the provisions serving that purpose. in terms of why would congress do this because this is the question. why would congress everything to do something like this. the condition of the state cooperation. they did that on medicaid. they offered a lot of inducement on medicaid, but because congress can't commandeer, at who a new congress could make states a good offer, but it had to be an offer in the states that refuse to accept the medicaid expansion of the statute was written would leave the poorest and most vulnerable people in that state without any help under the medicaid program. that is the way the statute was written, conditioning a whole lot on states willingness to go along. they would do that with medicaid. why would they do it here? after all, congress has done this before. commerce has routinely said tax credits or other benefits are

conditioned on various things in state cooperation in state enactment and regulations on federal requirements. in the finance committee, the origin of the aca 2002 with the tax credit offered and put in place in that year. the statutory provisions identified in the chairman's mark of the aca as the statutory precursor language that would be modified and build upon in enacting the statute. in fact, the structure of using coverage month as a basis for the part of how you define eligibility wasn't not found in a prior statutory language, a contracted the same committee. experts propose doing it here. people that know a lot about health care. one example, professor tim jones, one of the most prominent health care professors in the country, significant enough to be invited to the white house when the statue was signed off

authored a paper saying if were going to do a seed exchange model, we can come up with various ways of encouraging states to cooperate. one of the things we can do is we can offer tax subsidy for insurance only in states that complied with federal requirements as it has done with respect to tax subsidies for health savings accounts, pointing out you would congress have done this before you can do it here in the other thing we can do is offer the established exchanges, which the statute always -- the statute also provided funding for states to help them set up exchanges of their own, infinitely providing zero funding for the federal government to set up exchange. the debate over this condition credit subsidies and benefits on

state cooperation. the hospital, one of the other proposals in the senate conditioned benefits on state cooperation, on state taken legislative and regulatory action that the senate desired. this is part of the debate not only among outside commentators. it was a mechanism, a tool that was discussed and proposed in the senate and other bills as well. it was a way to avoid the federal takeover charge. one of the reasons the senate, unlike the house wanted to go with the exchange model was because there were some members of the senate, some democrats in the senate afraid of going home and having to defend a bill that could be characterized as a federal takeover. so ago that said states are going to create exchanges then i made sure states would do it was the way to bond the charge in the democratic policy committee in late 2009 said there's no

government takeover. why? all the concern exchanges are run by states. they claim that cannot be named based on a command of state because we know it is not constitutional. they claim only made if we believe the statute provided incentives for states that would induce a cooperation. as i know from our programs, if you don't get state incentives, they don't cooperate. under the clean their act, states cooperate because the federal government starts to take away highway funding in the states refused to cooperate. dirty states refused to operate, the clean-air act enforcement would grind to a halt because epa can't do it by itself. under other programs like section 44 clean water act for there's no, tuesday implement the program. congress is well aware if it

wants states to cooperate he can't say you have a chance. it has to provide incentives. and they assume states would cooperate. not only what was said by senate democrats. it was said by all kinds of folks. the president by 2014, each state, each state will set up what we call health insurance exchange. secretary sebelius added. secretary sebelius actually said states with the eager to create exchanges. before the 2010 elections, that might've been a possible argument. as we know for many states in 2010, a lot of legislators oppose cooperate in the statute were a lot deep throughout the country. but the assumption was states would cooperate. it was the universal assumption, the assumption select it and all sorts of claims about the bill in all sorts of ways to build the draft. snr dimensioned, or other aspects and the fact or as an

income floor, not just a feeling to tax credits shows throughout the bill and assumption states would cooperate. the idea that states would just say no wasn't contemplated. was that a mistake? it seems so. the sort of mistake fixed? of course not. the sort of mistake and a quarter severs that justifies statutory language? no, it's not. there is a dog that didn't bark. because what you cannot find, and i agree with jim, but what you cannot find any point in the debate and michael cannon and i were writing this article. i think he had a research assistant spend days going through every reference to the word exchange. i hope it was a research assistant and not you, michael. because we were curious what we would find. the was not a single time where anyone said that the

senate bill would provide for tax credits and federal exchanges. there is statements available in all 50 states, but entirely consistent with the assumption also voiced repeatedly that's also reflected in the statute that every state would cooperate. but not ones did anyone say contrary to the statute, tax credits will be available in federal exchanges. no one said that. there are folks, and commentators who look to the same provisions. i wasn't really paying attention enough i wasn't aware of this. people fighting about abortion, public option and other things says the bill has been finalized. but no one said something so simple. in fact, i was quite surprised. we didn't find any. no one has come up with a

congressional statement saying something contrary to the statute. the reason -- held by doing on time? >> is time for big finish. >> big finish, okay. remember this is a negotiating draft. the plan was we were going to have a senate bill. we were going to the house bill. they adopted approaches on different things. state exchanges are federal fallback. house bill federal exchange. news reports say the white house very much approve the house filamentous where he was going to go. they would be a house-senate conference like we usually have a dataflow enacted. the senate bill was the senate's negotiating position. the state exchange oriented induce state rather than exchange negotiating rounds. the problem is on the side, scott brown is elected in massachusetts. they're no longer six tivos.

no longer enough votes for a house conference bill. the choice at that point became a bill a lot of people didn't like. the president said lots of things he didn't like. 51 health policy experts urging the house to act on a lot of these things in the bill we don't like. the choice is clear. pass the senate bill. other limitations of the senate bill can be addressed through other means if you read the full bill, what they meant was not administrative fiat, but this will cause democratic congress in 2010 we will build a fix that legislatively. but everyone understood this though was not that anyone really wanted. it was the bill that could get past the 60 votes in the senate. there were no longer 60 votes in the senate. it was this or nothing am now was enacted. that is what we have today.

the law perhaps no one wants it, but it is the law that passed both the house and congress and went through bicameralism is the law of the land and the irs cannot rewrite that. i will stop there. >> thank you, jonathan. i will point out and i congratulate forward in the bill the whole way through. i bloopers a justice of the supreme court who also described that is being tortured if he had to do it. >> go ahead, dave. >> thank you. i would like to start by thinking cato. it's great to be here and talk about these cases come up what is really the founding fathers of this legislation. i always love coming to d.c. one of the main benefits is like my home state of washington in seattle, and much less likely to you told to slow down and not talk so fast. i will keep things going on time. most of my writing on this writing on these cases and on the statute has been critical of liberal arguments in favor of the government positions.

that is 90% of my writing, but given the makeup of the panel and a little bit of a lack of balance if we are to people talking about the challenger cited my bash the government side and we only have one person. much of my writing a same liberals on the wire we not making the best arguments in support of the government's position here. i am going to spend some time today trying to talk about what i think would be the best argument for the government's position. i will start by talking generally about theories of statutory interpretation. by friends on the right, physically on the right it may be politically on the right have been interpreting the statute and advancing in these cases a serious statutory interpretation they call plain text or plain language meeting of the provision issue. that method of interpretation as they advance it is much too cramped and under a broader theory of statutory interpretation, one that takes into account context, the government wins this case in a

printed outbreak. it doesn't run on chevron step two. it doesn't show ambiguity. does it run on a technicality. it was because the government's interpretation is the best interpretation of the only reasonable interpretation under the statute. the reason why i think this broader theory of statutory interpretation is proper ones is that it has been endorsed for recently by the supreme court. the supreme court said last term when you interpreting the statute, you need to look at the context of the provision of the broader statutory scheme in the native reasonable reading of the provision based both on the specific provision, but also, the statute as a whole, more generally. look at the overall design an object of the statue, the structure of the statute, the subsidy the effects of a proper interpretation to see if those substantive effects are compatible with the statute does the whole statute does a whole and see which interpretation is working for step with the design

and object of the statutory structure. as i said, that was a supreme court case. those of you in the audience who are not familiar, might want to reject the reasoning is the one of the liberal justices. it might've been justice breyer for a five-for majority. but that was just escalated talking about his version of strict textual interpretinterpret ation of statute just last term and that should not be surprising. the terms i use if you go back on tape in your reminding talk about the statutory interpretation, it is not the psychoanalysis or the general appeal you have heard some liberals make an advocate for the government. certainly not the liberal argument that forward as they foiled by my colleagues on the right. rather when just escalated talks about intent, purpose, object, design, he's not talking about what he read in "the new york times" the he's not talking the

general peels to purpose. rather the tax of the statute. intent based on text, structure based on text, design. that is textualism. and interpretation stapled to the statute and that is the government's best argument to win in this case. the theory of interpretation used by her previous speakers and the challengers of litigation is not textualism of the conscious tiscali has advocated. i don't know if it has a name. i don't know if it's a well recognized interpretation. i think that is the statutory isolationism. what i mean by that is that it looks at a provision holy and isolation. it comes up with a plain meaning based only on the narrow provision issue and then against the narrow plain meaning a huge amount of weight, a stronger fall, static friction and inertia that then goes out to the rest of the statute and does battle with other provisions that possibly conflict with the

