Interest that is defending itself, that is defending its right to pollute, that is endistinguishing its ability to compromise our atmosphere, compromise our health, compromise our great oceans and waters. This should be an easy struggle. This should be an easy struggle. But its not, and it will be a mark of shame on this generati generation, and it will a mark of shame on this buildin buildit i have goin the choice between the clear information from the that given the choice between the clear frftion from the scientists shall the clear experience of what is happening in all of our states and the power of the special interests, we ignored the first and we yielded to that power of those special interests. Mr. President , i yield the floor. Mr. Whitehouse mr. President . The presiding officer the senator from rhode island. Mr. Whitehouse i ask that the senate proceed to the immediate consideration of calendar number 146, Senate Resolution 156. The presiding officer the clerk will report. The clerk calendar number 146, s. Res. 156, entreesing the sense of the senate on the tenyear anniversary of nato ally command transformation. The presiding officer i is there objection to proceeding the measure . Without objection. Mr. Whitehouse i further ask that the committeereported substitute be agreed to, the resolution as amended be agreed to, the amendment to the preamble be agreed to, the preamble, as amend, be agreed to and the motions to reconsider be laid on the table, with no intervening action or debate. The presiding officer without objection. Mr. Whitehouse i ask unanimous consent that the senate proceed to the immediate consideration en bloc of the following resolutions, which were submitted earlier today, Senate Resolutions 207, 208, 209, 210, and 211. The presiding officer without objection. Mr. Whitehouse i ask unanimous consent that the resolutions be agreed to, the preamble be agreed to, the motions to reconsider be laid on the table, en bloc, with no intervening action or debate. The presiding officer without objection. Mr. Whitehouse i note well, before i i note the absee of a quorum, let me express my appreciation to the senator while we go through the closing script here. I appreciate very much his courtesy in accommodating news this way. I note the absence of a quorum. The presiding officer the clerk will call the roll. Quorum call the presiding officer the senator from rhode island. Mr. Whitehouse may i ask unanimous consent that the quorum call be suspended so that senator moran may be recognized and well proceed with the closing at the conclusion of his remarks. The presiding officer without objection. Mr. Moran mr. President , thank you, and thank the gentleman from rhode island. Three years ago Congress Passed a Massive Health insurance law, didnt have a single republican vote, and it had significant opposition by the public. In an administration proclaiming to be the most transparent ever, this 2,700page bill was ran through congress in the Early Morning hours on christmas eve. Even then, speaker of the house pelosi said that congress had to pass this bill so that we could find out whats in it. Well, we did. It was passed. And the American People are not liking what theyve discovered. While the president promised the Affordable Care act would Lower Health Care costs and strengthen our health care system, the law instead is increasing Health Insurance premiums, slowing economic recovery and hindering job creation, and we should not allow the administration to continue to ignore this reality. We should, we must permanently delay the Affordable Care act. Since its enactment in 2010, 18 components of the Health Care Law have been changed, canceled, or dlaismed the president downplays the laws substantial defects by characterizing them as glitches and bumps that are to be expected. He also claims that the Affordable Care act critics are responsible for the laws broken promises by arguing that the problem is quote fox folks out there who are actively working to make this law fail. Meanwhile, the Affordable Care act is slowly unraveling. Every day brings new information about missed deadlines, funding shortfalls, soaring Health Insurance premium rates and a technical implementation that is frowndering. It is is it any wonder that this law fins to be publicly unpopular . With the majority of mandates, fees, and taxes taking effect in 2014, we are already beginning to see the alarming effects of the law on our employees, employers, and our commitment of it is a broken promise, one after another. Promise number one in attempting to convince the American People that the a. C. A. Was guide, the president promised it would quote save families 2,500 in coming years. But since 20508, the average American Family has seen Health Insurance rise more than 3,000. Nonpartisan actuaries estimate that National Health spindz spending will grow at a rate of 6 annually between 2011 and 2021. As National Spending ticks up, American Families will continue to see their monthly premiums go up. States are beginning to release details on the rates consumers will pay for a. C. A. Related Health Insurance starting on january 1. An unfortunate pattern is emergessing. A. C. A. Mandated insurance is going to increase costs for many mens. Recently the state of indiana announced that insurance rates will increase 72 for consumers in their individual market. Consumers in ohio, florida, south carolina, and maryland have also anouned that they are expecting to see their premiums increase significantly. Just yesterday the georgia insurance commissioner asked the department of health and Human Services to extend the deadline to approve mettle plans in their state because some rates were expected to rise in georgia by 198 . In my home state of kansas, i consistently hear concerns from individuals, from business owners, and even local government officials about impending costs of the Affordable Care act. For example, rural Kansas School districts and special education coe ops whose budgets are already stretched thin will now be forced to cover the costsssociated with the law. This has resulted in the reduction of employees hours ants may trigger layoffs in order for districts to avoid significant a. C. A. Related penalties. Its sad to visit with the director of a special education coe op only to learn that less services are going to be provided to specialneeds students because of the costsssociated with the Affordable Care afnlg act. Mr. President , the American People were promised savings and security an and instead were experience ago loss of both. The Affordable Care act is leaving americans are less options and simply unAffordable Care. The second promise promise number two the president said no matter how we Reform Health care, well keep the promise that if you like your doctor, youll be able to keep your doctor, period. Reality has since whittled down this promise dramatically. If you go to the Affordable Care act web site today, you will find this far less confident statement. Depending on the plan you choose and the market plashings you may be able to keep your current doctor. Unquote. Mr. President , even large labor unions have recently criticized the president and Congressional Democrats for breaking their promise. Notably, the National Treasury employees union, the union that represents most i. R. S. Employees, is urging its members to write their elected officials to oppose any effort that would force them to participate in the Health Insurance exchange. Further, several unions stated, when you and the president sought our support for the Affordable Care act, you pledged that if we liked the health plans we have now, we could keep them. Sadly, that promise is under threat. Im quoting the union. And another statement, approximately 3 million laborers, retirees and their families now face the very real prospect of losing their health benefits. This i must remind you, was something you promised would not happen. A third promise, promise number three, the president indicated that the Affordable Care act would quote lower costs forbe the federal government, reducing our deficit by over 1 trillion in the next two decaded. It is paid for, it is fiscally responsible. Unquote. The only way the Affordable Care act will reduce deficits is by grossing increasing the taxes and feesssociated with the law. One wonders how anyone believed at the time that the new Entitlement Program would ever save money. These broken promises are more than just words. The administrations false starts and early failures are just the beginning. The harm this law will do to individuals, families, and businesses will continue to emerge. In less than three months, individuals will be asked to start enrolling in Health Insurance exchanges. When insurance rates, coverage requirements, and subsidy amounts are still rarnlgly unknown. Increasingly, the question is being asked as to what happens to individuals required to buy Health Insurance or face penalties if the exchanges are not ready on time . Im the Ranking Member of the Senate Appropriations subcommittee on healt health ann services. I offered two amendments to the fiscal year 2014 bill that would bring some certainty over this to this overreaching excuse me, this overarching issue. First i offered an amendment to codify the administrations decision to delay the employer mandate. While many of my colleagues on the democrat side issued press releases praising the administrations decision to delay, when asked to affirmatively vote in the committee to flai for one year, they all voted no. The amendment failed 207b a straight partyline vote. The Second Amendment i offered delayed the implementation and enforcement of the individual mandate for one year. While i support the delay of the employer mandate, in that disirks like it or not, the administration undermined its own credibility in stating at that the Affordable Care act will be implemented on time, as promised. We should not and cannot require individuals to risk their Health Care Coverage by signing up for an Unworkable Program with a dubious future. Unfortunatelunfortunately, my cs again on the democratic side disagree. They refuse to extend the exemption that the president granted to businesses, to employers, to all americans, to families and to individuals. The evidence continues to show that the Affordable Care act is so large and so quol convolutedt it di cannot be implemented into action. Think tanks have reached the same conclusion. Almost everything we were told about the Affordable Care act is untrue. Mr. President , we were told three years ago that we need to pass the Affordable Care act to nienfind out whats in it. Now we know, and its not good. We dont need to force american frames familiefamilies to endure years to see just how bad it will be. Mr. President , i note the eight absence of a quorum. The presiding officer the clerk will call the roll. Quorum call the presiding officer the senator from rhode island. Mr. Whitehouse i ask the quorum call be lifted. The presiding officer without objection. Mr. Whitehouse i ask unanimous consent when the senate completes its business today, it adjourn until 9 30 a. M. On thursday, august 1, 2013. And that following the prayer and pledge, the morning hour be deemed expired, the journal of proceedings be approved to date and the time for the two leaders be reserved for their use later in the day. And that following any leader remarks, the senate be in a period of morning business until 11 00 a. M. With the time equally divided and controlled between the two leaders or their designees. With senators permitted to speak therein for up to ten minutes each. And that following morning business, the senate proceed to executive session to consider calendar number 96, the chen nomination under the previous order. Finally, that the seconddegree filing deadline for amendments to s. 1243 be 11 00 a. M. Tomorrow. There will be two roll call votes at 12 00 noon tomorrow, confirmation of the chen nomination and cloture on the thud bill. Additionally, there will be a vote in the afternoon on confirmation of the power nomination. If theres no further business to come before the senate, i ask that it adjourn under the previous order. The presiding officer the Senate Stands adjourned until Senate Stands adjourned until you one, i think they serve as a window on the past to what was going on with american women at any given time in our past history, so if you look at the first ladys life you get a few of whats going on with women. The other thing that i find very interesting from a womens history standpoint is that its the conjunction of the public and private lives of women which is a topic that many scholars are very interested in and i think first ladies just epitomize the coming together of the public and the private life of an individual. Up next, a hearing on the implementation of the new Health Care Law. Members of the House Oversight committee debated the legality of provisions in the law that allow tax credits or americans who buy Health Insurance through federally run exchanges. The issue of the tax credits is now the subject of litigation. The Committee Chairman is congressman darrell issa of california. This hearing is about three hours. [inaudible] taxpayers have the right to know what they do for the government. We will work with partnership watchdogs to deliver the vexed American People and and bring genuine reform to the federal bureaucracy. This is the mission of the oversight and government reform commission. We are starting a little bit differently. Our colleagues are having a meeting with the president this morning from tenet ought to 11 00 so they will be joining us in just a moment. They will miss much of the oral testimony at the beginning here. The Ranking Member. Will go last in this order. We will receive the Opening Statement and she will give her Opening Statement as well so the order will be slightly different than what is typical but we are grateful for everyone to be here. These implementation of obamacare. While the substance discussed during todays hearing may be complicated principles involved enough. Congress makes laws. The president executive branch responsible for hearing those laws out as they were written. At issue today is an example of the regretting a lot to me political objectives. 2010 democrats in both chambers of commerce passed a law that expanded the control and waldman over Americans Health care choices through rules taxes and subsidies. To encourage states to set up a statebased exchange the senate and house created a subsidy for individuals only in states that operate their own health exchange. Section 1311 of the Affordable Care to Health Insurance nonprofit entity has established by a state. Section 1401 subsidies provided monthly when the taxpayers were covered by qualified health lan enrolled through an exchange established by the the state under section 1311. As the congressional legal analyst is made clear their language estate straightforward. A stricture lee texel analysis will likely lead to the conclusion that the irss authority to issue the premium tax credits is limited only to situations in which the taxpayers enroll in the state established exchange two therefore nairas interpretinterpret ation that expanded tax credits of those enrolled in those dictated exchanges will be contrary to clear congressional intent. And will likely be deemed invalid. At the time Congress Passed a upon the care the administration did it would be more popular in states would willingly create their own exchanges. However 34 states have refused to participate and left exchanges to the federal government. Therefore the impact of the irs and the treasure ruled extensive tax credits and federal changes is substantial. The cbos established roughly 75 of the cost of subsidies will be new federal spending. As a result this role will add hundreds of billions of dollars of federal spending which was not authorized by congress and the statute. Second the subsidies are tied to the laws employer mandates so employers face large tax penalties if their workers receive subsidies therefore the irs and treasuries willing harms many employees and workers in states which choose not to grade a exchange. My state of oklahoma is one of the state. The leaders in my states protect employers from the employer tax penalties and protect future generations of americans who will face increasing debt by not creating a state exchange do that with their option within the law. But now the irs and treasures were less invalidated my states decision harming the employers and workers in my state in adding to the federal deficit. Because of the significance has conducted conducted over cipro for year focusing on the process and factors of the irs and treasury have considered. Evidence we have gathered is consistent. The irs was given an enormous role in implementimplementing many obamacare provisions but the issue of whether tax credits would be available in