Friday, December 21, 2018

Obamacare Judge Doesn’t Understand Congressional Procedure

Earlier this year, I expressed my concern and frustration with a lawsuit that asked a Texas court to strike down all of Obamacare. When the court’s ruling did just that on Friday evening, I echoed my prior sentiments stating that I wanted elected Members of Congress to repeal the law, not unelected judges.

But in reading through the ruling, one thing struck me, as a former House and Senate staffer: Judge Reed O’Connor has precious little knowledge of congressional procedure, particularly as it relates to the budget reconciliation process in the Senate. When it came to the issue of severability—what other parts of Obamacare must be stricken if the law’s individual mandate is unconstitutional—O’Connor relied on numerous incorrect procedural assumptions to support his opinion. Exploring the issues in a fuller, and in my view more accurate, manner would likely have led to a different result.

Examining the “Dry Run”

In the section of the ruling analyzing the severability of the mandate from the rest of Obamacare, Judge O’Connor spent roughly 15 pages discussing the intent of the 111th Congress that passed the statute. Those passages examined both the law itself, and two prior Supreme Court rulings talking about the interaction between the mandate and the other main provisions of the law.

However, he spent only about two pages discussing the intent of the 115th Congress that passed the tax legislation setting the mandate penalty to zero—the action which led to the lawsuit. Given that bipartisan experts have concluded that Congress last year made an explicit decision to keep the rest of the law while nixing the mandate penalty, one would have thought the intent of the current Congress deserved a longer analysis than the brief discussion it received.

Moreover, Judge O’Connor should have also examined relevant legislation considered in the 114th Congress. In 2015, the Republican Congress passed, but President Obama vetoed, reconciliation legislation repealing major elements of Obamacare. While that legislation never got signed into law, Republicans viewed it as a “dry run” for repealing Obamacare in 2017, under a Republican President. It provides important evidence that Republicans could have gone much farther in dismantling Obamacare last year—but chose not to do so.

False Conclusion

Page 52 of the opinion includes this assertion: “Looking for any severability-related intent in the 2017 Congress is a fool’s errand because the 2017 ‘Congress did not repeal any part of [Obamacare], including the shared responsibility payment. In fact, it could not do so through the budget reconciliation procedures that it used.’” While the opinion quotes here from a claim made by a group of Democratic state attorneys general during their oral argument, both the opinion and the claim by the state attorneys general are false—and provably so.

In fact, the 2017 Congress could have repealed multiple parts of Obamacare—because the 2015 Congress passed legislation doing just that. The final version of the 2015 “dry run” repeal bill that President Obama vetoed contained the word “repeal” no fewer than 29 times—in an eight page document. Among the provisions the 2015 legislation would have repealed, stricken, or otherwise returned to their pre-Obamacare state:

  1. Section 1401 of the Internal Revenue Code, as amended by Section 1004 of the Health Care and Education Reconciliation Act of 2010 (premium subsidies)
  2. Section 1402 of Obamacare (cost-sharing subsidies)
  3. Most of Section 1411 of Obamacare (eligibility for subsidies)
  4. Section 1412 of Obamacare (payments of subsidies)
  5. Section 10201(e)(1)(B) of Obamacare, as modified by Section 1203(a)(2) of the Health Care and Education Reconciliation Act of 2010 (changes to Medicaid Disproportionate Share Hospital payments)
  6. Section 9001 of Obamacare, as amended by Section 1401 of the Health Care and Education Reconciliation Act of 2010 (“Cadillac tax” on high-cost employer plans)
  7. Section 9003 of Obamacare (prohibition on using Health Savings Account dollars for over-the-counter medications)
  8. Section 9004 of Obamacare (increase in penalty for Health Savings Account withdrawals used for non-health expenses)
  9. Section 9005 of Obamacare, as amended by Section 1403(b) of the Health Care and Education Reconciliation Act of 2010 (annual limit on Flexible Spending Arrangements)
  10. Section 9008 of Obamacare, as amended by Section 1404 of the Health Care and Education Reconciliation Act of 2010 (tax on pharmaceutical manufacturers)
  11. Section 9009 of Obamacare, as amended by Section 1405 of the Health Care and Education Reconciliation Act of 2010 (tax on device manufacturers)
  12. Section 9010 of Obamacare, as amended by Section 1406(a)(1) of the Health Care and Education Reconciliation Act of 2010 (tax on health insurers)
  13. Section 9012 of Obamacare (elimination of deduction for expenses related to Part D retiree drug subsidy)
  14. Section 9013 of Obamacare (increase in itemized deduction for medical expenses)
  15. Section 9014 of Obamacare (limitation on pay to insurance executives)
  16. Section 9015 of Obamacare, as amended by Section 1402 of the Health Care and Education Reconciliation Act of 2010 (tax on high-income earners)
  17. Section 10907 of Obamacare (tanning tax)

In addition to repealing all these provisions from Obamacare, the 2015 reconciliation legislation would also have sunset Obamacare’s Medicaid expansion to the able-bodied, and repealed two taxes included in the 2010 reconciliation bill that “fixed” portions of Obamacare immediately following its enactment—an expansion of Medicare taxes to certain unearned income, and a codification of the economic substance doctrine.

