Behind the Headlines: Courts and Obamacare

Tuesday, the United States Court of Appeals for the District of Columbia struck down the subsidy provisions of the Affordable Care Act for states that have not implemented their own exchanges. The court found that the plain wording of the statute made clear that Congress authorized subsidies only in exchanges established by a state, and that the federal government is not a state. Thus, subsidies are not authorized in exchanges established by the federal government.

--Sean Trende, “RealClearPolitics”  

Comment: Here’s what really happened. Before the 2012 Supreme Court ruling upholding Obamacare, the Federal government manipulated the states by withholding funds unless the states did exactly as Federal law required. Then, while upholding Obamacare two summers ago, the Court ruled that states could continue to receive Medicaid funding even if they ignored Obamacare’s demand to expand the Medicaid program.

The Court’s ruling meant states who declined to partner with Obamacare wouldn’t be punished for failing to join up. Obamacare had offered the states a carrot--money for states to give those who joined state exchanges--along with a stick--no Medicaid funds for states that rejected Obamacare’s Medicaid expansion (for those outside the current health insurance system, Obamacare = exchanges + Medicaid expansion).  With the stick gone, states saw less reason to set up their own exchanges, and most opted for letting the Feds run the program (to disastrous early results).

When the Feds realized what might happen, they by rule sent the carrot to Federal as well as state exchanges. But that’s not what the law says, and it isn’t why the Feds originally only gave states the carrot. The Feds began bribing the states--giving them a carrot--because they wanted state-run exchanges, a more likely event when states would also be expanding Medicaid exactly as the Feds had directed.