Sunday, June 14, 2015

What Happens If the Supreme Court Strikes Down the Federal Exchange Subsidies

In a couple of weeks, the Supreme Court will announce its decision in King v. Burwell. At stake are the subsidies for millions of people who bought their insurance policies in states that chose not to set up state exchanges. If the Court rules for the plaintiffs, those subsidies will be struck down; if it rules for the Administration, then they will survive.

And while the conventional wisdom among legal scholars is that either Chief Justice Roberts or Justice Kennedy or both will side with the liberal wing of the Court, the question must be asked, what if both end up siding with the three conservatives? Here's what happens in that unlikely event:

  • 7.5 million subsidies in 34 states would be invalid. 
  • Healthcare costs in all of those states would begin to spiral upward as people drop coverage rather than pay the higher rates.
  • The damage would not be limited to just those 34 states. Over time, insurers would pass on their higher costs to consumers in the remaining states, meaning overall rates would climb far more than they currently are.
  • The political fallout to both parties would be considerable as the insured would be rightly outraged at the lack of leadership.

Regarding the last point, make no mistake about it. Both parties will be held accountable by the voters and with good reason. Whether your sympathies are with the Administration or not, the fact remains that the Affordable Care Act was a disaster from the moment it was hatched. It barely passed the Senate and only as a funding bill. The House was unable to make the changes it needed to make - such as modifying or eliminating the employer mandate - because Democrats didn't have the 60 seats needed to survive another up and down vote.

The House bill, which had a public option, would've been a much better law had it passed the Senate, but Democrats couldn't cobble together the 60 votes they needed to get it through. To make matters worse, President Obama did a lousy job working with leaders of his own party and boxed himself into a corner by accepting a flawed law that even a majority of his own party doesn't like. None of this nonsense would be happening now if he had listened to progressives who wanted a single payer system.

But the GOP has plenty of blood on its hands. For the last seven years they have stood on the sidelines and done nothing but scream death panels and socialism. They have not come to the table with any substantive solutions for a healthcare system that is among the world's costliest and least efficient. The U.S. spends more than 17 percent of its GDP on healthcare and Republicans must bear the lion's share of the blame for that.

Until Obama embraced the idea of a mandated private insurance plan, conservatives were all for it. In 2006, Mitt Romney, while governor of Massachusetts, signed into law a bill that would become the template for Obamacare. And in 2007 a bipartisan bill sponsored by Bob Bennett (R-Utah) and Ron Wyden (D-Oregon) called for a federal mandate to purchase private health insurance, but failed to get enough votes to pass.

In 1994, then Senate minority leader Bob Dole approached then President Bill Clinton and told him he could get the votes needed to pass an individual mandate healthcare law if he could persuade his wife Hillary to abandoned her healthcare bill, dubbed back then as Hillarycare. Clinton passed on the opportunity and a few months later the GOP took both houses of Congress.

Even the Heritage Foundation, as far back as 1989, promoted the idea of individual mandated insurance:

Many states now require passengers in automobiles to wear seatbelt for their own protection. Many others require anybody driving a car to have liability insurance. But neither the federal government nor any state requires all households to protect themselves from the potentially catastrophic costs of a serious accident or illness. Under the Heritage plan, there would be such a requirement.
This mandate is based on two important principles. First, that healthcare protection is a responsibility of individuals, not businesses. Thus to the extent that anybody should be required to provide coverage to a family, the household mandate assumes that it is the family that carries the first responsibility. Second, it assumes that there is an implicit contract between households and society, based on the notion that health insurance is not like other forms of insurance protection. If a young man wrecks his Porsche and has not had the foresight to obtain insurance, we may commiserate but society feels no obligation to repair his car. But healthcare is different. If a man is struck down by a heart attack in the street, Americans will care for him whether or not he has insurance. If we find that he has spent his money on other things rather than insurance, we may be angry but we will not deny him services - even if it means more prudent citizens end up paying the tab. 
A mandate on individuals recognizes this implicit contract. Society does feel a moral obligation to insure that its citizens do not suffer from the unavailability of healthcare. But on the other hand, each household has the obligation, to the extent it is able, to avoid placing demands on society by protecting itself.

If the Supreme Court forces the hand of Congress by tossing the federal subsidies, both parties will have the burden AND responsibility of fixing the problem. Hiding behind blind ideology or stubbornness will not sit well with the electorate.

Mark my words, the voters will take out their frustrations on any member of Congress who doesn't come to the table with a viable, workable solution. And they won't give a rat's ass whether that member of Congress has a D or an R next to their name.

No comments: