All posts by Abbe Gluck

Congress has a “plan” and the Court can understand it – The Court rises to the challenge of statutory complexity in King v. Burwell

[posted earlier on SCOTUSblog]

“A fair reading of legislation demands a fair understanding of the legislative plan.”  So concludes the game-changing statutory interpretation opinion of Chief Justice John Roberts in King v. Burwell. The opinion begins with five pages of detailed explanation of how the Affordable Care Act’s main provisions operate.  This is not Justice Antonin Scalia’s textualism.   King turns out to be a case about understanding Congress, not finding it inscrutable.  And it is the first major statutory case in which, rather than shying away from the difficult questions raised by the mounting complexity of the modern statutory era, the Court rises to meet it.  In King¸ the Court tells us, in no uncertain terms:  “We’ve got this.”  In so doing, the case may have ushered in the next chapter in the story of statutory interpretation, the Court, and its relationship to Congress.

Yes, Congress is more complex than ever and the ACA is unbearably long.  Yes, the ACA’s legislative process was highly unorthodox.  Yes, there is an unprecedented and unusual number of overlapping delegations to agencies in the statute, one of which – the overlap between the Department of Health and Human Services and the IRS – was at issue in the case.  Yes, the ACA  was “inartfully draft[ed]” (the Court’s phrase).  The majority acknowledges all of these challenges , but it does not take the path that the Court’s textualists usually take in the face of them – throwing up their hands and saying that such complexity is all the more reason to adopt a literal approach because Congress can never be understood. Rather than use the ACA’s complexity to say that its meaning is hopelessly indeterminate, King tells us that, even in the face of such complexity, Congress not only had a plan but that the Court is more than capable of discerning it.  The Court is all grown up.

I previously wrote here that King would be textualism’s big test.  The case, as briefed, struck at the soul of legislation experts because it so starkly highlighted a pressing question that the Court has long-resisted answering: How will the law of statutes adapt to today’s era of legislative complexity?  Would the text-oriented Court give the ACA the kind of sophisticated reading that textualism’s advocates have long told us textualism stands for, or would King reveal that statutory interpretation is nothing but an unprincipled game – an opportunity for very smart lawyers to seek loopholes in massive federal laws with the sole mission of pulling statutes to pieces.  It smelled like a constitutional battle on the cheap.

But that’s not what we get in the King opinion. It’s not that a sophisticated Scalia-esque textualist opinion couldn’t have sustained the result;  it could have.  But in an important sense, the Court chooses not fight on the typical textualist terrain at all, and instead gives us a different vision of the Court’s role in the cases like this than we have seen in a  long time.  King  is one of the only major text-oriented statutory interpretation decisions in recent memory in which the majority opinion barely includes a single canon of interpretation.  Most major statutory interpretation cases are Karl Llewellyn’s nightmare – a  barrage of canon vs. counter-canon. That is what many of us expected from King. But instead of duking it out through the canons, the King majority opinion outright rejects some of textualism’s favorites, including the rule against superfluities and the presumption of consistent usage, on the ground that they simply are not legitimate or accurate assumptions to apply to a statute as complex and as unorthodoxly drafted as the ACA.

Justice Scalia’s dissent views these departures from favorite textual presumptions as an exercise in activism, even though those presumptions assume a level of drafting perfection that rarely holds.  But what actually justifies the textual canons of interpretation in the first place if not their connection to how Congress works? The Court for decades has argued that the canons are legitimate precisely on the ground that they are realistic assumptions of how Congress drafts or are part of a shared set of conventions that put Congress and courts on the same page. My own empirical work casts serious doubts on those assumptions.  King drives home the point. What could be more activist than using judge-made rules of interpretation to impose a meaning on a statute that has no connection to its context and would literally smash the law to pieces? It is no accident that the majority opinion opens with the lengthy explanation of the ACA. The Court is showing us that it understands this law, and that it is important that it does.

Continue reading Congress has a “plan” and the Court can understand it – The Court rises to the challenge of statutory complexity in King v. Burwell

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Federalism and the burden of textual clarity on the challengers in King v. Burwell

I have a new piece at Politico that follows up on the federalism arguments in King v. Burwell, the challenge to the Obamacare subsidies heard by the Court this week.  Here is an excerpt and link to the full piece:

Federalism comes into play here because, properly understood, the case at the big picture level is all about the nature of the state-federal relationship Congress designed when it wrote the ACA. But federalism is also relevant at the nitty gritty level of legal doctrine and the parsing of the words of the statute, because, as the amicus brief I co-authored in the case details, the court has a set of doctrines that tell it how to interpret statutory text when a federalism question is at issue. Those doctrines prohibit the court from reading a statute to intrude on the states or to impose a drastic condition or consequence on the states unless the statute is crystal clear. The relevance of these doctrines to King, and the textual interpretation question at the heart of the case, is obvious: For the challengers to win, the drastic penalty their reading would impose on the states must be absolutely clear in the statute.

The ACA comes nowhere close to meeting this requisite standard of clarity. As Justice Kagan noted at the oral argument, “This took a year and a half for anybody to even notice this language.” In fact, the four conservative dissenting justices in the 2012 ACA opinion themselves also described the statute as allowing the subsidies. So how could it be, as the challengers now argue, that the subsidies are denied in the statute with crystal clarity, if no one, not even the court, read the statute that way until this case was cooked up? It is also irrelevant if states now understand the possibility of the penalty after the case has received so much attention. The court’s federalism doctrines are about the clarity of statutory text at the time of enactment. Why? Because, as law professor Michael Dorf also noted today, the only way states can protect themselves in the political process—and the way that federally elected officials can best protect the states—is for the states to be on notice of what a potential statute requires so that they can object before it becomes a law. It is unfathomable that, if this penalty really were written into the statute, no state, politician, blogger or insurer would have objected to it in the two years of the ACA’s intense pre-enactment scrutiny. It simply is too drastic and too controversial to have gone unnoticed if it was in there as clearly as the challengers claim.

That should be the end of the matter. Without that requisite level of clarity, the challengers’ reading cannot prevail. There is a lot of post-argument talk on legal blogs about whether or not the Affordable Care Act, as the challengers would read it, coerces the states in ways that may raise constitutional problems, and how the ACA’s insurance exchange provisions compare to what the court found to be the coercive nature of the ACA’s Medicaid expansion in 2012. (The brief I co-authored does not address this question of potential coercion, but others do). But no one needs to answer those questions to decide this case, because the statute cannot fairly be read—whether interpreted as a matter of text, context or in light of the federalism doctrines’ high standard of clarity—as the challengers would read it. Indeed, the court has applied these federalism doctrines in many other cases to reject state-unfriendly readings when the statutory text was miles clearer than this.

Of course, if a justice has remaining doubts about the clarity of the text, the potential constitutional question may indeed have relevance. There is another black-letter doctrine that directs the court, when faced with competing interpretations of a statute, one of which raises a potential constitutional issue, to pick the other interpretation. That doctrine of “constitutional avoidance” is grounded in principles of separation of powers and judicial restraint: It safeguards against the concern that judges will legislate.

But the potentially coercive nature of the consequences also has another kind of relevance. The more dramatic the penalty, the more evident it is that the statute lacked the requisite textual clarity. It is implausible that no one would have noticed such a penalty, if it actually existed. Even Justices Scalia and Alito on Wednesday, at oral argument, assumed that if the court ruled for the challengers, Congress or the states would have no choice but to quickly address the dramatic consequences of the challengers’ interpretation. That very assumption—that the ACA can’t function properly or even tolerably exist as read by the challengers—is another nail in the coffin of the preposterous notion that it was written, in crystal clear fashion no less, to fail.

Read more: http://www.politico.com/magazine/story/2015/03/king-vs-burwell-states-rights-115813.html#ixzz3TZbGsXuB

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King: Obamacare Subsidies as Textualism’s Big Test

In November, I participated in a SCOTUSblog symposium on King, the Obamacare case that the Court will hear this week. The case, as I argued then and still deeply believe, is textualism’s biggest test yet. Will the textualists show us -as they have been arguing for the past 30 years–that textualism is indeed a sophisticated and objective method of statutory interpretation that is a safeguard against judicial activism?  Textualism has had enormous success in the federal courts over the past decade, but those judges who have moved in textualism’s direction will surely question those moves if textualism doesn’t deliver what it promised.  Given that we are going to hear a lot of textualism talk this week and in the coming months, and to help folks get up to speed on these issues, I have reprinted (with permission ) my SCOTUSblog contribution below:

Obamacare’s opponents have depicted the challenges in King v. Burwell, Halbig v. Burwell, and the other subsidies cases as the choice between clear statutory text and vague notions of statutory purpose.   This is a smart strategy, because it creates the illusion of an easy choice for the Court’s textualists, and even for most of the other Justices. Textualists have spent three decades convincing judges of all political stripes to come along for the ride, and have had enormous success in establishing “text-first” interpretation as the general norm. In so doing, textualists have repeatedly emphasized that textual interpretation is to be sophisticated, “holistic” and “contextual,” not “wooden” or “literal,” to use Justice Scalia’s words. A lot of us (myself included) have gone to bat for this version of textualism, arguing that it is democracy enhancing and in furtherance of rule-of-law values, such as predictability.

