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What Justice Kennedy Got Wrong in the Obamacare Oral Arguments
In my new piece for Defining Ideas from the Hoover Institution, I’m taking readers through the Supreme Court’s oral arguments last week in the case of King v. Burwell, which will decide the fate of Obamacare subsidies in states that are serviced by a federal health insurance exchange. (I also covered this topic at length in a Libertarian podcast with Troy Senik last week.) As I note there, perhaps the most inventive (and alarming) argument of the day came courtesy of Justice Anthony Kennedy:
In one sense the most novel argument of the day was an ill-thought-out suggestion by Justice Anthony Kennedy that the ACA might be unconstitutional if it were read to deny subsidies to health care policies purchased on the federal exchanges. Justice Kennedy never bothered to state whether his suggestion would require invalidation of the entire statute, or the creation of a massive subsidy that Congress itself had never authorized. There is, fortunately, no need to choose between these two unappetizing alternatives. Kennedy tossed off an argument that no one ever raised throughout the litigation: the denial of the federal subsidies would coerce individual states to set up exchanges in order to benefit their citizens.
The supposed precedent for this argument was the earlier decision in NFIB v. Sebelius that struck down part of Title II of the ACA that required states to forfeit all their current Medicaid benefits if they failed to sign up for the expanded set of Medicaid benefits under the ACA. Chief Justice Roberts held that this provision was coercive. No state could possibly withstand that financial hit. But in this instance, many states refused to establish the exchanges precisely because they were not threatened with the loss of any collateral benefits.
Shortly after the oral argument, Oklahoma Attorney General Scott Pruitt protested Justice Kennedy’s argument, noting that Oklahoma knew what the law required and was prepared to live with its consequences, given the heavy costs that it would have to incur to establish a state exchange. Indeed, the Kennedy provision leads to the bizarre conclusion that the statute would be unconstitutional if it omitted the possibility of purchasing any coverage under the federal exchanges, and his argument would invalidate dozens of statutes under which states are entitled to get benefits if they first undertake some particular action. The section is constitutional as written.
We will see how this plays out. As I noted in last week’s podcast, I initially predicted a 5-4 ruling against the Obama Administration in this case. Considering the questions Justice Kennedy and Chief Justice John Roberts issued from the bench, I am no longer quite as confident in that outcome. What do you expect?
Published in Law
Is there a concern here that Kennedy would therefore turn around and say that the canons of construction require some saving interpretation, therefore that can’t be what they mean?
I can see this argument, however isn’t there a way to limit a ruling on Kennedy’s novel interpretation by including a “magnitude” proviso. That is to say, in the case of the ACA, the fact that citizens would face significantly more expensive plans through federally-implemented exchanges presents the coercive element. Further, isn’t there another way to limit it further by saying that the ill-effects are directly on the people, and not on state budgets?
Of course, even a “magnitude” limitation would just open up a litigation opportunities for lawyers to challenge coercive laws as going too far.
What ever happened to establishing a clear rule and letting the cookie crumble as it may. It seems to me that in all of these big decisions that the SCOTUS is dealing with everything seems to start with the supposed outcome and work its way back to some ruling. The question before the court can’t be how to fix this or avoid a problem the question is does the law as written allow for X to happen. Any potentially negative outcomes are irrelevant to this case, aren’t they?
The ACA was written by fools and has created its own unworkable mess. Which Obama is illegally trying to patch over with executive actions he has no authority to carryout. If the words of the law no matter how clear and deliberate can be claimed to be confusing and therefore subject to the arbitrary whims of the executive than laws have no meaning. Congress becomes a rubber stamp of fuzzy intentions.
Indeed. There is no incentive for our lawmakers to go to the trouble of writing good laws if there are no consequences when they write bad ones. Well, there are consequences, just not for the ones who caused the problem to begin with. If I failed my algebra test the teacher didn’t flunk the guy next to me – I paid the price. This provided me with a great incentive to do better.
“But in this instance, many states refused to establish the exchanges precisely because they were not threatened with the loss of any collateral benefits.”
This brings to mind the fights during the ratification of the Constitution had regarding whether it should begin “We the people” or “We the states”. The ACA seems to pit one against the other. Instictively, I think this is temporary, where we are all (states and people) screwed going down the Obamacare path.
I can’t wrap my head around this argument. Kennedy seems to be saying that if the statute does not permit subsidies to be granted through the federal exchange, then it is unconstitutional. As so many others have noted, that cannot possibly be correct if much of the federal welfare and regulatory state is to survive.
But let’s assume that Kennedy is correct. If he thinks the statute is plain on its face that “established by the State” does not mean “established by the State or the federal government,” then maybe the upshot is that Congress drafted a statute that is unconstitutionally coercive on the states. The Court can decide that question another day, if it must, but it cannot today because that issue is clearly not before the Court. This is not a challenge by the states claiming that a lack of subsidies through the federal exchange coerces them into creating their own exchange. No state (or person or dog or cat) could possibly take that position because THERE ARE CURRENTLY SUBSIDIES AVAILABLE ON THE FEDERAL EXCHANGE. Kennedy’s concern could only arise in the real world after it’s been determined that the statute, contra the IRS interpretation, does not allow subsidies on the federal exchanges. This issue has not been briefed and nobody except Justice Kennedy (and maybe Roberts) even had this notion rattling around in their heads. Clearly not before the Court, right?
Moreover, I understand that the Court is obligated to interpret statutes to avoid the conclusion that they are unconstitutional. But that doctrine has its limits. You cannot read plain and unambiguous language out of a statute because you really don’t want to hold that the law is unconstitutional. But that seems to be what Kennedy in hinting at: he agrees with the petitioner’s statutory arguments that state does not mean federal, but he wants to avoid that conclusion due to a hypothetical stretch of constitutional problem that isn’t even before the Court.
I cannot imagine that Kennedy would put these thoughts in a judicial opinion and grant them the force of law, but then I remember Roberts’ position on the taxing power in the last Obamacare case.
My greatest fear is that we get some sort of split decision. The four reliable liberals take the reliably liberal position: Context and intent is all that matters. Harry Reid says that the petitioners are incorrect, thus it is so. Then you get Scalia, Alito, and Thomas taking the petitioner’s position. And, Kennedy (and maybe Roberts too) weigh in to affirm the lower court ruling upholding the IRS ruling for reasons that were never briefed, make no sense, and have no precedential effect in any future case. Nightmare scenario.
Also, it’s a pretty weird federalism argument when the states (none of which have actually raised the hypothetical concern) complain that a statute is coercive upon them because it doesn’t permit the federal government to supplant them completely in an area (insurance law and regulation) that has, for centuries, been a matter of state law exclusively.
“This statute is too coercive! It should really allow the federal government to take over completely, or we’ll have to keep regulating an area that’s been our province for centuries!” Said no state ever. Doesn’t some real state, at least, have to articulate this bizarre concern before Kennedy elevates it to Supreme Law of the Land status???