Wednesday, March 4, 2015

The Future of Obamacare May Hinge on One Key Constitutional Issue--It Isn’t What You Think

Most observers agree that we are likely to see a 5 to 4 decision in the case of King vs Burwell which will decide the fate of Obamacare.  It seemed clear during oral arguments today that the four liberal justices will vote with the government to allow subsidies to be offered to citizens of all states, not just those residing in states that set up their own exchanges.  It seemed equally obvious that Scalia, Alito, and, most likely, Thomas will vote with the Republican challengers who are seeking to destroy Obamacare.  

The questions from Chief Justice Roberts and Justice Kennedy gave no clear indication concerning how they might vote but Justice Kennedy raised an issue that may be the key to how the court will decide the case and how he might vote.  If Kennedy sides with the four liberal justices, Roberts may well join the majority upholding Obamacare in order to avoid being on the losing side in such an important case.  Kennedy's vote could then make the difference between a 5 to 4 or 6 to 3 vote for the government or a 5 to 4 or 6 to 3 vote that would gut Obamacare.

The key issue upon which the court may decide the case
Kennedy's swing vote and the court's decision may hinge on an issue few people have discussed until now.  On several occasions, Kennedy brought up the question of whether Congress was coercing the states to set up state-run exchanges when it wrote the Affordable Care Act.  The key to the court’ ruling in King vs Burwell may hinge on how the court, particularly Justice Kennedy decides this one issue:

Was Congress coercing the states by threatening them with dire consequences stemming from a loss of subsidies if they failed to establish state-run exchanges?

In previous cases, particularly SOUTH DAKOTA v. DOLE, 483 U.S. 203 (1987), the Supreme Court has ruled that it is constitutional for Congress to place conditions on the states receiving federal funds, such as the subsidies for their citizens to purchase health insurance, as long as the conditions are not “so coercive as to pass the point at which pressure turns into compulsion. Pp. 209-212.”

The challengers have a "Constitutional Problem" 
The challengers to Obamacare in the King vs Burwell case argue that Congress intentionally inserted the phrase “established by the state” in the section of the act discussing the subsidy in order to force the states to set up state exchanges or risk dire consequences.  Congress was saying to the states, argue the challengers, that if a state refused to set up its own  state exchange then its citizens would lose subsidies and the state’s insurance market would be thrown in the so-called “death spiral” of ever increasing health insurance premiums.  No one disputes that the end of subsidies in the states with no state-run Obamacare exchange would create serious problems for these states and, perhaps Obamacare in general.

If the challengers are right , as Kennedy pointed out during oral arguments, then the court is faced with a serious constitutional problem in ruling for the challengers.  Essentially, the court would have to rule that Congress COULD coerce the states, something the court had warned Congress in South Dakota vs Dole and other cases that it could not do.  Additionally, the court has long ruled that when Congress places conditions on the states receiving federal funds, it must make those conditions clear. Something it didn't do when it buried the phrase "established by the state" in one small section of the Act.  In fact, officials in at least 22 of the 34 states who refused to set up exchanges have said they were never informed that their citizens would lose subsidies if they failed to set up a state-run exchange. 

In short, if Congress inserted the wording “established by the state” in order to coerce the states into setting up their own Obamacare exchanges, then that part of the act would be unconstitutional if the threat of loss of subsidies would “pass the point at which pressure turns into compulsion.”  In supporting the challengers, the court would have to either (A) find that the threat of loss of subsidies and insurance “death spiral” wasn’t serious coercion, which even the challengers agree it was or (B) reverse itself and find that it was Constitutional for Congress to coerce the states, overturning precedent and threatening the whole concept of federalism built into the Constitution.

Irony here:  The Republican challengers to Obamacare who brought the King vs Burwell case are advocates of states' rights and seek to limit the power of the Federal government.  And yet, if they win their case, then the power of the Federal government over the states could be increased since there will be fewer Constitutional limits on the ability of Congress to coerce state governments to undertake activities or adopt programs they oppose.

Bottom Line: The fate of Obamacare may well hinge on how Justice Kennedy and, perhaps Roberts, rule on the issue of whether Congress can coerce the states and/or whether Congress was trying to do so when it wrote the Affordable Care Act.

Read more here about the oral argument and the coercion issue here:

Read about the South Dakota vs Dole case here:

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