The King challengers put all that on the line, and threaten all that textualists have accomplished. This is because King is not actually a text-versus-purpose case. Rather, King is about the proper way to engage in textual interpretation; specifically, about the interpretation of five words in a long and complex modern statute. And no one has to – or should – go outside the four corners of the Affordable Care (ACA) to decide it. So let’s cast aside the red herring of untethered purpose, and ask the question that gives King significance beyond the politics of health reform (and is a reason for the Court to avoid those politics): Will the Court follow, what Justice Scalia just five months ago (in Utility Air Regulatory Group v. EPA) called “the fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme”?

The five words at issue sit in a provision that requires the ACA’s insurance subsidies to be calculated based on premiums for individuals enrolled through an “Exchange established by the State under 1311” (ACA § 1401); the question is whether the IRS properly interpreted the ACA to allow those subsidies also to be available on federally operated exchanges (which now are the majority of exchanges). Section 1311 establishes the state-run exchanges and so, read in a vacuum, Section 1401 appears at first glance to deny the subsidies on federal exchanges. In context, however, the words are at a minimum highly ambiguous, and arguably actually clearly provide for subsidies on the federal exchanges.

Justice Scalia, an ardent proponent of judges not engaging in “legislation” under the guise of interpretation, has argued that the Court’s role is to adopt the interpretation that “does least violence to the text” (Green v. Bock Laundry). The IRS’s interpretation accomplishes that goal: Section 1401 can still be read literally because the section that authorizes the federal exchanges, Section 1321, provides that if a state does not establish an exchange under Section 1311, the Department of Health and Human Services (HHS) “shall . . . establish and operate such Exchange within the State.” In other words, HHS must “establish” a Section 1311 exchange, which is a state exchange. Moreover, the Act defines “Exchange,” with a capital E, three times in the statute as a “state” exchange. And HHS, in Section 1321, is told to establish “such [capital E] Exchange.” The Court need not add or delete a single word of the ACA to reach this conclusion. (In fact, the Court shouldn’t be engaging in that enterprise in the first place. This is a Chevron case: an agency interpretation is at issue, and so all that is required is that the agency’s own construction be reasonable.)

On the other hand, as amply detailed in the briefing, the ACA’s text – not its purpose or its legislative history, or anything else that textualists don’t generally consider – is slashed to pieces under the challengers’ reading. Two examples from a list of many offered in the briefing:

  •  Section 36B(f)(3) requires “[e]ach Exchange (or any person carrying out 1 or more responsibilities of an Exchange under section 1311(f)(3) or 1321(c)” to report the premiums doled out. Section 1321 is the federal exchange provision, and so this section is rendered meaningless if the federal exchanges have no subsidies.
  • Likewise Section 1312(f) provides that only “qualified individuals” can purchase on an Exchange but defines a qualified individual as one who “resides in the State that established the Exchange.” Failure to understand a federally operated exchange as the legal equivalent of a state exchange would mean that federal exchanges have no customers.

Justice Scalia’s own statutory interpretation treatise argues (at pages 63 and 168) that “there can be no justification for needlessly rendering provisions in conflict if they can be interpreted harmoniously,” and that statutory provisions should not be interpreted to render them ineffective or superfluous.

Textualists also advocate structural, contextual interpretation. As Justice Scalia’s treatise puts it (at 168): “[N]o interpretive fault is more common than the failure to follow the whole-text canon, which calls on the judicial interpreter to consider the entire text, in view of its structure and of the physical and logical relation of its many parts.” The subtitles of the ACA immediately surrounding the provision in question are a set of interlinking pieces: they add new requirements on insurers to make insurance accessible; impose the infamous individual mandate on the public to populate the insurance pools; and create the federal and state exchanges and authorize the subsidies (which the exchanges deliver) to make insurance purchase accessible and affordable enough for the individuals now required to purchase it. In their 2012 joint dissent in NFIB v. Sebelius, Justices Scalia, Kennedy, Thomas, and Alito read these parts as making no logical sense without one another and also read the statute to include subsidies on federal exchanges:

“Congress provided a backup scheme; if a State declines to participate in the operation of an exchange, the Federal Government will step in and operate an exchange in that State.”

and then:

“That system of incentives collapses if the federal subsidies are invalidated. Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges, and some insurers may be unwilling to offer insurance inside of exchanges. With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.

The 2012 Supreme Court brief of the state governments likewise read the statute as providing subsidies through the federal exchanges: “If a State is not willing to create and operate an exchange, the federal government will step in and do so itself. ACA § 1321(c). Subtitle E then establishes tax credits and other subsidies for the lower-income individuals and small businesses that purchase plans on the exchanges. ACA §§ 1401–21.” It is no coincidence that the section of the ACA in which all this appears is entitled “State Flexibility Relating to Exchanges”; the provision establishing the federal exchange (Section 1321) also has the title “State Flexibility.” By using this terminology, the text by its own terns gives states the choice – without penalty – between operating an exchange or letting the feds do it for them.

The 2012 plaintiffs – represented by the same lawyer in King – even argued that the entire Affordable Care Act should have been struck down without the subsidies, because it could not function without them.

Textualists apply several canons of construction premised on the assumption that Congress does not write statutes to fail. One is constitutional avoidance. Another is severability. (Both were used to save the ACA in NFIB.) Related is the major questions rule, which presumes that Congress is not subtle when it makes a major statutory move. The King challengers are asking the Court to adopt a reading that assumes that Congress purposefully designed the federal exchanges without the very same subsidies that in 2012 even the ACA’s opponents viewed as essential to the statute’s functioning. In other words, they are now arguing that Congress intentionally configured the federal exchanges to be doomed to fail. If that isn’t a major question that requires an explicit statutory statement, what is? The purpose of all of these rules – avoidance, severability, major questions – is to keep judges from “legislating”; that is, from interpreting a statute in ways that would make it unrecognizable to enacting Congress, as the proposed reading surely would.

In an effort to lend plausibly to their interpretation, the challengers have spent the past year constructing a narrative that the Exchange provisions operate exactly like Medicaid does: that Congress needed a “stick” – taking away the subsidies – to convince the states to operate the exchanges themselves. I have illustrated elsewhere that this reading of legislative history is inaccurate, but more importantly for this post, note that the challengers have to look outside the text of the statute to even try to construct this narrative. The text is fatal to this argument. Another common textual rule of interpretation, exclusio unius, draws strong inferences from Congress’s utilization of statutory structure in one part of a statute or related statutes and its omission from another. Medicaid is explicit that states lose their funding (and there is no federal fallback) if they do not cooperate. The ACA has not one word on that point in the exchange context and instead does what Medicaid doesn’t: the ACA provides fallback federal exchanges. This is exclusio unius 101: Medicaid shows that Congress knows how to be explicit if it wishes to use a federalism “stick.” The lack of an analogous provision for the exchanges leads to precisely the opposite of the challengers’ reading under textual analysis.

Textualists have spent the past thirty years persuading even their opponents of the jurisprudential benefits of a sophisticated text-based interpretive approach. The King challengers put that all at risk. To be clear: my argument isn’t about the merits of the ACA. The ACA isn’t perfect health policy. But the King challenge is all about the ACA’s merits. They have vowed to destroy the statute at any cost, even if it means corrupting textualism to do it.

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Where have the federalists gone? Obamacare, King, and the Court

The Obamacare case, King v. Burwell, which the Court will hear next week, has deep importance not only for health care but also for law.  I have previously detailed why the case is textualism’s big test. Today, in Politico, I explain why the case is also fundamentally about state rights.  The question is whether the Court’s federalism doctrines–which, let’s not forget, the Court applied against the Government in the last Obamacare case–whether these federalism doctrines, like the Court’s  textualist rules, are sufficiently legitimate and objective such they will apply regardless of which side they happen to support, even in a case as politicized as this one.  After all, isn’t that the point of have a rule of law in the first place?

Here is an excerpt and a link.

The issue in King is whether the ACA penalizes states that opt out of setting up their own health insurance exchanges and, instead, let the federal government do it for them. The challengers have seized on four words in this 2,000-page law that, they contend, contain a dramatic consequence for the 34 states that have made this choice and allowed the federal government to step in: the loss of critical insurance subsidies that make health insurance affordable and sustain the insurance markets under the law. Without the subsidies—which are estimated at $25 billion across the 34 states—more than eight million Americans will likely lose their insurance. And, as a result, the insurance markets in those states will face near-certain collapse.