initial meaning. when it does not come it looks one by one and use another provision of the statute and says well, is there anyway we can interpret this other provision in a way that makes sense? so for example, there is a provision in the affordable care act that says hey, federal changes, state exchanges most exchanges have reporting requirements and among those requirements above reporting on subsidies aid under those exchanges. if you look at a plain meaning of just that provision of the statute, you will say well, looks like subsidies are available of the federal exchanges that tells the exchanges to report subsidies paid under it. doesn't make a lot of sense to report zero the time. when faced with that sort of argument, complementary interpretation, the challengers don't be that as an opportunity to harmonize the statute. they see the textual provision

of some sort of hapless enemy that they say we can envision a world in which the other provision makes sense that we don't have to adjust our initial default reading. let's just assume the government was looking to save space. they didn't want to separate provisions for reporting, one for states and one for federal changes in some of these requirements are redundant. they are useless, but we will make some of them useless and still keep our default provisions. that is not a textual interpretation of the statue. textual interpretation looks at the statute is the statute as a whole and on arson attempts to harmonize each provision of the statute. in some ways, jonathan is told that terrible with analogies. i viewed their method of statutory interpretation asserted a very bad action movie with the narrow provision playing the role of our hero any of hundreds of other provisions, all of them viewed as hapless enemies and that of looking out once, they attacked one by one

they are all terribly weak. statutory interpretation under proper textualists framework advanced by justice scalia is not a lone hero. it's an ensemble cast and the other provisions are not enemies to be dispatched with diane initial narrow isolated reason for this provision. they are harmonize to come to a complete understanding of interpretation of the statute. you see this isolation in all sorts of challengers breeze. you see it in the plainest breeze. you see the structure of these opinions starts with a strong default than each individual challenge, one by one come is dispatched by saying they wouldn't be absurd to it up to a reading. it would be ridiculous. we can twist it in some way that makes it work. still under this more contextual

textbased argument, that is the best argument for the government, the method is interpretation. one come of the government wins and i'll explain why in a second. two, the best argument if your goal is not to preach to the converted. i think there are going to be judges, liberals who want to see everyone again insured and they are going to side with the government in any case. whether the government wants to win this case are folks in the press who support the government opinion want to convince people, think it's important to not focus on psychoanalysis or broad appeal that everyone should be insured, but to focus on the text of the statue. so here is a brief outline of what i think that contextual, i will even fiscally endorse, although maybe we'll find out the method of statutory interpretation would work here. a key provision of section 1401 assist subsidies are available only on exchanges established by the state under section 1311.

our goal as textualists is to say okay from what does that mean? we don't stop there nicely won praise and think i know without looking at the statute. we need to look at the rest of the statute. the first place to look when you figure out what the phrase means in an exchange established that the state under section 1311 is the definition section. the statute defines exchange and it defines exchange as a b. exchange as an exchange to that is helpful, but as an exchange established under section 1311. so anytime in the statute uses the term exchange with a b., what the statute has defined the term to mean this in exchange established under section 1311. what does that mean? we don't resort to psychoanalysis in their times. we like to section 1311. 1311 cents and you heard it before from previous speakers that state shall establish an exchange. all 1311 hosta do -- i'm sorry,

all 1311 relates to a state exchanges, with states have to do to establish exchanges, how states establish exchanges ,-com,-com ma hostas compare with others exchanges. the only purpose, the only type of exchange referenced in section 1311 our state established exchanges. not only that, doom of a state can establish an exchanges by complying with the terms of her teen 11. so we have this parallelism between 1311 and state exchanges. looking at those provisions, you think that is there. there's only state exchanges. the lonely provides state exchanges, but we know that's not true. another provision in section 1321 provides federally operated exchanges and what the heck does that mean given what we've just seen about 1311 and her team 21? well, 1311 of 1401. the provision that creates federal exchanges uses very

specific language. it says if the state fails to establish an exchange, then the federal government secretary shall establish such exchange. well, what does that mean? is it talking about a different kind of exchange? is the exchange in section 1321 somehow different? know, when it uses the exchange can imagine a site behind me. it is the same capital exchange is used throughout the rest of the statute in exchange established under 1311. so when the government, the federal government is acting under 1321 to establish such exchange, it establishing a 1311, the only time the reds. the statute doesn't say it shall establish an exchange. it doesn't say it shall establish a 1311 exchange. if as a shall establish such a 1311 exchange. what does that mean? why does the statute use the word section seven and or a?

the opinion concedes this because it is in the dictionary. you have to see what words mean and such means referring to the previous invention exchange. it is the exchange that the state was supposed to establish under 1311. if the statute had just said an exchange, and maybe it would just be a normal run of the mill her teen 11 exchange. but it says such exchange, which refers back. the majority got halfway there. it says it has to be referred back. we are going to admit that such refers to the 1311 exchange. that is a nonstarter, a non sequitur. every exchanges a 1311 exchange. you don't need this patch to create the interpretation that is a 1311 exchange. suggest they some isolated provisions, that is i think the best reading of the statute that the federal statute -- the federal exchange meaning under 1311 and going back to 1401

complies with the statute's definition. again, i am not an isolationist and a ceramic step is to look at the context of the whole and take a step back and look at the statute designed its structure. despite everything i said, if i look back at the statute as a whole and size system where there's all these terms relating to federal exchanges through 1321 exchanges on one hand in the statue is careful to limit or separate or distinguish 1311 exchange is operated by the state. is that what i find? it's not what i find. i've been hurling any mentions of her team 21 or federally operated exchanges with the exception of one provision which specifically provides for the reporting of tax subsidies on federal exchange. that is the main mention. so we don't have a two-tier system to two-tier system that might give me pause as they contextual us. perhaps there is a pattern in the statute, you look at the

statute as a whole is as well, maybe they use the term exchange come even though it is defined as a 1311 exchange to mean any exchange. her team 21, 1311, federal, state or regional, anything like that when the statute wants to limit to state exchanges, is that state exchanges. is that the system i see? that is not the system at all but the statute has said it appeared first, we know 1311 only relates to states in the state focuses baked right into the definition of exchange. so this distinction its challengers are trying to raise this sort of defined out of the definition of exchange to begin with. secondly, when the bill was referring to exchanges, professor adler refers to exchanges established by state and refers to exchanges in a number of ways. exchanges established under this title, exchanges established under this act, exchanges established under 1311, whatever that means because everyone is

under 1321. 1311 by the states and also in various places exchange generally. looking at the design and structure of the statute as a whole, it is not the sort of thing that talks about -- that differentiates between state and federal exchange. also they can textualists, i see i have about 15 seconds, so i will hurry up. is there a problem here with how this definition fits in with a design structure as a whole? the one main problem is the problem that professor adler talked about in his presentation, this potential conflict with the carrot and stick incentive system that reportedly the federal government set up. a couple things about the carrot and stick system and i will sit down. first of all, that is not a textual argument. the discussions about legislative history in legislative history and bill and bill legislative history and bill and bill drafts don't find their way into the actual statute itself unless you already agree with the strict isolationist interpretation of the provision at issue.

it is more of a second-order argument as to why they might do this. but the problem for them is that this carrot and stick argument faces a huge textual hurdle and that is the statute itself includes for the provision of federal exchanges. federal exchanges exist not in real life, not a "new york times" in the text of the statute. why the two exchanges? if the subsidies were supposed to be a threat and if congress thought it's threat would be uniformly successful, then there should be no need for a second fallback federal exchange. the answer cannot be commandeering principles. because of you don't want to commandeer, there's another option. don't provide anything. and the medicaid example of the states do not cooperate with medicaid, the fallback is not less greater federal system that comes in an ham-fisted they tries to do something for poor people that doesn't work.

