The Latest on the King Thing

In recent weeks, I've turned into quite the Debbie Downer regarding the outcome of the King v. Burwell federal ACA tax credit case, set to be argued this March with a decision expected to be announced sometime in June. This is a far cry from 6 months ago, when I first proposed my apparently naive "Denny's Grand Slam" workaround (has it really been that long?).

Anyway, today brings three important takes on the case from The New Republic's Brian Beutler, the Washington Post's Greg Sargent and Scholars Strategy Network's Prof. Theda Skocpol which have bolstered my spirits somewhat. First up, Beutler:

One of the first things Congress did back then [in 2011] was eliminate an Affordable Care Act provision that would have significantly expanded the number of expenses businesses are required to report to the IRS. Even before the law passed, business associations were livid about the “1099” requirement, and created such an uproar over it that the question quickly became how, not if, it would be repealed. Even Democrats wanted it gone.

The only problem was that the reporting requirement was expected to raise over $20 billion. Under GOP rule, it could only be offset with spending cuts elsewhere in the budget. As it happens, they found those spending cuts elsewhere in the ACA itself. Specifically, Republicans paid for repealing the 1099 provision by subjecting ACA beneficiaries to stricter rules regarding when they have to reimburse the government for subsidy overpayments. Make more money than you anticipated, and the government will claw back your premium assistance come tax season.

The congressional budget office scored the plan as essentially deficit neutral, and Republicans voted for it overwhelmingly. But you see the problem here. If the ACA plainly prohibits subsidies in states that didn’t set up their own exchanges, then there would be no subsidies in those states to claw back.

In other words, not a single member of Congress, including any of the Republicans who voted against the ACA (ie, all of them), had the slightest hint that the law they had written and were voting on was designed or intended not to provide tax credits for states which chose to run on the federal exchange.

In addition, as noted a week or so ago, the Congressional Budget Office certainly had absolutely no knowledge of any such provision; they wrote up 68 reports about the budgetary impact of the ACA and not a single one of them included any scenario involving some states not receiving tax credits.

Following up on this point, Greg Sargent points out that not a single state official (again, including Republican governors & state legislators) was ever given the slightest indication that they would lose out on the tax credits if they refused to set up their own exchanges:

Several state officials who were directly involved at the highest levels in early deliberations over setting up state exchanges — all of them Republicans or appointees of GOP governors — have told me that at no point in the decision-making process during the key time-frame was the possible loss of subsidies even considered as a factor. None of these officials — who were deeply involved in figuring out what the law meant for their states — read the statute as the challengers do.

Cindi Jones was appointed in August of 2010, after passage of the ACA, by Republican governor Bob McDonnell to head his Virginia Health Reform Initiative panel. A key question it faced was whether the state should set up an exchange or default to the federal one. The question of whether the failure to set up an exchange would sacrifice subsidies was not a consideration throughout the discussions, she says.

“There was no discussion at any meeting that one of the reasons we would want to do a state based exchange was that it would be the only way we would get subsidies,” says Jones, who was held over from a previous Democratic administration and now works for Governor Terry McAuliffe. Referring to 2010 and the spring of 2011, Jones said: “The discussion of whether or not to set up a state-based exchange versus a federal exchange would have been different if one of the issues we had to consider was whether or not our citizens would get subsidies.”

Sargent goes on with several additional examples, and also shoots down the counter-arguments likely to arise from the King plaintiffs quite nicely. He closes with a quote from Nicholas Bagley, the UM law professor who has been, until now, the one sounding the doom-and-gloom alarm the loudest on the subject, but who notes that Sargent's point about the states never being clued into the supposed "threat" here could play into the SCOTUS decision:

The challengers say that Congress clearly threatened the states with the loss of tax credits if they didn’t set up their own exchanges. But the states read the ACA very carefully, and they didn’t see any threat.