The challengers maintain that the case is simply about reading plain language. (I have detailed elsewhere why their hyper-literal reading of four words out of context is anything but plain and is not how the Supreme Court usually reads statutes.) But King is about a lot more than this. The case is about federalism—the role of states in our national democracy. The reason the challengers don’t want anyone to realize that is because the very text-oriented justices to whom they are appealing are the exact same justices who have consistently interpreted federal laws to protect states’ rights. And the challengers would read the ACA in the opposite way—as having devastating implications for the states.

The challengers’ interpretation turns Congress’s entire philosophy of states’ rights in the ACA upside down. Congress designed the exchanges to be state-deferential—to give the states a choice. But under the state-penalizing reading that challengers urge, the ACA—a statute that uses the phrase “state flexibility” five times—would be the most draconian modern statute ever enacted by the U.S. Congress that included a role for the states. What’s more, if interpreted as the challengers hope, the ACA would have been debated, enacted and implemented for two whole years under intense public scrutiny, including the scrutiny trained on it during the last major constitutional challenge in the Supreme Court in 2012, without anyone—no state, congressman or blogger—noticing these consequences or objecting to them.

A brief filed by Virginia and more than 20 other states attests that any clue of the dramatic penalty the challengers have read into the statute was entirely lacking. In the end, King is about whether an invented narrative that only emerged for purposes of this case should be permitted to work the greatest bait and switch on state governments in history.

Read more: http://www.politico.com/magazine/story/2015/02/king-v-burwell-states-rights-115550.html#ixzz3SxSbOrL4

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The CBO score and the Made-Up Narrative of the ObamaCare Subsidies Case

Two years ago, I posted on this blog that the CBO scoring of Obamacare was central, in the public eye, and intensely scrutinized by all involved with the statute. CBO never assumed in scoring the bill that subsidies would be unavailable on federal exchanges. Justice Scalia and the joint dissent in NFIB v. Sebelius also relied on the CBO score, saying: “By 2019, 20 million of the 24 million people who will obtain insurance through an exchange are expected to receive an average federal subsidy of $6,460 per person”—numbers that only make sense if the federal exchanges are included.  Today,  a Talking Points Memo piece offers even more evidence supporting the argument.  Here is one snippet:

“It definitely didn’t come up. This possibility never crossed anybody’s mind,” David Auerbach, who was a principal analyst for the CBO’s scoring of the ACA, told TPM on Thursday. “If we started to score it that way, they would have known that, and they would have said, ‘Oh, oh my gosh, no, no no,’ and they probably would have clarified the language. It just wasn’t on anybody’s radar at all.”

It remains my view that the text of the ACA, when read not in isolation, but in context–the approach the Court (including the textualists) repeatedly cites as its preferred approach–clearly permits the Government’s interpretation of the subsidies. (If anyone is doubtful, the Court made such a statement as recently as this Term in Utility Air, through Justice Scalia:

“[W]e, and EPA, must do our best, bearing in mind the “‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’” FDA  v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 133 (2000). As we reiterated the same day we decided Massachusetts, the presumption of consistent usage “‘readily yields’” to context, and a statutory term—even one defined in the statute—“may take on distinct characters from association with distinct statutory objects calling for dif­ferent implementation strategies.”)

But the CBO story offers another datum–along with the testimonials of staffers and reporters that have been pouring out all week–that no one ever assumed the statute said otherwise.  Why is this so important? Remember this is a Chevron case–a case that turns on the doctrine of agency deference.  To win under the doctrine, all the Government has to do is show that its reading of the statute is plausible.  The challengers, on the other hand, have to prove that the statute clearly says what they want it to say and admits of no other interpretation.  To do that, they have to convince the Court their reading of the statutory text is not only plausible but is the only possible reading.  The challengers are now trying to strengthen their case by weaving a narrative that Congress actually intended the result they claim the statute requires.  All of the evidence, textual and otherwise, points the other way.  A major lawsuit, challenging a massive federal statute that already has been upheld once by the Supreme Court and whose repeal has been rejected by Congress more than 40 times, should not be based on a story that is made up.

 

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Don’t Buy the Cooperative-Federalism-Makes-Halbig-Logical Argument

I had hope to take a day off blogging about Halbig and King (the ObamaCare Subsidies cases), but I cannot allow another new, and inaccurate, narrative about ObamaCare to take hold. Over at Volokh, my friend Ilya Somin argues that the holding in Halbig is not absurd because Congress uses statutory schemes all the time that try to incentivize states to administer federal law (and penalize them if they don’t).  It is true we see schemes like that all the time–Medicaid is a prime example–but the insurance exchange design at issue in these cases is NOT one of them.  This federalism argument was made before the D.C. Circuit and even Judge Griffith didn’t buy it in his ruling for the challengers.  I tried to dispel this myth back in March, when I wrote the following on this blog. As I said there, this isn’t Medicaid—it’s the Clean Air Act.

 “This is not a conditional spending program analogous to Medicaid. 

The challengers’ strategy in this round has been to contend that the subsidies are part of an overarching ACA “carrots and sticks” strategy to lure states into health reform and penalize them if they decline.  On that version of the story, it might make sense that subsidies would be unavailable in states that do not run their own exchanges. In their view, the subsidies are therefore exactly like the ACA’s Medicaid provision (from appellants’brief: “The ACA’s subsidy provision offered an analogous ‘deal’ to entice states to establish Exchanges—because Congress (wisely, in hindsight) knew it had to offer huge incentives for the states to assume responsibility for that logistically nightmarish and politically toxic task.”)

Putting aside the fact that no one thought the states wouldn’t want to run the exchanges themselves (indeed, Senators were demanding that option for their states), the exchange provisions simply do not work in the same way as Medicaid.  Unlike the ACA’s Medicaid provisions, the exchange provisions have a federal fallback:  Medicaid is use it or lose it; the exchanges are do it, or the feds step in and do it for you.  In other words, this isn’t Medicaid; it’s the Clean Air Act (CAA).  If a state decides not to create its own implementation plan under the CAA, its citizens do not lose the benefit of the federal program—the feds run it. The same goes for the ACA’s exchanges and so it would be nonsensical to deprive citizens in federal-exchange states of the subsidies.  More importantly, if we are going to compare apples to oranges, the ACA’s Medicaid provisions have an explicit provision stating that if the state declines to participate, it loses the program funds (this was the provision at issue in NFIB v. Sebelius in 2012).   The ACA’s subsidy provisions, in contrast, have no such provision, strong evidence that the subsidies were was not intended to be forfeited if the states did not participate.  If the challengers are going to insist on strict textual arguments, this is exclusio unius 101: the rule of interpretation that provides that where Congress includes a specific provision in one part of the statute but does not include an analogous provision elsewhere, that omission is assumed intentional.”

* * *

It may be true that the ACA’s politics have created a landscape no one ever predicted—one in which federalism-focused states, whose congressional representatives were demanding the states’ rights to establish exchanges instead of the federal government—have decided that politics is more important than federalism and opted out.  But what’s happened in hindsight doesn’t change what happened when the statute was enacted and how the statute is designed. What happened when the statute was designed was that no one thought the states needed a carrot to do this and the statute was never designed as a “use or lose it” incentive, like Medicaid

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Fourth Circuit Rules in FAVOR of the Government in the Obamacare Subsidies case

Making sure our readers keep up with this whiplash-causing day in the land of health reform: The Fourth Circuit released its own opinion (3-0, with a strong concurrence from J. Davis) rejecting the subsidies challenge pending in that court right after the DC Circuit released its own opinion sustaining the same challenge there . The Fourth Circuit went with a straight Chevron argument, but indicated it thought the government had the better reading of the statutory text in any event. Judge Davis concurred specially to make the point that Chevron wasn’t even necessary: that the statute clearly requires the subsidies on the federal exchanges. Of interest to statutory interpretation types (and along the lines of what I’ve been arguing in previous posts), Judge Davis also argued that this isn’t a case of “textualism v. purposivism” or statutory text versus some amorphous concept of congressional intent.  Davis argued that the text of the statute as a whole answers the question definitely in favor of the Government.

[cross-posted at Balkinization]

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D.C. Circuit Rules Against Govt in ObamaCare Exchange Subsidies Case

The D.C. Circuit has just ruled, 2-1, that the critical subsidies are not available to consumers buying insurance in states where the exchanges are operated by the federal government, rather than the states.   Initial reaction- more to come: The opinion  is terribly disappointing from a statutory interpretation perspective. It relies in part on irrelevant legislative history (from the HELP committee, whose bill wasn’t even the basis for these provisions–the Finance committee’s was) and gets it wrong anyway (as I argued here);  it bends over backwards to come up with reasons why Congress might have intended this result (which we all know it certainly did not); and it attaches far too much significance to a line in the statute that expressly deems exchanges in the territories to be state exchanges and does not replicate the special deeming language for the federal exchanges.  The territories language is boilerplate language used by Congress when talking about territories in statutes even beyond the ACA, and should have been attached no significance here. What’s more, applying the exclusio unius presumption  (that when Congress specifies X we can assume that it meant not to specify X elsewhere) to a statute as long and complicated as the ACA — and one that did not go through the usual linguistic “clean up” process in Conference (as I wrote here) does a disservice to textualism and all those who have defended it over the years–turning it into a wooden unreasonable formalism  rather than the sophisticated statutory analysis that textualists have been claiming they are all about.

