Mar 06 2015

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The Infuriating Justice: Anthony Kennedy

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At the Center of the Storm - Again...

At the Center of the Storm – Again…

In 2012, after oral arguments in NFIB v. Sebelius, the original Obamacare case, I counted five solid votes in favor of overturning the Affordable Care Act (ACA). Yet, in what should have been a slam-dunk ruling against the Administration, Chief Justice John Roberts chose to change sides and manufacture a constitutional justification (which had not even been mentioned in oral argument) that effectively saved Obamacare.

Going into Wednesday’s oral arguments in King v. Burwell – SCOTUS’ second bite at the Obamacare apple – I had felt that the narrow, regulatory nature of the case  would provide a majority of the Justices with a digestible question that any lay person could easily understand, providing the groundwork for a decision that would reverse a clear, unconstitutional act.

At issue is whether the IRS exceeded its authority in providing health insurance subsidies to citizens in states that did not establish their own health insurance exchange, under ACA, relying instead on the federal exchange. Specifically, in creating Obamacare, the architects (Jonathan Gruber et.al.) intentionally designed a financial incentive for the 50 states to create their own exchanges by stating categorically that subsidies under Obamacare would flow only to those states that had created their own health care exchanges.

But five years after the law’s passage, 34 states have chosen not to set up exchanges and rely, instead on the feds. The IRS, citing the broad purpose of the ACA as a law to expand health insurance coverage, interpreted the provision on subsidy eligibility in the statute in a manner that allowed the agency to provide billions in subsidies to up to six million Americans in all states, in clear contravention of the actual text of the ACA.

The case should be open and shut.

But then, there is not accounting for Justice Anthony Kennedy.

Almost immediately after the oral arguments began,  Kennedy moved beyond discussion of a clear reading of the text to an abstract, constitutional question involving potential violations of federalism in the case.

To wit: if Congress had intended to provide subsidies only to those states which had created exchanges, as the plaintiffs maintained, then such action could represent “coercion,” Kennedy stated.  States would be forced to either set up their own exchanges or risk seeing a “death spiral” in their state insurance marketplaces where a lack of subsidies would expand the ranks of the uninsured, shrink the pool of insured, leading to staggering price increases for those left with policies. In Kennedy’s thinking, if such “coercion” was in fact present, then the constitutional remedy would be to concur with the defendants that all states are eligible for subsidies, regardless of exchange type.

But Kennedy’s reasoning, no matter how well-intentioned, is deeply flawed.

1) The IRS and a “Death Spiral”:  Kennedy is starting his analysis from the wrong place.

Instead of ruling on the plain language of the ACA, he begins at a point after the IRS’ original, unconstitutional action in disbursing subsidies to all states, and using that vantage point to posit a “false choice” coercion argument. The “death spiral” that Kennedy mentions was not the result of the plain reading of the ACA law, but rather the IRS’ illegal subsidy transfers.

 In truth, far from Kennedy’s state’s rights  argument, had the IRS correctly interpreted the plain text of the ACA, the implication would not be coercion, but rather a show stopping revelation of the political ramifications of Obamacare’s core policy foundations  at the very beginning.

As the Wall Street Journal summarized, “The ACA’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….[triggering] a “death spiral” in which premiums keep climbing but still do not cover claims.”

Kennedy’s questions in oral argument suggest that he is seeking to cure a policy failure, which itself was a disguise to hide the true costs of Obamacare from the American people; a result that was achieved only through a thoroughly creative interpretation of very specific statutory language.

2) A Ruling in Favor of the Plaintiff Would Prove Coercion: 34 states  declined to create an exchange. Justice Kennedy, claiming the mantle of state’s rights crusader, is making tectonic plate shifting assumptions that the states did not actively know what they were getting into when they declined to set up exchanges, and that a “death spiral” was the only other potential result to creating an exchange. That implicitly  the states must be protected from the consequences of their own choices.

Indeed, Kennedy’s “coercion” argument in support of federalism  has a flimsy threshold at best, where “coercion” is established based solely on the fact that a federal program does not work well when states refuse to assist in its implementation.

Look anywhere in the federal government where there is federal-state interaction. The carrot and stick approach – which is designed into the ACA – is the very embodiment of federalism, where the feds attach policy strings to funds that the states can either accept or reject.  Think about the old 55 mph speed limit, housing grants or education funding. You get federal dollars only if you adhere to federal guidelines.

This case is no different.

As Kennedy considers King v. Burwell, he would do well to remember the now famous admonishment from Chief Justice Roberts in his judicial surrender on Obamacare in 2012.

We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation’s elected leaders….Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.”(emphasis added).

The high priests of Obamacare screwed up – in epic fashion. They assumed that free-flowing subsidies that did not weigh on state budgets would be too good to pass up, and would co-opt state buy-in through the establishment of exchanges. That is what the ACA provision in question states.

It is not SCOTUS’ job to save the Obama administration from itself or the consequences of its actions.  Indeed, it was left to Justice Scalia to succinctly summarize what is actually before the Court, “The question is not what the government intended, the question is what it actually wrote in the statute.”   In King v. Burwell, that point does not lend itself to interpretation.

Unmentioned  in Wednesday’s Court session was the larger issue of rampant Executive branch excess through actions to mold Obamacare policies to accommodate political calendars and shield pending failures in a manner that effectively re-writes the statute in serial fashion.

If SCOTUS does not uphold what is the clear and plain language of the law in this case, then the Court will have done irreparable damage to the separation of powers, rendering Congress little more than a repository to articulate its collective best intentions for the Executive to do as they please; emboldening not just this President, but all presidents yet to come.

Justice Kennedy should carefully consider all of this as he decides his vote. More than just the fate of subsidies are in question.






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