Error on Reason.com

This past Monday I posted a New Republic article on a lawsuit recently filed by Obamacare opponents in the United States District Court for the District of Columbia, who construe the Affordable Care Act to bar ACA tax credit subsidies to purchasers of individual health insurance policies on state exchanges managed by the federal government (as distinguished from exchanges managed by state governments).  My piece spotlighted the “upside-down preposterousness” of the opponents’ core contention – that the Congress that enacted the ACA “intended” to “subvert the ACA’s central purpose and stiff the very population the law was enacted to benefit.”  Reason.com, a leading libertarian blog, promptly published a critique of my piece by Peter Suderman.  So this post briefly answers Suderman’s analysis, as well as a similarly critical email response (enclosing House Ways & Means testimony) I received from Vanderbilt scholar (and law school classmate and friend) James Blumstein, a prominent academic foe of the ACA.   

Suderman makes three points, which he labels “truths Lazarus leaves out.”  The first of these allegedly ignored “truths” is that the statutory text of the ACA “is quite clear” that tax credits are exclusively to be available on state-facilitated exchanges, not federally-facilitated exchanges.  Suderman, echoing his fellow ACA opponents, relies on one statutory provision, which he, and they, read in isolation.  In contrast, Tim Jost, Sam Bagenstos, and I take into account other provisions of the law – “complementary statutory language,” as I put it in the New Republic piece, “clarifying that [the Department of] Health & Human Services ‘stands in the shoes’ of the state as administrator [of an exchange], but that such a federally-run exchange retains its functions, legal status, and operates subject to the same terms.”  Jim Blumstein offers essentially the same criticism, which merits the same response.  Citing the same single provision, Blumstein says the ACA provides for two forms of exchanges, but that only one of them – those run by state governments – is authorized to offer tax credits to help purchasers afford insurance.  When the statute is read as a whole, I think the Administration has the better textual argument.[1]

Suderman’s second “truth” involves “the intent of Congress.”  Here he pinpoints what he says is the “only relevant discussion of the provision” in the congressional record – an exchange between former Nevada Senator John Ensign and Senate Finance Committee Chair Max Baucus, when what ultimately became the ACA was being compiled in the Finance Committee in June 2009.  Quite remarkably, not only Suderman, but all other promoters of the legal theory behind this new lawsuit, make this particular snippet the sole concrete evidence for their claim to be in sync with the “intent” of the Congress that enacted the ACA.  But in fact, as Jost and Bagenstos detail, there actually are other parts of the legislative history that refer to or bear on the issue, all of which confirm that tax credits are to be equally available on federal as well as state-managed exchanges.  More important, this particular discussion neither refers to, nor is in any discernible way relevant to, that issue, nor to any of the statutory provisions bearing on it. 

Here is what this supposed smoking gun exchange was actually about. (PDF of the Committee transcript is here; the exchange occurs at pages 324-29.) During the Finance Committee mark-up, Senator Ensign was complaining about Chairman Baucus’ ruling that Ensign’s and Senator John Cornyn’s proposed amendments dealing with state medical malpractice laws were non-germane as outside the Finance Committee’s jurisdiction.  Ensign questioned how, consistent with that ruling, the Committee could in the bill prescribe requirements for insurance to be offered on state-run exchanges that dealt with matters under the jurisdiction of other Senate Committees.  Baucus responded that compliance with the requirements in question was a condition for the provision of tax credits, and tax provisions are in the Finance Committee’s jurisdiction.  How does Baucus’ remark support opponents’ claim that he intended, and the legislation provides, that tax credits be available only on state-managed exchanges?  It doesn’t. However well the Chair’s off-the-cuff rebuff to Ensign may have served at the moment as a plausible jurisdictional hook for the Finance Committee vis-à-vis other Senate committees, it says literally nothing about the availability of tax credits on federal exchanges.  The two issues have nothing to do with each other.  At all. [2]

Suderman’s third “truth” that he believes I should have acknowledged is that, in early 2009, Tim Jost wrote an issue brief that, Suderman says, argued in favor of limiting tax credit availability only to “states that complied with federal requirements . . . .”  Prior to reading his Reason post, I had not been aware of Jost’s issue brief.  In any event, the passage quoted by Suderman seems entirely consistent with anticipating that federally managed state exchanges could comply with federal requirements and offer tax credits, no less than state exchanges.  More important, he provides no basis for his imputation of talismanic stature to this particular academic paper.  He cites no evidence that anyone in Congress relied on, or read, the paper – and the truth, pardon the expression, is that there is none.   

 

 [1] It is true that my piece did not spell out in detail the counter-argument to this key claim of the lawsuit.  That was because that interpretive exercise has been detailed elsewhere, by Jost and Bagenstos.  Instead, I summarized their points (and linked to one of Jost’s’ relevant pieces).

 [2] Congress’ authority to require states to impose specific conditions on insurance policies offered on exchanges does NOT depend on their being a condition for the availability of tax credits. Congress’ prescription of those conditions for state exchanges is constitutionally valid, because the statute makes setting up an ACA-compliant exchange optional for the states, the option being, precisely, that if they choose otherwise, the federal government will set one up and run it in their stead.