David R. Henderson  

Krugman's Clever Misdirection on King versus Burwell

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Paul Krugman is clever. In a post, "Most of the Way with Obamacare," about the effects of Obamacare on the number of people with health insurance, he sneaks in two claims as if they are obvious and noncontroversial. The first claim is clearly wrong; the second is probably wrong.

Here's Krugman's first claim, and he leads the post with it:

As we wait for King v Burwell - just how far are Republicans on the court willing to destroy the institution's reputation on behalf of their party? -

You wouldn't know it from anything in this clause or anything in Krugman's post, but the people on the King side of the legal case are the ones suing to uphold the Affordable Care Act, aka Obamacare, and the people on the Burwell side are the ones seeking to have the Supreme Court say, in effect, "Well, we know what the law says and the law does not establish subsidies for the federal exchanges in the various states that have not set up their own exchanges, but come on--let's just assume that Congress got it wrong." Substituting its own judgment for what the law clearly says would "destroy" the Supreme Court's reputation?

Here's his second claim:

Finally, of course, a large number of states are refusing to expand Medicaid and in general trying to obstruct the law.

The first part is true. Many state governments have refused to expand Medicaid. The second part? I think it's false. I don't know of any state government that is "trying to obstruct the law." I am open to being told otherwise. I do know, though, of a government that is trying to obstruct the law. It's the federal government. That's what the case is about. See my discussion above on his first claim.


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COMMENTS (23 to date)
foosion writes:

The Burwell side is saying that there may be a typo in one section of the law, but if you look at the entire law, using standard statutory construction, and if you look at the contemporaneous interpretations of those in congress, their staffs and published news reports, then it's clear the law provides for subsidies even if the exchange in a state is built by the federal government.

There are people who disagree with this. See, generally, Krugman's famous ”Shape of the Planet: Both Sides Have a Point.”

JLV writes:

in re: the last point, circa 2013, a number of Red States put up what were regarded as unreasonable barriers for "Obamacare Navigators" to operate. (Example article from the time where a state official admits to obstruction: http://www.cbs46.com/story/23596272/state-insurance-commissioner-says-hes-obstructing-obamacare)

Which makes your first point a bit silly, no? The groups behind the challenge are actually trying to destroy Obamacare, not out of some allegiance to textual accuracy, but because they think its a bad law.

Jesse writes:

It seems to me that the current congress is tacitly obstructing a previous congress - a very simple change in language would solve this whole thing. I think it would be hard to argue that a past congress has more say in the matter than a current congress.

If congress doesn't have the authority to stonewall a written law for political pragmatism, how can you justify executive action?

Andrew_FL writes:

Krugman and the left wing side of this debate have confused (intentionally?) the legislation with the policy.

The policy intended by the writers of the legislation, was that the incentives they aimed at the states would force them to create exchanges and expand Medicaid. The states have "obstructed" this policy in the same way an rock slide on the road obstructs a road trip. There's nothing in the legislation that says the states can't do what they're doing, any more than my planning a trip somewhere says I won't have to take any unexpected detours.

And frankly, good for them. It's bad policy.

Glenn writes:

"The Burwell side is saying that there may be a typo in one section of the law, but if you look at the entire law, using standard statutory construction, and if you look at the contemporaneous interpretations of those in congress, their staffs and published news reports, then it's clear the law provides for subsidies even if the exchange in a state is built by the federal government." -foosion

This is not at all an accurate representation of the text of the law, or the working interpretation of the parties involved early in the implementation process. The IRS itself, in early rule-making, operated on the assumption that the statute prohibited the distribution of subsidies to states without a domestic exchange. Only later - when it became apparent that a very large number of states would not be creating an exchange - did it reverse course.