federal exchanges doesnt appear was even considered are given substantial time or attention. Prior to the proposed rule the irs only had a single week reason for supporting their interpretation of the destination that the secretary created federal exchange in the states that choose not to operate their own was enough to authorize subsidies in the states as well. After several commentators point out the irs rule is inconsistent with this issue treasury signed one individual together additional information. Rather than doing him by survey of the statute in legislative history appears as individuals sought out information to support their predetermined conclusion that the tax credits would be available for federal exchanges. The three briefings with me so irs and treasury officials could not room for details and provide evidence for factors that they may have considered. Theres virtually no evidence to support treasurys assertion that they carefully consider the language of the statute in the legislative history. For example in a letter to chairman issa october 12, 2012 assistant secretary for tax policy stated that there is no discernible pattern to how Congress Views the Term Exchange in obamacare. During the course of those briefings iris and treasury employees admitted they didnt organize or categorize the usages of exchanges in any way. Today i hope to gain a bit more clarification from Emily Mcmahon assistant secretary for tax policy about irs and treasuries careful consideration of the statute to bring light to this conversation. Also look forward to hearing from witnesses on the first Panel Including my own good friend Scott Pruitt Pruitt the attorney general thursday for your perspective on this rule. I look for tour conversation and as i mentioned before the Ranking Members comments will come at the conclusion of her Opening Statements members will have an additional seven days to put their Opening Statements on the record and i now recognize her first panel. The honorable scott pruett from the state of oklahoma. Thanks for being here. Dr. Charles willey is the chief executive officer for Innovative Health ,com,com ma in their Health Advocates incorporated. Mr. Simon lazarus is the senior counsel the constitutional liaison. Jonathan adlers Professor Bob at case western reserve or university and author of taxation without representation illegal irish rules to expand tax credits under the Affordable Care act published in Health Matrix journal of medicine. Thank you all for being here. Pursuant to rules all witnesses will be sworn in before they testify. If you would please rise and raise your right hand. Thank you. Do you solemnly swear from the testimony youre about to give will be the truth, the whole truth and nothing but the truth so help you god . Please let the record reflect that the witnesses all answered any from me. I i will ask you dilemma it your testimony to five minutes and your will be entered in the record. Attorney general pruitt you are first up to bat sir. Chairman lankford and Ranking Member sphere and make members of the 70 thank you for inviting me to appear before you today to present concerns of the affordable carrots in a legal and economic implications of actions taken by the u. S. Internal Revenue Service the Treasury Department and the is department of health and Human Services. This is a critical issue for oklahoma and for every one of the 34 states that chose not to establish a state Health Care Exchange a choice provided to us by congress and affirmed by the United StatesSupreme Court. Because of the serious ramifications facing our state to appreciate the attention the subcommittee is giving to these concerns in this matter. First i would like to be clear about my intentions regarding Health Health care policy and the law. My comments when i focus on the need for Health Care Reform or the wisdom of the policy choices embodied in the aca. Her responsibilities as attorney general is to preserve the rule of law, to give meaning and effect to that which you have passed in congress for protecting the rights and interests of our citizens. When Congress Passed the health care as they provided the states a choice. That choice is whether to establish a state Health Care Exchange or two off toward federal exchange. The aca included with the choices have consequences and benefits the states had to consider. As the chairman indicated our policymakers didnt that go through that process in a collaborative fashion. Among the outcomes of the state choosing not to establish the exchange is a consequence of no subsidies flowing into that state though provide a benefit of no penalties in the employer mandate arena for Large Employers. Our governor mary fallin and other statewide stakeholders thought thoughtfully and thoroughlthoroughl y review the options provided under the Affordable Care act and ultimately chose not to establish a state Health Care Exchange but after that decision was made they irs finalized a rule that would strip states of the main benefit of their choice, no Large Employer penalty. Congress provided this choice in the states in the irs is attempting to take that away by a rule. The irs is acting as a super legislative lobby and its capacity. By enacting Regulations Congress did not authorize their actions conflict with the aca and when informed of this and regulators ignored public warnings and concerns that pointed out the problem. Many months before the ruling filed in 2012 the reg was made as early as 2000 with respect to these concerns. The irs does not have the authority to expand access to subsidies beyond what is clearly written the law. As the chairman indicated as billions of dollars flowing unauthorized by congress. Regulation appears geared towards enacting the agencys own policies than faithfully following implementation of a law passed by congress. This is why in september of last year i filed a lawsuit in the district district of oklahoma challenging the irs rule and his of authority on Affordable Care act. Act. Our unique position allowed us to lead the charge against rogue agency is using law to advance their agenda. As we stated in our lawsuit oklahomas position has been clear from the beginning of the Large Employer penalty not only violates the law went implemented in states without a Health Care Exchange for cripples businesses with burdensome and onerous requirements and penalties. Or Mediumsized Company already struggling to meet the needs of its thousands of employees that want of employees the ponte equates to millions annually when one of its employees qualifies for subsidy under subpart a. Until the bomb demonstration has made it easy but its its reversal and delay the mandate really demonstrates and acknowledges the Large Employer mandate is in fact a complex job filling in harmful mandate in businesses and again oklahoma at is considered a Large Business under the statute. Exactly what this burden cause is a serious matter and if the aca exams employers and states in their own exchange that exemption should be recognized and enforced and we appreciate the committees focus on that. These issues are very important to the great state of oklahoma because we value our stability and growth in rule of law. Our fight continues on behalf of oklahoma citizens to confront the when it seeks to overreach its authority and circumvent the law. We hope to obtain relief in this matter to the courts but we welcome congressional oversight being brought to bear on these agencies. I look forward to answering any questions you may have been i thank you for your time this morning mr. Chairman. Thank you. Dr. Willie. Stay mr. Chairman and members of the Committee Good morning and thank you for your service to the Great American taxpayer the forgotten man. I am Charles Willey and internal medicine physician in my 29th year in st. Louis. My care patients has me aggressively leading them to longterm health. My Health Care Team is responsible and accountable for both the economic, the clinical and economic outcome care of our patients. Since 1992 we have been prepaid for Population Health managing one person at a time. In effect we are paid to keep their Medicare Beneficiaries happy healthy active and energetic for life. We intervene early and often. We spend whatever time and resource necessary to bring them to longterm health. Our so this fivestar quality and satisfaction at a medical cost ratio of 60 . Now this is happening on a scale of 40,000 members in a Medicare Advantage plan that i sounded in st. Louis in 2003. Witness that being healthy cost less than being sick. Ladies and gentlemen please understand the implications if all Medicare Beneficiaries were cared for in this method you could freeze the revenue to the medicare program, but nothing installed the greatest financial crisis of our time, the 70 trilliondollar application to the current payers of the medicare tax. We achieve this by aligning the incentives of the health plan the positions and the physicians with the longterm health of the patients. Its crucial that Medicare Advantage also liberates us from much of the destructive live regulation found in regular medicare law and the fcc. Now i have set about to replicate these methods for my employees and those of other medical practices and businesses in my town. Unfortunately obamacare increases destructive regulation , does nothing about the legions of ambulance chasing lawyers and creates new entitlement to become and remain sick. Its treating these problems caused by government with more government. As an employer 56 Health Care Workers it is doubly important that there health plan give them economic responsibility for Health Decisions and shortterm reward for becoming and remaining healthy because i need them to model and teach this to my customers, our customers and patients. In our health plan we have actually been increasing the deductible folic spending our Health Savings account. Now obamacare would limit our deductible to 2000 for as we would make it is high as the maximum hsa contribution and help our employees funded. This gives their staff ownership and a high motivation to avoid unnecessary costs by shopping wisely for Necessary HealthCare Services and by becoming healthy , the service is not necessary. Our benefit as i would have a higher premium and copayment for smoking, being of these for not complying with diabetes recommendations and control. These policies are good for our employees helping good for their savings accounts as well. Now obamacare cause these policies discriminatory and prohibits them. This is a clear example of government promoting and maintaining illness, preventable illness. Discrimination against all this new through no fault of ones unlike Ovarian Cancer is unacceptable but it is good to be candid about unhealthy behavior because that will motivate the behavior to stop. To do otherwise is enabling much like a spouse or parent of an alcoholic. The of courage to oppose the selfdestructive behavior actually promotes and maintains the illness increasing the probability of greater illness, disability and even premature death and increases costs. This is how obamacare is making entitlement of becoming and remaining sick. It codifies obesity cigarette smoking ongoing Substance Abuse and other choices, unhealthy choices to be not discriminated against and benefit design. My plan for my employees would lead them to health but i cant offered under the employer mandate. Now the irs is blatantly ignoring the laundry whiting it to include the subsidy in a federal exchange triggering a penalty against me the employer. Missouri opted out of the state basic change there for protecting my employees from unhealthy benefit design and higher costs and protecting my company from the irs fines. Im not a criminal. I dont need to be fined for helping my employees achieve health for the future. The federal government mandates discourage personal responsibility necessary for good health and enables selfinflicted illness. The oregon Medicaid Expansion enable beneficiaries to resume smoking since they could again afford cigarettes and there were no disincentives. These are the reasons by company and other Health Advocates have joined sebelius to overturn your Congressional Authority by the irs and rewriting the law. Ive dedicated my career to reforming health care from the marketplace with relief from this illegal aspect of the law. We advocates continue our plans for highquality low Cost Health Care plan for many nonmedicare people in our town. Our experience in pension care including understand the economics of the care cannot be replaced by nameless faceless faraway bureaucrats. This is america. Its demoralizing and humiliating for me to debate for the liberty to do what i know best and for that which for that which i am welltrained. You must defend us from government and free us to take care of our patients. Please join me in my oath to first do no harm. Respectfully, thank you. Thank you. Click your microphone on right there before you talk. Thank you. Thank you very much mr. Chairman and members of the committee for inviting me today. I look forward to trying to help evaluate whether the Affordable Care at premium assistance tax credits and subsidies should be fully available to all eligible individuals on aca prescribed exchanges whether they are facilitated by state governments or by the federal government. I believe that they should be. I believe that the Treasury Departments interpretation is correct, that reviewing courts must defer to it and they should not and will not overturn it. I copanelists have a contrary claim. And they do so i believe because they adopt what i would respectfully call the quarantine approach to statutory interpretation. They zero and selectively on certain provisions of the act and one in particular, with that provision out of context and then impose on it and interpretation which in the context of the entire statute and certainly his purposes, its purpose highly implausible interpretation. When you look at the statute in the context that it should be examined which i think the courts will certainly do, other relevant provisions confirm that the text of the aca is not at war with the central purpose. It is not sabotage that purpose. It rather effectuate sit so lets take a quick look at what we all know the purposes. When Congress Passed the aca is fiercest critics concurred with its that it had simply stated purpose to achieve near universal Health Insurance coverage which is a quote from mike copanelists professor edwards lengthy article on the subject. In addition all sides recognize that the exchanges were a central mechanism for achieving that goal. It was not until november 2011, 1. 