Obamacare Backers: Ignore What Obamacare Says!

Supporters defend subsidies for federally operated exchanges, even though the law only allows them through the states



Over the years, Obamacare's defenders have made plenty of absurd arguments in service of the law, but perhaps the most absurd argument of all is that the language of the law does not actually mean what it plainly says. Yet that is essentially the argument that some of the health law's defenders are making in public and that they are preparing to make in court.

The law expands health coverage by providing subsidies to people buying health insurance through government-run health exchanges—online marketplaces intended to allow people to compare and purchase health plans. But the text of the law clearly states that those subsidies are only available to individuals who purchase insurance in exchanges erected by states. The Internal Revenue Service, however, has ruled that the subsidies will be also be available in the 34 exchanges run by the federal government. 

Obamacare's backers now have to defend the IRS ruling, as a challenge to the tax agency's rule makes its way to court. It's no mere legalistic squabble. The outcome of this dispute could eventually determine whether the IRS has the authority to disburse some $800 billion in federal funds—the estimated value of the subsidies in the 34 states where the federal government has taken responsibility for creating the exchanges.

The legal text in question is not fuzzy or inscrutable. As Cato Institute Health Policy Director Michael Cannon and Case Western Law Professor Jonathan Adler noted in a recent paper, it clearly states that subsidies are available to individuals who purchase insurance "through an Exchange established by the State under Section 1311 of the Patient Protection and Affordable Care Act." In case there was any lingering confusion, the law elsewhere defines "State" as any of the 50 states or the District of Columbia. It also refers to exchanges created under section 1311 of the law, which governs state-created exchanges. Nowhere does it mention that subsidies are available to insurance purchased through section 1321—the segment of the law that provides for the creation of exchanges by the federal government.

One does not need to be an ideologue to see that the clearest and most obvious way—indeed, the only way—to understand language is that the law's insurance subsidies are limited to state-created exchanges. Indeed, one only need be an analyst at the Congressional Research Service, which noted last year that a "strictly textual analysis of the plain meaning of the provision would likely lead to the conclusion that the IRS' authority to issue the premium tax credits is limited only to situations in which the taxpayer is enrolled in a state-established exchange." 

Yes, it likely would. But not, apparently, at the IRS, which saw fit to offer a more expansive interpretation. The tax agency issued a rule saying that individuals are eligible for subsidies if they purchase insurance through exchanges "established under section 1311 or 1321 of the Affordable Care Act." Where did the extra bit come from? We can only guess. Former IRS Commissioner Douglas Shulman defended the rule as "consistent with the language, purpose, and structure" of the health care law, but notably failed to cite any specific legislative language allowing for subsidies in federally run exchanges.

So it's just the general sense of the thing? Well, more or less. Robert Weiner, a partner at the law firm Arnold & Porter, defended the IRS rule at an event hosted by the Cato Institute on Monday. Much of his argument could be boiled down to the notion that those who oppose the rule fail to see the bigger picture. Critics of the IRS rule, he said, had made "an effort to quarantine" a small portion of the law by "isolating seven words." That's an approach that excises the relevant context, he says, such as statute titles that refer to making health care "affordable…for all Americans." It's an argument that comes perilously close to suggesting that the health law's headline generalities should override its specific language.

Weiner also argued that the "Exchange created under 1311" could also be read to include exchanges created by the federal government, which he said would be "standing in the shoes of the state." If that's the case, then why does the law elsewhere explicitly set out requirements for exchanges created under either 1311 or 1321—an indication that they are separate entities and cannot stand in for each other?

But forget the legal details. Supporters of the IRS rule say you'd have to be totally nuts to believe that Congress would have written a law that denies subsidies to residents of so many states. Simon Lazarus, Senior Counsel for the liberal Constitutional Accountability Center, said at the Cato event that "it makes no sense" to imagine that the law's authors would have designed a "poison pill" for their own legislation.

