In a strikingly political decision, the Supreme Court ruled in favor of providing federal subsidies to states that did not set up their own Obamacare exchanges—despite the law explicitly calling for the opposite.
King v. Burwell emerged because thirty-six states either chose not to set up their own Affordable Care Act “marketplaces” or failed to properly maintain them and resorted to use of a federal exchange. As a result, the question of whether consumers in states without their own exchanges qualified for federal subsidies became a point of contention that eventually landed at the Supreme Court.
As Justice Antonin Scalia explained in his Burwell dissent:
This case requires us to decide whether someone who buys insurance on an Exchange established by the Secretary gets tax credits. You would think the answer would be obvious—so obvious there would hardly be a need for the Supreme Court to hear a case about it. In order to receive any money under §36B, an individual must enroll in an insurance plan through an “Exchange established by the State.” The Secretary of Health and Human Services is not a State. So an Exchange established by the Secretary is not an Exchange established by the State—which means people who buy health insurance through such an Exchange get no money under §36B.
Scalia’s point is central to understanding the backwardness of this ruling. Obamacare was written with the language Scalia described for a very specific reason. The goal was to coerce states into creating their own exchanges by tying access to federal subsidies to the creation of state-specific Obamacare “marketplaces.”
Recall Jonathan Gruber, the MIT economist and architect of Obamacare, who became a household name when it was revealed that he mocked the “stupidity of the American voter” for believing Obamacare wouldn’t ban their insurance plans or increase costs. He also stated in January 2012: “I think what’s important to remember politically about this, is if you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits.”
This directly contradicts the Supreme Court’s claim that Obamacare was just “sloppily written” and congressional intent was to provide federal subsidies in all 50 states. These coercive measures were baked into Obamacare, and the Supreme Court has now rewritten the statute for a second time.
Using federal law to coerce the states in this manner has become a time-tested American tradition. Take the drinking age as an example. States technically do not have to follow the guidelines set forth in the 1984 National Minimum Drinking Age Act. However, if they allow individuals under 21 to purchase alcohol, they lose a portion of their federal highway funding.
Notice that every state has since conformed to this federal standard. Also note that the Supreme Court ruled in South Dakota v. Dole that the National Minimum Drinking Age Act was in fact constitutional because, according to the Court, the level of coercion was just-so as to not violate the 10th and 21st amendments.
In her dissent, Justice O’Connor opined: “In my view, establishment of a minimum drinking age of 21 is not sufficiently related to interstate highway construction to justify so conditioning funds appropriated for that purpose.” The majority disagreed.
Today, there remain similar federal incentives built into funding for education, health care (most notably Medicaid), infrastructure, and countless other policy areas, all of which tie the hands of states and cajole them into a preferred federal model.
Given the long-standing effectiveness of this coercive federalization, our central planners were sure that no state would pass up the opportunity for “free” money when it came to Obamacare. Thus, they penned the section on exchanges accordingly, per Gruber, expecting state governments to line up at the trough as usual. Obamacare passed without much thought given to the state exchange issue, and was signed into law in March of 2010.
Then the tea party wave happened. Remember the contentious town hall meetings where constituents confronted their members of Congress over the absurdities of Obamacare? Recall when Democrats lost 60 seats in the House during the 2010 elections due in large part to dissatisfaction with the law?
This led to direct grassroots pressure on state legislatures and governors to refuse a state-based Obamacare exchange. Ultimately, 26 chose to forego the creation of their own exchanges outright. Others chose state-federal partnerships, and some eventually failed in their attempts at creating a state-based system.
Given the fact that the majority of states ultimately lacked their own exchanges, the executive branch decided to take matters into its own hands—as it has upwards of 30 times with Obamacare, congressional intent be damned. Federal subsidies were granted to those who qualified, despite the plain letter of the law. This gave birth to several lower court cases and what eventually became King v. Burwell.
Justice Scalia’s scathing dissent makes several good points about how shamelessly the Supreme Court has rewritten and protected Obamacare. As he artfully stated:
The Court’s decision reflects the philosophy that judges should endure whatever interpretive distortions it takes in order to correct a supposed flaw in the statutory machinery. That philosophy ignores the American people’s decision to give Congress “[a]ll legislative Powers” enumerated in the Constitution. Art. I, §1. They made Congress, not this Court, responsible for both making laws and mending them. This Court holds only the judicial power—the power to pronounce the law as Congress has enacted it. We lack the prerogative to repair laws that do not work out in practice, just as the people lack the ability to throw us out of office if they dislike the solutions we concoct. We must always remember, therefore, that “[o]ur task is to apply the text, not to improve upon it.”
Ultimately, Burwell leaves us with the messy Obamacare status quo, as written more by the executive and judicial branches rather than the actual lawmaking one, and will likely lead to further centralization of struggling state exchanges at taxpayer expense. Six million and counting have had the insurance plans they were promised they could keep banned, prices have skyrocketed (hence the need for the cost-hiding subsidies in question), and people have Obamacare health insurance cards without health care.
So much for affordability and access.