On October 5, I participated in an event at the Marquette University Law School entitled “Supreme Court Roundup” with Cato Institute Scholar Ilya Shapiro. The event was sponsored by the Law School Chapters of the Federalist Society and the American Constitution Society. A previous post contained my remarks on Obergefell v. Hodges (the “Gay Marriage case”). What follows are my prepared remarks on King v. Burwell (the “Obamacare case”).
The issue in this case was whether the Affordable Care Act’s tax credits are available in States that have a federal health insurance exchange rather than a state exchange. In Section 36A, the Affordable Care Act (commonly known as “Obamacare”) states that tax credits “shall be allowed” for any “applicable taxpayer.” Then, in Section 36B, the Act provides that the amount of the tax credit depends in part on whether the taxpayer has enrolled in an insurance plan through “an Exchange established by the State.” (emphasis added).
In King v. Burwell, the U.S. Supreme Court, in an opinion written by Chief Justice John Roberts, held that Section 36B allows tax credits to be used for insurance purchased on any exchange created under the Act, including insurance purchased on a federal exchange.
I want to be clear. I make the following statement with the intent to be as objective and non-partisan as possible. This litigation was nothing more than a post hoc attack on the Affordable Care Act, using one isolated provision of the law read out of context in order to arrive at a nonsensical meaning, which then used a manufactured theory of legislative intent – a theory without a shred of contemporaneous support in the legislative history – in a desperate attempt to prop up the nonsensical meaning.
The background of how this case arose is illuminating. At a 2010 conference sponsored by a conservative think tank, devoted to brainstorming ideas for how to challenge the Affordable Care Act, one lawyer mentioned in his presentation an odd quirk regarding the wording of one provision of the law. He himself has said that he didn’t ascribe any great significance to this provision at the time. Later, a law professor listening to an audio recording of the presentation made note of the odd wording of the provision. He thought that the language being discussed was an interesting snafu in the law, but didn’t think it was very significant. But when the law professor happened to mention the quirky language to a lawyer from the Cato Institute, named Michael Cannon, everything changed. Michael Cannon had an “a ha” moment and decided that this provision could provide an entry way for disrupting the entire law. And so the litigation began.(1)
My point is not that the Cato Institute did anything wrong in cobbling together this legal challenge to the Affordable Care Act. One of the best things about being an American is our God-given right to file a lawsuit. My point is that there is a difference between suing based upon the understanding that everyone involved in the health care debate had at the time, and suing years later based on a reading of the law that no one at the time expressed, advocated or complained of. Not even the opponents of the Affordable Care Act—and there were many — claimed at the time of the law’s passage that it did what this manufactured lawsuit claims that it did.
Now, clearly the ACA is a mess of a statute. It was always going to be an incredibly complex piece of legislation, but the procedural history of its passage was convoluted and sloppy. The House of Representatives passed a bill premised upon the use of insurance exchanges operated at the federal level. The Senate passed a bill premised upon the use of insurance exchanges by the states, with the federal exchanges as a back-up. Normally, both bills would have been consolidated by a Conference Committee and sent back to both houses for re-approval. But the Democrats had lost their supermajority in the Senate with the death of Senator Ted Kennedy, and they didn’t want to risk holding another vote. Instead, the House simply adopted the Senate bill’s language as it was.
So what became the law was rushed and sloppy because when the drafters of the Senate bill said “this whole thing will get cleaned up in Committee,” as bills usually do, the drafters didn’t anticipate that the Committee would never happen.
The case before the Supreme Court hinged on whether subsidies to help pay for insurance premiums were available only to people who bought coverage on exchanges established by a state, or whether such subsidies were also available to people who bought policies on a federal exchange. Taken in isolation, Section 36B says the former. But read as a whole, the entire statute assumes the latter.
This matters because, as everyone on both sides of the issue agree, denying subsidies to persons who purchase insurance on a federal exchange will create a death spiral that destroys the whole concept of mandatory health coverage.
So here is the fundamental question: should a judge take advantage of the sloppy nature of the bill’s language, and enforce a literal reading of the text even where doing so destroys the whole purpose of the Act? Is the court’s job to punish Congress for poor drafting, without regard to the consequences that follow?
Or should a judge consider the structure and other provisions of the ACA that make it clear that congress intended the subsidies to apply to both federal and state exchanges, and therefore discount one section’s literal language suggesting otherwise?
