When the Supreme Court ruled on Obamacare, it said two things: First, that the individual mandate is constitutional under the federal government's taxing power. Second, that the government couldn't withhold all Medicaid funding from states that refused to participate in the law's proposed expansion of the program.
The first thing the Court said has gotten most of the attention, perhaps because it has the media's favorite thing: Potentially exciting political implications! After the Court called the mandate a tax, Republicans everywhere began calling the law "the biggest tax increase in history," which, while not true, is the sort of thing that gets covered in an election year.
Rather, it's the second thing the Court said that actually matters for the law, and for real people, going forward. If states choose to sit the Medicaid expansion out, millions of people who would have been covered under the Medicaid expansion will remain uninsured. The law does not have provisions for extending subsidies to Americans making less than the poverty line, so someone making $9,000 a year in a state that refuses to participate in the Medicaid expansion might not get any help at all.
To get a sense of the numbers involved here, in Florida, Gov. Rick Scott has said he won't participate in the Medicaid expansion. If he follows through on that threat, 950,000 Floridians who would have been covered by the law won't be.
For reasons I go into in my column today, I'm quite certain that most or all states will end up participating in the Medicaid expansion. It's just too good of a deal for them to refuse. But it's not impossible to imagine a couple states run by ambitious Republican governors taking a few years to enter the system. And that, much more than whether we call the mandate a "penalty" or a "tax," could matter.
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RCP Obama approval: 47.7%; 7-day change: -0.5%.
Top story: All Medicaid everything
A growing number of states say they may opt out of the Medicaid expansion. "A growing number of Republican lawmakers and state Medicaid officials, including those in Florida, Texas and at least seven other Republican-leaning states, have said they may indeed walk away from the nearly $1 trillion federal pot -putting at risk the administration’s plans to cover up to 17 million people, or more than half the total expected to gain coverage under the law. While politics is a factor, states have legitimate budget concerns, said Matt Salo, executive director of the National Association of Medicaid Directors. Many state officials are already struggling to pay for the entitlement program, which typically is the largest or second largest state expense. Their future share may sound small, but it represents billions in new spending that could require cutbacks of other more popular programs, such as education or transportation, or else raising taxes. 'Downstream there is exposure for uncontrollable costs,' he said." Phil Galewitz in Kaiser Health News.
The Florida's governor said his state won't expand Medicaid. "In another sign of resistance to President Obama’s health care overhaul, Gov. Rick Scott of Florida, a Republican, said Monday that his state would not expand its Medicaid program. Florida is the largest state to say so firmly that it will take advantage of a new option granted by the Supreme Court decision on the health care law...'Florida will opt out of spending approximately $1.9 billion more taxpayer dollars required to implement a massive entitlement expansion of the Medicaid program,' said Mr. Scott, a former health care executive. More than one-fifth of Florida residents -- roughly 4 million of 19 million people -- lack health insurance. Mr. Scott also rejected another provision of the new federal law, saying Florida would not set up a health insurance exchange, or a regulated market where people can shop for coverage." Robert Pear in The New York Times.
The hospital industry is worried by the growing resistance. "Hospitals that currently treat the poor for free in emergency rooms were counting on a broad expansion of health insurance coverage to cut down on the number of unpaid bills on their books. The American Hospital Association and other national industry groups endorsed the health care reform law, calculating that more insured people would make up for $155 billion in lower Medicare payments over a decade. A smaller Medicaid expansion would be bad news for hospitals, especially in states like Florida and Texas with large numbers of uninsured people, according to Sheryl Skolnick, a health care equities analyst at CRT Capital Group in Stamford, Conn. 'That risk is real and meaningful: the hospitals may end up paying for the poorest and sickest of today's uninsured anyway AND see cuts in Medicare and Medicaid on top of that,' she wrote in a note to clients Friday." Jeffrey Young in The Huffington Post.
