Friday, March 13, 2015

The Hypothetical Proving the Gov't Should Win King v. Burwell (and which Professor Adler Didn't Address).

by Eric Segall

The issue in King v. Burwell, if this were not the Affordable Care Act, would be simple. It would not be about the intricacies of statutory interpretation or the avoidance doctrines of constitutional law or grand issues of federalism. It would be about reading plain text. In the nine days since the case was argued, the textual nature of the case has been marginalized by many Court commentators and legal scholars (maybe because Justice Kennedy seemed to embrace non-textual concerns). That is a shame because King should be resolved based on text alone.

Everyone in the world agrees that HHS must create health exchanges in those states that don't create their own exchanges. Everyone in the world agrees that federal subsidies are available on exchanges created by the states. Everyone in the world agrees that the issue in the case is whether federal subsidies are also available on federal exchanges.

Everyone in the world agrees that the requirement Congress imposed on HHS was to create "such" exchange and the word "such" was referring to an exchange "established by the state." Based on these universally shared premises, Justice Breyer at the oral argument said that "the Federal government, the Secretary, is establishing a thing for the State. And what is the thing?  The thing that it is establishing for the State is defined as an Exchange established by the State." Because everyone in the world agrees that subsidies are available on exchanges "established by the state," Justice Breyer thought it was an easy case.

Professor Jonathan Adler, generously agreed to debate me in the University of Pennsylvania Law Review. I offered this hypothetical in my opening statement which captured the issues in this case exactly:

Imagine the federal government wanted to encourage people to save more money to ease the pressures on the Social Security Program. Congress enacts the following law:
Every state shall set up an investment exchange to encourage long term saving. Any taxpayer who invests in an exchange established by the state shall receive a $1000 federal tax credit. If a state does not create an investment exchange, the Secretary of the Treasury shall create such exchange.
Could the Secretary of the Treasury provide subsidies on the federal investment exchange based on this law? Of course. And, here is the main point. If he didn't, he wouldn't be creating "such" exchange. He would be creating an entirely different exchange. That being the case, the Secretary of Treasury's interpretation is not only reasonable, it is the only plausible interpretation.

In his response to my essay, Professor Adler did not respond to this hypothetical.  Really, what could he say?

29 comments:

Shag from Brookline said...

Perhaps an "Adler-ed Mind" doesn't respond to hypotheticals.

Greg said...

I'm going to play devil's advocate here.

You have placed these sentences in the order most favorable to your position. I can take the exact same three sentences, change the order, and introduce ambiguity.

Consider:
Every state shall set up an investment exchange to encourage long term saving. If a state does not create an investment exchange, the Secretary of the Treasury shall create such exchange. Any taxpayer who invests in an exchange established by the state shall receive a $1000 federal tax credit.

Colloquially, if we put the "such exchange" after the tax credit definition, we would clearly be saying that all of the details described prior to "such exchange" would also apply to the federal exchange. By placing the tax credit definition after the description of the federal exchange, it becomes less clear whether it is describing something that applies to both types of exchange or is describing an explicit difference between the two types of exchanges.

With the health care exchanges, we don't have this added context of ordering because the establishment of the exchanges and the definition of the tax credit occur in different sections of the US code. However, this would seem to favor the more ambiguous interpretation.

Neither ordering is enough to elevate the "established by the state" wording to being absolutely clear, but they do change the meaning. If congress wanted to be absolutely clear they could say "Any taxpayer who invests in an exchange shall receive a $1000 federal tax credit." or "Any taxpayer who invests in an exchange established by the state shall receive a $1000 federal tax credit. Taxpayers who invest in an exchange established by the Secretary shall not be eligible for the credit."

All of this is to say that the wording really is ambiguous without looking at the statute more broadly. If the only input was the three sentences above, I would consider the statute ambiguous and allow Chevron deference. With the broader context available in the ACA, I think it is clear that both the context of the statute and principles of federalism compel a view that the credits apply to the federal exchanges, but I don't think there's any way for either side to end-run around those by claiming that the statute is clear.

Hashim said...

He could say that "such exchange" refers to the attributes of the exchange in the statutory provision(s) that create and regulate the exchange. The feds have to set up the same type of entity that the State would have. But that doesn't dictate whether the *individuals* who purchase on the exchange have to be treated the same w/r/t tax credits, when the separate statutory provision authorizing tax credits is limited to state-established exchanges.

