Why the Obamacare Case Drives Washington Crazy

Everything you thought you knew about the Affordable Care Act might be wrong.

National Journal
Sam Baker
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Sam Baker
March 2, 2015, 3:13 p.m.

The Su­preme Court’s latest Obama­care case is a mind-bend­er for the people who know the law best.

Law­makers, con­gres­sion­al staffers, policy ana­lysts, lob­by­ists, and re­port­ers spent more than a year slog­ging through the le­gis­lat­ive de­bate over the Af­ford­able Care Act — through months of ne­go­ti­ations, weeks of markups, reams of re­port­ing, end­less floor de­bates and in­ter­views, and mul­tiple make-or-break mo­ments for Pres­id­ent Obama. The Sen­ate even voted on Christ­mas Eve.

But now, the Su­preme Court might rule that everything they thought they knew about Obama­care was wrong.

The court will hear or­al ar­gu­ments Wed­nes­day in King v. Bur­well, the law­suit aim­ing to in­val­id­ate the Af­ford­able Care Act’s in­sur­ance sub­sidies in most of the coun­try. The chal­lengers in King will try to per­suade the court that the law only al­lows sub­sidies in a hand­ful of states — and, moreover, that Con­gress wanted it that way.

(RE­LATED: Why Obama­care Will Lose)

That’s an aw­fully hard sell for an aw­ful lot of the people who were around in 2009 and 2010, es­pe­cially the law­makers and staffers whose in­ten­tions the court is now try­ing to di­vine.

“In some ways, you can’t second-guess the Su­preme Court, which just leaves you sur­prised that it’s gone this far. Be­cause it’s so clear that this wasn’t even in our minds,” said Yvette Fontenot, who worked on the Af­ford­able Care Act as a Demo­crat­ic staffer for the Sen­ate Fin­ance Com­mit­tee.

To ac­cept the chal­lengers’ ar­gu­ment about con­gres­sion­al in­tent, the pro­pos­i­tion you have to ac­cept is this: For over a year, as Con­gress de­bated the Af­ford­able Care Act, and for a good while after it passed, hardly any­one — Re­pub­lic­ans, Demo­crats, journ­al­ists, and budget ana­lysts — really un­der­stood how it worked, even though Con­gress had spelled it out clearly.

“There’s just no way that we would have been hav­ing this con­ver­sa­tion about ex­clud­ing half the coun­try from tax cred­its “¦ but not have had the press, our op­pon­ents, and many in Con­gress scream­ing at the top of their lungs,” Fontenot said.

(RE­LATED: The One Word That Could Save Obama­care)

That’s why so many health care wonks have been so stu­pefied by this chal­lenge. Be­cause they were all there. They all lived through it. And this is­sue the Court will de­bate Wed­nes­day just didn’t come up at the time.

The Con­gres­sion­al Budget Of­fice has said it nev­er con­sidered the pos­sib­il­ity that sub­sidies might only be avail­able in some states — and that no one ever asked it to score the law’s costs un­der that as­sump­tion. Sev­er­al states have said they were nev­er told, while they were de­cid­ing wheth­er to set up their own ex­changes, that their de­cisions could deny fin­an­cial as­sist­ance to their res­id­ents. Even Re­pub­lic­ans as­sumed the sub­sidies would be avail­able in every state.

In 2012, Re­pub­lic­ans on the Sen­ate Budget Com­mit­tee pro­duced a re­port ar­guing that CBO had un­der­es­tim­ated Obama­care’s costs. Ac­cus­ing the budget of­fice of “a co­lossal mis­state­ment of real­ity,” Re­pub­lic­ans said the law would ac­tu­ally cost $2.6 tril­lion over its first dec­ade. That fig­ure would have been im­possible to reach without the law’s most ex­pens­ive pro­vi­sion — its sub­sidies.

And this was in June 2012, when it was clear that most states would not be set­ting up their own ex­changes. Only 14 states had passed bills to es­tab­lish ex­changes at the time of the Budget Com­mit­tee’s re­port, and health care ana­lysts were spec­u­lat­ing in the press that few­er than 20 states would ul­ti­mately sign on.

(RE­LATED: Re­pub­lic­ans See Lever­age from Su­preme Court for Obama­care Over­haul)

Mi­chael Can­non, the dir­ect­or of health policy at the liber­tari­an Cato In­sti­tute, says it doesn’t mat­ter how many people as­sumed that sub­sidies were avail­able in every state.

“It doesn’t mat­ter what they say about what they en­acted. It doesn’t mat­ter what they un­der­stood about what they en­acted,” he said. “Just be­cause an as­sump­tion is wide­spread doesn’t mean it’s true.”

The chal­lenge in King cen­ters around a line in the stat­ute that lays out the for­mula for cal­cu­lat­ing Obama­care’s sub­sidies. It says the amount of each per­son’s sub­sidy should be based on the time they were covered through “an Ex­change es­tab­lished by the State.”

To Can­non, that means the sub­sidies are only avail­able in state-based ex­changes — and not in the 34 states that turned to the fed­er­al gov­ern­ment to set up their mar­ket­places. The chal­lengers have had a harder time, though, per­suad­ing courts that Con­gress meant to lim­it sub­sidies to state-run ex­changes.

They ar­gue that Con­gress with­held sub­sidies from fed­er­ally run ex­changes so that states would have a power­ful in­cent­ive to set up their own. State in­sur­ance mar­kets could spin in­to total dis­ar­ray if the court sides with the chal­lengers in King, and the White House says Con­gress would not have set Obama­care up to fail.

(RE­LATED: Why Obama­care Will Win)

Sure it did, the chal­lengers ar­gue — the threat had to be big enough to light a fire un­der gov­ernors and state le­gis­lat­ors.

So, why didn’t any­one re­cog­nize Con­gress was mak­ing such a dra­mat­ic bar­gain with states? No one no­ticed the “es­tab­lished by the State” lan­guage un­til months after the law had passed, and even Can­non ini­tially thought it was just a glitch.

Again, Can­non says, a lot of people be­ing wrong doesn’t make them any less wrong.

“Re­pub­lic­ans had not read the law either,” Can­non said.

Demo­crat­ic aides say the “es­tab­lished by the State” lan­guage was in­cluded to dif­fer­en­ti­ate gov­ern­ment-sup­por­ted ex­changes from private mar­ket­places or pur­chas­ing sys­tems set up by small or­gan­iz­a­tions. Its pur­pose was to des­ig­nate an ex­change for each state through which sub­sidies would be avail­able, said Fontenot and John Mc­Donough, who worked on the law for the Sen­ate HELP Com­mit­tee.

“We un­der­stood ‘es­tab­lished by the State’ to throw in the fed­er­al ex­changes,” Mc­Donough said. “That’s what the law­yers told us.”

If Con­gress wanted to set up an of­fer states couldn’t re­fuse, it wouldn’t have au­thor­ized a fed­er­al fall­back at all, he said. The fall­back was in­cluded be­cause staff re­cog­nized that “no mat­ter how much you push, there would be some states that just wouldn’t be up to do­ing it,” Mc­Donough said.

What staff say now doesn’t mat­ter, leg­ally — the court’s think­ing is sup­posed to be con­fined to the text of the law and Con­gress’ in­tent as it was ex­pressed at the time.

But this isn’t like fig­ur­ing out what the Found­ing Fath­ers meant when they wrote the Second Amend­ment. Every­one who wrote Obama­care is still around — and wait­ing for the Su­preme Court to tell them what they had in mind.

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