Further, we have significant public commentary and testimony from consultants involved in the drafting of the statute which confirm this interpretation; one example:

"... if your governor doesn’t set up an exchange, you’re losing hundreds of millions of dollars of tax credits to be delivered to your citizens." - Jonathan Gruber

The plain language of the statute (with reference to the availability of tax credits):

“enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act.” -ACA

Care to speculate which of the two types of Exchanges allowed by the ACA are referenced in Section 1311? The Act even goes a step further, defining "State" to mean "each of the 50 U.S. states plus the District of Columbia" - prohibiting a read wherein the federal government is a "State" actor. Why go to that extra step if there wasn't any intent to discriminate between State actors and non-State actors within the statute?

The entire law is constructed on the premise that there are State exchanges (S 1311) and federal exchanges (S 1321); that tax credits are available only to those who purchase insurance under S 1311; and that most States would establish exchanges. Since the federal government cannot force the states to do anything (like establish an exchange), and there existed no other enforcement mechanism, why do you find the plain-language reading so implausible? It is extremely typical for the feds to use carrot-stick approaches to coerce states into cooperating with federal mandates.

All of that said, given the alternative, I think the Court under Roberts (widely regarded as small-c conservative) will be reluctant to find against the law. Not because the argument is without merit, but because they want to make as small a splash as possible.

BC writes:

@foosion, Actually, the video replay evidence shows pretty clearly that the intent of the Obamacare architects was to use subsidies to incentivize states to establish their own exchanges: [http://reason.com/blog/2014/07/24/watch-obamacare-architect-jonathan-grube#.0uuapl:DOet].

As they say in the NFL, after further review, the Obama Administration's call should be overturned.

David R. Henderson writes:

@foosion,
Glenn and BC answer your points well. Thanks, Glenn and BC.
@JLV,
in re: the last point, circa 2013, a number of Red States put up what were regarded as unreasonable barriers for "Obamacare Navigators" to operate. (Example article from the time where a state official admits to obstruction: http://www.cbs46.com/story/23596272/state-insurance-commissioner-says-hes-obstructing-obamacare)
Thanks, JLV. This is the kind of evidence I was asking for.
Which makes your first point a bit silly, no? The groups behind the challenge are actually trying to destroy Obamacare, not out of some allegiance to textual accuracy, but because they think its a bad law.
No. You’re probably, no, you’re almost certainly, right, about their motives. But that has nothing to do with the issue. Virtually by definition, the people who want a government to ignore the words of a law are the ones who want to obstruct the law.
@Glenn,
All of that said, given the alternative, I think the Court under Roberts (widely regarded as small-c conservative) will be reluctant to find against the law. Not because the argument is without merit, but because they want to make as small a splash as possible.
I agree. Look at the handstands Roberts did to justify his decision back in 2012.

Ricardo writes:

My thought experiment:

Suppose that upon further review, we suddenly realized that a word had been omitted from the official copy of the 2nd amendment. The goal had been to say that the right to bear arms "shall not be infringed," but a typo led to it saying "shall be infringed." Unfortunately, everyone signed the version with the typo.

What to do? It's obvious from the context that the wording should have been "shall not be infringed." But wait, is that really so obvious? How do we know what the signers were thinking? Maybe some of them actually hated the proposed amendment, and sneakily signed the incorrect version in order to thwart it!

You'd think that in a situation like this, we would say: okay, obviously we made a mistake, let's just sign a corrected version. But of course that would never happen today; you'd never get two-thirds of the Congress and three-fourths of the states. (This perhaps illustrates why we should be wary of legislation that does not receive even a single vote from the minority party.)

So what to do? I don't see a good answer.

David R. Henderson writes:

@Ricardo,
Your hypothetical is pretty far-fetched. It would be highly unlikely to have such a typo in a 27-word Amendment.
Also, it’s not applicable. The issue we’re discussing here has nothing to do with a typo.

Ricardo writes:

Hi David--

Fair enough. But lots of people are describing the current Obamacare situation as a typo. My point is that even if it truly were a typo, it would still not be obvious what we should do about it. I actually think the best solution in the typo case is to let the law stand as written, which is the opposite of what most of the typo folks think. I hoped that a simple example would illustrate that.

