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A SCOTUS ruling against Obamacare: Health care for the poor, but not for the working middle class?

If the Supreme Court kills Obamacare’s subsidies to people in the states on the federal exchanges, more than four million people in those states would likely see their premiums rise, probably forcing many to drop health coverage altogether.

This will create a very interesting question for Republican governors and legislators in some of these states, one with implications that people haven’t gamed out yet.

The question is this: Will these legislators really support federal money flowing into their states to help poor people continue to get health care, while opposing federal money flowing into their states in a way that could result in working and middle class people losing their health care?

Here’s why this question could arise. It turns on the fact that there are three categories of states: Those which set up exchanges and opted into the Medicaid expansion (full participants in the law); those which declined both (full resistance states); and those which declined to set up exchanges but opted in to the Medicaid expansion (partial resistance states). This last category is where things get very interesting.

Overall, roughly three dozen states declined to set up their own exchanges, and ended up on the federal exchanges instead. People in all of them would lose subsidies if SCOTUS determined that the law does not actually provide for subsidies to people in states on the federal exchanges.

At that point, the SCOTUS decision could be undone by a simple Congressional fix to the law (which seems unlikely) or by governors in those states agreeing to set up exchanges to keep subsidies flowing to their constituents (which seems marginally more likely, but hardly a certainty).

Many of those states that didn’t set up exchanges also declined to opt in to the Medicaid expansion for the same reason — resistance to Obamacare.

However, there are a number of states that declined to set up their own exchanges but have nonetheless opted in to the Medicaid expansion. There are some 15 states in this latter category.

In these states, declining to set up exchanges appeared — at first — to have no practical consequences in terms of the law’s benefits. The federal government set them up, and subsidies are now flowing to residents who qualified for them — because they have incomes from 100 percent to 400 percent of the federal poverty line — thus helping them get coverage. Meanwhile, federal money is also enabling those states’ poorer residents get coverage through the Medicaid expansion.

But now, in these states, if the subsidies are nixed, the Medicaid expansion will remain. And that means, suddenly, a situation in which poor people’s health coverage is being subsidized by the feds, while the health coverage of slightly better off people, folks who are more likely to be working, is not — leaving them potentially without it.

This is a very different situation than the one facing GOP governors in states that didn’t set up an exchange or opt into the Medicaid expansion. In those states, federal money for health care would now go to nobody. But in these other states, a situation that seems politically hard to defend — poor people get federal money for coverage, but slightly better off people, who are more likely to be working, will now likely lose it — will arise.

And we’re talking about a lot of people, and a lot of states. The chart below — which is based on the Kaiser Family Foundation’s calculations, using federal data — tells the story:

The chart shows all of the 15 states that are implementing the Medicaid expansion, but also declined to set up their own exchanges, which means they stand to lose federal subsidies if SCOTUS rules that way (states that partnered with the feds to establish exchanges also stand to lose subsidies).

For each state, the column under “subsidized enrollees” shows an approximation of the numbers who might lose subsidies — and hence, their health coverage. Meanwhile, the column under “Medicaid increase” shows the numbers who would simultaneously keep their health coverage. You can see that in some of these states, these are pretty big numbers — and pretty big disparities.

Now, these numbers are admittedly imperfect, because they only reflect the numbers of people set to get subsidies after signing up during open enrollment, some of whom may not have ended up paying. But the Kaiser Family Foundation’s Larry Levitt tells me this is all we’ve got, and says these numbers are useful as a general guide to the situation that could develop.

“Any state that has accepted the Medicaid expansion is a state that has agreed to go along with Obamacare to some degree — these are not states that are just complete refuseniks,” Levitt tells me. “If the Supreme Court sides with the plaintiffs, you would have a situation where these states are taking Obamacare money to cover poor people, but would be in effect refusing federal money to cover middle income working people.”

“That would certainly create a dilemma for these states,” Levitt continues. “It would likely lead them to want to figure out how to create an exchange and continue subsidies.”

Conservatives, of course, could argue that this isn’t all that unfair a situation: These states would now only be providing federal money to cover those who need it most — those on the Medicaid expansion, and not those who are a bit better off. But still, given that many people in these states are already benefiting from subsidies now enabling them to get coverage, telling them they will lose it — while their counterparts on the Medicaid expansion won’t — seems politically difficult and hard to justify.

Alternatively, conservatives could also argue that the only way to make the situation fair is to nix the Medicaid expansion in these states, too — after all, many conservatives oppose the expansion on philosophical grounds. But GOP governors in these states, of course, have already opted to cover their poorer citizens this way, and don’t appear likely to nix it, something that would also be strongly opposed by hospitals and providers.

To be sure, these governors might look at the new situation, shrug, let the subsidies go “poof,” and say, “tough luck — this unfair situation was created by Obama and Democrats.” On the other hand, as Dylan Scott details, the federal government could make it very easy for states to set up their own exchanges.  This looming disparity — and a desire to avoid it — might give them an incentive to do that.

And by the way, if some of them did, it could go some way towards mitigating the impact of a bad SCOTUS decision. Restoring the subsidies in some of these states — some of them are pretty big — would bring a lot of people back into the system. So perhaps a bad decision might not end up being quite as catastrophic over the long term as expected. Perhaps.


UPDATE: It should be noted that a handful of the 15 states in question have Democratic governors. I’m assuming those will be more likely to fix any adverse SCOTUS ruling. Meanwhile GOP governors run, or will run, most of the bigger states on that list.