Justice Kagan brilliantly illustrated how ridiculous the challenge to Obamacare is

The Supreme Court heard oral arguments Wednesday in a case that could severely damage health reform in America, and Justice Elena Kagan asked a clever question that drew laughter and exposed the logical weakness in the latest Obamacare challenge.

The case will determine whether the US can keep subsidizing health insurance for people in 34 states whose insurance exchanges are run by the federal government. One section of the law says people buying insurance through exchanges "established by the state" get subsidies; the law's opponents contend this means that those buying insurance through exchanges set up by the federal government don't get subsidies.

Kagan's question, however, seemed to suggest those four words shouldn't be taken literally. From the transcipt:

So I have three clerks, Mr. Carvin [the lawyer for the challengers]. Their names are Will and Elizabeth and Amanda. Okay? So my first clerk, I say, Will, I'd like you to write me a memo. And I say, Elizabeth, I want you to edit Will's memo once he's done. And then I say, Amanda, listen, if Will is too busy to write the memo, I want you to write such memo.

Now, my question is: If Will is too busy to write the memo and Amanda has to write such memo, should Elizabeth edit the memo? [Laughter]

The obvious answer is that yes, Elizabeth should edit the memo.

Here's Kagan's point. The ACA asked states (in her example, her clerk Will) to set up health exchanges that would get federal subsidies ("edits" by Elizabeth the clerk). But the law also specified that the federal government (equivalent to Amanda) could step in and set up the marketplaces if the states couldn't. Those marketplaces still need the subsidies to operate, just like the memo needed Elizabeth's edits.