By Kevin Outterson

Cross posted from The Incidental Economist:

The opponents of the Affordable Care Act certainly know their way around a courtroom. Oral arguments in the contraception mandate case (Hobby Lobby) will be heard on Tuesday at the Supreme Court. That same day, another challenge will be heard in a federal courtroom nearby, in the Court of Appeals for the DC Circuit (the WSJ photo identifies the wrong court).

To the Cato Institute, the tax credit cases (Halbig v. Sebelius and a related case in the Fourth Circuit, King v. Sebelius) represent their last shot to cripple the four-year-old law by wiping out health insurance subsidies to millions of people in the 36 states that did not create state exchanges. (I’ve blogged about these cases before, and Cato folks have also posted summaries of the anti-ACA amicus briefs. Sunday’s WSJ ran an editorial following the Cato line).

Today, I wanted to highlight the amicus brief filed on Thursday March 20, 2014 by the Commonwealth of Virginia in King v. Sebelius (the 4^th Circuit case, not the one up for oral argument on Tuesday). I appreciate the beauty of this argument, for it uses a conservative victory in federalism to support the federal government, and it comes from the newly-elected attorney general who replaced an early opponent of the ACA. (Mark Herring won by only 165 votes, but #electionsmatter).

I’m talking about the Pennhurst doctrine, which requires Congress to give states “clear notice” if conditions on states are attached to federal spending. So Virginia asks the very interesting question: Did Congress give “clear notice” that the penalty for failing to build a state exchange would be the loss of billions of dollars of health insurance subsidies?  When you put it that way, Cato’s argument collapses. From the brief:

For no one can reasonably claim that the federal government gave Virginia clear notice that its citizens would be denied premium tax-credit assistance as punishment for the Commonwealth’s decision to forgo building its own health insurance exchange.

And later:

 [The Plaintiffs argue] that everyone in Congress silently but mistakenly assumed that every State would create its own Exchange. (Appellants’ Br. 6, 42.) That claim finds no support in the record. The ACA was controversial when it was debated and adopted, and it was well known that numerous States objected to it and would not go along willingly.

The brief also notes that no Member of Congress expressed such a view and even the architects of this litigation (Cannon and Adler) were surprised by this “glitch” after the fact. The brief also reviews the official correspondence to and from the Governor on this issue; any notice whatsoever is lacking, much less “clear notice.”

What bothers me the most about this litigation is Cato’s willingness to try to hurt millions of vulnerable people in order to score political points, even after losing the 2012 Presidential election and the first bite of the Supreme Court apple in NFIB v. Sebelius. The Virginia brief puts the emphasis on the people:

Two sovereign interests compel the Commonwealth of Virginia to file this brief. First, the Commonwealth represents the interests of the hundreds of thousands of Virginians who depend on federal premium tax-credit assistance to afford the health insurance that is now available under the Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act” or “ACA”). Their interests are not represented by the Appellants here, four individual Virginians who do not want health insurance. Second, the Appellants’ legal theory contradicts the fundamental assumption on which the Commonwealth elected to forgo building its own health insurance exchange in favor of a federally-facilitated exchange: that doing so would not harm the interests of Virginians. The Appellants’ theory must be rejected under the Pennhurst doctrine, which prevents Spending Clause statutes like the ACA from being used to impose unusual conditions about which States were not provided “clear notice.” What is more, if Congress had actually done what Appellants claim — made State citizens financial hostages in a scheme to force State governments to adopt State-based exchanges —it would have violated the Tenth Amendment’s prohibition on coercing States to carry out federal policies. Accordingly, this Court should reject Appellants’ arguments and affirm the ruling of the District Court.

h/t Tim Jost

@kevinoutterson