King v. Burwell: Appreciating the Stakes of the Case

By Rachel Sachs

Yesterday, the Supreme Court heard oral arguments in King v. Burwell, and the Justices seemed split on the central issue of whether the Affordable Care Act (ACA) permits health insurance subsidies to flow to citizens of states that have chosen not to establish their own insurance exchanges.  Trying to predict the outcome of a case like this is notoriously difficult, but I do want to highlight briefly an important difference between the Court three years ago, when it decided NFIB v. Sebelius, and the Court yesterday.

In NFIB, seven Justices declared that the ACA’s Medicaid expansion was unconstitutionally coercive, concluding that the Secretary of Health and Human Services could not condition existing Medicaid funds on a state’s failure to expand Medicaid.  However, the Secretary was instead permitted to offer additional funds to states choosing to expand Medicaid, effectively making the expansion optional.  The Court at the time understood that this outcome could result in a national patchwork, in which certain states would adopt the Medicaid expansion and others would not.

But the Court, both at oral argument and in its opinions, seemed to lack an appreciation of the way in which the different parts of the Act fit together.  In particular, the Justices seemingly did not appreciate that there would be additional negative consequences for states who then chose not to expand Medicaid.  This was a mistake.  In reality, the decision placed affirmative burdens on states (and the citizens of those states) who chose not to expand.  Employers in such states would face new tax burdens, as low-wage workers who would’ve otherwise been eligible for Medicaid were funneled onto the exchanges, triggering financial penalties for their employers.  Hospitals who did not experience the promised reductions in uncompensated care nevertheless had their Disproportionate Share Hospital payments, meant to compensate for such care, reduced as part of the Act.  The valence of these concerns might have supported either side, but several of the Justices would likely have found them relevant to the overall analysis.

Comparatively, yesterday the Court displayed a more sophisticated understanding of the consequences of a decision striking down the subsidies in states that have not established their own exchanges.  They didn’t just appreciate the idea that many people who currently receive the subsidies would become unable to receive them.  More broadly, Justice Kennedy explicitly referred to the fact that such a decision would likely create an insurance death spiral in those states.  Justice Kagan referred to the “Draconian choices” that states would have to make under the petitioners’ reading, and several other Justices mentioned the consequences at stake as well.

This is not to say that understanding the stakes should compel a holding for the government purely on the grounds of avoiding these consequences.  But the consequences are often important even to those Justices who are less inclined to incorporate pragmatism into their decisionmaking.  The consequences are relevant to whether Congress could have conceivably intended such a statutory reading.  And they are relevant to whether the petitioners’ proposed reading would be unconstitutionally coercive, as Justice Kennedy asked.  If the Justices had considered the consequences three years ago, then perhaps the outcome would have been different.

As such, there is room for scholars in health law and related fields to educate the Justices about the consequences of their actions.  This engagement may take place through formal amicus briefing, as happened in this case, or academic writing.  The recent New England Journal of Medicine piece by Nick Bagley, David Jones, and Tim Jost is a terrific example of the latter, and the Petrie-Flom Center is even holding an event on April 1 inspired by that piece.

In this vein, I want to highlight a blog post written in response to yesterday’s oral argument that hasn’t yet been picked up more broadly in the media.  At the HealthLawProf Blog, Nicole Huberfeld adds a helpful clarification about the stakes of the case.  She notes that several states have obtained waivers to expand Medicaid by having their newly eligible Medicaid populations purchase insurance on the exchanges.  As such, any death spirals or other negative effects resulting from a decision against the government would not only implicate those states’ ability to maintain a functioning individual insurance marketplace, but it would also jeopardize the choices those states have made on the subject of the Medicaid expansion.  Particularly for those Justices concerned about federalism, Nicole’s arguments are important to consider.