KLEIN: Medicaid expansion is too good a deal for red states to pass up. "Over the coming weeks and months, you’re going to hear a lot of Republican governors fulminate against the Affordable Care Act and swear to do everything possible to stand in its way -- including refusing to participate in the Medicaid expansion. In fact, the governors of Florida, South Carolina and Louisiana have already promised to do exactly that. Ignore them. The deal the federal government is offering states on Medicaid is too good to refuse. And that’s particularly true for the red states. If Mitt Romney loses the election and Republicans lose their chance to repeal the Affordable Care Act, they’re going to end up participating in the law...The less you’ve been doing on Medicaid so far, the more the federal government will pay on your behalf going forward. And that gets to an irony of the health- care law: Red states have, in general, done less than blue states to cover their residents, so they’re going to get a sweeter deal under the terms of the Affordable Care Act." Ezra Klein in The Washington Post.
McConnell would use reconciliation for repeal, but he says it won't be easy. "Republicans will continue to fight to repeal the Obama administration's healthcare reform law, but odds are in favor of supporters of the legislation, Senate Minority Leader Mitch McConnell (R-Ky.) said Monday. 'If you like the bill -- and some of you may -- it is hard to undo something of this magnitude. It was a 2,700 page bill, which nobody really understands anyway,' McConnell said. McConnell made the comments to about 50 people during a tour of Hardin Memorial Hospital in Elizabethtown, Ky. 'If you thought it was a good idea for the federal government to go in this direction, I'd say the odds are still on your side,' McConnell continued according to The Associated Press. 'Because it's a lot harder to undo something than it is to stop it in the first place.'...Also, in response to the ruling, McConnell also said that if he became majority leader he would use a procedural option called reconciliation to try and repeal the law." Daniel Strauss in The Hill.
Most want Washington to stop arguing over the health care law. "Fifty-six percent of all those surveyed want to see the law’s opponents 'move on to other national issues' rather than 'continue to block the law from being implemented'...One other noteworthy finding from the Kaiser poll: It found 41 percent of Americans to be unaware of the Supreme Court decision." Sarah Kliff in The Washington Post.
Obama and Romney agree: the mandate isn't a tax. "Mitt Romney’s presidential campaign on Monday rejected a Republican attack on the Affordable Care Act, repudiating a contention made in last week’s Supreme Court decision that the law’s requirement that individuals carry medical coverage amounts to a tax. The Romney team’s refusal to invoke the word 'tax' with regard to the individual mandate puts the candidate at odds with others in his party at a moment when Republicans are attempting to capitalize on the Supreme Court’s decision, which deemed President Obama’s health-care law constitutional. Some Republican-led states are now trying to thwart the legislation’s effort to cover the poor. In an interview Monday on MSNBC, Romney campaign senior adviser Eric Fehrnstrom said the former Massachusetts governor 'disagrees with the court’s ruling that the mandate was a tax.'" Karen Tumulty and N.C. Aizenman in The Washington Post.
@ezraklein: Media friends! The main story out of SCOTUS's ruling is not the political fallout of the word "tax." It's the the Medicaid changes!
HENNESSEY: Republicans can use reconciliation to repeal much of Obamacare. "Reconciliation allows a bill to pass the Senate in a limited time period, with limited amendments, and with only 51 votes; filibusters are not permitted. In 2010, Democrats split their health-policy changes into two bills, one of which they enacted through this fast-track process. In 2013, a Republican majority could use the same reconciliation process to repeal those changes. The reconciliation process, however, applies only to legislative changes to taxes, spending and debt...A reconciliation bill could repeal the Affordable Care Act's Medicaid expansion, insurance premium and drug subsidies, tax increases (all 21 or them), Medicare and Medicaid spending cuts, its long-term care insurance program known as the Class Act, and its Independent Payment Advisory Board, a 15-member central committee with vast powers to control health-care and health markets." Keith Hennessey in The Wall Street Journal.
BROOKS: Republicans should offer their alternative. "Despite what you’ve read, there is a coherent Republican plan. The best encapsulation of that approach is found in the National Affairs essay, 'How to Replace Obamacare,' by James C. Capretta and Robert E. Moffit...Capretta and Moffit lay out the basic Republican principles: First, patients should have skin in the game. If they are going to request endless tests or elaborate procedures, they should bear a real share of the cost. Instead of relying on the current tax exemption that hides costs, the Republican plans would offer people a tax credit for use to purchase the insurance plan that suits their needs. The tax credit could phase out for the wealthy. Employees of small business who aren’t covered now would see an immediate benefit, which they could take from job to job...Capretta and Moffit have more details. Their plan is flexible, decentralized and compelling." David Brooks in The New York Times.
