tv King v. Burwell Oral Argument CSPAN March 8, 2015 4:10pm-5:11pm EDT
and especially in light of the answer to the last question about getting these things straight on the front in or we are going have real problems and not let history repeat itself. at this time, i ask unanimous consent by the taxpayer advocate be included in the hearing record. i asked unanimous consent that report prepared for the subcommittee also be included in the record. as there is no objection, they will be included. with that, i adjourn the meeting. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2015]
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combination, or a stickball set. washington is -- was a large man. he was very robust, terrific natural athlete, and madison is a skinny, little guy. >> historian david o stewart on founding father james madison and the partnerships he made that aid in the success of our fledging nation. >>'s gift that i like most is his ability to form remarkable partnerships with the great people of his era. it also alludes to his gift to country of his talents and what he was able to do to help create the first self-sustaining constitutional republic. >> tonight at 8:00 p.m. eastern and pacific on c-span's q&a. >> the future of president obama's health care law rests with the supreme court once
again. justices heard oral arguments whether tax subsidies can be given to people who buy insurance is in health exchanges, or only ones established by the state. the challenge rests on six words in the over 1000 page law comes stating that helps of these are available through" and exchange established by the state." only 16 states run their own exchanges. the federal government runs extended for the remainder of states adopted out of setting up their own. the court will rule on this case before the end of the term in june. this is about one hour and 25 minutes.
>> at least one plaintiff has a stake in these questions. we have four plaintiffs, there is a declaration stating that they are not eligible, but there is a question as to whether they are eligible for coverage as veterans. >> yes, where is mr. hearst, i refer you to the attendants -- appendix of page two, with a make it clear that mr. hearst would have to spend $750 of his own money because of the irs rule. hurst was a veteran for 10 months in 1970. he is not eligible for any
veterans service because if you've served such a short health services. if you serve such a short -- >> i'll ask the government if they agree that -- >> and i should point out that the government has never disputed this, and i'd also like -- >> but the court has an obligation to look into it on its own. >> that's true, but of course there has been fact-finding by lower courts in an adversarial system. i don't believe the court does its own -- >> i don't think it was ever brought up in the lower court that these two people were veterans. >> if i could just make one further point on this, justice ginsburg. even if he were technically eligible, which he is not, there is an irs rule 26 c.f.r. 1.36b2(c)(ii), which says -- >> ah, yes. >> with the usual clarity of the irs code, making clear that you are only disabled from receiving subsidies if you have actually
enrolled in a veteran's health services and it's undisputed that -- >> that's the government that's -- >> mr. hurst did not. >> that's deposition to. and then there were the two women, i think one of them was going to turn 65 in june, which would make her medicaid eligible. >> she will turn 65 in late june. she's obviously subject to the individual mandate well in advance of that. by virtue of the irs rule, she would have to spend $1800 per year for health insurance by virtue of the irs -- >> per year? >> excuse me? >> but you said she will turn 65 in june. >> late june, yes. >> so that takes care of 2015. >> no. right now she is obliged, under the individual mandate, to have insurance. you have to have insurance for 9 months of the year and so as of april 1 -- >> then -- >> she will be subject to the penalty which will be alleviated only by -- >> again, i'll ask the government if they agree with you on that. and then i think for the fourth plaintiff, there's a question whether she would qualify for a hardship exemption from the individual mandate even if she received the tax credit, in which case the tax credits would
be irrelevant. >> that's true. again, i'll refer you to the joint appendix at 41. that was the government's argument below. we didn't want to get into a factual dispute about it because we had such clear standing with respect -- >> yeah, but you have to -- >> but you would have to establish the standing, prove the standing. >> well, as -- >> if this gets beyond the opening door. >> fair enough, your honor, but it's black-letter law that only one plaintiff needs standing and for the reasons i've already articulated, both plaintiff hurst and plaintiff levy have. >> ok. i don't want to detain you on this any more but i will ask the government what their position is on standing. >> thank you. returning to the merits, the only provision in the act which either authorizes or limits subsidies says, in plain english, that the subsidies are only available through an exchange established by the state under section 1311. >> if you're going to elaborate on that, i would appreciate your in your elaboration, i've read that, and this statute is like
the tax code more than it's like the constitution. there are defined terms, and the words you just used concern a defined term. as i read the definition there's a section, definitions and it says, quote, the term "exchange" means, quote, an exchange established under 1311. and 1311 says, an exchange shall be a government agency, et cetera, that is established by a state. those are the definitions. so then you look to 1321. and 1321 says, if a state does not set up that exchange, then the federal, quote, secretary shall establish and operate such
exchange. so it says, "the secretary is to establish and operate such exchange," the only kind of exchange to which the act refers, which is an quote, "an exchange established by a state under 1311." that's the definition. so the statute tells the secretary, set up such exchange, namely, a 1311 state exchange. >> correct. >> and there's nothing else in this statute. >> correct. >> so that's throughout what they're talking about. so what's the problem? >> as your honor just said, it tells the secretary to establish such exchange. >> yes. >> and what 36b turns on is whether the state or the secretary has established the exchange. >> no, it uses the same terminology that it's used in 15 times in this statute, namely, the terminology in the
definition is "an exchange established by a state." >> under -- >> that's the phrase. >> well, under 1311, that is the phrase. and if 1311 created some the definitional section created some ambiguity as to whether hhs was establishing a 1311 or 1321 exchange, that is immaterial because 36b does not say all 1311 exchanges get subsidies, it says exchanges established by the state under section 1311 -- >> mr. carvin. >> not established by hhs under section 1311 -- >> mr. carvin. >> so it eliminates any potential ambiguity created by the definitional section. >> can i offer you a sort of simple daily life kind of example which i think is linguistically equivalent to what the sections here say that justice breyer was talking about? so i have three clerks, mr. carvin. their names are will and
