Appeals Courts Issue Contrary Rulings On Affordable Care Act

DominoVsPizzaHut

An exciting day for ACA-watchers! This morning a three-judge panel from The U.S. Court of Appeals for the D.C. Circuit ruled that Obamacare’s federal subsidies to help people afford health insurance can be offered to people who buy their insurance through state-run exchanges, but not to people buying health insurance through federal-run exchanges. (The case is Halwig v. Burwell (pdf link).) The ruling, if it gets to be applied (it’s on hold for appeal right now), could take away subsidies for over 7 million Americans, effectively gutting Obamacare.

Then, two hours later, the Fourth Circuit Court of Appeals issued an opposite ruling on the exact same question. that case is King v. Burwell.

Vox provides a useful three-sentence summary of the majority’s decision in Halwig:

1) The D.C. Circuit ruled that the Affordable Care Act never authorized subsidies for health insurance purchased on federally-run exchanges, rendering the subsidies illegal in 36 states.

2) Although this would absurdly undermine the entire purpose of Obamacare — which is to make affordable health coverage available to all — the court points to two other examples of “absurd” outcomes from the text of the law, including language that would have locked Guam and other U.S. territories into an unsustainable health insurance system.

3) The judges contend that there’s not sufficient evidence from the legislative history (like old drafts of the law, or other evidence predating this lawsuit) to determine whether Congress intended to use subsidies as a carrot or make them available in every state; without clear legislative history, the court defaults its interpretation of the plain text.

As I wrote last year, this issue is the single largest threat to Obamacare; if Obamacare can’t subsidize health insurance bought through Federal exchanges, that seems very likely to put Obamacare into a “death spiral”; prices will go up 70% or more, everyone but the most unhealthy will flee the heath exchanges, having only unhealthy people on the exchanges will cause prices to go up even more, etc etc..

On the legal merits, the courts can essentially decide one of three ways:

1) Read in full, the ACA unambiguously says that the subsidies are only available to people who buy insurance through state-run exchanges. This is what the majority in the Halwig case ruled.

2) Read in full, the ACA unambiguously says that the subsidies are available to people who buy insurance through either state or federal exchanges.

3) Read in full, the meaning of the ACA on this point is ambiguous. This is what the Fourth Circuit panel unanimously ruled. A ruling that the statutory text is ambiguous on this point is a victory for the Obama Administration, since in cases of genuine ambiguity Courts are supposed to defer to administrative agencies. (Although as Kevin Drum points out, that deference is a standard that the conservatives on the Court may be eager to overturn.)

The Obama administration has already announced its plan to appeal Halwig (which has been stayed pending appeal) to the full 11-judge panel of the D.C. Circuit. The three-judge panel that issued today’s ruling consisted of two Republican appointees and one Democratic appointee, all of whom voted along predictable party lines. However, the full 11-judge panel consists of 7 Democratic appointees (including 4 from Obama) and 4 Republican appointees, and I expect will go the other way.1

The question, then, is if the Supreme Court decides to take the case, and if so how they’ll rule. I could imagine that going either way, for reasons laid out in my earlier post.

P.S. The most quotable part of the fourth circuit’s ruling:

Appellants’ reading is not literal; it’s cramped. No case stands for the proposition that literal readings should take place in a vacuum, acontextually, and untethered from other parts of the operative text; indeed, the case law indicates the opposite.

So does common sense: If I ask for pizza from Pizza Hut for lunch but clarify that I would be fine with a pizza from Domino’s, and I then specify that I want ham and pepperoni on my pizza from Pizza Hut, my friend who returns from Domino’s with a ham and pepperoni pizza has still complied with a literal construction of my lunch order.

That is this case: Congress specified that Exchanges should be established and run by the states, but the contingency provision permits federal officials to act in place of the state when it fails to establish an Exchange. The premium tax credit calculation subprovision later specifies certain conditions regarding state-run Exchanges, but that does not mean that a literal reading of that provision somehow precludes its applicability to substitute federally-run Exchanges or erases the contingency provision out of the statute. […]

Appellants insist that the use of “established by the State” in the premium tax credits calculation subprovision is evidence of Congress’ intent to limit the availability of tax credits to consumers of state Exchange-purchased health insurance coverage. Their reading bespeaks a deeply flawed effort to squeeze the proverbial elephant into the proverbial mousehole.

