Wednesday, July 30, 2014

The back-and-Forth Treatment of Subsidies in Federal Exchanges in Legislative History

 We've got a discussion going. Excellent!  In “The Problematic Halbig Decision: Why “Intent” is Too Narrow an Inquiry”, David Gamage tells us that he and  others who were making regulations based on the new statute didn’t even hear mention of the possibility that non-participating states wouldn’t get subsidies for many months.  That’s what the House oversight report   says about Treasury at the time too.   So the Executive branch didn’t see any problem till it was pointed out to them from outsiders.

     This evidence cuts both ways, though. Notice that nobody says that Treasury officials read the subsidy clause and said, “Hey, there might be a problem because that language seems to exclude subsidies for federal exchanges.”  Why, when so many people now see a problem? My guess is that they were working frantically to implement the bill (remember  the federal exchange rollout fiasco  and all the deadline changes) and not looking for new problems.

     Let’s go back to   intent  , though.  As a bill progresses, clauses are inserted to please this and that group, and often  to get just one legislator’s vote. The people who draft the final bill may know very well what they’re doing, and hate the result compared to the draft-before-final, but insert the obnoxious clause knowingly because they need it to pass the bill.   They may then employ a useful bureaucratic trick: put the clause in the document to get agreement, but ignore it in implementation and hope the people who pushed for it don’t notice. (I’ve had that used  successfully against me myself more than once!)

More details are coming out about the legislative history.  The Health Committee draft  explicitly included a 6-year no-subsidy punishment period for states that didn’t establish exchanges (see  § 3104 ). That draft, which  introduced the idea of federal exchanges, explicitly said that people in states without state exchanges would not be eligible for subsidies for the first six years of the program. That’s not as drastic as the final bill, but it’s a pretty big stick against the states, so the Health Committee Democrats were definitely thinking about a punishment strategy. Also significant is that nobody in the press at the time seems to have discussed that aspect of the bill. It was in there, and on purpose, but nobody in the media took notice.  See “The Senate HELP Bill Limited Exchange Subsidies to Compliant States (but No One Mentioned It)” (Breitbart) 

     The Health bill was redrafted to eliminate the six-year punishment and instead to explicitly provide for subsidies to people in states with federal exchanges. But then that bill was merged with the Finance bill.  A staffer says, “[W]e layered the HELP Committee language that established a federal fallback on top of the Finance Committee language that included ‘exchange established by the state.’” The explicit provision for subsidies was deleted, leaving, in the end, just the  statement that subsidies would be provided for “an Exchange established by a state”.

    Thus,  some of the people working on the bill were thinking about punishment strategies, even though others weren’t.  In the final stage of drafting, the people in control of the bill had a draft in front of their eyes that explicitly excluded the punishment strategy, and they used some provisions of the draft but not that provision. See  “Liberal WaPo Blogger Inadvertently Strengthens Argument from Halbig Majority " (Patterico’s Pontifications)

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