elizabeth and amanda. ok? so my first clerk, i say, will, i'd like you to write me a memo. and i say, elizabeth, i want you to edit will's memo once he's done. and then i say, amanda, listen if will is too busy to write the memo, i want you to write such memo. now, my question is, if will is too busy to write the memo and amanda has to write such memo, should elizabeth edit the memo? [laughter] >> if you're going to create moneys to will for writing the memo and amanda writes the memo and you say, the money will go if will writes the memo, then under plain english and common sense, no, when amanda writes the memo -- >> gosh -- >> but now -- >> you run a different shop than i do if that's the way -- [laughter] because in my chambers, if elizabeth did not edit the memo, elizabeth would not be performing her function. in other words, there's a substitute, and i've set up a
substitute. and then i've given i've given instructions -- elizabeth, you write you edit will's memo, but of course if amanda writes the memo, the instructions carry over. elizabeth knows what she's supposed to do. she's supposed to edit amanda's memo, too. >> and in your chambers, you're agnostic as to whether will, elizabeth or amanda writes it. but the key point is here under section 1311, congress was not agnostic as to whether states or hhs established the exchange. it's -- >> well, mr. carvin, if i had those clerks, i had the same clerks -- and amanda wrote the memo, and i received it and i said, this is a great memo, who wrote it? would the answer be it was written by will, because amanda stepped into will's shoes? [laughter] >> that was my first answer. [laughter]
>> he's good, justice alito. >> justice kagan didn't accept it, so i'm going to the second answer, which is you are agnostic as between will and amanda, but this -- >> ah, but that's -- >> but congress was not agnostic as between state and federal exchanges. >> yes. that's a very important point, i think, because what you're saying is that the answer to the question really does depend on context, and it depends on an understanding of the law as a whole and whether they were agnostic. i agree with that. so it's not the simple four or five words because the four or five words in my example, it's obvious that elizabeth should edit the memo. it's the whole structure and context of the provision that suggests whether those instructions carry over to the substitute, isn't it? >> we implore you to examine these words in the context of the act as a whole because our argument becomes stronger for five reasons. to respond to justice breyer's point, he says such exchange connotes that it's the same person doing it. but look at the provision on
territorial exchanges. it says, territories can establish such exchanges and then it says, "and shall be treated as a state." so -- >> yes, it does. but you say connote. no, it's not a question of connotation. it is a question of denotation. now what does that mean? it means that the federal government, the secretary, is establishing a thing for the state. and what is the thing? the thing that it is establishing for the state is defined as an exchange established by the state. >> to -- >> now, that person from mars, who's literal, which i usually am not, but a literalist, i think would have to read it that way. but if you're not a literalist, well, at least you could read it that way. now you want to go into the context if you want to go into the context, at that point it seems to me your argument really is weaker.
>> well, two points. >> the exchanges fall apart, nobody can buy anything on them. you know the arguments. you've read the briefs. nobody can there are no customers. employers don't have to pay penalties as long as they use just people from virginia, but one maryland person comes you know all those arguments. so how does the context support you? >> well, again, under the literalist or nonliteralist interpretation, saying that hhs will establish such exchange doesn't suggest that the state has established such exchange if there was -- >> but the state, if made the -- >> if there was ambiguity in that regard just if i could finish my answer to justice breyer you look at a parallel provision where they use precisely the same language, and they said, "and shall be treated as a state," that language which is notably omitted from 1321 -- >> correct. >> and it's a basic principle of statutory construction that you interpret the same phrases the same way. and it shows that congress knew how to create equivalence between non-state exchanges and exchanges if and when it wanted to. sorry, justice sotomayor.
>> take a breath. [laughter] i'm a little concerned with how you envision this provision working. you're saying that the hhs exchange can't be for the state so that it's established by the choice of the state. the choice the state had was establish your own exchange or let the federal government establish it for you. that was the choice. if we read it the way you're saying, then we're going to read a statute as intruding on the federal-state relationship because then the states are going to be coerced into establishing their own exchanges. and you say, oh, no, they can't be coerced, but let's go back to
what justice breyer was talking about. in those states that don't their citizens don't receive subsidies, we're going to have the death spiral that this system was created to avoid. states are obligated, insurers are obligated to make sure that in their states, whether they're part of this program or not, that they have guaranteed coverage, that children are covered till they're 26, and that they base their costs on community ratings. so if they have to do that, then costs are going to rise on every insurance plan offered in the country in those 34 states, 3 or 6 of or 9 of your states will have tightened their medicaid
eligibility requirements in contravention of the act, so they're taking money by breaking their compacts. they would have to lose all of their medicaid money. tell me how that is not coercive in an unconstitutional way? and if it is coercive in an unconstitutional way, in bond just i think it was last term, we said that is a primary statutory command, that we read a statute in a way where we don't impinge on the basic federal-state relationship. >> this court has never suggested outside the very unusual coercion context of the nfib medicaid that a funding condition somehow invades a state police power. obviously -- >> oh, we did it we said it last
year. >> in an nf no, no. in bond, there the federal government was taking away a police power. here, all the federal government is doing is saying you want billions of free federal dollars. that's hardly invading state sovereignty and it's the kind of routine the funding condition that this court has upheld countless times. >> let me say that from the standpoint of the dynamics of federalism, it does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either create your own exchange, or we'll send your insurance market into a death spiral. we'll have people pay mandated taxes which will not get any credit on the subsidies. the cost of insurance will be sky high, but this is not coercion. it seems to me that under your argument, perhaps you will prevail in the plain words of the statute, there's a serious constitutional problem if we adopt your argument. >> two points, justice kennedy.