Congress Could Have Done More Last Year

Because President Obama vetoed the 2015 legislation, none of these provisions made it into law that year—but that’s not the point. To get to the President’s desk, all of these provisions received approval from both the House and the Senate under Congress’ strict budget reconciliation procedures. That fact disproves Judge O’Connor’s assertion that in 2017 “Congress took no action pertaining to [Obamacare.] Nor could it. The reconciliation process limited Congress to doing just what it did: Reducing taxes.”

Just by passing the 2015 legislation again, and having President Trump sign it into law, this Congress could have done much more pertaining to Obamacare. It could have reduced more taxes, yes, but it also could have made other major changes to the law—eliminating the subsidy payments and Medicaid expansion, along with other forms of spending (e.g., Disproportionate Share Hospital payments). Congress passed all those provisions in 2015, but did not pass them again in 2017.

But Congress Could NOT Have Repealed the Mandate Outright under Reconciliation

In striking down the entire law, the ruling contained a second, equally erroneous assertion: Judge O’Connor claimed Congress made a conscious decision not to repeal the individual mandate. He detailed how lawmakers eliminated the penalty for non-compliance with the mandate while retaining the mandate itself, along with the legislative findings that originally accompanied the mandate—findings that label the mandate as “essential” to the coverage scheme established by the law.

Here Judge O’Connor contradicted himself. After all, how could Congress have made a deliberate choice not to repeal the mandate last year if, as he claimed two paragraphs earlier in the ruling, Congress had no power to make changes to Obamacare under budget reconciliation procedures? Just as important, data points exist that suggest Congress could not have repealed the mandate entirely in a budget reconciliation bill.

For one, the legislative language of the 2015 reconciliation bill changed during the process to comply with Senate procedures. Politico explained at the time that the Senate parliamentarian, Elizabeth MacDonough, issued guidance suggesting the need to modify the House-passed language to comply with Senate rules: “The parliamentarian also ruled that other pieces of the repeal [bill] would have to be modified, but GOP aides say those edits to the individual mandate and employer mandate provisions are not major.”

As a result of the parliamentarian’s guidance, Senate staff revised the House-passed language. Instead of terminating the mandate penalty effective on a date certain, they set the penalty to zero on a date certain. That revised language passed the Senate as part of the 2015 reconciliation bill that President Obama vetoed, and then made its way into last year’s tax legislation.

As to the legislative findings about the mandate cited by Judge O’Connor—which in his view proves that Congress “intended to preserve the individual mandate because…[it] knew the provision is essential” to Obamacare—a budget reconciliation bill could not have repealed them. Because the findings themselves have no fiscal impact, any attempt to modify or repeal them would likely meet the test of “extraneous” material, and therefore stricken from the bill under the Senate’s “Byrd rule.”

Second, because the findings were placed within the Public Health Service Act—as opposed to the mandate, which Congress placed within the Internal Revenue Code—the findings supporting the mandate fall within the jurisdiction of different committees than the mandate itself. If the Senate Finance Committee had attempted to strike the findings—properly the purview of the Senate Health, Education, Labor, and Pensions Committee—in the tax bill, it would have exceeded its jurisdiction. That procedural violation would have resulted in the entire bill being ruled out of order.

Some critics may call this line of thinking speculative on my part. After all, conversations with the parliamentarian take place out of the public eye, Congress could have revised the language for any number of reasons, and so forth. But as a former Senate staffer who has followed the reconciliation process both while on Capitol Hill and since, it seems obvious that Congress’ actions surrounding the individual mandate were determined largely by the Senate’s “Byrd rule” on budget reconciliation, and the parliamentarian’s guidance regarding same.

The Bottom Line

Even if people dismiss the second half of my argument, about whether Congress could have repealed the individual mandate entirely under budget reconciliation, they cannot dismiss the first. Congress could have done far more under budget reconciliation to repeal major portions of Obamacare, beyond setting the mandate penalty to zero. We know that for a fact because the last Congress—the one that passed the “dry run” reconciliation bill in 2015—DID do far more to repeal the law, even if that legislation could not overcome a presidential veto.

It therefore follows that, when removing the penalty, Congress made an explicit choice not to repeal the rest of Obamacare. While I do not agree with that decision as a matter of policy, I must respect it as a matter of law. In arriving at his ruling, Judge O’Connor should have done the same.