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Halbig: Another Expert View

The federal judiciary is in great need of expert economic advice, and mercifully some are happy to supply it. “Stop the Anti-Obamacare Shenanigans,” Henry J. Aaron (senior fellow, Brookings), David M. Cutler (professor, Harvard), and Peter R. Orszag (shill, citigroup) plead on the New York Times op-ed page. They urge the Supreme Court to await the D.C. Circuit’s en banc decision in Halbig before granting cert in King v. Burwell. Because if the petitioners’ position and the D.C. Circuit’s ruling—ACA tax credits and mandates apply only under health care exchanges established by states, not to exchanges established by HHS in a state—were to prevail, “it would create total chaos.”

As opposed to the good order that’s prevailed in the insurance markets ever since Obamacare’s enactment. And further delay would solve—what? No lawyer on either side, no lawyer in between, and no market participant expects the question to be settled by anyone but the Supreme Court. But then, the authors write,

We are economists, not lawyers. But we note that the statute, while vague at points, confirms, when read in its entirety, that tax credits are to be available on all the exchanges, nationwide. … And when the law was passed, everyone involved in the law’s passage understood that this directive vested federal exchanges with the same mission and authority as state-mandated exchanges.

Like the authors of the First Amendment, the economists should have stopped after the first five words. The second sentence merely restates the legal question at issue, while hiding in a weasel phrase (“vague at points”) the inconvenient fact that the statute is very precise on the particular point at issue. The third sentence is an outright falsehood. As Jonathan Adler and Michael Cannon have shown in excruciating and (as here relevant) uncontested detail, no one understood any such thing. And of all people, Messrs. Aaron and Cutler ought to know.

On December 24, 2009, the wretched PPACA child was spawned by the U.S. Senate in the wee morning hours, with not a vote to spare. In January 2010, Senator Brown was elected to Ted Kennedy’s former seat, depriving the Democrats of a filibuster-proof majority. Whereupon a bunch of experts, including the aforementioned gentlemen, sent a letter to the House leadership, urging them to pass the Senate bill, warts and all. Best we can get, they said, and too important to be renegotiated. Details can be fixed through reconciliation (which did take place but conspicuously did not address the Halbig issue). Pass it.

The letter merits (re-)reading for its unctuous tone; for the “experts’” preposterous proposition that the ACA would or even sought to create “functioning insurance markets”; and for the light it sheds on this latest round of unsolicited expert advice. In this country, we usually follow the laws that Congress did enact, not some blowhard’s latter-day reconstruction. In 2010, they begged for an imperfect bargain; now, they want it back.

I teach law, not economics. But did someone just say, “ex post opportunism”?

Reader Discussion

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on September 15, 2014 at 16:24:30 pm

"[...], no one understood any such thing." Seriously?

According to Chris Condeluci, Republican tax counsel to the Senate Finance Committee while S. 1796 (the source of "established by State") was being drafted:

“Congress always intended for the federal exchanges to do everything the state exchanges do, one of those things being the federal subsidy, I can say, even as a Republican, Congress always intended this, we just didn’t indicate it through legislative history because the process was so screwed up.”

Of course, Max Baucus and others also told the DC Circuit as much in their brief. More to the point, the brief from Republican legislators supporting Halbig does not contradict them, or Mr Condeluci, on this point. Sensibly enough, it confines itself to variations on the plain text/confused process/separation of powers theme. (Though, amusingly, the best argument along these lines is the brief's own bizarre confusion about what precisely HHS was tasked to establish. It certainly wasn't a single national exchange!)

http://www.forbes.com/sites/danielfisher/2014/07/23/yes-congress-wanted-obamacare-subsidies-it-just-did-a-terrible-job-of-saying-that/

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Ken Kelly
on September 15, 2014 at 18:22:59 pm

Any contemporaneous evidence of such intent?

"I can say, even as a Republican . . ." - probable translation: "I can say, even as a RINO who now lobbies on behalf of corporations eager to ingratiate themselves with the Obama administration, the leftist permanent bureaucracy and the permanent congressional majority of Democrats and RINOs . . ."

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djf
on September 15, 2014 at 18:26:17 pm

"Congress always intended . . . ."

