WASHINGTON — They are only four
words in a 900-page law: “established by the state.”
But it is in the ambiguity of those
four words in the Affordable Care Act that opponents found a path to challenge
the law, all the way to the Supreme
Court.
How those words became the most
contentious part of President Obama’s signature domestic accomplishment has been
a mystery. Who wrote them, and why? Were they really intended, as the plaintiffs
in King
v. Burwell claim, to make the tax subsidies in the law available only in
states that established their own health
insurance marketplaces, and not in the three dozen states with federal
exchanges?
The answer, from interviews with
more than two dozen Democrats and Republicans involved in writing the law, is
that the words were a product of shifting politics and a sloppy merging of
different versions. Some described the words as “inadvertent,” “inartful” or “a
drafting error.” But none supported the contention of the plaintiffs, who are
from Virginia.
“I don’t ever recall any
distinction between federal and state exchanges in terms of the availability of
subsidies,” said Olympia J. Snowe, a former Republican senator from Maine who
helped write the Finance Committee version of the bill.
“It was never part of our
conversations at any point,” said Ms. Snowe, who voted against the final version
of the Senate bill. “Why would we have wanted to deny people subsidies? It was
not their fault if their state did not set up an exchange.” The four words, she
said, were perhaps “inadvertent language,” adding, “I don’t know how else to
explain it.”
Former Senator Jeff Bingaman,
Democrat of New Mexico, said there may have been “some sloppiness in the
drafting” of the bill. Mr. Bingaman, who was a member of both committees that
developed the measure, said he was surprised that the lawsuit had reached the Supreme
Court because the words in dispute appeared to be a “drafting error.”
“As far as I know, it escaped
everyone’s attention, or it would have been deleted, because it clearly
contradicted the main purpose of the legislation,” Mr. Bingaman said. He added,
“In all the discussion in the committees and on the floor, I didn’t ever hear
anybody suggest that this kind of distinction between federal and state
exchanges was in the bill.”
When the Supreme Court offers its
judgment, it could affect more than 7.5 million people now receiving subsidies
through the federal exchange and a health care industry that accounts for 17
percent of the nation’s gross domestic product.
The plaintiffs say the law allows
subsidies only where marketplaces have been “established by the state.” It is a
distinction that those who drafted the law say they did not intend to make.
The story of the four words has
its loose origins in Mr. Obama’s campaign pledge in 2008 to overhaul the health
insurance system, something presidents had tried to do for decades.
After he offered broad guidance on
what the plan should include, two Senate panels — the Health, Education, Labor
and Pensions Committee and the Finance Committee — began working on the
legislation in summer 2009. Staff members began reconciling many complex and
competing imperatives.
The idea of denying subsidies to
people who bought insurance through the federal exchange “was never discussed,”
said Charles M. Clapton, a lawyer who worked on both committees for Senator
Michael B. Enzi, Republican of Wyoming. Mr. Clapton said he had difficulty
accepting the argument advanced by the plaintiffs because it was “so contrary to
the intent” of those who had written the legislation.
At the Finance Committee, which
thrashed out its version of the bill in September and October 2009, senators
initially assumed that all states would set up exchanges, so they added a
section to the Internal Revenue Code to provide subsidies, in the form of tax
credits, for insurance purchased through an exchange.
But senators and staff lawyers
came to believe that some states — “five or 10 at the most” — would choose not
to set up exchanges, said Christopher E. Condeluci, who was a staff lawyer for
Republicans on the Finance Committee.
At that point, senators authorized
a backup plan to allow the federal government to establish an exchange in any
state that did not have its own, but they failed to include that language in the
section of the tax code providing subsidies. “We failed to include a
cross-reference to the federal exchange,” Mr. Condeluci said. “In my opinion,
due to a drafting error, we overlooked it. It was an oversight. Congress, in my
experience, always intended for the federal exchange to deliver subsidies.”
Russ Sullivan, the staff director
for Democrats on the Finance Committee, gave a similar account. The language in
the law providing tax credits through state exchanges was “a holdover from what
we had in the Finance Committee,” which originally assumed that “every state was
going to set up an exchange,” Mr. Sullivan said.
The idea of a federal backstop
came later, he said, when people started asking what would happen if some states
did not set up an exchange.