Here's the easiest way to understand why you're wrong. Imagine that Section 36B expressly said: subsidies are available on exchanges established by the State, *but not* on exchanges established by HHS. Would anyone in the world think that the statute was *internally inconsistent*, just because 1321 says "such"? Of course not. They'd immediately recognize that "such" in 1321 was focused on the attributes of the exchange itself, not on whether the consumers on the exchange get tax credits.

Joe said...

If you try hard enough, especially if you are a law professor, you can find "ambiguity" in lots of things.

But, especially with context (and very possibly w/o if you aren't -- pleasant guy or not -- biased), the law can (should) be applied as the government is applying it.

This isn't a game. It's a real world situation involving something that will deny many people health insurance. It is about being adults about what the law means and was intended to mean. It is about how the other side's approach will HURT federalism.

But, I realize this is an academic discussion. So, I appreciate the effort. Adler, however, is not just arguing in his ivy tower.

Unknown said...

I'm pretty much in agreement with Hashim. Mssr. Adler would probably say, to directly answer the question, the federal exchanges were exchanges "to encourage long term saving" but not established by the state and, therefore, do not meet the subsidy requirements.

Eric Segall said...

Greg, I think the best reading of your hypo is still quite clearly that credits would be available but I agree it would be a bit less clear than my hypo. Of course, you are right that Chevron would kick in for you hypo and gov't would win anyway (if law mattered). Of course, add context and we all know it is a slam dunk. Hashim, your hypo doesn't work b/c the additional language changes the plain meaning of "such," and doesn't exist in real life. THE LAW NOWHERE SAYS SUBSIDIES ARE ONLY AVAILABLE ON STATE EXCHANGES OR ARE NOT AVAILABLE ON FEDERAL EXCHANGES. That would be a very different law than the ACA and one no one thought would work. No one ever talked about a one-legged stool.

Hashim said...

But that's my exact point: No one in the world (other than you apparently) would think that adding belt-and-suspenders language to 36B clarifying that State means State (and not also HHS) somehow "changes the meaning" of "such" in 1321. That makes no sense, because "such" means what it means, and its meaning in 1321 can't turn on language in 36B. And what my hypo shows is that "such" in 1321 obviously refers to the required attributes of the Exchange itself (which is governed by 1311 et seq.), not to what customers are entitled to subsidies on "such" Exchange (which is separately governed by 36B).

Eric Segall said...

I have no idea what you mean Hashim. Of course an additional section of the law saying "such" means something different than the same changes the meaning of "such." The gov't is not creating "such" exchange" as the one listed in 1311 if subsidies aren't available. The gov't would be creating a different exchange not the "one just mentioned," which is the meaning of "such." An ACA exchange is an exchange with subsidies, otherwise is it something else.

Hashim said...

In my hypo, 36B wouldn't be saying *anything* about the meaning of "such" in 1321, let alone "changing" its meaning. 36B would simply be clarifying that subsidies are available only on State exchanges, not HHS exchanges. That clarification in 36B doesn't affect the semantic meaning of the word "such" in 1321, and it doesn't create an internal inconsistency between those two provisions. It'd be perfectly consistent and normal to say "such" in 1321 and yet also limit subsidies to state exchanges in 36B.

You're just begging the question when you argue that "such" means that HHS exchanges must be the same as State exchanges *in all respects.* "Such" has a narrower scope: it means that the 1321 Exchange must be the same as 1311 Exchange in the specific respects *governed by 1311 et seq*; namely, in the attributes of the Exchange itself in terms of how it is operated and what is sold on it, which are set forth in Title 42 and which are completely distinct issues from whether customers are entitled to subsidies, which is separately governed by Title 26.

Eric Segall said...

Hashim said: "Such has a narrower scope: it means that the 1321 Exchange must be the same as 1311 Exchange in the specific respects *governed by 1311 et seq." I don't know where you get that from. In 1321, "such" refers to "an exchange established by the state." Subsidies are available on "exchanges established by the state." Thus, subsidies are available on "such" exchanges, unless somewhere else it says they are not. Nothing else in the law says that though I know you think it does. But it doesn't.

Hashim said...

I think we've largely hit the point of diminishing returns, but I'll give it one last shot: 1321 says to set up "such" Exchange, which means a 1311 Exchange. But nothing in the Act says that subsidies are *always* available on a 1311 Exchange. Rather, 36B authorizes subsidies for a 1311 Exchange *only* where it is "established by the State." Which a 1321 Exchange most certainly is not.

