Unfortunately, the Supreme Court does not live-stream its arguments, so those of us not fortunate enough to be in attendance have to base our initial thoughts on reporting from folks at SCOTUSblog who scribble notes and run in and out of the courtroom. But it’s better than nothing! Some quick thoughts:
1. Context vs. Isolationism — It’s difficult (impossible?) to get a holistic sense of the argument from just following the live-blog reporting, but most of the questioning seemed to focus on the context and structure of the statute as a whole. Obviously, both sides rely on context, but framing the case as a question of context—as opposed to a question about an isolated phrase which is then tested against context—is likely good news for the government.
2. Standing Takes a Seat — Apparently the potential standing questions didn’t get much traction. Even the government didn’t want to argue plaintiffs’ standing in the Supreme Court, conceding that the trial court rulings together with the challengers’ attorney’s representation of continued standing were likely sufficient. This inability to challenge standing factually at the Supreme Court seems right to me.
3. Pennhurst to the Rescue? — The Justices asked a lot of questions about the Pennhurst doctrine (or federalism concerns more broadly). In short, Pennhurst treats federal inducements to states like contracts, where the terms of the deal need to be sufficiently clear for the courts to enforce the deal against the states. As explained here, if Congress really wanted to set up a carrot-and-stick system with the states, it needed to do so clearly. But as Sam Bagenstos points out in that previous link, there’s some confusion over what kinds of carrots and sticks need to be “clear” under the doctrine. And does the “seriousness” of the inducement matter? Is there a sliding-scale for clarity requirements, with serious punishments requiring a clearer statement than mild inducements? All of this matters because the mere availability of funds or credits might not require a clear statement. But a lack of subsidies that un-triggers certain other regulatory requirements (like the individual mandate) that then leads to an insurance market death spiral—that’s another matter. So what is the relevant inducement under the Pennhurst doctrine? The subsidy carrot or the death-spiral stick? Some Justices seemed concerned with the death spiral and not just the subsidy, so that could be good news for the government.
4. Constitutional Challenge vs. Constitutional Avoidance vs. Statutory Context — Things get really interesting here. The Pennhurst doctrine is a constitutional limit on Congress’s power to cajole states into acting in a certain matter. So if the challengers’ alleged subsidy/exchange inducement were insufficiently clear or improperly coercive, it might be unconstitutional—similar to how the Medicaid expansion was unconstitutional in the original ACA case. But critically, nobody is making that argument in King. The challengers don’t claim the alleged incentive system is unconstitutional, because they favor an incentive system that allows them to avoid subsidies. And the government doesn’t claim an alleged incentive system would be unconstitutional because (1) they don’t think that’s the system the ACA actually creates and (2) they likely don’t want to disclaim the ability to assert that kind of power in drafting future legislation.
What would it mean for the Court to conclude that the ACA operates like the challengers claim it operates but that the incentive structure is unconstitutionally vague or coercive? What would the remedy be? Well, similar to the Medicaid ruling in the previous case, the Court could sever the condition (“Establish an Exchange!”) from the inducement (“Your citizens get subsidies!”), which would leave us with…. precisely the construction of the statute the government is advancing here. Everyone gets subsidies regardless of who established the exchange.
But one level down from a constitutional challenge is the doctrine of constitutional avoidance, which Justice Kennedy apparently mentioned during the argument today. Basically, the doctrine of constitutional avoidance says (in relevant part) that if an interpretation of a statute would create serious constitutional problems, then the Court should interpret the statute in a manner that avoids the problems. Here, the Court could avoid the problems by adopting the government’s interpretation of the ACA. However—and Justice Scalia apparently made this point during arguments today—the doctrine only comes into play (if at all) if the statute is actually ambiguous. In other words, you can’t shoehorn the statute into a constitutional reading if the unambiguous language compels an unconstitutional one.
So the whole thing sort of folds back in on itself and we’re back to square one: Is the statute ambiguous? The head-slamming-on-desk problem with this question is that its relevant in at least three separate ways. Ambiguity is relevant for the Chevron question, because the Court will defer to an agency’s interpretation of ambiguous language. Ambiguity is relevant for the substantive constitutional Pennhurst question, since conditions must be clear (not ambiguous) to put states on notice of the terms of any incentive system. And ambiguity is relevant for the constitutional avoidance doctrine, since the Court won’t adopt a saving construction unless there’s sufficient wiggle room to do so. Ugh.
At the end of the day, however, I think the better argument is just one of regular old statutory context. In many ways, that’s all the doctrine of constitutional avoidance is: The Court doesn’t assume that Congress intended to pass unconstitutional laws. And here, you don’t need Pennhurst or Chevron or avoidance to look at the structure of the statute and conclude that section 1321 operates as a fallback, not as a threat.