Will the Supreme Court Scuttle Obamacare Subsidies? (No. What Can’t Happen, Won’t. )

Not long ago, I ran across a photo of the Supreme Court captioned: “Maybe this will turn out to be . . .  Obamacare’s death panel?”  

The caption refers to the widespread belief that when the Supreme Court rules on the latest challenge to Obamacare (“King vs. Burwell”),  it will strike down most of the government subsidies that have made insurance affordable for so many middle-income and low-income families.  (This lawsuit has been financed by the “Competitive Enterprise Institute,” a libertarian group with long ties to tobacco disinformation campaigns, and more recently, climate change denial. The Koch brothers are among the funders of the institute.)

The Supremes are expected to announce their decision in June. If Obamacare’s opponents prevail, the healthcare.gov system will have no choice but to cut off subsidies for as many as 7.5 million Americans in 34 states, including Texas and Florida, probably within a few weeks after the ruling is announced. The Kaiser Family Foundation has put together an eye-opening map revealing where subsidies are safe, and where they are at risk. 

The plaintiffs’ argument turns on just five words buried in the 900-page Affordable Care Act (ACA). In a paragraph describing the tax credits that will be available to people buying policies in online marketplaces, known as “exchanges” the law describes them as “exchanges established by the state.”

Seizing on that last phrase, the libertarians who masterminded this legal challenge gleefully point out that only 16 states opted to set up their own insurance exchanges. The remainder of the marketplaces were established by the federal government.

Ergo, the plaintiffs’ lawyers conclude, 34 states cannot legally offer subsidies to their citizens!

As a point of fact, if a person reads the entire ACA, he or she will discover that the law also is very clear that, if a state refuses to open an exchange, the federal government will “establish and operate such Exchange within the State.”

                  An Absurd Argument

When the IRS drafted its rules for implementing the ACA it realized that, of course, Congress intended to make subsidies available both in the state and in the federal exchanges.

By fixating on only five words, the plaintiffs’ lawyers ask the Court to ignore the broader goal of the “Patient Protection and Affordable Care Act”: universal healthcare.

As Jeffrey Toobin put it in the New Yorker earlier this month: “the King case is notable mostly for the cynicism at its heart. Instead of grandeur” –which is more typical of cases brought to the highest court in the land– “there is a smallness about this lawsuit.” 

I agree. The plaintiffs are concocting an argument based on semantics, not ideas. It is not that the ideologues bringing this case don’t understand the core mission of the ACA. They do.  They know that the goal is to provide affordable health care to all Americans.

But Obamaca’re opponents are quite coolly and cynically ignoring that mission while plucking a phrase out of the legislation, hoping that, if they sharpen it, by repeating it and  harping on it, they can use it to carve the heart out of Obamacare.

Think about it: if subsidies disappeared in 34 states, millions would no longer be able to afford their insurance. At that point, young healthy Americans would drop their policies, leaving the insurance pool filled with sicker, older patients who felt they had no choice but to buy coverage–even without the government’s help.

In order to pay for their care, insurers would hike premiums, and as rates levitated, more and more healthy customers would cancel their coverage. This in turn would trigger what experts call a “death spiral” as premiums rose to unaffordable heights, and insurers simply stopped offering coverage in many states.

To believe that legislators meant to offer subsidies only to people who happened to live in states that create their own exchanges is to believe that the law was consciously designed to self-destruct.

Nevertheless this is what the law’s challengers are claiming, and on March 4 the Court will begin hearing oral arguments.

                   The Media Whips Up Suspense

As that date approaches, the folks who create news have been flogging the story with headlines like these:

Is Washington Ready for the Death of Obamacare?”  

“Obamacare Faces The Abyss. Again.” 

Premiums Could Increase as Much As 774% if Subsidies Ruled Illegal”

After all, the media know that fear sells. And if they can persuade the public that this case is a cliffhanger, their audience might follow it for weeks.

2012 All Over Again

HealthBeat readers may remember that this is exactly what happened back in 2012 when the  Supremes heard a challenge to Obamacare’s “individual mandate.”

I wrote about that case on March 26, 2012, the day that the Court began to hear oral arguments.

