The Corner

Obamacare’s Assumptions

As Wesley Smith notes below, the New York Times is flagging a story about the drafting of Obamacare that supposedly undermines the plaintiffs in King v. Burwell and related cases. Author Robert Pear sees it that way, too, noting that nobody with whom he spoke intended to restrict subsidies to state-established exchanges as a way to make the states establish them. But the story he tells seems broadly consistent with the plaintiffs’ case.

Here’s the crucial passage from Pear:

At the Finance Committee, which thrashed out its version of the bill in September and October 2009, senators initially assumed that all states would set up exchanges, so they added a section to the Internal Revenue Code to provide subsidies, in the form of tax credits, for insurance purchased through an exchange.

But senators and staff lawyers came to believe that some states — “five or 10 at the most” — would choose not to set up exchanges, said Christopher E. Condeluci, who was a staff lawyer for Republicans on the Finance Committee.

At that point, senators authorized a backup plan to allow the federal government to establish an exchange in any state that did not have its own, but they failed to include that language in the section of the tax code providing subsidies. “We failed to include a cross-reference to the federal exchange,” Mr. Condeluci said. “In my opinion, due to a drafting error, we overlooked it. It was an oversight. Congress, in my experience, always intended for the federal exchange to deliver subsidies.”

Russ Sullivan, the staff director for Democrats on the Finance Committee, gave a similar account. The language in the law providing tax credits through state exchanges was “a holdover from what we had in the Finance Committee,” which originally assumed that “every state was going to set up an exchange,” Mr. Sullivan said.

The idea of a federal backstop came later, he said, when people started asking what would happen if some states did not set up an exchange. . . .

It appears that the four words now being challenged were based on the initial premise and were carelessly left in place as the legislation evolved.

So: The drafters initially assumed that all states would set up exchanges, and never changed all the language to reflect a different assumption. How different is that from the argument in this brief for the plaintiffs?

Whatever their preferences might have been, none of the Act’s authors deleted, expanded, or amended the language conditioning tax credits on states establishing Exchanges despite many opportunities to do so. What matters in a constitutional system is what the law actually says. . . . 

As was widely reported at the time of the PPACA’s enactment, PPACA proponents were confident that all states would establish Exchanges, and they scarcely contemplated the possibility that many states would refuse. This mistaken assumption accounts for why Congress did not authorize funding for the creation of federal Exchanges. It accounts for why the Congressional Budget Office scored the PPACA without considering whether tax credits would be limited to state-run Exchanges. It accounts for why the CBO scored the bill as if the federal government would not have to spend any money to implement federal Ex­changes. . . . Finally, it accounts for why the CBO likewise scored S. 1679 (the HELP bill) as providing Exchange subsidies in all states, even though — as all sides acknowledge — the bill withheld Exchange subsidies in non-compliant states.

By the rule at issue in this case, the IRS is trying to rewrite the statute because supporters failed to anticipate the widespread rejection by states of the role the law had assigned them. Yet the IRS cannot rewrite the statute simply because this assumption proved false (footnotes omitted).

If the drafters had taken seriously the possibility that most states would refuse to establish exchanges in time to pass a different law, they probably would have. The Supreme Court shouldn’t pretend that they did.


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