ObamaCare at the Crossroads
On March 4, the Supreme Court will hear oral arguments in King v. Burwell. On Fox News recently, George Will opined that King is the most important case the Court will hear this year. The issue at hand is the legality of the IRS regulation that ObamaCare subsidies can be awarded for health insurance policies purchased at the federal exchange, contrary to the stipulations in the law. If the Court finds for the plaintiffs, ObamaCare subsidies will be available only in the 13 states that developed their own exchanges.
Unlike NFIB v. Sebelius, King does not seek to overturn ObamaCare; the law’s constitutionality is not the issue in King. So if the plaintiffs prevail, ObamaCare will still stand. “Seven myths about King v. Burwell” at the SCOTUSblog provides a quick summary for getting up to speed on this suit.
There are four suits that challenge the IRS regulation, three of which have received a judgment in the lower courts. Pruitt and Halbig resulted in wins for the plaintiffs, but in King the government prevailed.
The idea men behind these suits are Jonathan H. Adler and Michael F. Cannon. They became the progenitors of these subsidy suits with their July 2012 paper: “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” The revised version of 2013 appeared at Health Matrix. With the Supreme Court’s acceptance of the King case last November, Adler and Cannon filed an amicus brief in December.
The subsidies (i.e. tax credits) are the worst feature of ObamaCare. For years we’ve heard bipartisan tax reformers, such as the Bowles-Simpson commission, call for Congress to “broaden the base,” which means eliminating the Tax Code’s exemptions from paying taxes. But ObamaCare goes in the opposite direction. With the ObamaCare subsidies, one’s income taxes won’t go to the U.S. Treasury to pay for the federal government, but instead will go to an insurance company to pay for one’s own health insurance premiums. In October 2011, Forbes ran “JCT: Obamacare's Subsidies Remove 8 Million More Americans from the Tax Rolls” by Avik Roy, who wrote:
One of the most perilous developments of recent years has been the rise in the percentage of Americans who pay no income tax. According to the Tax Foundation, 59 million Americans -- 42 percent of all filers -- had zero or even negative income tax liability. Now, a new report from the Joint Committee on Taxation says that, thanks to Obamacare’s exchange subsidies, an additional 8 million Americans will no longer have an income tax liability.
Already, the bottom two quintiles have a negative income tax liability. Also in 2011, the Heritage Foundation ran “Obamacare Tax Subsidies: Bigger Deficit, Fewer Taxpayers, Damaged Economy” by Paul L. Winfree, who wrote:
Obamacare’s tax subsidies are one of the primary reasons to repeal Obamacare. […] Obamacare tax subsidies create a scenario in which about half of all households will have zero or negative income tax liability.
In a January 2015 report, the CBO and JCT estimate that the gross cost of the subsidies, Medicaid expansion, etc. for 2016-2025 will be $1.993T, which will be offset by $643 billion in revenue (PDF-page 2). So the net cost of ObamaCare over those 10 years will be $1.35T.
Mitigation of soaring insurance premiums and medical bills wasn’t what the Democrats had in mind with ObamaCare; their aim was getting more people “covered.” What the folks who were actually paying wanted from healthcare reform was lower prices, not subsidies so they can pay ever-higher prices.
The affordability of the Affordable Care Act, however, is not what the Court’s decision in King will hinge on. Rather, it is language: what the law says and what the lawyers arguing the law say. The Fourth Circuit heard oral arguments (audio) on May 14, 2014, and they delivered their 3-0 decision on July 22. (By the way, when the Fourth Circuit took up the case, it was known as “King v. Sebelius,” as HHS Secretary Sebelius had yet to resign.)
The brief that the government filed with the Supreme Court has a bit of language in it, (for all the briefs, click here). The term “cooperative federalism” appears eight times in the government’s brief. On page 15, we read: “the availability of tax credits in every State is essential to the Act’s model of cooperative federalism.” And on page 35: “Interpreting Section 36B to make tax credits available through the Exchanges in every State is essential to the effective operation of the Act’s insurance market reforms and to its framework of cooperative federalism.”
What is the government talking about? The term “cooperative federalism” never appears in the text of the ACA. There’s no cooperative federalism in the program, as 74 percent of the States aren’t cooperating. Did Congress cooperate with the States by consulting them when they passed the ACA? (The Solicitor General might read up on cooperative federalism, perhaps even the Cliff Notes.)
Some warn of dire consequences were the Court to rule for the plaintiffs in King. ThinkProgress warns that “7.3 million people could lose out on $36.1 billion in subsidies by 2016.” Some say that the new Republican Congress must have a fix waiting in the wings in case the Court finds for the plaintiffs.
Why? Republicans don’t believe in any of this; not a single one of them voted for ObamaCare, and they’ve voted repeatedly to repeal it. ObamaCare is an entirely Democrat concoction that was rammed down Americans’ throats against their wishes. Republicans shouldn’t be expected to fix, save, or otherwise bail out Democrat ideas on legislation.
In the landmark 2012 decision in NFIB v. Sebelius, the Court “rewrote” the ACA. “Rewrite” and its variants occur seven times in the dissent. What would it say about the Court if it again “rewrote” this law? The ACA was a mess to begin with, but it has been made even more incoherent by the Court itself. Shall the Court once again “rewrite” the law in order to save it? Is that the function of the high court, or is it to call balls and strikes? One reason the Court should strike down the IRS rule in King is because they should have struck down the entire ACA in NFIB. The reason the country is going through all this is because the Court didn’t read the law correctly back in 2012.
Regardless of what happens -- whether the Supreme Court strikes it down, or a future government repeals it, or it implodes in a brilliant death spiral and gets sucked into the “super-massive black hole” at the center of the galaxy where all Bad Ideas eventually go to die -- ObamaCare shouldn’t be seen as a total and hugely expensive waste of time and money, but as a civics lesson.
One of the lessons we should learn from this episode is how far America has fallen from her Founding; for instance, the 1942 decision in Wickard v. Filburn. That Supreme Court decision, cited 25 times in NFIB, allowed the government to deny Americans the right to farm their own land for the purpose of feeding themselves and their families. That’s not America.
Perhaps the biggest reason to hope that the Supreme Court will find for the plaintiffs in King v. Burwell and strike down Obama’s IRS regulation is to see what will happen next. Would Obama ignore the Court and continue awarding the illegal tax credit subsidies? And if the president does flout the Court, defiantly proclaiming “I will not go back,” what will Congress do about it?
Jon N. Hall is a programmer/analyst from Kansas City.