Friday, February 13, 2015

King v. Burwell, Plaintiff's Brief, Part 2

Original post

This picks up on page 42, section C of the Plaintiff's brief.

The Plaintiff continues the argument, contrasting the appeals court opinion that "context" changes the meaning of the phrase at issue. But the section in question (36B) is the only section that handles subsidy availability. And even the context reinforces the Plaintiff's position. Congress didn't use "established by the State under Section 1311" every time it referred to Exchanges. It often used "an Exchange" or "Exchange established under this Act." But the IRS rule makes all the different phrases mean the same thing, and rules for interpreting statutes hold that different phrases do not mean the same thing. Even the lower courts held that Congress could have written the language to include HHS exchanges. There was even explicit language in the statute that expressly included both State and HHS subsidies established under Sections 1311 or 1321.

One of the appellate judges suggested that the section governing the formula was an odd spot to put the eligibility requirements, but the section on the formula was the only place to put the eligibility requirements. And even the Government's reading acknowledges that the section limits subsidies to exchanges, regardless of whether it limits them to State exchanges. So it less an "Elephant in a mousehole" and more a pair of elephants in an elephant pen. Such a formulation is common practice for Congress.

The Government's absurdity argument also fails, as even the Fourth Circuit (the appeals court) held that it does not cause absurdities. (That matters because courts will avoid readings that result in absurd outcomes, regardless of how plain the language is.) And that's the only reason to depart from the plain text of the statute. As the lower court conceded, it's reasonable that Congress meant the language and the result is a reasonable outcome. Therefore attempting to discern subjective Congressional intent can be avoided entirely and the plain text followed.

Using the subsidy program as an incentive to compel State co-operation is both sensible and consistent with Congress's purpose, as it provides both a carrot and a stick to push otherwise-reluctant states to implement the exchanges. In fact, that's exactly what Congress did with the Medicaid expansion - unless the States implemented the exchanges, all of a State's Medicaid funds would be stripped away. The same logic applies to both - Congress expected that local officials would work to avoid having to explain to local voters why the State had lost substantial Federal aid money. But the IRS rule actually kills that incentive.

The Government also argues that the Courts must rewrite the law, because it "contradicts" the Affordable Care Act's stated purpose, "Affordable Care" through the subsidies. But using the claimed purpose to force the section to mean the opposite of what it says is lawless revisionism. And Court precedent holds explicitly that a vague idea of the purpose of a statute is not enough to overcome the text. But even then, the Government is not seeking to implement Congressional intent, but a new purpose that defeats the Act's clear intention to encourage state-established exchanges. But conditioning the subsidies on State exchanges is the best and maybe only way to get both State exchanges and widely-available subsidies.

The Government's argument kills the State Exchange part of the law, in contradiction to the plan text, despite the Act's claim to mandate them on the states. Nothing in the law or legislative history suggests that the subsidies were ever intended outside of State exchanges, let alone on HHS exchanges. The Government's argument is just an attempt to place the Executive's policy preference above Congress's intention to develop State Exchanges. There is no reason, under the Government's argument, that the IRS was even restricted to limiting the subsidies to Exchange purchases. They could also issue subsidies to people who buy directly from insurers, as the Act's purpose is "Affordable Care". (and, well, HHS did exactly that for awhile.)

Any time the law creates conditions for dispensing funds, the Executive can't just say "nevermind" and hand them out anyway. In fact, under the Government's analysis, the IRS could have denied subsidies to HHS exchanges had they been authorized on the grounds that Congress also intended the States to create exchanges themselves.

But again, Congress put all Medicaid subsidies on the table, meaning that the Government's argument that the Exchange subsidies were too important simply can't hold up - if a sixty-year program with broad support would be ended in States that refused the Exchange, certainly a simple purchase subsidy would not be "too big". While the Exchange program contained the HHS fallback, the Medicaid expansion/withholding did not have a fallback measure. The Medicaid program would be entirely thwarted by a State's refusal to create an exchange.

But it doesn't matter, even if Congress over-estimated the willingness of states to co-operate, it's not the Court's job to fix statutes that don't work out in practice. And there's no reason to believe that the provision would have failed had the IRS not written it out of the law. Since the IRS promised the States the subsidies anyway, 34 states decided not to do it. Any loss of subsidy today lies at the feet of the IRS's departing from the law. That departure cannot be self-justifying.

The legislative history (the history of comments, statements and reports related to the bill's passage) cannot be relevant when the text is plain. Even if the history directly contradicts the text, it cannot overcome the plain language unless that language would result in absurd outcomes. What little legislative history does exists only supports the notion that subsidies were limited to State exchanges, but again this doesn't matter because the language in the law is clear. But experts, the Senate committee, and architects and consultants all at least contemplated the use of the limitation to compel States, to overcome the resistance of Senators who were unwilling to sign on to a single, mandatory Federal exchange. And again, the plain text creates no absurdities.

Lastly, Chevron deference (where the courts accept agency interpretations of the laws they administer by default) can't help because:

1) The text is plain. Deference applies when the text is ambiguous.

2) It's implausible that Congress passed such a huge decision to the IRS. And such a delegation would either be clear or non-existent. Such a grant is absent here.

3) Deference wouldn't apply here anyway, because tax-credits are also either clearly granted or not granted at all.

4) No one contends that this section is ambiguous. The Government contends that this reading is required to resolve ambiguities elsewhere in the statute, but the IRS doesn't have the authority to decide what ambiguities exist in the parts of the law under the jurisdiction of HHS. And HHS cannot interpret the tax code.

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That's it, that's the end of the Plaintiff's brief. (Thank God, so to speak.) I might do the Government's brief if people are interested, but I am uncertain. Let me know!

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