their negotiations over the law into a tax, in order to uphold the mandate under the Constitution.

If the IRS regulation is upheld because the statutory language is ambiguous—which is the best the government can hope for—then the next Administration could rewrite the regulation.

It seems Nancy Pelosi was wrong. It takes more than passing the law to know what’s in it. It takes several years of legal battles that go up to the Supreme Court, so the nine justices can decide what the thousand-page law means. It would be better if both Republicans and Democrats compromised, and we developed a workable healthcare system. The system we had before Obamacare was not working, and the ACA system is not working.

Sausage and statutes. As Otto von Bismarck said, it is better not to watch them be made. Some of us, however, revel in the goriness.

What’s your prediction on the decision in King v. Burwell?

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1 Comment

Filed under Law, Politics

One response to “Obamacare at the Supreme Court Again: Is a State a State?

  1. Pingback: Power, Negotiation, and the Affordable Care Act: A Look Toward the Future | Sara Rickover, Behind the Corporate Veil

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