Sunday, December 9, 2012

Anything to see here?


Two-years have passed since the signing of the Affordable Care Act (ACA, Obamacare). At this point, one thing is clear, there was a significant “drafting” mistake in the original legislation. There has been an on-going fight over this. I think it’s coming to a boil. If so, it couldn’t come at worse time for the Administration. Some connecting dots:


-A critical component of ACA was the establishment of Health Insurance Exchanges (HIXs). This was supposed to guarantee the availability of “affordable” insurance. Each state will have a HIX.


-Under ACA, a state could either, 1) establish its own HIX, 2) Do a partial HIX with federal support, or 3) Let D.C. pick up the whole thing.


-ACA provided strong incentives to the states to choose option #1 (90% reimbursement). It was originally assumed that a high percentage of the states would set up their own HIXs.


-To make the cost of insurance “affordable” there were tax-credits available for lower income individuals and families. These tax-credits are an essential ingredient to Obamacare.


-The following is the key language that is now in question: (Link)


Tax credits are available if


(A)  the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependentof the taxpayer and…..

……which were enrolled through an Exchange established by the State



The tax credits are limited to those states that establish their own HIX. Period. The Letter of the Law reads, (clearly to me) that the ACA tax credits are not available in states that choose to have D.C. manage the required HIX (option #3)


-Many states have refused to set up their own HIX. The following shows the tally as of 11/29. Yesterday, NJ’s Chris Christie, surprisingly, said “Nix to HIX”.





-If the tax credits for “No HIX” states were to go away, Obamacare goes down for the count.


-The Obama Administration “fixed” the problematic “drafting error”. The President called the Treasury Secretary, (Geithner) and told him to fix it. Timmy, in turn, called the boss at the IRS, Doug Schulman, and told him to fix it.  Doug issued a ruling that “eliminates” the conflicting language. Poof! The problem goes away. Maybe.


-Without the consent of Congress, the IRS changed the letter of the law on the most significant legislation in the past fifty-years. With out the IRS ruling, ACA was D.O.A.


The most recent development in this curious story came on Friday. Doug Elmendorf, the head of the Congressional Budget Office (CBO) wrote a letter to Congressman Darrell Issa (R-CA) on this topic. (Link)


Elmendorf’s letter was in response to one from Issa. Elmendorf frames Issa’s question:


You asked for a description and explanation of CBO’s assumption that premium assistance tax credits established under ACA would be available in every state, including states where the insurance exchange would be established by the federal government.


Elmendorf answered with this:


To the best of our recollection, the possibility that those subsidies would only be available in states that created their own exchanges did not arise


To the best of our recollection?


When the CBO originally looked at ACA, it produced reports that assumed that the tax credits would be available to all states, regardless of what choice was made with HIX.  This fact is now being used as “evidence” that legislators “intended” to have the credits available without restriction.


Issa’s letter was trying to get to the facts. Why didn’t CBO produce numbers that reflected the wording of the law? Elmendorf’s response was a put down (IMHO). He’s saying, “No one brought it up”.


I’ll repeat the words that are causing the problem. What’s your interpretation? What was the intent of Congress on the issue of availability of insurance tax credits? Do you think the IRS should have glossed this over? (It was a backdoor “fix”, plain and simple) Do you think Issa is going to rollover on this? (Not a chance) Did the CBO make a mistake by not considering the plain language in ACA back in 2010? (At a minimum, it should have asked for a clarification). And how about the, “We don’t recall” answer from CBO?


tax credits are available… to those who were enrolled through an Exchange established by the State 



I’m not sure what to make of this. I think the language was a mistake. ACA was pushed through in 72 hours, no one caught the error.

The working assumptions provided by CBO in 2010 were not intended to confuse Congress, but that was the result.

The IRS “fix” will be challenged in court.

The Congressional Research  Service has a good write up on the legal issues involved (Link).

