King v. Burwell: The Latest Obamacare Mess at the Supreme Court

King v. Burwell: The Latest Obamacare Mess at the Supreme Court

A true environmentalist
A true environmentalist

When I first heard about King v. Burwell, the latest Obamacare controversy before the U.S. Supreme Court, I assumed it was the kind of case in which the legislative intent was clear, but for one reason or another the wording of the statute did not match the legislative intent.

That would have been an interesting case, because it would have given the Court a chance to struggle with age-old “intent vs. text” questions.

It turns out, though, that the legislative intent is unclear—if there was any unified intent at all. And the statute is at least as messy as the evidence of intent.

First as the intent: Whether Congress intended for tax credits to go to citizens of states that had not adopted state insurance exchanges depends on whom you ask. The government now says “yes,” but Obamacare architect Jonathan Gruber was captured in two separate YouTube videos saying “no.” In those videos, he claims that tax credits were to be limited to states that set up their own exchanges as a way of inducing states to cooperate (no exchange, no tax credits). Some in the media assert that a decision for the plaintiffs (limiting credits to insurance purchased on state-created exchanges) would create “chaos”—but if Gruber is right, then that was exactly what Congress wanted.

Now for the text: Reading the record in this case give you some idea of how poorly drafted the Obamacare law is. Section 1311(b)(1) of the statute requires the states to establish exchanges. A provision just a few sections later (1321(b)) tells states they may elect to establish exchanges, and another (1321(c)) provides for federally-created substitutes.

Still another section says that tax credits are available for insurance purchased on “exchanges.” In at least two provisions, the statute inserts cross references that make it crystal clear it means state-created exchanges—not the federally-created substitutes.

But still other provisions seem to assume that state-created exchanges, and therefore the tax credits, will exist in all states. But for this to be so, then the statute’s drafters had to assume that the first section (mentioned above) ordering the states to set up such exchanges was valid. Problem is, that section is clearly unconstitutional: The Supreme Court has ruled several times that the federal government may not simply order a state to adopt a law or perform a task. Whoever wrote that section had never studied elementary constitutional law, or perhaps didn’t care.

There’s another wrinkle: The way the case got to the Supreme Court is that the plaintiffs challenged an IRS interpretation of the statute. Specifically, the IRS read the law as requiring tax credits in all states. Now, as a rule of thumb (under the Court’s Chevron holding), the Court defers to any reasonable executive-branch interpretation of an ambiguous statute. But the traditional legislative grace canon holds that the Chevron rule doesn’t apply in tax-credit cases, because taxation is so central to the legislative (as opposed to the executive) power.

One argument for tax credits in all states, possibly originated by Justice Kennedy, acknowledges that the law’s mandate on states to create exchanges is unconstitutional. It also assumes that interpreting the statute to provide for credits only in states that establish their own exchanges would be unconstitutional as excessive federal “coercion.” This argument therefore concludes that the statute must be construed to provide for tax credits in all states.

There are two problems with this argument. First, if severe financial consequences for state non-cooperation constitute “coercion,” then certain other federal welfare programs, particularly Medicaid, are unconstitutional. It is unlikely that anyone who would advance this argument would really support that result. Second, by universalizing the tax credits, this argument rewards an overreaching federal government by authorizing it to spend even more money and thereby control even more lives than otherwise. It is an elementary legal principle that no one should be rewarded for his own wrong.

When faced with incurable problems in a statute, judges’ time-honored solution is to kick the issue back to the political branches for a solution. (The courts often follow a similar approach in the common law—that is, ruling in a way that forces the parties to negotiate their way out of the problem.)

Deciding the case for the plaintiffs (denying tax credits in states that do not adopt exchanges) will create either (1) a mess intended by Congress or (2) a mess not intended by Congress. Either way, the public anger generated by loss of tax credits will force Congress and the President to work together to clear matters up.

That’s exactly what the Supreme Court should do.

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