As we come closer to a Supreme Court ruling in King v. Burwell, news organizations are gearing up to portray a decision nixing subsidies in three dozen mostly-Republican states as a fatal blow to the whole Affordable Care Act. CNN predicts such a decision could send “Obamacare” into a “death spiral.” Reuters blares: “Obamcare faces latest brush with death.”
But in fact, the absolute worst-case scenario you can envision unfolding from an adverse ruling is a considerably less awful outcome. Put simply, it’s very plausible the health care system would continue progressing towards universal health care in around 16 to 18 mostly blue states, while in many red states, something approaching chaos would set in, at least in the short term.
In other words, a ruling against the government in King, followed by lawmakers doing nothing in response, would not destroy the law. Instead, it would more likely result in a deeper polarization of the health care system, between states where coverage continues to expand and consumers enjoy the ACA’s protections, and states where the coverage expansion and increased consumer protections would unravel.
“In 16 states, plus D.C., the health care system would be functioning exactly as was originally intended with the ACA, with steady movement towards near-universal coverage, and all the protections in place for people with preexisting conditions,” Larry Levitt, a senior vice president with the Kaiser Family Foundation, tells me. “Meanwhile, in all the other states, you would have millions losing coverage and insurance markets thrown into chaos, with premiums increasing and insurers exiting the market altogether.”
None of this is to minimize the blow that a ruling for King would deliver to the Affordable Care Act. Many millions of people could end up losing insurance, and the damage could radiate out beyond imploding insurance markets, possibly causing economic disruptions. There would no longer be a coverage guarantee in many states, a major setback to the goal of universal health care.
Still, what continues to get lost in the coverage is that even if you assume that neither Congress nor state lawmakers do anything, much of Obamacare would remain in place, and significantly more people would retain its benefits than would lose them. This is important, not just to get the significance of the ruling right, but also because it has direct relevance to the policy and political story that will unfold after it.
If the Court nixes subsidies, as many as six million people could lose then, according to many estimates. The number who lose coverage could rise as insurance markets implode. But subsidies would remain in the 16 states plus D.C. that have their own exchanges. Add in Pennsylvania and Delaware, which are already on track to setting up exchanges, and that’s 18 states plus D.C. In those states, some 2.6 million are currently receiving subsidies, Levitt calculates. That would continue untouched.
Meanwhile, the Medicaid expansion remains in those states and also in the dozen or so states that expanded Medicaid but did not set up exchanges. And that expansion has covered an additional 12.2 million people.
In total, then, according to Levitt’s calculations, even if the Court nixes subsidies and lawmakers do nothing, at least 14.8 million will still be receiving financial help to gain health coverage through Obamacare.
That’s around six million fewer than if the Court leaves the law undisturbed — a serious setback. But still, 15 million newly-insured people is a major achievement. And that’s only as of today; those numbers will likely continue to grow as blue states add people to the exchanges, and as the Medicaid expansion continues adding people in those states and in the red states that have opted into it.
“It’s hard to find many government programs that are benefiting that many people,” Levitt says. Margot Sanger-Katz recently gamed out similar projections, and concluded: “the law would still reduce the number of uninsured Americans by about two-thirds of what it would accomplish unchallenged.” And as Sanger-Katz explains, many other features of the law would remain, too.
But even this doesn’t tell the full story. A ruling could deepen the polarization that is already being produced by red states opting out of the Medicaid expansion — polarization that could grow more pronounced as many of those states also lose subsidies for lower income beneficiaries. That may be the policy outcome many Republicans want, of course. But it’s also possible that the ever-sharpening contrast could ultimately make it harder for public officials — both federal and state — to stand by and do nothing. As Ezra Klein notes, the choice is basically between fixing the problem and developing a “two-tier health care system.”
“You would start to see a major division between states that had willingly participated in the ACA, which suddenly have an economic boon and high rates of insurance, and states that returned to pre-ACA standards or worse, with a continuation of under-insurance and a struggling health economy,” says Caroline Pearson, a senior vice president for Avalere Health, a health care consulting firm. “Those states would have an incentive to implement state-based reforms. But where would the money come from? They would need federal funds to create state-based solutions.”
In the long term, it’s always possible a GOP president and Congress could repeal Obamacare everywhere, or that another legal challenge could bring the whole thing down. But those scenarios appear increasingly unlikely. And so, if Obamacare does become more entrenched in in large parts of the country even as the system gets more polarized in the wake of an adverse King ruling, the question would become: how long would that remain politically and substantively sustainable? As Brian Beutler puts it:
Anyone who claims to know how that uncertainty would be resolved is lying, but everyone who’s followed the issue closely knows that the story wouldn’t end with more than 30 states limping along with hobbled insurance markets in perpetuity.
Meanwhile, all indications are that in the mostly blue states that were undisturbed by the lawsuit, the progression towards universal health care would continue.