 

[cross posted at Balkinzation]

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What the EPA case *Really* Has to Say About the ObamaCare Subsidies Lawsuits

          The proponents of the ObamaCare tax subsidies law suit (currently pending in both the D.C. and Fourth Circuits and which I have discussed here, here,  here, and here) have seized on the Court’s recent decision in Utility Air Regulatory Group v. EPA—going so far as to file letters of supplemental authority with both courts highlighting the case as additional relevant authority for the subsidies suits.   We should hope that the courts understand the Affordable Care Act—and the specifics of the subsidies challenge—well enough to understand how different these cases are.  There is also much in Utility Air, not mentioned by the challengers, that supports the Government’s position in the ACA case, and that should resonate with even the most textualist of judges.

            The ACA challengers’ filings and blog posts highlight the part of Utility Air in which the Court refused to let EPA “tailor” the Clean Air Act’s explicit pollution thresholds (raising them higher than the statutory allowance because greenhouse gas emissions are much greater than conventional pollutants).  They also highlight the Court’s invocation of the so-called “major questions” rule—the presumption that Congress does not delegate decisions to agencies of vast economic and political significance without making that delegation clear.

          The subsidies challenges present completely different facts.  The issue in those cases is whether a line in the ACA that provides that the subsidies shall be available to individuals enrolled in insurance “through an Exchange established by the State under section 1311,” clearly also excludes individuals enrolled through federally-operated exchanges.  The challengers have made this argument because more than half of the states are using federal exchanges and denying the subsidies on those exchanges would be lethal to the ACA’s operation.   Both HHS and the IRS have interpreted the statute as providing the subsidies on the insurance exchanges operated by both the state and the federal governments.  Their interpretation is based on the fact that numerous other provisions of the statute, as elaborated in the government’s briefings, would be nonsense and superfluous under the challengers’ reading.  One of many possible examples is ACA §36B(f), which  provides that”

 

Each Exchange (or any person carrying out 1 or more responsibilities of an Exchange under section 1311(f)(3) or 1321(c) of the Patient Protection and Affordable Care Act) shall provide the following information to the Secretary and to the taxpayer with respect to any health plan provided through the Exchange:… (C) The aggregate amount of any advance payment of such credit or reductions”

 

Section 1311 refers to the state exchanges; section 1321 refers to the federal exchanges.  Half of this section—which requires reporting to the IRS of the amount of the subsidies offered on both exchanges—would be superfluous the subsidies were not available on the federal exchange. It also would be nonsense. 

            Enter Utility Air.  In the key first part of the opinion, not highlighted by the challengers, the Court, first, emphasizes that Chevron deference applies to an agency’s reasonable construction of a statutory ambiguity; and second, emphatically rejects overly literal, a-contextual readings of statutes that do not consider how statutory terms functions in their broader context within the statute as a whole.  From Justice Scalia’s opinion in Utility Air:

“To be sure, Congress’s profligate use of “air pollutant” where what is meant is obviously narrower than the Act­wide definition is not conducive to clarity. One ordinarily assumes “‘that identical words used in different parts of the same act are intended to have the same meaning.’” Environmental Defense v. Duke Energy Corp., 549 U. S. 561, 574 (2007). In this respect (as in countless others),the Act is far from a chef d’oeuvre of legislative draftsman­ship. But we, and EPA, must do our best, bearing in mind the “‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’” FDA  v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 133 (2000). As we reiterated the same day we decided Massachusetts, the presumption of consistent usage “‘readily yields’” to context, and a statutory term—even one defined in the statute—“may take on distinct characters from association with distinct statutory objects calling for dif­ferent implementation strategies.”

             In case of the subsidies, it is clear beyond cavil that, in the context of the ACA as a whole, the subsidies are available on the federal  exchanges.  Indeed, Justice Scalia himself—in the Joint Dissent authored by Justices Scalia, Thomas, Kennedy and Alito, in NFIB (the major 2012 constitutional challenge to health reform )  described the ACA’s state-federal health exchange division-of-labor without any doubt as to the provision of the subsidies on federal exchanges.  In fact, the Joint Dissent goes further, arguing that the exchanges will collapse without the subsidies and the Act will not function as Congress intended:

“Congress thought that some States might decline federal funding for the operation ofa “health benefit exchange,” Congress provided a backup scheme; if a State declines to participate in the operation of an exchange, the Federal Government will step in and operate an exchange in that State. See 42 U. S. C. §18041(c)(1).”

and then:

“The Act’s design is to allocate billions of federal dollars to subsidize individuals’ purchases on the exchanges. ..  By 2019, 20 million of the 24 million people who will obtain insurance through an exchange are expected to receive an average federal subsidy of $6,460 per person. See CBO, Analysis of the Major Health Care Legislation Enacted in March 2010, pp. 18–19 (Mar. 30, 2011).”

and then:

“In the absence of federal subsidies to purchasers, insur­ance companies will have little incentive to sell insurance on the exchanges. Under the ACA’s scheme, few, if any, individuals would want to buy individual insurance poli­cies outside of an exchange, because federal subsidies would be unavailable outside of an exchange. …  That system of incentives collapses if the federal subsidies are invalidated. Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges, and some insurers may be unwilling to offer insurance inside of exchanges. With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.”

        The  Joint Dissent’s understanding of how the statute operates came from a holistic reading of the statute—the statute as a whole, in context, as any good textualist should read it, and as Justice Scalia himself has been arguing for years how good textualists do read statutes.  For the subsidies-case challengers now to argue that it was clear Congress intended something different flies in the face of all the evidence we have from Congress and the states (as I elaborated here) and, from the Court itself in NFIB.  The D.C. District Court found the ACA so clear on the allowance of the federal exchange subsidies that it did not even go to Chevron deference.  But at a minimum, the statutory context as a whole creates an ambiguity that has been reasonably resolved by both federal agencies—HHS and the IRS—explicitly delegated the authority to interpret these provisions. Contrary to the challengers’ new arguments based on Utility Air, the IRS and HHS are not doing anything like “tailoring” the ACA’s clear text to new circumstances; rather, they are enforcing the ACA as written. 

        Finally, with respect to the major questions rule—the presumption that Congress does not silently give agencies the power to decide questions of major economic or political significance—that rule cuts exactly in the opposite direction in the subsidies case as in the EPA case.  In the subsidies case, had HHS or the IRScome out with the opposite interpretation—allowing subsidies on only the state exchanges—the result would have been, as Justice Scalia himself agreed in the NFIB Joint Dissent—the complete collapse of the ACA’s insurance regime. Such an agency interpretation would have denied the subsidies—and so denied health insurance—to the more than 12.5 million Americans expected to be eligible for subsidies in federal-exchange states.  If that interpretation—the opposite interpretation as the one actually adopted by HHS and IRS—wouldn’t constitute a decision of enormous political and economic significance that Congress couldn’t possibly have intended an agency to make—what would?

[cross posted at Balkinization 
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What Bond, Abramski, and Pom Wonderful Have in Common: The Enduring Mystery of the Canons of Statutory Interpretation

Before the final cases of the Term overtake us, it is worth pausing a moment on the connection shared by three cases handed down earlier this month, each about radically different subjects, but giving rise to the same misunderstandings about statutory interpretation: Bond (about the reach of the Chemical Weapons Convention Implementation Act to a wife’s attempt to injure her husband’s lover);  Pom Wonderful (a deceptive labeling dispute between two drink makers); and Abramski (about the straw purchase of firearms).

In each of these cases, the Court considered well-worn interpretive principles to get it out of the interpretive jam—the federalism canon in Bond; the harmonization canon in Pom Wonderful; and the rule of lenity in Abramski.  What is surprising about the cases is that they have, in fact, surprised anyone, as they have, given how utterly common these principles are.  Also noteworthy is the way in which Court itself in these cases seems to be having a much more explicit debate about the nature of these presumptions and what triggers them it typically does.