one is the government's never made that argument. number two, i'd like to think -- >> sometimes we think of things the government doesn't. [laughter] >> well, i certainly hope you do in this case, but not on this question. what i'm trying to, quite seriously, justice kennedy convey is if this was unconstitutional, then the medicaid statute that this court approved in nfib would be unconstitutional. >> mr. carvin, what would the consequence of unconstitutionality be? very often you have an ambiguous provision, could be interpreted one way or another way. if interpreting it one way is unconstitutional, you interpret it the other way. >> correct. >> but do we have any case which says that when there is a clear provision, if it is unconstitutional, we can rewrite it? >> and that and that -- >> is there any case we have that says that? >> no, your honor. and that was really my point justice kennedy. think about the consequences when of the medicaid deal as being coercive.
22 states have said no to the medicaid deal. that has created a bizarre anomaly in the law. that if people making less than the poverty line are not available to any federal funds to help them with health insurance. >> i fully understand that, but i think the court and the counsel for both sides should confront the proposition that your argument raises a serious constitutional question. now, i'm not sure that the government would agree with that, but it is in the background of how we interpret this statute. >> your honor -- >> it may well be that you're correct as to these words, and there's nothing we can do. i understand that. >> there are many -- >> a, there's no savings construction to echo justice scalia's point, but, b, the point i want to make on the straight-up constitutionality is, if this is unconstitutional, then all of the provisions in the u.s. code that say to states if you do something for no child left behind, we will >> but this is this is quite different. >> in south carolina v. dole, where the matter of funding for the highway, suppose
congress said, and if you don't build the highways, you have to go 35 miles an hour all over the state. we wouldn't allow that. >> no. well, there, of course, you would be interfering with a basic state prerogative as to establish their limit, and they are the condition is not related to that. here the condition is perfectly related to it. >> mr. carvin -- >> we want to create something new -- >> mr. carvin, here's a -- you refer to the medicaid example. that's a familiar -- a grant in aid says to the state, here's the federal money and here's the conditions, take it or leave it. that's one pattern. but this pattern that we have says flexible state. you can you can have your program if you want it, and if you don't, there's a fallback. there's the federal program. i mean, that's a typical pattern. it's the pattern of the clean air act. you can have a state implementation plan, but state if you don't get up your plan there's a federal implementation plan.
i have never seen anything like this where it's if you take what the statute says you can have in 1321, then you get these disastrous consequences. >> that's why this is much less risky a deal for congress. and what distinguishes it from medicaid as the dissenting opinion in nfib pointed out. in medicaid, congress is playing all in, take it or leave it. if they turn down the deal, then medicaid is completely thwarted. here, if they turn down the subsidy deal, they still get the valuable benefits of an exchange and there's not a scintilla of -- >> what are those benefits? what are the customers that can buy on it? what are the insurers that will sell on it? >> well, three points. one is we know textually that they thought exchanges without subsidies work, because again, they have territorial exchanges, but the government concedes no subsidies.
>> that's not -- >> we have legislative history which -- >> mr. carvin, that's not what you said previously when you were here last time in this never-ending saga. [laughter] you said without the subsidies driving demand within the exchanges, insurance companies would have absolutely no reason to offer their products through exchanges. and then you said the insurance exchanges cannot operate as intended by congress absent the subsidies. >> that is entirely true. they wouldn't have operated as intended because congress intended all 50 states to take this deal. so eliminating -- >> so why create 1326 at all? obviously, they thought that some states wouldn't. >> well, they thought it was possible and -- >> very possible. >> and then -- >> because they set up a mechanism for that to happen. >> and then what happens? you still get the exchange. it's not like medicaid where the entire federal program is thwarted. you get the benefits that were lauded. >> but nobody's going to visit the program if there are no subsidies because not enough
people will buy the programs to stay in the exchanges. >> that is demonstrably untrue and not reflected anywhere in the legislative history. the legislative history quite clearly contradicts that. many senators got up and said there are very valuable benefits to the exchange, one-stop shopping, amazon, as president obama has said. the government came in the last case and told you these two things operate quite independently. we don't need exchange without subsidies. in contrast, there's not a scintilla of legislative history suggesting that without subsidies, there will be a death spiral. not a word. >> wait a minute. that was the whole purpose that drove this bill because states had experimented with this, and those that didn't have subsidies or other provisions of the act didn't survive. >> they didn't have -- >> you said it yourself in the prior case. >> no. the prior case was about the individual mandate. the government came in and said the individual mandate is
necessary to affect death spirals. no one, in the findings in congress or anywhere else, suggested that subsidies were available. will subsidies reduce the number of people available on the individual -- >> my problem -- my problem is that the reverse. you're talking about congress, hiding, borrowing the phrase of one of my colleagues, a huge thing in a mousetrap. ok? because do you really believe that states fully understood that they were not going to get -- their citizens were not going to get subsidies if they let the federal government? what senator said that during the hearings? >> the same amount of senators who said that subsidies were available on hhs exchanges which is none. they didn't deal with it in the legislative history just as they didn't deal with medicaid because the statute was quite clear. let's talk about it in context again, justice sotomayor. the context is the only provisions in the act establishing any limit on the subsidies is found in 36b.
