to get the subsidies. rather, it comes in this technical formula that's directed to the department of the treasury saying how much the amount of the subsidy should be. and that seems to be it both makes no sense from congress's point of view, and in terms of our own point of view, in terms of interpreting statutes, that's not the clarity with which we require the government to speak when it's upsetting federal-state relations like this. >> i must respectfully disagree for three reasons, justice kagan. in the first place, of course, you where else would you expect a tax credit except in the tax code? that's where this was. you wouldn't put it in 42 u.s.c., which has nothing to do with taxes. it's the only place where exchange is limitations placed. you have three audiences here, not just states. you have to tell taxpayers what they're entitled to. you have to tell insurance

companies when these subsidies are available. and you have states. so you have to put it in 36b. so the argument, i guess, the government is making is what you should have done is put half of it in 36b and half it in 1321 which, of course, would have confused everybody. 36b would say, exchanges period. then you'd go to 1321 and say when we said exchanges in 36b, we meant established by the state. >> mr. carvin, if i were a state official and i was trying to decide whether my state should establish an exchange, and i wanted to know whether individuals who enrolled in a plan on my possible state-established exchange would get a credit, where would i look? >> exactly. the basic thesis here is these exchanges don't work without subsidies. you've read 1311. you've read 1321. now you're going to go find out where the subsidies are. that's 36b. they're hypothesizing state -- >> i think not, mr. carvin. i mean, i think the place i would look to find out about my choices is in the provision of the statute that talks about my

choices. i think the last place i would look is a provision of the statute that talks about what is it coverage months for purposes of this subsection, which, by the way, isn't even the right subsection, but whatever. that where i would look, is in where it talks about what a coverage month is? >> but, your honor, i've already described the difficulties of putting it part of it in 1321, right? because then you would create this bizarre tax credit provision which is only half true, and you wouldn't tell taxpayers and insurance companies. so i believe that's the complete answer. but the other practical point i'd like to make is they had three years to implement this. and no one thought the states were going to have to make a decision overnight. if the irs had done its job, every state would have been fully informed of the consequences because presumably they've read 36b, and then they would make an intelligent

decision well in advance of the two 2013 deadline. so there's a bizarre notion that states were somehow unable to read a statute or to or to read a regulation is simply -- >> i really want i really want to hear what you're going to say in your two minutes. and if you want, only if you want, i would be interested in your responses to the government's brief, that if you read the words "established by the state" without reference to the technical definition as you wish, this isn't just about the taxes. it means employers in virginia don't have to make policy, don't have to don't have to give policies, but if they have one maryland worker they do. it means that they never can tighten up their medicaid regulations, never, in 34 states but, of course, in the others they can.

it means that there's no qualified person ever to buy anything on a an exchange established by the secretary for the state, and they have two or three other anomalies that have nothing to do with taxes, all of which supports their argument that you have to read this phrase technically according to the definition. now, that's their basic point. i've tried to summarize it. do it as you wish you. i just want you to have 5 or 10 minutes to answer it. >> thank you. and the first point is there are no anomalies. >> i'm going to clock that, see if see if you get 5 minutes. >> there are no the first point i'd like to make is there are no anomalies stemming from our interpretation of 36b. the government agrees with that. their biggest anomaly is this qualified individuals point about how there would be nobody on hhs exchanges. the solicitor general is not going to stand up here and tell you that if we prevail in our interpretation of 36b, they would be obliged by the logic of that opinion to empty out hhs exchanges. so we all agree that there's no connection between 36b and the

qualified individual. that's point one. point two is, if you want anomalies, their interpretation of the statute requires 34 states today to lose all medicaid coverage. why is that? because of the provisions on 64a through 66a of the government's brief, there are various requirements that the state, on pain of losing all of its medicaid funds, must coordinate between the state-established exchange, the state agency for chip, and the state agency for medicaid in terms of secure interface and enrollment. now that makes perfect sense if "exchange established by the state" means what it says, but they think it encompasses hhs exchanges. well, the state cannot ensure coordination between hhs exchanges and the state agencies, and none of the 34 are doing it today. so under their atextual reading of the statute, 34 states will

suffer the penalty that this court found in nfib as unconstitutionally coercive. as to this medicaid maintenance anomaly, the government agrees that the purpose of this provision was to freeze medicaid payments until you had an exchange with subsidies, which makes sense, right? you want to coordinate the two. and that's exactly what this provision means under our interpretation. until you have an exchange with subsidies, the states will be frozen. the government says, that thing ended on january 1, 2014. that's a figment of their imagination. it's nowhere in the statute. plus which it makes no sense. before 2014, the states were powerless to have an exchange with subsidies, right? they couldn't do it. so there was a 3year freeze on medicaid that they were

powerless to get out of. after 2014, if they don't want to have their medicaid frozen, all they have to do is establish an exchange. so it's a less harsh restriction on states, plus which it gives them another incentive in addition to the subsidies to create the state exchange, which is the purpose enunciated in 1311. i don't know oh, as to, yeah maybe somebody would from another if you had an employee that let lived in other state, maybe he would be subject to the employer mandate. why is that an anomaly? congress likes the employer mandate. of course they wanted to expand it. they also never thought it would really happen because, again what they thought was going to happen was there wouldn't be neighboring states without it because nobody was going to turn down this extraordinarily generous deal. >> i think if i could -- >> wow. you've been talking a long time. >> yes.

