There's an anvil hanging over the head of Obamacare, and it's a Supreme Court ruling set to arrive this summer on whether people in states that did not set up health insurance exchanges can also claim subsidies for their insurance. If the Supreme Court rules against the subsidies, millions of Americans could overnight discover that they can no longer afford their Obamacare coverage.
Needless to say, that means there's been a lot of attention on the nuances of the legal argument being presented in the court. And some progressives think that Wisconsin Gov. Scott Walker of all people has offered a smoking gun to save the law.
The entire argument against Obamacare presented in the Supreme Court case King v. Burwell comes down to whether it matters who runs the exchanges: if it's the state itself or the federal government. Opponents say the ACA only meant for residents of states running their own exchanges to receive health insurance subsidies.
In an interview given to the Wall Street Journal in 2013, Walker describes his decision for Wisconsin not to set up its own health insurance marketplace, or exchange. Here's what he had to say (emphasis added):
This really isn’t an exchange that the states run or even run in a partnership. The federal government determines what’s going to be covered. How it’s going to be covered. And the only distinction is whether or not a state can say that they’re running it, put up a sign that says they are running it. But, in the end, there’s no real substantive difference between a federal exchange, or a state exchange, or the in between, the hybrid, the partnership. And so I said, if I can’t run it, if I don’t have control over it, why would I take the responsibility of explaining to people something that I don’t have any control over.
ThinkProgress, which rediscovered the video this week, said the comments "demolished" opponents' case against the ACA. Here's a Republican governor saying that there's "no real substantive difference" between a federal-run or state-run exchange. So, the outlet posits, that must mean Walker believed subsidies were available in any exchange, countering the challenge in the Supreme Court case.
That's not necessarily the case, though. Dennis Smith, who was formerly Walker's top health official, told me in an interview Friday morning that Walker's comments refer to specifically to the responsibilities of running the exchange, and don't speak to whether or not the subsidies are available.
"People who are trying to pull the subsidy issue into the governor's comments are just wrong," Smith said.
Like many other Republican governors who decided not to run an exchange, Walker contended that the exchanges would be too costly to run and that Washington put too many requirements on the states — so there would be no advantage for a state to run its own exchange.
Unless, as the plaintiffs in the Supreme Court case contend, the state would only receive subsidies if it set up its own exchange.
Smith said the state was aware of the "legal theory" that federal subsidies might not be legal in states that declined to run their own exchanges. But he said that didn't factor into the state's decision not to run the exchange. Walker announced he was deferring to the federal government to set up his state's exchange in mid-November 2012. The first lawsuit against the subsidies had been filed in Oklahoma two months earlier.
But Walker's an interesting study on the subsidy question. Months after rejecting the exchange, he announced a unique Medicaid plan in February 2013 that relies on the very health insurance subsidies under review at the Supreme Court.
The ACA's Medicaid expansion provides funding for states to cover adults earning up to 138 percent the federal poverty level, or about $16,105 for an individual. Before the ACA, Wisconsin already had a generous Medicaid program that covered adults earning twice the federal poverty level, or $23,340 for an individual, but the state had an enrollment freeze.
Under Walker's plan, he rejected billions in federal expansion funds while paring back Medicaid eligibility for adults earning up to the federal poverty level and lifting the enrollment freeze. That was expected to add 83,000 new adults to the state's Medicaid program, while dropping existing coverage for 77,000 people earning above the federal poverty line.
Walker, who is still being criticized by opponents for the move, has defended the decision to remove people off the Medicaid rolls. In a November 2013 interview with Milwaukee Public Radio, Walker asserted that federal subsidies would make coverage affordable for those people. He said: “You’re going to hear some detractors claim that moving people to the private market or to the exchanges isn’t affordable. I think most people would find it hard to imagine that with the tax subsidies, that $19 a month is somehow not affordable. I think it is.”
Walker's plan allowed him to claim two major victories: he rejected Obamacare's Medicaid expansion, while also claiming that everyone in Wisconsin would have access to affordable care. It also distinguishes him from other possible 2016 GOP contenders, New Jersey Gov. Chris Christie and Ohio Gov. John Kasich, who both accepted the Medicaid expansion funds.
Here's why the subsidy question matters so much in Wisconsin, and for Walker politically. If you're kicking people off the Medicaid rolls and promising them they could find affordable coverage with these subsidies, wouldn't you want to be sure that these subsidies were, in fact, legal?
Smith said although the state was aware of the legal challenges to the subsidies, they didn't factor into Walker’s Medicaid decision. "It was too much of a wild card," Smith said. Lawsuits against the subsidies had been filed by that time, but the legal challenge was just beginning.
Walker's Medicaid plan "did assume subsidies would be available for individuals start at 100 percent of the poverty line under a federally facilitated marketplace," Smith said. "That was our assumption, and the lawsuits were too much of a wild card." He added, "The governor was putting his proposal together and could not wait until all the court outcomes. You go with the information that you have at the time."
So what would Wisconsin do if the Supreme Court strikes down the federal subsidies later this year? That's unclear. Walker in an interview with WisconsinEye this week said he'd wait on guidance from Congress.
“It would create an urgent problem across the country — not just in Wisconsin,” Walker said.