YGLESIAS: Obamacare will be good for small businesses. "The bill in fact contains substantial benefits (some might even say giveaways) for small businesses. That starts with a program already under way to offer special subsidies to firms with fewer than 25 employees that want to offer health benefits. As long as your employees earn less than $50,000 on average (law firms, medical practices, and other elite professional partnership are thus ineligible), you can get a tax credit to defray 35 percent of the cost of the insurance if you’re a for-profit firm, and 25 percent if you’re a nonprofit. When the law really gets rolling in 2014, those subsidies rise to 50 percent for for-profits and 35 percent for nonprofits. Firms with fewer than 50 employees are also exempt from the 'employer responsibility' provision of the law that otherwise constitutes the biggest business burden in the legislation...Put the special subsidies and the exemption together, and the result is a law that’s pretty clearly a good deal for small businesses." Matthew Yglesias in Slate.
1) GLASSNER AND SCHAPIRO: Higher education isn't broken. "Though college debt levels clearly are something to monitor, the vast majority of students graduate with relatively small debt burdens -- about $25,000 on average -- and about one-third leave college with no debt at all. Meanwhile, the college premium -- the ratio of college earnings to high school earnings -- is at or near record levels and has been increasing decade after decade since the late 1970s. While for-profit colleges enroll an increasing percentage of all undergraduates, the demand for education at selective private and public universities and colleges continues to grow, as evidenced by dramatic declines in the percentage of applicants they admit. And worry that on-line education will replace the four-year undergraduate growth experience that takes place on a college campus seems as unfounded now as when first articulated 20 years ago." Barry Glassner and Morton Schapiro in Los Angeles Times.
2) BARRO: Don't blame cars for the shortcomings of mass transit. "Advocates of mass transit like to point out that it isn’t the only form of transportation that gets public subsidies. In particular, road construction and maintenance have benefited from increased taxpayer subsidies over the last decade and a half...But while it’s true that the government subsidizes all modes of transportation, road subsidies remain a small component of public and private spending on auto travel and are hardly the key factor that is making transit uncompetitive. A fair look at the whole picture shows that government subsidizes mass transit much more heavily than it subsidizes driving and that transit’s problems go far beyond subsidies for cars." Josh Barro in City Journal.
3) NOCERA: Community colleges have a big role to play. "A man named Gerald Chertavian came by my office not long ago, and, by the time he left, I was filled with renewed appreciation for the potential of community colleges to help stem the decline of the middle class. There are few more urgent tasks. Chertavian is not the president of a community college or even a teacher at one. Rather, he runs a program, Year Up, which he founded, that makes it possible for poor high school graduates to land good jobs...But Year Up, which operates in nine cities, can absorb only 1,400 students a year. What about the millions of others who don’t have access to a program like that? It was when I posed that question to Chertavian that he started talking about community colleges." Joe Nocera in The New York Times.
4) EL-ERIAN: Europe may lose its chance to save itself. "Optimists - fortunately, there remain a few, especially in Europe itself - believe that when the situation becomes really critical, political leaders will turn things around and put Europe back on the path of economic growth, job creation, and financial stability. But pessimists have been growing in number and influence. They see political dysfunction adding to financial turmoil, thereby amplifying the eurozone’s initial design flaws. Of course, who is ultimately proven correct is a function of eurozone governments’ willingness to make the difficult decisions that are required, and in a coordinated and timely fashion. But that is not the only determinant: governments must also be able to turn things around once the willingness to do so materializes. And here, the endless delays are making the challenges more daunting and the outcome more uncertain." Mohamed El-Erian in Project Syndicate.
5) ROBINSON: It's time to stop ignoring climate change. "The National Oceanic and Atmospheric Administration says the past winter was the fourth-warmest on record in the United States. To top that, spring -- which meteorologists define as the months of March, April and May -- was the warmest since recordkeeping began in 1895...Why might this be happening? Well, the level of heat-trapping carbon dioxide in the atmosphere is more than 35 percent greater than in 1880, NASA scientists report, with most of the increase coming since 1960. And why might carbon dioxide levels be rising? Because since the Industrial Revolution, humankind has been burning fossil fuels -- and spewing carbon dioxide into the atmosphere -- at what could turn out to be a catastrophic rate. Scientists’ predictions about how quickly temperatures would rise -- and how rapidly assorted phenomena, such as melting polar ice and rising sea levels, would proceed -- have turned out, thus far, to be conservative." Eugene Robinson in The Washington Post.
