King vs. Burwell- Part 2: The Arguments

As explained in part 1, two federal courts have now determined that the wording of the ACA is unambiguous and that federal subsidies cannot be offered to those who purchased health care through Healthcare.gov.  A third court is likely to reach the same conclusion in a case out of Indiana while a fourth court has sided with the federal government in a “close call.”  Thus, the burden of proof now rests squarely on the federal government.  And what are they offering as proof?

Many of those influential in the drafting of Obamacare originally described these cases as “absurd,” or “screwy” and “nutty.”  One- an unnamed M.I.T. economist who essentially crafted the entire law- described the lawsuits as “stupid,” a word he relies on way too much in other contexts.  As noted above, the courts disagree with this characterization.  Even in the case out of Virginia, although finding for the government, they note “a literal reading of the statute undoubtedly accords more closely with the Plaintiff’s position” and that “the government has the stronger position, although only slightly.”  In 2012, not long after the Supreme Court upheld Obamacare under their Taxing authority and not the Commerce Clause, Gruber told multiple audiences that “If you are a state and you don’t set up an exchange, that means your citizens don’t get their tax credits.”   Surely the law’s architect knows the details of the legislation, just as any architect knows the structural defects of a building.  Furthermore, he also recently noted that the language of the law was deliberately tortured so as not to appear to be a tax law, thus implicating the IRS directly.  His recently surfaced statements about the stupidity of the American public not to recognize this withstanding, thankfully the Supreme Court did not see through this ruse (at least John Roberts).

Some have posited the theory that this was simply a drafting error.  Drafting errors are to be expected at times, especially when you are talking about over 1,000 pages of law while re-ordering 17% of the American economy.  It is why they had to pass the law to see what was in it.  A “mistake” here and there may occur, but when you specifically state that tax credits are available to recipients who enroll “through an Exchange added by the State” on two occasions, then cross reference that specific language another seven times, your argument looks less and less like a drafting error and more and more like the intent of Congress on how this law was intended to work.  These explicit statements and these cross references occurred at many times in the legislative process thus increasing the chances an “error” would be caught and corrected.  Additionally, the Obama administration now concedes there was no drafting errors and that was not even a consideration in the lower courts.  To introduce that argument now would be absolutely silly.

Thus, the government is left with two arguments- the ambiguity of the language which could trigger a Chevron deference defense of the IRS ruling, and the intent of Congress.  Let’s look first at the latter since this is their key argument now- after the fact.  In effect, they are arguing the theory of “congressional intent” without any evidence and to the extent that evidence exists in the congressional record, it actually refutes their theory.

Obamacare came about through several versions of different bills that worked their way through Congress.  Among them were several that explicitly provided for subsidies for those who enrolled through a federal exchange.  Other bills offered subsidies through exchanges offered only by the states.  It is obvious that most congressional members favored the latter since that is what eventually ended up in the ACA.  In short, they had a chance during the legislative process to legally allow what the IRS now provides, but failed or refused to do so.  Ideally, most members would have preferred the former type of bill, but since the latter was the only one that had a chance of passing through Congress, they chose that option.  You cannot go back and say you really wanted the other one, but I voted for this one because (insert excuse here).

In fact, the congressional record supports the plaintiffs here.  For example, [mc_name name=’Rep. Lloyd Doggett (D-TX)’ chamber=’house’ mcid=’D000399′ ], a member of the Texas congressional delegation, warned the Democratic Party and [mc_name name=’Rep. Nancy Pelosi (D-CA)’ chamber=’house’ mcid=’P000197′ ] that although there could be a fallback federal exchange, states could prevent their citizens from any benefit (subsidy) by simply refusing to establish an exchange.  The remainder of the Texas delegation joined Doggett in this observation only to be ignored by the Democratic leadership.  In the end, they fell in line and voted for the ACA.

Today, people like [mc_name name=’Sen. Max Baucus (D-MT)’ chamber=’senate’ mcid=’B000243′ ], [mc_name name=’Sen. Tom Harkin (D-IA)’ chamber=’senate’ mcid=’H000206′ ] and [mc_name name=’Sen. Harry Reid (D-NV)’ chamber=’senate’ mcid=’R000146′ ] now claim the law really intended what the IRS eventually decied- it meant to offer subsidies to those who purchased insurance on the federal exchange.  But, this argument has surfaced only after these lawsuits started going against them.  It makes little difference what [mc_name name=’Rep. Nancy Pelosi (D-CA)’ chamber=’house’ mcid=’P000197′ ], [mc_name name=’Rep. Sander Levin (D-MI)’ chamber=’house’ mcid=’L000263′ ] or Harry Waxman say since they were not instrumental in the drafting of the law.  All six of these people also followed the Obama line that “if you liked your plan you could keep it.”  Either they are ignorant dolts, or they are bold-faced liars.

In the end, there is a substantial body of evidence to show that many realized this was a potential problem.  Alternative solutions- specifically providing for subsidies through enrollment in the federal exchange- were contemplated and rejected.  The reasons for their rejection- federalism concerns, GOP obstructionism, fiscal concerns, etc.- makes no difference.

What could potentially save Obamacare’s subsidy scheme is ambiguity.  This is where the concept of Chevron deference enters the discussion.  Based on a case from 1994, this doctrine directs courts to “defer” to an administrative agency’s (the IRS here) interpretation of statutes and their obligations under those laws when the original statute is ambiguous.  In effect, it asserts (without saying so) that these agencies are better equipped to formulate rules and interpret the intricacies of statutes than are courts.  However, that does not exclude the courts from statutory interpretation altogether.  Where a law is unambiguous, the courts and the implementing agencies must defer to the actual legislation.  In all these cases, even the one out of Virginia which the government “won,” the courts note the “unambiguous” language in the ACA when it comes to offering subsidies for State exchanges.  In the absence of ambiguity, there are no Chevron considerations.

This is an interesting argument now being proffered by the government.  The original interpretation and rule promulgated by the IRS did not offer subsidies for insurance purchased on the federal exchange.  Only after they received politically motivated pressure did they change their “interpretation.”  What is galling about this argument is that there is ample evidence to prove this was a potential problem during the legislative process, that solutions were offered and argued for during the legislative process, that Congress contemplated these problems, and that Congress explicitly rejected those alternatives.  The result is the unambiguous final language in the ACA.  There is no grant of power to the IRS in this law to promulgate rules should the actual operation fail to achieve its desired “goal.”  Even the law’s architect now admits the law was deliberately drafted to hoodwink Congress, the CBO and the American public.

Next: Possible outcomes and responses