5 years after presidenpresiden t obama signed ac into other professor adler and his coauthor Michael Canon of cato s surface their discovery was an apparent glitch as they called it in the act and that this glitch supported a 180degree contraindication of the laws indication. As Michael Canon has proclaimed that result could drive a stake through the heart of obamacare. But the truth is we were all right the first time. The purpose of the aca are in harmony. The congress that adopted this law did not intend and the statute of the authors who drafted it does not put this oppose its stake in the hands of Health Reform components in state capitols who are very sincere. I dont doubt that for a minute that opponents such as attorney general pruitt and in effect stiffing the core constituency of the law was enacted to benefit. Now, statutory interpretation is not for the faint of heart and im going to try to spare us all , try just to summarize very briefly if i can but the gist of my argument is and leave details to my statement for those that have the heart to try to plow through that. So im going to focus on the textual argument that my opponents, the aca and opponents make to begin with and as your Opening Statement i think very so singly and clearly put it mr. Chairman the opponents argument zeroes in on section 1401 which enacts a new section 36b of the Internal Revenue code and it targets a provision that is in their to define how to calculate the amount of premium assistance in that provision pegs the premium assistance amount to put monthly premiums for insurance policies which cover the taxpayer and which were enrolled in through an exchange established by the state under section 1311 of the aca. Its no wonder that it took a year and and a half to find this particular provision i must say. The theory of my colleagues here is that because this subsection calculates premiums for policies that are issued through an exchange established by the state under section 1311, therefore they say federally facilitated exchanges which are directed in another section of the act stand and where states fail to set up exchanges of their own cannot be considered their equivalent in their policyholders need premium assistance are left out in the cold. If this seems like an impossible interpretation it becomes much more so if one looks at the act as a whole, which i have done but im not going to go through all of the things that i have learned by doing that. Im going to focus on one provision which i feel particularly undermines these selfdefeating spin that my colleagues here with but on section 36b and section 1311. The section i would like to focus on the courses section 1321 and this is the section which says that if the state fails to establish an exchange then the secretary of health and Human Services shall establish and operate such exchange until take such actions are necessary to implement such other requirements. Now the key part of our position is simply that the use of the words such exchange and the use of exchange with a capital a map showing the defined term that the logical commonsense interpretation of that language is that the exchange under hhs stewardship shall remain as it would have been under state stewardship and shall be its functional equivalent and shall be subject to the same requirements and shall have the authority necessary to take such actions as are necessary to implement its functions. As the steward of such exchange our position is the secretary stands in stand in the shoes of our acts on behalf of of ed state government. This type of surrogacy were stewardship is commonplace and the law. And so that is what, that is what we feel 1321 and the statute as a whole contemplates. There is really no reason to impose this interpretation that professor adlers coauthor Michael Canon has said would ring obama cares Exchange Engines to a screeching hault. Mr. Lazarus i hate to interrupt you but how much time to let because we want to receive all of your statement. Have i overshot . I apologize. Apologize. Thats awry. Do you have a final statement . I certainly do. I just wanted to say that opponents recognize they need more than this textonly argument. They have gone through a purpose argument and they claim that the congress deliberately designed the exchange provisions so that they would essentially fail in the federal Exchange States and i would just like to suggest that is rather impossible to think that the aca sponsors and we are talking about people like harry reid, senator Chuck Schumer and max baucus would potentially turn it over to the aca opponents like attorney general pruitt the power to sabotage the law in their states but i think you have to think thats true in order to sustain the argument. Thank you mr. Lazarus. I apologize. Thank you mr. Chairman and members of the subcommittee. Thank you for the opportunity to testify today. The subcommittee has asked for my views on legal basis for the irs and Treasury Department rule purporting to extend tax credits and car sharing subsidies in the federal exchanges. I will be brief. There is none. The irs rule is directly contrary to plain language of the aec a and not authorized their love. The tax of section 14 through and that the entire akzo authorizes tax credits for the purchase of qualifying Health Coverage and by the state under this section 1311 of the act. Nowhere does the act authorized tax credits for the purchase of coverage and exchange established by the federal government. Attacks in the statute does not support the irish rule. Do not iris finalizes tax credit will it offered no substantive defense of his decision to extend tax credits through federal changes. A cursory statement verified no provision of tax credits are to identify any relevant legislative history to support its position. Hard to see how this rulemaking satisfied the apa requirements in recent decisionmaking. To this day neither the iris for supporters have been able to come up with the statement prayer to or contemporaneous to the packers passing of the act. There are many statements available in all 50 states as there are many statements at all 50 states would eagerly create and implement exchanges. There even statements that states be required to create exchanges. Something definitely federal government cannot compel. What there is not as a single statement saying the tax credit would be available in federal exchanges because no one assumed that the federal exchanges will be necessary which explains why they opted not provide any funding for the federal exchange months after the rule was issued after members of this committee that and others began to pass arguments in support of the iris rule. These arguments found spots of ambiguity that could be used to sustain the rule and ignore relevant statutory provisions. Some of these arguments are contradictory. None of these arguments can overcome the statues. My copanelist in his testimony misrepresents the timing and the substance of the argument i made by mr. Cannon and statutory provisions that undermine our argument is not based on a single provision but a careful reading of every provision in the statute. Indeed the only way to read the statute without generating surpluses, that is without generating language that must be rendered irrelevant is to recognize when the statute says established by the state it means established by the state. Some claim it would be observed to enact health care and state cooperation access to or in state coffers with federal policy. This is called sabotage. That is precisely what provisions of the active. The best example of this or the medicaid provisions. The medicaid provisions threaten to withhold not only the Medicaid Expansion but ill medicaid funding in a state if the state refused expansion. That would clearly have significant consequences on the most vulnerable populations. Even with the expansion the statute denies tax credits to the poorest of the working poor because there is a minimum income requirement. My copanilist may think this is a policy but its indisputable that this is in fact what the text of the statute does. Some say it would be absurd to oppose raising requirements without subsidizing health heale but that is also what multiple provisions of this act clearly and indisputably do such of his tax at provision. Some may think that the way the act was designed but that does not make it any less the law. The relevant statutory language was not an accident or an error. It was the choice of those in the senate to want state basic changes to play a key role in Health Care Reform. Others prefer the federal model. And has a had a built in enacted the model based on unconditional tax credits may tax credits may been the law of the land. After the of the filibuster proof majority in the senate apa opted to rely on the senate bill and its provisions clearly and expressly conditioning tax credits on cooperation. There was an air in believing that a majority of states with corporate and create their exchanges at their own expense. Such a miscalculation could not justify reweddings statute afterthefact that is what the irs has done. This rule is allowed to stand have fiscal and economic consequences. Whether not subsidy sound policy is not an issue. Whether the irs can unilaterally reread a lot entrusted to implement and enforce such tax credits are worthwhile and federal exchanges and congress may provide a statute. Thank you for your time and im willing to answer questions you might have. Thank you. As i mentioned before ms. Speier wind shear wessel has First Priority in an Opening Statement as well. Attorney general pruitt you mention the effect on the state of oklahoma as well as some businesses in oklahoma and individuals. Can you highlight that a little bit more . What is the effect of this . At this rule has is being proposed in the final rule if implemented what is the state effect on the state of oklahoma . With respect to the establishment of the state health Health Care Exchanges to the law did not provide that choice under medicaid by 72 vote saying that the congress and the aca could not reduce the power of congress coerce and intimidate or threaten the state to expand medicaid at the risk of losing the entirety of medicaid so they are now to sovereign decision so states can make. One is whether to expand medicaid and webster. The state Health Care Exchange. Mr. Chairman and arguments before the court in oklahoma we are arguing the decision that oklahomas has made the governor and legislature has balanced the convening interest of the penalties that would issue the state of oklahoma and the cost underrated trey burden of excess do they balance those factors i made a sovereign informed decision not to adopt the state Health Care Exchange. The iris action effectively takes that decision away. Addition of the iris by rule in may of us says we will issue the subsidy and assess the employer mandate penalty. We think that is clearly takes away the decision to oklahomas me. As far as businesses and our state oklahoma is a Large Employer. Therefore we are subject to tax provisions. We are in the process of evaluating the cost of compliance and implementation and it made his decision as a state that we seek not to establish an exchange and avoid those costs and burdens and we make that argument as well. You make comments before between the state and the federal government. Can you elaborate on that . Under several Supreme Court precedence the Supreme Court is held at the federal government may not coerce the state to implement a federal program. Establish this principle and reaffirmed. What this means is the federal government wants the state to participate in or cooperate with a federal program and must offer inducement. One of the approaches we have seen as is for the federal government to threaten adverse economic treatment of private actors in the state if the state doesnt cooperate. Its what the text of the law does hereby withholding certain benefits to individuals and exchanges and Insurance Companies if they dont cooperate. You are saying this is not a compulsory think. This was a benefit put in front of them to say theres a consequence if you dont and a benefit if you do and the assumption of the government based on prior laws the consequence, the states will choose to do this on their own. That is something that is common and done in other portions of the statute. A the medicaid provisions for example operate in certain experts in Health Care Reform actually proposed this precise mechanism could be used as a way of cooperation and this would be an alternative to trying to find an additional pot of money to stay cooperative. Okay. Mr. Lazarus thank you for being here as well and your preparation. It seems in your Opening Statement you look at the laws of holland say congress is purpose or use the term that was the purpose or the intent of versus the actual textual reading of the statute that mr. Adler said as well. Can you identify you mentioned the statement that such Exchange Portion this section 1401 puts out the specific payment and specifically enumerates it has to be a state from 1311. Doesnt say from a state 1311 are federal from 1321. Is there a section of the text you look at them makes it plain that they should apply for federal apply for federal or taking it based on what you assume is the intent or the purpose of the laws the whole . Can you turn your microphone on as well please, sir . Im sorry. The text of the whole statute and i focus in particular on 1321 in the Exchange Language shows and should be interpreted to mean its a textual argument. Its not just some theoretical purpose point. That language should be interpreted to mean that a federally facilitated exchange stands in the shoes other than has all the same attributes and responsibilities as the state facilitated exchange. 1401 says statebased exchange like 1311. It should have also said statebased exchange like 1311 or 1321. Did need to say that because in 1321 where the federal exchange is explained and the rule is explained, it says the secretary shall establish and operate such an exchange. The words such is in reference to the exchange and 1311 and therefore its appropriate to interpret that to mean it becomes the same and furthermore mr. Chairman the fact that exchange in 1321 is capitalized is very important. That references back to the definition of what a Capital Exchange is which is made in 1311. Everywhere Capital Exchange for the capital a means it is referring to that defined concept. Thats the basic textual argument. Their other arguments such as the provision of the reconciliation supplement to the aca and after later in the year. That would have been later. We are running low on time. Can i make one comment on a little point . Im going to honor somebody remembers and we will come back. There will be other moments and with that i will recognize mr. Kosar. Thank you mr. Chairman. Can i get this light upon up on the screen, please . Mr. Adler in the background of 1401 section 36b the most important part of the statutory interpretation law the tax . Yes. Taxes the most them gordon part. Is it clear that tax credit should be linked to states that create their own exchanges and can you explain that . Its clear. In a relative provisions of this exchange and a Capital Exchange but then it goes on it goes on to say established by the state so even if one accepts that the Word Exchange in section 1401 references section 1321 is that it goes on to enumerate additional requirements. Air repeats the section number ,com,com ma section 1311 and on top of that is says established by the state in that state is capitalized and is also defined in the statute. And the interpretation offered by mike copanelists requires us to forget or ignore the fact that the statute and ignore the fact that the phrase established by estate is repeated authorizing the tax credits and i would go on to say in the reconciliation bill that amended the act congress recognized that it had to enumerate both section 1311 and section 1321 if that is what it meant so reporting requirements, the congress did not simply say exchange, did not simply say section 1311 exchange. The fact that section 1401 repeats the established by a state required means that even if we except the argument, we have this additional language we have to account for, and the only way his argument can work is if we ignore that language and ignore the expressly defined term in the statute which the testimony says we cannot do. I and my dentist, not an attorney. At the most people out in the real world want to hear it in plain terms. The administrations terminology was to drive individual exchanges so that you had all these 50 different marketplaces. Is that true . That was the intent of the senate bill. As we all know, there was a housesenate conference that may have been intending to make changes to that, but that bill was never brought out. Certainly the said bill that became law was designed test pass every state, create an exchange, and then to use this database exchanges as a means for providing subsidies. So summarized, the legislative history. Well, the history is entirely consistent with the intent to that to have states encourage states to create their own exchanges and to use state run exchanges as the mechanism for providing subsidies and tax credits, and that no provision was made for providing subsidies and taxpayers through federal exchanges, either in text or in the finding because we must remember that while the statute did authorize subsidies to states to help them set up exchanges initially, it provided for no funding for the creation of federal exchanges which further reaffirms no one thought the federal government would have to create exchanges. The secretary of health and Human Services repeatedly said that every state would do it and that is what people expected. What was the mistake here was not in the drafting of the law. It was not realizing the majority of states had no interest in creating their own exchange. Well was the consequence of scott browns election and massachusetts . That the senate bill be more specific. The senate bill adopted the state based exchange not model. It passed the senate. The plaintiff at the time was to have that bill go to a housesenate conference, commerce of the house bill which adopted a different approach. And there are certainly accounts suggesting that at least when it came to exchanges that the house approach was more likely to emerge from that conference. Scott browns election meant there were no wonder the votes in the senate to pass the conference bill. And so in effect the New York Times ran a story about Health Care Benefits for congressional staff. Members of congress this week pointed out that there are many provisions in the law that are the results of congress being stuck with the senate bill as the basis for Health Care Reform and the exchange provisions are one of them. The choice was made to take as senate bill that had many provisions that many people, or inadequate as the only alternative. And that was the choice because there were not the votes to do anything else. So the Senate Bill May have provisions that some may think dont work very well. But that was the choice that was