@WestWingReport: Climate change hitting you in the wallet. Chicago Board of Trade: surging & extended temps have pushed corn & soybean futures sharply higher
Top long reads
Debtor's prisons aren't dead. "Three years ago, Gina Ray, who is now 31 and unemployed, was fined $179 for speeding. She failed to show up at court (she says the ticket bore the wrong date), so her license was revoked. When she was next pulled over, she was, of course, driving without a license. By then her fees added up to more than $1,500. Unable to pay, she was handed over to a private probation company and jailed -- charged an additional fee for each day behind bars. For that driving offense, Ms. Ray has been locked up three times for a total of 40 days and owes $3,170, much of it to the probation company. Her story, in hardscrabble, rural Alabama, where Krispy Kreme promises that 'two can dine for $5.99,' is not about innocence. It is, rather, about the mushrooming of fines and fees levied by money-starved towns across the country and the for-profit businesses that administer the system." Ethan Bronner in The New York Times.
Justin Gillis profiles climate scientist Lonnie Thompson:"One day in 1991, high in the thin, crystalline air of the Peruvian Andes, Lonnie G. Thompson saw that the world’s largest tropical ice cap was starting to melt. It was the moment he realized that his life’s work had suddenly become a race. The discovery meant other ice caps were likely to melt, too, and the tales of past climate that they contained could disappear before scientists had a chance to learn from them. Driven by a new sense of urgency over the ensuing 20 years, he pulled off a string of achievements with few parallels in modern science. He led teams to some of the highest, most remote reaches of the earth to retrieve samples of the endangered ice. Then last October, the race against the clock became much more personal. Dr. Thompson woke up in a Columbus hospital room, a strange dream rattling in his brain. He looked down. 'Wires were coming out of my chest,' he said. Machinery had been implanted to keep him alive. Longer term, doctors told him, only a heart transplant would restore him to full health."
Elizabeth McGowan and Lisa Song on the biggest oil spill you've never heard of:"An acrid stench had already enveloped John LaForge's five-bedroom house when he opened the door just after 6 a.m. on July 26, 2010. By the time the building contractor hurried the few feet to the refuge of his Dodge Ram pickup, his throat was stinging and his head was throbbing...John and Lorraine LaForge, their grown daughter and one of the three grandchildren living with them at the time piled into the pickup and their minivan as fast as they could, given Lorraine's health problems. They didn't pause to grab toys for the baby or extra clothes for the two children at preschool. They didn't even lock up the house. Within a half hour, they had checked into two rooms at a Holiday Inn Express, which the family of six would call home for the next 61 days. Their lives had been turned upside down by the first major spill of Canadian diluted bitumen in a U.S. river. Diluted bitumen is the same type of oil that could someday be carried by the much-debated Keystone XL pipeline."
Don Terry on the economic decline of Gary, Indiana:"Not all teenagers are as lucky as J’Len Glass. He trusts his parents. He knows they will always tell it to him straight. Yet the 15-year-old, who wants to be a doctor, can’t help being skeptical of his elders’ veracity--or at least of their memories--when they tell him that his shrinking, economically depressed hometown of Gary, Indiana--Steel City--was, once upon a time, a wonderful place to raise a family. That it had good public schools and well-maintained city parks and streets. That there were department stores, restaurants, movie theaters, nightclubs, and crowded office buildings up and down Broadway, its main thoroughfare...That he could graduate high school, and if he didn’t want to go to college or join the military, he could just stay put and make a decent living in one of the smoke-belching steel mills that ringed the city and provided paychecks to tens of thousands of workers."
Janelle Monáe interlude: Janelle Monáe plays "Tightrope" live on The Late Show with David Letterman.
Got tips, additions, or comments? E-mail me.
Still to come:Manufacturing contracts; many tobacco shops may close; cloud computing is facing new scrutiny; 'clean coal' efforts struggle; and a goat rides a horse.