In other words, HHS *has* established "such" Exchange -- it has established a 1311 Exchange; but it's 36B that governs when all "such" Exchanges get subsidies -- and the answer is only if they were "established by the State."

Put differently, your reading of the word "such" in 1321 renders "established by the State" in 36B completely superfluous and utterly inexplicable. Why on earth would any rational human being write the phrase "established by the State" in 36B if in fact subsidies are available regardless of who established the Exchange? It is bizarrely adding words to 36B that mean the exact opposite of what you claim Congress intended when it said "such" in 1321. No competent (or even literate) legislative draftsman would ever do such a thing.

former law student said...

This is essentially Justice Kagan's hypothetical, where the back-up role of Amanda is played by the Secretary of the Treasury.

But does shirker Will get the credit for writing the memo when Amanda does it? No, but that's irrelevant, because the object is to get the memo written, not to give Will credit.

former law student said...


36B authorizes subsidies for a 1311 Exchange *only* where it is "established by the State

Actually 36B doesn't. It doesn't even use "only" in that context.

What is important is that the relevant clause makes no sense in the context of the sentence. Further, it has an obvious missing word: , or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act...

"And" what? There is a shocking lack of parallelism to "and which were enrolled in through." Further, "Which" refers to things, not people. Were the plans enrolled in the people, or were the people enrolled in the plans?
Moreover, "enrolled in through" is hardly felicitous phrasing.

But the obvious missing word is "Section" in front of 1311. If PPACA opponents allow themselves to fill in missing words, how can they deny that right to the PPACA's proponents?

From this internal evidence, we can deduce that this wording is either a first draft, or a subsequent or final draft which was mutilated in the markup and editing process.

Shag from Brookline said...

"former law student" provides linguistic skills to this "slice and dice" #tag discussion. Maybe we need more dropouts.

Marty Lederman said...

Let's say, for the sake of argument, that Hash is right that the word "such" does not, in and of itself, do all the work to require tax credits on HHS exchanges (say, because the tax-credit section is directed to parties (Treasury and individuals) other than those addressed in 1311/1321 (HHS and the States)).

Even so, the challengers' interpretation of the Act cannot be right because denial of the tax credits would make it *impossible* for HHS to operate "such exchange" -- and would thus render the statute internally absurd.

Here's how I addressed the point in this post (http://balkin.blogspot.com/2015/03/plain-meaning-absurdity-and-almost.html):

The challengers' . . . reading is “objectively absurd.” In particular, if the challengers were correct that tax credits are unavailable for insurance purchased on a federally established Exchange, Congress’s directive to the Secretary of HHS to establish and operate such federal Exchanges in States that have failed to do so would make no sense at all, as the Solicitor General explains at pages 24 and 38-39 of his brief.

Subsection 1321(c)(1) of the Act provides that if a State elects not to set up an Exchange, or if a State does try to set up an Exchange but misses the deadline, or fails to satisfy all the relevant requirements for an Exchange, the HHS Secretary “shall . . . establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.” The challengers concede (opening brief at 22) that this provision is designed to require HHS to establish the “same Exchange” that would exist if the State established the Exchange for itself, and that "[t]he HHS Exchange should operate just like the Exchange the state would otherwise have established.”

If tax credits were unavailable with respect to insurance policies purchased on an HHS Exchange, however, that Exchange would not operate anything like its State-run counterpart. Without the tax credits, consumers could not afford to buy insurance on the Exchange. And the HHS-facilitated Exchanges would then collapse as insurers dropped out. It would be absurd, indeed, for Congress to have insisted that HHS to set up such dysfunctional Exchanges, without the tax credits that are crucial to their operation. As the SG puts it (p.24), “[a]n Exchange without credits would be a rump Exchange bearing little resemblance to its state-run counterpart—if it could operate at all.” This wouldn’t merely be Hamlet without the Prince; it would be Hamlet without the Danish monarchy . . . more like Rosencrantz and Guildenstern Are Dead.

[continued in next comment]

Marty Lederman said...

[continued]



Think of it this way: In their opening brief, the challengers hypothesize what they describe as an analogous statute (pp. 22-23) that instructs States to build airports with particular specifications—airports designed to facilitate affordable air travel for all, let’s say—and then includes a provision explaining that if a State fails to do so, the U.S. Secretary of Transportation must construct “such airports.” (The purported point of the hypo is to support the challengers’ argument that no one would ever refer to the latter as “state-constructed airports.”) Under the challengers’ reading of the Act, however, the DOT airports would have empty hangers, and be useless, because no one could afford to fly.

