Bracing for King v. Burwell

By the end of this week, we’ll have a Supreme Court decision on King v. Burwell, the latest “challenge to Obamacare,” as the headlines put it.

The first thing you need to know is that the headlines are all wrong.  King v. Burwell  is not a “challenge” to Obamacare — the plaintiffs do not seek to overturn a single sentence of the Affordable Care Act.  Rather the plaintiffs are challenging an IRS rule that is blatantly unfaithful to the ACA (but happens to be politically expedient for the administration).

Quick background:  One section of the ACA says that States shall establish “Exchanges” to regulate the health insurance market within their borders (section 1311).  Another section says, for states that “fail” to establish Exchanges, the Secretary of HHS can establish a federal Exchange (section 1321).  And then in another section, ACA says that low-income citizens can be eligible for tax credits if they purchase health insurance “through an Exchange established by the State” (section 36B).

The whole point of this structure was to pressure the states into establishing exchanges.  States that failed to establish exchanges would face the wrath of the voters who didn’t get their subsidies.  The administration and its congressional allies assumed that the states would knuckle under and create exchanges.  In the end 36 states did not set up exchanges.

Having failed to coerce the states, the administration lost all interest in actually implementing the coercive measures, and so the IRS rewrote the statute by rule, saying that tax credits are now available for anyone who buys insurance through the federal exchange.

King v. Burwell seeks to strike down the IRS rule and force the administration to live by the political bargain struck by Congress.

As the decision nears, speculation is mounting that Justice Kennedy might provide the swing vote in favor of the administration out of “federalism” concerns.  In other words, Kennedy is worried that if the IRS enforced that statute as it is actually written, it would be unduly coercive on the states.  That concern surfaced only briefly during oral argument, but if Kennedy — or any other justice — votes for the administration out of respect for federalism, there is something seriously wrong with his analysis.

First, the idea that you should interpret a statute so as to avoid constitutional problems is legitimate only when the statute is ambiguous — the idea is that you resolve ambiguities in a way that is consistent with the Constitution.  But here there is no ambiguity.  Tax credits are available only through an exchange “established by the State.”

Second, the coercion is exactly what Congress intended — and only because the Pelosi forces couldn’t get away with something even more coercive, i.e., creating only a federal exchange and forcing each state to sign up for it.  Instead they had to settle for a system of voluntary state cooperation, but with plenty of federal carrots and sticks to achieve state cooperation.  Keep in mind that this is the same legislation that threatened to withhold each state’s entire Medicaid funding if they failed to expand Medicaid eligibility (a condition that was struck down in NFIB v. Sebelius — against the wishes of Justices Ginsburg and Sotomayor).

The task before the Supreme Court is to apply the text as written.  Once the Court confirms the meaning of the text, some other litigant can challenge the statutory provision as unconstitutionally coercive on the states.  That will be Justice Kennedy’s opportunity to show concern for federalism.

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