yes. sorry. >> you have two more sentences. >> even if there were anomalies in these other sections, you don't transport them to 36b which is concededly neither absurd and furthers the purposes of the act, just like in utility air, because the word pollutants didn't work with one section, you don't spread it like a virus throughout the rest of the act. you cure it in that provision -- >> those were two long sentences -- >> if and when there's any litigation. >> i think i think -- >> oh, it was a long sentence. >> yes. i think i'm right that justice breyer's question about anomalies, which are replete in the act, under your interpretation, did not talk about what i think is one of the most glaring ones, which is this qualified individualist thing, that you're essentially setting up a system in which these federal exchanges, that there

will be no customers and, in fact, there will be no products, because section 1311 says that the exchange shall make health plans available to qualified individuals, and then the next section says that qualified individual means an individual who resides in the state that established the exchange. so under your theory, if federal exchanges don't qualify as exchanges established by the state, that means federal exchanges have no customers. >> which, of course, is not the reading that the government's giving to it because they're not going to tell you -- >> well, that's because they don't share your theory. >> no, no. >> under your theory -- >> no. >> that's the result. >> well, no. let me be as clear as i can. if we prevail in this case, they are not going to empty out the hhs exchanges because they understand that there are numerous defenses even if you interpret "established by the state" literally in the qualified individuals provision. number one defense that they will use is, it says you have to be a qualified individual with respect to an exchange. as justice breyer pointed out, the statutory definition of exchange is a 1311 exchange. so they're only talking about

state exchanges, not these hhs exchanges, and it is in section 1312, which immediately follows 1311, before 1321. number two, "qualified individual" doesn't mean that means you're guaranteed access. it doesn't mean if you're not qualified, you're absolutely denied access. we know that from the illegal alien provision, which says illegal aliens are neither qualified individuals nor eligible for subsidies. >> ah, but look at the look at the prisoner provision, which says prisoners shouldn't be treated as qualified individuals. so under your theory, this statute effectively said that prisoners should be able to enroll on federal exchanges? that makes no sense. >> it makes perfect sense to say the states get a choice. think about somebody who's in prison in february, they're getting out in april, they've got to buy insurance under the individual mandate. so if you said nobody who's incarcerated can buy insurance that means they wouldn't be able to buy insurance during the relevant enrollment period. it makes perfect sense to give states the flexibility to say, as to those incarcerated principles, you can make them available for exchanges, but under illegal aliens we don't

want to, which is why we are saying they are neither qualified nor eligible. even if justice even if you don't find that the most pristine logic to be applied to a statute, remember, we are interpreting these statutes to avoid an absurd result. and it's a basic principle of statutory construction that you will give a plausible, if not the most persuasive, reading to a statute to avoid the result. >> but we are interpreting a statute generally to make it make sense as a whole, right? we look at the whole text. we don't look at four words. we look at the whole text, the particular context, the more general context, try to make everything harmonious with everything else. i think you said, even at the very beginning of this argument as we were going back and forth about my hypothetical, that, of course, context matters and context might make all the difference with respect to what

those five words mean. and i think what we're suggesting is that, if you look at the entire text, it's pretty clear that you oughtn't to treat those five words in the way you are. >> i've given you the contextual points before. i think the key one that i'd like to convey to you, justice kagan, is section 1311. you say the statute must work harmoniously. if you provide a subsidies to hhs exchanges, you have essentially gutted section 1311's strong preference for state exchanges. what will happen is precisely what did happen under the irs rule, 2/3 of the states are saying no, we're not going to undertake this thankless task of running these exchanges with no incentives to do so. so yes, it what i have here in terms of what the statute means is 36b quite clearly saying exchanges are available only on states. i have 1311 explaining why they limited subsidies to that. and there is no contrary legislative history at all. what do they have, an atextual reading of 36b, which they can't explain why anybody would have used those words if they wanted

to convey exchanges, a rule that completely undermines the purposes of 1311 and no supporting legislative history. so under all the legal materials that this court normally used to discern what statute means, we clearly prevail. >> thank you, counsel. general verrilli, you'll have extra 10 minutes as well. >> thank you, mr. chief justice, and may it please the court, standing has been raised, so let me start by telling you where we stand on standing and then i'd appreciate the opportunity after that to summarize what i think are the two key points in this case. now, with respect to standing, the question the case or controversy question turns on whether any of the four petitioners is liable for the tax penalty for 2014. now, this case was litigated in the district court in 2013 based on projections on the part of each of the four petitioners that they would earn a certain income in 2014. they filed declarations saying that.