At the time, I observed: “For months, the media has been feasting on the story, calling it ‘The Case That Could Change Health Care Forever.’  Yesterday, the Baltimore Sun declared: ‘The most important six hours of recent American history will start to unfold on Monday.’

“No question” I admitted, “the story is sizzling. And I hate to be a wet blanket. But let me suggest that the hullaballoo is totally unwarranted 

“I cannot believe for a minute that this Court wants to go down in history as the Gang of Nine that quashed the most important piece of legislation that Congress has passed in 47 years. If the Court strikes down the Obama administration’s signature legislation  .  .  . it risks undermining its own credibility, shredding what is left of its reputation for political neutrality.”

So I was not surprised in June of 2012 when the Court confirmed that Obamcare’s individual mandate was constitutional, ruling 5 to 4, with Chief Justice Roberts providing the swing vote.

This time around, I expect that SCOTUS will once again stand by the ACA, for many of the same reasons.

A More Seasoned Perspective 

The media’s memory is short. Its mandate after all, is to focus on today’s news.

By contrast Jim Jaffe is a pragmatic and experienced beltway observer. For 16 years, he worked for House Democrats who served on the Ways and Means Committee, apprenticing with Representatives Green, Gibbons and Gephardt before being hired by Chairman Dan Rostenkowski where he was, as he puts it, “the staff person/henchman (depending on your perspective) assigned to dealing with the media.”

Jaffe has seen the same movie more than once, and knows that, no matter how they grandly they posture, both politicians and Supreme Court Justices  are constrained by the reality of what has happened in the past. The court calls it “precedent.”  They cannot just wipe the slate clean and start over.  And this applies to Obamacare’s critics on the left as well as its enemies on the right.

Last week, I received an email from Jaffe, a long-time HealthBeat reader.

“Health reform isn’t newsworthy any more,” Jim Jaffe wrote,  “instead, we call it history.”  I know Jaffe and I realized that when the said that the Affordable Care Act is “history,” he meant that it’s a “done deal”–here to stay.

To illustrate his point he also sent me a column that he had just published on the Huffington Post titled “The Health Reform War Has Been Won.”

There, he concedes: “There will continue to be attacks from extremists in caves on both sides who refuse to acknowledge that the war is over and continue to lob grenades in an effort to enlarge consumer choice (from the right) or enact a single-payer scheme (from the left), but these are becoming increasingly irrelevant minor distractions.” 

It might seem cavalier to call “King vs. Burwell” a minor distraction. After all, if you take the challenge seriously, the stakes are enormous. But as Jeffrey Toobin has pointed out “there is a smallness about this lawsuit.” It is petty, and the legal basis for the challenge is flimsy.

Why the ACA is  “History”

In other words, the train hasn’t just left the station; it has crisscrossed the nation—leaving its track marks all over a health care system that accounts for  about one-fifth of GDP. Obamacare has created jobs, and has steered investments to confom  with, and take advantage of, the ACA.

But it is not just its effect on the economy that is important: the ACA has transformed cultural expectations in a way that cannot be rolled back.

This challenge came too late. If Obamacare’s opponents had managed to bring it to the Court before people began to receive subsidies, it might have had a chance (assuming the majority of the court was willing to vote its politics, and not the law.) 

Let me be clear: when I say that the ACA is now part of history, I am not suggesting that it is set in stone. Over time Obamacare will be refined and, no doubt, improved.

Healthcare 2.0 will begin in 2016 when a new Congress and White House begin to refine the legislation. As Sarah Kliff has reported on VOX, experts who helped Democrats craft the original legislation already are discussing changes, with an eye to lowering costs while improving quality.  It’s possible that these could include lowering deductibles, and letting Medicare negotiate with drug-makers for lower prices.

Some in Washington say that “’the Democrats did health care,'” Zeke Emanuel, senior fellow at the Center for American Progress and a former Obama advisor on health policy told Kliff.  But “You don’t ‘do’ health care once. You do health care forever. It’s not a marathon. It’s life.”

Yet even while the law will be refined, the main provisions of Obamacare will survive. Without the individual and employer mandates, the penalties and the subsidies,  the overarching goal– universal healthcare– would be impossible.

