Thoughts on the Government’s Opposition Brief in King v. Burwell

January 25th, 2015

The United States recently filed its brief in King v. Burwell. In this post, I will highlight a few keys aspects of the argument, and analyze some of the new, or refined arguments the government made.

First, the government repeats at several points that the petitioner’s reading of the statute would wreak “havoc” on the law, and health insurance markets.

The denial of tax credits and the resulting loss of customers would thus have disastrous conse- quences for the insurance markets in the affected States, which would remain subject to the Act’s non- discrimination rules but without the safeguards Con- gress deemed essential to preventing death spirals.

“wholly apart from the havoc it would wreak on the Act’s structure and design” …

Accordingly, petitioners’ reading “would throw a debilitating wrench into the Act’s internal economic machinery.” Pet. App. 29a.

I expect the government to make this point much more forcefully during oral arguments.

Second, the government argues that its reading is consistent with principles of cooperative federalism.

Second, the availability of tax credits in every State is essential to the Act’s model of cooperative federal- ism. Petitioners’ reading would transform Congress’s promise of “State flexibility,” 42 U.S.C. 18041, into a threat that a State would suffer severe consequences unless it established its own Exchange. To accept petitioners’ account, moreover, the Court would have to accept that Congress adopted that scheme not in a provision giving States clear notice of the consequenc- es of their choice, but instead by hiding it in isolated phrases in the formula for calculating an individual’s tax credit. The Act should be interpreted to avoid the disrespect for State sovereignty inherent in petition- ers’ reading. …

Thus, like many other cooperative-federalism statutes, the Act permits state implementation of federal require- ments in the first instance, but directs the federal government to step into a State’s shoes if the State fails to act. …

The scheme peti- tioners posit bears no relation to the normal operation of cooperative-federalism programs. …

It would display considerable disrespect for state sovereignty for Congress to hide the ramifi- cations of a State’s election in subclauses setting forth the technical formula for calculating the amount of an eligible individual’s tax credit. …

And it would have been perverse for Senators concerned about federalism to insist on pressuring States to participate in the im- plementation of a federal statute.

Third, the government has fashioned something of a federalism canon argument–in short, we should presume that Congress did not intend to impose such a stark condition on states because that would not respect the states’s sovereign interests.

“Among the background principles of construction that [the Court’s] cases have recognized are those grounded in the relationship between the Federal Government and the States under our Constitution.” Bond v. United States, 134 S. Ct. 2077, 2088 (2014). Those principles bear directly on the interpretive question in this case. Rather than assuming that Congress subjected States (with only the most ob- scure notice) to the onerous regime that would be required by petitioners’ interpretation of the Act, cf. NFIB v. Sebelius, 132 S. Ct. 2566, 2601-2602 (2012) (opinion of Roberts, C.J.); Gregory v. Ashcroft, 501 U.S. 452, 460-461 (1991); Pennhurst, 451 U.S. at 17, the Court should interpret the Act in a manner that advances the respect for state sovereignty reflected in its express promise of “State flexibility” and its coop- erative federalism design. …

In other words, giving the states a choice between establishing an exchange and crippling their health insurance markets would have violated principles of federalism, so Congress should not be understood to have made such a choice.

It is implausible that Congress would have risked the collapse of the statutory scheme in non-electing States—and the denial of affordable coverage to mil- lions of Americans—as a means to ensure that the Act’s express offer of “State flexibility” would never be accepted.

But what about the Medicaid expansion, you ask? As I, and others have argued, this is precisely how the Medicaid expansion works–force states to expand Medicaid or risk losing all funding. To this, the government replies that Medicaid is a conditional-spending program which imposes conditions on states. The tax credits are meant for individuals, not states.

With the Medicaid expansion, there was no fallback, and states that did not expand would lose ALL of their funding. This is why 7 Justices found the expansion unconstitutional.

