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Halbig’s Critics Hoist By Their Own Petards

Next Time, Read The Law Before Making It Law

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This has not been a good week for defenders of Obamacare and their scorn for the legal arguments challenging whether the statute provides subdsidies for buyers of health insurance policies on the federal Helthcare.gov exchange. On Monday, a divided panel of the DC Circuit ruled in Halbig v Burwell that the statute only provides subsidies for purchases on the state exchanges (the Fourth Circuit reached the opposite conclusion). The reaction to Halbig from pundits on the Left – most of them not lawyers, and many of them obviously woefully ignorant of how courts read laws – can only be characterized as an unhinged meltdown. The latest news has only further undermined their position.

In the end, it remains to be seen who will win in court. But there are a couple of lessons here that liberal/progressive pundits and Democratic politicians would be wise to learn, about the perils of hyperbolic arguments, the dangers of pronouncing on things you don’t understand, the difference between law and political rhetoric, the hazards of forgetting recent political history, and the continuing bitter harvest of the way in which Obamacare was rammed through Congress in violation of the usual methods for writing laws.

No, The Good Faith Of The Lawsuit Doesn’t Matter: One of the stranger arguments made against Halbig, not only by non-lawyers who don’t know any better but even in the opening lines of Judge Edwards’ dissent, is that the lawsuit is somehow illegitimate because the people filing it are not really trying to help the ACA, but are foes of the statute. Here’s a little secret: people who file lawsuits against federal laws are not usually big fans of those laws. Do you think the Guantanamo detainees who challenged the Military Commissions Act were really just disinterested scholars motivated by a concern for proper functioning of the military justice system? It’s the job of courts to determine the meaning of laws, not the motives of litigants.

Textualism, Intent, Context, and How To Read Laws: To review some ground I covered on Monday, the core question here is what the law actually says. While courts use a variety of rules or “canons” of interpretation to resolve difficult questions, as Justice Thomas explained in an opinion for the Court back in 1992:

[C]anons of construction are no more than rules of thumb that help courts determine the meaning of legislation, and in interpreting a statute, a court should always turn first to one cardinal canon before all others. We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says thereWhen the words of a statute are unambiguous, then this first canon is also the last: “judicial inquiry is complete.”…Germain says that legislative history points to a different result. But we think that judicial inquiry into the applicability of 1292 begins and ends with what 1292 does say, and with what 158(d) does not.

By contrast, as Justice Scalia wrote in a concurring opinion this spring, courts should not be in the business of trying to dig behind the language of the law to figure out what it really meant to say:

Reliance on legislative history rests upon several frail premises. First, and most important: That the statute means what Congress intended. It does not. Because we are a government of laws, not of men, and are governed by what Congress enacted rather than by what it intended, the sole object of the interpretative enterprise is to determine what a law says. Second: That there was a congressional “intent” apart from that reflected in the enacted text. On most issues of detail that come before this Court, I am confident that the majority of Senators and Representatives had no views whatever on how the issues should be resolved—indeed, were unaware of the issues entirely. Third: That the views expressed in a committee report or a floor statement represent those of all the Members of that House. Many of them almost certainly did not read the report or hear the statement, much less agree with it—not to mention the Members of the other House and the President who signed the bill.

The view that courts should read statutes to mean what they say, rather than trying to bend them to whatever “purpose” the court thinks the statute was supposed to serve, is referred to in legal circles as “textualism,” and it is a close cousin of “Originalism,” the view that courts should read the Constitution to mean what it said – and was understood to say – at the time it was written. (The principal difference being that most of the Constitution is quite old and more general than your typical statute, so courts are more apt to look at dictionaries, public debates and the like to interpret the understood meaning of terms. But in both cases, the goal is not to get inside the heads of the legislators but rather to determine the plain meaning of the language at the time it was written).

Here, the plain language of the ACA is straightforward: Section 1401 of the ACA, codified at Section 36B of the Internal Revenue Code, provides tax credit subsidies to individuals who buy insurance on exchanges “established by the State under section 1311″ of the ACA. Section 1304(d) clearly sets forth the definition of “State,” and it’s what you would expect: “the term ‘State’ means each of the 50 States and the District of Columbia.” A separate section of the ACA, section 1321, allows the federal government to “establish and operate such Exchanges within the State” if the State does not do so, and the statute nowhere provides a similar subsidy to buyers on the state exchanges or states that the federal exchange should be treated as a state exchange for purposes of the subsidies. This is not at all ambiguous.