with respect to 2 of the 4, the projections were of their income were such that they would qualify for the unaffordability exception and they wouldn't have standing. with respect to the other two, their projections were such that they wouldn't qualify for the unaffordability exception and they would have standing. but those were projections in 2013 about their income in 2014. 2014 has now come and gone, and we know we don't know, but petitioners know whether any of the 4 have, in fact are, in fact, liable for the tax penalty and that will depend on whether their actual income in 2014 matched their projections. now, mr. carvin said there was fact-finding about this. i'm afraid that's not correct. the petitioners the petitioners did file a motion for summary judgment, but the case was decided on the basis of the government's motion to dismiss before discovery and without any fact-finding. i'm assuming because mr. carvin has not said anything about the absence of a tax penalty, that at least, 1 of the 4 has and is, in fact, liable for a tax penalty, but that's the key standing question. now, with respect to the

veterans point, your honor, if it is the case, as mr. carvin tells us, that mr. hurst was a veteran for only 10 months, then i think he's correct, he would not qualify for va health care because you generally have to serve two years. so that's where we are on standing. now, if i could turn to the merits. >> so are you saying one person does have standing? >> no, no. it will depend on whether as a factual matter 1 of the 4 has and is, in fact, liable for the tax penalty for 2014. and that's information that is not in the government's possession. it is in the possession of petitioners' counsel. and i should make one more point, with respect to 2015, there were no projections, there's nothing in the record about the possible income of any of the petitioners for 2015, so there's really nothing that would establish a case of controversy for 2014. >> well, you're surely not raising a standing question with us here for the first time at oral argument, are you? >> well, mr. chief justice, as i said, that based on the projections, it was our understanding that at least 1 of the 4 would be liable for a tax penalty. the question of standing has been raised and i've tried to identify for the court what i think is the relevant question which is whether any one of the 4 has, in fact is, in fact liable for a tax penalty because -- >> this is this is on a motion

to dismiss, right? >> well, that's correct, your honor, but it does also go to this court's jurisdiction. because if none of the four is liable for a tax penalty for 2014, there just isn't the case or controversy. none of them is liable, there's no there's no injury. and so i do think that's ultimately the relevant question here and with respect to standing. i don't think there's a question about veteran status, but i do think that's the relevant question. >> isn't the question before us as to standing whether the district court correctly held in the motion to dismiss context that there was standing? that may not be the end of the matter, but don't we have to isn't that what's before us? >> well, that may be yes. but then you and you might alternatively think about this as a question of mootness, i guess, in that, you know, based on the projection, there was a case or controversy, but if the projection didn't come to pass and none of the plaintiffs is liable for a tax penalty, then the case or controversy no longer exists. >> well, what are you suggesting? should we have a should we have a trial here? >> no, i'm not suggesting

anything of the kinds. >> on this issue and find -- what the facts are? >> justice alito, i did not raise standing affirmatively the court raised it. and i'm just doing my best to let the court know what our position is on standing. >> well, you would you send it back then to the district court? >> well, i guess no. i guess what i've said is that mr. carvin hasn't suggested that there's no plaintiff liable for a tax penalty. based on that, i'm inferring that at least one of the petitioners -- >> representation by him? >> and i'm not -- >> would you -- has standing. why wouldn't we accept a there's no reason not to if he if he makes a representation that at least one of the four is has was liable in 2014 and is liable in 2000 or will be liable in 2015 -- >> so i guess what i'm saying -- >> i mean, we know at least one of them won't because that's -- >> what i'm saying about that is i'm actually going to step further than that, justice sotomayor, given that there hasn't been i'm willing to accept the absence of a representation as an indication that there is a case or

controversy here, and so that's why, mr. chief justice, we haven't raised standing and that's what it but i do think that the key question is whether one of the four is liable for a tax penalty. you have to have that to have a case or controversy in the case. if i could now, let me please turn to the merits that summarize what i think are the two key points. first, our reading follows directly from the text of the act's applicable provisions and it's really the only way to make sense of section 36b and the rest of the act. textually, their reading produces an incoherent statute that doesn't work. and second, our reading is compelled by the act's structure and design. their reading forces hhs to establish rump exchanges that are doomed to fail. it makes a mockery of the statute's express status express textual promise of state flexibility. it precipitates the insurance market death spirals that the statutory findings specifically say the statute was designed to avoid, and of course it revokes the promise of affordable care for millions of americans. that cannot be the statute that