David R. Henderson writes:

@Ricardo,
Thanks. Now that we’ve narrowed the issue, I’ll have to think about it. My preliminary thought, though, is this. There appear to cases quite commonly in which a complex contract contains typos that mean the opposite of what was intended and courts take a common-sense view, enforcing intent rather than the actual wording. Again, that doesn’t apply here. But if there were some legislation in which one could establish, beyond a reasonable doubt, that it was simply a typo, then I think intent, not actual wording, should dominate.

ColoComment writes:

For all the commentary reading I have done re: King v. Burwell, I had not realized that the specific issue before the S.Ct. is procedural.

http://www.washingtonpost.com/news/volokh-conspiracy/wp/2015/06/24/jim-blumstein-on-why-the-procedural-posture-of-king-v-burwell-might-matter/

David R. Henderson writes:

@ColoComment,
Very interesting. Thanks.

David J writes:

If nothing else, the fact that this case exists and that the law is worded as it is should be enough to make Nancy Pelosi apologize for pushing passage of a law before knowing what's in it.

What I hate the most about this case is that even if the rule of law triumphs, it will do so at the expense of many people who really do not deserve what will happen to them. And again, lawmakers will be to blame. If the current IRS interpretation is upheld, it will be a slap in the face to anyone who thinks words have meaning and the rule of law.

Zeke writes:

@ Ricardo

Two points:

(1)

How do readers decide what is and is not a typo? Presumably, the context. However, the more opaque that context becomes, then the less you can be sure it is a typo. In this case, I can muster many arguments it is not a typo. It seems to me then that the clear import of the statutory language should govern, because it is not plainly a typo.

(2)

So, what should you do if it is plainly a typo? It probably matters how easy it is for the legislative body to fix the typo. Maybe that bleeds into point 1.

Edogg writes:

Gruber expressed worry that if a state didn't set up its own exchange, the federal government would delay setting up or not be able to set up in time its own exchange. The state's citizens would thus lose the tax credits if the federal government did not set up an exchange.

"In the law it says if the states don't provide them, the federal backstop will. The federal government has been sort of slow in putting out its backstop, I think partly because they want to sorta squeeze the states to do it. I think what's important to remember politically about this, it's that if you're a state and you don't set up an exchange, that means your citizens don't get your tax credits." -Jonathan Gruber
As you might be able to guess, only the last sentence is usually quoted, but that's dishonest.

Edogg writes:

The language "established by the state under 1311 of the Patient Protection and Affordable Care Act" or "established by the state under section 1311 of the Patient Protection and Affordable Care Act" is just used when language is being inserted into other laws, i.e. the Internal Revenue Code or the Social Security Act. I don't think the Affordable Care Act should be read as incentivizing the states through tax credits, relaxing a requirement that states not have restrictive medicaid eligibility, and whether the HHS Secretary certifies the comparability of pediatric coverage offered by qualified health plans. (In the text of the Affordable Care Act, ctrl f "established by the state under".)

Glenn, you say that,
"The entire law is constructed on the premise that there are State exchanges (S 1311) and federal exchanges (S 1321); that tax credits are available only to those who purchase insurance under S 1311; and that most States would establish exchanges. Since the federal government cannot force the states to do anything (like establish an exchange), and there existed no other enforcement mechanism, why do you find the plain-language reading so implausible? It is extremely typical for the feds to use carrot-stick approaches to coerce states into cooperating with federal mandates."

No way is the choice of going with the federal backstop meant to be that consequential. Section 1311 is about a dozen pages long. Section 1321 includes about one paragraph (subsection c) on the federal backstop and refers to States "will not have any required exchange operational...", which could easily be about potential administrative difficulties. (Not that the federal government is that great about setting up a website.) Section 1321 doesn't mention the supposed tax credit consequence. Sections in the law discussing whether a person is eligible for tax credits don't discuss this consequence. The place where the phrase "established by the state" occurs is in a subsection defining the premium assistance amount and there is no indication that an important distinction is being made about federal backstop exchanges.

Michael Byrnes writes:

Here's what I don't understand about the King interpretation - I don't think I've ever seen a convincing explanation on this point.