  1. Hooray for the nuclear option! []
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32 Responses to Appeals Courts Issue Contrary Rulings On Affordable Care Act

  1. 1
    Jake Squid says:

    Neither of those hunks of pizza in Romney’s hands is from either Dominoes or Pizza Hut. Of that much I am certain. I am somewhat less certain (though mightily certain, indeed) that the pizza in Romney’s left hand is the result of a terrible, terrible photoshop.

    I am a lot less certain about the eventual outcome of these cases. I mean, sure, one could read it as the majority in the DC Circuit did. If one were to be cruel and disingenuous.

  2. 2
    Ampersand says:

    I am somewhat less certain (though mightily certain, indeed) that the pizza in Romney’s left hand is the result of a terrible, terrible photoshop.

    That the two slices of pizza are, in fact, the same slice of pizza, down to the placement of the tiniest bubbles, adds to that impression. :-)

  3. 3
    Jake Squid says:

    That the two slices of pizza are, in fact, the same slice of pizza

    I though they might be. In the right slice (as we look at it) there seems to be a straight line extending through the slice(s) diagnolly down to the left that makes it look like 2 slices badly photoshopped into one giant, Koronet-like slice. I thought I saw something similar in the left slice, but my poor visual processing & the angle make that one look a lot more possible.

  4. 4
    RonF says:

    Here in Chicago, both Domino’s and Pizza Hut are generally considered to be “cardboard with catsup and cheesy goo” rather than something one can legitimately call “pizza”.

  5. 5
    RonF says:

    This from Mother Jones:

    It’s long been a fundamental principle in administrative law that an agency’s interpretation of a federal statute that they are charged with enforcing is entitled to judicial deference, unless such deference is unreasonable.

    and

    Longstanding precedent holds that courts should generally defer to agency interpretations as long as they’re plausible. They don’t have to be perfect. They don’t even have to be the best possible interpretations. They merely have to make sense.

    This is news to me – not that I’m challenging the assertion of it being long-standing usage, just that I’m not previously familiar with it. I appreciate the fact that errors and ambiguities will creep into law, but the level of deference suggested here seem to me to be institutionalizing the concept that the Executive branch has broad authority to essentially usurp the role of the Legislative branch. My reaction would be more along the lines of “If Congress did that bad of a job in writing the law, kick it back to them and have them clarify it – that’s their job, not the President’s people.”

  6. 6
    vadva says:

    This is news to me – not that I’m challenging the assertion of it being long-standing usage, just that I’m not previously familiar with it.

    It may not be familiar to you, but just about anyone who has studied law (or even done a course or two in Business Law) is familiar with Chevron deference.

  7. 7
    Ampersand says:

    But for those of us who haven’t studied law, here’s the Wikipedia entry. :-p

    A two-part analysis was born from the Chevron decision (called the “Chevron two-step test”), where a reviewing court determines:

    (1) “First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court as well as the agency must give effect to the unambiguously expressed intent of Congress.”

    “If the Court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction of the statute . . . Rather,

    (2) [I]f the statute is silent or ambiguous with respect to the specific question, the issue for the court is whether the agency’s answer is based on a permissible construction of the statute.”

    Ron:

    My reaction would be more along the lines of “If Congress did that bad of a job in writing the law, kick it back to them and have them clarify it – that’s their job, not the President’s people.”

    In practice, this means that almost any complex law could be vetoed by the current Congress without a majority. Just have lawyers go over it with a fine-tooth comb until they find any possible ambiguity in an important component of the law, and then start your lawsuit. If they can get five possibly biased judges to see ambiguity – even if no one in the world had seen any ambiguity in the law in question until the lawsuit – then in your system, the law gets thrown back to Congress, and if 41 Senators are willing to vote against it (or if the Speaker of the House refuses to bring it up for a vote), it’s now a dead law.