congress intended. >> of course it could be. i mean it may not be the statute they intended. the question is whether it's the statute that they wrote. i mean, you know, there are no provisions in the statute that turn out to be ill considered and ill conceived. >> so it's not the statute that they wrote, and the reason it's not the statute that they wrote, i think i want to actually start, if i could, picking up i think on a variation of the hypothetical that justice kagan ask asked. in petitioners' brief they throw down the gauntlet with respect to a hypothetical about airports, and that a statute requires a state to construct an airport, it says the federal government shall construct such airport if the state doesn't, and no one would think that the federal government's airport was an airport constructed by the state. well, what i would say to that is that if those statutory provisions were conjoined with a provision that said airplanes may only land at airports constructed by the state, then you would conclude immediately that what that federally

constructed airport qualifies as an airport constructed by the state, and the because otherwise the statute would make no sense. and the same exact thing is true here. >> there are no statutes that make no sense. >> this one makes sense. >> if that is the case, every statute must make sense and we will we will twist the words as necessary to make it make that can't be the rule. >> that isn't the rule. but the rule -- >> of course not. >> is that you read -- that you don't read statutory provisions in isolation. you read them in context. the rule is that you read them in order to ensure that the statute operates as a harmonious whole. you read them so that you don't render the statutory provisions ineffective. you read them to promote -- >> where is that possible. >> you read -- >> i mean, you acknowledge that all of what you're saying only applies where there are alternative readings that are reasonable. you pick the one that will do all the things that you say. >> and there is there is -- >> but, but if it can only reasonably mean one thing, it will continue to mean that one

thing even if it has untoward consequences for the rest of the statute. no? >> with respect to this statute, first, let me i want to make two points. first -- >> answer me in principle. i mean, is it not the case that if the only reasonable interpretation of a particular provision produces disastrous consequences in the rest of the statute, it nonetheless means what it says. is that true or not? >> i think there are a couple of limitations on that principle. the first is if what you have is a situation in which the that creates conflict within a statutory scheme, then the court's got to do its best to try to harmonize and reconcile the provisions. and, secondly -- >> well, i disagree with that. you have a single case in which we have said the provision is not ambiguous, it means this thing, but, lord, that would make a terrible statute, so we will interpret it to mean something else. do you have one case where we've ever said that? >> i think i think brown & williamson is a good example of

that. in brown & williamson, the court said, look, the definition of drug and drug delivery device would actually seem unambiguously to cover tobacco but when you read that provision in context, and considering the full scope of the regulatory regime, it can't possibly mean that. but let me let me actually work through the text here, because i do think i can show you that there's a quite reasonable reading of this statutory text that allows you to affirm and requires you to affirm the government's position. >> but, general verrilli, before we get too immersed in a number of provisions of this, could you respond to a question that was asked during mr. carvin's argument. if we adopt petitioners' interpretation of this act, is it unconstitutionally coercive? >> so the here's what i would say about that, justice alito. i think that it would be certainly be a novel constitutional question, and i think that i'm not prepared to say to the court today that it is unconstitutional. it would be my duty to defend the statute and on the authority

of new york v. united states, i think we would do so. but i don't think there's any doubt that it's a novel question, and if the court believes it's a serious question -- >> is it a i was going to say does novel mean difficult? [laughter] >> because it does seem to me that if petitioners' argument is correct, this is just not a rational choice for the states to make and that they're being coerced. >> so what i -- >> and that you then have to invoke the standard of constitutional avoidance. >> well, what i was going to say, justice kennedy, is to the extent the court believes that this is a serious constitutional question and this does rise to the level of something approaching coercion, then i do think the doctrine of constitutional avoidance becomes another very powerful reason to read the statutory text our way. because i do think and i do think with respect to the point that your honor's making remember, it's not just it's not just a situation in which there is onerous conditions, onerous

consequences for state residents. it's also a profound problem of notice here, that, you know, if you read petitioners' if you take petitioners' reading of the statute, then the idea that states were given added -- you can't possibly justify this as adequate notice to the states. >> well, mr. general verrilli, let me ask you this about notice. we get lots and lots of amicus briefs from states. and we got two amicus briefs from states here. 34 states, i think, is -- that's the number of states that declined to or failed to establish a state exchange? >> correct. >> now, if they were all caught off guard and they were upset about this, you would expect them to file an amicus brief telling us that. but actually, of the 34, only 6 of them signed the brief that was submitted by a number of states making that argument. 23 states, 23 jurisdictions submitted that brief.

