The smartest, least dishonest argument you’ll hear from Halbig Truthers goes something like this: The statutory text of the Affordable Care Act can only be read one way, and by that reading, the government isn’t authorized to provide subsidies to beneficiaries in states that didn’t set up their own exchanges. Did the bill’s authors intend to do this? Probably! But we can’t really say for sure, and in any case, it shouldn’t matter much. It’s not insane to think Congress meant to induce states to set up their own exchanges, and used the subsidies as a carrot to encourage them to do so. And that explanation is most compatible with the wording of the section of the bill we’re focused on. QED.
This is a stretch for a lot of reasons, starting with the assumption that the ACA can only be read one way. But it also requires assuming that the bill’s authors—and the Democrats who voted for it, and the reporters who covered it, and the economic analysts who scored it, and the advocates who scrutinized it—all misunderstood what they were doing, and needed a handful of conservative lawyers trying to destroy Obamacare to explain it to them more than a year after the fact.
One of the central players in this drama was the Congressional Budget Office, and we know the analysts there never imagined Congress intended to condition subsidies on states setting up their own exchanges. Two weeks ago, Talking Points Memo’s Dylan Scott wrote a good, thorough story about how CBO always treated it as a given that ACA subsidies would be available in every state, and scored the bill as such. Even if it would’ve ultimately changed nothing about their modeling, it really is a big stretch to posit that CBO’s principal analysts wouldn’t have recognized the law’s core benefit as part of a very high-stakes incentive system.
The problem is that CBO’s cost estimates don’t actually harm the smart Halbig-Truther argument, because the Truthers have insulated themselves from having to contend with almost anything CBO did. If CBO assumed subsidies would be available in every state, it’s because CBO assumed all states would respond to the incentive and set up their own exchanges. Or perhaps that CBO analysts just made lazy assumptions without reference to the bill text. Garbage in, garbage out.
But when you burrow a bit deeper, those analysts point out the pro-Halbig argument doesn’t hold up very well.
“We never had the discussion about how many states would set up their own exchange, but if we had had that discussion, I can’t imagine we would have said every state’s going to set up their own exchange,” says Chapin White, a senior policy researcher at the RAND Corporation, who was one of CBO’s principle analysts modeling the Affordable Care Act.
White swats away the notion that CBO might have glossed over a major incentive system like the one Halbig Truthers have imagined into existence. If the subsidies were meant to be conditional, as Halbig Truthers claim, CBO would’ve known and, moreover, they probably wouldn’t have assumed every state would’ve opted in.
“CBO is definitely used to modeling states and how they’re going to respond to changes in federal incentives. That’s going on all the time with, say, the Medicaid program. CBO did assume that every state would expand Medicaid up to 138 percent of poverty, because they would’ve lost their existing Medicaid funding. It’s reasonable to say that absent the Supreme Court ruling, all states would’ve gone ahead and done that.”
But the assumptions would’ve been different for a Halbig-style incentive system. The Medicaid-expansion incentive was incredibly strong. There, the carrot was billions of nearly-free federal dollars. Until the Supreme Court intervened, the stick was the complete demolition of Medicaid within non-expansion states. A huge, devastating blow. Halbig Truthers posit a different, weaker incentive. The carrot, again, was billions of free federal dollars. But the stick was much smaller—namely, that states would be hard-pressed to turn down free money, and possibly to invite dysfunction into their insurance markets. It did not entail harming hundreds of thousands of people benefitting from an existing anti-poverty program.
A better analogy, then, would be to the original establishment of Medicaid back in the 1960s, wherein the federal government lured states with large sums of money, but only mild coercion. And there, history would have guided CBO to different assumptions.
“It took states years and years to pick that up, even though there was free federal money on the table,” White told me. Along the same lines, “If we had had the conversation at the time, I feel strongly that we would’ve come up with some assumption about the share of states that would’ve established their own exchanges and it wouldn’t have been 100 percent.” And that, in turn, would’ve yielded a much different, cheaper cost estimate than the one they ultimately produced.
Halbig Truthers will note that White is benefiting from 20/20 hindsight here, and that his recollections and counterfactuals don’t tell us anything definitive about what Congress intended to do. But they do make the implication that CBO might’ve missed something this big, or flubbed their analysis of the supposed incentive system, a lot harder to swallow—and a pretty big affront to the policy analysts who scored the bill.
“Definitely the notion that all 50 states and D.C. would set up their own exchanges, seems far-fetched to me now,” White says. “I don’t even really remember talking through any debates over what share of states would set up their own exchanges and what states would use the federal fallback. My recollection of the operating environment was that it just didn’t matter whether the states or federal government set up the exchanges, the exchange subsidies and projected enrollment would be the same.”
N.B. I set about reporting this story hoping to find something more conclusive. When I requested an interview with White, it was to ask him about how CBO modeled the administrative and start-up costs of state and federal exchanges. Since establishing state and federal exchanges ultimately entailed different costs, I thought CBO might’ve made specific assumptions about how many states would set up their own exchanges, and how many would rely on the federal fallback, in its cost estimates. If CBO both assumed that some states would use the fallback, and that residents of those states would be eligible for tax credits, it would’ve spoken pretty clearly to congressional intent.
As it turns out, this distinction didn’t require CBO to make any assumptions at all, because for CBO’s purposes the costs would’ve been identical regardless. Congress appropriated money to set up exchanges, and that money was presumed to be appropriated, regardless of how it was ultimately spent. “When Congress appropriates a billion dollars for getting the exchange up and running, CBO just says, ‘OK, Congress spent a billion dollars,’” says White. “It’s not CBO’s role to project what appropriations Congress chooses to make.”
Brian Beutler is a senior editor at The New Republic.