Moreover, regardless of how strict a textualist you are, one of the rules of construction that courts typically follow most rigorously is the rule that laws should not be read so that some words in the statute are meaningless “surplusage” – that is, that the law would say the exact same thing whether those words were there or not. As Jonathan Adler notes, this is the problem with saying that an exchange “established by the State under section 1311″ includes an exchange established by the federal government established under the separate section 1321 – it would render the phrase “by the State” (and for that matter the cross-reference to section 1311) completely meaningless, since the statute would then mean the same as if it simply said “exchange established under this Title,” and yet the statute uses the term “exchange” elsewhere without adding “established by the State,” suggesting that it did so in Section 1401 for a reason. By contrast, the IRS regulation interpreting the statute gives away that game when it states that subsidies would be available “regardless of whether the Exchange is established and operated by a State”.

Now, courts should not read the words of a statute in isolation, but in context; on this, textualist defenders agree with Halbig‘s critics. But textualists talk about context, we mean that words should not mean one thing in one part of a statute and another in another part, or that one piece of a statute should not render another piece meaningless. The government has made a few arguments of this nature in Halbig, but even the Fourth Circuit, ruling in the government’s favor, did not find them particularly persuasive. “Context” does not just mean “the statute should be read to say whatever people who supported it would like it to say.”

The alternative is to argue that the statute is ambiguous – this is what the Fourth Circuit found – and therefore the courts should defer to the IRS in deciding what it means (despite the fact that, as a House oversight committee report detailed, the IRS’ did not exactly follow a thorough and rigorous process in interpreting the statute). But the argument for ambiguity, given the entirely clear language of the key provisions, is not that persuasive. Here’s the Washington Post’s Greg Sargent:

The problem with that construction is its premise: That the phrase “says” something clear. That presumes that the phrase itself settles the core question at the heart of these legal challenges. To believe that, you have to believe that the literal meaning of the phrase is that subsidies should only goes [sic] to those on state exchanges, and not on the federal one. But the phrase does not literally say that subsidies should not go to people who get subsidies from the federal exchange, which under the law must be established in states that decline to set up their own exchanges. In fairness, opponents are right — the phrase also does not literally say that subsidies should go to those on the federal exchange.

But all of that is precisely what makes the statutory language in question ambiguous.

This is not how laws work, and most certainly not the tax code or federal appropriations statutes. Just try telling the IRS in any other context that you’re entitled to a deduction because the tax code doesn’t specifically say you can’t take it. If the law doesn’t expressly create the subsidy, it doesn’t exist, period.

What the critics have mostly argued instead of express statutory language is that the purpose of the ACA is to provide subsidies for buyers of insurance, so it would be a nonsensical result to conclude that it omitted to provide those subsidies to buyers on the federal exchange, which by now covers 36 states. As I’ll discuss below, that is not a nonsensical idea at all – but more to the point, the job of the courts is to say what statutes mean, not to rewrite them if for some reason they don’t do enough to accomplish whatever policy purpose the judges think Congress was trying to accomplish. Congress writes lots of laws that don’t really do what they claim to do – let’s not get started on the many ways in which Obamacare fails to do the things it was promised to do – but it’s not the job of the courts to repair that. It’s not some sort of right-wing judicial activism to read the statute carefully; to the contrary, the point of textualism is to avoid the activist practice of rewriting the laws from what they actually say.

Why this matters so much is that this dispute is likely bound for the Supreme Court. As with the original Obamacare case, there are all sorts of institutional and political reasons why Chief Justice Roberts may not want to join the other four Justices who were ready, last time around, to throw out the entire statute. But as a matter of legal interpretation, the Halbig plaintiffs are on much more solid ground than the government. Critics of textualism, like Rick Hasen in this Slate essay, argue that the courts have gone astray in taking a plain-language approach to reading laws rather than looking to effect broader statutory purposes. But like it or not, the battle for textualism and against reliance on legislative history and purpose has mostly been won by Justice Scalia over the last 30 years (even among the more liberal Justices – Michael Cannon notes an example of textualism from Justice Kagan), and it is highly unlikely that the Court will retreat from textualism now, in its hour of triumph. As Sean Trende explains:

As a purely theoretical matter, the theory behind the Halbig case is much less novel than the ones that animated the constitutional challenge to Obamacare. Were it any other law and I were advising a client, I would proceed with a pretty high degree of confidence that my client would be victorious using plaintiff’s arguments, especially before conservative judges….[A]s a general matter…for statutes the basic process is to look at the plain language of the statute first, either ignoring Congress’ intent entirely, or turning to it only in the case of an ambiguity in the statute. In this case, the law passed by Congress says that subsidies are available in exchanges established by a state. For a conservative justice, the temptation will be for the analysis to begin and to end there.

Analysts don’t have to like this mode of interpretation…But when analyzing the likelihood that the court will side with plaintiffs, you have to understand that this is how those justices will approach the question.

