THE BLOG

Why the Courts Won't Kill Obamacare

08/19/2014 01:39 pm ET | Updated Oct 19, 2014
SAUL LOEB via Getty Images

Resistance to the Affordable Care Act is now running on fossil fuel -- the rejectionism of judges appointed by Republican presidents long-gone.

Last month, a D.C. Circuit Court of Appeals panel ruled that the nearly 5 million Americans who get subsidized health insurance from federally-run markets known as "insurance exchanges" received these subsidies unlawfully. Judges chosen by the two Presidents George Bush made up a majority of the three-person panel; a judge appointed by President Jimmy Carter dissented. Hours later, another three-judge panel (from the neighboring 4th Circuit Court of Appeals) found the same subsidies lawful. All three members of this panel were picked by Presidents Bill Clinton and Barack Obama.

If you're one of these nearly 5 million Americans, don't worry. Expect the D.C. Circuit -- comprised of seven judges named by Democrats and four by Republicans -- to reverse last month's ruling, after reaching rare agreement to rehear the case en banc (as a full court). And expect years to pass before the U.S. Supreme Court takes up this issue -- if it ever does.

I doubt it will: The ACA is becoming embedded in the fabric of American expectations, and the Supreme Court avoids quixotic quests. More on this in a moment, but, first, some basics about what the dueling court rulings do and don't mean:

To start, it's wishful thinking by ACA opponents (and overstatement by the law's defenders) to say the ACA "will crumble" if people aren't permitted to obtain subsidized coverage from federal insurance exchanges.

That's not to say it wouldn't be tragic: I have trouble wrapping my mind around the cruelty of a legal campaign to deny millions of Americans the sense of safety that comes with knowing that serious illness won't bring on financial catastrophe.

It's likely, moreover, that loss of subsidies would lead to an unraveling of the federally-run exchanges. By making coverage affordable, subsidies trigger a legal obligation to buy it (the so-called "individual mandate"); this, in turn, pulls healthier people into the insurance marketplace, further reducing the price of coverage for everyone, even the sickest. And the presence of these healthy people in the pool of medical risk makes it workable for the ACA to require that health plans sold on exchanges be available to all at prices that don't vary with people's expected health.

So barring Americans from accessing subsidies via federally-run exchanges would set off a classic insurance-market "downward spiral" by nullifying the individual mandate for millions of people (for whom unsubsidized premiums would exceed eight percent of income, the ACA's affordability ceiling for imposing the mandate). Healthier consumers would flee the federal exchanges ("adverse selection," in economics lingo), leaving the plans these exchanges sell with sicker patients. This would, in turn, push premiums higher, driving away additional, relatively-healthy patients, hiking premiums further -- the oft-noted "death spiral" that insurance exchanges were meant to avert.

But the unraveling of the federal exchanges wouldn't mean the "crumbling" of the ACA. In the 36 states that haven't formed their own exchanges, pressure to do so would mount. State exchanges would keep offering the subsidies (available to families of four making up to $95,000 per year), and many Americans who harbor deep suspicion of the ACA would come to see the safety these subsidies provide.

The politics are inexorable. The Congressional Budget Office projected last April that exchange enrollment will quadruple over the next three years, to 25 million people in 2017, three-fourths of whom will receive subsidies (assuming their availability on both federal and state exchanges). Most of them will gain coverage (and subsidies) through federal exchanges. That's a formidable constituency to cross by wrecking the federal exchanges. State governors and legislators, even those with Tea Party sympathies, would face strong pressure to step into the breach by creating state exchanges.

Add to this the likely pressure from hospitals and insurers, two industries with huge clout in state politics. They'd face large revenue losses if the federal exchanges collapse, and they'd be motivated to use their clout to undo these losses by demanding the startup of state exchanges.

It's a classic American story -- a new social safety-net program seen through a glass darkly -- until people come to know and rely upon it. Distrust and ideological objections beset both Social Security (in the 1930s) and Medicare (in the 1960s), but each eventually became part of the fabric of American life.

Opponents of publicly-supported medical coverage for all understand this. Twenty years ago, Republican guru Bill Kristol warned party leaders (who were planning to strike a deal with President Clinton on health care reform) that anything short of "unqualified political defeat" for the Clinton health reforms would court disaster for Republicans. The Clinton plan, he wrote in a December 1993 memo, would addict Americans to a "new government dependency," establish Democrats as "generous protector(s) of middle-class interests," and thus "strike a punishing blow against Republican claims to defend the middle class by restraining government."

Congressional Republicans embraced this logic, crushed the Clinton reforms, and retook the House of Representatives months later (in 1994) for the first time in 40 years. The same logic animated their fierce opposition to the ACA's passage. They failed this second time around but didn't quit. "Repeal" became a campaign slogan. Hiccups in the law's implementation (e.g. the initial failures of www.healthcare.gov, the website for federal exchanges ) became proof of its unworkability. And Tea-Party-friendly state officials refused to expand Medicaid to cover people with incomes up to 133 percent of the federal poverty line, though the federal government would have covered virtually the full cost.

The legal campaign against the ACA is an adjunct to this attack. It's at times been grounded in libertarian principle -- e.g. my Georgetown Law colleague Randy Barnett's argument that the federal constitutional power to "regulate commerce" doesn't authorize the individual mandate. But much of this campaign is ill-concealed politics.

The D.C. Circuit's decision last month to bar access to subsidies via federal insurance exchanges is a case in point. To reach the issue, the majority needed to find that the federal Administrative Procedure Act (APA) permitted the plaintiffs to sue. This posed no small challenge since the Act permits suits only when there is "no other adequate remedy in a court." The plaintiffs (who objected to tax penalties they'd have to pay if subsidies became available via the federal exchanges) could have paid the penalties, then sued for a refund. So to allow the plaintiffs' case to go forward, the majority needed to say that suing for a refund wasn't an "adequate remedy."

The majority did so through shameless inconsistency. The APA's provision for lawsuits to challenge government action, it said, deserves "hospitable interpretation" -- only "clear and convincing evidence of a contrary legislative intent" could justify finding that a suit for a refund was "adequate." Since those who enacted the APA in 1946 didn't speak to the Affordable Care Act's tax penalties, there wasn't "contrary legislative intent"; thus the D.C. Circuit could consider the plaintiffs' claim.

Shrewd lawyering: in President Truman's time, Congress failed to predict Obamacare. But when the majority turned to the merits, its interpretive stance went from "hospitable" to absurdist. Drafting glitches are common in complex statutes, and the two Republican judges found one. When a state fails to meet the ACA deadline for creating an exchange, the Act instructs the federal government to "establish and operate such Exchange within the State." But the Act offers subsidies for health plans "enrolled in through an Exchange established by the State."

A "hospitable" interpretation would have treated federally and state operated exchanges as equivalent for subsidy purposes, so as to avoid bringing down the federal exchanges. But, of course, bringing down these exchanges was the judges' goal.

The politics here is raw. It requires absurdism of a different sort to say that the choice between "hospitable interpretation" and judicial take-down of a messy statute isn't driven by ideology or partisan allegiance. I'm reminded of an old standby from high school physics: all the air molecules in a room could coincidently make their way to one side, doubling the pressure in one half of the room while leaving a vacuum in the other. It never happens, because this accident is too improbable; ditto for the claim that judges' political leanings and verdicts on the ACA correlate by coincidence.

But judicial take-down of the ACA will fail. The process that Republicans averted two decades ago is underway -- and irreversible: The ACA is becoming part of American expectations. Already, 12 million more people are insured because of the ACA; this number will rise to nearly 20 million next year and to 25 million in 2016, according to the CBO. Financial and political pressure is mounting on recalcitrant states to accept federal funds for expanding Medicaid, which would cover millions more. Tracking polls haven't yet shown an uptick in the ACA's favorability ratings, but this will happen as millions of Americans (and their friends and loved ones) discover the security their new coverage provides.

Principled legal arguments can sail against political winds, but the barely-veiled politics practiced by the federal bench's ACA rejectionists can't and won't. The rejectionists' ranks are thinning: Since President Clinton took office, Democratic presidents have made two-thirds of 986 judicial appointments (Clinton, 379; Bush, 328; Obama - 279). Their audacity will wane. The judicial fossil fuel that's powering resistance to the ACA's historic expansion of medical coverage is running low.

ACA dead-enders will stay at it, fighting Medicaid expansion and filing creative, hopeless lawsuits. They'll stop Medicaid expansion in some states, denying coverage to millions of the most needy. But the ACA will survive. In health care policy, the arc of history has taken a decisive turn toward human decency.

I write regularly on subjects at the interface between law, culture, politics and your health. Follow me on Twitter: @greggbloche