I presume that Congress INTENDED not to write a disastrous piece of legislation that would wreak havoc on the entire Health Care system. But, unfortunately, that is not what happened with PPACA. It is called the law of unintended consequences. The Intent of Congress, for purposes of implementing and enforcing a statute, is to be determined by the language that was actually enacted by Congress and signed by the President, not on the post hoc claims of those unhappy with the law that was "the best they could get under the circumstances." The fact that Mr. Condeluci, or Senator Baucus, or any other individual in the House or Senate now makes a post hoc claim of what the intent was at the time is completely irrelevant. If the Panel decision in Halbig was truly contrary to the intent of Congress, there is a very simple fix - pass a law amending the statute. But don't try to tell me that "an Exchange established by a State pursuant to Section 1311" doesn't mean exactly what it says, it really means "an Exchange established by a State pursuant to Section 1311 OR AN EXCHANGE ESTABLISHED BY THE FEDERAL GOVERNMENT PURSUANT TO SECTION1321." Just because you don't have the votes to amend the statute in the manner required by the Constitution, don't claim the power to amend it through judicial sleight of hand and think others are going to sit still for that.

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Daniel J. Artz
on September 15, 2014 at 19:41:17 pm

1. Dr. Jonathan Gruber. Twice
2. The contract hhs signed with cgi did not include premium tax credit functionality. It was added later- AFTER the halbig reg was done by the irs. There's only 1 reason why.
3. Why did the irs write the reg in the first place?

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Rightisright5116
on September 16, 2014 at 07:03:51 am

[…] via Halbig: Another Expert View | Online Library of Law & Liberty. […]

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Image of Halbig: Another Expert View | Online Library of Law & Liberty | The Health Policy Skeptic
Halbig: Another Expert View | Online Library of Law & Liberty | The Health Policy Skeptic
on September 16, 2014 at 11:48:30 am

I was addressing Greve's specific claim that "no one understood" the ACA to allow tax credits or subsidies through the HHS backup exchanges. That claim is ridiculous.

Your position is similar to the one described by Fisher and Condeluci in the Forbes item that I linked to, and by the Republican MOC in their brief. I don't agree with it, but It is not ridiculous.

http://www.forbes.com/sites/danielfisher/2014/07/23/yes-congress-wanted-obamacare-subsidies-it-just-did-a-terrible-job-of-saying-that/

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Ken Kelly
on September 16, 2014 at 12:28:09 pm

1. In the famous Nobilis video, Jonathan Gruber said that the Feds might not have their backup exchanges ready on time, therefore any State that decided not to set up an exchange was risking leaving their residents without access to tax credits when the ACA individual market coverage laws took effect in 2014.

https://www.youtube.com/watch?v=GtnEmPXEpr0&feature=youtu.be&t=31m25s

Michael F Cannon - one of the two architects of the Halbig strategy, along with Jonathan H Adler made a very similar point (for a different purpose) in June 2011 (my emphasis):

"A key battleground is whether states will implement the law by creating government bureaucracies that Obamacare euphemistically calls health insurance “exchanges.” Starting in 2014, these exchanges would enforce the insurance regulations that will make health care more costly and scarce, and will dole out the subsidies to private insurance companies that will add trillions to the national debt. Supporters have called exchanges 'the most important aspect' of the law. The Obama administration wants exchanges set up yesterday, but since it can create only a few exchanges itself by 2014, it is counting on states to help."

http://www.cato.org/publications/commentary/just-say-no-implementing-obamacare

I have no idea how these statements constitute evidence that TC were not available through HHS-run exchanges - quite the opposite, in fact. Unless they were available, Gruber's comment in particular would make no sense.

https://www.youtube.com/watch?v=GtnEmPXEpr0&feature=youtu.be&t=31m25s

2. This is silly. The contract has plenty of references to tax credit functionality. For example, under Section 2.3 ""Delivery of Federal Exchange", Sub-section 2.3.1 "Eligibility Verification and Enrollment Services" includes "BP-EE:10 Prepare/Update Individual Eligibility Application".

"BP-EE:10" is described in the Blueprint document which is referenced in the contract (APTC = "Advance Premium Tax Credit"):

"Collects initial and updated application information from an individual necessary to determine eligibility for enrollment in a qualified health plan, APTC, CSR, and Medicaid, CHIP, and the Basic Health Program. Application information includes details about each member of the household."

3. Did you read the rule? Or the proposed rule issued in August 2011? Your question will answer itself.

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Ken Kelly
on September 16, 2014 at 13:10:03 pm

'@RightisRight....It seems that pretty every right wing group was united on 2 points as late as October of 2011.