…John Roberts cares mostly about doctrine, and doctrinally he got everything he wanted and more [in the 2012 decision upholding Obamacare]. He sacrificed a political outcome to do so….It is unclear how Roberts can achieve such an outcome here. If the court does take the case, I am not sure how it does that without creating a powerful nationwide precedent for a more liberal approach to statutory interpretation. Because of the unique circumstances of the law, he may ultimately be willing to do that. I don’t think, however, that you can simply look at his vote in 2012, and be certain that he would behave similarly in 2015.

I agree with Trende – if this was a politically uncontroversial case, I’d much rather be representing a client with the Halbig plaintiffs’ argument than the government’s argument, and an argument like Hasen’s frontal assault on textualism would be an obvious dead letter.

There has been lots of incredulity from non-lawyers at the idea of reading laws to mean exactly what they say. This Charles Gaba post attempted to analogize the Halbig argument with this “gotcha”:

The exact wording of the passage is “enrolled in through an Exchange established by the State”. Setting aside the question of whether the “S” in “State” was meant to be capitalized or lower-case, and even setting aside the fact that “State” could be interpreted as referring to either one of the 50 individual “United States of America” or to the sovereign “State” of the Federal Government, I’ll throw one more at you: What about the District of Columbia’s exchange?? D.C. is not a “State” by most interpretations of the word; it doesn’t have voting U.S. Representatives or Senators, it doesn’t have it’s own Constitution and so forth. Yet their ACA exchange isn’t being challenged by the plaintiffs in the Halbig case. Why not?

Furthermore, what about Virginia, Massachusetts and Kentucky? Technically speaking, as someone in the comments pointed out the other day, all three of these are “Commonwealths”, not “States”. Yet, again, the Halbig plaintiffs aren’t challenging these three. Is the DC Circuit Court and/or the Supreme Court of the United States going to rule that they don’t count as “states”? Will they be stripped of their Senators and Representatives like the District of Columbia? Will we have to change the children’s song to “47 Nifty United States (and 3 Commonwealths)”?*

Of course they won’t. Which means that “established by the State” is, by definition, extremely ambiguous.

Gaba had to update his post to claim that he was just kidding after I pointed out to him on Twitter that the reason nobody is challenging the definition of “State” as including DC and the “Commonwealth” states is that the statute explicitly defines the term “State” to include “each of the 50 States and the District of Columbia.” But that goes to the heart of the argument: Congress defined the term, it included DC, but it did not include the federal government. This kind of definition-reading is lawyers’ daily work, and it really is not controversial in most cases. But fans of the ACA seem shocked that courts would do it here, and they seem to think that being shocked is an argument in and of itself.

Is It Plausible That Congress Meant To Do This?: Notwithstanding the language of the statute, the main argument made against Halbig by left-wing pundits is that it is simply inconceivable that Congress would have provided subsidies only to buyers on the state exchanges, and that at most any omission of subsidies on the federal exchanges must have been some sort of typo that the courts ought to fix. But even if you could get a court to ignore the statutory text, there are four main problems with this line of argument.

As a practical matter, the first problem with this argument – that Congress would never, ever, ever have intended to cut off healthcare funding as a club to get states to join the program – is that it ignores the fact that this is precisely what Congress did in the Medicaid section of the statute. The ACA’s Medicaid expansion didn’t just condition new Medicaid funding on states agreeing to Obamacare’s new rules for Medicaid eligibility. It went even further, and stripped away every penny of federal Medicaid funding for states that would not go along.

Is it plausible that Barack Obama, Nancy Pelosi and Harry Reid wanted to completely defund Medicaid anywhere in the country? Of course not. Did they pass a statute doing just that? They did. Did the Administration defend that statute in court? Yes it did (and lost; the Supreme Court threw out that part of the ACA). But they did it because they expected that the leverage of holding hostage 20-25% of a state’s budget would be so powerful that all 50 states would have to go along. It is hardly a fantasy to think that the exchange subsidies were drafted with a similar thought in mind and a similar assumption that every state could be made to go along, so the federal exchange would never be more than a short-term stopgap (recall that early drafts of the law did not even include a provision for a federal exchange).

Second, recall the wider political context. It was widely assumed in 2009-2010 that Obama’s 2012 opponent would be a then-sitting GOP governor: Sarah Palin, or if not Palin then Tim Pawlenty, Mark Sanford, Rick Perry, Jon Hunstman, Bobby Jindal, Haley Barbour, or Charlie Crist. The major battle in Washington immediately before Obamacare was the stimulus bill, which provoked a huge fight between the Administration and various state governors who did not want to accept federal funds that came with a lot of strings attached, but many of whom ended up with little choice but to accept at least some of those, in some cases due to bruising fights with their own state legislatures and heavy-handed ad campaigns directed by the DNC from Washington. The Administration seemed obsessed with co-opting and neutralizing as many potential adversaries as possible by forcing them to sign on to its policies, and was visibly frustrated that Republicans (with exceptions like Huntsman, who took an Administration job, and Crist) were not cooperating in eliminating distinctions between themselves and Obama. At the same time, Democrats were still convinced that their healthcare policies would be popular and that Republicans would be compelled by public pressure to support them. Using heavy-handed tactics to coerce recalcitrant governors into accepting both Medicaid and the Obamacare exchanges made all sorts of political sense from this perspective, and it is entirely plausible that the drafters of the ACA simply assumed that they would succeed in setting up exchanges in all 50 states, and didn’t consider what would happen if that plan didn’t work.

