Anything to see here?

Bruce Krasting's picture


Two-years have passed since the signing of the Affordable Care Act (ACA, Obamacare). At this point, one thing is clear, there was a significant “drafting” mistake in the original legislation. There has been an on-going fight over this. I think it's coming to a boil. If so, it couldn’t come at worse time for the Administration. Some connecting dots:


-A critical component of ACA was the establishment of Health Insurance Exchanges (HIXs). This was supposed to guarantee the availability of "affordable" insurance. Each state will have a HIX.


-Under ACA, a state could either, 1) establish its own HIX, 2) Do a partial HIX with federal support, or 3) Let D.C. pick up the whole thing.


-ACA provided strong incentives to the states to choose option #1 (90% reimbursement). It was originally assumed that a high percentage of the states would set up their own HIXs.


-To make the cost of insurance “affordable” there were tax-credits available for lower income individuals and families. These tax-credits are an essential ingredient to Obamacare.


-The following is the key language that is now in question: (Link)


Tax credits are available if


(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer's spouse, or any dependentof the taxpayer and.....


......which were enrolled through an Exchange established by the State



The tax credits are limited to those states that establish their own HIX. Period. The Letter of the Law reads, (clearly to me) that the ACA tax credits are not available in states that choose to have D.C. manage the required HIX (option #3)


-Many states have refused to set up their own HIX. The following shows the tally as of 11/29. Yesterday, NJ’s Chris Christie, surprisingly, said “Nix to HIX”.





-If the tax credits for “No HIX” states were to go away, Obamacare goes down for the count.


-The Obama Administration “fixed” the problematic “drafting error”. The President called the Treasury Secretary, (Geithner) and told him to fix it. Timmy, in turn, called the boss at the IRS, Doug Schulman, and told him to fix it. Doug issued a ruling that “eliminates” the conflicting language. Poof! The problem goes away. Maybe.


-Without the consent of Congress, the IRS changed the letter of the law on the most significant legislation in the past fifty-years. With out the IRS ruling, ACA was D.O.A.


The most recent development in this curious story came on Friday. Doug Elmendorf, the head of the Congressional Budget Office (CBO) wrote a letter to Congressman Darrell Issa (R-CA) on this topic. (Link)


Elmendorf’s letter was in response to one from Issa. Elmendorf frames Issa’s question:


You asked for a description and explanation of CBO’s assumption that premium assistance tax credits established under ACA would be available in every state, including states where the insurance exchange would be established by the federal government.


Elmendorf answered with this:


To the best of our recollection, the possibility that those subsidies would only be available in states that created their own exchanges did not arise


To the best of our recollection?


When the CBO originally looked at ACA, it produced reports that assumed that the tax credits would be available to all states, regardless of what choice was made with HIX. This fact is now being used as “evidence” that legislators “intended” to have the credits available without restriction.


Issa’s letter was trying to get to the facts. Why didn’t CBO produce numbers that reflected the wording of the law? Elmendorf’s response was a put down (IMHO). He’s saying, “No one brought it up”.


I’ll repeat the words that are causing the problem. What’s your interpretation? What was the intent of Congress on the issue of availability of insurance tax credits? Do you think the IRS should have glossed this over? (It was a backdoor “fix”, plain and simple) Do you think Issa is going to rollover on this? (Not a chance) Did the CBO make a mistake by not considering the plain language in ACA back in 2010? (At a minimum, it should have asked for a clarification). And how about the, "We don't recall" answer from CBO?


tax credits are available... to those who were enrolled through an Exchange established by the State





I'm not sure what to make of this. I think the language was a mistake. ACA was pushed through in 72 hours, no one caught the error.


The working assumptions provided by CBO in 2010 were not intended to confuse Congress, but that was the result.


The IRS "fix" will be challenged in court.


The Congressional Research Service has a good write up on the legal issues involved (Link).