17 of them are states that established state exchanges. only 6 of the states that didn't establish state exchanges signed that brief, how do you account for that? >> so, i guess i'd make two points about that, justice alito. first, you've got 22 states there, states in both camps, all of whom told you that they didn't understand the statute that way. now, with respect to the other 8 states that filed the amicus brief on the other side, i actually think there's quite an important point that goes to their understanding of what this act did. remember, this is an irs rule that we're talking about here, and the irs put out a notice of proposed rulemaking saying this is what we intend to do, and several of these states oklahoma, indiana, nebraska they filed rulemaking comments in that in that proceeding. and if you look at those rulemaking comments you will see that they address a number of issues, and they say nothing nothing about the issue that's before the court now. so if they really understood the statute as denying subsidies in states that did not set up their own exchanges, that would have front and center in their

rulemaking comments, but they said nothing about it and i think that tells you a good deal about where -- what everybody understood that this statute was -- >> well, there's another point on notice on this pennhurst argument that seems curious to me. usually when this argument comes up, a state has signed up for a federal program and then they say, oh, my gosh, we didn't realize what we had gotten ourselves into. but here, it's not too late for a state to establish an exchange if we were to adopt petitioners' interpretation of the statute. so going forward, there would be no harm. >> well, let me address that directly, and then i'd like to make a broader point about statutory context in response. now directly, of course, i don't i don't think it's possible to say there would be no harm. the tax credits will be cut off immediately and you will have very significant, very adverse effects immediately for millions of people in many states in their insurance markets -- >> well, i said i've said going forward. >> and then -- >> after the current tax year.

>> and then going -- >> would it not be possible if we were to adopt petitioners' interpretation of the statute to stay the mandate until the end of this tax year as we have done in other cases where we have adopted an interpretation of the constitutional or a statute that would have very disruptive consequences such as the northern pipeline case. >> sure. northern pipeline is an example of doing that, and it will be up to the court to decide whether it has the authority to do that. i will say, this does seem different than northern pipeline to me, because this is about money going out of the federal treasury, which is a different scenario. but if the court obviously, if that's where the court is going and that's what the court thinks the proper disposition is, that would reduce the disruption. but what i think is another important point to make here just as a practical matter, the idea that a number of states all of these states or a significant number are going to be able to in the 6 months between when a decision in the this case would come out and when the new the new year for insurance purposes will begin we'll be able to set up exchanges, get them up, up and

running and get all the approvals done i think is completely unrealistic. >> how long has it taken -- >> well, for just to give you an example of the current time line, justice ginsburg, the in order to be in order to have an exchange approved and insurance policies on the exchange ready for the 2016 year, those approvals have to occur by may of 2015. ok. so that gives you a sense of the of the time line that hhs is operating under. >> what about what about congress? you really think congress is just going to sit there while all of these disastrous consequences ensue. i mean, how often have we come out with a decision such as the you know, the bankruptcy court decision? congress adjusts, enacts a statute that takes care of the problem. it happens all the time. why is that not going to happen here? >> well, this congress, your honor, i -- [laughter]

>> you know, i mean, of course theoretically of course, theoretically they could. >> i don't care what congress you're talking about. if the consequences are as disastrous as you say, so many million people without insurance and whatnot, yes, i think this congress would act. >> and but the relevant question and then i'm going to try to get back to the point i was trying to make in response to justice alito's question. the relevant question here is, what did the congress that enacted this statute in 2010 do? did they really set up a system in which the states are subject to the kind of onerous situation that the petitioner claims? and i think there are three textual indications objective, textual indications that cannot possibly have been the statutory scheme that congress tried to set up. first is the existence of the federal exchanges. it would make no sense -- no sense -- for congress to have provided for federal exchanges if, as mr. carvin suggests, the statutory design was supposed to result in every state establishing its exchange. >> well, wouldn't it have been again, talking about federalism a mechanism for states to show

that they had concerns about the wisdom and the workability of the act in the form that it was passed? >> i think that federalism values are promoted by our interpretation. if that is indeed what a state thought, in the state really was to have -- preferred not to have the state government participate in the implementation of this act the reasons that your honor identified, the structure of the act that commerce put in place and we are advocating for today fully vindicates that concern. they can decide not to participate without having any adverse consequences visit upon the citizens of the state. that is why our rating is the pro-federalism breeding. it is there reading that is the anti-federalism reading. if i could get to the second stack to tory form -- statutory

form section 1321 says that the statute is divine -- designed to afford state possibility. it would be an orwellian sense of the word "that's ability" to use it in a manner that petitioners say the statute do say is it is the polar ops of the flex ability. the third point seems to me is the notice point. if indeed the plan was that every state meant to establish an exchange for itself and that would cure all the mass statutory anomalies and absurdities in impossibilities that this reading provides for if that was really the plan than the consequence for the states would be in neon lights in the statute. you would went to make absolutely sure that every state got a message. instead, what you have is a subclause in 36 be which is approved -- which addresses liability for individual

taxpayers during >> this is not the most elegantly drafted statute. it was push through on expedited procedures and did not have the kind of consideration by a conference committee, for example that statutes usually do. what would be so surprising here if of months -- among its other imperfections is that with the states have to do is not obvious? it does not strike me as inconceivable. >> i will answer that question by talking with the legislative process. i think it is quite relevant, even to you, the respective question that you asked. the language here in 36b was not the product of some last-minute deal, not the product of scribbling at the end. the language that emerged here about tax credits, the linkage and 3611, was the product of

