Commentary

Misinterpreting Obamacare to Save It

Good advice from former Supreme Court reporter Linda Greenhouse, writing in The New York Times: Just “read the briefs,” she suggests — referring to the copious filings in King v. Burwell, which give nine justices another opportunity to constrain the reach of the Affordable Care Act, aka Obamacare. King will be argued on March 4 and likely decided by June 30. Here’s the background:

The Affordable Care Act authorizes the federal government to set up an exchange for the purchase of health insurance if a state decides not to; but the statute says that subsidies to consumers are available only on exchanges “established by the state.” That excludes federal exchanges. The implications are enormous: Without subsidies to nearly 5 million Americans buying policies on federal exchanges in three-dozen states, a core feature of Obamacare becomes dysfunctional.

The government maintains that “established by the state” is a “term of art” — a “technical” phrase embracing more than its actual words denote. When a state opts out, the federal government simply steps in as the state’s surrogate. Functionally, the federal exchange is — pardon the doublespeak — an exchange established by the state. Never mind the assault on federalism.

After perusing a few briefs among the 32 filed on the government’s side, Ms. Greenhouse arrives at these conclusions: First, no reasonable person reading the ACA in full context would deduce that consumers on federal exchanges were to be denied subsidies. Second, when the ACA was enacted, no one interpreted the statute in that manner. Third, state sovereignty is compromised if states that decline to establish exchanges are given no notice of the dire consequences.

For a different perspective, however, consider two briefs (out of 22 supporting King) that Ms. Greenhouse may have overlooked. The first is a filing by Case Western law professor Jonathan Adler and my colleague Michael Cannon, and the second is a brief from Oklahoma and five other states. Those two briefs persuasively counter the points raised by Ms. Greenhouse.

First, regarding Congress’ intent: Recourse to intent may be necessary when the text of a statute is ambiguous. But there is nothing ambiguous about “established by the state.” Moreover, Congress has repeatedly conditioned the receipt of federal benefits on state cooperation. No one should have been surprised or puzzled by yet another program bribing the states to join. The real mockery of legislative intent would be subsidies without strings attached. Think LBJ’s Medicaid, Richard Nixon’s health care reform, Bill Clinton’s SCHIP and his Health Security Act, George W. Bush’s Health Coverage Tax Credit, and President Obama’s Medicaid expansion — all of which withheld federal benefits unless the states jumped through various hoops. The Obamacare subsidy scheme is just one more in a long list of federal carrots and sticks. Congress’ intent was both obvious and commonplace. None other than Jonathan Gruber, a key Obamacare architect, had this to say long before King was filed: “[I]f you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits.”

Nothing supports the government’s contention that it deserves a do-over.

Second, regarding interpretations of the Affordable Care Act when it was enacted: A legislator’s understanding is trumped by the crystalline language of the statute itself. In this instance, there are multiple references to an exchange “established by the state,” and other references excluding that qualifier. Plainly, Congress knew how and when to distinguish state from federal exchanges. Indeed, 11 Texas Democrats warned in a letter to Mr. Obama and then-House Speaker Nancy Pelosi that the ACA’s subsidy provisions operated like a conditional-grant program. At the same time, no part of the public legislative record supports the notion that subsidies would be available on federal exchanges. Statements by Obamacare supporters and the Congressional Budget Office indicating that tax credits would apply in all states reflected the mistaken assumption that no state would resist federal blandishments. Mistaken assumptions do not empower the executive branch to engineer a legislative do-over.

Third, regarding state sovereignty: Yes, if Congress failed to give states clear notice of conditions imposed on receiving federal benefits, that would compromise state sovereignty. However, lack of clarity didn’t come from Congress; it came from the Internal Revenue Service, which drafted, without congressional authorization, regulations allowing subsidies expressly forbidden by the statute. To affirm the government’s case because the IRS confused the states is to absolve parent-killing because the murderer is now an orphan.

In a nutshell, the government has not identified any statutory text that conflicts with the plain meaning of Obamacare’s subsidy provisions. Nor has the administration uncovered a single contemporaneous statement suggesting that subsidies would be paid on federal exchanges. Instead, the president prefers to rewrite the statute — an abuse of executive power that is contrary to law and must not be condoned.

Robert A. Levy is chairman of the Cato Institute, which also filed an amicus brief in support of King.