The Cato Institute has been pounding away on this topic, Cato believes it has evidence that Sen. Max Baucus (D-MT), Chairman, Committee On Finance, spoke of ACA limiting tax credits to only states with their own HIX. (Link) (Video). If correct, it would be a problem for ACA. I doubt that Baccus is going to speak up on this. After all, he was one of the guys running the show.


I don't think this is as cut and dried as Cato makes it out to be. At a minimum, Baccus was confused on the critical question of tax credit availability. That is the point, the big-shots running the show did not really understand what they were doing. Most legislators had no clue what they were signing.


There is no easy fix to this. If you asked the House how it would apply the tax credits today, it would limit them, as the original law was written. That vote would be on party lines. There will be no effort to clarify the original language, that would open a huge can of worms. Stay tuned...




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Tunga's picture

The head of the IRS is one; Jesus F. Mendez - Rodriguez.
Assertions to the contrary are bogus.
The Congress deliberatly obliterated the text of CFR 250.11 so anyone interested in confiming what the Tunga is telling you will need to consult a copy of the CFR dated before 2001.

sun tzu's picture

You are all racists. The whole lot of you. Everything is good, no great. There is no deficit or unemployment. Anyone who says there is must be a racist. 

All Risk No Reward's picture

More re-arranging chairs on the Titanic.  Talk about **anything** but the real issue.

The debt isn't payable.  It's all fraud.

Big Finance Capital is waging a covert, financial war on people who are not smart enough to figure it out or who are collaborators.

This isn't conspiracy theory, it is mathematical fact and the chart, below, proves it beyond all doubt.

Debt Money Tyranny

ObamaCare is a distraction...  financial warfare is the name of the game...  and the victims don't even know they are victims.

Tunga's picture

Here's a link to a photo that shows what the page in the CFR where the Secretary of the IRS is named looks like now.
Read it and weep my pretties.  You been had. Big time. 

Tunga's picture

A Non Resident Alien is a free state sovereign. AKA a human born upon the land of one of the freely associated compact states. 

Section 59B Page 170 Lines 1-3 HC Bill: Any NONRESIDENT Alien is exempt from individual taxes.  Page 45 (47 on PDF) TITLE IV—AMENDMENTS TO INTERNAL REVENUE CODE OF 1986 Subtitle A—Shared Responsibility PART 1—INDIVIDUAL RESPONSIBILITY SEC. 401. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE. (a) IN GENERAL.—Subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new part: ‘‘PART VIII—HEALTH CARE RELATED TAXES

  Subpart A—Tax on Individuals Without Acceptable Health Care Coverage     ‘‘(c) EXCEPTIONS.—   ‘‘(2) NONRESIDENT ALIENS.—Subsection (a) shall not apply to any individual who is a nonresident alien. 
So there. Only those folks who are government employees are liable to pay for the new government Healthcare. 
Fear. Have you had yours today? 


moneybots's picture

"We have to pass it to find out what is in it."


That is the way a fraud is perpetrated.

adr's picture

I pay $5k a year for insurance, my employer pays another $6k, 90% of my premium 10% of my dependent. I pay 10% of any hospital bill and $20 fo a doctor visit.

After adjustments the insurance company has paid out about $30k in claims. One baby born and a broken arm, plus a few doctor visits.

My employer and I have paid much more into the system than was paid out. Even with the outrageous doctor fees and idiotic illegal billing practices.

The easy answer is to outlaw all forms of health insurance and mandate that doctors are paid by the hospital, instead of allowing seperate billing by ER doctors and the hospital. Tell me again how a room costs $8k an hour?

When I was a kid doctors made housecalls and didn't even charge for them. Of course we had a local pharmacist who actually mixed drugs, instead of taking pills from a giant bin and placing them in a small bottle. Before you think I am talking about the 1950s or earlier, I'm talking about the 1970s. I went to ER in 1990 and the bill was $80 without health insurance.

