The Supreme Court Is Gunning for Obamacare

Republicans finally found the equalizer to Mitt Romney's disdain for the other 47% in a video clip in which we hear MIT economics professor Jonathan Gruber counting With the Court hearing the case today, March 4th, we bring back this analysis from last December.
    
on the "stupidity of the American voter" being "really, really critical" to get Obamacare passed into law.

He was speaking of the mandate that the healthier young buy insurance to pay for the care of older people who are less so. The loyal opposition feigned horror at what they called a deception as if it had been discovered only now. Never a secret, it had long been a hotly debated media topic from before Obamacare was signed into law. And, of course, it's how insurance works. Yet we heard an agitated Jeff Sessions, Republican senator from Alabama, say this “strategy…to hide the truth from the American people” is nothing less than “a threat to the American republic”.

If stupid is Gruber's opinion of the American public, so what. Republicans (and plenty of Democrats) think of college professors as elitist and arrogant so why the surprise when a bit of confirmation comes along? (The real scandal ought to be how much the government paid him for consulting — $393,000 apparently — considering that as an amply paid academic he might have donated his expertise to the country.)

It is what else Gruber said that's of greater concern. The videos were unearthed by an investment adviser from outside Philadelphia acting as a citizen journalist by scouring the Internet for whatever he could find to undermine the Affordable Care Act. Additional to the "stupidity" video clip, he found an hour-long talk Gruber had given explaining the mechanics of the law at a Virginia think tank in 2012 (found here) where he said:

"In the law it says that if the states don't provide the [exchanges] then the federal backstop will. The federal government has been sort of slow in putting up a backstop I think partly because they want to put a squeeze [on] the states to do it because …what’s important to remember politically about this is if you're a state and you don’t set up an exchange, that means your citizens don't get their tax credits".

For states unwilling to mount their own exchange, the Affordable Care Act provides for the federal government to establish and manage an exchange in their behalf. It then says that subsidies are to be granted to low-income people who sign up for insurance "through an Exchange established by the State". Missing is any explicit wording that says the federal government is also authorized to pay subsidies to persons who sign up on the federally run exchanges.

A slip of the pen, a typo, say those who insist the mission is the same no matter who administers the exchanges. The obvious intent is for all Americans to be treated equally. But Gruber's comments say that the missing language was deliberate. He has since said he spoke "inappropriately". Irrespective of his second thoughts, his quote went straight into the brief of the petitioners trying to cripple the Act in King v. Burwell, the case now before the Supreme Court that says the 36 federally operated exchanges have been paying subsidies to insurance buyers illegally.

Prof. Gruber is slated to testify before Congress on December 9th. If present at its creation, he might under oath have to say that it was indeed the intention from the outset to play tough with the states, denying subsidies to citizens of a state that left the burden of operating its exchange with the federal government. Or he might contend that he had read the law after it passed and his remarks at a talk two years later were simply his interpretation of what he had read.

There's some validity to the latter. Gruber's own computer models of the behavior of Obamacare always assumed federal subsidy payments.

Elsewhere in the Act there is indication that drafters of the law did not have a squeeze play in mind. There are sections with titles such as "State Flexibility Relating to Exchanges” that offer states the option to create their own exchanges or hand off the job to the federal government with no mention of penalty.

It was both highly unusual and suspect that the Supreme Court stepped in to take over King v. Burwell — the case in which the 4th Circuit Court of Appeals in Virginia had approved federal payment of subsidies — when there were no split rulings at the circuit level. There had been. In a second challenge to the federal subsidies, Halbig v. Burwell, a three-judge panel of the D.C. Circuit Court of Appeals had reached the opposite decision, ruling that the federal-run exchanges could not pay subsidies. But that court had vacated its own ruling, deciding that the case should be heard en banc, that is, before all the judges of that court. That left King as the only ruling out there when the Supreme Court jumped the line, aborting the review of Halbig by the D.C. court, possibly wary that seven of its eleven judges were appointed by Democratic presidents and might be disposed to rule in favor of the subsidies. Yale law professor Abbe Gluck believes that heading that off means "this case is going to be decided as a matter of politics and not as a matter of law. And that's extremely problematic". The Supreme Court has disrupted "what the whole circuit process is for, to let arguments percolate either way on a case".

The High Court's peremptory action reminds us of a similar moment when the justices reached well beyond a complaint about a corporate-funded political movie brought by the conservative advocacy organization Citizens United in order to advance a political agenda of unlimited campaign spending by corporations and unions. It's hard not to suspect that the conservative justices have again reached for a case because they don't want to miss the opportunity to send the Affordable Care Act into the "death spiral" that would ensue if the federal exchange subsidies were taken away. Faced with paying full rate, citizens now needing subsidies would drop out.

