Observations Yankee Doodling

US Supreme Court v Obamacare: round 2

BMJ 2015; 350 doi: https://doi.org/10.1136/bmj.h1368 (Published 11 March 2015) Cite this as: BMJ 2015;350:h1368
  1. Douglas Kamerow, senior scholar, Robert Graham Center for policy studies in primary care, professor of family medicine, Georgetown University, and associate editor, The BMJ
  1. dkamerow{at}aafp.org

Will the Affordable Care Act be gutted because of a small drafting error?

The US Affordable Care Act (“Obamacare”) was designed to expand health insurance coverage in three major ways: allowing young people through to age 25 to be included on their parents’ policies; expanding the Medicaid program for poor people to include those earning up to 133% of the federal poverty level; and providing federal subsidies to help low and middle income people afford mandated health insurance.

The third mechanism, subsidies, in the form of tax credits, has become the latest focal point for controversy. A little known lawyer discovered four words in the 1000 page law that cast doubt on whether the subsidies could be given to around seven million people who were already receiving them.1

Obamacare gave each state the option of setting up its own marketplace (called an exchange) to sell health insurance policies to its citizens. If the state declined, then the federal exchange—healthcare.gov—took over that state’s enrollments. Only 13 states set up their own exchanges, leaving about three dozen that defaulted to the federal exchange. Around seven million low and middle income Americans have received tax credit subsidies in these states.

Here’s where the four words come in. One part of the law states that tax credits were to be issued by exchanges that had been “established by the states.” Does this mean that those people who purchased healthcare through the federal exchange were ineligible for subsidies? Not according to the Internal Revenue Service, the taxing agency that set up the tax credits. Not according to those who wrote the law, who said it was just a mistake in drafting. And not according to the overall thrust and strategy of the law, which was clearly intended to maximize coverage throughout the country.

A small libertarian think tank took up the challenge and searched for injured parties and hired lawyers so that they could file multiple lawsuits demanding that the subsidies in the states using the federal exchange be invalidated because of these four words.2 Two of those cases, with conflicting results in lower courts, have now reached the US Supreme Court for a final decision.3 The name of the case is King v Matthews.

Drastic consequences

The consequences if the plaintiffs succeed are huge. Somewhere between seven and eight million people will lose their subsidies, and most of them will likely terminate their now unaffordable policies, leaving them uninsured. Moreover, it is likely that people who choose to stay in the insurance pool will be those with ongoing treatment and (large) medical expenses. This will lead to an imbalance in the states’ insurance roles, which will result in an increase in premium costs. One estimate is that the premiums could triple within weeks of a decision taking effect. There is also much speculation that a verdict for the plaintiffs would lead to decreasing enrollments and ultimately a “death spiral” for the entire system, so the stakes are high indeed.4 5

The Obama administration has decided that its best strategy is to proceed as if a victory for the plaintiffs would lead to irreparable damage to law, placing even more pressure on the nine justices of the Supreme Court. The president refused to say what he would do if the court decides against him: “I’m not going to anticipate bad law.”4

Arguments were held at the Supreme Court on 4 March. As expected, most of the justices’ comments and questions revealed their philosophical backgrounds. The four liberal justices gave the attorney for the plaintiffs a hard time, asking how interpretation of a law rested on only four words out of 1000 pages. Three of the conservative justices attacked the Obama administration’s position, stating that the “plain language” of the law was enough for them.

The deciding votes

But two of the justices did not behave as expected. Justice Anthony Kennedy, who voted against the constitutionality of the individual mandate in the law on the losing side in 2012, peppered both lawyers with questions. He said he found a “serious constitutional question” in the plaintiff’s interpretation that the law was intended to incentivize the states to set up their own exchanges; he thought that that would be federal coercion, which he voted against in one of the decisions in 2012 regarding the states and Medicaid.6

Also somewhat surprisingly, conservative Chief Justice John Roberts, who made headlines when he provided the winning vote for the law in the 2012 case, was almost silent, not revealing his predispositions at all.

How will the court decide this high stakes case, when it releases its decision in late June or early July? Seven votes are taken for granted: four liberals against the plaintiffs and three conservatives supporting them. It then takes only one vote, from either Kennedy or Roberts, to give Obamacare a victory and leave the law (and subsidies) intact.

Although predicting the outcome of Supreme Court cases is a fool’s game, I think the law will survive, in a 5-4 (or even 6-3) vote. Time will tell.

Notes

Cite this as: BMJ 2015;350:h1368

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References

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