Clesthenes's picture

Here’s the situation: Social Security is broke: too many people retiring and taking money out, too few putting money in.  If this continues, the system crashes.


All “prescription drugs” contain poisons.  We know this because they are approved by the FDA.  Before the FDA will accept a drug for examination, the applicant must submit a so-called Form LD50; “lethal Dosage 50%”.  That is, what dosage will result in a 50% death rate?


Hence, all prescription drugs and probably many, maybe all, over-the-counter drugs contain low levels of poisons.


Why do American governments subsidize such poisons (Obamacare et cetera)?


They want to make it as easy as possible for people to poison themselves, and die as quickly as possible after they retire.


The system of plunder will last longer.


You don’t need to die this way.  I’m 68 chronologically; but my biological age is 30-40 years younger.  I hit baseballs for exercise; and I frequently take turns with former pro and college players who tell me that if I played Men’s Senior League (a level of play equal to a major college), I would “wreck” the league.  In other words, at 68, I have the health, vitality and body of a near-professional athlete somewhere between ages 20 and 30.


This result was no accident; but the result of following a health regimen I developed the past forty years.  This regimen will make all health insurances completely un-necessary; eliminate all needs for medications and doctors (except, possibly, for broken bones); significant savings on food purchases (that is, a significantly more efficient digestive system, and immune system); and, if followed moderately, a lowered biological age by five to twenty years.

blunderdog's picture

Come, now.

All drugs ARE poisons.

Yen Cross's picture

Obama care? what a joke! I'll leave it at that ;-]

Yen Cross's picture

Have your agent contact me/ I'm PPO with $20 co-pay paying almost $5k annually/ No health issues.

 Finally the plane shows up?

johnQpublic's picture

1992 : 4 stitches in thumb....232 dollars without health insurance

2011 : 5 staples in scalp(easier and faster than stitches)....3572 dollars not covered by insurance company, and 2800+ paid by my insurance, totally over 6 grand


explain why....anyone?

i sure as shit cant

AGuy's picture

"explain why....anyone?"

$400 for the actual work $6200 for the paperwork, Doctor's malpractice, and unnecessary tests.



Hannibal's picture

I cancelled (fired) without exception all of my insurance.

TuffsNotEnuff's picture

May I mention Veterans Administration ???

Community Health Care clinics?


All of these offer good service at low cost. Single-payer generally, though CHCs do take insurance.

A third to a half the cost for treating chronic care patients -- $1.5-trillion a year for all of those folks under the insurance/scam systems.

Oh, "Free Market" folks don't like to hear that?

Oldwood's picture

We serfs will have to learn to accept our station in life. Ultimately the fuedal lords will have such a firm grasp about our throats that we will find it much easier to just go along to get along. The Lords will provide, admittedly in a very limited way, and due to their oppresive powers, no one will dare try to escape the "system". But it will be fair. We will all at last be equal. No one need try harder or be creative more than is required to squeaze out the benefits of our meager "rights". Its all happened before.

Yen Cross's picture

Never submit, and hold your(close) friends Dear...

Yen Cross's picture

You all have excellent arguments/   I can't take a side! Brilliant minds<>

 It's all elbows and assholes/ Does that help?  JR vs Senior. does that help? My father is a prick/

GMadScientist's picture

Well-within the wheelhouse of the wheeling/dealing weasels.

Dangertime's picture summarize.


Congress isn't the only entity making or altering laws.  Now the IRS does it.

rwe2late's picture

Congress makes laws? What does that mean?

Is that what high school civics still teaches?

As though what the Constitution intended still applies?

Congress (the supposed representatives of the People), no longer regulates money or declares war.

Those matters are determined by a quasi-private body and the President.

Congress no longer protects the Bill of Rights. They formally conceded that responsibility to the executive branch with such as the NDAA and the Patriot Act, though in fact the responsibility had already been conceded.