Yet there's no need to presume that the law's authors intended the provision as self-destructive. It's perfectly plausible that the provision was intended to entice states into creating the exchanges themselves, since Congress is constitutionally prohibited from requiring them to do so. In fact, it's not just plausible, it's consistent with the way the law handled its Medicaid expansion, which also included various penalties and incentives for states—including, originally, the potential loss of all federal Medicaid funds (a provision that was struck down last year by the Supreme Court). Conditioning the subsidies on state participation would mean that the subsidy funding would function as both carrot and stick—a bonus for states that comply, and a loss for states that don't.

Lazarus gave perhaps the best objection to this argument, which is that for the threat to work it must be obvious to all involved. "By its nature," he said, "a threat must be communicated." And yet he noted that there was essentially no discussion of this threat, and even Cannon and Adler admit that when they first encountered the language, they initially understood it as a glitch. How could the condition have been effective as a threat if no one knew about it?

Like Weiner, Lazarus also urged a holistic sensibility when interpreting the law, one that looks at "the whole statute" and avoids the "quarantine approach." But the defenders of the IRS rule are the ones who have ignored the relevant historical context. When Obamacare was drafted, everyone—supporters and critics alike—assumed as a given that all states would create their own exchanges. So there was no reason to have much discussion about what would happen if they didn't. (Nor, for that matter, was there much incentive for the law's authors to talk up a provision of the bill that would have resulted in fewer individuals getting coverage subsidies.)

As a challenge to the IRS rule heads to court, Obamacare's supporters hope to convince both the public and the legal system that the argument made by critics is absurd. But what's truly absurd is their argument that the law's clear and unambiguous language means anything other than what it clearly says.

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  1. Thats kinda crazy dude for sure


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      1. Mandy…you should really get to know WomSom.

  2. Ok. Educate this Canadian. From what I gather Americans can purchase various types of insurance covering whatever. Fine. Now the prevailing view outside the USA is that people go bankrupt if they get really sick with, say, cancer. Does affordable insurance exist to cover cancer treatment or not and what does Obamacare do to address this concern posited by such folks?

    1. If you don’t already have cancer (or some other serious disease), you can easily get insurance that will cover up to many millions in costs if you happen to get cancer. Availability and price of this insurance varies greatly depending on what state you live in and what employer you have. Obamacare basically guarantees such coverage to everyone, even if they already have cancer when they go to buy the insurance. That’s one of many reasons that Obamacare is horribly broken. It isn’t insurance anymore.

    2. Now the prevailing view outside the USA is that people go bankrupt if they get really sick with, say, cancer.

      You would only go bankrupt if you don’t have insurance. And generally if you don’t have insurance, you probably don’t have a high paying job and much in the way of assets. In which case bankruptcy is pretty mild.

      Generally, in bankruptcy they can’t take your house or car or miscellaneous chattel. Nor can they touch your pensions or 401Ks.

      So generally, the hospitals and doctors just write off the debt or offer to settle for a fraction of the debt.

      1. Thanks. Thought it wasn’t as dire as leftists on the continent paint.

      2. This is not entirely the case. Many if not most health insurance policies have lifetime coverage limits, and once you exceed that — not hard to do with intense cancer treatments — you’re fucked.

        So generally, the hospitals and doctors just write off the debt or offer to settle for a fraction of the debt.

        Awesome, just fuck someone else when you run out of money. How libertarian.

        1. This is not entirely the case. Many if not most health insurance policies have lifetime coverage limits, and once you exceed that — not hard to do with intense cancer treatments — you’re fucked.

          And your solution is… to have the tax payer cover the cancer patient’s costs? And no government bean counter will intervene and put their own limits?

          Awesome, just fuck someone else when you run out of money. How libertarian.

          You call a voluntary agreement between two parties “fucking someone else”?

        2. Damn, my longer comment disappeared into the ether.

          Anyway, there have always been things called “catastrophic” health insurance policies that trade higher deductibles for additional coverage within specific parameters, supplemental plans intended to fill in the gaps of an HMO or PPO type of plan. Just forcing companies to assume that EVERYONE will blow past the lifetime limit only means that they’ll have to charge EVERYONE higher premiums to compensate.

