During oral argument in the D.C. Circuit case, Judge A. Raymond Randolph suggested a different way of seeing the issue. “There is an absurdity principle, but there is not a stupidity principle. If the law is just stupid, I don’t think it’s up to the court to save it.”
If Obamacare had proven popular, though, withholding tax credits in states that stayed out of the exchanges would have been neither absurd nor stupid. It would have been an inducement to get the remaining holdout states to establish exchanges. As Adler and Cannon demonstrate, previous Senate bills tied the availability of tax credits to whether states established exchanges. What’s more, some of the legal briefs defending the IRS concede that previous bills put this condition on tax credits. This wasn’t some unthinkable error that somehow made it into the particular bill that ended up becoming law.The sponsors of the legislation clearly did assume that states would establish exchanges. “By 2014, each state will set up what we’re calling a health-insurance exchange,” said President Obama weeks after signing the law. In August 2012, the New York Times corroborated the point: “When Congress passed legislation to expand coverage two years ago, Mr. Obama and lawmakers assumed that every state would set up its own exchange.’’
There’s another problem with the contention that Congress could not have intended a policy that would not work. The Obamacare law included something called “the Class Act,” which was supposed to help the disabled pay for long-term care. Critics warned that the program could not be viable as designed, so the law included a provision saying it would have to be projected to be solvent for 75 years to continue. The critics, it turned out, were right: The program could not establish solvency, and the administration had to abandon it and then agree to its formal repeal. In other words: Yes, it is entirely conceivable that Congress would enact a law that would prove unworkable; that it would enact a law that could be predicted to be unworkable; and that a specific provision of a law might doom it.
The AARP brief claims that “it is implausible, to say the least, that Congress intended to allow the entire Act to be cannibalized by a state’s choice not to establish its own Exchange.” All of the pro-IRS briefs say that allowing the states to block tax credits by refusing to establish an exchange would frustrate the law’s main goal of expanding coverage, which would be perverse.
Yet nobody disputes that the law allowed states to refuse to expand Medicaid, which also frustrates that goal. The law as enacted tried to get the states to go along with the expansion by denying all Medicaid funds to holdouts. The Supreme Court ruled that the federal government could not use such a blunt instrument: It could withhold some Medicaid funds but not all of them.
The withholding of tax credits from states without exchanges could similarly have been meant to induce them to establish them. In that case the lawmakers just overestimated how powerful an inducement it would be, and eventually the administration, facing a disaster for its policy and political ambitions, used the IRS to nullify the inducement altogether. The states called the feds’ bluff.
Here and there it has been speculated that the inducement could still work if the courts, by applying the law as written, re-create it. If the plaintiffs win, only in a minority of states will people who get insurance from exchanges receive federal help in paying for it. In 36 states people on the exchange will face big bills. That hardship and that disparity might lead these voters to demand that their state governments start an exchange after all — or that Congress amend the law so that they can get their subsidies.
Or the law could just collapse politically. Figuring out how the political system would react to its ruling is not, of course, the courts’ job. Getting the law right is. Congress cannot have intended to let the choices of the IRS cannibalize the rule of law.
— Ramesh Ponnuru is a senior editor of National Review.