1. That states should not create exchanges as this would lend further credence and help to the law.
2. (And this is the most relevant point) That refusing to create an exchange and forcing HHS to do it would have NO penalty whatsoever for the states. This is directly from Michael Cannon's blog http://www.cato.org/blog/state-legislators-just-say-no-obamacare-exchanges
3. Gruber's comments are easily explained (using context, what a concept) when understood in the context of Cannon's comments about states not establishing exchanges to make it harder for HHS to get them running and thereby allowing states to "block" tax credits UNTIL HHS has the exchange up and running. Thus, Gruber was essentially saying that he, like all the right wing "experts", thought that HHS would not be able to get the exchanges up and running in time for 2014 and those states who did not actively establish an exchange in time were risking their citizens not getting the benefits because there would be no exchange ready in time for the law to go into effect. (Also important to note that January 1, 2013 was the deadline for determining whether each state would establish or could get it done in time while Gruber stated that it would take 2 years to get an exchange up and running which means that he thought that HHS would need until 2015 to get their exchanges up and running.)

You can peruse any of his blog posts (or articles) from before Adler brought him the "glitch" language and novelty legal argument with which they used to craft this alternative universe in which Congressional intent is evidenced by a 4-word phrase read in isolation instead of intent derived through a reading of the statute as a whole, and that particular phrase in context within the statute as a whole looking to the statutory purpose to derive the meaning.

All this to say that even Michael Cannon, healthcare policy "expert" and co-author of the Halbig strategy, believed and stated the exact opposite until political expediency caused him to do a 180 turn in his reasoning. By the way, you wont find him or Adler touting any of his previous statements in that HM article (I can't imagine why) nor will you find any of the numerous other parts of the legislative history such as rejected "opt-out" amendments, the discussion on Wyden's waiver process, and other statements that reference ALL citizens going to ALL exchanges receiving tax credits (because thats the way the law is setup).

You will also not find a full explanation of the places in the law where Exchanges are referred to (more than 30 different phrases used to describe Exchanges) nor do Adler/Cannon even explain all of the instances where that exact phrase "established by the state" is used. This is because if they had looked into and explained ALL of those instances it would have been clear that the Halbig interpretation leads to absurdity and contradictions within the law. (Such as requiring "non-establishing" states to maintain their Medicaid eligibility standards forever while also denying ALL Medicaid funds to "non-establishing" states because their Medicaid and CHIP Agencies don't link to a website of an exchange "established by the state".

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Something Aint Right Here
on September 17, 2014 at 07:35:56 am

Your gruber comment is laughable. You know darn well he made the same comment twice.

Your understanding of the cgi contract is incomplete. The erde module was not added until after the halbig reg. That's the functionality module.

I have seen cannon reference the idea that he was not a believer in the halbig argument until he dug in.

I was not a believer in the halbig argument until gruber and then I dug in.

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Rightisright
on September 17, 2014 at 07:38:47 am

You also fail to mention that gruber spoke of this not once but twice. Your attempt to nuance will not undo what my apparent lying eyes and ears have seen and heard.

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Rightisright
on September 17, 2014 at 07:42:28 am

Can any if you halbig haters explain why the irs wrote the reg to change the law in the first place if it was so obvious that ever exchange was to offer subsidies?

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Rightisright
on September 17, 2014 at 09:49:22 am

'@RightisRight......The point is that Cannon (and EVERYONE else) knew what Congressional intent was before this glitch was found. Further, the point that it had to be "found" and was not readily apparent is perhaps one of the strongest arguments against Halbig. If, as Halbig claims, this was a "threat" to states to get them to setup the exchanges on their own, it is the WORST threat in the history of threats. It would be like someone running out into the woods and writing a threat on a tree and then trying to say that the person who did not perform should be subject to the consequences of the threat. Its nonsensical.

Also, Congressional intent is not taken from a 4-word phrase read in isolation. Congressional intent is derived from the statute as a whole, reading each provision in context with the rest of the statute and in conjunction with the statutory purpose. THAT is why Cannon and other right wingers' contemporaneous statements are so damning is because everyone KNEW what Congressional intent was and is in regards to exchanges. The fact that there is a glitch in the law does not change Congressional intent. It just means that there is a glitch in the language making the language ambiguous when read in context. Thus, the Court should give Chevron deference to a proper agency interpretation that leads to a coherent reading of the statute.