    That’s not how the system is supposed to work. If a current Congress wants to undo a law made by a majority of a previous Congress, it’s supposed to require a majority of elected Senators and Representatives.

    The current example is a very good example. There was no actual ambiguity in the law over this point. Everyone knows perfectly well what the law means; the writers of the ACA intended to provide subsidies in all states, including those that have federally-run exchanges. No one involved in running exchanges, at the federal or state level, was confused on this point; no one involved in tax law was confused on this point. The activist lawyers who created this lawsuit weren’t confused on this point – in a previous lawsuit (which was on other grounds), they themselves said that Congress’ goal for the ACA was to provide affordable health care nationwide. But now they’re claiming to believe otherwise, because they’re activist lawyers who will say anything in pursuit of their cause.

    Because some lawyers acting in bad faith found what’s essentially a typo in one line, however, we now have a legal illusion of ambiguity where there is no actual ambiguity in real-world practice or in Congress’ intention. Under your proposed system, that’s enough to effectively veto a law created by Congress.

    What you’re talking about isn’t making Congress more powerful at the expense of the executive. What your suggestion would really do is make lawyers and the Courts much more powerful at the expense of Congress.

  8. 8
    Brian says:

    No wonder lawyers rank somewhere between head lice and bed bugs in most people’s estimation. On the rare occasions life tends to be fair, a lawyer can point to an unartful phrase on page 2,112 and undo the fair part.

  9. 9
    Manju says:

    I think you’re too pessimistic, amp. If the ruling is upheld, it affects people who live in States using the Federal Exchange. This map breaks them down:

    http://obamacarefacts.com/state-health-insurance-exchange.php

    The obvious solution: States set up their own exchanges. Blue states should be no problem. Battlegrounds are still doable.

    But what about the former Confederacy? Look what happened to Medicaid expansion under the ACA, you say…the poor are fucked.

    But consider this from CNN:

    Premium Tax Credits…To qualify, a person must earn between 100% and 400% of the federal poverty level and buy coverage through a health insurance marketplace, also called an exchange. In 2013, that would mean an income between $11,490 and $45,960 for individuals or between $23,550 and $94,200 for a family of four.

    http://inhealth.cnn.com/making-healthcare-decisions/what-you-should-know-about-health-insurance-subsidies-and-tax-credits?redirect=beme

    The demographics are much different than Medicaid.

    Also, the South is poorer, with lower medium incomes. That means Obama’s tax credits hit more middle income people (relative to state mediums) than it would in Blue states.

    Even in a worst case scenario, some of the most RWing states may end up setting up exchanges. This isn’t as easy as taking away welfare for poor americans. Granted, it isn’t as hard as taking away social security either, but it is somewhere in between.

    I think you can win this one politically.

  10. 10
    Jake Squid says:

    In my mind, the DC Circuit court is like that bully who grabs your arm and starts pummeling your head with it while asking, “Why are you punching yourself?” repeatedly.

  11. 11
    RonF says:

    Manju:

    The obvious solution: States set up their own exchanges.

    But there are consequences to those States that set up their own exchanges, as was forseen after the Supreme Court’s rulingin 2012 against the Feds being able to force States to expand their Medicaid rolls.

    ObamaCare required states to increase eligibility for Medicaid to 133 percent of the poverty line, or roughly $30,000 per year for a family of four. The expansion would also make childless single men (a notoriously high-cost group) eligible for Medicaid for the first time. In all, about 40 percent of all the people projected to gain coverage under ObamaCare would do so via Medicaid.

    But this imposed real costs on states. For example, the Medicaid expansion would cost New Jersey taxpayers roughly $35 billion over 10 years, and New Yorkers as much as $52 billion.

    Not surprisingly, many states balked — and now the high court has agreed: Congress can’t strip all Medicaid funds from states that refuse the expansion, as the ObamaCare law threatened.

    So what will state legislators do now?

    If they agree to expand their Medicaid programs anyway, they’ll be choosing to pile new costs on their state budgets and new taxes on their constituents.

