Halbig & Obamacare: Applying Modern Standards and Ex-Post-Facto Knowledge to Historical Analysis

One of the great dangers of historical analysis is applying our modern standards and ex post facto knowledge to analysis of historical decisions.  For example, I see modern students all the time assume that the Protestant Reformation was about secularization, because that is how we think about religious reform and the tide of trends that were to follow a century or two later.  But tell John Calvin's Geneva it was about secularization and they would have looked at you like you were nuts (If they didn't burn you).  Ditto we bring our horror for nuclear arms developed in the Cold War and apply it to decision-makers in WWII dropping the bomb on Hiroshima.  I don't think there is anything harder in historical analysis than shedding our knowledge and attitudes and putting ourselves in the relevant time.

Believe it or not, it does not take 300 or even 50 years for these problems to manifest themselves.  They can occur in just four.  Take the recent Halbig case, one of a series of split decisions on the PPACA and whether IRS rules to allow government subsidies of health care policies in Federal exchanges are consistent with that law.

The case, Halbig v. Burwell, involved the availability of subsidies on federally operated insurance marketplaces. The language of the Affordable Care Act plainly says that subsidies are only available on exchanges established by states. The plaintiff argued this meant that, well, subsidies could only be available on exchanges established by states. Since he lives in a state with a federally operated exchange, his exchange was illegally handing out subsidies.

The government argued that this was ridiculous; when you consider the law in its totality, it said, the federal government obviously never meant to exclude federally operated exchanges from the subsidy pool, because that would gut the whole law. The appeals court disagreed with the government, 2-1. Somewhere in the neighborhood of 5 million people may lose their subsidies as a result.

This result isn’t entirely shocking. As Jonathan Adler, one of the architects of the legal strategy behind Halbig, noted today on a conference call, the government was unable to come up with any contemporaneous congressional statements that supported its view of congressional intent, and the statutory language is pretty clear. Members of Congress have subsequently stated that this wasn’t their intent, but my understanding is that courts are specifically barred from considering post-facto statements about intent.

We look at what we know NOW, which is that Federal health care exchanges operate in 37 states, and that the Federal exchange serves more customers than all the other state exchanges combined.  So, with this knowledge, we declare that Congress could not possibly meant to have denied subsidies to more than half the system.

But this is an ex-post-facto, fallacious argument.  The key is "what did Congress expect in 2010 when the law was passed", and it was pretty clear that Congress expected all the states to form exchanges.  In fact, the provision of subsidies only in state exchanges was the carrot Congress built in to encourage states to form exchanges. (Since Congress could not actually mandate states form exchanges, it has to use such financial carrots and stick.  Congress does this all the time, all the way back to seat belt and 55MPH speed limit mandates that were forced on states at the threat of losing state highway funds.  The Medicaid program has worked this way with states for years -- and the Obamacare Medicare changes follow exactly this template of Feds asking states to do something and providing incentives for them to do so in the form of Federal subsidies).  Don't think of the issue as "not providing subsidies in federal exchanges."  That is not how Congress would have stated it at the time.  Think of it as "subsidies are not provided if the state does not build an exchange".  This was not a bug, it was a feature.  Drafters intended this as an incentive for creating exchanges.  That they never imagined so many would not create exchanges does  not change this fact.

It was not really until 2012 that anyone even took seriously the idea that states might not set up exchanges.  Even as late as December 2012, the list was only 17 states, not 37.  And note from the linked article the dissenting states' logic -- they were refusing to form an exchange because it was thought that the Feds could not set one up in time.  Why?  Because the Congress and the Feds had not planned on the Federal exchanges serving very many people.  It had never been the expectation or intent.

If, in 2010, on the day after Obamacare had passed, one had run around and said "subsidies don't apply in states that do not form exchanges" the likely reaction would not have been "WHAT?!"  but "Duh."  No one at the time would have thought that would "gut the whole law."

Postscript:  By the way, note how dangerous both the arguments are that opponents of Halbig are using

  1. The implementation of these IRS regulations are so big and so far along that it would be disruptive to make them illegal.  This means that the Administration is claiming to have the power to do anything it wants as long as it does it faster than the courts can work and makes sure the program in question affects lots of people
  2. The courts should give almost unlimited deference to Administration interpretations of law.  This means, in effect, that the Administration rather than the Courts are the preferred and default interpreter of law.  Does this make a lick of sense?  Why have a judiciary at all?
  • mesocyclone

    Good luck convincing the Obama-appointed majority of the DC district (as opposed to the two members who just ruled against the law). The left has long demonstrated that it only cares about text when the text supports it, only cares about intent when the intent supports it, etc. They have no respect for the rule of law, only for the rule of progressives.

  • Nehemiah

    An En Banc decision by the Circuit Court will likely go Obama's way as suggested by mesocyclone. Looks like Chief Justice Roberts will get a second bite at the apple.

  • HenryBowman419

    Why have a judiciary at all?