no, the fallback is nothing. the federal exchange however access you must do something and in this case under the challengers dairy, federal exchanges that one leg is tool that only offers expensive insurance, fails under the mandate, those under the individual mandate, employer mandate. if it is useless under the theory, it is entire server hostage. the fact atheist means they must serve some purpose based in the text and that specifically contradicts the argument based on this textbased argument i think the government wins. >> thank you. [applause] and i went over. the >> you talk fast. you do do that. >> first welcome i want to thank michael and cato for hosting us

for an inviting me to participate in this morning's panel. and so, i will start by saying i realize a lot of what david said about interpretation and the textual issues in this case and in particular his point about the proper way to engage and that is to not look as provisions and isolations or the text as a whole, the statutory team as a whole. when you do that in this case, it is clear that tax credits should be available on all exchanges, both federally facilitated and stay run. given david's focus and statutory interpretations, i will focus elsewhere in our remarks on the issue of legislative history, congressional and in particular, the argument made that these subsidies were included in the statute as a tool to encourage the state to set up there on exchanges as professor adler and the basic ideas, the congress monitor and exchanges but they couldn't mandate of course and so they intentionally made this

exchange is available only on state exchanges to the states that have no choice but to set up their own exchange. that is the argument. the problem is the text, the history, the purpose of the statute all say otherwise and that was the point made in the amicus brief, filed before the panel by leading members of congress, the folks who participated in the discussions, deliberations, negotiations and enactment of the affordable care act. this statement by jonathan gruber we saw a video this morning. a very quick off-the-cuff remark a few years after it was passed and i should know the same thing jonathan gruber himself has disavowed. i think what is most important is not what someone said as part of a q&a at a conference two years a conference tears after though i was passed, but the folks who were actually there, but they had to say. ..

subsidies will be available on

federal exchanges. instead the language that professor adler pointed out in a technical subsection setting up a formula for calculating the amount of the tax credit and that's a pretty strange place to put the condition if it was dealing with a lobby upon its a especially given the other language of the provision that makes clear that credit is available to all applicable taxpayers regardless of where they live. justice scalia we have heard him a fair amount that congress doesn't hide elephants in mouse holes. this was a pretty big elephant to hide in a pretty small mouse hole. the textual point is confirmed by the history of the debates in congress about the affordable care act. professor adler talked about medicaid and the fact that the medicaid expansion was conditioned on state compliance but the issue here no one doubts that congress can't engage in these kinds of carrot and stick incentives but the question is whether they did it here with respect to the exchanges in the

present subsidies and there's just no evidence in the actual legislative record that it did. he also mentioned a study by an academic which i should say mentioned this is one way. he also mentioned that congress could set up a federal fallback which is what we all know they did that importantly there's just no evidence that cam joe's paper was ever discussed in the actual debates in congress and there's nothing in any of the debates of congress that suggest this is what congress was intending. in fact there was a lot of debate about the bill and also about the tax credits and the credits were always discussed in terms of it made clear that income.state of residence was the qualifying criteria. contrary to what professor adler said there was widespread awareness of the time that the states might not set up their own exchanges. it was not surprising there would be opposition in some states and this was generally understood. yet despite does everyone always

discerned the credits would it be available to all purchasers on all exchanges or purchasers qualified on income and all exchanges both state and federal. there's lots of evidence in the record company amicus brief discusses this. one example there was a march 2010 fact sheet issued by the three house committees. it explains how the exchanges would operate. it expresses we recognized there would be federal and state exchanges and it turned out distinction between them. members of congress one of the subsidies available on exchanges for the simple reason that the subsidies were essential to the effective operation of the exchanges and eliminating that premium would undermine aspects of a lot crucial to achieving health care reform including the individual mandate and the insurance reform dealing with pre-existing conditions. so it's not just at the subsidies are critical to the overall goal of providing it they were essential to making sure that other specific parts of a statutory scheme could work

properly. so the basic point is congress didn't intend for the subsidies to be part of a carrot and stick incentives system to get the exchange and there was no reason for congress to do that. i mean professor adler suggested that this is the only way you could get the states to comply and that's not true. congress has a lot of tools in its toolbox for encouraging state compliance and lumping it often does to set up a federal fallback. it's the case that states will often want to setup their own program rather than rely on the federal fallback so they may maintain federal control over the program. you can see the state discussions on whether to set up an exchange state officials including republicans saying they want to set up for an exchange because we don't want to lose control over the program to the federal government. that's the congress site. on the stateside the states never understood the tax subsidy incentives offered in this way so this failed because the states didn't get the message. there's lots of examples and

evidence of this in deliberations on the state about whether to set up an exchange. a couple of quick examples ohio and the working group report listed listed five pros and for cons setting up the state exchanges the availability or not of the tax credit was nowhere mentioned. the national governors association and identified lots of implementing exchanges but again the prospect that state citizens might deny the tax credit the state setting up its own exchange was not one of them. this is just a matter of data. there's a conference of report a study done by georgetown university health policy institute that looked while at all the state decisions implementing aza exchanges. the states are motivated by the policy considerations such as flexibility over the program, control over an strategic calculations by aza opponents that the availability of the tax credits was just not a factor that played into debate decisions on whether to set up an exchange. so again this was not a carrot

and stick incentives the scheme. concerts -- congress and state legislators believe that all state subsidy would be available on all exchanges including those run by the federal government so based on history and based on the tax that david discuss it clear tax credit subsidies be available on federally facilitated exchanges. it's still worth remembering that the statute doesn't need to declare -- be clear on that point for the government. there's a key supreme court case that says the statute is ambiguous. the courts defer to the reasonable interpretation of the agencies charged with implementing that statute. in this case that the irs and hh as those which issued rules contribute a tax credit should be available on all exchanges federal and state. it's worth highlighting really quickly comments made by the panel majority in "the hill" that decision. they said at the end of their opinion that they were reluctant

to reach the decision that they did but they felt their hands were tied because they were judges and try to implement the statute that congress enacted. they said in other words they were exercising judicial restraint. the real restraint here is to do what judges are supposed to do which won the statute is ambiguous and i don't think it is but if you think it's ambiguous you are supposed to defer to the reasonable interpretation given by the agencies charged with implementing the statue. in fact that's what two of the judges in the decision did. one of the judges said it was ambiguous but required subsidies on federally facilitated exchanges. the two judges in the majority said it was unclear what does that mean we have to do? we have to defer to the rule promulgated by the irs and the statues and subsidies available on federally facilitated exchanges. that's a lot very quickly on the merits and also i will send a rest my time talking briefly about where we are in the litigation was going to happen next in particular what might

happen in court tomorrow when the justices decide whether to take up king. as most folks will know it takes four votes to the court to decide to hear case on the bottom line is that the court follows its usual practices and procedures it will not grant review. the most important factors to consider in deciding whether or not to hear case is whether there's a division of authority among the courts below. whether in cases coming out of federal court there's a circuit. this principle is expressed and reflected in the supreme court rules. rule 10 identifies the factors the court considers in deciding whether to grant search and the first factor is whether united states courts of appeal isn't your decision conflict with the decision of another united states court of appeals on the same important matter. an important part of the job of the court is to make sure that the laws implemented uniformly that the laws handled when when when part of the country in a different way in a different

part. that's why roberts and his confirmation hearing the job of the supreme court is to hear uniformity consistency of the federal. this is what we hear the justices themselves thing of the time. justice scalia told the senate judiciary committee that when he and a colleague were talking about a case they ask themselves is there a conflict? is there a significant issue on which the lower courts are divided and he said if so we don't get above. recently judge ginsburg said the same thing in discussing why the court denied same-sex marriage cases. she said when when there's not as a mite -- disagreement we don't step in. the job of the court is to keep the law the united states more or less uniform and i think that's why professor adler said he wasn't surprised by the denial given the lack of -- so there is no circuit split and no disagreement. as we all know there was a disagreement in the circuit issued in the decision coming

out the other way than the core circuit that the d.c. circuit has subsequently granted that the full court will hear the case and it vacated the panel's judgment that eliminated any division among the circuit. there has been some continuing conversation whether that was proper and i will just say it clearly was. you can see that in the federal appellate rules themselves. they expressly say that all our review is appropriate for cases of accordance and expressly defines importance include when there's a circuit. the laws challengers continue to argue argue that theirs are circuit fled. they recognize if you want direct cert there's important. they only vacated death panels judgment announced opinion and that's true but it's really a distinction without a difference. what matters for present purposes is there is no division in the way the laws being applied in different parts of

the country so no need for the supreme court to intervene now. justice scalia again said, and he talked a lot is what happened. he said earlier this month in an oral argument that the court does not review opinions. it reviews judgments and interviews results. most of the rules and 10 don't apply here. the other one i could argue lately in place when the state quarter united states court of appeal reports federal law that has not been but should be settled by the square. i think it would be astonishing for the court to decide the question in came raises its recent decision that the same-sex marriage positioned him. why is that? or when the marriage petition raise fundamental constitutional questions affecting the rights of millions americans. in contrast legal questioning and king is a narrow and straightforward question of statutory interpretation. the marriage cases involve dozens of state laws the constitutional provision set aside on federal ground.

whether you want the supreme court to weigh in and whether that's a valid determination of that row. in contrast there is no judgment from a court of appeals setting the federal regulation at issue in these cases. whatever you think about the court's decision i guess there's a lot of disagreement in this room on that question and makes far less sense for the courts to hear king. they will either deny the petition and king or possibly hold it in wait and see what the d.c. circuit does when the whole court hears the case. it will also get get the courts of benefit to hear what the d.c. circuit has to say. that's one reason the court waits so it will get a chance to hear from the d.c. circuit in the tenth circuit which is expediting its review of prove it. okay excellent so i think it will be a denial.

