Last Ditch for Liberals: The Pennhurst doctrine may save the ACA — at a cost.

March 2015 marked the fifth anniversary of the Affordable Care Act, President Obama’s flagship policy and potentially his enduring legislative legacy. Following the 2012 ruling in NFIB v. Sebelius, proponents of the ACA for the most part believed themselves out of the woods. However, a recent case brought before the Supreme Court, King v. Burwell, places Obamacare in yet another existential crisis. Appellants in the case have argued that a poorly written clause in the ACA means that previously eligible customers in states that refuse to set up their own exchange cannot receive tax subsidies. In order to protect the ACA, supporters are now turning to a conservative states’ rights legal doctrine: the Pennhurst doctrine.

The Pennhurst argument, one of several employed by liberals in amicus briefs on the law’s behalf, dictates that Congress may not swindle states by placing unexpected obligations on federal money. This legal tactic — employing a conservative doctrine to save the ACA — is part of a last-ditch effort to sway conservative justices and save the law. However, it doesn’t come cheap, as expanding the Pennhurst doctrine could have serious long-term legal consequences for how Congress crafts legislation. Policy experts caution that invoking the Pennhurst argument could open a floodgate of objections to legislation that changes how federal money is allocated to states and their citizens. But what the Pennhurst argument’s ultimate impact may be — and whether it will be used in the King v. Burwell decision at all — is still a matter of debate.

The ACA is a bit like a tricycle. Community rating, the individual mandate, and health care subsidies — the law’s three cornerstones — are the wheels, each indispensable for the law to function. Community rating requires that health insurance agencies offer the same price to all customers, although small price adjustments are allowed for smokers and the elderly. The individual mandate drives the healthy to get insurance, which, in turn, brings down the price. Meanwhile, government subsidies for health care policies make it possible for low-income Americans to become insured. Without either the individual mandate or subsidies, the ACA tricycle becomes a hazardous, lopsided bicycle.

Policymakers have previously struggled to strike this delicate balance. In the early 1990s, New York strapped its individual health insurance market to a unicycle, when it instituted community rating with guaranteed issue to all citizens — but without subsidies or an individual mandate. The result was disastrous. The price of health insurance was twice as high as the national average, and as a result, only 2 in every 1,000 New Yorkers were insured on the individual market. Despite the policy’s devastating effects, it survived more than two decades, until ACA subsidies changed the game, leading New York insurance prices to fall by 50 percent.

An adverse ruling on King v. Burwell would cause New York-style insurance price spikes in the 34 states with federally facilitated marketplaces (FFM). Since the case centers on whether the ACA authorizes the government to give subsidies both to citizens who enroll through a state exchange and citizens who enroll through a federal exchange, a decision that answers “no” would essentially dismantle federal exchanges.

King v. Burwell is largely a textual issue. The law technically mandates the use of “an Exchange established by the State,” but this wording has proven problematic. Does a seven-word typo tucked away in a subsidy calculation provision negate the rest of the law? It’s a question of contextualism versus literalism. For the most part, the liberal justices — Kagan, Sotomayor, Ginsburg and Breyer — fall on the side of contextualism, and the conservative justices — Alito, Scalia and Thomas — prefer a more literal reading of the law. In this case, the more moderate Chief Justice Roberts and Justice Kennedy are the swing votes.

The Pennhurst doctrine in large part caters to the more moderate justices. Anyone who has ever asked a friend to pick up food understands the spirit of the Pennhurst doctrine: You can’t refuse to pay back a friend for bringing you a Happy Meal if all you asked for was lunch. Similarly, if Congress offers to reimburse states for improving roads, it cannot pass a law discounting freeways to avoid paying states that have already restored them. For the most part, the Pennhurst doctrine is good old-fashioned common sense.

However, the argument used in King v. Burwell is a drastic expansion of the Pennhurst doctrine’s scope. Right now, the doctrine applies to states-as-states. This means that if the government does not properly inform the state of obligations attached to federal money, the state may take the government to court only if the obligation on the money directly affects the state government. However, the doctrine does not apply to individuals within those states. Since the subsidies in the ACA are directed at citizens, not state governments, the Pennhurst doctrine in its current form does not apply. But an expanded Pennhurst doctrine, altered to save the ACA, would. Expanding the Pennhurst doctrine to apply to states-as-intermediaries means that actors other than state governments could then find legal standing in obligations put on federal money. For example, if the government raises the minimum age to gain Social Security benefits, anyone who has paid into FICA could potentially get his or her state to challenge the federal government in court for lack of clear notice using the Pennhurst doctrine. As a result, reforming welfare programs and subsidies in Congress could become even more treacherous and labyrinthine a process than it already is.

Furthermore, the expansion could also mean that the burden would fall on the government to give ample notice to states about not only the direct obligations on federal money, but also the indirect consequences of not meeting the obligations. In the past, the Pennhurst doctrine has only come into play when the government did not clarify obligations, or what states had to do to receive federal money. However, this new interpretation of the Pennhurst doctrine focuses on consequences, or what will happen to states that do not meet obligations on federal money. And though this distinction is admittedly minor, the legal implications loom large. Consequences, unlike obligations, are often difficult to predict, and expanding the doctrine to include them could open up all types of legislation to new legal challenges. The Court would almost certainly try to rein in the scope of what constitutes consequences that the Federal government is responsible for giving advanced notice of — perhaps limiting the doctrine to apply only to consequences explicitly intended by law. But the Supreme Court couldn’t curb how broadly Pennhurst would be applied in the future through the King v. Burwell ruling alone. Lower courts could later stretch the interpretation of consequences to allow new legal challenges to laws.

Well aware of the politics of this case, proponents of the ACA push this argument because of these conservative Pennhurst expansions, not in spite of them. The doctrine is a bargaining chip of sorts, since if applied to King v. Burwell, it would then, in all likelihood, find its scope of influence expanded. The Pennhurst argument plays to the conservative justices’ belief that the federal government must be limited in how it can attach obligations on federal money. For this reason, conservative justices might be willing to rule in favor of the Obama administration to expand the doctrine’s reach.

It’s clear that expanding the Pennhurst doctrine to include states-as-intermediaries and legally mandated consequences would mark a drastic shift in the power between the federal government and state governments. And ironically, the liberal proponents of the ACA who submitted the amicus brief that detailed the Pennhurst argument to the Supreme Court would almost certainly object to the majority of uses for this new conservative expansion of the doctrine. This is precisely why the Pennhurst doctrine has a chance: Conservative judges would be loath to miss such a momentous chance to limit federal power. A swing vote like Justice Kennedy, who made clear his concern about unconstitutional coercion — another conservative legal defense of the law — during the King v. Burwell oral arguments, could be swayed by a Pennhurst argument on the case. The other swing vote, Chief Justice Roberts, is arguably even more likely to have a penchant for Pennhurst, since he helped shape the original doctrine while serving as a clerk for former Chief Justice Rehnquist.

But expanding Pennhurst to save the ACA may not be worth it, since limiting Congress’ reach could damage our social safety net and have severe, unintended implications on future litigation. Until the Supreme Court makes a ruling on the case this summer, it will remain unclear how the Pennhurst argument influences the case. However, the fact that liberals were willing to put forward such a conservative argument for the survival of the ACA speaks heavily to the urgency of the circumstances. When the ink dries on King v. Burwell, liberals may wake up to a new Pennhurst reality that they can’t just scrub out.

Art by Kwang Choi.