Patrick Borchers is a contributing writer on Leavenworth St.
It’s not just that it’s a mess in that its mechanisms don’t match the stated goal of universal and affordable care. It’s a mess from a craftsmanship standpoint.
It’s been made messier yet by the Supreme Court. In 2012, the Supreme Court upheld the individual mandate on a tortured rationale. Most people thought that Justice Kennedy would be the swing vote in that case, but I was confident that he’d vote that the individual mandate was beyond Congress’s power. After listening to the tapes of the oral argument, the vote I was worried about was Justice Roberts’s and, as it turned out, with good reason.
Roberts managed to construe the individual mandate as a “tax” (an argument that the other eight Justices rejected) and joining with the Court’s four liberals (who said it was “commerce”) upheld the individual mandate.
The Court, however, struck down the mandatory Medicaid provision as being too coercive. The ACA as written would have required states to cover everyone up to 133% of the poverty line or lose all of their Medicaid funding. The Court ruled that states must be given a choice as to whether to accept the additional Medicaid funding offered and many, including Nebraska, have refused on the ground that even if Congress holds to its promise to cover 90% of the increased cost it will be ruinously expensive.
But buried in the ACA’s thousands of pages of text is a ticking time bomb and it has to do with the “exchanges” on which persons who don’t otherwise have coverage are to buy their policies. The ACA clearly gives states the choice of either creating their own exchange or allowing their residents to buy on the federally created exchange (the notoriously buggy healthcare.gov site).
Part and parcel of the ACA’s redistributive economics is that persons between 100% and 400% of the federal poverty line are entitled to gradually diminishing subsidies the closer they get to the 400% ceiling. But the flawed Medicaid aspect of the law makes a mess out of the scheme. For states like Nebraska that have opted out, there are people who don’t qualify for Medicaid and are too poor to receive a subsidy.
But back to the exchanges.
Most states (34 at this point), including Nebraska, have opted not to create their own exchange. Then someone noticed something odd about the subsidies. The ACA says that the subsidies are available to those who are “enrolled in through an Exchange established by the State under section 1311.” But the federal exchange is created by a different provision, section 1321. And the federal exchange makes no mention of subsidies.
So it appears that under the plain language of the ACA the subsidies are only to go to those who signed up under a state exchange created under section 1311. Moreover, there are other apparent downstream consequences, such as the employer mandate disappearing in states that don’t have their own exchange.
The theory advanced by most commentators is that this was just a drafting boo boo born of the fact that the state and federal exchanges appeared in different versions of the bill and that nobody noticed the gap before it went to the President’s desk. However, the talkative Prof. Gruber (remember him of the “stupidity of the American voter” quote?) was filmed saying that it was an intentional strategy to force states to create their own exchanges.
The lower courts, predictably, arrived at conflicting results. The U.S. Court of Appeals for the Fourth Circuit (centered in Richmond, Virginia) applied what I call the “we know what you meant” theory of statutory interpretation and ruled that the subsidies extend to those who signed up on the federal exchange. The U.S. Court of Appeals for the District of Columbia applied what I call the “you’re stuck with what you wrote” theory of statutory interpretation and held that they did not.
A couple of weeks ago, the case was argued before the U.S. Supreme Court. The verbal gymnastics performed by the lawyer for the federal government, egged on by the Court’s four liberals, were something to behold. The government has at least three main theories as to why the subsidies should attach to the federal exchange. First, read “in context” Congress meant to extend the subsidies to the federal exchange, because otherwise the statute would unravel. Second, the reference to “state exchange” isn’t really that – it’s a reference to whatever exchange the state uses (never mind that stuff about “created under section 1311.”) Third, the statute is “ambiguous” and therefore administrative agencies (here the IRS) are entitled to “clarify” the statute through administrative regulations.
It’s clear beyond any doubt that the four liberals will vote with the government. In fact, they left so little chance for challengers’ lawyer to speak that Chief Justice Roberts gave him 10 extra minutes. If I had been the lawyer for the federal government, I think I might’ve just said “what she said,” pointing to Justice Kagan, who ran point for that wing, and sat down.
Conservatives Scalia and Alito pushed back mightily. Justice Scalia was nearly taunting the government’s lawyer daring him to cite to a case where the Supreme Court has “rewritten” a statute to make it make more sense. Justice Thomas, who doesn’t ask questions, is a good bet to vote with Scalia and Alito because Thomas has little patience for others’ mistakes.
Which brings us to Justices Roberts and Kennedy. Roberts, normally an aggressive questioner, didn’t say much. Kennedy was hard on both lawyers. At times he seemed worried that interpreting the statute to only extend subsidies to states with their own exchanges would be unduly coercive, like the Medicaid trap that Congress tried to build. At other junctures he was highly skeptical of the government’s argument that the statute was “ambiguous” and that the IRS could be trusted to fix it.
Roberts’s near silence is hard to interpret.
Predicting the outcome of these cases is difficult. On the one hand, I was very surprised that the Supreme Court agreed to hear the case. It seemed very likely that the full D.C. Circuit would reverse the three judge panel that read the statute literally, which avoid the split in the lower courts and allow the Supreme Court to stay out of it.
But the simple math is that the federal government clearly has four rock solid votes. The challengers have two in Scalia and Alito, and probably a third in Thomas. So the government only needs to get one of Kennedy and Roberts. I hope to be proved wrong, but I think the government will get the vote it needs.