President Barack Obama won big when Congress passed his health
care bill. But the administration made a serious mistake and now is
trying to rewrite the law. Without going to Congress, as required
by the Constitution.
The central feature of the misnamed Patient Protection and
Affordable Care Act is the requirement that Americans buy health
insurance, which Supreme Court Chief Justice John Roberts decided
really wasn’t a mandate in a bizarre opinion upholding the law. As
important as that requirement are the exchanges through which
people are supposed to purchase insurance.
PPACA includes tax credits and subsidies so people can afford
insurance made more expensive by a gaggle of new federal
requirements. Congress didn’t just decide that people have to buy
insurance. People must purchase insurance as determined by
Washington. Or, more accurately, the Health and Human Services
bureaucracy, which is empowered to decide every Americans’
coverage.
However, Congress and the president tied federal tax credits and
subsidies only to policies purchased through state-established
exchanges. Apparently the administration did not imagine that
anyone would defy Uncle Sam. However, so far only 14 states and the
District of Columbia have created exchanges. At least half of the
states are likely to refuse to construct insurance exchanges. Which
means Washington will have to do it for them. Indeed, HHS Secretary
Kathleen Sebelius admitted that the federal government may have to
run as many as 30 exchanges. But PPACA did not provide tax credits
or subsidies for federally established exchanges.
Which creates another problem for the administration. In
a recent paper for Case Western Reserve University School of
Law, Case Western law professor Jonathan Adler and Cato Institute
scholar Michael Cannon point out: “The tax credits and subsidies
for the purchase of qualifying health insurance plans in state-run
exchanges serve as more than just an inducement to states. For
example, these entitlements also operate as the trigger for
enforcement of the Act’s ‘employer mandate.’ As a consequence, that
mandate is effectively unenforceable in states that decline to
create an exchange. Because such a large number of states may
decline to create exchanges of their own, it may be difficult to
implement the law as some had intended.”
Oops!
In a system based on the rule of law, the Obama administration
would go back to Congress and ask it to “fix” the law. But the
administration knows that the GOP-dominated House would laugh in
response. Even the Senate, with increased Republican membership,
would refuse. So the president decided to dispense with the
legislative branch and make law on his own.
The Internal Revenue Service issued a rule in May extending the
provisions relating to state exchanges to federal ones. It’s a nice
trick but contrary to PPACA. Note Adler and Cannon: “The plain text
of the Act only authorizes premium-assistance tax credits and cost
sharing subsidies for those who purchase plans on state-run
exchanges.”
In fact, the administration does not claim otherwise. The
Department of Health and Human Services stated that the IRS rule
was “supported by the statute.” The Treasury Department explained
that the regulation was “consistent with the intent of the law and
our ability to interpret and implement it.” However, nothing in the
U.S. Constitution authorizes bureaucrats to act as lawmakers as
they “interpret and implement” legislation passed by Congress.
The IRS has its defenders, such as
Timothy Jost of Washington & Lee University. In fact, he
seems to resent Adler and Cannon defending the rule of law. He asks
why “extending the benefits of our health care system to millions
of uninsured Americans troubles” opponents of Obamacare.
In fact, politicizing the health care system, turning control of
people’s insurance coverage over to Washington, is bad policy. When
Uncle Sam rations care those with the least political influence are
likely to do badly. Health care reform is necessary, but
nationalizing the system was not the right approach.
Anyway, good intentions cannot justify ignoring the rule of law.
The Constitution means little if the executive can write
legislation at its pleasure. Congress, not the president, makes
law. If legislators didn’t vote tax credits and subsidies for
federal exchanges, the president can’t add them.
Jost admits, as he must, that the law does not authorize credits
and subsidies for federal exchanges, but says no matter. He
contends that the omission was just a “drafting error.”
However, the Supreme Court has ruled that it will fix
legislation only where there is “overwhelming evidence from the
structure, language, and subject matter of the law” that Congress
meant otherwise. That is not the case here.
Congress has a responsibility to do its job right and to fix its
own mistakes. The courts do not have carte blanche to step in.
Adjusting a typo is one thing. Adding a substantive provision that
reduces revenue and increases expenditures is another. Indeed, if
no state created an exchange, the IRS regulation would cost nearly
$700 billion over the coming decade.
In this case the enactment process militates against a judicial
rewrite. After the election of Scott Brown in January 2010, the
Democrats lost their filibuster-proof majority in the Senate. That
required the Democrats to accept an unfinished product as the final
version, subject only to the modest changes available through the
reconciliation process (which requires a simple Senate majority).
Adler and Cannon point out: “Given the choice between a Senate bill
with many provisions they did not like, or no bill at all, they
opted to accept the former.” And in using the reconciliation
process Congress did not add benefits for federally created
exchanges.