made. Thank you. Thank you. And i would like to recognize an Opening Statement. You could move directly to question. Thank you, mr. Chairman. Witnesses for appearing. I apologize for not being present at your Opening Statements. As you know, the president of the United States came to speak to the Democratic Caucus which happens maybe once or twice a year. So it is obviously important for us to meet with him and be available to answer to ask questions as well. So i apologize for not being here. Hopefully in the future we can accommodate both sides of the aisle. Congress passed the Affordable Care act to make Affordable Health care available to all americans. It is the law of the land, and i am pleased to say it is already working. More than 3 million young adults who would otherwise have been uninsured are now able to stay on their parents Health Insurance. My son is one of them. More than 20 million children with preexisting conditions can no longer be denied Health Insurance. Seniors have saved more than 7 billion on their Prescription Drug costs. Those are just a few of the benefits that have already Emily Mcmahon. The full impact of the aca will not be felt until next year. Many states have embraced obamacare and implemented their own exchanges and have already announced lower premiums. In some cases dramatically lower than ever was expected. And that is despite offering better, enhanced benefits including free preventive care, no lifetime limits on coverage, and not being able to deny customers because they have a preexisting condition. In california average premiums ended the exchange are for 2 , to 29 percent lower than average premiums this year. In new york there will drop to as much as 50 lower. The law is working, and maybe that is what the opponents are afraid of. What happened when Congress Passes laws . Agencies implement them. That is what the Treasury Department issued regulations implementing provisions of their formal care act theyre relate to premium tax credits it authorizes to make Health Insurance affordable to lowincome earners. I know that when i voted for the law it never occurred to me that americans could be treated differently simply because of where they live. No one ever debated using the subsidies as a carrot or a stake to give states to implement their own exchange. I expected as Many Americans as possible to get affordable coverage and help if they needed why would we give a tax credit to the taxpayers seeking Health Insurance and one state and not a similarly situated taxpayers in another state. Since the fall of 2012 this committee has been scrutinizing treasurys implementation of the Affordable Care act tax provisions including the provision of tax credits for those who meet certain income criteria. Treasurys for these documents give us highlevel briefings and permit a Committee Staff to study sensitive documents without adoptions. What we found was the treasury follow the same transparent procedures in issuing this regulation that it is used in implementing other lost congress has enacted. We have found no evidence to the contrary. The chairman also consulted the cbo last year which confirmed that its core of the Affordable Care act at the time that it was passed in march 2010 assumed that tax credits in all states including states where exchange was established by the federal governments. I asked instead of this part, mr. Chairman, to enter the cbo response. Without objection. As we all know there are detractors to have never liked the Affordable Care act. As part of politics. They have marshalled their best arguments to vigorous we advocate to anyone. First they tried to stop the obamacare act. Then they took to the courts and pursue their case all the way to the United StatesSupreme Court. They lost their two. The continual effort to roll back time has become frustrating even some members of the majoritys own party. Senators coburn and mccain now categorize that effort stepped back aca as dishonest and tight. Cockburn stated, and , the worst thing is being dishonest with your base about what you can accomplish. Getting everybody up and in creating disappointment. It is a terribly dangerous and not successful strategy. Those attempting to sabotage obamacare are not giving up. All theyre left with now on their second best legal arguments. Todays hearing was called by the majority to put the best light on these arguments. Indeed, two witnesses called by the majority on todays first panel are litigants in pending lawsuits on this very topic. Well i appreciate that these witnesses have traveled to dig to give us their interpretation on the legality of certain aspects of Health Care Law, i want to make this abundantly clear. This hearing is not the proper forum to litigate the merits of these cases. The subcommittee hearing room is not a court room. I hope that members intend to use this area are the documents obtained in the committees investigation to try and in plus litigation. That would be above and beyond the scope of our authority. As you know, i am a strong believer in the importance of congressional oversight, but i do not believe that we should insert the subcommittee in active litigation in the guise of oversight. I hope you will exercise your discretion and direct members to avoid asking questions which could jeopardize in any way a fair trial for all litigants. Otherwise i believe you may intentionally or not permit the Legal Process to be tainted by political and to ferrets. It simply does not serve any legitimate goal of this committee or congress. That said, these arguments present real world implications for millions of hardworking americans who will be seeking access to affordable Health Insurance over the next several months and into the future. This approved lawsuit were to prevail, all he would achieve is making health care on affordable so over 300,000 oklahomans who would no longer be able to receive premium tax credits to help them buy Health Insurance and up,. Contrary to any at the logical victory some may think could be won by this lawsuit, the reality of a legal victory is a terrible loss for lowerincome people of oklahoma that would pay the attorney general salary into sexes are even underwriting the very lawsuit that would deny the benefits. We are all public servants, and we should be better than that, looking to implement the law so that the reality attaches purpose and that it be done in an effective and efficient manner as possible. Unfortunately this congress will be voting this week for the 40th time to repeal or defund the Affordable Care act in whole or in part. So while i may disagree with the attorney generals pursuit of this letter litigation that is so contrary to the general welfare of the people of this state i have to concede that the current house of representatives in its desperate attempt to get this lot is not setting much of an example. I think the Witnesses Today for their appearance and that concludes my comments. And with that if it would be appropriate now for me to ask my opening set of questions. Absolutely. All right. Thank you. So i understand that your reading of the Affordable Care act is that it does not permit the irs to provide premium tax credits to individuals to participate in Health Insurance exchanges administered by the federal government. In back to you believe the irs has no authority to make such rules. Correct. The Congressional Research service has examined this issue and it did not come to the same conclusion. According to its report which i would like to enter into the record on page eight. Without objection. The report states that the irs rule appears to be an exercise of the authority delegated to the agency tass implement section 36 be which includes the authority to provide a refundable tax credits for taxpayers enrolled in Health Insurance exchanges. Have you seen this report . I have. I would note that earlier in the report crs makes clear that airplane reading of the statutory text would likely lead one to the conclusion that the irs does not have the authority. The languages like you just quoted is language that can be pointed to in case of a conclusion that the language is sufficiently ambiguous to allow the irs to make that interpretation, prior to that they strongly suggest the plain reading of the text which is where one must part with foreclose the irs rule. I am glad. Actually, mr. Adler, think in fact what the crs step does in many cases is provide both sides an issue and then comes up with conclusions. What i read just now was the conclusion. Thus if reviewing the best of if a reviewing Court Determines that there was ambiguity surrounding the issue of whether a premium credits are available in federal exchanges and reaches step to of the chevron analysis with respect to the regulations issued under 36 be their regulation will very likely consider a reasonable Agency Interpretation of the statute and a 48 difference by the court. What you just quoted, the word if. Crs, as i said earlier, they know that it is unlikely that a court would reach that conclusion, and i would add that it is important to remember in the context of chevron difference of the question of whether a statute is ambiguous is a question that coors zero no deference to agencies on. The explicit point time and time again is a question of law purely for the courts. And so the fact that the irs believes it has found ambiguity in the statute is not relevant in asking the question of whether or not the text is plain thank you, mr. Adler. I would like to ask you a question. Do you believe congress provided the irs authority to provide tax credits to individuals to participate in the federal exchange . Yes. You are obviously different. Would you like to explain why . Well, in my statement and i regret that i was not here to year. Basically i would make two points. First of all, the text of the statute, of the whole statute, not just the particular phrase that professor adler and his colleagues zero win on, the text about the whole statute supports strongly the sensible interpretation that tax credits and subsidies are to be available to all americans, whatever state they live in, whether they are in a federal exchange for the state with the state facilitated exchange. Secondly, professor adler has come up with an argument that congress it was not just a glitch the supports his interpretation, but that there was actually a deliberate design by the sponsors of the act. And he needs that because the tax text is now really support this point. And this is a completely baseless and really hard to say absurd because it is much more than absurd, the notion that as i said in my statements, senator schumer or senator reid or senator murray or senator baucus deliberately designed an Exchange Mechanism that would cause the statute to fail and deliberately put in the hands of their opponents such as attorney general pruitt, the power to sabotage the act entirely is so absurd that i cannot imagine how i any judge would spend three minutes. So those are the two basic reasons that i feel this interpretation, ingenious the back though it may be. I feel an obligation to represent all the people. I yield back. Mr. Mchenry. Thank you, mr. Chairman. I would say to the Ranking Members, looking at page eight of the Congressional Research service, let me quote, the plain language of 36 be suggests the premium tax credits are available only where taxpayers are enrolled in an exchange established by the state. As noted previously, strict textual analysis of the meeting of the provisions would likely lead to the conclusion that the irs authority to a issued a premium tax credits is limited to situations in which the taxpayers it and rolled. Therefore an irs interpretation that extended tax credits to those a role in federally facilitated exchanges would be contrary tech clear congressional intent. Receiving no chevron difference and likely be deemed invalid. I would say that that i appreciate the Ranking Member entering that into the record. At things to make the case very clearly on why were having this very important during. But make no mistake about it, obamacare is a ms. It is an absolute mess. And what we are trying to do on my side of the aisle and i think reasonable americans have come to this conclusion is it is broken. For us to force this on the American People when theyre having a hard time finding work is the wrong approach, absolutely the wrong approach. And so whether it is attorney general of oklahoma or other elected officials around the country, when they see this being committed on the people and when they look at the clear leader of a lot and you see the fellow government going in a very different direction, they have an obligation to step forward. I commend the attorney general of polk, for stepping forward today and for the work that he is done. Look, the administration has argued that the information reporting requirements added in 36 be that i reference your means that the subsidies are available both as federal and state exchanges, and that is not what the letter of the law says. Mr. Adler, does the administration have the authority is simply decline to implement a provision of law, of the law required . The executive branchs required ted safely administer the laws that passed by congress provided those laws are constitutional and that is true of this administration and prior administrations. If Congress Passes a law that in hindsight seems to be unwise or perhaps even absurd coming it is not the prerogative of the individual agencies to try and rewrite the law through regulation. Of the Congressional Research service put together a Ten Page Memo on this legal question. The irs put out irs or treasury put out one paragraph explanation of their legality. It is the evidence provided by the administration irs and the treasury, is that sufficient . No, it shouldnt. The locations imposed by the clear text and the statute, the irs, like all federal agencies is also on an obligation to engage in a reasonable Decision Making in the administrative procedure act which means when the irs is involved in issuing regulations it has to make clear the reasoning that it goes through that winter in coming up with that regulation. And courts have applied that test to statutory interpretation engage in by agencies. That is the reference. Right. And so the paragraph that the irs provided in finalizing the rules, even if it were impermissible interpretation of the ad, and i dont believe it was, i believe it still fails the reason decisionmaking requirement that all agencies are under in this requirement is a part of the administrative procedure act because it is important that when agencies issue regulations or interpret federal statute that they make clear to the American People the reasons why they are interpreting a statue in a particular way. So this administration, this is not something new for administrations. Well, i think it is fair to say that there are often times when administrations of both parties have failed to engage in Decision Making or fail to fully explain the reasons for the decisions. I think that more often than not when the agency fails to provide an adequate explanation first choice is because it realizes that there is no adequate explanation. I think that is what explains. My time is limited. Attorney general, i will have time to ask you, but i am deeply concerned about this case. Your pursuing folks that have strong moral convictions that own business is being forced to buy Health Care Policies counter to their moral principles and beliefs. And i encourage you to continue your good work on that. There are a lot of folks that have been harmed by this, including in my district. They are very closely watching your actions in the good work youre doing. Thank you, mr. Chairman. I yield back. Thank you, mr. Chairman. Want to thank the panel for being here today and your time, but i have to say, i will start my comments. I dont really have a question. I completely disagree since we have matters of opinion year on the dais. Matters of opinion there by the panel where we are peaking a phrase out of a report. And in the context that we wish, i think the Affordable Care act is in continues to work effectively. The businesses in my district finally have the support to protect the women and other employees to make sure that Insurance Companies dont discriminate against them and provide the bulk of their profits back into the direct delivery of care which they should have been doing all along. And so as you can see, i have my own opinions about the Affordable Care act and the benefits. And i have my own opinion about the statutory language and its legislative history support for the irs rule which allows everyone, regardless if theyre living in a state with a state administered or federally administered exchange to have access to the benefits of the Affordable Care act. And i am not going to ask questions about that because i agree with my colleagues in San Francisco that this is