>> i think you've got a very good view of both sides of this question and i think it's clear which way justice scalia is going to vote if the court takes this case. let me very quickly asked the side of the table to quickly say whether or not you think the court takes this case or holds on. duis predict that it won't but i think the factors that might cause the court to take the case here are the fact that when you're dealing with implementation of the large statutory scheme like this in place before the next piece can actually operate there is an argument that results in sooner rather than later. it's important to the whole system to work. their questions about how much time states would have to reconsider their decision about whether to create changes are

whether or not to create an exchange with the irs rules in place. there is question of timing to determine if they can still get subsidies from hhs to create exchanges to consider for the waiver provision to operate and so on and is why every federal appellate court in these cases has expedited the proceedings. every court up until the grant of en banc in the d.c. circuit, every appellate court that has had one of these cases has recognized its not a question that can sit out there for a long time. the supreme court does have a habit especially with constitutional cases some paradoxically of letting things percolate. one reason for that is because of the cost of air through the supreme court makes an erroneous constitutional judgment and only the supreme court can fi fix ito the court often think what constitutional cases percolate a long time.

briand had a piece in slate complaining about the court not taking constitutional cases where there were circuit splits but clearly because it's waiting for the right vehicle. in this kind of context there's an argument that the statute and what congress and the states do their next big clarity about it sooner rather than later and every appellate court has recognized that thus far. that may be enough for the four justices to vote. >> let me add one comment about this. i think the more recent behavior of the courts is not denial of circuit in the same-sex marriage cases. i think it's the granting of stays in the various voting cases. i think what we see there is when the court believes the lower courts are gaming the system they are not particularly tolerant of that. here the d.c. circuit in the whole blowing up of the filibuster rule and so forth is

very much politicize this issue. i really feel for the judges to just put on and i think this is highly political that this makes the distinction between a split in circuit versus a split in opinion. this is too fancy and doesn't pass the smell test. i think it's always risky to predict the court is going to take a case because the odds are that it's not. certainly she's right about that trade i do think this has an odor of bad institutional behavior and especially when you add that oklahoma case to the mix. i would not be surprised to see the court agree on this case. >> i think that's the smell test. we look at the federal rule expressly provides for review in the circumstance. the politicization of accord with accusations like that i think that is the reason the supreme court may be hesitant to

take it because given those kinds of comments and given the fact is percolating quickly in the lower court it will look like a political move on the courts case to set the now. >> please raise your hand and wait for the microphone and please state your name in any organization you are with if you would like to. this person was extremely quick. >> hi. maureen with the indianapolis star. indiana's challenge in addition to the challenge of the subsidy as drake talked about this morning challenging the sovereignty issue and whether the government can tax states and employers. can anyone address what you think of that part of the indiana challenge? >> i think that's a tougher case to make. he mentioned he's concerned about garcia and it's certainly true that the garcia decision the rationale that the court articulated the idea that states have enough political weight in

congress to protect their own interests has been thoroughly repudiated by the court. the precise holding of garcia went states act not as states but as employers or service providers or participants can be treated like any under the commerce power is something that the court has reaffirmed quite regularly in the context of reaching other federal decisions. i think that's absolutely challenge. it's not like the district court is going to go against that and i don't see many signs the supreme court is likely to revisit that part of this doctrine. >> let me say a word about that. in the nfib case the states challenged the aca. states did t. up in overruling of the garcia case. the supreme court denied search on that issue so that was in the cert petition. in the court did not take it up so it can garcia's not going to be overturned easily.

on the other hand there are some distinctions from what the indiana case is bringing up and the garcia case. garcia basically says the federal government can impose working conditions minimum wage laws on the state. this is actually slightly different. this is actually imposition of attacks on the state not just requiring compliance with actually penalizing it in a certain way. that is a nontrivial distinction. so i think jonathan is right and that probably will not result in overturning garcia but i think this is a nuance that arguably can put this more to the commandeering category rather than into you must live by the rules as every employer must. >> anyone else? >> my name is todd kiefer. i have a blog free-market monkey.com and also contribute to watchdog wired.com in the state of pennsylvania.

i'm sorry i don't have my source to cite my source but what i've seen is the issue came up of what happens if half extends and the pressure comes on the states to to them set up exchange is? from what i have found their $629 million still on the table of level 1 awards to states that rejected the exchanges. seven states rescinded those awards that the 629 is the states that did not. the other problem here is that january 1, 2015 the application deadline to apply for level to exchange awards. if the republicans control the congress they certainly than the proponents would certainly not get any help there. what at that point obama choose to use his pen and his phone by executive order to extend those

deadlines? >> is possible that the litigation, the court as part of its relief extend some of the deadlines but the fact that these deadlines exist is an argument for dealing with resolving this sooner rather than later. again that's why appellate courts have the ability to display these cases. the next that i think is going to talk about practical issues but there they think the law that affect how this goes for it. waiver provision beginning in 2017 could arguably be used by states to obtain tax credits without having to create a full exchange. there are a lot of pieces in this law which one may look at it in its entirety and i don't think it's true that those on the side fields located in its entirety reinforce that states have differences waves of energy in the way our system works is that congress makes an offer in

states refuse and the voters of the state don't like it then let me vote people out. that is the way the system works. people don't get tax credits as a way to create an exchange and people don't like that then we can pressure a state representative to change that. because this litigation could drag on and they can't get help that would be too bad. i think those that would slow up this litigation they would be a sad consequence that the mechanisms and a lot designed to help this election were effectively disarmed or disconnected because the federal government decided to slow the litigation down. >> i think the idea that because it's a complicated regulatory scheme that the supreme court review now just doesn't work. there'll kinds of complicated statutory schemes and regulatory programs in the supreme court can get involved in looking at the issues involved in the lower courts. i think the fact that the laurel

courts are taking this seriously will get this through the courts and there will be ways to deal with the revocations of the decision when the time comes. >> who else? >> hi. clay clay from height. at a quick question on the timing. when can we expect to hear from the supreme court on this petition and number two do you think the terms could have any bearing on maybe punting on this decision or maybe a couple of weeks? >> that's an interesting issue. in due course the order list from today, i'm sorry from friday will be disclosed monday. if there's no decision and i agree with those that say nondecision is a possibility that it would be pushed off into the future and would be rescheduled for conference works subsequent comp -- conference. we will know monday whether there has been a decision and if

there's a decision what it is. we will also know if there has been a nondecision or deferral of that decision. i think that will be monday's news. >> actually might not know monday. even if the court decides to take this case in the fourth circuit they sometimes delayed announcing that until they have done another quick round to see if there are any structural problems. >> they will want to expedite this case. they may do it did -- delayed a week. >> c they could wait a little bit. i think if there is a quick denial we could see that on monday but if we don't on monday could mean a lot of different things. there will be further conversation. if someone agrees with the decision and is writing a denial that will result in delays. we will wait and see what the d.c. circuit does.

>> typically the court case can take it case in january. in the current term. anyone else? >> my name is rich weinstein. professor adler three weeks ago you were meeting professor bagley in michigan and he mentioned at the end that there was further research taking place and i think you are talking about what was going on with the cpi contract. could you expand on that a little bit? >> that's something that i think folks are looking at. there has been a lot of research trying to figure out what the irs of various federal agencies thought that the statute. there's a house oversight committee report which shows the irs as it typically does when it was first drafting its rule follow the language of the statute. it wasn't until someone else saw a news report about problems

this could cause and potential legal issues that someone decided they would depart from the statute. there's a question with regard to the contract whether or not similarly when the contracts for the computer operations of the exchanges were being developed whether or not federal exchange required the same capability and being able to calculate exchanges as state exchanges. there are some that have argued looking at these contracts as i have been reading statutes having to read dozens upon dozens of pages of procurement contracts, even worse, there's an argument made that the functionality for the federal exchanges were initially required to have. it's required to have for federal exchanges and did not require the ability to calculate it and provide a tax credit. that would be an indication that folks that do this sort of thing on a routine basis in agencies

and reading the statute read it the way i read it in the presentation that this was a political issue. that's established by the state and used consistently throughout the statute in a particular way. the state is defining the statute, definition that david didn't mention. to include d.c. and not include the federal government and territories equivalent for certain purposes. the federal government never is. when people engage in a statute what was there on politicized reason and the statute? federal agencies haven't been forthcoming with everything. there certainly are efforts to look at what neutral folks think it meant because obviously know everyone who reads the statute has a sense of what the possible implications are. in an early read they said basically we go by the plaintext. a pretty strong argument that this is limited. you could argue you could find

it ambiguous. the irs initially said the state exchanges are settled by the state and they were later told to change that. when they promulgated their rule they gave no rationale and all the arguments we have heard about such exchanges and the like the argument that came up or brought up after the irs made the decision after were people were scrambling to find arguments for why the statute could be read. otherwise if i could quickly, david was recording for u. r. a g. early this past year. it's important to read the whole decision because i agree 100% we care about context. that's why read the whole statute. it's why look at every use of the phrases established by the state. in some cases if david is right there provisions in the statute that allow the federal government to pull all medicaid funding and federal exchanges don't fulfill certain obligations. that's just crazy.

it makes sense that states can use medicaid money and state exchanges but to say they stay stayed -- [inaudible] that can be read to the other thing scalia's said talking about the clean air air act up air act the power of instituting the law includes authority and responsibility to resolve some questions by congress that arise during the administration but it does not include a the power to revise clear statutory terms that turn out not to work in practice. we reaffirm the court administrative law principle and an agency may not be right clear statutory terms to assume its own sense of how the statute should operate. states clear to capitalize defined in the statute established by the state is inserted in a provisions and what we have not heard today is any reason my congress would insert the phrase established by the state in section 1401.