    And if a state doesn’t expand its Medicaid program, most of those who would’ve been eligible for Medicaid will now become eligible for subsidies through ObamaCare’s health insurance exchanges. And those subsidies are paid in full by the feds.

    Thus, New York, for example, would shift most of that $52 billion in new costs back to the federal government.

    Red states’ governors and legislators know that their constituents won’t vote for people who raise taxes. Blue states’ governors and legislators know that a lot more of their constituents are government clients who get money from the government and don’t care that much about a rise in taxes. Especially in those states like Illinois that are one-party states.

  12. 12
    Jake Squid says:

    Blue states’ governors and legislators know that a lot more of their constituents are government clients who get money from the government and don’t care that much about a rise in taxes.

    I’m not sure what you mean by this? Can you clarify?

  13. 13
    Lee1 says:

    I’m not sure what you mean by this? Can you clarify?

    I’m also pretty confused by that statement, since I thought it was pretty well established that broadly speaking red states get more money from the federal government relative to what they contribute compared to blue states. A couple google-handy sites reflecting that – I won’t pretend to know how great these data are, but they’re consistent with basically everything I’ve seen:
    http://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
    http://en.wikipedia.org/wiki/Federal_taxation_and_spending_by_state

    ETA: I see RonF was talking about state as opposed to federal government, so my links are less relevant. But I think they’re still somewhat relevant to the question of a general pattern of “government clients” and their contributions, and it’s also my understanding that this pattern in terms of voting patterns vs. government assistance broadly speaking holds at the within-state level in addition to the among-state level (I don’t have a cite for that and I could be full of shit, but I don’t think so…).

  14. 14
    Charles S says:

    Maybe RonF means that red states are governed by the party of the plutocrats, while blue states are governed by the party that poor people vote for, so red state governors and legislatures don’t care about depriving poor people of access to health care, they only care about not taxing Republican voters. Meanwhile, Democrats in blue states need to pay attention to the needs of poor people, since poor people make up a non-negligible fraction of Democratic primary voters.

    It doesn’t matter that red states take more from the Federal government than they pay in revenue, only which constituencies each party pays attention to.

    While the Dems don’t actually pay attention to poor people, they do pay attention to the chunk of the middle and upper classes that gives a little bit of a damn about poor people, while the rich people that the Repubs pay attention to don’t care about poor people getting health care, so the result is similar to what I’m guessing Ron meant.

  15. 15
    Manju says:

    Ron, behold…GWBush’s budget busting Medicare Pt D. Lets take a look at some deep south States:

    Medicare Prescription Drug, Improvement, and Modernization Act of 2003

    Alabama

    Aye [R] Bonner, Jo
    Aye [R] Everett, Terry
    Aye [R] Rogers, Mike
    Aye [R] Aderholt, Robert
    Aye [D] Cramer, Bud
    Aye [R] Bachus, Spencer
    Nay [D] Davis, Artur

    Georgia

    Aye [R] Kingston, Jack
    Nay [D] Bishop, Sanford
    Nay [D] Marshall, Jim
    Nay [D] Majette, Denise
    Nay [D] Lewis, John
    Aye [R] Isakson, John
    Aye [R] Linder, John
    Aye [R] Collins, Mac
    Nay [R] Norwood, Charles
    Aye [R] Deal, Nathan
    Aye [R] Gingrey, Phil
    Aye [R] Burns, Max
    No [D] Scott, Davi

    Mississippi

    Nay [D] Clay, Lacy
    Aye [R] Akin, Todd
    Nay [D] Gephardt, Dick
    Nay [D] Skelton, Ike
    Nay [D] McCarthy, Karen
    Aye [R] Graves, Sam
    Aye [R] Blunt, Roy
    Aye [R] Emerson, Jo Ann
    Aye [R] Hulshof, Kenny

    https://www.govtrack.us/congress/votes/108-2003/h332

    Southern Republicans won’t raise taxes / bust the budget in order to provide social benefits?

    Then explain the above.