not inappropriate forum. The courts now will decide this issue. Instead of want to make these two points. First, this will mark the 40th time the republicans have attempted to appeal in whole or in part the Affordable Care act and is unprecedented for elected officials to devote as much time to impede the late and stop the implementation of federal law and the benefits that the law will provide to millions of americans. They are wasting precious time and Government Resources by impeding the effective and efficient implementation of federal law. I see this hearing as part of that effort. Second, the Affordable Care act is the law of the land. Our job is to oversee in this committee the Affordable Care act implementation and to make legislative recommendations and or changes which make that process more efficient and effective. Instead of holding a hearing on an issue that is subject ongoing litigation, lets clarify this work and work on legislation that would insure that everyone who lives in the state with the federally administered exchange can receive the same benefits as someone who lives in a state with a state administered exchange. I think we should be productive, not destructive, and that think we should remember the equal Protection Laws of this country which indicate unequivocally that we should be treating everyone the same. Thank you, mr. Chairman. Thank you. Thank you. Mr. Adler referred to the rest of u. S. Aca opponents. I dont know if you are. Some of these guys are in a lawsuit. I am certainly an opponent. Think it is a bad law. But regardless of whether youre for or against the law does not change your interpretation of how the law was written. Correct. I first wrote about these versions of the law many months before the oped. And that was a time when pointing out these provisions, the irs had yet to propose rule. And i was not aware of the potential consequences of restricting tax credits and subsidies in terms of the employer mandate. It was merely a question of such story interpretation and one that had been pointed up by a others as well. That is as basic as it gets. Remember firstyear law students , and you teach at that fine university in ohio. Frankly, kids in grades cool the legislative branch rice pilaf and the executive branch carries it out as written. We all learned in grade school. Certainly any firstyear law student would understand. Let me ask you this. Do you think that the employer mandate which is part of the law scheduled to take effect starting january of next year, do you think that the president has the ability to simply waved the employer mandate . I think that the justification for that has been provided by the administration is inadequate. Do not believe it is subject to legal challenge. I am not sure. I certainly have not seen an explanation that would justify that sort of blanket refusal to implement a clear statutory revision. Two examples of where the language says one thing but the legislative branch wrote one thing and the executive branch is doing something different. Yes. And i would i have been critical of republican administrations for doing similar things. The executive branch that is my point. Whether youre for or against the law does not matter. We have a way things work and his wonderful system in america. The legislative branch rice pilaf and opprobrious the dollars. The executive branch carries up alliance has the dollars. When the executive branch is not do with the legislative branch says every having an unconstitutional fashion. Theyre certainly not discharging their obligations. Let me go back. Again, you talked about this several times, but i would like to hammer this point home, interpreting statutes, the first thing you look at is the clear language. Tell me how these five words are taken out of context, exchange established by the state. I dont think that when that phrase is used repeatedly, not just once, in multiple places, that it can be meeting anything other than what it clearly says. And if the defining of terms is as important as mr. Lazarus says it is in the fact that state is a defined term in the statute should be just as important as his emphasis on the Word Exchange. The other side is accused republicans of sabotaging the law, working against the law. I am, but i would just like to ask a few questions. And trying to stop it because i think it is bad, but i want to ask if he would and frankly i would love to get my reaction. Democratic senator max baucus trying to sabotage the law when he says i just see a huge train wreck coming down the road . Would ask if he thinks that Union President jimmy hoffa is sabotaging the law when he says this will destroy the very health and wellbeing of our members along with millions of other hardworking americans. Frankly abbott as give howard dean is trying to sabotage the law when he says the independent them and Advisory Board is essentially health care rationing body. So the simple fact is this law is not working even though the site says that it is. It is not working and you have to take republicans word for it and democrats were. Completely. And as in my testimony there is clear design in this law that will put the government the federal government in the business of promoting illness and maintaining it as an entitlement. It is bad all the way around. It is distorting what is happening in health care already, causing their least efficient, most expensive, most dangerous sector of the Health Care Industry to be a winner. That is hospitals possible cartels. Ten seconds. I just want to get mr. Lazarus, and you can have time. If the chairman says so, but is max baucus de you agree with senator baucus when he says this is a train wreck coming . Do you agree when he says it will destroy the wellbeing of our members along with millions of other hardworking americans . Do you agree with howard dean of the independent payment Advisory Board is a problem . I need your microphone on. Sorry. I consider myself a lawyer of sorts, and i am not Health Policy expert. Remember, your Opening Statement, that long Opening Statement, you accuse the other three as a being opponents. I assume that means you are a proponent. You agree with the statements that i read or do you think senator baucus has lost it and does not know what he is talking about . I am a very strong supporter of the Affordable Care act. I dont really know what senator baucus was referring to. I just read it to you. I dont know what he had in mind. I am completely unfamiliar with the statements by mr. Hoffman and mr. Deane, so i have no ability to comment on them. Thank you. The chairman of the full committee. Thank you, mr. Chairman. I will start off with i guess i will start off with mr. Adler. See you live in Cleveland Heights . I used to. I grew up there. My brother is dead graduate. My sisterinlaw is with the university. So i guess i am a strong proponent of case western reserve. Glad to hear it. Having said that, i would really like to ask you a constitutional question. And one of them is not constitutional but more a balance of opinions. The Congressional Budget Office, when scoring the Affordable Care act scored it assuming that all states were going to buy into this and participate. With a little checking we asked the cbo how many lawyers they have on it. They said they had basically oneandahalf lawyers fulltime equivalents. None of whom were constitutional lawyers and those lawyers did not issue a decision or an opinion as to why they were scoring that everyone was going to participate. From a standpoint of the law, is there any evidence when people talk about cbo scoring that cbo issued an opinion . Even if they did, is that opinion was not published a members of congress, where it really bear any credibility as to, for example, mr. Attorney general pruitt point of it is not in the four square of the law . I am not aware of any legal precedent for relying upon as ceos core in interpreting statutes. I would note that the cbo of discourse statutes in ways that it is directed to by congress, even if that involves adopting impossible assumptions. I would also note that the cbo in scoring the statute as i understand it did not account for any federal spending necessary to create federal changes. So if the cbo had considered the possibility that the federal government would be creating exchanges, i would think it would have had to account for all the spending that the federal government would have had to engage in to do that for. I think he had made my point very well. In preparation for this hearing we asked for documents. We found out through Public Disclosure that we received 500 documents just before coming here. I had the account and and we received 386. You will be pleased some of the 70 of those pages or your work already publicly posted publicly posted. So you have been presented as responsive to our inquiry as to the administrations decision. Clearly they did not read what they sent us. Lets get back to my democratic friends on the other side who are always saying that the law is a lot. Is there case law that you know of where a lot very specifically does or does not do something, and the executive branch creates a rule that is outside of the actual in the actual text that they can cite. And i am not trying to make the attorney generals case, but we lived through the entire 2400 pages or more that we had to pass before we can find out what was in it. We now know that there is nothing in there that says it. Have you found anything . I know your pieces on this. It goes to Great Lengths to say you did not find it, but if you looked again is there, in fact, anything in that that would allow somebody in good faith, maybe mr. Lazard who is a strong supporter and like to find a scintilla of justification, did you find that . There is nothing in the statute, and we also looked. And to be honest, we expected to find in the legislative history statements that went against art pieces. The expected to find members of congress saying, there will be subsidies and federal exchanges. And in that case the argument would have been, do we go by congressional statement or the plain text of the statute. We could not find even that. And those that have criticized our paper have not been able to find a single contemporaneous statement where any member of congress or supporter of the law said, there will be credits in federal exchanges. The closest that they can find is a statement saying that there will be tax credits in all 50 states, but those same sources usually say that every state will willingly create an exchange which would be a reason for tax credits of 50 states. It is striking how little there is an added the statute itself which is, of course, we should focus on, or the surrounding legislative history. Let me just close with a quick series of questions. The constitution explicitly gives the right of the appropriation of funds to this branch, is that correct . Correct. If we choose not to appropriate funds we make a statement notwithstanding previous law. Correct. So our absolute right not to appropriate funds for portions of the Affordable Care act that we believe do not need to what the president has out of thin air cause them to mean is exclusively our jurisdiction of the constitution. Yes, and i would add that congress has, for the past several decades, regularly opted to defund portions of authorized laws that congress did not want to see implemented and has been done under both republican and democratic majorities. I will leave the doctor added. The other two lawyers were correct. Exclusive jurisdiction of the congress and that congress has a right not to Fund Anything it does not want to fund, particularly if it is outside the existing legislation. Is that correct . Yes. Mr. Lazarists. I know you of the Affordable Care act, but isnt it our right not to fund that which we believe should not be funded and isnt it the right of every success of congress to start anew as to appropriations since George Washington was leading a ragtag army and ask for money a very long time ago. Well, i think it is quite clear that congress has the power the right and responsibility. Was asking i know i need to yield back, but the power is a different question. The right and responsibility under the constitution, wouldnt you say that is clearly within the four squares of our constitution . Particularly the word responsibility is putting a spin on it that i dont think is necessary. I would not necessarily want to add to that, but certainly there is a power. That is what congress is for, and that is what politics is all about. Mr. Chairman, i dont want to engage in politics. The term responsibility to me means a lot. I note to my democratic friends and you, mr. Chairman, right and responsibility of the constitution means a lot to us. I yield back. Mr. Cartwright. Thank you, mr. Chairman. This hearing is nothing but another partisan attack on the Affordable Care act. The gentlemans comments about not engaging in politics notwithstanding. Isnt it a coincidence that it corresponds with the 40th attempt to repeal the Affordable Care act this month jack and, you know, i understand my colleague from ohio has once again referred to the senator, max baucus statement about a train wreck. I think, once again, it is important to put that statement in the context. At the time senator baucus was objecting to the cutting by hhs to the pr budget for implementation of the Affordable Care act. And what he said was, a lot of people have no idea about all of this. People just dont know a lot about it. The kaiser pole pointed that out and the stand yet hired a contractor who was addressing kathleen sebelius. I am just sorry that that is going to be money down the drain because contractors like to make money. I just tell you, i see a huge train wreck coming down. What he was talking about was a people dont know about the Affordable Care act and sign up it is going to be a problem in that dont think anybody disputes that. Opponents of obamacare are trying to deny a low income people in certain states like my state, pennsylvania, the tax credits that they need and deserve under the law to make health care affordable. If they succeed in the courts kamal they will have achieved is creating a twotier society with profound effects in my home state and throughout the nation. What matters most is that it does nothing to address the real issues. The real issue is that four out of five in the u. S. Will live in poverty or long term unemployment at some point in their lives, and the majority have yet to pass a single jobs built in the 113th congress. The real issue is that in places like scranton and wilkesbarre and easton and pottsville, unemployment is over 9 . The real issue is that over 70,000 people in my district dont have Health Insurance. About 6500 of those people are children. In fact, just under nine and a half percent of families and one and have children in my district live below the poverty line. These are the exact people who need these tax credits. Instead we are sitting here wasting time and taxpayer dollars trying to find any possible reading of the law, a technicality to take away health care from the people he needed most. And many of my republican colleagues believe that the aca should be repealed or defunded and have voted nearly 40 times all ready to do so. The efforts have become frustrating, even to members of the republican party. Senators coburn and mccain have expressed their distaste for the continual few tell those to eliminate funding for the aca. And my question for you is, are you aware that despite the Supreme Court ruling upholding the aca the house this week is going to up vote for the 40th time. I am nowhere because you just told me. That aca was clearly designed to provide all americans with the past to Affordable Health care regardless of where they live. The aca represents a measurable progress and has already better the lives of millions of americans. Now, mr. Lazarus, if the opponents are successful what will happen to the millions of americans who are already benefiting from Health Reform . Well, in states like attorney general prove its, the federal government is going to be operating the strange, if the opponents such as c are successful then the large majority of people who were supposed to be benefiting from the law as opposed to be able to get access to affordable Health Insurance policies on the exchanges simply will not be able to do so. I mean, this is why you have to call this not only a poisonpill theory of how to interpret the statute, but it is really as self administered poisonpill theory. Thank you. I say, what assets they would be and if we regress to get into a time when children are denied coverage for preexisting conditions or hardworking people are forced to bankruptcy because of one Health Emergency and where the emergency room, again, in this country, serves as the primary care facility. With that i yield back, mr. Chairman. Thank you. Thank you, mr. Chairman. Today we have