>> david. >> a few things. the structure of this back-and-forth is sort of telling. on one side we have an inquiry into what do the irs functionary put in a request for work to computer programmers. there's bad of a possible way and again i don't know what those documents will say. on the other hand we have a judge with the statues thing i'm going to look at the statutory text and see what that means. but statutory tax should be controlled. the idea that we should read the statute without considering its implications and any sort of plain meaning warfare meaning that justice glee would say is a fair reading of the statute. you don't interpret it in a vacuum. you do need to say how does the reading of the statute affect the rest of the working statute? leslie with regard to harry

reads midnight editing session again i don't think any of that matters are my textual interpretation of the statute. the statute as written with the state, notes defined but it's also included in 1311 so it works by reference. the reason why some staffer in harry reid's office late at night perhaps after a looked at the statute in said oh my gosh week in this provision we say established by the state. i don't know if we interview with that person would matter. that is not what was passed. you try to say what's the best reading of the statute and that's what's important. >> i'm afraid that's all of our time. i said i wasn't going to be all about scalia's that might be about chief justice roberts and

i've been schooled. two announcement. there is water on the first floor outside. we are going to take now a ten-minute break not a 15 minute break and rest rooms are located on the lower level. so please thank our panel. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> and everyone will take their seats it think we are ready to get started again. now that the first panel has adequately fill the sin, right and wrong on the case and whether or not the court is going to take it in what's going to have that we are going to look in this panel what it would mean if it succeeded. my name is lori montgomery i'm reporter at the "washington post." my connection with the subject is i covered the health care law. to be honest with you the chaos of those days makes it seem a little crazy that we are sitting here parsing what they meant. i think what they meant was to get it passed by all means necessary. our speakers on the second panel

are going to start off with robert laszewski president of health policy and strategy associates. bob had 20 years of experience in the insurance industries serving as a chief operating officer for none of this is before getting his business in 1992. he is participated extensively in the nation's health care debate and has been a regular contributor on the issue for a number of national television and radio networks as well as the major networks and trade journalism's. it concentrates on how employers providers health insurance companies and hmos and blue cross plans come to grips with market and policy change. bob will discuss the potential economic impacts of the healthy case. next up will be len nichols director for health policy research and professor of health policy at george mason university university. he has been intimately involved in policy development and

communications with the media and policymakers for over 20 years. serving as senior adviser for health policy at the office of management and budget in the clinton administration. since that time he has testified frequently before congress and the state legislature and has been a principle research associate at the urban institute vice president of the center for health change and director of the health policy program and the new america foundation. as he has come to focus his research on payment and delivery reform len has been an adviser to the medicare and medicaid advisor of seamus and principle investigator on a five-year validation of patient-centered medical care home programs and a robert wood johnson foundation on payment reform and how might be used to reduce health disparities. len will talk about implications on how this victory for policymakers as well as average americans.

paul miller is a resident fellow at the american enterprise institute waste studies regulatory barriers to choice and competition health care cost factors and market-based alternatives to the affordable care act. a former senior health economist for the joint economic committee in congress miller was previously a trial attorney, journalist sports broadcaster. he once thought about exploring standup comedy as well but soon realized prescribing government health policy drew more laughs. he's the co-author of the best-seller of the bestseller why obamacare is wrong for america and author of one of them the care fails, the playbook for market reform. tom will focus on how congress and state legislatures might respond to a victory. finally michael cannon has been described by my publication as an influential health care wonk at the libertarian cato institute where he is the director of health policy studies. along with jonathan adler he

wrote the leading scholarly treatment of the issues before us today. taxation without representation, the legal irs rule to expand tax credits under the ppaca published in health matrix journal of medicine. this means of course he is no opinion on how the courts should rule in the case. this presentation will focus on the dueling mayors of the healthy case. is the administration committing a staggering violation of the law? we are going to start out with bob. >> thanks laurie. it's great to be here and thank you michael for inviting me. my job today is to talk about the what if. what if it is affirmed and what impact that would have on the marketplace. and because -- to go to the chase who would be devastating catastrophic. we talked about nuclear object -- options but i don't think any of us receive the

nuclear option. in the other states where the states are running the exchanges it would make a direct impact and the impact and 36 states would be devastating. 86% of those enrolled her in subsidy and the people who are in subsidy are generally low-income people. we'll would happen is that many people lost their subsidies presumably the minute the supreme court ruled in favor of helvig the next month or no subsidies of these people simply would not be able to afford by and large to continue their health insurance because this group is so disproportionally low income. obamacare works pretty well for people that are at low income levels. they get about all of their premium paid, their deductibles and co-pays or cut dramatically and as a result the bombardier's disproportionally and polling people who are lower income. people who are working-class or middle-class it's not working as smoothly. the obamacare is only involved about one out of every three subsidy eligible people and for

a program to work like this the rule of thumb in the insurance markets is you have to get about 75% of the people enrolled. obamacare is far from having cleared the tower and right in the middle of this three-year open enrollment at the courts were to rule to affirm helvig you would have an america that is not able to stand on its own right now and devastated from that point. let's not get it -- and it's important to understand the states that are running their exchanges may have a shot at making this sustainable but that would clearly not be the case with this. another factor here is the affordable care act's reinsurance division for the insurance companies pretty much picks up order of magnitude 80 to 90% of their losses. it's a very complex system and it depends on number of things. 80 to 90% of an insurance company's losses are sustained

to the taxpayer by the federal government in 2014, 2015 and 2016. if the helvig ruling were to come down during his period there would be a beauty of devastation for the insurance companies because of that. now made the administration claimed 5.4 million are almost in federal exchanges 86% subsidy eligible based upon the adjustments 7.3 million that they came up with a few weeks ago we have close to 4 million people, we will have 4 million people at year-end and exchanges under subsidy. insurance companies are telling me that the enrollment is melting at a rate of 3% of month which is much more we have seen in the normal marketplace. the normal marketplace expect the people coming on -- that's not the case with obamacare. it's been shrinking. and of course we will have the 2015 are moments. we don't know what that's going to be.

the congressional budget office has said obamacare will be at 13 million people at the end of 2015. they are at about 6.5 million hour will be at year-end with the melding of your enrollment so the obama administration has before it doubling the number of people covered in the insurance exchanges by the end of the 2015 enrollment to stay on the cbo estimate track. by the way that's probably a pretty good track for being sustainable. obamacare has to have 50 million people in exchanges to be confident that this will be sustainable and we are at 6.5 million now. we don't know exactly what the income breakdown of people is an obamacare and we don't have that data that the administration a few months ago told us that the average subsidy people receive is very high. so the average subsidy they are receiving for the net premium they are paying is very low it tells you right there the bias is clearly toward low-income people who need the subsidies

and if they don't get the subsidies would be able to continue. so you would almost certainly have dramatic to some rolle for the insurance plans the moment the subsidies ceased but wouldn't immediately impacts negatively the insurance companies because of the reinsurance provisions. you might recall that the obama administration took the cap off their reinsurance provisions a few months ago, another controversial move that might be subject to some court tests but they took the cap off. basically the insurance companies have an open-ended subsidy here. affordable care acts risk program comes in three parts. of revenue neutral risk adjustment that doesn't mean much in terms of this issue at but acclaim reinsurance program and a risk corridor program that sustains the losses on behalf of the insurance companies. any claim in 2015 every claim

