The 4th Circuit has the most plausible, commonsense reading of a badly drafted part of a 2,400-page statute. The alternative is that Congress included in Obamacare the seeds of its own destruction, giving naysaying governors the power to kill it—without ever saying so. The history of passing this law was full of devious twists and turns, but that form of willful self-destruction is not among them.
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.