First, somewhere in ACA, it is stated that eligibility to buy insurance through an exchange is limited to people who "“resid[e] in the State that established the Exchange.” That means that the letter of the law says no one is allowed to buy insurance via a federally-established exchange. Not just a prohibition of buying subsidized insurance via federal exchanges, but a prohibition of buying any insurance whatsoever via federal exchanges.

I have yet to hear anyone try to argue that Congress intended for the federal exchanges to be prohibited from selling insurance to anyone, whether subsidized or not. Even King does not make that claim!

King seems to be implicitly accepting that sometimes Congress said "state exchanges" when it meant "all exchanges", yet arguing that in this one particular case congress intended to be more exclusionary. That seems like a much weaker argument to make.

Daniel Kuehn writes:

David - this has not been my understanding of what the Burwell side is arguing. They are making a case for fidelity to the text too just like the King side, they just take a different view of what that requires. A good exposition of what I've understood Burwell's argument to be is provided by SCOTUSblog last year: http://www.scotusblog.com/2014/11/symposium-the-grant-in-king-obamacare-subsidies-as-textualisms-big-test/

ThomasH writes:

Professor Henderson has his view of King v Burwell, but he begs the question that SCOTUS has to answer: what is the intent of Congress. In passing the Affordable Care Act, did Congress intend to deny subsides to low income people who live in states that do not set up stage exchanges? It is clear that Congress thought that states should establish such exchanges but it did provide a way for people to get health insurance from federally established exchanges if the state did not set one up. It seems unlikely to me that Congress intended to deny subsidies to people getting their coverage through the alternative mechanism Congress established. Actually even that is not quite it. Rather, did IRS act reasonably in interpreting the intent of Congress as it did?

Rich Berger writes:

If the text of a law governs when you want it to, and does not when it is inconvenient, you no longer have a coherent system of law, but simply a cloak over arbitrary power.

And yes, the Democrats meant to draft the law this way, thinking that they would force the states to set up exchanges. Oops! Given that the law is full of carrots and sticks for employers, governments and citizens, and this simple one was improperly designed, what is the chance that this monstrosity will work as a whole?

Hasdrubal writes:

This is the same law that attempted to take away all federal funds for Medicare to a state if they didn't expand their coverage.

Why is it hard to believe that the same law that had such draconian penalties affecting the most vulnerable people would also have penalties affecting people above the poverty line if states don't comply?

What I hate the most about this case is that even if the rule of law triumphs, it will do so at the expense of many people who really do not deserve what will happen to them.

I'm not so sure of this. We're assuming states won't cave and create exchanges of their own, or that Congress won't cave and change the law.

After all, a loss in King v Burwell for the Democrats will be a HUGE boost for them in the 2016 campaign: Elect us or Republicans will take away your insurance! If I were a Democrat, I would be silently cheering for Burwell because it really puts Republicans in a bind and gives Democrats an amazing issue to campaign on.

Daublin writes:

I wholeheartedly agree with David's perspective here. It's best for all of us if the courts stand firm on following the plain text of the law. It's not even for this issue; I believe both marriage and abortion would be much less of hot button issues if they were kicked over to Congress, and Congress had to flesh out some sort of compromise position on them that will serve 90% of the population's desires rather than 51%.

For Obamacare, it seems only natural that Congress should take another round of discussion on this. Yes they are shouting at each other like little kids on the playground who have bruises on their knees, but it's important for all American citizens that these guys be forced to do their job in a straightforward and professional way.

The exchanges should probably just be dropped. It was a dubious idea economically and the implementation hasn't made it look any better.

The employer mandate and the individual mandate, much as I dislike them, are at least coherent and have some sort of logical basis to them. I mainly dislike the employer mandate because it amounts to a minimum wage hike, and I really prefer living in a society that has plenty of lower rungs on the job ladder, all the way down to volunteering.

I dislike the individual mandate for multiple reasons. I would prefer explicit allocations, rather than paying for things by taxing the young. As well, I really wish more people would pay for medical expenses out of savings. If you can save up $100k, you become unafraid of medical expenses. Saving is important for retirement anyway.

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