Congress approves treaties? As if treaties still held the force of law, except when the executive branch, including its Pentagon/Homeland military chooses to selectively “enforce” its own bizarre interpretations of treaty terms. Anyhow, the President now makes his own (secret or not) agreements with foreign governments irrespective of what “Congress” publicly proclaims.

Laws? What are laws? Whatever the president’s signing statements and executive orders say, not what Congress might have “thought”. And what does a “law” mean if it is not enforced or applied?

The IRS has long been used, since at least Capone, to selectively target those who meet with executive disapproval, and selectively ignore even greater thievery by those favored.

But to get to the main topic.

Well-paid lobbyists write the legislation which is rubber-stamped by well-rewarded Congresspersons. Both are employed by the same benefactors to “make” the self-serving laws which are then conveniently applied or not by well-rewarded executive “leaders“.

Of course, the laws are only meant as a guidepost to authorize what would otherwise be theft and fraud. Should anyone dispute that. an army of corporate and government lawyers are ready to disguise what is being done by claims of secrecy privileges and confidential “settlements”.

And then there is the Supreme Court, ready to, oh, let’s not even go there, I’m already in need of more coffee.

a growing concern's picture

This is nice investigating by Bruce, but no one cares.  The rule of law died some time ago, and even the Constitution is brushed aside at the whim of an executive order.

magpie's picture

Getting Obamacare enacted was the last deed of the Supreme Court, it will probably be sidelined and dismantled after it votes down gay marriage.

Yen Cross's picture

This is for Red Ryder/ and Lunatic Fringe. Remember the movie "Vision Quest - Lunatic Fringe by Red Rider - YouTube

Yen Cross's picture

No comment/ I got busted for talking about volcanos and shit. I'm out

 Regarding the Euro/ I would be a sell the top, not buy the dip person. The euro has traded (weekly candle) 250 pip max range in the last week. The euro has traded 1.29-1.31 roughly over the last 120 days?  Lower highs, lower lows...  Sell the rallys under the 200 day average. Be safe

   I'm not a euro trader/ disclaimer I use the euro for my cross trades/

ISEEIT's picture

Just runnin' my mouth....But I see 126.50-131.50 as the band.

Yen Cross's picture

Decimal points? Are you trading copper? Just joking/

GMadScientist's picture

123.50 after Germany's recession is formalized.

Das boot! Down scope!

pfairley's picture

Who would oppose the interpretation favoring tax credits to citizens with no state HIX?  

 More critical is the meager '$750 annual penalty tax' to people who don't buy health insurance....similar small tax penalty to companies that don't provide health care.

 This is too small an insurance premium at USA's high health costs...and part of the sales scam that Obamacare was a 'good deal'.

 The penalty tax has to go up so much to properly fund  true health costs...we should expect a revolt on the high debt added to the US govt...and/or a grass roots revolt people who thought they were getting cheap or free health insurance from the govt.


Oldwood's picture

We still have the "rich" to tax! There's plenty O money out there.

Tapeworm's picture

Is that 750 per person? As in 3000 for a family of four?

jballz's picture


yeah this nitpicking rant is gay as a rainbow unicorn.

We all know the gov follows the letter of the law, this sill be a big sticking point for sure.


All this amounts to is a sanitized version of those stupid emails from yeteryear (Obamacare says they will poison your puppies page 461.... Obamacare says they will seize all the money on the planet page 558.....waaaaaaaaaaaa)

Panic demise, now play loopholes.

Get a fuckin life, blogger. 

Body of Lies's picture

What was Congress' intent? you ask ... How the Fuck would they know ... they never read the bill ... and besides they had to pass the bill to see what was in it

GMadScientist's picture

Their intent was that you only get the tax credit, if you actually need it (i.e. had to because you couldn't pay).

This differentiates it from an across-the-board tax credit that would be de facto vouchers for people with insurance (and make the bill cost more).

Now, back to your regularly-scheduled hand-wringing and panty-twisting exercises...