Any judge who says that a "glitch" in the law should override Congressional intent is actually making law and circumventing the will of Congress when it passed the law. Further, Congress, the House specifically, has introduced numerous bills to repeal Obamacare and specifically to give States the option to opt-out of the exchanges (See Rep. Fleming's bills) and that legislation has been rejected by Congress as a whole.

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Something Aint Right Here
on September 17, 2014 at 11:06:46 am

Everyone knew what the intent was- to force the states to build their own exchanges.

To say that this was not publicized or a well known feature of the law until it was revealed is not, in my view, a strong argument. After all, it wasn't until several years after the law was passed that it was revealed that I couldn't keep my plan if I liked my plan, period. And it wasn't until yesterday that the GAO revealed that the Stupack/Executive Order and Hyde are both being ignored.

And there's also that other famous quote. How'd it go? We had to pass the law to see what was in the law.

Let's face it. The law's a mess. It was designed and sold based on false premises, it was passed based on promises that were never kept (abortion), its implementation has been a running joke, with the Admin rewriting the law as it goes.

Here's an honest question: WHY was it so important that the States run their own exchanges? I would have expected a Progressive law to want the exact opposite, centralized control.

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rightisright
on September 17, 2014 at 13:23:42 pm

'@RightisRight..... Once again, you miss the entire point of Halbig's argument. The Halbig argument is that Congress knowingly and intentionally inserted this language as a specific threat to the states to create exchanges or lose out on the subsidies for their citizens and that the statute is unambiguous and crystal clear on this. The point is that the law IS poorly drafted and has many glitches and errors. All the more reason for judges to declare this provision ambiguous and defer to the agency interpretation which brings coherence to the statute. To do otherwise would be to rewrite the law and congressional intent.

Further, we ALL know what congressional intent was in this matter. Your "point" about "WHY was is so important that the States run their own exchanges?" actually assumes your own conclusion based off of the Halbig interpretation. These provisions of the statute ALLOWED States that wanted to run their own exchanges to do so without the federal government stepping in. However, Congress wrote in the federal fallback specifically because they knew that some states would not follow through, and they wanted to ensure that ALL citizens had access to the exchanges and the subsidies that they would get on the exchanges. As the entire statute makes clear, States are never allowed to "opt-out" or "waive" ANY of the reforms in the ACA (which includes the subsidies for the exchanges) without providing coverage that was at least as good as what was being provided through the exchanges. Nowhere in the bill do you see a provision that allows States to summarily "opt-out" because they knew they needed the 3-legged stool for it to work.

Finally, the point about the "threat" and the states not knowing about it goes directly to the heart of Halbig's argument and the Court's reasoning in cases where Congress is using its spending powers to coerce states to do something. The Court has repeatedly said that where States are given a choice by Congress as to whether to perform or not the terms of that choice must be CLEAR with the States having clear notice of the consequences of their accepting or rejecting the money. Here, there is no clear notice and the terms certainly are not clear. (This was shown by Cannon and all those right wingers who knew that States refusing to setup exchanges risked no penalty in doing so.) Without an informed choice, states (and their citizens) cannot be penalized because there was no "consent" in this matter. It also leaves state legislators who refused to create exchanges liable to their citizens who would lose these subsidies and might throw them out of office even though it was not their fault because Congress did not make them aware of the consequences. Of course, there is also the issue of the amount of money that is being used as coercion here. The Supreme Court made the distinction that the Medicaid expansion was coercion because of the amount of money that was being threatened (about 10% of a state's overall budget). In this case, the potential amount of money is quite close to that (about 5-7% of a state's overall budget) meaning that Congress also crossed the line in the coercion department (Not to mention the threat to withhold ALL Medicaid funds for non-establishing states based on the Halbig interpretation).

All I ask is that you show us 1) Any contemporaneous statement where a legislator said that some states might not get subsidies OR that some citizens would be denied subsidies because of the state that they live in not establishing an exchange OR 2) that Congress ever allowed a State to "opt-out" of the requirements of an exchange without providing the same benefits and coverage. OR 3) that the Halbig interpretation produces a consistent or even plausible statutory construction when used as such throughout the statute. (This includes explaining the difference between "established by THE State" and "established by A State")

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Something Aint Right Here
on September 17, 2014 at 14:26:13 pm

you hit it on the head right there!

Nuff said, all you O-care apologists!

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gabe

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