the senate committee markup, a public hearing covered by c-span . you can watch it in the c-span archives. you can see coming out of that that the understanding was with the statutory set up was with subsidies being available in every state. >> there were sanity -- senators, whether not that were opposed having the federal government run the whole thing because they thought that would be to a single-payer system which some to -- some people wanted? and the explanation for this provision is it prevents the federalization of the entire thing? it certainly a plausible explanation. >> mr. carmen has floated that as a nation and he is suggested that it was senator ben nelson that required it. there is actually no evidence

whatsoever that anybody thought that way. that the solution to the problem your honor identified is what congress did by having the states have the option to set up their exchanges and state-by-state federal fallbacks rather than a national system. senator nelson has stated he had no intention of that kind. there is no evidence that anyone did. would mr. carvin has it suggested is that this was a product of some deal to try to get votes so the act could get past. what i suggest your honor is that there is objective proof that is not true. the provisions in the act that were negotiated at the into secure the necessary votes on title x of the act. if you look in the act pages 833-924, you can see all the commitments. nothing -- none of the president to do with the lang which created --

>> if congress did not want the phrase "established by the state" to mean what that would normally be taken to mean, why did they use that line which? -- language? why did they not use other formulations that appear in the act? why did not say "established under the act?" why do not include a provision that was say an exchange established by hhs is a state exchange when they have a provision in there that does exactly that for the district of columbia and for the territories. it says they are deemed to be states for these purposes. why would they do that? >> the provision says " established by the state under section 1311." our position textually is, and we believe this is a better reading of the text, that by cross-referencing

section 1311, effectively what congress is doing is saying that exchanges established through whatever mechanism, exchanges set up by states themselves -- >> 1311, 1321? that seems to me to go in the wrong direction. >> i think it goes in the right direction if you ride with me for a little bit. >> your answer does not explain why by the state is in their. why doesn't they say "established by 1311?" >> wherever this provision appears in the act, it is doing work. the work it is doing is saying what we are talking about is this the civic exchange established in the specific state as opposed to the general rules for exchanges. if you look at the medicaid means it works the same way.

>> why would they not say "in the state?" >> i suppose they could have but it works privately will this way. it is really how they're are using it with respect to the qualified individual provision. with respect to the provision it's is a qualified individual is a person who is located or resides in the state that established the exchange. clearly what they are talking about is a geographical reference to a particular state. that is what is going on there and every time the statute uses that phrase. it is doing that work and that is why it is in their here it if i could go back to your point, justice kennedy, it says establish by state under section 1311. section 1311b.1, it says -- it is not as mr. carvin says, each state shall establish."

window -- we know when congress used that line which it was a something some inclusive than state governments shall set up exchange. we know that because congress s'backdrop was the 10th amendment. we know that because a section 20 -- 1321. section 1321 provides the means by which 1311 be one requirement is it satisfied. it will be satisfied by a state electing to meet the federal requirements for exchanges. or could be satisfied in the event that a state does not, or tries but comes up short, with hhs stepping in and establishing -- >> really needs the federal government shall establish in the state does not establish? if that were the correct interpretation do not need 1321 at all. >> i think the right way to think about this, justice alito is that what is going on -- the right to focus is not on the

pool but on the what. on the thing that gets set up and whether it qualifies as an exchange established the state. and these exchanges do qualify and the reason the qualified is because they fulfill the requirements of section 1311b1 and 1321 tell you that. it says to hhs that when a state has not elected to be the federal requirements, hhs steps in. what hhs does the sets of the required exchange and such exchange, referring to the required exchange, but the only change required in the act is a change under 1311 b1. it has to be that what hhs is doing under the plain text of the statute is billing the requirement of 1311 b1. that is why we say it qualifies an extension established by the state.

it's by the definition which says the extent established under 1311, which says each state shall establish an exchange and it has to be that way. edition is have conceded on page 22 of their brief, that an exchange that hhs sets up is supposed to be the same exchange and the petitioner say functioning just like an exchange that the state sets up for itself. >> you are putting a lot of weight on the word "such." it seems an unrealistic interpretation of "such" that the federal government shall establish a state exchange. it seems to me that just -- such means in exchange for the state rather than in a change of the state. at the federal government establish a state exchange? that is gobbledygook. it must be something different there -- different.

