Supporters of the “Affordable Care Act” have been rather glum of late. Since the Supreme Court agreed to hear King v. Burwell, a lawsuit that challenges the Obama administration’s decision to funnel insurance subsidies through federal exchanges established in the 36 states that refused to create PPACA “marketplaces,” they have rather ironically bemoaned the possibility that five unelected justices could do irreparable damage to the law with one “wrong ruling.” Consequently, they have desperately grasped at a thin straw tossed their way by Justice Anthony Kennedy during Wednesday’s oral arguments about the case.
In an exchange with Michael Carvin, who represents the petitioners, Kennedy offered the following comment: “Let me say that from the standpoint of the dynamics of Federalism, it does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either create your exchange, or we’ll send your insurance market into a death spiral.” Because this came from a justice assumed to be hostile to PPACA and echoes an argument made by a Yale Law School professor who supports the Obama administration’s position in King, it gave the law’s supporters false hope.
A typical example of this newfound optimism can be found in a giddy Slate piece titled, “Will Kennedy Save Obamacare?” Its author describes his comment as follows: “Something rather amazing happened during Wednesday’s oral arguments… most observers expected Justice Anthony Kennedy … to join his fellow right-wingers in cheering on the challengers. Instead, he threw a curveball.” But even the Obama administration’s Solicitor General, Donald Verrilli, didn’t take the “curveball” seriously. He told the Court he “was not prepared” to argue that a ruling in favor of the petitioners would present a federalism problem.
The important question, of course, is not what Verrilli thinks. It is rather what Justice Kennedy believes. And a variety of other questions and comments that he posed throughout the hearing suggest that the federalism issue is by no means his main concern. On the Obama administration’s position that the IRS can issue a rule at odds with the law’s text, for example, he told Verrilli, “[I]t seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars of subsidies involved here? Hundreds of millions?”
Kennedy also addressed a point that has puzzled several lower courts—the Obama administration’s argument that the language of PPACA is ambiguous on the issue of subsidies and what entities may issue them. Speaking to Verrilli, Kennedy put it thus: “[I]t seems to me a little odd that the director of Internal Revenue didn’t … didn’t identify this problem if it’s ambiguous and advise Congress it was.” The ambiguity claim is crucial to the government’s case. It attempts to explain the evolving IRS interpretation of PPACA’s subsidies provision while undermining the petitioners’ “plain text” argument.
When Verrilli dressed this up in textual terms, Kennedy was clearly skeptical. Verilli began, “And but to really, to get to the fundamental point here that both at the level of text, you have clear irresolvable conflicts so that the statute can’t work if you read it Mr. Carvin’s way. You have, at the level of text …” At this point, Kennedy interrupted him with a decidedly unambiguous question: “Is that a synonym for ambiguity?” This addled Verrilli so much that he forgot which justice he was talking to: I think so, exactly right, Justice Scalia … I mean, excuse me, Justice Kennedy … that that you have ambiguity there.”
This is where Obama administration’s argument comes back to bite Verrilli. By claiming that the text of statute is ambiguous, the Solicitor General is admitting that someone has to clarify its language. And this is pointed out by Kennedy: “[I]t seems to me our cases say that if the Internal Revenue Service is going to allow deductions using these, that it has to be very, very clear.” And it is obviously not the function of the executive branch to make the law clear enough for Kennedy’s tastes. And it certainly is not the function of the IRS, the most politicized agency of the executive branch, with the possible exception of the DOJ.
The extent to which the IRS is politicized is clearly demonstrated by its behavior on this very issue. As Michael Cannon reminds us in National Review, “The IRS’s draft rule originally included the statutory language restricting tax credits to Exchanges ‘established by the State,’ but IRS officials deleted it and inserted broader language when political appointees approached them about it.” In other words, the IRS itself interpreted the subsidy provision of PPACA precisely as the plaintiffs read it, but was pressured to change its rule when the HHS realized that most states were not going to set up exchanges.
This should be enough to convince the justices that the text of the law is clear. Kennedy’s concern about federalism is real but probably not strong enough to convince him to let the IRS rule stand. As he put it during the oral arguments, “[I]t is in the background of how we interpret this … statute.” This is the thin reed upon which the supporters of Obamacare have chosen to lean. But he added a caveat that they have ignored. He told Michael Carvin, “It may well be that you’re correct as to these words, and there’s nothing we can do. I understand that.” Chief Justice Roberts may cave again, but Kennedy won’t.