In their reply brief, the challengers respond to this argument by insisting (p.19) that, even on their view, there would be good reason for HHS to establish Exchanges, because those Exchanges would offer an “organized and transparent marketplace” for consumers to “shop and compare health insurance options,” just like Orbitz, or Expedia. Needless to say, however, Orbitz and Expedia are not airports, nor are they “just like” airports. And even with respect to their alleged value as “marketplaces,” the HHS Exchanges would be worthless on the challengers’ reading, because there would be no affordable “health insurance options” for residents of the State to “shop and compare.” That truly would be an absurd result—which is reason enough to reject the challengers’ reading of the Act. [UPDATE, per Nick Bagley: "If Congress had meant to punish uncooperative states, it didn’t have to saddle them with dysfunctional exchanges. It could have left them with no exchanges at all. Congress created a fallback because it wanted to enable everyone — even people in states that objected to health care reform — to secure affordable insurance."]

Unknown said...

former law student says, "But the obvious missing word is 'Section' in front of 1311. If PPACA opponents allow themselves to fill in missing words, how can they deny that right to the PPACA's proponents?" The answer is Nobody disputes "1311" refers to section 1311. Maybe the Solicitor General should have raised this point but did not.

JKB said...

Has anyone written about Congress' inept drafting of the law? I know it's hundreds of pages and Byzantine in complexity, but it seems opponents have seized on a typo. And bully for them, but I'm left wondering why we're not calling out those made the drafting mistake in the first place, which has resulted now (quite unexpectedly, to be sure) in untold dollars spent and ink spilled over sloppy copy in Congress. Justice Scalia says the Court should not presume to fix badly composed law. But it would be great if someone with legal skills could analyze how the mistake happened.

Unknown said...

@JKB: I can tell You exactly how it happened. Drafts are often hashed out in conference committees. Democrats expected to have a filibuster-proof majority in the Senate, even after Sen. Kennedy died. Ms. Coakley turn out to be the worst Democrat running for office since Mondale in '84 and lost, giving the GOP filibuster ability (filibustability) and the potential to block any conference bill. Democrats chose to pass the bill as written, complete with the claimed flaws. In other words, Democrats did a half measure and are now seeking full credit, in My opinion.

David said...

While I completely agree that your interpretation of the law is correct and this should be an obvious outcome - I disagree your hypothetical clears anything up. I'll respond for Adler: "The government sets up an exchange to encourage long term savings in any state that doesn't set one up. However, if the exchange wasn't set up by the state but by the federal government, they're not entitled to the credit, just use of the exchange". I persoanlly think that's illogical for many reasons but it's consistent with the challengers interpretation and won't win over anyone who doesn't already agree with what we think the outcome should be.

David said...

Also - as far as Scalia goes - the fact that Congress has already declined to make what would have been one of the simplest legislative fixes in the history of legislation lays waste to his claim that Congress would act.

What I'm wondering, is how the Supreme Court could even consider the argument that the law is unambiguous in the way the challengers interpret it. Just the sheer number of courts that have interpreted it the other way to me make it impossible to say "the law was unambigious and means the exact opposite of what everyone who previously read the law thought it meant." I don't know how the Supreme Court recovers it's reputation from a decision like that (and I think Roberts knows that too . . .). 6-3 with a Chevron concurrance carrying the day.

former law student said...

How the plaintiffs wish 36B to be interpreted. But it's a long way from how it was written:

"(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer [provided that the taxpayer enrolled in such plan] ... through an Exchange established by the State under [Section] 1311 of the Patient Protection and Affordable Care Act, or

Eric Segall said...

David, the ACA says nothing like: "The government sets up an exchange to encourage long term savings in any state that doesn't set one up. However, if the exchange wasn't set up by the state but by the federal government, they're not entitled to the credit, just use of the exchange." It just doesn't come close to saying that and without that additional language, the word "such" means the same.

Joe said...

It is unclear that a conference committee would have caught the provision or even necessarily have changed it. It's useful to understand how Republicans hindered good government here, but that only takes us so far.

As various people have argued, unless you are looking for ways to be confused, the provision as written makes as much sense in the way the government is using it as much as lots of other things that are upheld.

The "half-measure" is at most a somewhat unedited draft with a good excuse. And, the blame is clear, though some -- including Prof. Adler -- refuse to be clear about it. Adler especially is annoying since he fronts as someone who supports good policy making. Some criticism of his fellow conservatives would be honest and useful. Friends often convince more than opponents.

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