The manufacturing industry contracted for the first time in three years. "The report from the Institute for Supply Management said businesses saw solid sales but that they sensed a shift in overseas demand. That helped drive down new orders and could constrain economic growth over the next quarter...The institute said its index of manufacturing activity fell 3.8 percentage points in June to 49.7 percent -- the first reading since July 2009 that was below 50 percent, which indicates a contraction. However, the group said the overall economy is still expanding." Ylan Mui in The Washington Post.
@Neil_Irwin: Yikes. ISM-Manufacturing slips to 49.7, down from 53.5 and suggesting slight contraction. Very unwelcome.
Millions will lose jobless benefits without congressional action. "Millions of long-term unemployed Americans will face the loss of their jobless benefits at year's end without congressional action. As federal programs wind down this year, pressure will increase on lawmakers to consider an extension while the unemployment rate hovers around 8 percent. At least one lawmaker, though, thinks the chances of an extension hinge on the outcome of the presidential election, pushing the issue into an already busy lame-duck session. 'I think Nov. 6 will determine the outcome more than anything else,' Rep. Sandy Levin (D-Mich.), ranking member on the Ways and Means Committee, told The Hill...There is no funding for federal benefits beyond Dec. 29, and advocates of extending the program face a high level of difficulty as Congress hurtles toward the so-called fiscal cliff, a volatile mix of spending cuts and tax increases set to hit next year." Vicki Needham in The Hill.
Greece will push to improve its bailout agreement. "Greece will push for a better bailout agreement when it resumes long-stalled talks with international lenders this week, despite warnings from a European central banker Monday that the country must press ahead with its reform program and not dally further in meeting its commitments. The heads of a delegation of officials from the European Commission, International Monetary Fund and European Central Bank--known as the troika--will begin a three-day visit to Athens on Thursday to assess Greece's progress in implementing its latest €173 billion ($219 billion) bailout program...Among demands being sought by Prime Minister Antonis Samaras are a series of tax cuts and measures to help low-income earners over the next four years, part of a broader plan to extend the budget targets of Greece's rescue package by at least two years beyond the end of the agreed financing period in 2014." Stelios Bouras and Margit Feher in The Wall Street Journal.
The World Bank may offer technical assistance to crisis-plagued countries like Greece. "The World Bank’s new president, on his first day on the job, said on Monday that the institution would be open to offering technical assistance to crisis-plagued high-income countries like Greece. 'There are many situations in which what our member countries want most of all is our technical expertise,' Jim Yong Kim, an American physician and global health expert, told reporters. 'There are so many sources of capital these days in the world that that’s not going to be our role, but our role will be to provide technical assistance.' In offering such assistance, the bank would not be disbursing loans or grants. Rather, it would act as a consultant, helping a government draft an infrastructure investment or poverty reduction plan, for instance. Still, Dr. Kim said that the bank would remain focused on its core goal of eradicating poverty around the world." Annie Lowrey in The New York Times.
Eurozone unemployment hit a record high. "Fundamental weaknesses in the euro zone economy were back in the spotlight Monday, with the release of reports showing record unemployment in May, a decline in manufacturing and intense pressure on French public finances just days after European leaders decided on measures to reinforce the longer-term prospects for the currency union. Unemployment in the euro zone rose in May to 11.1 percent from 11.0 percent in April, Eurostat, the statistical agency of the European Union, reported from Luxembourg. The May jobless figure was the highest recorded since the creation of the euro in 1999." David Jolly in The New York Times.
@mattyglesias: How is the EU supposed to have a single currency if it can’t make a website where you can look up member states’ economic data?
Documentary interlude: Authentic Los Angeles profiles shoemaker Raul Ojeda.
Many small tobacco shops may soon have to close. "Hundreds of small tobacco shops that let smokers roll their own cigarettes soon could be out of business under federal legislation classifying them as manufacturers, subjecting them to the same taxes and regulations as the broader industry. Such stores have spread rapidly over the past few years by capitalizing on technology and loopholes that let them offer cigarettes often at half the price of ready-made brands. An amendment tucked inside the $27 billion federal highway bill approved by Congress on Friday expands the definition of a tobacco manufacturer to include businesses operating roll-your-own machines, making them responsible for federal excise taxes. Lawmakers passed the amendment after the U.S. Government Accountability Office estimated in April that changes in the market for roll-your-own cigarettes had reduced federal revenue by as much as $492 million between April 2009 and September 2011." Mike Esterl in The Wall Street Journal.
