by Nicholas Bagley, Assistant Professor of Law, University of Michigan Law School.
*This piece first appeared at The Incidental Economist.
One of the strangest things about King v. Burwell is the challengers’ claim that the ACA clearly withholds tax credits from states that refused to set up exchanges. When asked why on earth Congress would do such a thing, the challengers insist that Congress badly wanted the states to establish their own exchanges. The tax credits were, on this view, a carrot to prompt state participation.
Some federal programs do work kind of like this. Medicaid, for example, dangles federal money to the states in order to encourage them to participate. If a state doesn’t accept the conditions that Congress places on receiving that money, then the state doesn’t get the money. In the lingo, Medicaid is a conditional spending program.
When it comes to the exchanges, however, the ACA is not a conditional spending program. And it’s not a close call: the ACA doesn’t look like any other conditional spending program in the U.S. Code. Together with Thomas Merrill, Gillian Metzger, and Abbe Gluck, I submitted an amicus brief to the Supreme Court explaining why. (Abbe developed some of these arguments in a blog post last year.)
For starters, Congress isn’t coy about what happens when a state fails to participate in a conditional spending program. It speaks clearly—the state doesn’t get the money—and that consequence is spelled out in a provision that speaks directly to states. That’s how the Medicaid statute works: when a state fails to play by Medicaid’s rules, “the Secretary [of HHS] shall notify such State agency that further payments will not be made to the State.” Direct and clear.