The Cato Institute has been pounding away on this topic, Cato believes it has evidence that Sen. Max Baucus (D-MT), Chairman, Committee On Finance, spoke of ACA limiting tax credits to only states with their own HIX. (Link)  (Video). If correct, it would be a problem for ACA. I doubt that Baccus is going to speak up on this. After all, he was one of the guys running the show.

I don’t think this is as cut and dried as Cato makes it out to be. At a minimum, Baccus was confused on the critical question of tax credit availability. That is the point, the big-shots running the show did not really understand what they were doing. Most legislators had no clue what they were signing.

There is no easy fix to this. If you asked the House how it would apply the tax credits today, it would limit them, as the original law was written. That vote would be on party lines. There will be no effort to clarify the original language, that would open a huge can of worms. Stay tuned…





  1. After four years of observing them in action, let’s apply common sense.

    They intentionally put the language in there to “persuade” the states to set up a hix.

    Now the states say “no”.

    So now the admin will pretend they didn’t put the language in there intentionally.

    And they will simply change the language via the irs or whatever means they need and not even pretend to consult congress about it.

    And they will get away with it.

    If there is anyone who thinks they will not get away with doing anything with the law that they want to, then that person has not been paying attention over the last four years.

  2. It’d be nice to have a national uproar about how haphazardly major laws are often passed without even reading them. Patriot Act.

    However, simple as this is, it’s too complicated to capture the public’s attention and it’s obviously just an oversight, I utterly detest Obama and this law, yet it’s clear even to me it was an oversight and will be amended with to fuss or involvement of Congress.

    Far bigger problems and more pernicious laws than this to worry about, if people want to get upset about something.

  3. ObamaCare did not really get passed into law — Nancy Pelosi bribed a bunch of spineless crooks/congress members to approve a law that no one (not even the wicked witch of San Fran herself) had actually read.

    The bitch actually stated PUBLICLY that “we have to pass this law so we can find out what it says”… that is a direct quote, made on the floor of Congress. It is in the official record.

    The “spirit” of ObamaCare is fraud and bribery — so it should come as no surprise that the tax cheat over at the IRS is busy re-interpreting the English language to mean whatever it takes to avoid admitting it was a mistake.

    The US needed, and still needs, cost controls on health care. ObamaCare didn’t really address costs (except to add an additional layer of bureaucrats / additional costs). ObamaCare focused on providing more government jobs and sound bites — and even that only made it through Congress via fraud and bribery.

    Welcome to the 3rd world banana republic government the “majority” supposedly voted for!

  4. Anyone who heard Obama describe “Best Practices” in the first debate and knows how “Best Practices” is applied by insurance companies as well as the term “evidence based” knows that he did not have a clue what is in his legislation. One of the biggest problems in our health care system has been incredibly lousy incredibly expensive insurance. From what I have read under HIX this is going to get even worse.

  5. Check out what is really going to become of the U.S. “After America: Rebuilding” is available on Amazon Kindle. It even has a new Constitution. Pretty neat read.

  6. Re Congressional intent, recall the original Obamacare law FORCED states to create their own exchanges or else lose ALL existing Medicaid money. Congress absolutely, indeed unequivocally, intended that only persons in a state exchange would be eligible for the federal premium subsidy/tax credit. It fully expected every state would create its own exchange because the threat of withdrawing all Medicaid would leave the states with no other choice. But the Court struck down this punitive provision. The federal gov’t cannot withdraw existing Medicaid from “uncooperative” states. Period. http://www.economics21.org/commentary/did-supreme-court-ruling-render-health-laws-finances-untenable

    Any argument now that Congress intended federally-created exchanges to share in the subsidies is belied by the now-invalidated Medicaid “shot-gun” clause. Congress never dreamed there would be a single fed-created exchange and it clearly intended there not be.

    That is why Obamacare was never scored with even one federally created exchange in the mix. The CBO just doesn’t want to admit it. Hence its peculiarly worded, over-lawyered answer to Issa; and I am glad to hear he’s on the case. If the IRS’s “amendment” is blocked — and it should be — Obamacare will self-detonate.