          And, frankly, “just fuck someone else when you run out of money,” is probably the most concise explanation of the economics of the ACA I’ve ever seen. Thank you for that.

        3. Awesome, just fuck someone else when you run out of money. How libertarian.

          I suppose it’s possible to make a dumber reply. He merely described the way the existing system (not a product of libertarian design) operates. He was not describing it as preferred, ideal, etc.

          This is the way it works in a system that is extensively regulated and defined by government. Nothing libertarian about it.

      3. It depends, with bankruptcy. If you file Chapter 7, the court seizes all non-exempt assets, sells them off, gives the proceeds to your creditors, and then discharges the debt. Most debt can be discharged (back taxes and child support can’t) and you’re able to get exemptions for property depending on the state and various federal laws. You can actually apply the exemptions to a 401(k), as well as stuff like real property, cars, household goods.

        With houses, ironically, the less equity you have, the better off you are, since you actually don’t own very much of the house. With cars, you basically take the FMV of the car, subtract whatever you owe, and add how much you’ve paid. If you’re above the exemption, they sell the car and give you the amount of the exemption, then the rest goes to the remainder of the loan, and whatever’s left goes to creditors.

        Chapter 13, on the other hand, is basically where a court sets up a payment plan. It’s tougher to get than a 7 because you have to be making enough disposable income to stick to the plan, but it lets you keep all your crap.

        In both cases, you can only file once every 8 years, IIRC, and your credit rating goes to absolute shit for about a decade. But, the alternative is living in a box on the street because you’ve got 74 different liens on your paychecks, so it’s better than it might seem at first.

    3. People have always been covered through Medicare/Medicaid. People who weren’t dirt poor were expected to buy insurance; if they didn’t, then they had to pay out of pocket until they fell under the Medicaid limits, at which point they were covered. Ostensibly, Obamacare forces these people to buy coverage now, whether they want to or not.

      But the actual consequence of Obamacare is a huge expansion of IRS responsibilities, plus a big giveaway to insurance companies, which now can force healthy young people to buy overpriced insurance packages.

      What health care reform should have done is prohibit insurers from kicking out expensive patients after they signed up, and from ending the tax breaks for employer-provided health care (which was the cause of most of the health insurace related anxieties).

    4. “Now the prevailing view outside the USA is that people go bankrupt if they get really sick with, say, cancer.”

      Which, if you think about it, is far better than simply being denied care.

  3. And….first. Not the spammer.

  4. Secretary Sebelius, I should have expected to find you holding Obama’s leash. The more you tighten your grip, the more young and healthy will slip through your fingers.

  5. Obama supporter: “The letter of the law doesn’t matter, it’s are noble and pure intentions that matter.”

    1. At least, we thought they were…

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  6. “it makes no sense” to imagine that the law’s authors would have designed a “poison pill” for their own legislation

    It’s a shame that we can’t go back and ask the people who passed the law what they intended. It’s not that they’re dead and long gone, it’s just that they didn’t read the bill before hand.

  7. “We have to pass this law so that we can find out what the IRS says is in it”

  8. “Our intention was to pass this law and then guilt trip everybody into letting the IRS rewrite it, polls and government teachers and lamestream intellectualism confirm that fluid intentions bear primacy over existence.”

  9. “Lazarus gave perhaps the best objection to this argument, which is that for the threat to work it must be obvious to all involved.”

    Let the Dr. Strangelove jokes commence!

    1. It was to be announced at the Party Congress on Monday. As you know, the Premier loves surprises.

  10. …’you’d have to be totally nuts to believe that Congress would have written a law”…
    Au contraire!
    You’d have to be totally nuts to believe otherwise.

  11. like Larry implied I am inspired that some one can profit $7039 in a few weeks on the computer. did you look at this page

  12. Odd thought: WHY does the $800 billion figure keep cropping up? It seems to be showing up with inordinate frequency…

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  14. Yes. And in addition, this is just a suspension of enforcement. The law is still there, and they can decide to enforce it at any time. So the prudent thing for businesses to do is to act as if it is enforced, meaning cutting workers and hours.

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