heard basically infomercials or commercials for obamacare from the other side of the aisle. The purpose of todays hearing is about the separation of powers and government, the checks and balances and the authorities bestowed upon the constitution to legislate and use those legislative and executive branches. What we had here was a very unpopular law that was pushed through in a hurry with the election of scott brown. They know the law was flawed when it was passed. The house had different ideas about how they should go forward. And the perception by the people at that time and i, like mr. Willey, was a practicing physician when this was passed. And so i look at it through that perspective. But the people in the country did not like this concept. It did not like it in the 90s. They did not like it for five years ago because it represented , in their mind, a federal or government takeover of health care. This in a new. Pacs, the implied in letters that i will introduce in just a minute that it would be better if they have a federal exchange or a National Single payer. But this was widely rejected by the American People and therefore it is my contention that it was their intent to avoid using the term, to avoid using the term federal exchange and focus on state exchanges because state sounded less like government takeover of health care. So this was my intent. I would like to enter into into the records a law review article from professor timothy joe. Without objection. Mr. Adler, can we put that up on the screen . Mr. Adler, have you seen this law review article . Is, i have. Okay. Page seven, professor wright said a way to get around the common during problem would be for congress to exercise his Constitutional Authority to spend money for Public Welfare either by offering tax subsidies for insurance only in states that comply with federal requirements war by offering its illicit payments to states that established exchanges for the federal requirements. Can you comment on whether or not what you found in your research would suggest that the senate bill did this . The said bill certainly is written to do precisely what the professor suggested that it could. And that had been done in prior context, as he notes as with Health Savings accounts. Who is timothy just nyse relevant . See is a law professor who is a very prominent expert on health law. As far as i am aware was very involved in Health Care Reform and helping me develop ideas that were part of Health Care Reform. Mr. Chairman, i would also like to enter into or ask unanimous consent to enter into the record a story from the npr that references Democratic House members from texas who wrote president obama urging that the house approach be preserved in the final bill. Without objection. And also i would like to introduce into the record a letter from u. S. Representative and six of his colleagues to my democratic colleagues. Without objection. Basically this letter is describing where in texas this of this problem and suggested that they urged the president of the house approach should be preserved. Leaders in their state oppose the bill and there will not bother to create an exchange leaving uninsured state residents with no way to benefit from the new law. So it was not an accident that federal exchanges were left out as was suggested. For him to suggest that you, mr. Adler, and the others on this panel are just engaging in selfdefeating span were looking to buy the glitch to bring this of kellogg down, would you disagree with that . As i mentioned before, i first heard about these provisions in the law before i was aware of the way that these provisions interacted with, for example, the employer mandate. Before it was clear that the majority of states would refuse to implement exchanges to me as a scholar of the minister of law and federalism. It was interesting to seek a different way in which Congress Says tried to induce the state collaboration thank you. Could you quickly give us an update on where the lawsuit that you are engaged in is going and what you expect to occur in the near future . Well, thank you, congressman. We have fully briefed the motion to dismiss the federal government. That was argued before the court back in june and we are awaiting the decision by the court at this time. If i could, mr. Chairman, i think it is important to remember that this congress and congress routinely use the spending power to accomplish something called cooperative federalism. And it is not unfamiliar to this committee or to congress and i would say, congressman car ride, with respect to the statement that has been a couple of times that of the all citizens across the country were intended to be treated equally. Routinely states engage in cooperative federalism with congress. Citizens were treated differently quite often. As you know, eligibility determinations are given to the states and there are incentives to the states to match the appropriations of this congress to cover more individuals. You might be surprised that in this state of obama we have a program called in cheryl, that has been around since 2003. It covers 30,000 individuals that could not otherwise afford Health Insurance. Cms has notified the state of obama despite the program being very successful and providing access to health care because the state of obama has not expanded medicaid and the viejo ca, cms is killed that program and told the state of a, to cease operations, under the 1115 medicaid waiver. So it is somewhat thinking right to say that a state when it makes a decision that has been reserved to the state by congress to decide whether a state health care rationing should issue in that state, we made that decision. We are pro end of the rule of law. It is not an opponent of the policy decisions that you have made in this congress. We are seeking to give life and meaning to what you have passed in this body. When an agency makes a decision that is inconsistent with that, when it makes a decision that is clearly against the plain reading of the statute, mr. Lazarus has set on more than one occasion that the context of the statue justifies his position, and only justifies the position if you dont read the plain language of the 1401, section 1401. You have to count that as surplusage to say that somehow these statutes are harmonious with one another as far as providing benefits under a federal exchange. So if this is something that on a couple of occasions this morning the motives perhaps of the state of obama and bring this lawsuit been brought to bear, i want you to know that the motives of my office, i did not the Attorney Generals Office did not make a decision about whether to expand medicaid it did not make a decision about whether to adopt the Health Care Exchange. We are giving life and meeting to the plain reading of the statue honoring the decisions that have been made by our governor and our legislature and by this congress and i believe that every member of this committee should take seriously the language that has been passed by congress to make sure that agencies he that. Otherwise rule of law is the aggregate, and that is what we are part of death. Thank you. Thank you, mr. Chairman perrier. I would say it is tough to take the statute seriously. You have mr. Adler tell the tale again as it has been sadly sold so many times before about this law came into being, and it was not as serious work product on the day that it passed this house and went to the president s desk. Could have been a serious work problem. We could have sorted these out and solve a lot of these problems, but the politics trumka policy and we did not candidly. It embarrasses me that you have to sort this out in the courts and were not able to sort this out here on capitol hill. Ought to be an article one an article to decision, not nautical three decision, and we have failed the citizens of 00 booktv, and that respect. I to got the same word from the white house that if i had only been smarter would not have chosen al savings account. I would have chosen a plan that had more coverage and did not expose me to so much risk and require me to be as responsible. Thankfully the federal government has intervened, counsel make a man i am going to do better starting january 1st and then told will be much happier as a result. I appreciate what was said about not impugning anyones motives and you have no doubt that folks believe what they say when there were trying to do the best. That is not what i heard from my friends on the other side of the aisle this morning which is very frustrating because youre you are, trained in ways with the exception of the doctor behind me, the rest of us only wish we had the skills and insights. Yet folks say perhaps you are out to get your employees, your desire to help them to be well is inferior to the governments desire to treat them after they get sick, and it is incredibly frustrating to me that we secondguess again folks to have spend not just years but decades of their lives becoming experts in this field and we supplant the judgment of our positions with the judge half of our attorneys. Incredibly frustrating to me. Let me ask you because again i appreciate the honesty with which you are approaching this. Obviously we are on different sides of this issue. Let me ask you, i could probably stipulate that section 1401 makes a difference. I might not believe it, but i would stipulated for the purposes of this conversation. Why then do we need to included established by state . Why dont we just say exchange and be done with it . Seems that including that language almost by definition tells me we are trying to distinguish this from all of the other exchange conversations were talking about. Do you not find that troubling . I dont find it troubling. I understand how you could see it that way. I think that my point at the point of those who read this sketch is the way i do is simply that when in 1321 it says that the secretary shall establish such exchange, it is referring back to the definition of exchange which include includes established by the state. And that would be the interpretation which i think is a completely reasonable and not necessarily the only interpretation, but once you admit that it is a potential interpretation you have to look at the whole context and the purpose of the statute and you drive home the point about the dangers of sloppy legislating to be going back to the tale of here we are in the conference, trying to sort out two different congressional positions, trying to bring this language to perfection and then jettisoned the effort altogether. In fact was sitting in this very same chair earlier this year. I dont know if you are familiar with the navigator. My sister language, there is no system language in here whatsoever. This is not the first time we have had this conversation. If you feel the frustration of my colleagues it is because this is not the first time someone has read something into statute. We see it time and time again. If folks wonder what washington does not function, if the administration had come here on any of those occasions and said we made a mistake. Work with us to help us draft resolution, we would be in a different case today. Let me ask you i am looking at ten pages of analysis of the legality surrounding section 1401. I see one paragraph of a treasury analysis on that same topic. What is your assessment of the seriousness with which treasury analyzes this issue . Based on what the Treasury Department published, it does not appear that they engaged in their recent Decision Making that is required of agencies of the issue regulations and purport to provide a qualitative interpretation of the statute. There were derelict in their responsibilities in providing that meager justification. With the chairmans indulgence, let me ask you why. There are a lot of serious public servants. Implementing congressional mandates is not a new job. Why in the world is it that you believe such a cavalier work ethic was applied to this topic when folks are so serious about others . I dont know. There are many instances. We several an article where there were quite forthright about not being able to implement the law in particular ways because the text prevented them from doing so and went on at length discussing the relevant statutory divisions. The way this provision was treated is an anomaly. And i dont know why they did it this way, but as someone who has looked at statute and legislative history and someone, i think the explanation may be that the evidence to support their theory was not there and that thing that is further confirmed by the fact that months later when Treasury Department first began providing explanations for a rule it adopted mutually inconsistent explanations. Such exchange justification and the reliance on the reporting requirements that apply to both sections are mutually inconsistent. They cannot both be correct. Yet october 2012 Treasury Department offered them both simultaneously. I believe that was because there really is not anything there. Thank you for being here all witnesses are sworn in before they have testified. Please raise your right hand. He solemnly swell your testimony is the truth and nothing but the truth, to so help you god . Thank you, you may be seated. We would like the witness to answer the of perman. To allow time for discussion. Obviously you are the sole witness on this panel. We do request to hear from you for the last two questions. Your entire written statement will be made a part of the permanent record as well. You are recognized now for your permit statement. Thank you, chairman langford and members of the committee. I appreciate the opportunity to testify regarding the premium tax credits created as part of the pourable care act. Eca established affordable insurance exchanges known as Health Insurance marketplaces where consumers can choose private Health Insurance plans beginning in 2014. So that this insurance is affordable, Congress Also included a premium tax credit that it has been estimated will help approximately 20 million americans to be able to afford private Health Insurance. These tax credits could be worth 4000 recovered individuals each year on average. On august 17, 2011, the Treasury Department and the irs issued proposed regulations implementing the tax credits under section 36 b of the Internal Revenue code. Final regulations provide that opinion tax credit is available to individuals enrolling through all exchanges, whether directly operated by a facilitated Exchange Operated on behalf of the state. The regulations were developed in accordance with our standard procedure for developing regulations under the Internal Revenue code. Career irs staff attorneys and attorneys from the Treasury Office conducted a rigorous analysis of the statutory provisions, drawing on their extensive and collective experience, interpreting and implementing the code. Public comments were solicited and were carefully considered during the development of the final regulation. Treasury and irs believes that the final regulations interpret the statutory language in a manner that is appropriate to its context and consistent with the purpose and structure pursuant to wellestablished principles of statutory construction. This interpretation takes into account the fact that section 36 b as added by the aca requires federally facilitated exchanges to report to the irs data related eligibility for the premium tax credit and advance payment. A requirement that would be pointless unless the enrolling individuals were eligible for the premium tax credit. Regulations also reflect the fact that when a state chooses not to establish an Exchange Pursuant to section or 1011 of the aca, it provides that the secretary of health and Human Services shall establish such exchange within the state. In other words, congress made this exchange the equivalent of a state exchange in all functions, including making qualified individuals eligible for tax credits to purchase insurance through those exchanges. I also know that the legislative history does not indicate that congress intended to limit the premium tax credits to state exchanges or more specifically to exclude the federally facilitated exchange. Finally, the regulations are consistent with the explanation of the aca leased by the Nonpartisan Committee on taxation in with the assumptions made by the Congressional Budget Office and estimating the effects that we recently confirmed in the 2012 letter to chairman darrell issa. I understand that some members will have Committee Questions about the legal interpretations. Treasury appreciates the importance oversight role, it is important to remember that our conclusions are subject to ongoing active litigation. In fact i understand that some of the plaintiffs were on earlier panel. It is important to recognize only the Justice Department speaks to the administrations official legal positions as to the merits of our conclusion. I will do what i can to answer the committees questions today subject to the Treasury Departments legitimate confidentiality interests and sensitivities concerning active litigation. As you know, the pourable care act is subjected to provide Health Care Coverage for nearly 30 million additional americans. Agencies throughout the administration are implementing the aca to build on the Progress Party made towards more affordable coverage greatly welcome the opportunity to continue our work with this committee and to achieve justice. I think you understand. We thank you. Thank you, madam. Thank you for being here. You are a part of that team that pulled us together and folks that had an involvement in the process. What was your proposed role and then the final roll when it was done . Well, mr. Chairman, at the time that both the proposed regulation and the formal regulation were issued, i was the acting assistant secretary for the tax policy. In that role, it is part of the Internal Revenue code are part of the process that we are going through is not only the final decision of it, obviously, there will be a legal conversation. How that was pulled together. There was a rigorous analysis of irs folks, obviously it is a long law and new in the format in a lot of ways. We have asked the treasury for a age limits number of documents and trying to gather how was the decision made between the state exchange issue or such exchanges as you mentioned, also including this conversation. What we have found so far is a half page memo that included the justification in such exchanges. That is around a 600 billiondollar decision that was made to be able to include that so we ask for the background of that. Today we actually received a letter from treasury thing that they would dress 500 pages of the documents so document so far to provide the background. We actually went and we have received 383 pages of documents. 