Courts Can't Fix Obamacare

Obamacare was dealt a pretty severe setback in a court case today. Republicans can capitalize, if they're smart.
Operating against the rules.

Obamacare, the program, has been operating in violation of Obamacare, the law.

That's what the U.S. Court of Appeals in Washington ruled this morning: The Affordable Care Act authorizes federal authorities to offer tax credits to defray the cost of health insurance bought on exchanges -- but only if those exchanges were established by state governments. The law does not authorize the credits for the 36 states that refused to set up exchanges and are relying instead on a federal exchange. So President Barack Obama's administration should stop offering those credits and imposing the taxes and penalties that are tied to them.

The court found that the law, with its repeated references to exchanges "established by the State," was unambiguous about this issue. Another court, the Fourth Circuit in Virginia, made a contrary ruling this morning: The law is ambiguous, so the courts should defer to the administration's reading of it.

The majority decision of the Washington court seems to me to have the better argument.

Supporters of Obamacare have been lamenting that the law shouldn't be crippled by a mere "drafting error." But it's not at all clear that restricting tax credits to state-established exchanges was a drafting error. If Obamacare had proven more popular, or resistance to it weaker, then most states would have established exchanges. And if the law were put in place as written -- with the restriction on tax credits -- then the few holdouts would be under pressure to establish exchanges to get credits for their residents. Other health-care legislation before Congress at the same time as Obamacare had the same restriction.

It's wrong, then, to say that Congress obviously didn't intend to include this restriction. It can't be read out of the law simply because, given the actual state of play in American politics, the consequences of that restriction ended up being severely harmful to the program's future. As U.S. Circuit Judge Thomas Griffith wrote in the first decision, the administration has already acknowledged that other features of Obamacare, as written, don't work. It's not up to the courts to fix all the law's deficiencies.

The case isn't over. The administration is asking for a review by the full Washington appeals court. Most of the judges involved will be Democratic appointees, so the White House will probably prevail. The U.S. Supreme Court may decide not to review the case.

And if it does take it up? Conservatives doubt the court would rule that the tax credits are illegal in 36 states. They think Chief Justice John Roberts's decision in the big constitutional challenge to Obamacare in 2012 shows that he'll flinch from undermining Obama's signature health-care initiative, even if his initial instinct is that the administration is wrong on the law.

That's possible. But maybe Roberts would view the issue differently. In 2012, he was being asked to strike down the law as unconstitutional. This time, he would merely have to uphold the law as written, with Congress still able to revise it if needed to deal with the consequences.

Neither party should be confident about how those consequences would play out. Democrats in states without their own exchanges could put pressure on Republicans to establish exchanges or see many people pay higher premiums. Republicans nationally have never made clear how they would replace Obamacare without stripping coverage from millions of people. That failure could become a bigger political problem for them if the courts ultimately conclude that a lot of exchange participants aren't eligible for subsidies.

The Washington court has done its part for the rule of law today. Whether it has a lasting victory, and whether health-care policy gets better as a result, is now up to others -- especially Republican politicians and judicial appointees.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author on this story:
    Ramesh Ponnuru at

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    Timothy Lavin at

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