between $70,250,000 completely reinjured by the federal government, the carrier is on the hook for the first 70,000. the fallback, the layer that comes after that is the catcha catchall. it gets complicated but what it says is after we sustain all the high claim trust we will make sure your medical loss ratio doesn't exceed a certain point. again it's very complicated but the bottom line is if the claims losses are really bad this provision alone will pick up 75% of any loss the insurance company sustains after the federal government picks up the claims between 70 and 250,000 thousand. when he met these things together the reinsurance provisions are probably going to cover 80 to 90% of the of the insurance company. for a state publicly traded company or blue cross plan this means any losses they would

sustain would be minor and fairly immaterial. but you have a number of obamacare co-ops out there that just got started under obamacare. in iowa, nebraska and main and montana and individual co-op has about 50% of market share in each of the states. they would be protected by the reinsurance provisions as well but the problem is they would lose most of their involvement and any insurance business is challenged by two things. one, having too many claims and the others not having enough people to cover your expenses. if these people, if these co-ops were to lose the subsidized population from their business they would not be able to sustain themselves. it would simply lose their business. it wouldn't matter that the government was reinsurance their medical loss ratio problem. they would have terrific expense problems and probably would go down almost immediately. these co-ops have no other

source of capital. only money the federal government gave them. they would be able to have an insurance company take them over because the courts as an insurance company can't run the co-ops so they would really be in a tough spot. what we would have is almost immediately the market implodi imploding. as soon as the subsidies and the people would need to find, the people would not be able to pay their premium. how many people would that be? i took the 7.3 million davis the most recent talk about the other day and looked at what the federal government said enrolled in each of these exchanges and here are some of the states states. it states what are medicaid expansion states and i know but that because it would seem to me they would be most likely to want to try to continue state exchanges. they accepted the medicaid exchanges but they would be an enormous political imperative for the states to have to do something. the insurance companies would be waiting to see what the states

would do. you would have 283,000 people in north carolina immediately lose their subsidies. the vast majority of those would have to drop their coverage. in florida 895,000 people would immediately lose the subsidies. this is based on 2014 enrollment. if they doubled a moment in 2015 that could be something approaching 2 million people in florida. for 600,000 people in north carolina depending on how many people they enroll in 2015. it's a huge problem. texas 580,000. it could be 1 million in 2015 that the obama administration stays on the cbo track for a moment. that would be an enormous political issue and what the carriers would be doing if they would be sitting there saying albright what are the states going to do? if the helwig ruling came down it would likely be made here because the court tends to make its big rulings before the july break. we would be looking at the rest

of the calendar year. insurance companies are committed to being in exchanges for that calendar year. there's a provision in the new health plan agreement that says the carrier can get out the subsidies go away but only subject to state and federal l law. the health insurance portability and accountability act of 1996 is still operative and assess the carrier can't cancel individuals. you can only cancel a class of business. we only have one class of business today and that's the obamacare business and exchanges. the silver and gold plans for example. you can't cancel only the people who lose subsidies. if the insurance company wants to get out of have to cancel everybody in it if it cancels all of its individuals in the market pipa says -- hipaa says they can't come back in the market for five years so you have a hell of a dilemma here. the carrier is looking at the market falling apart. they are subsidized to the end

of the year with the reinsurance provisions. it's not going to be huge loss but the market is melted on them. it's further comforted by the fact that under the affordable affordable care at an insurance company can't cancel someone until they haven't paid a premium for three months, 90 days. traditionally you don't pay your insurance premium and you were canceled at the end of the month. affordable care acts as they have to keep them for 90 days so it's just a real mess here. my sense is that most of the carriers would probably stay in the market for that calendar year. they would stay in the market for another six months and they would fall back on the reinsurance provisions and they would look to see what the state is going to do. if you look like the state is going to enact a state of change they will probably gut it out. if it doesn't look like the state is going to do the exchange then they are likely to get out and they may have to get out of the entire market. this would impact the nonexchange market as well.

this thing falls apart the nonexchange market the off exchange market is as unviable as the exchange market. so can the states just simply move to create a state exchange? tim jos wrote a piece in health affairs recently and he pretty much pointed out that for a state to immediately create state exchanges is not a simple matter. you have a political problem of course. if the texas legislature voted to do that it would likely take many months, many months to set up a set exchange simply as creating a state exchange and then contracting with the federal government to continue doing the exchange on their behalf. that would be the simplest way to do it. that would take many months to do. what we would have is really a sobering situation here. to say that this was a catastrophe in terms of the insurance markets is not understated. it would be an extraordinary --

in terms of the insurance markets which would create one hell of a political problem for the governors and legislatures in the states. i think the debate with would then quickly move onto who broke it because folks it would be broken. [applause] >> thanks very much for that cheery assessment. [laughter] now here is len. >> i'm not doing anything here. i can only click. i can't move the mouse. if i go forward it to you. it's not a good plan.

i need technical help. it's a really nice lag. meanwhile we are all resounding and pessimism. i got forward. i can't get to my slide. all right, let's try again. if the wrong people were in court what the hell is going to have been? first of all it is worth taking three minutes and just assessing how is the aca doing already because that will play into how this post-helwig conversation goes. it seems to me you need a judge on coverage growth and their

three dimensions dimensions to cost them grow. it's both per-capita federal spending and household spending and then of course the things people in the health system relate care about quality and health. on coverage you have got to say although shockingly given the way the world out of the web site went down the success enrolling people is somewhat amazing. roughly one third of the injured have been covered. i agree with bob completely. the real test is what happens in 2015 and think about it, the people who signed up the first year are probably the people who knew they have a health issue. the path in persuading those design of the second year is higher. it's going to be amazing if you get as many people but it's also important to remember that this one third reduction in the insured occurred despite the fact that half the states did not expand medicaid as they could have. so it's a nontrivial success.

the cost is coming down. careful people know it started coming down before the affordable care acts of the affordable care act cannot claim most of the responsibility here. i do think you could say and it's interesting and i think bob knows it if you go out on the health care system and talk the people running it they have focused like a laser beam on cost growth projection anyways they have not before and it has been a focus partly because of the payment reform agenda by the affordable care act and picked up and amplified by the private sector. you see those last four years a more or less constant per-capita health care cost growth rate way below historical norms. the stability of that growth rate is really what we are talking about here. that is what people hope to hang onto. in some ways what matters is of course what's going on in washington. this is cbo's forecast for total health spending by the federal government in 2020.

each bar is a different time in the forecast was made. the first bar is just before the law was passed or signed and that basically is just medicare and medicaid before the aca. the second bar is the forecast of spending post-aca but pre-roberts so they assumed medicaid would be full speed and all that stuff and they said by 2020 we be sending a couple hundred million more than we are expected to before baseline. the amazing thing is april 2014 baseline. what that shows you is even taken into account enrollment expansions is cbo expects by 2020, the total federal spent will be less than it was projected to be before the aca pass. that's what you call paying for yourself by carving out space

and cost growth reduction over time which is why most analysts are pretty optimistic about that. the thing that matters of course is what a household pays. what we have here is an incomplete but he has yet all we have got picture of how premiums are changing in 2015. bob was too kind to say in 2014 basically health plans had to make a fairly uneducated guess about the risk pool they were going to get. they have to make these guesses based upon incomplete knowledge on what the insured were like. we know what they are like but we don't know which one is going to show up. expectation is of course the sicker ones will show up. so the 2014 premiums were probably low given all that backdoor coverage, risk covered by the federal government on a whim. not on a whim but an optimistic

perspective. 2015 is a premium based much more in who you really have gotten what the experience is either short but nevertheless way better than they had before. therefore the premium movement in 2015 is actually a better indication of how insurance view this market stability. that's why the average premium change between 2014 and 2015 b. negative 0.8% is so amazing. yes there is variability. nashville has a positive and denver has a negative 15 but the point is on average the second lowest cost is the most important because that is the one to which subsidies are paid. the second lowest is stable or going down on average across the country. that's kind of amazing. if you know the quality world it moves like a glacier. what this shows you is the

percentage of recommended care that adults get across the country and some researchers that brands got a lot of attention amid 2000 when they reported americans only get what they should get 67% of the time. we are now up to 69 so that's pretty impressive but that occurred before affordable care. my point is quality move slowly. you cannot claim quality has been improved although we do your powerpoint correctly you could do this because what you have here is the statistic that has been focused on the most and that is readmission percentages in the medicare program come you may have known that 19% of medicare beneficiaries were given problem were reinvented for the same problem within 30 days. 19%. that has gone all the way down to 18.4 and 18. again you could make this look good and you could feel good about yourself. what i'm worried about is there

a find in the aca for not doing well on read missions with all the attention read missions have gotten. the fact that the number of hospitals are going up is not good news. quality not so good. what matters of course is health than their 10,000 ways that could show you this but this is healthy people through 2020. the metrics by which they judge the health of the population. it basically shows 10 measures are improving, eight are stuck in support. we are basically not moving fast. what is getting worse is kind of depressing. suicide and adolescent depression and increasingly oral access increasingly oral axis of the poem. what's moving and was bothering me the most is what's moving h his -- what's not moving is obesity and chronic conditions. as a professor i have to give a score in the score is on average coverage i would get a b+ in an a for performance but at b+

because the rollout was so bad it made people doubt the government could organize a two-car parade. i understand this is never been in doubt but b+ is what i would give him a question will be how much expansion is there in 2015? cost, it would say again better than expected so give it a b but the real question is how are out-of-pocket payments are changing over time could a lot of people at those low income subsidies are quite worried about the deductibles they are paying and the quality has not moved much. health has not moved at all an overall b- which is not bad for a law that some people think is the end of civilization. what it is where we are and the point is how much will it spread and how deep will the payment reforms last at the end of the day if we don't make payment reform work. everything else is commentary.