so it's not a mouse hole. it's the place you'd expect to find it. it's the only place in the act that limits subsidies to purchases made on exchange. >> but it's a -- >> i don't know think that's quite right, mr. carvin. >> justice ginsburg. >> it's a tax code provision that's an implementation provision. it tells you how you compute the individual amount. >> it -- >> it it's not in the body of the legislation where you would expect to find this. >> no. your honor, if that's true -- >> and if it -- >> sorry. please. >> what justice kagan just read to you, you had the idea that the subsidies were essential -- >> no. >> to have the thing work. that's what you told us last time. >> what i told you was it wouldn't work as expected, and that's because they thought this deal would work just like the medicaid deal where all 50 states would say yes, so you would have both of congressional purposes. >> then why in the world would they set up this whole extra
thing if they didn't think anybody was going to take it? >> well, that was my response to justice sotomayor. that is completely unsupported empirical observation made post hoc by amicus. there's no reflection of that in the legislative history. indeed, the legislative history refutes it. >> mr. carvin, we've heard talk about this other case. did you win that other case? [laughter] so maybe it makes sense that you have a different story today? >> i'm really glad your honor said that. [laughter] >> and if i could return to context because i think -- >> i mean i'm sorry, mr. carvin. please. >> just very briefly, justice kagan. very much appreciate it. to respond, we've already talked about context. section 1311 is a key part of this context. it says in the strongest possible terms we want states to run these exchanges. if you give unconditional subsidies, then, of course there is absolutely no incentive for states to do it, and you have fundamentally undermined that distinct statutory purpose. whereas if you condition subsidies, congress accomplishes both of its goals. widespread subsidies, plus
state-run exchanges. in terms of terms of art, again, there is language in the statute which says "exchanges," "exchanges under the act." those phrases naturally encompass both hhs exchanges and state-established exchanges. and, yet, the solicitor general is coming here to tell you that a rational, english-speaking person intending to convey subsidies available on hhs exchanges use the phrase "exchanges established by the state." he cannot provide to you any rational reason why somebody trying to convey the former would use the latter formulation. >> mr. carvin, why don't you take an extra ten minutes and maybe we'll give you a little bit more of a chance to talk. >> ok. fine. >> well, then, i'll ask a question. [laughter] >> well, if you're going to ruin my 10 minutes. >> no. i mean, let's go back to this question of where congress put
this thing because putting aside constitutional issues, i mean, there's at least a presumption as we interpret statutes, that congress does not mean to impose heavy burdens and draconian choices on states unless it says so awfully clearly. and here and this goes back to what justice ginsburg was saying , there's really nothing clear about this. i mean, this took a year and a half for anybody to even notice this language. and as justice ginsburg said it's put in not in the place that you would expect it to be put in, which is where it says to the states, here is the choice you have. it's not even put in where the statute defines who a qualified individual is or who is entitled to get the subsidies. rather, it comes in this technical formula that's directed to the department of the treasury saying how much the amount of the subsidy should be. and that seems to be it both makes no sense from congress's point of view, and in terms of our own point of view, in terms
of interpreting statutes, that's not the clarity with which we require the government to speak when it's upsetting federal-state relations like this. >> i must respectfully disagree for three reasons, justice kagan. in the first place, of course, you -- where else would you expect a tax credit except in the tax code? that's where this was. you wouldn't put it in 42 u.s.c., which has nothing to do with taxes. it's the only place where exchange is limitations placed. you have three audiences here, not just states. you have to tell taxpayers what they're entitled to. you have to tell insurance companies when these subsidies are available. and you have states. so you have to put it in 36b. so the argument, i guess, the government is making is what you should have done is put half of it in 36b and half it in 1321 which, of course, would have confused everybody. 36b would say, exchanges period. then you'd go to 1321 and say when we said exchanges in 36b,
we meant established by the state. >> mr. carvin, if i were a state official and i was trying to decide whether my state should establish an exchange, and i wanted to know whether individuals who enrolled in a plan on my possible state-established exchange would get a credit, where would i look? >> exactly. the basic thesis here is these exchanges don't work without subsidies. you've read 1311. you've read 1321. now you're going to go find out where the subsidies are. that's 36b. they're hypothesizing state -- >> i think not, mr. carvin. i mean, i think the place i would look to find out about my choices is in the provision of the statute that talks about my choices. i think the last place i would look is a provision of the statute that talks about what is it coverage months for purposes of this subsection, which, by the way, isn't even the right subsection, but whatever.