Some are questioning the speed of the federal government's move to cloud computing. "Storm-related outages at an Amazon data center in Ashburn prompted some congressional officials on Monday to question whether the federal government is moving too swiftly to put important data on private-sector cloud computing servers. The outages affected companies such as Netflix and Pinterest, not the government. But several federal agencies have moved e-mail and other services to cloud servers, which are housed at remote data centers and typically managed by technology companies such as Amazon or Google." Craig Timberg in The Washington Post.
For-profit college degrees don't help graduates earn more. "Critics have long criticized for-profit schools for recruiting unqualified students who go on to have higher loan default rates than their peers. In their defense, for-profit schools point out that they tend to attract more economically disadvantaged students from less educated families. A new study from two Boston University economists has controlled for these socio-economic differences and finds that students at for-profit schools fail to receive any wage boost from obtaining a certificate or associate’s degree. 'There is little evidence of a return to any certificate or degree from a for-profit,' the researchers write in a new paper for the National Bureau of Economic Research. By contrast, students who receive degrees 'from a public or not-for-profit institution receive a large wage premium,' they explain, boosting their earnings by as much as 15 percent." Suzy Khimm in The Washington Post.
Adorable animals riding other adorable animals interlude: A goat hangs out on top of a horse.
A tax break for drilling means near-zero tax rates for many producers. "Chesapeake Energy Corp. (CHK) made $5.5 billion in pretax profits since its founding more than two decades ago. So far, the second-largest U.S. natural-gas producer has paid income taxes on almost none of it. Chesapeake paid $53 million over its 23-year history, or about 1 percent of the cumulative pretax profits during that period, data compiled by Bloomberg show. That’s less than half of Chief Executive Officer Aubrey McClendon’s compensation, for example, in 2008 alone. The company and other U.S. oil and gas producers can thank a century-old rule that allows them to postpone income taxes in recognition of the inherent risk of drilling wells that may turn out to be dry. The break may be outdated for companies such as Chesapeake, which, thanks to advances in technology, struck oil or gas in 99.6 percent of its wells last year." Zachary Mider, Bradley Olson, Jesse Drucker, and Todd White in Bloomberg.
@mccarthyryanj: The 2nd-largest natgas producer in the US has paid almost no income taxes on its profits in 2 decades
Carbon capture and storage efforts aren't going so well. "Carbon capture and storage (CCS) is still too expensive to be viable. And, to date, governments haven’t figured out how to nurture CCS the way they’ve helped solar or wind or biofuels get off the ground. Case in point: A new report from the Congressional Budget Office finds that Congress has authorized $6.9 billion for developing carbon capture since 2005 -- but, so far, there’s little to show for it. The Obama administration has said that it would like to develop five to ten 'demonstration' projects for CCS by 2016 -- with a goal of making coal plants that can bury their carbon underground economically viable within a decade. According to the CBO, this is unlikely to happen. Power plants that can capture and store their carbon are initially expected to cost about 75 percent more than regular coal plants. And those costs won’t come down unless there’s either a huge technological breakthrough or utilities invest a lot more of their own money in building new plants. Neither appears imminent." Brad Plumer in The Washington Post.
The House farm bill is moving closer to reality. "Lobbyists on the farm bill are facing crunch time this week, even with lawmakers in both chambers out of town. Staff for the House Agriculture Committee are putting the finishing touches on a five-year farm bill that would set the nation on a track to spend at least $900 billion on farm subsidies and food stamps over the next decade. K Street is eagerly expecting a draft summary to circulate Thursday or Friday. House Agriculture Committee Chairman Frank Lucas (R-Okla.) is proceeding with a July 11 markup of the measure, despite the leadership scheduling a healthcare repeal vote for that day. Lucas expects the committee to need at least three days to finish because of the large number of amendments...For commodity groups dissatisfied with the Senate farm bill, this is a do-over -- and for conservatives, it's a chance to win bigger budget cuts to food stamps." Erik Wasson in The Hill.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.