A Bad Couple Weeks for ObamaCare

It’s been a bad couple weeks for ObamaCare.  It started with a Republican gorilla-stomp in the midterms, a rout that included several Governors’ mansions and state legislatures that essentially froze in place the Medicaid expansion map.  Then, in a shocker, the Supreme Court decided to consider King v. Burwell, the case that could undo ObamaCare’s marketplace subsidies and threaten the coverage of more than 4 million Americans.  It’s enough to give weekend bedspins.

Ice Age for Medicaid Expansion

In many states with rampant uninsurance, Republican candidates won critical Governors’ races and in others the GOP solidified seats in their legislatures.  The net effect: it’s a new Ice Age for the Medicaid expansion map, with states taking the Affordable Care Act’s (ACA) 100% Federal match for uninsured adults essentially now frozen in place.  We may even see some backsliding.

Some 24 states have accepted the ACA deal and expanded their Medicaid programs in the wake of the last big SCOTUS ruling on ObamaCare.  In fact, more Americans have gained coverage from Medicaid expansion than ObamaCare’s subsidies in the new insurance marketplaces.  But despite the fact that holdout states continue to pay their share for Medicaid expansion through Federal taxes, over two dozen mostly Red State governors continue to throw the middle finger at the guy in White House.  Most notably, reelection of Rick Scott in Florida, Scott Walker in Wisconsin, Sam Brownback in Kansas, Nathan Deal in Georgia, and Rod LePage in Maine stuck a fork in coverage for the uninsured there.

Utah Gov. Gary Herbert will outline a formal Medicaid expansion plan this month. Republican governors in Tennessee, Wyoming, South Dakota and North Carolina have also flirted with Medicaid expansion plans in 2015. And a late recount win in Alaska for left-leaning Bill Walker may open prospects for coverage for 43,000 residents in 2015.

But we could see real retreat on Medicaid expansion in GOP states that were already moving forward. New Republican governors in Arizona, Arkansas, and Illinois have the power to threaten health coverage for hundreds of thousands who have enrolled in expanded Medicaid, and have done so during the campaign. Indiana Governor Mike Pence was negotiating a plan with the Obama administration pre-election, but now appears to have his own Presidential aspirations in mind and may put the plan on ice.  Arkansas’ controversial Medicaid expansion waiver to use Federal dollars to buy private coverage was already approved, but its new governor, former US Rep. Asa Hutchinson, is no fan of the plan, which requires annual approval by the legislature and is now very much in doubt.

It was a bad midterm election for the uninsured, especially childless adults. What remains to be seen is how hard a line the Obama Administration takes to force holdout Red States to take the money, using existing Medicaid funds as leverage.  My guess is that hard line will be pretty limp. As George Burns said, “like shooting pool with a rope.”

The SCOTUS Subsidy Surprise

The day after the election the Supreme Court made a surprise decision to hear arguments in King v. Burwell, what many thought to be a sideshow case in the lower courts around the Constitutionality of ObamaCare subsidies in the 36 states using the Federal exchange.  It was basically a case challenging a drafting error in the law, which didn’t make clear enough distinction between state-based and Federal marketplaces, and ACA opponents saw their opening.

Even being “strict constructionists” in their jurisprudence, one has to believe the conservative activist Court didn’t take this case to rubber-stamp ObamaCare’s subsidies.  If the justices find for King, some 4-4.5 million Americans will see their martketplace subsidies at risk.  Without subsidies, the vast majority of those insured will drop coverage like a hot rock, leaving only the sickest in the pool — what economists call a “death spiral” for insurers operating in the marketplaces.  It would essentially lay a mushroom cloud on all private coverage options in those states, leaving ObamaCare a smoking wreck of mostly Blue State Medicaid expansions.

There’s no ignoring this point: in Republican territory, the ACA and its marketplaces and Medicaid expansion are more vigorously opposed than in states that elect Democrats. If SCOTUS upholds King, then coverage and politics will truly converge in Red States. A win for King means Red States can effectively purge themselves of all vestiges of ObamaCare, by not expanding Medicaid and not establishing an exchange.

I think this would be a huge problem for Republicans, forcing them to come up with solutions that are politically palatable to them. All these new GOP Members of Congress, and Red State holdout governors, need to start thinking, now, about what to do if SCOTUS announces a decision in June 2015 denying tax credits to millions of their citizens, while they in turn continue to deny Medicaid coverage.