By Johnathan Silver
The Internal Revenue Service could hand Texas more than $300 million, after a federal court in North Texas ruled that the federal government improperly charged a handful of states millions in state Medicaid program fees that help fund the Affordable Care Act, also known as Obamacare.
Texas Attorney General Ken Paxton led a group of states in a 2015 lawsuit to recover money the federal government collected from the Health Insurance Providers Fee.
Under the ruling, issued Aug. 21, Texas stands to be repaid $304.7 million. Other states due to get payouts are Louisiana ($172.5 million), Kansas ($142.1 million), Indiana ($94.8 million), Wisconsin ($88.9 million) and Nebraska ($36.2 million), according to the attorney general's office.
"Obamacare is unconstitutional, plain and simple," Paxton said in a statement. "We all know that the feds cannot tax the state, and we're proud to return this illegally collected money to the people of Texas."
Louisiana Attorney General Jeff Landry heralded the ruling as a "money laundering scheme foiled." Many of the attorneys general used language similar to Paxton's.
Nebraska Attorney General Doug Peterson said in a statement: "The federal government is not able to tax the states because of the unconstitutional constructs of Obamacare,"
But the case might not be over.
"We are reviewing the decision and considering our next steps," a U.S. Justice Department spokesman told the American-Statesman.
"Kansas budgeters should not bank on this money just yet," Kansas Attorney General Derek Schmidt said in a statement. But the ruling is "well-reasoned and puts us in a much stronger position as our case goes up on appeal."
States shouldn't count on a victory just yet, said William Sage, the James R. Dougherty Chair for Faculty Excellence at the University of Texas School of Law and professor of surgery and perioperative care at Dell Medical School.
"It's really important to point out the irony of winning $300 million back from the federal government for Medicaid, when Texas turned down $100 billion from the federal government for Medicaid," he said.
Meanwhile, Texas and Wisconsin lawyers are set to argue in court Wednesday that Obamacare should be declared unconstitutional, according to Paxton's office.
States opposed to the health care law point to three aspects of the policy's history in arguing for its full dismantling.
The Affordable Care Act doesn't have a severability component to it, meaning it doesn't have language that says if any provision of it is held unconstitutional, the remaining provisions will remain intact. Generally, major legislation has such language, Sage said. Not having it opened "the entire law to invalidation if a central provision such as the individual mandate is invalidated," he said.
Also, when the Democratic-controlled Congress enacted the Affordable Care Act, it expected the individual mandate to be upheld under the legislative branch's power to regulate interstate commerce "and gave the mandate prominence to emphasize its connection to commerce," Sage said.
That didn't happen.
In the U.S. Supreme Court's 2012 decision in National Federation of Independent Business v. Sebelius, the court wouldn't accept the commerce clause argument, but Chief Justice John Roberts, along with the court's liberal wing, upheld the mandate under Congress' power to tax. That decision meant the Affordable Care Act went from creating a legal obligation to have health coverage to having a legal obligation to pay a penalty (tax) for not having health coverage, Sage said. In the Tax Cuts and Jobs Act of 2017, Congress didn't repeal the individual mandate, but it eliminated the tax penalty beginning next year.
Taken together, Sage said, some Republican states are arguing that if the only thing upholding the mandate was the tax, and now there's no tax, and there's no severability provision in the health care law, then not just the mandate but also the rest of the law is invalid.
"It's bold but misguided," Sage said of the argument. "Many people, and much of the health care industry, rely on other parts of the ACA -- including the Medicaid expansion. I don't think these are legal arguments against the ACA. They're political arguments."
Sage called what's become of the Affordable Care Act a "great tragedy."
"This law has been litigated to death," he said. "This is not something that's happened to major social legislation in the past."
(c)2018 Austin American-Statesman, Texas