>> if the language of 36 b were exactly the same as it is now and this tablet -- statute said in 1321 that an exchange set up by hhs shall qualify as an exchange established by the state, you would not change the way which of 36 beat one iota and there were not be any doubt in anyone's mind that subsidies were available on federal exchanges here it we are saying that effectively reading of 1311 and 1312 together, that is what the statute does. it is a reasonable reading of the statute. it is the only reading of the statute that allows you to be faithful to the text of 1311 b1 the word "shall", -- >> the exchange that the exchange was posted set up, what

it means the state exchange. and exchange satisfied by the state because it satisfies the requirement of 36 b one. your case hinders on the fact that a federal exchange is a state exchange. it hinges on it qualified as the state exchange or being a quote into a steady oracle into the operational statute. a reasonable reason -- >> once you have concluded it's a provisional reading you have to read it the way we say it is to be read because it is the only way to make sense of the statute as a whole. the only way to bring to harmony with the ax qualified individual and qualified health plans to lead what they do admit is an absurdity. >> would you agree that there are provisions of the act where the exact same phrase

established by the state has to be read to mean established by the state and not by hhs? >> i think they are wrong about each one. >> i would be interested in your answer. 82 usc section nine 3h1d each state shall status procedures to make sure a exchange established by the state utilizes secure electronic interface. if exchange established by the state there is redeeming and hhs exchange, that means that the state in which that exchange has established is responsible for making sure that the federal exchange as a secure electronic interface. >> that is completely wrong. the statute says -- the statutory obligation is addressing the state medicaid agencies. it says they shall establish procedures to ensure the court

nation. hhs has issued regulations setting forth with that statutory provision requires the states and the circumstances. every state where there is a federally facilitated exchange has fulfilled the requirements that it works perfect we find. there is no anomaly there at all. >> it for the regulations attract the statute? >> they gave the state authority to say whether or not these conditions have been met. >> the requirements are imposed on the state medicaid and their relationship. that is what the statute does. it does say and that proves our point, that each state shall -- it does not safe states that instead of the stages for themselves shall. it says each state shall hear it it that there will be something to qualified as an exchange qualified for the state and

every state. if your honor was to ask about ended the others you can. there are no anomalies. >> as i understand your answer to be that there are federal regulations telling the states with a have to do here. they have all that. the factor base of the state is some obligation under the regulations to make sure that there is a proper interface for the federal exchange. >> on the stateside. yes. those are state government agencies and it is their side of the interface they must govern. if there are a milan police they palin can -- anomalies they palin comparison to the anomalies on the other side. i want to focus on the site about the qualified health plan and individual. the statute is quite clear in section 1311 that in exchange not an exchange established by the state, but in exchange can only sell a qualified health plan. it is forbidden from have

selling a health plan that is not a qualified health plan. it is an exchange. the statute also said that two certified a health plan is qualified the exchange has to decide that it is the interest to qualified individuals. qualified individuals are persons to reside in the state that establishes these exchange. if you read the statute the way mr. carvin reads it, you come to the conclusion that the state with a steadily facilitated exchange there are no qualified individuals here it therefore the exchange cannot -- there are not any. there are not any qualified health plans that can lawfully -- be sold on the change. >> what is the provision that says only a qualified individual can be -- can enroll in a plan under an exchange? >> i will address that but i want to make sure the provision i'm talking about respect to the

prohibition on selling qualified health plans to anybody is on anything other than a qualified exchange is 1311 d2b. is absolutely unambiguous. and exchange may not make available any health plan that is not qualified health plan. >> what is the provision you are referring to when you say that an exchange made in a role only a qualified individual? >> what it says throughout is that qualified individuals are eligible to purchase on it changes. -- exchanges. it is the necessary meaning of that phrase that if you're not a qualified individual then you are not eligible to purchase health care on an exchange because otherwise the word qualified would not have any meeting. the meaning of the word qualified is a distinction between people who are eligible and in eligible. do not make any sense.

think of the people who are not qualified individuals. they are people in prison and on -- undocumented aliens here it -- aliens. >> the person on an exchange must reside in the state that establishes the exchange. >> there are no such people under mr. carvin's excellent nation of the statute. he just wanted into a textual brick wall. >> you argue that it is a logical inference from a number of provisions that only a qualified individual may purchase a policy to there is no provision you can point to that says that directly. >> that is what qualified means. if you're not qualified you were unqualified. that is what it means. he just take the word qualified out of the statute if the reader that would. >> it is not a technical term in? >> given the way it is to find it is a person who resides in

the state. it does that because the statute was quite clear you would not be allowed to shop across state lines because that would infringe on traditional state prerogatives regarding insurance. with respect to prisoners, it is having any sensitive prisoners should be allowed to get insurance. there is a specific statutory provision that says when you have a life circumstance like getting out of prison you can sign up at that point. he makes the point about unlawfully present persons being "unqualified and not being able to be covered." that is not surplus. that is there for an important reason which is someone can be a lawful status and therefore be eligible for health care but then lose lawful status. at that point they can no longer be covered here it noted that works for them. -- none of that works for them. to get to the fundamental point at the level of text you have clear and dissolvable conflict. the statute cannot work if you