The ACA followed that model in its provisions addressing Medicaid, a longstanding conditional- spending program. To provide coverage for low- income individuals—including those with incomes too low to qualify for tax credits—the Act provided that, as a condition of continued receipt of federal Medicaid funds, States were required to expand Medicaid eligi- bility substantially. Id. at 2581-2582. Congress ex- pected that every State would continue to participate in Medicaid, and it thus provided no alternative in the event that a State declined to do so. Id. at 2665 (Scal- ia, Kennedy, Thomas, & Alito, JJ., dissenting).

In contrast, the SG argues, Congress took a different approach for the tax credits.

Congress took an entirely different approach to Exchanges and tax credits. The Act does offer grants to provide “[a]ssistance to States” in establishing Exchanges. 42 U.S.C. 18031(a). But unlike those conditional grants, the “premium assistance” made available by Section 36B is a federal tax credit award- ed to individual federal taxpayers. The credits are also part of an integrated set of national reforms that apply whether or not a State elects to establish its own Exchange. Section 36B thus bears no resemblance to the conditional-spending programs on which petitioners rely.

Fourth, the governments calls the petitioner’s position that Congress intended to threaten states “baseless,” “strains credulity,” and “lacks credibility.”

Instead, they reverse-engineer a description of the Act’s design and history to fit their misreading of Section 36B. Petitioners insist that Congress intentionally threatened to impose a dysfunctional regime on the States in order to pres- sure them to establish Exchanges for themselves, and that Congress assumed that every State would com- ply. That notion is baseless. …

It strains credulity to insist, as petitioners must, that Congress limited tax credits to States that estab- lish Exchanges for themselves by including the modi- fier “established by the State under [Section 18031]” in two subclauses of Section 36B, yet omitted that purportedly crucial limiting language from all of the Act’s myriad other references to the credits and sub- sidies available on Exchanges. …

Petitioners’ rendering of the Act lacks credibility.

The SG describe this history as a “high-stakes game of chicken.”

But Congress did not adopt such a self-defeating scheme. Nor did it engage the States in the high- stakes game of chicken that petitioners posit.

In a footnote, they shoo away Jonathan Gruber and Timothy S. Jost.

Petitioners rely heavily (Br. 4-5, 42-43) on statements made by Jonathan Gruber, an economist, consultant, and supporter of the Act. But those statements were made two years after the Act was passed, and Gruber has clarified that they were taken out of con- text. Jonathan Gruber, Written Testimony Before the House Comm. on Oversight & Gov’t Reform 2 (Dec. 9, 2014). Petitioners also cite (Br. 41) an earlier academic paper noting that Congress could limit tax credits to States that set up Exchanges. Timothy S. Jost, Health Insurance Exchanges: Legal Issues 7 (2009). But there is no indication any Member of Congress saw that paper, and in any event the Act actually corresponds to a different option described in the same paper: It “invite[s] state participation in a federal program, and provide[s] a federal fallback program to administer exchanges in states that refuse[ ] to establish complying exchanges.” Ibid.

Finally, there is a throw-away reference to the rule of law. The government argues that it would violate the rule of law to invalidate the IRS Rule, as it fails to accord respect to the elected branches.

Petitioners invoke (Br. 17) “judicial fidelity to the rule of law and well-established interpretive princi- ples.” But it is petitioners, not the government, who seek to rewrite the Act. Determining the meaning of a statute duly enacted by Congress, particularly a statute as consequential as this one, by focusing on isolated phrases divorced from textual cross- references, definitions, and context—and with no regard for the statute’s structure and design—does not respect the rule of law. It subverts the rule of law by denying appropriate respect to the choices Con- gress has made in the exercise of its democratically accountable authority.

“Democratically accountable authority” is a code word for judicial restraint to the elected branches. In the brief I submitted along with the Cato Institute, we take a very different understanding of the rule of law–something Obamacare’s implementation does wanton (not wonton) violence to.