A federal appeals court Tuesday seemed skeptical of the Obama administration’s claim that it can give subsidies to Americans regardless of what kind of Obamacare exchange they join, in a case that could threaten the fundamental deal underpinning the Affordable Care Act.
One judge called the Obamacare rollout an “unmitigated disaster” and said the administration is stretching to try to cover up for how poorly the law was written.
“I know there’s an absurdity principle, but is there a stupidity principle?” said Judge A. Raymond Randolph. “If the law is just stupid, I don’t think it’s up to the court to save it.”
At stake in the case is whether the government can pay subsidies to help Americans buy insurance regardless of whether they are in states that set up their own health care markets, known as exchanges, or whether they live in the two-thirds of states where the federal government stepped in to set up an exchange.
If the court rules that residents are able to get tax credits only if they are part of state-run exchanges, many of the Americans who live in the 34 states where the federal government runs the exchange will be less likely to sign up. If they don’t sign up and choose to pay the tax penalty under the individual mandate, it could skew the economics underpinning the entire law.
“What you’re asking for is to destroy the individual mandate,” Judge Harry T. Edwards told the plaintiffs suing to stop the subsidies. “You kill this, you kill the individual mandate, and you gut the statute.”
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The argument before a three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia took place just a few blocks away from the Supreme Court, where justices heard oral arguments over the law’s contraceptive mandate requiring businesses to cover employees’ birth control.
Although that case is freighted with importance for religious liberties, the case before the Circuit Court could have a greater effect on Obamacare.
Judge Randolph seemed inclined to support the plaintiffs, while Judge Edwards sided with the administration. That could make Judge Thomas B. Griffith the swing vote.
Judge Griffith peppered the Justice Department attorney with questions about why judges should look beyond the plain wording of the law — which says subsidies will go to residents enrolled in “an exchange established by the state.”
The Obama administration said Congress intended for everyone who qualified to get subsidies regardless of whether they were in state-run or federal exchanges.
Judge Edwards agreed with the administration and engaged in a feverish back-and-forth.
Michael A. Carvin, the attorney for the plaintiffs, at times threw up his hands in frustration.
“Your argument makes no sense,” Judge Edwards told the attorney. “Who cares who sets up the exchanges?”
Judge Randolph retorted, “Ben Nelson.”
Mr. Nelson was a Democratic senator from Nebraska at the time the Affordable Care Act passed. He was viewed as the swing vote and appeared wary of expansive federal control of the health care system.
The subsidies were one way to entice states to set up their own exchanges and exert their sphere of influence, Mr. Carvin said.
Judge Randolph added several other pieces of evidence that the wording was deliberate. He said it appeared to be copied from a law that made a distinction between federal government and state programs.
All sides seemed to agree that the law was poorly drafted.
That poor drafting was a result of the byzantine process Congress followed in 2009 and 2010. Democrats in late 2009 controlled 60 votes in the Senate, enabling them to overcome repeated filibuster attempts and pass the bill without any Republican support. Still, they had to make numerous compromises with Mr. Nelson and others.
That bill still needed to be squared with a House version, where issues such as the exchanges could have been worked out.
But Scott Brown’s election win of a Senate seat in early 2010 restored the Republicans’ ability to filibuster, which left Democrats stuck. Rather than try to work with the Republicans, Democrats took the Senate version and pushed it through the House.
Judge Griffith wondered whether the courts should step in when Congress messes up.
“If we know the clear purpose of Congress and yet they didn’t legislate clearly enough,” he said, “is it our job to fix the problem?”
The case is Halbig v. Sebelius.