.. in the pool of courses we won't go. the blue is nothing across-the-board although as bob pointed out, almost a million people in florida has signed up from the exchange of 600,000

almost in texas. the point is that's going to happen if the decision is made in a certain way is going to vary a lot by the states. remember the colors. green is everything. green is going to be fine. green is fine because they haven't exchange. they've done medicaid. they are going to move along. the gracie will be fine enough. leave them alone. the problem is half the yellow states, arkansas, pennsylvania, iowa, probably ohio, they are trying to link medicaid and the exchange in a fundamental way. will you take this federal subsidy away, up everything. the blue states that their politicians stream of this libertarian paradise and is

never taken a federal time. this states it has occurred in a serious way. these are reports for process systems. the negative part is the reduction and self-pay admissions. the reduction in uncompensated carrot missions. the reduction in people that could not pay. the red bar is increasing medicaid are payment, pain admissions. obviously these things are correlated, but not perfect. but when is the hospitals where expansion has occurred are happy. where the implosion would occur or not have. so i want to show you a map from the 65. this is an medicaid was created.

some of the nomadic ibis tacked onto medicare at the very end. wilbur mills admittedly tacked it on there. if passed in july. the program started in january of 66. i can assure you they did not have medicare regulations -- medicaid regulations in the second half of 265 here the first year they said whatever you are doing we will cover half. 26 states took it out. exactly the same number that expanded medicaid this time. what this color-coded map tells you is what your states decided to create medicaid. dark was the first year. light blue is the second year, that sort of fluorescent blue virginia tennessee, colorado is the fourth year. deep south five years and my point is this. over time, the hospitals and the health care system, persuaded

those who are ideologically, philosophically and racially opposed to create a medicaid program in the first place. this person, she calls herself in "the new york times" the reason the laws passed. working at a haircutter he, part-time, the affordable care to give her way to get health insurance, cut her hours, go to college, improve her life. i submit to you this is the deal. this is the price of insurance, everything but medicare. across the income spectrum. the left-hand corner of the origin is very medicaid was before the affordable care act. you recall medicaid covered exactly half of our poverty population. half, not all. on the right-hand side we get

high-income people, u.k. tax exclusion for and sponsored purpose. our subsidies and tax rates go up is your income rates go up to the biggest subsidy date is for bill gates. the people in the middle, you are on your own, they are the only ones paying retail. you're the only ones paying for health insurance in this company. the affordable care act is all about giving us the phone about giving those people an extension to medicaid and second fighting scales up to the esi world goodbye would she want to turn 30 million people into opponents of your political positions? thank you very much. [applause] >> okay, i guess you can answer that question. >> when you get myself back to you. all right.

i will just go ahead and see if that will work. here we are. okay, lower here. first it's good to be back a cato. again, we're both grandma nice work here and the auditorium below. a couple of quick acknowledgments and disclaimers. i always like to thank the obama administration for making my work necessary and i acknowledge i got involved in the early launch of these losses, but it was just because there was sure to the legislation for the florida bar. defenders of the irs rule and opponents of the legal challenges would have us believe on a global, unbearable disasters will occur if the federal exchange tax credits were overturned is illegal. you can almost smell the napalm in the morning coming down.

i would say in fact it's apocalypse not. no one of the scenarios would depict after a supreme court ruling affirming the original d.c. circuit court original opinion that will have a bearing devastated scene similar to the one in the highest-rated tv film lover. or there might be some alternative scenarios. and if you have to your own captions. this could be the millions left without any health insurance or health care treatments are on the alternative that could be the potential second wave of enrollees for the next open enrollment. or could be republican legislators on capitol hill and the states about to read the future consequences of what they wished for. we also have the fake distress calls for the health insurance industry, which once upon a time seemed to worry about being tied to the ac is regulatory of railroad tracks, but the

stockholm syndrome developed a wish for being tied up. this in error suggest republicans rushing in to help her being entangled in a deeper traffic and would anticipate. our bipolar political world, one side or another is supposed to be at the end of the pool. the question is what does the rope really look like? could it be a slipknot for a slipknot for people loose on the tax subsidies for the federal exchanges, he began to unravel the rest of the affordable care act quite quickly. the alternative may be a news not, which may mean upsetting the subsidies and the interests benefiting from them would kill off the political future of aca opponents. okay, i've saved a few minutes for substance, just a little. i will follow the primary role

of public policy predictions, which is don't include any specific numbers or concrete day. what are the short-term effects of the plaintiffs win? the pluses from the viewpoints of those to bring the challenges fewer mandates. you are going to see the end of the employer mandate. it's not coming back. it's already on weeks that it says it is in a great beacon of the individual mandate. also listening of the boundary lines of essential health benefits, what are the range of actuarial accrued policies in the marketplace. more state control. less intensive for detailed federal requirements. happy to have anything done by the states at a certain point. but in a positive sense, more two-sided renegotiation of what was in a world that doesn't exist anymore and has never been politically sustainable or

economically viable. in that sense, it's also a bit mutually assured accountability. neither side able to walk away from what is old hat. we would go to marc rich is, you should. we do a different form of disruptive renovation of a health policy world that could actually begin to work more than it currently does. here the short-term i is your plan is not a negative side, a good satisfaction. one of the disruptions are the prices become more transparent. you find out what things cost as opposed to camouflage. and the short-term, the disruptors would be a matter. they are given a flipping of the field between the present and future as opposed what they just

experienced a year ago. used to be be you could see all be up for a pass those that were supposed to eventually arrived at the benefits of the affordable care at in the hassles up front. it was a difficult road to be in. now in the sense of sameness of eventually be a better world want to work her way through it. but in the meantime you can have some identifiable folk saint of lost what i have and i'm upset about that. we have more health industry whining but over time you get to learn how to not know. we have a wee lad of the medicaid program has the last ship standing and many states trying to expand out more aggressively than they are to have because of the loss of the exchange bypass. the early adopters and the bluest of the blue states would be hanging on because they would've subsidies and and they be happy without although it creates political tensions in terms of the redistribution that the money in the pot.

what would be the short-term effects of the plaintiffs lose? the pluses. i am still looking. [laughter] what it means is back to the herd or long-term politics, but a tougher climb. some minuses. the groundhog's day put more years of obama term proposition will make this up as we go along in order to change the law as it goes. in fact, the encouragement of the regulatory overreach we are to solve with the iris will to do that in more areas rather than fewer areas. we have another entrenched entitlement we can't pay for and then we be some limited workarounds. the landscape is not totally bleak. the medicare program i had today is different from the one launched 50 years ago. things change but the article system it is hard to change quickly with mass entitlement state. but with some of the key

institutional players due to reposition him respond? on the hill, bears limits. even on the hill to procrastination and polarization. it's hard to believe, but it's true. when things are a big mess, they have to respond to what they were to put it out. so you have some urgent translation fixes. some of these might transition when it comes down, but things to be done on the regulatory side. the idea that anybody has their past subsidies grabbed out of their hands are already almost on the honor system including for insurance or may be settled later. we can never figure out what's going on. the premise that somehow people are risk somehow people or risk her with a birdie relied along come the weather was good legal guidance or not is not a risk there. there might even be a bit of a pause, some patches were in return for some rules of debate

for what goes ahead in the future that there are some fixes put together an inch around to get folks through the next time. it may depend on a supreme court decision came down. if it's in between the current open season at the next when you have time to adjust if you're talking about a captain in 2016. there may be more of a cliffhanger nature to it. but what we're likely to see is the effort to expand and liberalize and create an alternative subsidy delivery system to think of other ways in which was roughly the same commitment of resources toward subsidizing coverage, it can be done through other less of noxious or intensive means of the current affordable character provides. what we have in many cases the employer mandate an employer mandate and individual mandates which never had either the need, the mistreated capability or the political support to carry out on a long-term basis.