Start with Bond.  Some commentators were eagerly anticipating a major foreign affairs/treaty power opinion. Instead, many were aghast that the Court avoided the hard constitutional questions raised by the case by applying a mundane principle of statutory interpretation.  Others were even more infuriated that  the Court allegedly “invented” the interpretive principle that it used for this case. Commentators (see, e.g., this piece in the  National Review) cheered on Justice Scalia for opposing application of this brand new “federalism presumption”—the rule that ambiguous federal statutes be construed not to intrude on traditional state domains.  In fact, that principle is neither new, nor does Justice Scalia oppose it.  The principle is a first-cousin of the presumption against preemption (which has been around at least since the 1930s) and was itself announced in Gregory v. Ashcroft, 501 U.S. 452 (1991) (joined by Justice Scalia) and applied in case after case since then.  The canon is so common that not teaching it would be malpractice in any statutory interpretation course.  The worlds of statutory interpretation and constitutional law are too inextricably intertwined at this point for any Court-watchers to be surprised about the existence of these interpretive presumptions or their decisive power in major, constitutional-law-implicating cases.

What Justice Scalia was objecting to was not the canon’s existence but what triggers it. His argument was that the statute was not sufficiently ambiguous to trigger the canon’s application.  That’s the important doctrinal question that comes out of the Court’s opinion—whether federalism or any of the other 100 common policy presumptions of statutory interpretation—require ambiguity to trigger them or whether they can swoop in, armed with the mantle of quasi-constitutional law, even if the text is clear.

Abramski raises the same exact issue, in the opposite presentation. This time it was Justice Scalia who was arguing for the application of a canon—there, the rule of lenity.  But the majority (through Justice Kagan this time)  clarified the statute for itself using other tools—this time, statutory history and purpose—and so did not need the rule of lenity.  Like Bond, this is a fight about when the many different interpretive presumptions that are already in play apply any individual case. As I have  previously elaborated, the Court remains woefully inconsistent about these matters.  Justice Scalia himself recently co-authored a 500-page treatise that passes judgment on many of the canons but fails to discuss any system of applying them, any way to make their application more consistent or even what they  are.  Most commentators (not I) emphatically resist the idea that these interpretive presumptions are some kind of judge-made law (indeed, that feeling is part of what is driving the outrage about Bond).  But anyone following these cases should question whether it can really be said anymore (if it ever could have been said) that these rules are not deciding cases, are not in fact judicial creations and are not precedential.  The canons of constitutional avoidance, lenity, federalism and many more decided not only these cases but also the vast majority of statutory cases ranging from the health reform case to the Enron case. Isn’t it time to reevaluate their legal status and their importance?

A brief word about Pom Wonderful. Writing for the majority, Justice Kennedy framed the case as resting on a potential conflict between the Lanham Act and the Federal Food, Drug and Cosmetic Act.   As he described it (internal citations omitted):

“[T]his is a statutory interpretation case and the Court relies on traditional rules of statutory interpreta­tion. That does not change because the case involves multiple federal statutes.  Nor does it change because an agency is involved. Analysis of the statutory text, aided by established princi­ples of interpretation, controls.

A principle of interpretation is “often countered, of course, by some maxim pointing in a different direction.” It is thus unsurprising that in this case a thresh­old dispute has arisen as to which of two competing max­ims establishes the proper framework for decision. POM argues that this case concerns whether one statute, the FDCA as amended, is an “implied repeal” in part of an­other statute, i.e., the Lanham Act. POM contends that in such cases courts must give full effect to both statutes unless they are in “irreconcilable conflict”… Coca-Cola resists this canon and its high standard. Coca-Cola argues that argues that the case concerns whether a more specific law, the FDCA, clarifies or narrows the scope of a more general law. The Court’s task, it claims, is to “reconcil[e]” the laws….”

The Court does not need to resolve this dispute. Even assuming that Coca-Cola is correct that the Court’s task is to reconcile or harmonize the statutes and not, as POM urges, to enforce both statutes in full unless there is a genuinely irreconcilable conflict, Coca-Cola is incorrect that the best way to harmonize the statutes is to bar POM’s Lanham Act claim.”  Slip at. 8-9.

What is so bizarre about Pom Wonderful, and the reason I include it in this post, is first, that Justice Kennedy begins the opinion with an almost elementary lesson in statutory interpretation—noting that conflict between canons is typical, and that “traditional canons” (whatever those are!) control in all statutory cases regardless of how many federal statutes or federal parties are involved.  This seems to be quite a basic statement for the Court to feel compelled to make, and one it should not need to make in an era in which the vast majority of cases the Court decides involve one or more federal statutes and the potential application of the canons. Even so, and this is the second puzzling aspect of Pom Wonderful, Justice Kennedy then completely avoids answering the very question he presented–namely, how we are to resolve the recurring issue of canon conflict. Instead, he adopts a purposive and functional approach that discounts the canons altogether—but, really, implicitly favors the rule of preferred by Pom Wonderful.

Where are we in the so-called “statutory interpretation wars”? Commentators for years have been arguing that the big fights between textualism and purposivsm are over.  That may be true when it comes to questions about those two interpretive philosophies, but, as this Term has showed us, we have a long way to go before we arrive at any kind of doctrinal stability, much less a coherent approach to the endeavor.

Cross-posted at Balkinization

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Update on ObamaCare Subsidies Post- Brief Response to Cannon

      Quick update to my ObamaCare Subsidies Case post of yesterday:  Michael Cannon has written a response, in which he claims that the statutory history that my post unpacked helps the challengers. The crux of his argument is the same as the one in the briefing; namely, that because there was a provision in an earlier draft of a bill from the HELP Committee (that did not become the ACA) that would have denied subsidies to the states if they did not establish their own exchanges and also refused to let the government do it, that proves denying the subsidies is logical within the structure of the current statute.  First off, as I have argued, early drafts of bills that changed considerably before becoming law should have little weight, so I don’t think any real weight should be put on the HELP bill.  That said, I read the history the other way.  As I detailed yesterday, the HELP bill posited three options for the states and the exchanges:  1) the states could establish the exchanges themselves and get the subsidies; 2) the states could invite the federal government to establish them for the states and get the subsidies; or 3) the states could refuse to have exchanges altogether, in which case there would be no exchanges and no subsidies for four years—at which time the federal government would come in and, once it did, the subsidies would be available. Nothing in the HELP bill contemplates a federally operated exchange with no subsidies. That’s the key point; with respect to every option in the HELP bill, once the feds come in, the exchanges are available. Read it the whole thing (all of section 3104) for yourself.   (The only limitation on the subsidies, for federal and state exchanges alike, was if the state refused to apply the employer mandate to its own state government employees; that limitation never got into the final ACA and is irrelevant here.)

        Further, the final version of the ACA did not adopt option 3 above. The final version of the ACA does not give states the option of refusing to have exchanges altogether.  Thus, if we care about what provisions about state vs. federal exchanges survived the HELP bill, it was option 1 and option 2.  Either way—including with respect to option 3—Congress never contemplated a federal exchange with no subsidies.  And that’s what makes sense–for all the reasons about how the ACA functions and its other provisions, which I and others already have amply detailed.

       (Cannon also nits that I did not provide a link to his amicus brief (which I did not do because my post referred to his arguments on the blogs). Glad to provide it here.)

     More after the oral argument…

[cross-posted at Balkinization]

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ObamaCare Subsidies in the D.C. Circuit: Clearing Up Some ACA Facts and History

     The ObamaCare subsidies challenge, Halbig v. Sebelius, will be argued tomorrow in the D.C. Circuit.  In  this latest round of litigation, the challengers have made a variety of kitchen-sink arguments, many of which are incompatible with the basic principles of statutory construction on which their briefs purport to rely and which evince a misunderstanding of the ACA’s procedural history. The Government’s briefing and the lower court opinions understandably chose not to respond in detail to all of them; but given the intensity with which some of these arguments have appeared on the blogs in recent days, I will use this post to try to clear up some of these matters.

      For readers just getting up to speed, the lawsuit aims to prevent the Administration from subsidizing insurance purchases in those states in which the federal government, rather than the states, is operating the Affordable Care Act’s (ACA) new insurance marketplaces (called “exchanges”).  The case is a big deal: more than 12.5 million people are expected to be eligible for this financial assistance on the federal exchanges; the subsidies average more than $5,000 per person; and the subsidies are essential to supporting the insurance-purchase mandate—which in turn supports the insurance-market reforms at the heart of the ACA. The challengers’ argument is based on a line in the ACA that provides that the subsidies shall be available to individuals enrolled in insurance “through an Exchange established by the State under section 1311,” which they argue clearly excludes individuals enrolled through federally-operated exchanges. I have already written extensively (here, here and here) about why that textual argument—although superficially appealing—should be rejected on its own terms: The ACA’s overall textual structure and context dictate the opposite result. The D.C. district court reached the same conclusion; and it is on those grounds that this case will hopefully be decided on appeal. 

     This post has a different aim: namely, to clear the air on some of those additional, throw-and-see-if-it-sticks assertions that have been made, and to provide the factual and legal background. 

 #1: This is not a conditional spending program analogous to Medicaid.