The job of the judge is to ascertain the intent of Congress, not to play “gotcha” games with the legislative branch. It is significant that there is simply no contemporaneous evidence in the legislative history surrounding the passage of the ACA that the subsidies were intended to be limited to state exchanges. Not one statement by a member of Congress, not one piece of testimony at a hearing, and not one commissioned report expresses that view. Here I refer to the comprehensive discussion of the legislative history contained in the amicus brief filed by a group of health policy scholars, which walks through the legislative history in detail and states:
“The background and legislative evolution of the ACA squarely support the government’s position because they show that the 111th Congress subscribed throughout to the principle that an exchange cannot succeed without subsidies.” (at p. 20)
Why would Congress create federal insurance exchanges but include Section 36B which only authorizes subsidies for the users of state exchanges? It appears that the Senate bill began with the premise that only state exchanges would be used, and included subsidies as an integral part of the exchanges. Later, the Senate bill was amended to include federal exchanges as a backup to the state exchanges. But the language authorizing subsidies was located in a different part of the bill, where various tax provisions were grouped, and that language was not changed to coincide with the expansion to federal exchanges. It was missed.
Supporters of the plaintiff’s legal challenge argued that this explanation for the presence of Section 36B is based upon after-the-fact recollections, and that there is no contemporaneous evidence that the drafters intended to amend Section 36B but simply missed one provision in a very large and complicated bill. Of course, it is hard to imagine what this sort of evidence might look like. If I go off to the grocery store, and come back without milk, I am likely to respond to my wife’s accusatory stare by saying that “I forgot.” If she demands that I produce some concrete evidence that my failure to purchase milk was not intentional, I am not sure that I could do that. We don’t document our acts of forgetfulness.
On the other hand, the plaintiffs were alleging that the denial of federal subsidies was part of the original plan all along, as part of an intent to incentivize the creation of state exchanges. While there is plenty of evidence that the backers of the Affordable Care Act recognized that the presence of subsidies was an important component of the success of the law, there was simply no evidence from the time of the drafting that congress thought that denying the subsidies to persons using a state exchange was an integral part of their plan. It is the plaintiffs who put forth an after-the fact theory of motive without any no contemporaneous evidence in support, not the law’s defenders.
Chief Justice Robert’s opinion for the Court follows a simple progression:
(1) Read in isolation, the most natural reading of “an Exchange established by the State” as used in Section 36B of the Internal Revenue Code’s provision governing the size of tax credits available for the purchase of health insurance would make such credits unavailable for individuals purchasing insurance through the federal exchange in those states that did not create their own exchanges;
(2) however, statutory code sections should not be read in isolation, and given other provisions of the Affordable Care Act as well as its overall design, the language is ambiguous; and
(3) accordingly, to implement rather than frustrate the manifest purpose of the law, in this provision (though not necessarily in others) “by the State” means “by the State or by the federal government acting in place of the State.”(2)
Critics of Justice Roberts’ reasoning accuse him of being activist. Yale law professor Abbe Gluck turns this criticism around:
What could be more activist than using judge-made rules of interpretation to impose a meaning on a statute that has no connection to its context and would literally smash the law to pieces? It is no accident that the majority opinion opens with the lengthy explanation of the ACA. The Court is showing us that it understands this law, and that it is important that it does. . . . [The Chief Justice’s] opinion does not use the tools of textualism to shirk responsibility for the result or as a substitute for justifying its decision in the context of what Congress actually did.
In other words, the Supreme Court rejected a clever attempt to construct an alternate reality out of a few words. Instead, a majority of the Court focused on doing its job and identifying the intent of Congress.
Professor Stanley Fish has characterized the opinion of Justice Roberts in the following way:
[Justice Roberts writes] “we cannot interpret federal statutes to negate their own stated purposes.” In this case, the stated purpose, he tells us, was to “improve health insurance markets and not to destroy them,” and therefore “we must interpret the Act in a way that is consistent with the former and avoids the latter.”
This is not to subvert the natural reading, but to insist on it. The unnatural reading is the one that regards the phrase “exchange established by the state” as if it floated in space untethered to the constraint of any actual communicative project and bore a timeless meaning that was somehow its property. The unnatural reading is Scalia’s. As Justice Elena Kagan said in the oral arguments, “We don’t look at four [or five] words. We look at the whole, the particular context, the more general context, try to make everything harmonious with everything else.” And when we do this, she might have added, we are not engaging in a special or aberrant mode of interpretation; we’re just doing interpretation in the way that it is always, and necessarily, done.
I can’t say it any better than that.
(2) This succinct summary comes courtesy of Cornell law professor Michael Dorf.