    Well, one needs a judiciary because often the judiciary will vote in a manner of which you approve, and you can bludgeon your political opponents with such ruling. If it does not vote "properly", then you [the Administration] are free to simply ignore the ruling, which the current Administration has done multiple times. Who will hold you accountable? Eric Holder (Ha, Ha, Ha!)?

  • HenryBowman419

    If it comes down to Roberts, we can safely assume that whatever the Admin had on him to blackmail him the first time will still be a problem, so he will perform as instructed by his masters in the Obama Admin.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    The fact that 2 directly contradictory rulings about essentially the same facts of the same law were issued illustrates 1) how bad the judicial system is, and 2) how bad this law is.

    I am not a lawyer (nor have I played one on tv), but from what I have read, the operative language essentially limits payments to those who have purchased plans in exchanges run by “the States.” It does not say federal government, or any other operating venue.

    In past court decisions and application, the IRS has zero interpretive discretion (other than that which they construct internally, then mysteriously lose emails about) on how tax law and subsidies get applied.

    The language is very clear in the ACA. Obama could simply change this language unilaterally and make (some of) this problem go away.

    That would be an unbelievably brazen act, and would incite riots, as well as call into question his legitimacy.

    Roberts will get another shot at this one, and he'd better get it right (he doesn't have a lot of room here).

  • http://devilish-details.blogspot.com/ mesaeconoguy

    That’s exactly what I thought after the first review, which was incredibly poorly constructed

    http://www.hoover.org/research/what-was-roberts-thinking

    They’ve got to have something on Roberts.

  • xtmar

    Re #1, I don't think this is as ridiculous as it sounds, even though it's terrible for the rule of law. Basically, if you get something embedded deep enough in society, it's possible that the costs of switching will be too large to rectify, even if that's nominally the right thing to do. Most particularly, you occasionally see some disputes from the fringes over whether this or that amendment was properly passed, or if a state actually joined the Union. If it turned out that the fringers were right, either because they got better evidence or came up with a better legal theory, I still think most people, and the courts, would rule that Texas is still part of the Union, t crossing and i dotting to the contrary.

  • Canvasback

    Damn straight. Review the treaties we made with the First Nations people.

  • mahtso

    These opponents of Halbig, are they mostly coke or mostly pepsi?

  • CapnRusty

    Slavery was "deeply imbedded" in America. But the cost of the Civil War was not too large to rectify slavery. The price of freedom is high. Our ancestors were willing to pay it, and they passed it on to us.

  • CapnRusty

    "It is not our job to protect the people from the consequences of their political choices."
    ~ Justice John Roberts, in the decision upholding Obamacare as a tax. We can hope he meant that.

  • CapnRusty

    The reason the DC Circuit has 7 liberals and 4 conservatives is because Harry Reid overturned a hundred years of Senate procedure and eliminated the filibuster on lower-level judicial nominations. This enabled the Senate Democrats to "pack the court" with three hyper-Liberal appointees. It had been 4 on each side prior to that.Those appointees would never have gotten past a Republican filibuster.

  • CK

    Does anyone recognize that the winning argument for the left may mean that the administration or FUTURE administrations can decide what the law says? A future Republican president could unilaterally rewrite these regulations to eliminate subsidies and mandates.
    I can just imagine the questions the Obama team will be peppered with at the SCOTUS to explain that one.
    Roberts would actually have to write law to decide in Obama's favor and that may be a step too far for him.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    It is his job to get the interpretation of past jurisprudence right. He failed, and made the situation far, far worse.

  • CapnRusty

    I did not agree with Roberts' decision. However, the principle he stated gives him a firm basis to interpret the statute as written.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    No it does not, for reasons stated above (http://www.hoover.org/research/what-was-roberts-thinking). That statement is a cop-out, and is used to insulate against the disaster he helped cause in his poor ruling.

    He failed to rule correctly, and conclusively, using tortured logic and legal gymnastics to justify creating social policy, which is clearly not his job.

    In hindsight, given the fraud and illegality surrounding this law which has occurred, and the executive abuse of power which resulted from its enactment, it would be interesting to see Roberts reconsider his previous tacit approval of the law and take a hard stance in the next round.

    I do not believe he will. I believe he is firmly in the federal power camp, which now includes compulsion to purchase goods and services, which is unconstitutional.

  • bigmaq1980

    Maybe the two separate videos from an Obamacare architect would be enough to demonstrate intent:

    http://reason.com/blog/2014/07/24/watch-obamacare-architect-jonathan-grube

    It becomes rather hard to ignore when someone as intimately involved as Gruber makes these kinds of statements at the early stages.

    Though, not saying the SCOTUS couldn't find a way to twist around the wording to find a way to let the subsidies go unchallenged. After all, they did on the individual mandate on an argument not even made by the government lawyers.

  • Robert Rounthwaite

    An amazing example of this ability of our current beliefs to rewrite the past in today's WSJ blog: http://online.wsj.com/articles/best-of-the-web-today-gruber-vs-gruber-1406318853?tesla=y&mod=djemBestOfTheWeb_h&mg=reno64-wsj