154 pages of that was the draft proposed rule itself. So let me just walk through a little bit of what else we received. 386 pages that we have received from the treasury and irs about how this came to be. It was a draft proposal and 70 pages part of the law review article that i had mr. Adler earlier today, it was also as part of a response to the article. This was after this was done. Fiftynine were law cases. Cameron also tasks with defending the role. Eleven pages from House Republicans and 45 pages or from public hearings on the 36 b regulation. Somewhere about the Public Comments in three pages of emails about setting up a meeting to discuss this issue with energy and commerce. Eight pages were written after the final roll and three pages or a wall street journal oped. This includes a Senate Finance hearing. The request for documents or about the conversation of oneness is being discussed early on. What we received was 369 pages of public material that was obviously after that. Two pages showed us that this was the adaptability of this case and they were mostly emails from treasury staff commenting on articles as suggested. What we need to know is how is the conversation accomplished. What happened in that conversation and was there active discussion and what we have asked for are the notes about that. When it comes to things that are not relevant, mostly this is part of the information. Not based on those conversations. How can we determine what that conversation is like leading up to this decision . A couple of things, we did provide additional materials for review by your staff. Those Materials Included at least two legal memorandums related to those proposed and final regulations and memos that accompanied the clearance packages of the regulation that it was public. I understand, as you mentioned our concerns with providing additional documents. All of this is not relevant. There are a lot of pages. But they are not relevant what we ask for. Please go ahead. Mr. Chairman, i can assure you that we did have a discussion of the federal exchange before the proposed regulations were issued in between the issuance that was proposed and the regulation. There was an irs working group that was comprised of the staff and the irs attorneys and attorneys from tax policy to analyze this very carefully and a number of issues that were presented in the development and we consider this carefully before the proposed regulations were issued. We have a number of comments on proposed regulations the issue is to be considered before issuance of the diploma regulations. A lot of the discussion was oral and part of the increase in discussion. To the extent that there are additional documents that may relate to the internals of alterations this morning explained that we have concerns about confidentiality and the Chilling Effect that releases those additional documents. We are making process. So there is not any written evidence is further conversation between those goes, can we get a list of individuals that were involved and not specifically about those issues . Mr. Chairman, i cannot provide you on the top of my head a list of individuals. Or a number of people involved. People who came and went at different times. But i can take your questions here that would be great. Obviously there are a lot of issues that apply to them. This is the specific issue that we are trying to identify. How is the conversation and what was the diligence put to that. That is terrific and we just want to get a feel about and what happened with that. Thank you, mr. Chairman. Thank you for coming today. I have some questions for you. The Treasury Department issued a final regulation allowing premium tax credits to be available in the origin of their exchange participation. Am i correct in that . Sumac yes, that is correct. Under the interpretation that was put forward, i really operated exchanges would not qualify for the premium assistance tax credit. Has our government ever provided this on a statebystate basis or denied tax credits based solely on their state of residence . Im not aware of any code or provision that operates on a. Was the Treasury Department ever consulted on a carving out a premium tax credits . To the best of my knowledge, no. Lets talk about regulation drafting. The department of treasury and david gest has conducted this o. We will join in on the safety regulations. It will be part of the ac provision and we actually solicited Public Comments before the proposed items to make sure that our proposed items reflects the public input and we have issued the proposed guidance, including the issuance over 100 comments on issues related to regulation we have taken all of this into account in accordance with our standards in the future. You follow the rulemaking procedure, didnt you . Yes, sir. Were the efforts to design regulations similar to other treasury regulations . Yes, congressman, it was essentially the same and is a process that we always use in developing tax regulations. Was the department of treasury aware that they should be available only in state run exchanges or is this alternative considered during the rulemaking process . We became aware of that argument in the course of developing the proposed regulation. We have considered it very carefully up to this point. As i have said, between the publication and the regulations. Okay, good. Would you characterize the administrations effort is transparent and fair in the rulemaking process . Yes, congressman, i would. We have published this for public comment. We have a number of Public Comments and hearings, number people took into account all of the comments we received. The fundamental purpose of the four book your to create an accessible market for Health Insurance which meeks Affordable Care available to all, including expansion of medicaid and development of Health Insurance marketplaces and providing incentives for participation. All of these positions support the goals of universal access and a strong Sustainable Health care system. Ms. Emily mcmahon, do you consider the purpose of the law and drafted regulations . Yes. Yes, we do. The purpose of the Affordable Care act is to achieve universal Health Care Coverage and affordable Health Care Coverage in every state. Thank you for that. Thank you for coming today. I yield back. Thank you, mr. Chairman. With the previous questions you indicated that you know about this constitutional concern when youre putting together the proposed rule and on the then the final rule. Is that correct . Yes, congressman, we were aware of the question regarding federal exchanges and it would not characterize it as a constitutional question sirach but you knew that there was a controversy about how this would be interpreted and i was by the state . You that there is a concern and controversy . Yes, we knew that the issue had been raised. What i am getting at, you are aware of it but you didnt think it would be a level where you would require a type of process to reach a conclusion. You just kept it within the same process that the irs has when it comes to establishing regulation became aware of it by reading an article. If you do anything different, did you do anything different than what you were doing before. You know, we followed our established process. What is that established process . You have the final say . Is her group of people who say this is how the law should be . Here is how it should work . That the group gives you a recommendation and i assume ultimately winds up on someones desk and it gets the final okay. Is that how it works . Sumac process begins with an irs Treasury Working Group whose staff continues the rotation of the code provision. Is that working group a formal number or is it ad hoc . Five people monday, 20 people the next usually at the beginning of the rulemaking process. People are identified as subject Matter Experts in that group comprises the working group for development. You know who those people are . You know names of the top of your head . As i said earlier, i can take that request that. You know of that group where you had a letter that was signed by 24 members of congress, several doctors had signed it in others. You know that group would be reviewed at citing this issue, do you know if that was reviewed . I am not sure what letter you are referring to. We can make the number available. We will do so for members of congress. Okay. Do you know the proposed rule, which was august 17, sometime in august of 2011. Is that right . Yes. In this process we know that the director of implementation came on board in december 2010 to help implement the Affordable Care act and was this a process in making this issue determination . Yes, she was involved in discussions about the development of this section. So there is one of the people that was involved. Any other names . Was dubbed showmen directly involved . Steve miller . Neither of those individuals was involved in the working group. That sarah was . She was not involved to the best of my recollection in the working group of lawyers. This includes implementations. Bushey extensively involved in this that i do not know sirach thank you, mr. Chairman. Businessman, thank you for being here today. In november 2012 it was stated that a thorough neat and trim legal and knossos was not conducted due to the availability of tax exchanges because it wasnt one of the most significant issues considered in the 36 be regulation. With this also your perspective . Congressman, i am not familiar with this comment. I can say from my own perspective we did consider this question a very serious issue. We have analyzed it. So you feel that you did do a thorough legal and knossos . Yes. Can you give me examples of what that was . What was the thorough legal analysis . Well, members of the irs and Treasury Working Group looked very carefully at the provisions of this itself. As well as other provisions of the Affordable Care act, including section 13 women and section 1321 which addresses the establishment of exchanges. Making clear that the federal exchange is wanting to do the equivalent. There are others that relate to the advanced. Was this something that would have enormous spending and locations . Cumbersome and, we believe that our interpretation of the statute is consistent with the way that the Affordable Care act was handled by the Congressional Budget Office. That is not the question that i asked. To the irs or treasury denied a 70point back to whether congress may tax credits available only in this statebased exchanges . When we became aware of the question, we also became aware that i was the rationale being suggested. You have any evidence that they made this available for state created exchanges . Congressman, in the course of our rulemaking process, we did look very carefully at all the legislative history related to the Affordable Care act. And we found nothing to suggest that the incentive rationale is what you are suggesting. He said there is evidence to support a thorough investigation. Is there anything to show this . We are not feeling it. Congressman, i would simply refer you to the letter that we sent this morning regarding a concern of additional documents. To the treasury create large financial incentives, such as in Exchange Establishment grant because of the cost of state creating exchanges and specific running funding for the creation of a federal exchange . Coppersmith, i do not recall whether thamith, i do not recall whether that was explicitly considered during the rulemaking process. Okay. On october 12, 2012, a letter was written on the tax tax credit rule and it said access throughout those, congress refers to this as exchanges established by a state and establish under the aca. There is no discernible pattern that says that congress intended the particular language to limit the availability of the tax credit. Did you review this letter . Yes, im familiar with the letter. Okay, can you tell us how they search for a pattern for references to exchange and make exchanging obamacare . Congressman, the irs treasury and attorneys looked through the Affordable Care act and examine all of the references to try to determine whether there was any particular convention that congress had used in regards to state or federal exchanges were both. As it indicates, we were not able to find that. Working on a complicated rule is searching for a pattern Like Congress referred to under certain terms. Would you expect them to categorize or organize these results . Commerce and, as i have said, the working group did a thorough analysis. Did you organize results . Im not familiar with that. Did you know that the irs is committed to the staff and if these exchanges are established and under the aca in any way . Congressman, i am not familiar with the comments youre referring to. You think it is a problem that no one organizes all of the references with the exchanges under this as to whether it exists or not . Congressman, the irs and Treasury Working Group did a very thorough analysis and i am satisfied with their work looking at all of the relevant aca provisions. Im satisfied with their conclusion. You can produce no evidence connecting the congress and, i would simply refer you to the letters that we send this morning in which we described our concerns with producing additional documentation. Thank you. Thank you very much, mr. Chairman. The first question is when it comes to the issue of availability of premium tax credits, which have been of interest since last fall, anderson i understand that treasury has responded to the majority by providing documents and briefings overview of sensitive documents since august when the chairman made his first request for information. Would you account the number made a majority of this issue . We have received a number of requests for information both formal and informal. We have 500 pages of documents, including legal memoranda is and some of which we have made available and our staff has also met three times for a total of eight hours to explain a process and developing Legal Research and analysis. When it comes to all of those requests between you and your staff and your team, how could your response be categorized . You think you have been responsive . We have done the best that we can to provide the committee with the information that it needs. Including answering questions presented by the staff and the number of documents, including memoranda is that describe our analysis. We are happy to continue working with the committee to provide information that you may need. I believe that today we have been very responsive. Thank you. Mr. Chairman, i want to take the opportunity to enter into the record of this dated to dated july 21. Addressed to the honorable jul. Addressed to the honorable carol i said. It is signed by the members. We could add that to the record. Without objection. Thank you. In addition to that we have more questions. I understand you and your staff have also participated in a number of briefings with Committee Staff. How many briefings have been held and what amount of times has this