BraveSirRobin's picture

ACA is the most screwed up thing this country has done. What a shoddy process all the way through. Pelosi was right - we had to pass it to find out what was in it. Morons. We are all doomed because we sent these clowns back into office.

The people get the government they deserve.

New_Meat's picture


"I'm not sure what to make of this.  I think the language was a mistake.  ACA was pushed through in 72 hours, no one caught the error."

Actually, there was no bill in the Well, the promised "Post all Bills on the Internet for five days before a vote," didn't happen, and San Fran Nan famously said "We'll have to pass the bill before we can see what is in it."  Therefore, no one knew what was there, nor could they.  Or maybe it was being manipulated even as the "vote" was rammed through.

Some poor schmuck at the Center for American Progress dropped the ball that you point out, forgot to put in normal severability language, and couldn't figure out how to explain that a tax is only a tax when the Secretary deems it to be so.

"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean, neither more nor less."  "The question is," said Alice, "whether you can make words mean so many different things?"  "The question is," said Humpty Dumpty, "which is to be master?  That's all." --Lewis Carroll's Management Handbook

It took the most adroit powers of the Chief Justice to invent a way out of this mess; at least for the early inconsistencies.

- Ned

Tunga's picture

Yo Ned- Check USC 26 7701 paragraph 30 to see your ass defined as a corporate entity. Since 1954 Ned. The Sups only had to read the law. Now you can too. Dumb ass. 

zorba THE GREEK's picture

Yea though I walk through the Valley of Death, I shall fear no evil,

because I carry a loaded 357 Magnum with me wherever I go.

idea_hamster's picture

My sneaking suspicion is that the DC crowd assumed that this program would unfold like Medicaid.  

IIRC, states aren't required to set up their own Medicaid systems, and if they don't DC will run one in that state.  But each state did do its own system because the federal cost sharing was there, states are power-jealous, and back when Medicaid rolled out, they could afford it.  In fact, it was a great employment program, expanding state payrolls.

I have a hunch that none of the out-of-touch DC types thought that the states would opt for DC to run the program.  They may have even put this in thinking it made state-level plans a sure thing.

But today the state coffers are empty and there are enough nay-sayers to make holding out politically palatable.  Lots of folks simply don't believe in the Great Society rhetoric any longer.  And a fair amout of those are people who would be getting the tax break.

I think this was a surprise to DC, and the IRS rulemaking end-run shows that.

As far as the admin law element, I suspect that the courts would overturn the rule if we could find a party with standing to bring the case.  But I don't see that happening.  DC will have to put together their own version of HIX and run it -- could turn out to be the best of the lot, given that it will draw from multiple state pools -- the Powerball of HIX.  Or it could rot.

Meremortal's picture

This would be important if the USA was still a nation of laws.

SmittyinLA's picture

Let's hope the house axes the deductions for state income taxes as their first fiscal cliff cut

Drunken Monkey's picture

"What was the intent of Congress?" Implicit in that question is the assumption that the members actually read the bill, and were thus in a position to form an intent, which I don't belive for a minute.

Everybodys All American's picture

The bottom line is that most people and therefore states don't want this health care system from Obama. Even now this far along the polling suggests a lot of people hope it is not implemented. The final chapter has certainly not been written.

three chord sloth's picture

Most state governments, the smarter ones anyway, realize that this is a bait-and-switch con. Once the state takes on the burden of implementing this thing, the feds will begin paring back the payments... leaving the state to either kick folks off (and get pilloried) or pick up the slack. Just like what happened with Medicaid.

LawsofPhysics's picture

The plan is simple, all those states that say "no", will lose all the "free" federal goodies. All states must be "dependent". Independence will be crushed at all cost. "Healthcare" will be no different.

spanish inquisition's picture

"Cut! Print it! Set up for the next scene." "What about the boom mike in the shot?" "Don't worry, we will fix it in post." 

Bruce Krasting's picture

You're thinking movies, I'm thinking circus.

A circus movie? That might work...