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What Happens if Obamacare Loses in the Supreme Court?

Let’s say that the Supreme Court holds, in the King v. Burwell case involving federal exchanges, that such exchanges are not legally permitted to receive subsidies. This holding would create an enormous problem for Obamacare, since individuals in a large number of states would not be receiving subsidies. Clearly, a legislative change would be required. What then?

It has generally been assumed that this legislative change would be beneficial to opponents of Obamacare, as compared to the current situation. Under the current situation, once Republicans control both houses in January, they can pass modifications of Obamacare, but it is assumed that Obama will simply veto them.  The default situation—the regmine without a new law—is the continuation of Obamacare, which Obama likes. But if the Supreme Court holds the subsidies for federal exchanges illegal, the default situation changes: no subsidies for federal exchanges. And therefore one might argue that the Republicans are better off in this situation.

Perhaps. But things are more complicated. The default situation, if the Supreme Court holds the subsidies illegal, is similar to (although distinct from) the default under spending bills. If Obama vetoes a spending bill, the government often closes down. While one might believe that this would pressure him into approving Republican measures, it often doesn’t. The press—who often behave, as Glenn Reynolds puts it, as Democratic operatives with bylines—will usually report the shutdown in a biased way and the Republicans will be forced to compromise. If this happens with federal exchange subsidies—a likely possibility, even though Obama is losing support in the press—then the Republicans may be in a more difficult position than many people appear to assume.

Part of the issue turns on what will happen to people who lose the subsidies. If they lose their health insurance, then the Republicans are likely to be blamed by the press. If the Republican Congress does not give Obama what he wants, then states may choose to adopt exchanges in order not to lose the subsidies.  One issue favoring the Republicans is that the employer mandate will not apply to states with federal exchanges. In addition, the people who lose the subsidies are likely not to be covered by the individual mandate.  

The Republicans may be able to get some concessions from Obama, but how much is hard to know. Some might be relatively easier, such as the medical devices tax, but will not do much to eliminate the problems with Obamacare. My preference would be to lower the minimum requirements that insurance policies have to satisfy in order to be sold on the exchanges. My guess is that Obama will fight this tooth and nail.

The bottom line is that even if the administration loses in the Supreme Court, it is by no means clear that it will lose in the political sphere. It is sad to say, but real reform of Obamacare is likely to require Republican control of not only of the Congress but of the Presidency.

Reader Discussion

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on November 13, 2014 at 12:53:26 pm

Indeed.

Republican politicians have long played the Roe vs. Wade game: Rail against a popular policy you are powerless to overturn as a means of pandering to your base without actually threatening anyone. But once you are actually empowered, your base will expect you to carry out your threats -- even if that means making yourself unpalatable to the rest of the public. The day of reckoning may be at hand.

If the Supreme Court strikes down subsidies for federal exchanges, many politicians will be forced to show their hands and everyone will get to see who has been bluffing. I expect some Republicans would be perfectly willing to let healthcare suffer in their own states; Mississippi has been willing do to so for decades, so I don't expect the outcome of Obamacare litigation to alter many votes there. But others Republicans would not. Imagine the spectacle of Republican states losing their social safety net, as their Republican governors stand aside passively. All we'll need is for George W. Bush to fly in and say, "Nice job, Brownie!" to complete the picture of Republican indifference.

And Rappaport is right: How likely is it that the public will blame the mess on Republicans -- you know, the party that has voted 50+ times to repeal Obamacare, yet never once brought a substitute bill up for a vote? Heck, that storyline is already hard-wired into public consciousness. Every editorial board from NY to LA could claim the problems were all Obama's fault -- and no one would believe it. Recall how the world obsessed over Bill Clinton's marital problems even as every prominent Republican in the 1990s had been divorced (often multiple times) -- once an idea is embedded in public consciousness, it is nigh impossible to dislodge.

The Republicans are certain to suffer losses in 2016 regardless. But the size of the losses are yet to be measured. The Clinton impeachment impressed upon the public the idea that Republicans are obsessed with attacking Democrats -- public welfare be damned. The aftermath of Obamacare litigation may simply serve to remind people of this.

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nobody.really
on November 13, 2014 at 12:57:27 pm

I really wouldn't put much faith in the conservative socialist/fascist Republican Party. They have accepted the Income Tax,the Federal Reserve,Public Education, Social Security,Public Housing,Medicare,Medicaid and the whole litany of progressive socialism and its inherent Welfare State. Over the past 60 plus years anytime the Republicans had the chance they changed next to nothing and kept the Welfare State intact. From a political changing point of view the only chance for a substantial dismantlement of the American Welfare State,at least on the national level,is the Libertarian Party.

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libertarian jerry
on January 08, 2015 at 19:49:37 pm

Fear not! If the Affordable Care Act is wrecked by the Supreme Court based on an instance of imprecise wording, it won't be the end of the world. I'm sure the new Republican-majority Congress will instantly spring into action and quickly agree upon legislation that will prevent total chaos all across the health insurance, healthcare, and business sectors that have spent the past 5 years planning and adapting around ACA provisions. In any case, such broad systemic uncertainty and disruption should have no negative effect on an economic recovery that everyone knows didn't really exist to begin with.

No doubt they also know exactly what will need to be done for some 10 million Americans who could suddenly find themselves without coverage once more, and for seriously ill people who could again be looking at preexisting exclusion issues and lifetime maximum coverage limits. The fact is that, as with immigration, they probably won't really need to do much of anything. Free market forces will sort all of this out. Most likely before the 2016 elections...

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Tiberius P Cowberry

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.