It’s the worst kind of revisionist history to claim that the ACA put states on notice of the harsh consequences of failing to establish an exchange. The states had no idea that tax credits hung in the balance. And the Supreme Court has said time and again that statutes shouldn’t be read to impose unexpected burdens on the states. That basic principle — the idea that states must have clear notice of the consequences of their decisions — protects the rights of the states in our federal system. And it cuts hard in favor of the government.

This is exactly what the L.A. Times' Michael Hiltzik meant when he noted the parallels to a key scene in the classic Stanley Kubrick film, Dr. Strangelove, way back in July:

If that really was Congress's intent, Bagley observes, the lawmakers would have made the threat explicit, not buried it deep within an obscure provision of a 900-page law. He illustrates the point with a reference from "The Godfather," when Vito Corleone backed up his offer that can't be refused by having a gun held to the head of the guy receiving the offer.

We think the principle is illustrated even better by a line from "Dr. Strangelove." (We celebrated the dark comedy's 50th anniversary here.)

"But the whole point of the Doomsday Machine is lost if you keep it a secret!Why didn't you tell the world, eh?"

If Congress really intended to coerce the states into establishing their own exchanges by barring subsidies for insurance purchased through the federal exchange, plainly it would not have concealed the Doomsday Machine in an obscure section of the law, hoping it would be unearthed by a Cato Institute ideologue.

Last summer, when I was first proposing my "Grand Slam" solution, I also noted that the potential backlash from a SCOTUS ruling in favor of the King (then Halbig) plaintiffs could be devastating...for Republicans:

...consider the following attack ad, modelled on Mark Totten's press release above:

"Tens of thousands of Louisianans will have to pay hundreds of dollars in higher taxes...all because Bobby Jindal is too petty to shell out $10 bucks for a domain name!!"

The Republicans in two dozen states thought they were playing smart politics (with people's lives, but screw them, right?) when they denied Medicaid expansion, but this has since blown up in their faces, and has now become a potent issue for Democrats in several GOP-held states. I think I know why they thought this...and why it didn't work out the way they figured.

As far as I can tell, the Republican mindset was this: Poor people don't vote. Therefore, screwing over poor people = brownie points from the GOP base without any potential downside.

However, I think they forgot something important: Regular Medicaid might only apply to poor people, but the Medicaid expansion provided for by the ACA applies to many lower-middle class people...and they do vote (at least in far greater numbers than the "dirt poor" anyway).

In this case, the potential backfire is even greater, for two reasons.

First, when those states denied Medicaid expansion, they were denying those 5 million people something which didn't exist yet. With the tax subsidies, you're yanking away cold hard cash from millions of people who already are receiving it. That's a huge difference. It's one thing to be promised something and then have that promise recalled; it's something else to actually have something in hand and then be told that you have to give it back. Ask people how they'd feel about expanding Medicare vs. having their existing Medicare taken away and you'll see my point.

Secondly, I don't know the exact voting patterns of different socioeconomic levels, but I have to imagine that most of the people receiving ACA subsidies are even more likely to be active voters than those who were screwed out of Medicaid a few rungs down the econimic ladder.

If the Democrats play this the right way...they could turn this lemon into a huge pitcher of cool, refreshing lemonade.

This brings me to Prof. Skocpol of Harvard University (she noted the 68 CBO budget reports above) who, along with Prof. Lawrence Jacobs of the University of Minnesota, has posted an article along the same lines:

Ironically, the citizens and private companies most at risk for big economic losses following a pro-King decision are overwhelmingly located in states governed by conservative Republicans. Furthermore, those who would be harmed are not very poor people who vote for Democrats or skip elections. They are middle-income people, at least half of whom support Republicans.

Skocpol/Jacobs list several more in-depth points regarding the optical/political headaches that these state Republicans will have to contend with in the event that they "win" the King case.

My takeaway from all of this is that perhaps I'm being a bit too gloomy about both the outcome of the case...as well as the aftermath of such an outcome.