total for your staff . We have participated in three separate briefings. I believe the total time that our staff spent was over eight hours. In meetings . Not including preparation. In actual meetings with Committee Staff. That is correct. Isnt it also true that the treasury has made available the viewing of documents about redaction . Yes, that is correct. Some of the memoranda that we originally provided was rejected and it was part of those available. We are talking about the premium tax credits and how this relates. Are the kinds of documents that the treasury has made available, congressman, this would be of interest to litigation. Because those documents are of the same issue. Is that correct . Yes, the documents we have provided, at least in part relates the question. Okay. My time is running short, but isnt it true that the plaintiff has not started process because there are questions about whether or not the lawsuit have changed . Congressman, the department of justice is handling the litigation for the administration. I believe you are correct that this is at the early stages. It is a question, but i i seated as stated it as a truth and the fact. Thank you. We appreciate you being here and we hope that one day we will have a republican administration, but i hope never to be in the chair where you are. That came a very expensive questions and im believe that we have a former commissioner who said he was absolutely satisfied. I know thats not the case with the debate, but he said that several times. Working group did a very fair and office. I assure you that we had extensive discussions. And it is so important with my folks back home. Do you remember when this conversation was beginning, do you remember this being an important issue. When the issue is identified, largely because we were the one that first became aware that some individuals were suggesting is a possible interpretation of the relevant provisions of the credit would not be available in a federal exchange. Smacks of the work was already going on Committee Analysis begun. This was robust and established and then you heard that this might be an alternative interpretation . Is that the time i . Well, this was at the time we identified this issue and we are were also in the early stages. I would say in identifying a number of issues. If we dont resolve this in the affirmative, our entire vision of how these are going to be deployed across the country, but it will, unraveled. This is a huge decision. If you decide the other direction, folks in my home state of georgia are not going to receive any subsidies whatsoever. So this cannot be overstated. But if we dont get this right, we are going to sweep out the foundation on which the president s Health Care Plan is established . I would say that we recognize that the interpretation would not be available on federal exchanges and it was inconsistent with the understanding. I am asking a very different question the manner you have a staff of professionals in your working record that this is not an ordinary sure. This is not age cannot claim this issue. This is the president s landmark social agenda that is going to be held to the statutory standard under which it was passed by congress and signed by the president is it your recollection the that was never a topic of conversation . That no one ever felt that that we have to get this right because otherwise this social agenda becomes unraveled . Congressman, we have analyzed this question. I understand that and we have talked about several times. So im asking the answer to be something different. That is do you recall that topic ever coming out in all of the discussions that you had. All of those conversations that this was done properly. If the answer is no, that is okay. As i said, we appreciated the fact that the interpretation that you are suggesting i dont think you answered my question. Can i get this over here . This is the analysis that i saw in that the proposed regulatory language. My friends are not burdened with implementing this and they have pros and cons helping us work through what the issues were and what the legal adoption lies. It is what i have gone from you all from the discussion groups in the analysis. It says that it may be interpreted to exchange established to operate in the state. Can i ask you about the other exchanges . What are the other exchanges that this doesnt refer to . Established for the exchange, what were the other exchanges about . What are the other exchanges that they could be interpreted as . In addition to the exchanges established by a state, they are obviously federally facilitated exchanges. I think that is exactly what my folks back home have said. Which is why we have this language in here. There is no mention of that, mr. Chairman, in the proposed red clearance package. I just find it unbelievable that as a freshman member on the committee, that i cant see the documentation was produced in folks to say it was an extensive discussion. For something that is the largest single value issued and what we will consider. I think the chairman. You are recognized. Mr. Chairman, i must say that i am deeply troubled by the attack approach that is taken by every member with the exception of you. You have shown great deference to the witnesses. You have spoke politely to them and you have asked questi you have spoke politely to them and you have asked questions in a manner that they can answer. This is not a courtroom. I think that bullying the witnesses that come before us is inappropriate as the colleagues that say here in an effort to try to find out information. Having said that, i find it interesting that that we will buy some supplies the language on the lot and the regulations here on the portal tracts. But in the irs code that says that the 501 c4 will be exclusively for the social welfare purposes in this country, then the irs comes in and by regulation changes exclusively, we havent had one iota in delving into that issue. Instead we have spent months looking at the irs and trying to find a link between the white house and the irs with the establishment of been conservative in nature. Lo and behold the reason they were looking at them is because it is really hard to understand where that line has been drawn. But the discussion that went on earlier today about how it would be outrageous for a regulatory entity tube security statute, which is what the first panelist were talking about the most part. It is just kind of like it doesnt relate to the when it comes to the rs and i think that its quite entertaining at the very least. Dam, i think you for being here. Youre you are not being treated any differently than any other administrative person that comes to this committee and is raked over the coals are my colleagues on the other side of the aisle. I regret that and i apologize. With exception of the chairman who has always shown great respect. Lets discuss this issue. Is it not true that this particular bill, the Affordable Care act, was debated ad infinitum in the congress of the United States . Deliver distance away. We have a robust legislative issue. The Senate Debate last more than a month if in fact the intention was to take this relationship with the state. We have reviewed this, maam. We have reviewed this in terms of the floor debate. To try to find out if there was any discussion of the approach that you mentioned. And we did not find any discussion of that approach, but that was the approach that was intended. Would this be something that would reflect poorly on members of congress that we would only want to give the values of a horrible Health Insurance to some people in the country and not all people in the country . Congress woman, we believe that the Affordable Care act was intended to provide affordable Health Insurance for individuals across the country and we agree with that objective and we are doing our best to implement a manner of that is consistent with that objective. Copious documents that have been reviewed by referencing a premium tax credit that will be offered exchanges in the state. It was not ever set forth by one that would be a benefit. Is that correct . That is correct, we did not find any evidence in our review of the legislative history that there was any intent to exclude the federal exchanges of the tax code. We had a request for the chairman of this committee to the Congressional Budget Office. The cbo said to the best of the recollection, the subsidies only be available in states that created their own exchanges. That we have this with a wide range of staff when the legislation was being considered. We have researched this issue as well. Based on this congressional record, do you believe that this interpretation of exchanges was reasonable . Yes, i believe it was reasonable and part of the better interpretation. Thank you. Mr. Chairman, you have been very generous and i yield back. Let me rephrase it. Isnt it true the house passed the exact same version of obamacare as the Senate Passed . I mean, scott brown did that. I think its an easy answer. I believe that is correct. It is, yes. Isnt it true that the house debate prior to the passage of obamacare in the senate cannot be considered relevant legislative history . So prior to taking this up, prior to december 24th, that history, prior to that, cannot be brought up. Its not relevant. , 00, im not sure we can i can make an equivocal statement. How long have you been in your post . Ive been in my particular job at the Treasury Department for four years, approximately. Okay. Do you recognize that a search of the house debate prior to december 24th, 2009, was inappropriate and not considered relevant relative history. Uh, congressman, im afraid the answers yes. Well the answers yes. Well, congressman, im afraid i dont understand the question. Youre taking the prior information, taking what was actually debated op the house that had nothing to do with the Senate Version because what i asked you is, did the house pass the exact same version as the senate, did it not . It did. The relevant aspect does not apply. It is not inappropriate to consider that discussion prior to december 24th, 2009 in relation to what the law means. Congressman, with all do respect see, im really having problems here because, see, im a dentist, and details are a lot to me. Beautys in the detail, and im having real problems here that we pick and choose whatever information we want to, and the facts that we want to. Lets continue. In the briefings, treasury and irs employees told the Committee Staff that the review of the legislative history did not review include a review of the two antecedent bills. To the best of your knowledge, is it true that the review of the legislative history did not include the review of the antesee didnt antecedent bills . Congressman, i would have too back and ask that question to the treasury staff. I cant recall at this point the answer to that question. This is, i mean, here were talking about something that i know a little bit about, about health care, about something to personalble to people that we ought to get this right. Im going to ask again. Are you aware that the antecedent tax bills on state compliance . Congressman, im not prepared to discuss the antecedent bills, but happy to take the question back and provide you with an answer later. Do you think this, the questions im asking are relevant . These bills, are they not relevant . Mr. Chairman i do not yield. Congressman, im not suggesting that your question is irrelevant. You are obviously entitled to ask any question that youd like. We will do our best. This is very important, dont you think . I mean, you know, in constructing this legislative agenda and looking at this, the beauty is in the details, and this is very pertinent information, very, very pert innocent information because what i see here is we have the senate bill, and it came over to the house, and they passed it verbatim, no changes because they couldnt afford the changes. Thats where i want to go to next was this letter from the house. At the april briefing, you had with Committee Staff, you were shown a letter that Texas Democrats in the house sent to president obama, then speaker nancy pelosi, and the majority leader hoyer, and during that briefing, you stated that was the first time you saw the letter; is that correct . That is correct. Did anyone at irs and treasury consider that unusual circumstances of the past, specifically the election of scott brown in january of 2010 met House Democrats had to pass a senate bill they knew was flawed or did not pass a bill at all . Youre aware of the numbers in the senate; right . It was not going to move unless it was exactly the same bill. Im aware of, generally, of the process that led up to enactment of the Affordable Care act, but i cannot tell you in detail whether the particular political aspects that were considered in the manner that youre suggesting. Well, i think this is very important, maam, and because it is very pertinent to the law because the senate bill is very poignant to state run exchanges. It doesnt talk about federal exchanges or the states that opt out. It only talks about state exchanges, and thats whats so interesting about this context. It is the beauty that is in the detail. Were not entitled to pick and choose if it doesnt exist in statute. Thats why this is meaningful, and thats why we want answers to all the questions so i expect answers back. I yield back. Thank you. Ms. Mcmahon, i have a separate question. It deals with the advance of the tax credit that those tax credits are sent out to those who qualify monthly. Doesnt get sent to them, but to their insurer; correct . The qualifieded health plan . Correct, to the insurance. Im going to give you a hypothetical here to process through it. A person signs up, goes through the process, payments start getting sent, four months into it, and the individual stops paying their portion. The governments still continues to pay theirs, and the individual stops paying their portion. Is there a system in place for the insurance to notify the irs to let them know, hey, this person stopped paying, and do we know yet how thats going to tucks . Its somewhat connected to where you are at, but do we know how its going to work . Thats a recent question thats come up. I congressman, that is an aspect of the implementation of the Affordable Care act im not personally involve with. The irs is handling, i believe, those sorts of questions. Okay. Its an interesting thing to process. I didnt know if you were connected to the group and what it may be, and we dont know if they stop paying at some point how everys notified or what the consz convinces for that are or how it works. The reference we talked to a couple times about the exchanges piece, treasurys argued the exchanges in 1321 refers back to 1311 put them as the equivalent; is that correct . Yes, thats correct. In the memo, thats the crux of the argument to say they connected it to in the reconciliation report, though, it lists them separately. It lists 1311 and a 1321 and keeps them separate, and i think part of the struggle we have is trying to figure out the reconciliation language seems to keep the federal and state exchanges different. They just dont refer to the if they are e qif slant, why refer to both and keep them separate . Theres ambiguity in the law, and you were not hearing the earlier conversation, but theres this ongoing conversation about what does the statute say and what does the statute mean or what was the purpose of it. A couple times you referenced you felt it was the purpose of the law to provide the coverage. We struggle with what the text of the law says, and thats part of the challenge of it. You also mentioned you went back through the legislative history, and you couldnt find anything that had the characteristic approach. Did you also find anything for the legislative history that you can recall about suggesting there be tax credits for those in federal exchanges . Uh, in our review of the legislative history, we did not find any specific references to the premium tax credit being available in either state exchanges or federal exchanges is my recollection, our review of the legislative history was consistent with our understanding of the purpose of the Affordable Care act, which was that the credits would be available in all exchanges whether state or federally facilitated. Okay. During the briefing, you mentioned the three different briefings and request for documents. It came up theres about 50 emails treasury considers privileged emails related to this topic. Would there be a day at some point we can see those things even in camera to evaluate the 50 emails, or do you know why they are considered privileged information . Well, mr. Chairman, the letter that we sent this morning explains our concerns with the release of the additional documents. That being said, i mean, we are still in ongoing discussions with your staff about providing you with any