       The challengers’ strategy in this round has been to contend that the subsidies are part of an overarching ACA “carrots and sticks” strategy to lure states into health reform and penalize them if they decline.  On that version of the story, it might make sense that subsidies would be unavailable in states that do not run their own exchanges. In their view, the subsidies are therefore exactly like the ACA’s Medicaid provision (from appellants’brief: “The ACA’s subsidy provision offered an analogous ‘deal’ to entice states to establish Exchanges—because Congress (wisely, in hindsight) knew it had to offer huge incentives for the states to assume responsibility for that logistically nightmarish and politically toxic task.”)

       Putting aside the fact that no one thought the states wouldn’t want to run the exchanges themselves (indeed, Senators were demanding that option for their states), the exchange provisions simply do not work in the same way as Medicaid.  Unlike the ACA’s Medicaid provisions, the exchange provisions have a federal fallback:  Medicaid is use it or lose it; the exchanges are do it, or the feds step in and do it for you.  In other words, this isn’t Medicaid; it’s the Clean Air Act (CAA).  If a state decides not to create its own implementation plan under the CAA, its citizens do not lose the benefit of the federal program—the feds run it. The same goes for the ACA’s exchanges and so it would be nonsensical to deprive citizens in federal-exchange states of the subsidies.  More importantly, if we are going to compare apples to oranges, the ACA’s Medicaid provisions have an explicit provision stating that if the state declines to participate, it loses the program funds (this was the provision at issue in NFIB v. Sebelius in 2012).   The ACA’s subsidy provisions, in contrast, have no such provision, strong evidence that the subsidies were was not intended to be forfeited if the states did not participate.  If the challengers are going to insist on strict textual arguments, this is exclusio unius 101: the rule of interpretation that provides that where Congress includes a specific provision in one part of the statute but does not include an analogous provision elsewhere, that omission is assumed intentional.

 #2: The HELP Committee Bill Did Not Deprive All Federal-Exchange States of the Subsidies

            As part of their effort to depict the subsidies as “carrots” for state participation, the challengers have relied on an early draft bill from the HELP Committee, much of which was later incorporated into the ACA. Setting aside the fact that the challengers should not be able to simultaneously embrace and reject the ACA’s legislative history, as the briefs do, they have focused on the Senate HELP Committee’s original draft, which was subsequently merged with a Finance Committee draft and further morphed by Majority Leader Reid—all of which should give us pause about relying on these early drafts in the first place.  Regardless, challengers have asserted that the HELP Committee bill denied premium credits in states that did not establish exchanges (from the brief: “Under the HELP bill, if a state established an Exchange (“Gateway”), residents could receive “credits” almost immediately. Affordable Health Choices Act, supra, § 3104(b)(1) …. If a state neither established an Exchange nor requested a federal Exchange, “the residents of such State shall not be eligible for credits” until four years after the date of enactment. Id. at § 3104(d) (emphasis added). The HELP bill permanently withheld credits in states that failed to implement the bill’s employer mandate. Id.”)  

              Pull up the HELP bill for yourself and keep reading. The section of the HELP bill that challengers’ rely upon—§3104–did give the subsidies to the federally-run exchanges. That section gave the states a choice to adopt their own exchanges (which it called “Gateways”) and adopt the supporting insurance provisions (§3104(a)(1)), or “request that the Secretary operate … a Gateway in such State” and adopt the supporting relevant insurance provisions (§3104(a)(2)), or do neither (§3104(a)(3)). The next section required the Secretary to establish the Gateway herself if the state does not adopt its own Gateway under any of the three provisions of section (a). (§3104(b)(c)).  Critically, section (b)(3) provides “the State shall be deemed to be an ‘establishing State’  on the date on which the Gateway established by the Secretary is in effect in Such state.”  In other words, as soon as the federal exchange was set up, it was to be considered a state exchange for all purposes—the exact argument that the government is now making before the D.C. Circuit.  Finally, the section expressly provided that—exactly as in the case of state-run gateways—the subsidies would become available on the federally-run gateways within 60 days.  (“Any resident of a State described in paragraph (3) … shall be eligible for credits under section 3111 beginning on the date that is 60 days after the date  which such Gateway is established in such State [by the Secretary].” §3104(c)(4). )

      It is true that the HELP bill (§3104(d)) also provided that subsidies would be denied for four years in states that both refused to adopt the reforms themselves and also refused to request the federal government to do it for them. But that conceptualization of state-choice did not make it into the ACA. Instead, the ACA replicates only the first two state-flexibility options from the HELP bill–the options for which the subsidies were always available: the states can establish the exchanges themselves or the feds will do it for them. The subsidies were to be given to both.  The ACA, unlike the HELP draft, does not give the states the choice to decline the implementation altogether.  (Again, it’s the Clean Air Act. It’s not Medicaid.)

  #3: The Question of Subsidies on the Exchanges Had Nothing to Do with the Jurisdiction of the Senate Finance Committee

       Surprisingly, the challengers also have persisted in citing a stray 2009 remark by Senator Baucus as further proof of their “carrots” argument, even after the factual premise of that remark has been corrected.  (From the appellant’s brief: “Senator Max Baucus, used the conditional nature of the subsidies to justify his jurisdiction over the Exchanges and related regulations of health coverage in the draft ACA; that is, the Finance Committee  had jurisdiction over health issues only because the bill conditioned “tax credit” subsidies, within its bailiwick, on states creating Exchanges subject to regulation.” One amicus, on the blogs, has made the same argument here.). As an initial matter, the Baucus comment had nothing to do with differentiating between the state and federal exchanges. It was an explanation of why his Committee shared jurisdiction over health reform with the HELP Committee. (Specifically he was explaining why the Finance Committee had jurisdiction over amendments relating to health insurance coverage even though it would not have jurisdiction over medical malpractice amendments.) But even if it were relevant, it tells us nothing about whether the subsidies might be offered on one, the other, or both. (Read the transcript for yourself.) More importantly, it is simply not true, as the challengers claim, that also including subsidies for the federal exchanges would somehow have deprived the Finance Committee of jurisdiction over the ACA. There is zero evidence for any such argument in the record or in the rules of the Senate.   Regardless as I have already detailed (here)  a stray comment early in the drafting process of a statute with a legislative process as unorthodox as the ACA’s has no place in the judicial decision-making process. 

 #4: The IRS Has Authority to Issue this Rule

         The challengers also argue that the IRS did not have the authority to adopt the rule in question in the case.  As DOJ has argued, the provision in question appears in the Internal Revenue Code and expressly states that the Secretary “shall prescribe such regulations as may be necessary to carry out the provisions of this section.” (ACA §36B(g)). That should be enough to defeat this argument.  The challengers nevertheless argue that, because the section in question cross-references ACA §1311, and because §1311 falls under HHS authority, the IRS should not have been able to interpret the section.  At the same time, they claim: “[c]onversely, the IRS Rule would not be entitled to deference had it been promulgated by HHS rather than the IRS” because “HHS … does not administer the subsidy provision, 26 U.S.C. § 36B.”  Right. That’s because the IRS does.  In other words, challengers are claiming that no one has the authority to interpret the section!  This argument is entirely at odds with a statute that is replete with hundreds of provisions for administrative implementation and that clearly intends the agencies to do the lion’s share of the gap filling–including in this very section.  The broader argument here is that Chevron deference for administrative rulemaking is not appropriate at all  when multiple agencies are involved.  In my view, this is not a multiple-agency question: the section here sits squarely in the Internal Revenue Code and, unlike classic multiple-implementation cases, the section in question does not also mention HHS’s authority.  Instead the ACA simply gives the IRS full authority here.  In any event, I have previously offered evidence (here)) for why a no-deference rule for multiple implementers is inconsistent with current doctrine. 

  #5: State Officials Did not Base Their Decisions Not to Participate On The Assumption the Subsidies Would Not Be Offered In the Federal Exchange

       A group of state officials has filed  amicus briefs claiming that they decided not to run an exchange because they assumed the subsidies would not be offered on a federally-run exchange (the  argument here is that these state officials were purportedly trying to relieve their citizens from the insurance mandate: because the subsidies make insurance more affordable and trigger some employer requirements to provide health insurance, without the subsidies more people would fall into the ACA’s hardship exemption and not be subject to the mandate). These assertions are almost certainly false, according to evidence provided by the Center on Health Insurance Reforms at Georgetown (CHIR). CHIR has been tracking the states’ relevant public statements and letters throughout implementation. They have demonstrated that the states’ public justifications for their decisions—their official declaration of intent not to pursue a state exchange—made no mention of this argument whatsoever. Virginia filed an amicus brief in the companion case illustrating the same thing. Instead, the states’ official declarations mentioned considerations like lack of state flexibility and not enough guidance from the Administration   CHIR also has provided statements from some of these states’ leaders evincing their understanding that some subsidies would indeed be offered to their citizens through the federally run exchanges. In any event, state officials’ post hoc justifications should have no import for an inquiry into congressional intent. 