The 4th Circuit had approved the federal government paying subsidies, calling the text of the law ambiguous. Were it to overturn that ruling, the Supreme Court would additionally upset the common practice when a law is unclear of deferring to the interpretation of the agency that administers it, which is what the 4th Circuit did. It is the IRS that awards the subsidies — they take the form of tax credits — and in King the court deferred to that agency's conclusion that federal subsidies were the intent if not the letter of the statute.

The government will argue that the Affordable Care Act must be taken as a whole and will point to the several instances in the law where the wording assumes that the federal government will be paying subsidies. Section 1321 clearly prescribes that if a state does not establish an exchange under Section 1311, the Department of Health and Human Services “shall . . . establish and operate such Exchange within the State”. That wording treats the federal exchanges not as federal but as surrogate state exchanges.

Other sections concerning state exchanges make no separate mention of parallel federal exchanges, which means that the Act considers them to be one and the same — and that subsidies are therefore intended for both.

Prof. Gluck would probably fault us for saying in an earlier article that the challenges to Obamacare are a "clear case of the letter of the law versus its intent". She says there is no need to go outside the law to argue "vague notions" of intent. The Act's own references to itself make clear that federal subsidies are intended. As one of several examples she offers, Section 36B(f)(3) requires “[e]ach Exchange … under section 1311(f)(3) or 1321(c)” to report the subsidies it has doled out. Section 1321 is the federal exchange provision, so this section makes no sense if the federal exchanges are to issue no subsidies.

She also cites the Section 1312(f) stipulation that only a person who “resides in the State that established the Exchange” can purchase on an exchange. If a federal exchange established for a state is not considered a state exchange, then it can have no customers. Clearly, all such exchanges are considered by the Act as state exchanges and therefore eligible for subsidies. Three times in the Act, "Exchange" is defined as being a state exchange, the point being that there is no federal exchange, only subsidy-eligible state exchanges run by the federal government.

But will the Court pay any attention to this? In what appears to be their avidity to challenge the Act, will they take a blinkered view and focus only on a few missing words?

In a post on SCOTUSblog, Ms Gluck says the "textualists" on the Court like Antonin Scalia "have spent three decades convincing judges of all political stripes" to adopt holistic readings of the law, giving priority to the full text. The interpretation of a law should do “least violence to the text”, Scalia has written, emphasizing that “there can be no justification for needlessly rendering provisions in conflict if they can be interpreted harmoniously.”

Liberals fear that Chief Justice John Roberts may welcome the opportunity to reverse his apostasy of breaking ranks with conservatives when he allowed the insurance purchase mandate — and therefore Obamacare itself — to go forward in the Court's 2012 decision. His return to the "gang of four" would normally leave Justice Anthony Kennedy as the swing vote, but Kennedy voted with the conservatives against the mandate, the other way Obamacare could have been crippled. That portends 5-to-4 against the subsidies.

Gluck also delves into that case. In the dissent by Justices Scalia, Kennedy, Thomas and Alito she finds them acknowledging that the subsidies are essential, that the incentive to buy insurance "collapses if the federal subsidies are invalidated...With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all”. But that doesn't preclude their engineering that collapse by disallowing federal subsidies in their King v. Burwell decision. It would, however, defy another textualist principle, that Congress does not write statutes designed to fail, whereas a cramped interpretation of just seven words in a 906-page law would be an argument that Congress did craft the Affordable Care Act to self-destruct. That is effectively the case King is trying to make.

So how will he and those on the Court persuaded of the textual approach justify a vote against the subsidies on such narrow grounds as authorized only for an "Exchange established by the State" when several places elsewhere in the text establish a federally-managed exchange as a state exchange. We can expect the conservatives on the Court to come up with a convoluted rationale and probably view the prize of destroying Obamacare as worth a few moments of embarrassment confined to legal circles about reversing field on "textualism".

The most recent Gallup poll has only 37% in favor of Obamacare with 53% against, which conservative commentators have leapt on as validation. Not mentioned is that 74% of those who bought insurance on the exchanges are very satisfied. A good guess is that the difference is found in those with employer-paid insurance who are content with their untaxed insurance benefit but against insurance for others on ideological grounds that oppose the mandate or social programs in general.

What opponents — and that includes those on the Supreme Court — do not seem to foresee is the explosive backlash once the effects of a destroyed Obamacare sink in. Republicans will first hear from the insurance companies, who have come to appreciate the millions of new customers they would now lose. Then there are the estimated 4.3 million who are newly insured because of subsides but who would drop out because the full charge for insurance will be too expensive. Those paying at any cost will tend to be those with health problems, meaning the insurers will need to spiral premium costs upward to pay for their care, and that will drive still more into the uninsured column. Pleading runaway costs, will the insurers then buy congressional votes to repeal the Obamacare proscriptions against turning away pre-existing conditions and canceling policies after sickness and yearly and lifetime caps?

The case will probably be heard around March with a ruling at the end of June.