Anyway, leaving out tax credits and subsidies for federal
exchanges was not just a “drafting error.” Even Jost admits, “It is
clear that the federal government favored state exchanges.” The
mere fact that tax credits and subsidies for federally run
exchanges would be consistent with the legislation does not mean
they were intended to be part of the legislation. Jost assumes
rather than proves that Congress intended other than it legislated.
Jost, like the administration, wants the IRS to amend the law to
read as he wishes, not as Congress intended.
Indeed, Adler and Cannon make a strong case that legislators
knew what they were doing, that “this feature of the law was
intentional and purposeful, and that the IRS’s rule has no basis in
law.”
First, the legislation is clear. The text of the bill as passed
is unambiguous. The relevant section only applies to state-run
exchanges. Antecedent legislation that was subsumed by PPACA also
failed to provide tax credits and subsidies for federal exchanges.
Moreover, argue Adler and Cannon, “Neither the structure, history,
nor other indicia of congressional intent support the IRS
position.”
Backers of PPACA decided to rely on state-created exchanges.
Obviously, Congress could have taken a different approach. In fact,
Senate Finance Committee Chairman Max Baucus, who wrote much of the
law, initially favored a federally established exchange. But his
first “chairman’s mark” went with a state-based system, with
federal exchanges as back-up.
Since the Constitution barred Uncle Sam from formally mandating
state action, legislators provided financial incentives to win over
recalcitrant states. Note Adler and Cannon, offering benefits only
for state-established exchanges “is consistent with the PPACA’s
modus operandi of using financial incentives to elicit a
desired behavior.” There are penalties for individuals, employers,
and states. (Indeed, the Supreme Court ruled that the cost to
states that did not expand Medicaid was so onerous as to be
unconstitutional.) Obamacare’s supporters appeared convinced that
they would get their way.
For instance, the president declared that “by 2014, each state
will set up what we’re calling a health insurance exchange.”
Secretary Sebelius insisted that states were “very eager” to
establish exchanges. President Obama and the congressional authors
of PPACA probably did not expect to encounter widespread
resistance. After all, the alternative to state action was a
federal takeover without politically attractive benefits. The law’s
supporters may have been foolish, but it is not up to the IRS to
remake the law in response.
To override the obvious would require substantial evidence of
contrary intent, but none exists. In fact, Senator Baucus stated
that benefits were provided only to state-run exchanges. And that
comment, observe Adler and Cannon, “is the only instance
we found of a member of Congress discussing whether tax credits
would be available in federal exchanges, and it flatly and
authoritatively contradicts the IRS position.”
Backers of an administrative rewrite contend that the results of
the law, as passed, are, well, absurd — that, in the words of a
prior Supreme Court decision, “will produce a result demonstrably
at odds with the intentions of its drafters.” However, many laws
passed by Congress have absurd results.
PPACA is no different. Adler and Cannon point out that “In at
least two other instances, Congress displayed an even higher
tolerance for iatrogenic instability.” Legislators imposed
community-rating on health insurance for children with no
additional requirements, destroying the market for such policies in
many states. And the administration gave up on the Community Living
Assistance Services and Support Act, designed to cover long-term
care, because the law as written was unsustainable.
Anyway, the alleged absurdity results not from how Obamacare was
written, but from Congress’s erroneous assumption that states would
rush to establish exchanges. The judiciary is not empowered to
correct legislators’ judgment errors.
In fact, the administration appears to be suffering from a case
of buyer’s remorse. States were supposed to establish exchanges.
But they haven’t. Congress did not provide for that possibility by
backing federally created exchanges in the same way. So the
administration wants to insert the provision via administrative
fiat.
PPACA backers also claim general administrative authority to
interpret and implement statutes, but agencies can only operate
based on legislative authority. If the executive can issue any rule
“consistent” with rather than authorized by a law, there are few
things that it cannot do — which truly would be an absurd result.
Obamacare is massively complex; a wide variety of provisions could
conceivably be consistent with the law’s professed objectives. But
turning them into law is a job for legislators, not
bureaucrats.
Obamacare does many things, most bad. However, it only
authorizes tax credits and subsidies for “a governmental agency or
nonprofit entity that is established by a State.” That does not
include the federal government. The evidence suggests this is what
Congress intended.
Maybe legislators were overly confident that their incentives
would be sufficient to goad states to act. However, that mistake
would not justify an IRS rewrite of the law. Only Congress can
authorize tax credits and subsidies. Agencies have substantial
discretion but, conclude Adler and Cannon, “they cannot write their
own laws, impose taxes, issue tax credits, spend federal revenue,
incur new federal debt, or create new legal entitlements without
congressional authorization.”
Apparently the Obama administration does not understand this
basic constitutional fact. But then, respecting the Constitution is
obviously not a priority for the president who once taught
constitutional law. It is now up to the courts to protect the rule
of law.
