ACA supporters who have pinned their hopes on Justice Kennedy upholding the ACA to support the principles of federalism should be very, very careful what they wish for. As I argue in National Review, under the joint opinion in NFIB v. Sebelius (which AMK joined), the proper remedy for a coercive statute is to invalidate it in its entirety, not salvage its valid parts.
With the Supreme Court on the brink of invalidating an IRS rule that provides billions of dollars of subsidies in states that did not establish Obamacare exchanges, defenders of the law have suddenly become fair-weather federalists. They argue that the Obamacare regulation must be upheld, because invalidating it would intrude on state sovereignty. Yes, you read that right: Allowing the federal government to expand the reach of Obamacare and its mandates into states that refused to create Obamacare exchanges would promote states’ rights. While this argument may seem crazy on its face, it has emerged as a Hail Mary effort to obtain the blessing of the Court’s perennial swing vote, Justice Anthony M. Kennedy. This plan, however, may seriously backfire and unravel all of Obamacare, not just this provision. If the subsidy scheme is in fact unconstitutionally coercive to states, the correct remedy is to strike the law in its entirety, not salvage its legitimate parts. …
If this is how the ACA operates, fair-weather federalists should be very careful what they wish for. Justice Kennedy — the target of this federalism pitch — wrote in the joint dissent in NFIB v. Sebelius that the proper remedy for such a coercive law is not to discard its unconstitutional provisions, but to invalidate it in its entirety. With respect to the “question of remedy” in the face of Obamacare’s coercive Medicaid expansion, Justice Kennedy — joined by Justices Scalia, Thomas, and Alito — wrote that the “most natural remedy would be to invalidate the Medicaid expansion.” All of it, whether a state wanted the additional Medicaid funding or not.
Under the joint opinion, invalidating the Medicaid expansion in its entirety–even in states that wanted the money–was considered a less bold remedy than chopping it up into parts.
Some may argue that invalidating the subsidies for all states goes too far. Not so, said the joint opinion in NFIB: A judicial remedy that “imposes on the Nation” a law that “Congress did not enact . . . can be a more extreme exercise of the judicial power than striking the whole statute and allowing Congress to address the conditions that pertained when the statute was considered at the outset.” Applying this principle to King v. Burwell would mean that no state, even those that had established exchanges, could receive subsidies. Allowing the Court to split the difference with a Solomonic remedy that Congress did not design would amount to a “judicial usurpation.” Rather, if the Court invalidates the provision in its entirety, Congress would get to start with a blank slate, instead of salvaging a judicially created chimera.
Finally, the troubles don’t end here. The day after King v. Burwell, at least one state AG will bring suit alleging that that without the subsidies, the ACA’s core provisions–individual mandate and guaranteed issue–cannot stand. A decision by the Court suggesting that this scheme is coercive will make this future challenge viable.
The trouble for ACA supporters doesn’t end with this case. Even if the Court jettisons the subsidies only in states that did not establish an exchange, you can be certain that some enterprising state attorneys general will file suit immediately. The inevitable multi-state challenge will argue that the ACA as designed cannot exist without the subsidies, one-third of the law’s three-legged stool. As a result, the core provisions of the ACA — the individual mandate and the guaranteed-issue and community-rating provisions — would need to be scuttled as well. If successful, those 37 states would become exempt from all the most burdensome aspects of Obamacare.
I see the “federalism argument” going one of two ways:
Under the best-case scenario for Obamacare supporters, the Court may decide to read the law in such a way as to save the challenged IRS rule. Indeed, such a “saving construction” was effectively how Chief Justice Roberts resuscitated Obamacare’s Medicaid expansion for states that wanted it. But even there, Roberts justified his life preserver to Obamacare on the basis of the fact that the law threatened to withdraw pre-existing funding that states had already agreed to. However, this distinction does not exist for the year-old Obamacare subsidies, which many states have expressly refused. If the severability analysis of the joint opinion in NFIB controls, then supporters of Obamacare have much, much more to fear than the invalidation of the IRS rule. Federalism will sink, rather than save, Obamacare.
Be very careful what you wish for.