Consistent with its usual
practice, the Finance Committee voted on a detailed conceptual description of
the bill. The actual legislative language was not available at the time of that
vote.
In the Finance Committee bill, the
sections setting up exchanges were separate from the section providing tax
credits.
The words were written by
professional drafters — skilled nonpartisan lawyers — from the office of the
Senate legislative counsel, then James W. Fransen. It appears that the four
words now being challenged were based on the initial premise and were carelessly
left in place as the legislation evolved.
The language of the Finance
Committee bill was written largely by Mr. Fransen and a tax expert, Mark J.
Mathiesen, while much of the health committee version was written by William R.
Baird, a public health expert. The two committees worked on separate tracks.
When Mr. Fransen retired in
December 2014, after working in the Senate for nearly 40 years, Senator Harry
Reid, Democrat of Nevada, who was majority leader at the time, praised his
impartiality and said he understood the tax code “perhaps better than anyone in
Washington.” Mr. Fransen did not respond to a message seeking comment, and other
attempts to reach him were not successful.
Still, there were substantial
differences between the two committees’ versions of the bill, and the task of
merging them in October and November 2009 fell largely to Mr. Reid. Both bills
called for insurance exchanges and provided subsidies to lower-income people,
but the health committee measure clearly allowed subsidies in all states. The
Finance Committee version was not so explicit.
In stitching together the final
legislation, Mr. Reid took the language on tax credits from the Finance
Committee, and he generally followed the health committee in allowing the
secretary of health and human services to operate a federal exchange.
But in borrowing from the health
committee bill, Mr. Reid did not adopt an important provision that could perhaps
have avoided the current fight. That provision said that a state with a federal
exchange “shall be deemed to be a participating state,” and that its residents
could receive federal subsidies to help pay premiums.
“I remember meeting after meeting
in which we went through the language of the legislation line by line,” said
Robert D. Greenawalt, who worked as a senior tax adviser to Mr. Reid. “I do not
recall any discussion of a distinction between federal and state exchanges for
the purpose of subsidies.” But Mr. Greenawalt said: “In merging two bills that
were so big, it’s possible that something got left out. It would have been
accidental.”
Douglas W. Elmendorf, director of
the Congressional Budget Office at the time, and his staff reviewed every
version of the bill so they could estimate the cost. If subsidies were
unavailable in some states, the cost would presumably have been lower.
“To the best of our recollection,
the possibility that those subsidies would only be available in states that
created their own exchanges did not arise during the discussions C.B.O. staff
had with a wide range of congressional staff,” Mr. Elmendorf said.
Senators — notably Max Baucus,
Democrat of Montana, who was chairman of the Finance Committee — also were
mindful of the politics of health care.
Jon Selib, Mr. Baucus’s chief of
staff, said senators had never discussed the question now before the justices.
Mr. Baucus, “from the red state of Montana,” would never have agreed to an
arrangement that jeopardized tax credits for his constituents, he added.
Senate Democratic leaders said
they had several reasons for highlighting the role of state exchanges. They
wanted to make clear that states could decide for themselves whether to set up
exchanges because that made the bill more palatable to conservative Democrats.
In addition, they wanted to contrast their bill with one passed in November 2009
by the House, which called for a national insurance exchange.
The Senate bill was on the floor
for 25 consecutive days before it was approved on Christmas Eve 2009 by a party-line
vote of 60 to 39. Senators always assumed that their bill would be polished
and refined in negotiations with the House. But the expected conference between
the two chambers never occurred. Democrats switched their plans after Scott
Brown, a Republican, won a special election in January 2010 to fill the seat
long held by Senator Edward M. Kennedy, Democrat of Massachusetts, who had died
the previous year.
Having lost a filibuster-proof
majority, Democrats believed they could not afford to make significant changes
in the Senate bill; it was then approved by the House and sent to the president,
with an agreement that lingering questions could be answered separately. Some
were, though these four words were unaddressed.
The Obama administration contends
that the “text, structure and history” of the Affordable Care Act all support
its position. Even if the court agreed on the intent of Congress, that would not
necessarily ensure a victory for the administration.
A powerful line of judicial
thinking holds that courts do not have a license to disregard or revise the
clear language of a law.
What matters, Justice Antonin
Scalia has said, is “not what Congress would have wanted, but what Congress
enacted.”