  #6:  Any “Legitimate Method of Statutory Construction” Undermines the Challengers Case

             Finally, in an apparent attempt to scare the textualist D.C. Circuit panel, the challengers have littered their briefs with sentences like the following: “No legitimate method of statutory construction would interpret the phrase “Exchange established by the State under section 1311”’ to include the federal exchanges.  The challengers have two primary textual arguments: 1) the text just quoted above, standing in isolation and 2) the textual canon known as the rule against superfluities, which counsels courts to give effect to every statutory phrase (and not render any redundant).  Any principled textualist will see that there are many more textual arguments on the other side.  I already have mentioned the exclusio unius canon above.  Here are a few more.

 The superfluities argument made by the challengers actually cuts in favor of the Government: ACA §36B(f) provides:

 ‘‘(3) INFORMATION REQUIREMENT.—As revised by section 1004(c) of HCERA.Each Exchange (or any person carrying out 1 or more responsibilities of an Exchange under section 1311(f)(3) or 1321(c) of the Patient Protection and Affordable Care Act) shall provide the following information to the Secretary and to the taxpayer with respect to any health plan provided through the Exchange:… ‘‘(C) The aggregate amount of any advance payment of such credit or reductions”….

 Section 1311 refers to the state exchanges; section 1321 refers to the federal exchanges.  Half of this section—which requires reporting to the IRS of the amount of the subsidies offered on both exchanges—would be superfluous the subsidies were not available on the federal exchange. It also would be absurd—another favorite textualist canon. 

       Furthermore, as noted by the words in the statute in italics, this section, §36B(f), was added to the ACA in the reconciliation legislation, which followed a week after the ACA’s enactment-. That legislation harmonized House/Senate preferences and took the place of Conference, which is typically the last stage of legislation and brings together the versions from each chamber. Every legislation expert knows that this last stage—where differences across the chambers are resolved—is the most important. It’s why the Supreme Court pays special attention to Conference Reports, for example.   As a result, §36B(f) is the latest piece to be added to the official original ACA statute and is part of the only document that was negotiated and written by both chambers together.  As I have written previously (here), unforeseeable political circumstances made the Senate text of the ACA the text that had to be adopted virtually unchanged by the House. The reconciliation bull was the one and only later-coming piece of the ACA that was negotiated and written by both House and Senate.  It is no small matter, then, that §36B(f) clearly contemplates the subsidies on both types of exchanges.

             Finally, the challengers have ignored two of the most important textual canons of all:  1) that text must be interpreted in context, a point always espoused by leading textualists, including Justice Scalia and John Manning; and 2) the whole act rule—also known as the non-derogation canon—the rule that statutes must be read as a whole, giving effect to all provisions in a way that makes them work as a coherent whole.  The Government’s brief is replete with references to other parts of the ACA that make no sense—like §36(B)(f) above—if the court reads the federal subsidies out of the statute.

           In a recent blog post, one amicus’s response to this argument that a single phrase should not be able to undermine the entire act is the following: “the Obama administration aborted another PPACA entitlement – the “CLASS Act” – because a single statutory phrase forbade its implementation unless the program could be actuarially solvent.”  The CLASS Act was a title of the ACA concerning long term care—and once again, the comparison actually cuts the other way.  Concerned that a long-term care insurance program would be economic infeasible, Congress included an economic feasibility requirement in the text of the statute. A “single statutory phrase” can indeed halt an entire statute if Congress clearly so provides its intention for the entire program to be halted. The absence of a similar clear statement in the case of the subsidies provisions is telling (exclusio unius). Moreover, virtually every canon of statutory interpretation counsels courts that, where the statutory meaning is less than clear, they should render the statute coherent—or defer to the agency..

 ***

     Would it have been preferable had Congress done a better job drafting this behemoth law? Of course. It likewise would be preferable if our politics were not such that no one dare touch the statute to make little fixes that would clean it up, or improve it.  But bad politics should not make bad law. This case raises important matters of statutory interpretation doctrine that have significance far beyond the confines of this politically charged case.  The District Court applied ordinary rules of statutory construction to sustain the statute.  Those of us who study legislation hope that the D.C. Circuit will give the statute the same careful look tomorrow. 

[cross posted at Balkinization]

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Obamacare Subsidies Upheld- D.D.C finds ACA “Clear”

The first merits decision in the Obamacare tax subsidy litigation has been handed down, and it is a big victory for the federal Government.  Judge Paul Friedman (D.D.C.) has upheld the IRS’s rule implementing  the Affordable Care Act, and making its tax subsidies available to consumers purchasing insurance on exchanges operated by the federal government, as well as to consumers purchasing insurance on exchanges operated by states.  My previous post here described the main arguments on both sides, which centered around some very sloppy drafting by Congress with respect to these provisions.

The reason the opinion is such a big victory for the Government is that Judge Friedman did not even go to Chevron deference, as some had expected. Instead, the Judge found the ACA clear, despite the bad drafting. Looking to the text in question; the legislative history; the many other provisions of the statute implicating the subsidies; and the Congressional Budget Office’s estimates during the drafting process (which I blogged about here), the Judge found no ambiguity in the statute and upheld the rule on that basis.  (He references Chevron deference as an alternative, but not necessary, basis for the holding in a footnote.)

Another point of interest in the opinion for Chevron aficionados: The Supreme Court has never resolved the question whether Chevron deference is available for multiple agencies. Much recent writing (including work by Jody Freeman and Jim Rossi; Jacob Gersen, and my recent empirical work with Lisa Bressman) has focused on the increasing frequency with which Congress delegates to multiple agencies at once, so this is very much a live question. The plaintiffs here had invoked a 2003 case from the D.C. Circuit implying that, when multiple implementers are in the picture, there might not  be Chevron deference for anyone (a conclusion that our recent empirical study finds inconsistent with congressional expectations).  Judge Friedman rejected that conclusion here, arguing that Congress’s intent to delegate to both HHS and IRS, and to take advantage of both agencies’ expertise, was clear.   That’s even more good legal fodder for the courts in other Circuits still deciding parallel cases and for the D.C. Circuit, which almost surely will be asked by the plaintiffs to hear an appeal on this one.

[Cross posted at Balkinization]

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How Congress Works (And the ObamaCare Subsidies Lawsuit)

Many thanks to Rick for inviting me to contribute.  It’s that crazy time of year when time is short, but I could not resist beginning my blogging gig with a couple of quick posts about the pending Obamacare health exchange lawsuit, which should be decided within the next week or so by a district court in Washington D.C.(Judge Paul Friedman), and followed by several similar decisions in suits pending in Virginia, Oklahoma and Indiana.  The case is incredibly important—if the challengers win, consumers on more than half of the Obamacare health insurance exchanges will receive no tax subsidies to help cover the cost of insurance, an outcome that will devastate the operation of the Act. The case, in my view, is also incredibly weak.  And perhaps most significantly for law professors, the case shows us just how much lawyers and courts have to learn about the legislative process.  This post will offer some “Congress 101,” and explain how an understanding of the ACA’s legislative process should have put this case to bed long ago.  In my next post on this subject, I will tackle some of the other issues in the case, including some interesting Chevron arguments.

A quick summary of the case, for those not up to speed: The health reform statute, the ACA, sets up new insurance marketplaces (like Expedia for health insurance) and provides generous subsidies to individuals and families with incomes up to 400% of the federal poverty level to help them buy insurance in those marketplaces, which are called insurance exchanges. The statute makes states the default operators of those exchanges but if a state chooses not to operate one or fails to, the federal government steps in.  As most readers know, more than half of the states have decided not to operate their own exchanges, and so the federal government is doing so (how it’s doing in that regard is another important story, but one not relevant here).

 What is relevant here is that the ACA is a very badly drafted statute.  And it’s badly drafted for a simple reason that turns out to be important to understanding how the pending litigation should be resolved:  Because Senator Ted Kennedy died in the middle of the legislative process and was replaced by Republican Scott Brown, the statute never went through the usual legislative process, including the usual legislative clean-up process. Instead, because the Democrats lost their 60th filibuster-preventing vote, the version that had passed the Senate before Brown took office, which everyone initially had thought would be a mere first salvo, had to effectively serve as the final version, unchangeable by the House, because nothing else could get through the Senate.  In the end, the statute was synthesized across both chambers by an alternative process, called “reconciliation,” which allows for only limited changes but avoids a filibuster under Congress’s rules.  Keep this in mind and read on….

So, the statute is sloppy.  It has three section 1563s, for example, as Tim Jost has pointed out.  The section at issue in this case, the one introducing the tax subsidies, is another example of the sloppiness.  It states that the subsidies shall be available to individuals enrolled in insurance “through an Exchange established by the State under section 1311” of the Act (emphasis added). The challengers argue that this text clearly excludes individuals enrolled through federally-operated exchanges from receiving the subsidies.   Section 1321 of the Act, however, further discusses the state exchanges and sets forth the process for the federal government to step in when the states fail to operate them. In such case, the Act provides, HHS shall “establish and operate such Exchange within the State” (emphasis added).  The Government points to this and other language to argue that when the federal government operates a state exchange it stands in shoes of the state exchange and is “such an exchange” for purposes of the Act. At a minimum , the Government argues, the statute is more than sufficiently ambiguous to trigger agency deference.

