Why the Obamacare Case Drives Washington Crazy

Everything you thought you knew about the Affordable Care Act might be wrong.

National Journal

The Supreme Court's latest Obamacare case is a mind-bender for the people who know the law best.

Lawmakers, congressional staffers, policy analysts, lobbyists, and reporters spent more than a year slogging through the legislative debate over the Affordable Care Act—through months of negotiations, weeks of markups, reams of reporting, endless floor debates and interviews, and multiple make-or-break moments for President Obama. The Senate even voted on Christmas Eve.

But now, the Supreme Court might rule that everything they thought they knew about Obamacare was wrong.

The court will hear oral arguments Wednesday in King v. Burwell, the lawsuit aiming to invalidate the Affordable Care Act's insurance subsidies in most of the country. The challengers in King will try to persuade the court that the law only allows subsidies in a handful of states—and, moreover, that Congress wanted it that way.

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That's an awfully hard sell for an awful lot of the people who were around in 2009 and 2010, especially the lawmakers and staffers whose intentions the court is now trying to divine.

"In some ways, you can't second-guess the Supreme Court, which just leaves you surprised that it's gone this far. Because it's so clear that this wasn't even in our minds," said Yvette Fontenot, who worked on the Affordable Care Act as a Democratic staffer for the Senate Finance Committee.

To accept the challengers' argument about congressional intent, the proposition you have to accept is this: For over a year, as Congress debated the Affordable Care Act, and for a good while after it passed, hardly anyone—Republicans, Democrats, journalists, and budget analysts—really understood how it worked, even though Congress had spelled it out clearly.

"There's just no way that we would have been having this conversation about excluding half the country from tax credits "¦ but not have had the press, our opponents, and many in Congress screaming at the top of their lungs," Fontenot said.

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That's why so many health care wonks have been so stupefied by this challenge. Because they were all there. They all lived through it. And this issue the Court will debate Wednesday just didn't come up at the time.

The Congressional Budget Office has said it never considered the possibility that subsidies might only be available in some states—and that no one ever asked it to score the law's costs under that assumption. Several states have said they were never told, while they were deciding whether to set up their own exchanges, that their decisions could deny financial assistance to their residents. Even Republicans assumed the subsidies would be available in every state.

In 2012, Republicans on the Senate Budget Committee produced a report arguing that CBO had underestimated Obamacare's costs. Accusing the budget office of "a colossal misstatement of reality," Republicans said the law would actually cost $2.6 trillion over its first decade. That figure would have been impossible to reach without the law's most expensive provision—its subsidies.

And this was in June 2012, when it was clear that most states would not be setting up their own exchanges. Only 14 states had passed bills to establish exchanges at the time of the Budget Committee's report, and health care analysts were speculating in the press that fewer than 20 states would ultimately sign on.

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Michael Cannon, the director of health policy at the libertarian Cato Institute, says it doesn't matter how many people assumed that subsidies were available in every state.

"It doesn't matter what they say about what they enacted. It doesn't matter what they understood about what they enacted," he said. "Just because an assumption is widespread doesn't mean it's true."

The challenge in King centers around a line in the statute that lays out the formula for calculating Obamacare's subsidies. It says the amount of each person's subsidy should be based on the time they were covered through "an Exchange established by the State."

To Cannon, that means the subsidies are only available in state-based exchanges—and not in the 34 states that turned to the federal government to set up their marketplaces. The challengers have had a harder time, though, persuading courts that Congress meant to limit subsidies to state-run exchanges.

They argue that Congress withheld subsidies from federally run exchanges so that states would have a powerful incentive to set up their own. State insurance markets could spin into total disarray if the court sides with the challengers in King, and the White House says Congress would not have set Obamacare up to fail.

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Sure it did, the challengers argue—the threat had to be big enough to light a fire under governors and state legislators.

So, why didn't anyone recognize Congress was making such a dramatic bargain with states? No one noticed the "established by the State" language until months after the law had passed, and even Cannon initially thought it was just a glitch.

Again, Cannon says, a lot of people being wrong doesn't make them any less wrong.

"Republicans had not read the law either," Cannon said.

Democratic aides say the "established by the State" language was included to differentiate government-supported exchanges from private marketplaces or purchasing systems set up by small organizations. Its purpose was to designate an exchange for each state through which subsidies would be available, said Fontenot and John McDonough, who worked on the law for the Senate HELP Committee.

"We understood 'established by the State' to throw in the federal exchanges," McDonough said. "That's what the lawyers told us."

If Congress wanted to set up an offer states couldn't refuse, it wouldn't have authorized a federal fallback at all, he said. The fallback was included because staff recognized that "no matter how much you push, there would be some states that just wouldn't be up to doing it," McDonough said.

What staff say now doesn't matter, legally—the court's thinking is supposed to be confined to the text of the law and Congress' intent as it was expressed at the time.

But this isn't like figuring out what the Founding Fathers meant when they wrote the Second Amendment. Everyone who wrote Obamacare is still around—and waiting for the Supreme Court to tell them what they had in mind.