The Cato Institute loses again

Judge Spencer (ED-VA) issued his opinion late yesterday in King v. Sebelius, the second case on whether the ACA’s tax credits are legal in states with federally-facilitated exchanges. The court granted the US government’s motion to dismiss, which will send the case on to the Fourth Circuit. As Austin explained yesterday, briefs were just filed in the parallel case Halbig v. Sebelius before the District of Columbia Circuit.*

These cases are the mastermind of the Cato Institute. The core idea is that Democrats in Congress and President Obama intended to punish moderately poor people in any state that did not create a state exchange. It is a preposterous idea, based entirely on a drafting ambiguity (in 26 USC 36B) that would have been fixed by a bipartisan technical correction in any normal tax bill. But the ACA is no ordinary bill. It has become the forum for gladiatorial combat in the courts.

The biggest problem with Cato’s argument is federalism. If Congress wanted to threaten states in such a dramatic fashion (build state exchanges or suffer the consequences), then Congress must give “clear notice” so the states see the choice clearly. This is the Arlington rule, an opinion by Justice Alito joined by the other 4 conservative justices.

Lacking evidence of such “clear notice,” Judge Spencer found that Congress could not possibly have intended such a result, especially when it would upend many other provisions in the statute. The key paragraph:

What is clear is that there is no direct support in the legislative history of the ACA for Plaintiffs’ theory that Congress intended to condition federal funds on state participation. Halbig, 2014 WL 129023, at *i6 (holding that there is no evidence in the legislative record that the House, the Senate, any relevant committee of either House, or any legislator ever entertained the idea of conditioning federal tax credits upon state participation in the creation of the Exchanges). As previously discussed, had Congress intended to condition tax subsidies it would have needed to provide clear notice. While on the surface, Plaintiffs’ plain meaning interpretation of section 36B has a certain common sense appeal, the lack of any support in the legislative history of the ACA indicates that it is not a viable theory. The legislative history of the ACA “reveals an intent to grant states the option of establishing their own Exchanges, rather than an intent to coerce or entice states into participating.” Halbig, 2014 WL 129023, at *17. Further, the text of the ACA and its legislative history evidence congressional intent to ensure broad access to affordable health coverage for all. See, e.g., 42 U.S.C. § i8o9i(2)(D)-(G); S. Rep. No. 111-89, at 4; see also H.R. Rep. No. 111-443, vol. II, at 977.

* Kathleen Sebelius might be setting a record as a defendant in high-stakes health care litigation.

h/t to Tim Jost for the opinion


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