Yesterday, a The US Court of Appeals for the DC Circuit issued a ruling in the case of Halbig v. Burwell. The plaintiff, Jacqueline Halbig, was the senior policy adviser to the Department of Health and Human Services under President George W. Bush. In her lawsuit, Halbig contended that under the Patient Protection and Affordable Care Act (Obamacare) as written and signed into law, only those who purchased an insurance policy through a state-run insurance exchange would be eligible to receive Federal insurance premium subsidies. Those who purchased their policies through the Federal exchange (Healthcare.gov) were ineligible to receive the subsidies.
Indeed, this is what the PPACA says. Again and again, in the sections that outline the creation of the state and Federal insurance exchanges, the law makes no mention of subsidy availability through the Federal marketplace. It seems clear that the authors of the bill were deliberately trying to make the Federal exchange less attractive than state exchanges. And if you recall, the PPACA also gave the Federal Department of Health and Human Services the power to withhold all Federal Medicaid funding from states that declined to set up their own health care exchange — until the Supreme Court ruled that this power was unconstitutional.
With the power to defund Medicaid taken away from HHS by the Supreme Court, individual states were no longer under pressure to build their own insurance exchanges. Only 17 states set up their own exchanges, with seven more participating in a marketplace partnership with the Federal government. Obviously this was a situation that was completely unforeseen by the authors of the bill, who fully expected state exchanges to issue the vast majority of new Obamacare-compliant insurance policies.
It fell upon the IRS to remedy the situation. In a new rule announced in May 2012, the IRS announced that policies purchased through the Federal exchanges would indeed qualify for subsidies. They did not seek a formal legislative change to the PPACA. Rather, they simply enacted a rule that countermanded the clear language of the existing law, because the law as written would have been a disaster.
So, does the IRS or any other Federal agency have the power to enact rules that “fix” a poorly written law, without the consent of Congress? In yesterday’s decision, the DC Circuit court clearly said “no”; they sided 2-1 with the plaintiff, Jacqueline Halbig. But in another lawsuit (King v. Burwell) questioning the same IRS rule, the Fourth Circuit appellate court ruled yesterday 3-0 in favor of the government, stating that the agency rule was the right thing to do since the written law would have denied insureds equal access to the subsidies. It appears that the issue is still not clearly settled.
Which leads me to ask an obvious question: why have so many provisions of the PPACA, upon a second look, been deemed bad enough to either eliminate or amend? To date, and not including yesterday’s appellate court rulings, there have been 42 administrative, judicial, and legislative changes to the PPACA as it was signed into law by President Obama. This was to be the “signature achievement” of the Obama Presidency, but no other social welfare bill of this size or scope has required over three dozen “fixes” in its first two years of implementation. And no doubt there will be more in the months leading up to the 2014 mid-term elections.
Part of the problem, naturally, is the enormous complexity of the law. The final bill, as signed into law by the President, was 906 pages long. This document was created by reconciling two even bigger ones – HR3962 (the Affordable Healthcare for America Act) passed in by the House of Representatives in November 2009 at 1990 pages, and the Patient Protection and Affordable Care Act, passed by the Senate in December 2009 at 2409 pages.
Another reason for the bloated size of the bill involves the politics of its passage by Congress. Senate Majority Harry Reid was under a lot of pressure after the death of Ted Kennedy in August of 2009. With Kennedy (or his hand-picked temporary replacement, Paul G. Kirk) on board, Senate Democrats had a veto-proof 60 member majority. Republicans had no way to oppose the final vote on the bill. But with Republican Scott Brown favored to win the special January 2010 runoff election for Kennedy’s Massachusetts Senate seat, the 60 member majority was in jeopardy.
Reid knew he had to pass a health care bill by the end of December, before the Holiday recess and before the Massachusetts special election. But Republicans could still slow down the debate process, and the House bill was far to long and complicated to move to a floor vote in just a few weeks. To remedy this situation, Reid took a totally unrelated House bill (HR3590, the Service Members Home Ownership Tax Act of 2009) and attached the healthcare reform bill that had been previously drafted by the Senate (the Patient Protection and Affordable Care Act) as a 2400 page “amendment.”
The newly transformed bill, which had already been overwhelmingly passed by the House, was then passed by the Senate on December 24, 2009. Reid and Pelosi agreed that this trick was the equivalent of both houses of Congress passing the same bill. Reconciling HR3962 and the new Senate version of HR3590 into a final bill would be taken care of before the President signed the bill into law.
As we have seen, the reconciliation of these two bills left much to be desired. And there’s something else. It was the Senate version of HR3590, 99% of which consisted of the health care reform amendment, that became the outline for the final law. Therefore the structure of the bill, including its numerous tax and revenue provisions, originated in the Senate. Further complicating the issue is the fact that the Supreme Court ruled that the Health Care Mandate, which is the central foundation of the law, is in essence a tax. And as any fourth grader can tell you, tax and revenue bills can only originate in the House of Representatives, as stipulated in Article I Section 7 of the Constitution.
It still remains to be seen if the Constitution’s revenue provisions could be used to successfully challenge the validity of the law. The stakes of such a case would be so high that Federal appellate courts, including the US Supreme court, might simply refuse to hear it. But one thing is very clear — Obamacare is so deeply flawed that it will probably never work the way its supporters had hoped.