[laughter] that's where i would look, is in where it talks about what a coverage month is? >> but, your honor, i've already described the difficulties of putting it part of it in 1321, right? because then you would create this bizarre tax credit provision which is only half true, and you wouldn't tell taxpayers and insurance companies. so i believe that's the complete answer. but the other practical point i'd like to make is they had three years to implement this. and no one thought the states were going to have to make a decision overnight. if the irs had done its job, every state would have been fully informed of the consequences because presumably they've read 36b, and then they would make an intelligent decision well in advance of the 2013 deadline. so there's a bizarre notion that states were somehow unable to read a statute or to or to read a regulation is simply --
>> i really want i really want to hear what you're going to say in your five to ten minutes. and if you want, only if you want, i would be interested in your responses to the government's brief, that if you read the words "established by the state" without reference to the technical definition as you wish, this isn't just about the taxes. it means employers in virginia don't have to make policy, don't have to don't have to give policies, but if they have one maryland worker they do. it means that they never can tighten up their medicaid regulations, never, in 34 states but, of course, in the others they can. it means that there's no qualified person ever to buy anything on an exchange established by the secretary for the state, and they have two or three other anomalies that have nothing to do with taxes, all of which supports their argument that you have to read this phrase technically according to the definition. now, that's their basic point. i've tried to summarize it. do it as you wish. i just want you to have 5 or 10 minutes to answer it.
>> thank you. and the first point is there are no anomalies. >> i'm going to clock that, see if see if you get 5 minutes. [laughter] >> there are no -- the first point i'd like to make is there are no anomalies stemming from our interpretation of 36b. the government agrees with that. their biggest anomaly is this qualified individuals point about how there would be nobody on hhs exchanges. the solicitor general is not going to stand up here and tell you that if we prevail in our interpretation of 36b, they would be obliged by the logic of that opinion to empty out hhs exchanges. so we all agree that there's no connection between 36b and the qualified individual. that's point one. point two is, if you want anomalies, their interpretation of the statute requires 34 states today to lose all medicaid coverage. why is that? because of the provisions on 64a through 66a of the government's brief, there are various requirements that the state, on pain of losing all of its
medicaid funds, must coordinate between the state-established exchange, the state agency for chip, and the state agency for medicaid in terms of secure interface and enrollment. now that makes perfect sense if "exchange established by the state" means what it says, but they think it encompasses hhs exchanges. well, the state cannot ensure coordination between hhs exchanges and the state agencies, and none of the 34 are doing it today. so under their atextual reading of the statute, 34 states will suffer the penalty that this court found in nfib as unconstitutionally coercive. as to this medicaid maintenance anomaly, the government agrees that the purpose of this provision was to freeze medicaid payments until you had an exchange with subsidies, which makes sense, right? you want to coordinate the two. and that's exactly what this provision means under our interpretation. until you have an exchange with subsidies, the states will be frozen. the government says, that thing
ended on january 1, 2014. that's a figment of their imagination. it's nowhere in the statute. plus which it makes no sense. before 2014, the states were powerless to have an exchange with subsidies, right? they couldn't do it. so there was a 3-year freeze on medicaid that they were powerless to get out of. after 2014, if they don't want to have their medicaid frozen, all they have to do is establish an exchange. so it's a less harsh restriction on states, plus which it gives them another incentive in addition to the subsidies to create the state exchange, which is the purpose enunciated in 1311. i don't know oh, as to, yeah maybe somebody would from another if you had an employee that let lived in other state, maybe he would be subject to the employer mandate. why is that an anomaly? congress likes the employer mandate. of course they wanted to expand it. they also never thought it would really happen because, again what they thought was going to happen was there wouldn't be
neighboring states without it because nobody was going to turn down this extraordinarily generous deal. i don't know if my 5 minutes are up, but that's my response to these anomalies. >> as i understand it -- >> i think if i could -- >> wow. you've been talking a long time. [laughter] >> yes. yes. sorry. >> you have two more sentences. >> even if there were anomalies in these other sections, you don't transport them to 36b which is concededly neither absurd and furthers the purposes of the act, just like in utility air, because the word pollutants didn't work with one section, you don't spread it like a virus throughout the rest of the act. you cure it in that provision -- >> those were two long sentences -- >> if and when there's any litigation. >> i think -- i think -- >> oh, it was a long sentence. >> yes. i think i'm right that justice breyer's question about anomalies, which are replete in the act, under your interpretation, did not talk
about what i think is one of the most glaring ones, which is this qualified individualist thing, that you're essentially setting up a system in which these federal exchanges, that there will be no customers and, in fact, there will be no products, because section 1311 says that the exchange shall make health plans available to qualified individuals, and then the next section says that qualified individual means an individual who resides in the state that established the exchange. so under your theory, if federal exchanges don't qualify as exchanges established by the state, that means federal exchanges have no customers. >> which, of course, is not the reading that the government's giving to it because they're not going to tell you -- >> well, that's because they don't share your theory. >> no, no. >> under your theory -- >> no. >> that's the result. >> well, no. let me be as clear as i can. if we prevail in this case, they are not going to empty out the hhs exchanges because they understand that there are numerous defenses even if you interpret "established by the state"
literally in the qualified individuals provision. number one defense that they will use is, it says you have to be a qualified individual with respect to an exchange. as justice breyer pointed out, the statutory definition of exchange is a 1311 exchange. so they're only talking about state exchanges, not these hhs exchanges, and it is in section 1312, which immediately follows 1311, before 1321. number two, "qualified individual" doesn't mean that means you're guaranteed access. it doesn't mean if you're not qualified, you're absolutely denied access. we know that from the illegal alien provision, which says illegal aliens are neither qualified individuals nor eligible for subsidies. >> ah, but look at the look at the prisoner provision, which says prisoners shouldn't be treated as qualified individuals. so under your theory, this statute effectively said that prisoners should be able to enroll on federal exchanges?