Third, there is another entirely plausible reason why this statute got passed without a lot of thought being given to the consequences. Normally, issues with the language and details of a large, complex bill get hammered out in the House-Senate conference that follows passage of separate bills through both Houses of Congress. But here, that never happened. The Senate passed a bill, the House passed a different bill, and then the election of Scott Brown in January 2010 made it impossible to muster the 60 votes to pass anything else through the Senate. (Ironically, as you may recall, Brown’s main theme against Obamacare was that Massachusetts voters were perfectly happy with their own state exchange – and as it turned out, that exchange was driven into the ground by Obamacare, throwing the state’s voters onto the federal exchange). So Democrats basically broke the rules and disregarded the usual legislative process, passed the Senate bill through the House, and then pretended it was a budget bill so they could re-pass it through the Senate without 60 votes. That not only means there was never a conference to determine which provisions the sponsors really wanted in the bill, there was also never a conference report detailing what Congress meant in provisions that might seem ambiguous or counterintuitive. The blame for the mess made in the statute rests squarely on those who insisted that they didn’t need to follow the usual rules and procedures for passing bills.

And now, fourth, we have the damning vidoetapes of Jonathan Gruber, one of the key architects of the law as a White House consultant. Halbig‘s critics have sung from a unanimous songbook all week on the idea that – even if it was theoretically possible that Congress might have intended to reserve subsidies to the state exchanges – there was no evidence at all that anybody in Congress actually thought that. Brian Beutler at The New Republic was the most strident on this point: “The claim that the ACA *intends* to deny subsidies to people in Healthcare.gov states is a demonstrable fraud,” Beutler wrote, and “I sympathize with the poor clerks who were assigned to Google for evidence that the administration and Congress were content with ignoring the importance of the subsidies to the expansion goal,” and this:

I suspect many of the people advancing this claim realize that it is false, and are engaged in an elaborate gaslighting campaign. Others have probably convinced themselves that they are correct, and are now mansplaining the intent of Congress to both the reporters who covered the bill and the aides who drafted it, all of whom understand how absurd this revisionist history really is.

…as far as the academic question of what Congress intended goes, there can be no debate. You can ask the people who wrote the bill. You can ask the reporters who chronicled the legislative process, to whom the intent argument is an incredible affront. You can ask state officials, who were advised that federal Medicaid dollars were conditional upon the Medicaid expansion (as originally envisioned) but not that the subsidy dollars were conditional upon establishing an exchange.

Now, as a legal matter, none of this is relevant (and conservative commentators were flagging this issue in the statute as far back as 2011), but Beutler’s claim that nobody imagined that the law meant what it plainly said is blown to shreds by two videos (so far) showing Gruber doing exactly the thing Beutler and his cited sources at Vox.com claimed was impossible, inconceivable and had never happened: telling audiences that states needed to set up exchanges to avoid leaving the subsidy money on the table. Moe Lane has covered those vidoes here and here. Gruber is one of the drafters of the law who has been going around this week saying the same thing as Beutler and even filed an amicus brief telling the court that the statute provides subsidies on the federal exchange, and Sargent cites some other fairly vauge examples of his later tune, but on tape closer in time to the events, he was telling audiences who had come for his advice on this point that the statute conditioned subsidies on state exchanges. In a wonderful bit of new Washington-speak on a par with “I lied to my diary,” Gruber told TNR after the first video surfaced that it was “just a speak-o—you know, like a typo,” but the second video shows him making this point in prepared remarks. And Gruber isn’t just any old staffer – he was paid almost $400,000 in consulting fees by the Administration for his work on Obamacare, and his remarks on the subject were part of the continuing cash-in on his expertise on the statute’s implications for states, what was apparently a regular stock speech.

If anything, Gruber’s change of tune over time is yet further evidence of why reliance on the statements – sometimes conflicting, sometimes self-interested – of proponents of a bill is a poor substitute for reading the bill itself. And the fact that none of the journalists covering the debate actually got statements on the record at the time on this issue is not proof of anything but the incompetence of those journalists. Beutler, Sargent, Ezra Klein and the rest of the Vox crowd are now stuck furiously backpedaling from the Gruber videos because they insisted on overselling the unanimity of opinion on an issue that was not so much a consensus as an oversight. One hopes they will learn something from this episode about calling people liars and frauds, but I would not hold my breath.

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