There are other provisions that bear on the issue, most importantly 26 U.S.C. 36B(f)(3), which requires the exchanges to provide information about the tax subsidies for each consumer both to the consumer and to the federal government.  That section directs its reporting requirements to both “[e]ach Exchange … under section 1311(f)(3) [the state exchanges] or 1321c [the federal exchanges].”  In other words, 36B(f)(3)assumes that the federal exchanges will also be reporting information about tax subsidies—a requirement that is arguably nonsensical if consumers on federal exchanges are not eligible for those subsidies.

My view is that whatever you believe about the merits of these respective textual arguments, a basic understanding of the ACA’s legislative process makes clear that Congress intended for the subsidies to be available on the federal exchanges.  I think the statute is sloppy, but I think its meaning is plain—and not because I am relying on fuzzy notions of statutory purpose. Rather, there are formalist, structural features of the legislative process that make this case an easy one.   (For more about the unforgivable ignorance of lawyers and courts about how Congress works, see my two articles, Statutory Interpretation from the Inside—An Empirical Study of Congressional Drafting, Delegation and the Canons: I and II, 65 Stan. L. Rev. 901, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2244952, and 66 Stan. L. Rev. (forthcoming 2014), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2358074 (both with Lisa Bressman)).

  1. Why Understanding the ACA’s Use of Reconciliation Should End This Litigation

Mostly absent from the briefing for either side in the case is the fact that the section in the bill that most clearly provides for both state and federal exchange subsidies—the information reporting requirement in section 36B(f)(3), quoted above—was added during the Reconciliation process.  The other sections in dispute were added in the earlier, Ted Kennedy, Senate draft.   In contrast, 36B(f)(3) came in months later. That subsection makes clear the assumption that the subsidies would be available on the federally-operated exchanges as well as on the state exchanges.  Let me explain now why the fact that 36B(f)(3) came in through Reconciliation should be the ballgame.   

As noted, the Reconciliation process was the House-Senate bill-synthesizing process that was used in the ACA instead of the usual Conference Committee process.  Everyone who follows Congress knows that the Conference stage is the most important stage of the legislative process.  Even the courts, which are generally ignorant about the legislative process,  acknowledge this fact about the importance of Conference.  It’s the key stage for two reasons.  First, it’s where the critical compromises get worked out across the two chambers.  And second, it is the last stage of the process. In the case of the ACA, Reconciliation took the place of Conference, and Reconciliation was particularly important because the two chambers did not have their usual back and forth during the ordinary legislative process (again, because everyone was stuck with Kennedy version of the Senate-passed bill). Reconciliation was the only way, in the ACA story, that the two chambers reached a final agreement.  It was the critical moment, and the provisions added then are where the courts should focus their attention, and where any ambiguities should be resolved.

The counterargument, of course, and one the challengers make, is that Congress could have done more to clarify its intentions during that Reconciliation process.  Sure, that would have done everyone a big favor.  But even assuming that the special rules of Reconciliation (which only allow certain budget-related changes) would have permitted such clarifying changes, that kind of negative inference makes little real-world sense –not  only because of the exceedingly messy context of the ACA’s drafting but, more importantly, because there is zero evidence that anyone thought there was anything to clarify. Because both chambers were certain that the subsidies applied to the federal exchanges, there was no reason to focus the chambers’ final-stage political efforts on uncontroversial provisions. 

And it is implausible that there was any doubt on the part of House that the federal exchanges would receive the subsidies.  Recall that the House wanted all of the exchanges federally run and only acceded to the Senate, state-led, default version because of the Ted Kennedy situation. Given the House’s reluctance to make that compromise in the first place, it is unthinkable that the House would have silently—without any commentary in media, on the floor, or in proposed reconciliation amendments—accepted a compromise that so greatly disadvantaged the federal exchanges that were its priority all along.   It is of no small moment that the Reconciliation bill originated in the House, and is where the House got to put its imprint on the legislation.  The language about the federal and state exchanges added as part of that bill cannot be read as anything other than as confirming  the common understanding that the subsidies would be available on both types of exchanges.

2.  The CBO Canon: Construe Statutory Ambiguities Consistent with the Assumptions of the Budget Score

When these cases were first proposed last year, I posted here (https://electionlawblog.org/?p=36795) an argument that Congress’s intent to give subsidies to the federal exchanges was evident from the simple fact that the budgetary estimate for the ACA—which was a central part of the legislative process—assumed that those subsidies would be available.  More generally, I proposed a new “CBO Canon” of statutory interpretation: a default interpretive presumption that ambiguous statutes should be construed consistent with the assumptions underlying the Congressional Budget Office’s estimate of the financial impact of the legislation. This proposed rule is especially relevant for statutes like the ACA, for which the President set a budgetary goal and news outlets repeatedly reported that the statute was tweaked over and over again to get the numbers just right.  

No Supreme Court case has ever utilized the CBO score in this manner, but all of the Supreme Court’s statutory cases claim to be about effectuating the legislative bargain. The challengers in this case also have claimed that the purported omission of the subsidies for the federal exchanges was intentional—that is, they are not trying to take an advantage of  something they claim to be a mere drafting error.   My recent empirical work with Lisa Bressman strongly suggests that congressional drafters rely on the budget score enormously in making their deals—indeed, much more so than they rely on the judicial rules of statutory interpretation and often even more than they rely on close readings of the statutory text itself.  In other words, if the idea really is to effectuate the congressional deal, as the challengers claim, the courts should construe statutory ambiguities in a way consistent with the assumptions made by CBO during the drafting process.

The government and amici have picked up the CBO argument in this case, including providing a letter to Congress from CBO director Douglas Elmendorf testifying to CBO’s initial and ongoing understanding that the subsidies would not be for the state exchanges alone. Opponents have offered nothing as a counterargument except for the fact that CBO’s initial calculation assumed, as did most others policymakers, that most of the exchanges would be state operated (because that is what the federalists now opposing the ACA wanted!). But that does not change the fact that CBO never understood the subsidies to be for the state exchanges alone.  And we have more evidence that Congress, the President, and the public all knew, followed and relied on that CBO estimate throughout the ACA drafting process than we have that any of those players were focused on the kind of hyper-technical textual arguments—made in the context of a 2,000 page statute—on which the challengers hinge this case.

3. The Legislative History is Irrelevant

The challengers also make a legislative-history based argument that likewise falls by the wayside once one understands the ACA’s legislative process.  They cite a stray remark by Senator Baucus in September 2009 explaining that the Finance Committee had jurisdiction over the bill (in addition to the Health, Education, Labor and Pensions Committee) because subsidies operate as tax credits.  As an initial matter, the Baucus comment had nothing to do with differentiating between the state and federal exchanges—it was an explanation of why the Committee had jurisdiction over amendments relating to health insurance coverage even as it would not have jurisdiction over medical malpractice amendments. But even if it were relevant, it tells us nothing about whether the subsidies might be offered on one, the other, or both. (Read the transcript for yourself: http://www.finance.senate.gov/hearings/hearing/download/?id=c6a0c668-37d9-4955-861c-50959b0a8392.) )  More importantly, it is simply not true, as the challengers claim, that also including subsidies for the federal exchanges would somehow have deprived the Finance Committee of jurisdiction over the ACA. There is zero evidence for any such argument in the record or in the rules of the Senate. 

Of greater general importance, a stray comment early in the drafting process of a statute with a legislative process as unorthodox as the ACA’s has no place in the judicial decision-making process.  Our recent empirical work suggests that congressional insiders would agree.  Legislative history has an important place in the statute-making process when the legislative history represents a consensus, is the product of deliberation, and is tied to the text of the ultimate legislation.  It has less relevance and is less reliable when the statute goes through a process so unpredictable that even its sponsors could not have charted its ultimate path.  (The challengers out-of-context use of the Baucus comment is proof positive of the risk of legislative-history cherry-picking in general, but is all the more risky in messy statutes like this one.) And this same risk goes for any other stray comment that either side might find.

There’s a lot more that could be said about how little we understand the legislative process and how important it is—both to this litigation and, more generally, to most legal questions that we now face.  Nor have I attempted to comprehensively chronicle each of the challengers’ more minor arguments in this kitchen-sink of a case, or to talk about how this case is yet another illustration of the specially divisive politics of health reform.  But I’ll leave it here for now, and return in a future post with some thoughts about the Chevron arguments, which are likely to be decisive.

 [cross-posted at Balkinization]

 

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