and what will be very much in play is the risk. if not all of the risk adjustment in the reinsurance, but the risk corridors are vulnerable to this environment, particularly in the interim period between 2015 and 2016. you think after you adjust for a health risk him after your ticket at the high cost claims that the individual market and it turns out the insurers do pretty well with current markets, they don't need to have the taxpayers and on budget manner. that is not before after the exercise, but the risk corridors are quickly at risk of going away. what would happen in the states. we have some more backsliding in some of the red states. more the governor side than in the state legislators side. we've seen that happen to send agree with medicaid. some states have also been trying to think about using the lower end of the income eligible

exchange enrollees as a way to get federal money without having to get their hands dirty and medicaid. this would upset arrangements including a syscon sin the governors reelected and with the arrangements. it will be harder for state politicians on the republican side is playing is still get the money. i'll have to say we've got to do something here, which is an interesting positive development in the longer-term political science, but discomfort for those who are saying it's all your fault we didn't have much to do with it. we it. we end up with some type of hybrid state exchanges. his majesty may say the current boundary lines and what can or cannot qualify as the seed exchange might be suggested under this law, the improvisational ability is that looks like a state exchange to me should not be discounted. i think it will be much more fluid and attack from the federal side, they'd be happy to call anything a state exchanges

they can find a partly willing partner to engage with them. we also have some state pushback and some bargaining leverage on the stateside where they can say guess i will consider doing an exchange, but unlike what you told us we had to do before, now we are to parties at the bargaining table. what are you doing to get in return. that's a different type of partnership between the states and the federal government than the way in which the aca unfolded here at the bus to call her folks previously said if you get the feds out of the way camus can fix our state health care markets. they have to begin to be acted upon. i have to send a finger-pointing, but ultimately of everyone. one factory different in a few the state is don't underestimate you've got 20 or more states still resisting and medicaid expansion several years after was supposed to have occurred in the closet voluntary system. it's one thing to attempt the

medicaid and more likely to vote folks on the exchange yet that's the political calculation. what is the real positive behind the separate out the details they like to use. it's the political systems hygiene and therapy. we might have to return to regular order where we find out you have to work itself out in the political system rather than take a quick high pass. a mutual rendezvous for both sides with reality a few of the frozen number of much like tenet 94 will begin to thought and a reshuffling of the deck of cards and find out where we turn out on that. think of it as kind of a way to correct what is done with the regulatory system which is what happened in the court system of ruby way. he has to work it out in the

accommodation nobody wants is the maximum preference, but they're willing to live with it so they don't get everything they want. some common ground all parties can agree. one thing both parties always agree to washington which is when it comes to other people, became distributed differently, both continue to pass and a different set of arrangements. [applause] well, there is very optimistic it especially the return to regular order. i don't know. they might thank you all of you for being here. i have two points that i wanted make. one is that there are really two ways of understanding the potential disruption involved surrounding this issue. the second point is to matter whose side you take or no matter how you look at the potential

destruction, the potential for destruction gets worse over time. so the government says under the plainest interpretation of the statue coming to determine this disruption in the plainest day they actually agree answer is yes, that is true. as bob details are shyness aei, the courts ruled for the plainest in the cases. but the plainest interpretation suggests the only thing worse than not as if we stop with the government's interpretation which has caused more disruption. the plainest day these lawsuits don't create any disruption at all. the purpose of the lawsuits is to end the massive economic and political destruction caused by the president's decision to ignore the clear statutory language is hard to uphold. and so let's dive right into

those narratives explaining these legal challenges. again, talking about tmv burwell and indiana the irs. the narrative is this. we are implementing law as congress intended in these pesky plaintiffs over here are trying to gut the law. their interpretation would cause premium by blocking an essential piece of the law would cause premiums to double over 7 million people. it is important to recognize when you get that of the subsidy that doesn't increase the cost of the health insurance because the subsidy to shift the cost of the premium payer to taxpayer, so what happens is the premium payers exposed to the full cost. more transparency. but the government says premiums would double for the amount people are paying out of pocket for their premiums would double tiered for some people would go

up sevenfold, maybe 4 million people would see an average increase like that. and as bob said, insurance markets could collapse and two thirds of the country. the law itself would collapse because congress isn't likely to tolerate that. just sit there and do nothing. the framework media adopted when reporting on these lawsuits is the government's narrative. they frame the discussion in the same term. if these lawsuits prevail, then there will be disruption. two sides of the litigation with another narrative. the plainest say the obama administration is not implementing the law as congress intended. the flask is is giovanna care at all. the plainest aren't poor because they argue the law says one thing. is doing something off. argue the patient protection or

is clearly about the president to implement at her vision to implement that was that's a mouthful. just one side of the story. it's important to note however two of the three judicial opinion in these cases, they side with the plainest. they've adopted the interpretation the statute is clear and non-ambiguous. the third opinion has yard, there's merit to what you are saying. interestingly, one more piece of your who are sure with the original investigator at the time near the statue has the authority to implement a fax in

a subsidy for the federal exchanges, putting many ways the president has been implementing those taxes and out late in the 3060 not 3060.establish changes. plus about 57 million other americans subject to the penalties and the plaintiffs are suing to stop what they think are unauthorized taxes and subsidies. under the plainest interpretation, it's completely different from what the government did hear they are not suing to stop the law. as the president for violating. as the row when he ruled for the plainest, he was not overruling or overturning or gutting, but no matter what you think of obamacare, it is far preferable, obamacare itself is far

preferable to the system where the president can tax disfavored groups without law protection. so which respect it, which narrative has a big impact on how you look at an categorize the disruption. the obama administration is correct the law authorizes these taxes and spending in the 36 federal exchanges in the disruption involved here is only the disruption of the individual insurance markets are two thirds of the country. if the plainest are correct, the distortion is far, far greater. the plainest iraq. those taxes and subsidies never should've happened. the money shouldn't have gone out the door because they are forbidden by federal law. under this interpretation, everywhere those taxes ,-com,-com ma those subsidies in the anticipation prior to when

they took effect in january 2014 has changed our world and as a disruption compared to what should happen if the government had followed law. the disruptions have been widespread and may have been deep. they disrupted the health care perspective from including legislative vote would possibly even elections. they threaten to disrupt the judicial process as well. let's talk about the economic impact for a second. if the law does not authorizes taxes and subsidies for 36 days, versus the administration announced its intention to offer states a federal exchange back in 2011 insurers have been more enthusiastic about participating than they would've been otherwise served the president had followed the law. in 2013, were insurance chose to participate in more participate out of the administration followed the law.

importance of adequate for cutting hours for perhaps millions of employees, bus driver is epicure were cursed with a mandate from which they are by law. some people's incomes have suffered as a result of the decision not to follow the law. lance americans pay penalties or purchase covers to comply with the mandate from which they are by law exams. 47 million americans agree to enroll in exchange coverage with the promise of subsidies the government had no authority to offer than subsidies at the single court ruling for the win that the next president, whoever he or she may be. also, another economic distortion of the federal debt has risen above authorized by law and the tax burden on current and future generations. that's the economic impact. more troubling to me is the political impact of these unauthorized taxes and subsidies in anticipation.

again, if the law does not authorize tax is, then the obama administration's decision has disrupted the democratic process as well. if the administration had stuck to the statute and let it be known states essentially that it be known states can effectively block the exchange subsidy, the employer mandate into a larger and do for refusing to create and exchange as early as 2011 the debate would've been all about those things. i feel by opposition to two of those things. opposition to the individual mandate an employer mandate. republicans rode opposition in 2010 would've made that a cause. remember the governorships and legislative changers changed hands. they may have been more vigorous to exchanges. we may have had more than 3060 refusing to establish. it may of been the fact that resistance could block parts of

the law, would've been an issue in the off year elections and presidential elections in 2012. they could have launched grass-roots campaigns to block the mandate they know to exchange. voters would've behaved differently. remember how congress called dozens of votes for obamacare. those votes may not have succeeded, but the votes cast by individual members may have changed if it reveals the law is actually very to save resistance and much less worker than the obama administration had been pretending. they could have conduct affected individual races and even the presidential election in terms of how many decided to enter the race in the alterman outcome of the presidential election if this lie was exposed to be less workable than the president had been pretending it was and we could've had congressional debate in 2013 before any

disruption coming before anyone lost them before the money went out the door, before there was any threat. but we'll never know what would've happened because the obama administration tonight sees the ability to veto the law is unpopular in mandate and disenfranchise voters who voted in state elections out of opposition to this law. in addition, americans voted in 2012 as if they were not in keeping hold the thought that would expose the full cost of force congress to reopen it in the irs is still influencing the 2014 congressional races been held next week because candidates decided whether to run this year and voters will vote this year as if the gaping hole does not exist, the law commerce enacted from our popular and successful than it actually is. so had the administration followed the law come the fact 36 states exercise the toes would've led