Yet media pundits once again have persuaded some that President Obama’s landmark legislation is about to be “gutted.” At the very least, the talking heads seem to be  convincing other talking heads. (Like reporters who all hang out at the same bar during a war, pundits tend to listen to and read each other.)

But I am  not convinced. Indeed, I will go further: What can’t happen won’t. 

As a practical matter, as I argue in the posts below,  if the Court ruled against Obamcare, the fall-out would be too great, undermining our economy, the social contract between government and its citizens, and the integrity of the Supreme Court itself. Finally, in the end the GOP would take the hit, and Chief Justice Roberts knows this.







7 thoughts on “Will the Supreme Court Scuttle Obamacare Subsidies? (No. What Can’t Happen, Won’t. )

  1. You’re right, of course. But at some level I enjoyed a fantasy imagining the political fireworks when millions of Americans discovered their subsidies were being pulled away and premiums would skyrocket. Most people still have no idea how costly American health care really is. Those who have high deductibles are catching on, and that is a growing group. But most of the rest are mainly interested in co-pays and annual deductibles.

    Then there is that still too-large population for whom health insurance is as distant an idea as a paid-for new car or boarding school for the kids. I spoke to a young man a couple years ago for whom the concept of insurance was so foreign that he had no idea what the words “deductible,” “co-pay” or “premium” even meant. The vocabulary was like another language.

  2. John–

    I can totally understand your fantasy. (One can also fantasize about what would happen to the GOP if voters turned on them

    As I will describe in a later post, the majority of people who
    have subsidies are: middle-class, white people who have full-time jobs.
    A large percentage of them live in Red States.
    In other words, many of them are Republican voters.

    If they lose their subsidies, they will be very upset. And the GOP really doesn’t have a plan for addressing this. There is some talk of creating a bridge that would let people keep their
    subsidies for a while But many Republicans would object
    to any fix. It is extremely unlikely that they could get enough votes together to do something that might appease voters.

    So I j hope–and am actually quite sure–that Roberts is sane enough, and intelligent enough, that he will vote against the plaintiffs. (There are 4 other solid votes not the Court that will back Obamacare, and Roberts might even be able to bring
    Kennedy with him, making the vote 6-3 in favor of the govt.

  3. Seems like I read somewhere that even the plaintiffs didn’t realize what kind of mess they would cause if the court ruled in their favor. When you hold it at arm’s length and look at it, the whole idea is downright silly.

  4. John–

    You are right. When you hold it at arm’s length, the argument just dissolves. It is ludicrous.

    I know one of the lead “master-minds” in this case–
    Michael Cannon, from the Cato Institute.

    Michael is v intelligent, and can seem charming. But
    sometimes he says things that are totally out of touch with reality. (In 2012 he & I were on a NYT panel debating Obamacare. He began shouting at me that , under the ACA’a individual mandate, if people don’t buy insurance or pay the penalty, the IRS will comet their homes and throw them in jail.

    (The law makes it v clear this is not true. If the IRS owes you a refund, they will deduct the penalty from your refund. But if you are not due a refund, there is no other penalty or punishment. )

    But Cannon, like some other Obamacare opponents, lives in a paranoid world, quite divorced from reality.

    This is what gave them the hutzpah to go the Supreme Court with a such a thin case.

    The vast majority of legal scholars agree that the case has no basis in the law. But they fear that the Court will vote its politics, not the law.

    I believe that, as a practical matter, the court cannot do that.
    The practical consequences would be too great.

    Two or three people on the court are not entirely rational.
    But Chief Justice Roberts is. He is sane, and is very quite concerned about how the “Robert’s Court” will be seen in history. And he has at least 4 other justices who will vote with him. He might also be able to persuade Kennedy to come along with him, which would make the vote 6-4 in favor.

    Best, Maggie

  5. Jan Henderson–

    Many thanks.

    Yes, I do think Roberts is rational (And that can’t be said of all of the Justices.) I suspect the final vote will be 5-4 in the government’s favor-maybe 6-3 if Roberts manages to bring
    Kennedy with him–which he might.

    I hadn’t seen the Cole piece but just read it. Thank you.
    It is extremely lucid and persuasive

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