  16. 16
    Fibi says:

    I blogged before checking my reference and…I completely misremembered. Please consider this deleted!

  17. 17
    RonF says:

    Manju, most people didn’t sit and run the numbers, they just went with party loyalty. Those who did failed to use adequate assumptions on the increase in a) people who would sign up and b) the cost of drugs. Since then they’ve learned different. What’s going on now is based in great part on the lesson learned from the Medicare Part D debacle.

  18. 18
    Manju says:

    Ron,

    Somebody sat there and ran the numbers…because I see all the Dems on my list opposing. Unless you’re now telling me that Dems wanted to blow the opportunity to expand the welfare state under a Republican Prez, I think it’s pretty clear that they opposed because Med Pt D was fiscally irresponsible.

    So now the party that bought us a true budget buster is telling us that the Affordable Care Act, which the CBO says is deficit neutral, is the one that we should worry about. I’m a republican but I ain’t buying it.

    The Democrats are the Party of Fiscal Responsibility. As a RWinger, that’s one reason I vote for them . You should too.

  19. 19
    Manju says:

    I looked at my list and suddenly wondered when Dick Gephardt moved to Mississippi. That’s Missouri up there. Here’s Mississippi:

    Aye [R] Wicker, Roger
    Nay [D] Thompson, Bennie
    Aye [R] Pickering, Chip
    Nay [D] Taylor, Gene

  20. 20
    RonF says:

    Somebody sat there and ran the numbers…because I see all the Dems on my list opposing. Unless you’re now telling me that Dems wanted to blow the opportunity to expand the welfare state under a Republican Prez, I think it’s pretty clear that they opposed because Med Pt D was fiscally irresponsible.

    Or maybe they were doing what so many people are accusing the GOP House of doing these days – opposing a bill not on it’s merits but because it’s proposed by the opposition’s President.

    The Democrats are the Party of Fiscal Responsibility.

    Ha. Very funny. Neither party is the party of Fiscal Responsibility. Both the GOP and the Democrats are the Party of Making Sure Our Clients Get Paid. The Tea Party movement is trying to change that in the GOP, with mixed results to be sure. It’s going to take a while.

    Meanwhile, we have this over at Althouse. For those of you not familiar with her, she’s a law professor at the University of Wisconsin in Madison. She voted for Obama twice. She links to Reason.com wherein one of the main architects of the ACA gets pretty explicit that the basis for the Halbig decision is sound – that subsidies were very much intended to be limited to State-run exchanges, so as to force the States to set them up. There’s both quotes and videos.

    It also shows him trying to backtrack on all that later on when it became clear that many States were NOT going to set those exchanges up and when Halbig was filed and that this was going to have a deleterious effect on the ACA.

  21. 21
    Jake Squid says:

    Here’s what Gruber has to say about this.

    It’s worth reading that whole post. A good point is made about how meaningless this is even if Gruber is lying about what he said and why.

  22. 22
    Manju says:

    Ron:

    Bush’s Medicare Pt D created an unfunded liability. He did not cut spending, raise taxes, or allow Medicare to bargain down drug prices to pay for it. This was no secret at the time.

    In contrast, Obamacare is fully-funded and deficit neutral to reducing. You can argue that the projections are wrong, but there are at least provisions in there designed to make it such. The same cannot be said of Medicare Pt D.

    So we know that Republicans will support welfare for their constituents: drug companies and seniors. We know they’ll do it even if its fiscally irresponsible. We know that Dems will support welfare for theirs. But we do not know that they’ll do it with unfunded liabilities for permanent programs.

    The Tea Party thinks defaulting on the National Debt is reasonable. They are therefore not even in the running for the most fiscally responsible.

    That leaves the Dems. Vote for them.

  23. 23
    Jake Squid says:

    Lawyers,Guns & Money continues their commentary on the flimsiness of this decision and the associated conservative logic.

  24. 24
    RonF says:

    The Tea Party thinks defaulting on the National debt is reasonable. They are therefore not even in the running for the most fiscally responsible.

    That seems an odd statement to me. What is the logic that leads you to that conclusion?

  25. 26
    RonF says:

    Manju, while the New York Times headline claims that the position of many people in the G.O.P. was that “default wouldn’t be so bad”, the position advanced by pretty much everyone in the article was that the country would not actually have to default, that tax receipt cash flow and governmental salary savings were sufficient to cover debt payments, and that the threat of default was artificial, not real. So while both the NYT headline and your statement claim that the Republicans and the Tea Party Movement were in favor of defaulting, that’s not supported by the article.

  26. 27
    Manju says:

    the position advanced by pretty much everyone in the article was that the country would not actually have to default, that tax receipt cash flow and governmental salary savings were sufficient to cover debt payments

    Ok, then lets say; “The Tea Party thinks that tax receipt cash flow and governmental salary savings were sufficient to cover our debt in Oct 2013 w/o raising the debt ceiling. They are therefore not even in the running for the most fiscally responsible.”*

    *This position is obviously a ruse. So the NYTimes didn’t bother to take it seriously. I’ll unpack the sophistry for you later but just quickly:

    “Everybody talks about how destabilizing doing this will be on the markets,” he said. “And you’ll see that initially, but heck, I’ve seen that in my business. When you go through that, and you address the problem and you address your creditors and say, ‘Listen, we’re going to pay you. We’re just not going to pay you today, but we’re going to pay you with interest, and we will pay everybody that’s due money’ — if you did that, the world would say America is finally addressing their problem.”

    Emphasis mine. That’s a default.

  27. 28
    RonF says:

    That was the position of one person in that article. The rest were of the opinion that tax receipts and salary savings generated enough cash flow to keep payments current.

    This position is obviously a ruse. So the NYTimes didn’t bother to take it seriously.

    The ruse is that the NYT a) used the headline to lie about the actual position of the people it quoted and b) attempted to discredit what they did say by ignoring them. When someone attempts to refute a position by ignoring the assertions presented in the position and focusing on the characteristics of the people holding it, I tend to presume that what that someone found was that the facts are not in their favor and thus find it inconvenient to discuss them. I don’t pretend to know whether or not what they were saying was true – but the NYT has the resources to find out and tell people, and they didn’t.

  28. 29
    Manju says:

    Ron, upon 2nd thought, a reasonable interpretation of the NYTimes headline is that “default” refers not only to interest payments to existing bonds, but also to the failure to meet other payment obligations when due.

    You still have to pay the military. You have to pay doctors who have billed Medicare. You have to send out Social Security benefits. The failure to pay these obligations affects our credit.

    Make no mistake about it…if we did not raise the debt ceiling we would have failed to make an interest payment sometime in the last 3 months of 2013. Playing with this scenario the way the Tea Party did was fiscally irresponsible.

    The rationalization that they used… that they didn’t think a default on interest payments would happen because we could just default on other obligations…was itself fiscally irresponsible.

  29. 30
    RonF says:

    My interpretation – and IIRC the general interpretation in the context of the time the government shutdown was looming – was that “default” meant failure to pay the interest on Treasury bonds. That’s also what the people in the article were talking about. The issues you raise are real, but not the subject of the discussion.

  30. 31
    Jake Squid says:

    … IIRC the general interpretation in the context of the time the government shutdown was looming – was that “default” meant failure to pay the interest on Treasury bonds.

    My memory of the interpretation at the time was that default meant failure to pay the government’s bills (social security, medicaid, etc.) as well as interest on debt. I’m not saying that you’re wrong, just my memory is different than yours.

  31. 32
    Manju says:

    Look Ron…pick your poison.

    They either want to default on treasury bonds or stiff the military, defense contractors, social security recipients, Medicare providers, etc of money owed for work already done.

    The real answer is that they were risking default on “all of the above”. But since both positions are in and of themselves fiscally irresponsible, I only need to demonstrate that they were doing one. That I’ve done, I’m sure.

    So just pick one and add to that the unfunded liability of Bush’s Medicare Pt D. Now you can see that one Party is behaving in an off-the-charts fiscally irresponsible manner.

    So, my fellow Republican, please vote for the other guys.