It's a Strike!

But how will the Supreme Court Rule on this Obabacare pitch?

Federalism and ObamaCare

Liberals discover state’s rights in a Hail Mary to save the health law.

By: WSJ Editorial, 3/4/15

A closely divided Supreme Court heard arguments in the challenge to ObamaCare’s illegal subsidies on Wednesday, and the session spun off in an unexpected and provocative direction: To wit, several Justices suggested that the Affordable Care Act as drafted would unconstitutionally coerce the states.

King v. Burwell turns on the statute’s plain text limiting health subsidies to those insurance exchanges established by the states, rather than the 36 run by the federal government as fallbacks. This condition for federal dollars was meant as an incentive for Governors to participate in ObamaCare, which is the normal framework whenever Washington wants to enlist the states to act on its behalf under cooperative federalism, from Medicaid to highway funding to clean-air laws.

But Justices Anthony Kennedy, Elena Kagan and others wondered if this arrangement crosses over from Congress merely attempting to influence state decisions into using spending and regulation to compel these sovereigns to join ObamaCare. “From the standpoint of the dynamics of federalism . . . there’s a serious constitutional problem if we adopt your argument,” Justice Kennedy told plaintiffs counsel Michael Carvin.

The brief version of this contention is that the Affordable Care Act’s rules and mandates artificially increase the cost of health insurance in the name of social equity and income redistribution. The subsidies are meant in part to offset this intrusion into the market. Without the subsidies, consumers would be exposed to the full cost of ObamaCare’s political agenda and fewer would buy overpriced health plans as a result. Insurers could go into a “death spiral” in which premiums keep climbing but still don’t cover claims.

The Kaiser Family Foundation estimates consumer out-of-pocket spending would jump 256% on average without subsidies. In other words, under this theory, Governors must choose between cooperating with ObamaCare or destroying their insurance markets.

The Obama Administration has never explicitly made this case (that would be awkward). But the point has been developed by liberals like Abbe Gluck of Yale Law and deserves elaboration.

One problem is that coercion precedents like South Dakota v. Dole (1987) involve situations in which the states were given an initial choice to cooperate, or not. Then the federal government later sought to fundamentally change the terms of a longstanding bargain by threatening to withhold spending, take it or leave it. For this reason, in a 7-2 ObamaCare decision from 2012, the High Court ruled that states could not be forced to expand Medicaid.

That is not the same as this case. If Governors decline to establish an exchange, their citizens are not entitled to benefits, but that is not coercion. That is the very trade-off that is supposed to encourage states to participate. If the subsidies will flow no matter what, few if any states would become the partners the Administration wanted.

More to the point, federalism is supposed to protect political accountability. Two-thirds of the states made an informed decision to rebuff ObamaCare, but if voters prefer otherwise, they can elect new Governors who won’t. If federal subsidies flow no matter what, then states aren’t presented with a real choice. That isn’t how federalism works in the American system. As Justice Kennedy rightly noted, the exchange decision was partly “a mechanism for states to show they had concerns about the wisdom and workability of the act in the form that it was passed.”

As for the insurance markets, it’s healthy that liberals at last appreciate that their own regulations are destructive. Yet in the 1980s and 1990s, eight states including Kentucky, Washington and New York imposed the same rules—without subsidies. In other words, the regulations are supposedly valuable by themselves to achieve liberal policy goals.

Liberals are invoking faux federalism at this late hour to appeal to Justice Kennedy’s separation-of-powers instincts and persuade the Court to sanction both federal and state subsidies under a doctrine known as “constitutional avoidance.” That means the courts abstain from interpreting statutes in ways the produce unconstitutional results.

But they cannot use this doctrine to rewrite laws in which the statutory language is as clear and consistent as the Affordable Care Act on the distinction between federal and state exchanges. The Supreme Court has already rewritten ObamaCare once in order to save it. If the Justices really want to vindicate federalism, they should uphold the law as written and force Congress to confront the consequences of its reckless legislating.