Why Justice Anthony Kennedy might be the key vote in the next Obamacare decision

Justice Anthony Kennedy is considered a swing vote on the Supreme Court in King v. Burwell, the case that could dramatically limit Obamacare and deplete the health-care law’s insurance subsidies for millions of people. And at Wednesday’s hearings, he voiced concerns with the challengers’ argument — and whether it could lead to an unconstitutional framework should it succeed.

Here’s the full exchange:

Justice Kennedy: Let me say that from the standpoint of the dynamics of Federalism, it does seem to me that there is something very powerful to the point that if your argument is accepted, the States are being told either create your own Exchange, or we’ll send your insurance market into a death spiral. We’ll have people pay mandated taxes which will not get any credit … on the subsidies. The cost of insurance will be sky-high, but this is not coercion. It seems to me that under your argument, perhaps you will prevail in the plain words of the statute, there’s a serious constitutional problem if we adopt your argument.

Mr. Carvin: Two points, Justice Kennedy. One is the government’s never made that argument. Number two, I’d like to think—

Justice Kennedy: Sometimes we think of things the government doesn’t.

(Laughter.)

Mr. Carvin: Well, I certainly hope you do in this case, but not … on this question. What … I’m trying to, quite seriously, Justice Kennedy, convey is if this was unconstitutional, then the Medicaid statute that this Court approved in NFIB would be unconstitutional.

Justice Scalia: Mr. Carvin, … what would the consequence of unconstitutionality be? Very often you have an ambiguous provision, could be interpreted one way or another way. If interpreting it one way is unconstitutional,you interpret it the other way.

Mr. Carvin: Correct.

Justice Scalia: But do we have any case which says that when there is a clear provision, if it is unconstitutional, we can rewrite it? … Is there any case we have that says that?

Mr Carvin: No, Your Honor. And that was really my point, Justice Kennedy. Think about the consequences … of the Medicaid deal as being coercive. Twenty-two states have said no to the Medicaid deal. That has created a bizarre anomaly in the law; that if people making less than the poverty line are not available to any Federal funds to help them with health insurance.

Justice Kennedy: I … fully understand that, but I think the Court and the consuel for both sides should confront the proposition that your argument raises a serious constitutional question. Now, I’m not sure that the government would agree with that, but it … is in the background of how we interpret this … statute.… It may well be that you’re correct as to these words, and there’s nothing we can do. I understand that.

Kennedy’s concern is that the Supreme Court would essentially endorse an unconstitutional mandate if it sided with the challenge to Obamacare.

If the federal government really did set up a scheme that only gave subsidies to states that built their own exchanges — which is the challengers’ reading of the law — it could be, as SCOTUSblog put it, an “unconstitutional form of federal coercion.” Because the subsidies are so integral to making the exchanges work, the government would essentially be forcing states to build marketplaces.