Ignoring the Supreme Court When You Don’t Like the Result

Should President Obama ignore an adverse ruling in King v. Burwell? That is the case recently argued in the U.S. Supreme Court. Plaintiffs argue that the Affordable Care Act (“ACA”) does not allow the federal government to subsidize federal health exchanges, only state-created health exchanges. The law itself is complex, totaling nearly a thousand pages in length. However, the statutory interpretation issue is straightforward.

The ACA provides that territories of the United States (e.g., Guam) are “States,” for purposes of this law. Section 1323 provides that if a “territory” creates an Exchange, it “shall be treated as a State” under this law. Another section of the ACA says that the District of Columbia is a “State” for subsidy purposes. Another section of the law provides, “In this title, the term ‘State’ means each of the 50 States and the District of Columbia.” Congress knew how to define “state” to include more than “states.” It did that when it defined Washington, D.C. and “territories” as “States.”

However, no section of the law defines “State” to include the federal government. That was not an accident. An earlier version of the bill—one that Congress did not enact—provided that “any references in this subtitle to [any] Health Insurance Exchange . . . shall be deemed a reference to the State-based Health Insurance Exchange.” That language would treat federal exchanges the same as state exchanges. Congress, however, did not enact that version.

Congress had a reason not to extending subsidies to federal exchange (under Section 1311 of the ACA), while authorizing subsidies for states, the District of the Columbia, and any U.S. territory that created a “qualified exchange,” (under Section 1321 of the ACA). Congress wanted to incentivize the states to set up health exchanges while denying subsidies for a state’s citizens if the state refused to create an exchange. As one architect of the law explained:

What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits—but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges.

The Administration thought that the ACA would be wildly popular. For many people, it is not. As of January 2015, only 14 states had established Health Exchanges. That meant that the Department of Health and Human Services (“HHS”), using Section 1321 of the ACA, established exchanges in the remaining states. The IRS claims that when Section 36B refers to Section 1311 and state exchanges, there is some sort of ambiguity and it really means to refer to Sections 1311 and 1321 and federal or state exchanges.

The Supreme Court, in King v. Burwell will decide whether the IRS can define Section 1311 to mean Sections 1311 and 1321. If the Court authorizes the IRS to, in effect, change the meaning of Section 1311, that will be the first time that Congress has delegated the power to raise taxes or spend tax subsidies. If the President loses this case, HHS Secretary Burwell has told us, reassuringly (just kidding), that “we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision.”

What to do? A University of Chicago law professor now argues that the President, if he loses this case, should just ignore the Court ruling except for the four individuals who brought this particular lawsuit. After all, he says—quoting Abraham Lincoln, no less—Supreme Court opinions are “‘entitled to very high respect and consideration in all parallel cases’ but were ultimately limited to ‘the parties to a suit as to the object of that suit.’” [The internal quotations are from Lincoln; the rest are from the commentator.] The commentator does not identify the reference, but Lincoln was talking about Dred Scott v. Sanford (1857). That case held, among other things, that blacks, even freed black slaves, could not be U.S. citizens. Lincoln and the people overruled Dred Scott with the 13^th and 14^th Amendments.

The quotation from Lincoln is missing a few important words, and the commentator leaves out other details. Lincoln made his remarks as part of his First Inaugural Address. He was arguing that the government should not be bound by litigation to which it was not a party: “if the policy of the Government upon vital questions affecting the whole people is to be irrevocably fixed by decisions of the Supreme Court, the instant they are made in ordinary litigation between parties in personal actions the people will have ceased to be their own rulers.”

The government was not a party to Dred Scott. The parties were two private people. The government is a party to King v. Burwell. Burwell is the Secretary of HHS. Other defendants include the Secretary of the Treasury, the IRS, and a host of other government officials. The argument for disregarding the Supreme Court ignores all that, and it misquotes Lincoln. It is easy to argue that the law supports your position if you leave out the facts. Lincoln never said he would ignore the Supreme Court in a case where he was a party. Read his First Inaugural. It’s not that long, it is well written (it is Lincoln, after all), and it makes no fatuous arguments.

Let us say that the Obama Administration follows this law professor’s advice if it loses before the Supreme Court. IRS officials will give out tax subsidies contrary to the law. Those officials will violate the Federal Anti-Deficiency Act, 31 U.S.C. § 1341, et seq., which prohibits them from passing out federal money without statutory authorization. The helpful employees who pay out these subsidies go to prison, and the government collects from the recipient three times the federal money received. There is no need for the prosecution to prove any specific intent to defraud.

That is not the end of the story. What happens if the Administration does not enforce the Anti-Deficiency Act? Congress thought of that, too. Any taxpayer can sue the officials and force them return the money, out of their own pockets, by filing a qui tam action under the False Claims Act, 31 U.S.C. § 3729 et seq. The taxpayer has an incentive to sue because he or she collects from 15 percent to 30 percent of the proceeds.

There is another problem. If the Administration can ignore an adverse decision in King v. Burwell (and apply the rule only to the four individuals who are plaintiffs), future governments can do likewise. For example, let us say the Supreme Court rules that there is a constitutional right to gay marriage. Under the proposal of the law professor, states can apply that decision only to the particular gay couples suing in that particular case. My Verdict co-columnist Michael Dorf discusses that point on his blog.

So, if the Administration takes this advice, it will find that its officials will go bankrupt repaying the money out of their pockets. My advice: follow the law, not the law professor.