that makes no sense. >> it makes perfect sense to say the states get a choice. think about somebody who's in prison in february, they're getting out in april, they've got to buy insurance under the individual mandate. so if you said nobody who's incarcerated can buy insurance that means they wouldn't be able to buy insurance during the relevant enrollment period. it makes perfect sense to give states the flexibility to say, as to those incarcerated principles, you can make them available for exchanges, but under illegal aliens we don't want to, which is why we are saying they are neither qualified nor eligible. even if justice even if you don't find that the most pristine logic to be applied to a statute, remember, we are interpreting these statutes to avoid an absurd result. and it's a basic principle of statutory construction that you will give a plausible, if not the most persuasive, reading to a statute to avoid the result. >> but we are interpreting a statute generally to make it make sense as a whole, right? we look at the whole text. we don't look at four words. we look at the whole text, the
particular context, the more general context, try to make everything harmonious with everything else. i think you said, even at the very beginning of this argument as we were going back and forth about my hypothetical, that, of course, context matters and context might make all the difference with respect to what those five words mean. and i think what we're suggesting is that, if you look at the entire text, it's pretty clear that you oughtn't to treat those five words in the way you are. >> i've given you the contextual points before. i think the key one that i'd like to convey to you, justice kagan, is section 1311. you say the statute must work harmoniously. if you provide subsidies to hhs exchanges, you have essentially gutted section 1311's strong preference for state exchanges. what will happen is precisely what did happen under the irs rule, 2/3 of the states are saying no, we're not going to undertake this thankless task of running these exchanges with no
incentives to do so. so yes, it what i have here in terms of what the statute means is 36b quite clearly saying exchanges are available only on states. i have 1311 explaining why they limited subsidies to that. and there is no contrary legislative history at all. what do they have, an atextual reading of 36b, which they can't explain why anybody would have used those words if they wanted to convey exchanges, a rule that completely undermines the purposes of 1311 and no supporting legislative history. so under all the legal materials that this court normally used to discern what statute means, we clearly prevail. >> thank you, counsel. general verrilli, you'll have an extra 10 minutes as well. >> thank you, mr. chief justice, and may it please
the court, standing has been raised, so let me start by telling you where we stand on standing and then i'd appreciate the opportunity after that to summarize what i think are the two key points in this case. now, with respect to standing, the question the case or controversy question turns on whether any of the four petitioners is liable for the tax penalty for 2014. now, this case was litigated in the district court in 2013 based on projections on the part of each of the four petitioners that they would earn a certain income in 2014. they filed declarations saying that. with respect to 2 of the 4, the projections were of their income were such that they would qualify for the unaffordability exception and they wouldn't have standing. with respect to the other two, their projections were such that they wouldn't qualify for the unaffordability exception and they would have standing. but those were projections in 2013 about their income in 2014. 2014 has now come and gone, and we don't know, but petitioners know whether any of the 4 have
in fact -- are, in fact, liable for the tax penalty and that will depend on whether their actual income in 2014 matched their projections. now, mr. carvin said there was fact-finding about this. i'm afraid that's not correct. the petitioners did file a motion for summary judgment, but the case was decided on the basis of the government's motion to dismiss before discovery and without any fact-finding. i'm assuming because mr. carvin has not said anything about the absence of a tax penalty, that, at least, 1 of the 4 has and is, in fact, liable for a tax penalty, but that's the key standing question. now, with respect to the veterans point, your honor, if it is the case, as mr. carvin tells us, that mr. hurst was a veteran for only 10 months, then i think he's correct, he would not qualify for va health care because you generally have to serve two years. so that's where we are on standing. now, if i could turn to the merits. >> so are you saying one person does have standing? >> no, no. it will depend on whether as a factual matter 1 of the 4 has and is, in fact, liable for the tax penalty for 2014.