read it mr. carvin's way. >>'s agenda for ambiguity? >> i think you are right justice kennedy. they have ambiguity there precisely because you have -- this statute will operate one way or another. the question is how it will operate. when you read it their way -- >> if you think it's ambiguous we think about chevron. i think it's a drastic step for us to say that the department of internal revenue and its director can make this call when we are another when there are millions of dollars of subsidies of per year? >> there are billions of dollars a year. >> i think it's a to say that at the internal revenue service is going to allow deductions it has

to be very clear. it seems to me a little odd that the director did not identify this problem if it is ambiguous and advise congress at once. >> with respect to chevron deference, we do think chevron deference clearly supports the government. before we get to that, you can resolve and should resolve this statute is statute winning in our favor even without resorting to chevron difference. it's what the very important principles of federalism that we've been describing here direct you to do. if you think there is a constitutional problem of the statute it is with the doctrine of constitutional avoidance. with regards to chevron, section 36bg expressly delegates to the irs the authority to make any

decisions necessary to implement section 36 be. congress said the irs should do this. it is a big question, and as the court said two terms ago chevron applies to big questions as well a small. your honor raise the point about the need for clarity and a tax seduction. -- the reduction. there is a treatise that describes it as a false notion. it is certainly not consistent with this court unanimously decision to terms ago that chevron applies to the tax code like it in the house. >> if you are right about chevron, that would indicate a subsequent investors and could change that interpretation. >> a subsequent administration would need a strong case under step two of the chevron analysis in view of disruptive consequences. i think you can and should

resolve this case because the statute really has to be read when taken as a whole to adopt the government's position. >> is there any tax attorneys in the courtroom today i would think they would probably write down what you said today. the u.s. foot argue in the future we should not read them to -- there should be missed resumption of that the tax credit is provided by the statute. >> you should read it according to its terms, and when you read it according to the terms and read it in context and read it against the background principles of federalism, you have to affirm the government's interpretation. thank you. >> former minutes, mr. carvin. >> thank you mr. chief justice. mr. hearst would be subject for a penalty for 2014. both he and mrs. leedy would face the same principle for 2015 if the government is suggesting their cases become moot because of change search -- circumstances under cardinal

chemical. it is their burden to raise it not ours to supplement the record. in terms of all the states losing, 34 states losing their medicaid fund, the solicitor general greatly distorted the statute is printed in 64a of their exhibit. it is obviously contrary to that. it says the state like in a five people to enroll on their exchanges. they can't enroll anyone on their exchanges if there are no such exchanges and the state. therefore, by the plain language, if you adopt the nation that the change established by the state needs established by hhs, all of them need to lose their medicaid funding. >> could i add to something the general indicated with? the need to read subsidies limited.

-- in a limited way. there's a need to ensure that exemptions, tax liabilities are let it -- read in a limited way. after your reading we are giving more exemptions to employers not to provide more insurance. more exemptions to states and others toward individuals. how does that work? you have two competing -- >> you to get more exams and for employers under our reading but it is on a bigamist. -- on ambiguous. they can and requires on ambiguous statutes not to it afford the tax credit. under their view of the statute the federal government gets to unilaterally impose on the states, there is an amicus from

indiana, requiring uninsured individuals. under their theory the states are absolutely helpless to stop the federal intervention into the most basic personnel practices. under all -- under our theory they can say no. the more intrusive view of the statute is there's. in terms of the funding edition head-on on, i think my short answer is as follows. there is no way to view the statute is more course of our harmful than the medicaid -- the reversion of medicaid approved by this court and the dissenting opinion when he did this provision as something that was a sick -- an acceptable, noncoercive alternative. as justice scalia pointed out, there is no alternative reading of the statute that avoids that because either way you are treading on state sovereignty.

in terms of qualified individuals as predicted, the solicitor general did not come here and tell you that if we prevail under this theory they will have to empty out the hhs six changes. nor did he respond to my argument that with respect to an exchange under the definitional section only applies to study changes. i think we can view this as a complete litigators position. in terms of a qualified health care he said that she does find answer is in 1311. 1311 is only talking about state established exchanges. it has no obligation to hhs six changes they could not possibly create an anomaly. thank you. >> knife -- live at 7:00 a.m., your comments on washington journal.

dan pfeiffer talking about working in the white house. after that, former british defense secretary liam fox discusses relations with his country. >> here are some of our featured programs for this weekend on the c-span network. on c-span2 book tv, tonight at tenant got eastern, former marine war correspondent david morse on the history of post-traumatic stress disorder that affects over 27 million americans, including himself. sunday night at 8:00, scott taylor argues that the obama administration is hurting our national security. on american history tv on c-span3, the commemoration of bloody sunday when 50 years ago voters rights advocates begin in march from selma to montgomery alabama and were met with violence by state and local police. today at noon eastern, we're live from selma with your phone calls, followed by the

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