and that's information that is not in the government's possession. it is in the possession of petitioners' counsel. and i should make one more point, with respect to 2015, there were no projections, there's nothing in the record about the possible income of any of the petitioners for 2015, so there's really nothing that would establish a case of controversy for 2014. >> well, you're surely not raising a standing question with us here for the first time at oral argument, are you? >> well, mr. chief justice, as i said, that based on the projections, it was our understanding that at least 1 of the 4 would be liable for a tax penalty. the question of standing has been raised and i've tried to identify for the court what i think is the relevant question which is whether any one of the 4 has, in fact is, in fact liable for a tax penalty because -- >> this is this is on a motion to dismiss, right? >> well, that's correct, your honor, but it does also go to this court's jurisdiction. because if none of the four is liable for a tax penalty for 2014, there just isn't the case
or controversy. none of them is liable, there's no there's no injury. and so i do think that's ultimately the relevant question here and with respect to liable for a tax penalty for standing. i don't think there's a question about veteran status, but i do think that's the relevant question. >> isn't the question before us as to standing whether the district court correctly held in the motion to dismiss context that there was standing? that may not be the end of the matter, but don't we have to -- isn't that what's before us? >> well, that may be yes. but then you and you might alternatively think about this as a question of mootness, i guess, in that, you know, based on the projection, there was a case or controversy, but if the projection didn't come to pass and none of the plaintiffs is liable for a tax penalty, then the case or controversy no longer exists. >> well, what are you suggesting? should we have a should we have a trial here? >> no, i'm not suggesting anything of the kind. >> on this issue and find -- what the facts are? >> justice alito, i did not raise standing affirmatively the court raised it. and i'm just doing my best to let the court know what our position is on standing. >> well, you would you send it back then to the district court?
>> well, i guess no. i guess what i've said is that mr. carvin hasn't suggested that there's no plaintiff liable for a tax penalty. based on that, i'm inferring that at least one of the petitioners -- >> representation by him? >> and i'm not -- >> would you -- has standing. why wouldn't we accept a there's no reason not to if he if he makes a representation that at least one of the four is has was liable in 2014 and is liable in 2000 or will be liable in 2015 -- >> so i guess what i'm saying -- >> i mean, we know at least one of them won't because that's -- >> what i'm saying about that is i'm actually going to step further than that, justice sotomayor, given that there hasn't been i'm willing to accept the absence of a representation as an indication that there is a case or controversy here, and so that's why, mr. chief justice, we haven't raised standing and that's what it but i do think that the key question is whether one of the four is liable for a tax penalty. you have to have that to have a case or controversy in the case.
if i could now, let me please turn to the merits that summarize what i think are the two key points. first, our reading follows directly from the text of the act's applicable provisions and it's really the only way to make sense of section 36b and the rest of the act. textually, their reading produces an incoherent statute that doesn't work. and second, our reading is compelled by the act's structure and design. their reading forces hhs to establish rump exchanges that are doomed to fail. it makes a mockery of the statute's express status express textual promise of state flexibility. it precipitates the insurance market death spirals that the statutory findings specifically say the statute was designed to avoid, and of course it revokes the promise of affordable care for millions of americans. that cannot be the statute that congress intended. >> of course it could be. i mean it may not be the statute they intended. the question is whether it's the statute that they wrote. i mean, you know, there are no provisions in the statute that
turn out to be ill considered and ill conceived. in petitioner's brief, they throw down the gauntlet with respect to a hypothetical about airports, and that a statute requires a state to construct an airport, it says the federal government shall construct such airport if the state doesn't, and no one would think that the federal government's airport was an airport constructed by the state. well, what i would say to that is that if those statutory provisions were conjoined with a provision that said airplanes may only land at airports constructed by the state, then you would conclude immediately that what that federally constructed airport qualifies as an airport constructed by the state, and the because otherwise the statute would make no sense. and the same exact thing is true
here. >> there are no statutes that make no sense. >> this one makes sense. >> if that is the case, every statute must make sense and we will -- we will twist the words as necessary to make it make that can't be the rule. >> that isn't the rule. but the rule -- you don't read statutory position it -- provisions in isolation. you read them in context. the rule is that you read them in order to ensure that the statute operates as a harmonious whole. you read them so that you don't render the statutory provisions ineffective. you read them to promote -- >> where is that possible. >> you read -- >> i mean, you acknowledge that all of what you're saying only applies where there are alternative readings that are reasonable. you pick the one that will do all the things that you say. >> and there is there is -- >> but, but if it can only reasonably mean one thing, it will continue to mean that one thing even if it has untoward consequences for the rest of the statute. no? >> with respect to this statute, first, let me i want to make two points. first -- >> answer me in principle. i mean, is it not the case that
if the only reasonable interpretation of a particular provision produces disastrous consequences in the rest of the statute, it nonetheless means what it says. is that true or not? >> i think there are a couple of limitations on that principle. the first is if what you have is a situation in which the that creates conflict within a statutory scheme, then the court's got to do its best to try to harmonize and reconcile the provisions. and, secondly -- >> well, i disagree with that. you have a single case in which we have said the provision is not ambiguous, it means this thing, but, lord, that would make a terrible statute, so we will interpret it to mean something else. do you have one case where we've ever said that? >> i think i think brown & williamson is a good example of that. in brown & williamson, the court said, look, the definition of drug and drug delivery device would actually seem unambiguously to cover tobacco but when you read that provision in context, and considering the full scope of the regulatory regime, it can't possibly mean
that. but let me let me actually work through the text here, because i do think i can show you that there's a quite reasonable reading of this statutory text that allows you to affirm and requires you to affirm the government's position. >> but, general verrilli, before we get too immersed in a number of provisions of this, could you respond to a question that was asked during mr. carvin's argument. if we adopt petitioners' interpretation of this act, is it unconstitutionally coercive? >> so here's what i would say about that, justice alito. i think that it would be certainly be a novel constitutional question, and i think that i'm not prepared to say to the court today that it is unconstitutional. it would be my duty to defend the statute and on the authority of new york v. united states, i think we would do so. but i don't think there's any doubt that it's a novel question, and if the court believes it's a serious question -- >> is it a i was going to say does novel mean difficult?
because it does seem to me that if petitioners' argument is correct, this is just not a rational choice for the states to make and that they're being coerced. >> so what i -- >> and that you then have to invoke the standard of constitutional avoidance. >> well, what i was going to say, justice kennedy, is to the extent the court believes that this is a serious constitutional question and this does rise to the level of something approaching coercion, then i do think the doctrine of constitutional avoidance becomes another very powerful reason to read the statutory text our way. because i do think and i do think with respect to the point that your honor's making remember, it's not just it's not just a situation in which there is onerous conditions, onerous consequences for state residents. it's also a profound problem of notice here, that, you know, if you read petitioners' if you take petitioners' reading of the statute, then the idea that
states were given added -- you can't possibly justify this as adequate notice to the states. >> well, mr. general verrilli, let me ask you this about notice. we get lots and lots of amicus briefs from states. and we got two amicus briefs from states here. 34 states, i think, is -- that's the number of states that declined to or failed to establish a state exchange? >> correct. >> now, if they were all caught off guard and they were upset about this, you would expect them to file an amicus brief telling us that. but actually, of the 34, only 6 of them signed the brief that was submitted by a number of states making that argument. 23 states, 23 jurisdictions submitted that brief. 17 of them are states that established state exchanges. only 6 of the states that didn't establish state exchanges signed that brief, how do you account for that? >> so, i guess i'd make two points about that, justice alito.
first, you've got states there, 22 states in both camps, all of whom told you that they didn't understand the statute that way. now, with respect to the other 8 states that filed the amicus brief on the other side, i actually think there's quite an important point that goes to their understanding of what this act did. remember, this is an irs rule that we're talking about here, and the irs put out a notice of proposed rulemaking saying this is what we intend to do, and several of these states oklahoma, indiana, nebraska they , filed rulemaking comments in that in that proceeding. and if you look at those rulemaking comments you will see that they address a number of issues, and they say nothing nothing about the issue that's , before the court now. so if they really understood the statute as denying subsidies in states that did not set up their own exchanges, that would have front and center in their rulemaking comments, but they said nothing about it and i think that tells you a good deal about where -- what everybody understood that this statute was -- >> well, there's another point on notice on this pennhurst argument that seems curious to me.
usually when this argument comes up, a state has signed up for a federal program and then they say, oh, my gosh, we didn't realize what we had gotten ourselves into. but here, it's not too late for a state to establish an exchange if we were to adopt petitioners' interpretation of the statute. so going forward, there would be no harm. >> well, let me address that directly, and then i'd like to make a broader point about statutory context in response. now directly, of course, i don't think it's possible to say there would be no harm. the tax credits will be cut off immediately and you will have very significant, very adverse effects immediately for millions of people in many states in their insurance markets -- >> well, i said i've said going forward. >> and then -- >> after the current tax year. >> and then going -- >> would it not be possible if we were to adopt petitioners' interpretation of the statute to stay the mandate until the end of this tax year as we have done in other cases where we have adopted an interpretation of the
constitutional or a statute that would have very disruptive consequences such as the northern pipeline case. >> sure. northern pipeline is an example of doing that, and it will be up to the court to decide whether it has the authority to do that. i will say, this does seem different than northern pipeline to me, because this is about money going out of the federal treasury, which is a different scenario. but if the court obviously, if that's where the court is going and that's what the court thinks the proper disposition is, that would reduce the disruption. but what i think is another important point to make here just as a practical matter, the idea that a number of states all of these states or a significant number are going to be able to in the 6 months between when a decision in the this case would come out and when the new year for insurance purposes will begin we'll be able to set up exchanges, get them up, up and running and get all the approvals done i think is completely unrealistic. >> how long has it taken -- >> well, for just to give you an example of the current time line, justice ginsburg, the in -- in order to be in order to have an exchange approved and
insurance policies on the exchange ready for the 2016 year, those approvals have to occur by may of 2015. ok. so that gives you a sense of the time line that hhs is operating under. >> what about what about congress? you really think congress is just going to sit there while all of these disastrous consequences ensue? mean, how often have we come out with a decision such as the you know, the bankruptcy court decision? congress adjusts, enacts a statute that takes care of the problem. it happens all the time. why is that not going to happen here? >> well, this congress, your honor, i -- you know, i mean, of course theoretically of course, theoretically they could. >> i don't care what congress you're talking about. if the consequences are as disastrous as you say, so many million people without insurance and whatnot, yes, i think this congress would act. >> the relevant question and then i'm going to try to get back to the point i was trying to make in response to justice alito's question. the relevant question here is,
what did the congress that enacted this statute in 2010 do? did they really set up a system in which the states are subject to the kind of onerous situation that the petitioner claims? and i think there are three textual indications objective, textual indications that cannot possibly have been the statutory scheme that congress tried to set up. first, is the existence of the federal exchanges. it would make no sense, no sense for congress to have provided for federal exchanges if, as mr. carvin suggests, the statutory design was supposed to result in every state establishing its exchange. second -- >> well, wouldn't it have been again, talking about federalism , a mechanism for states to show , that they had concerns about the wisdom and the workability of the act in the form that it was passed? >> so, jus