Friday Reads: SCOTUS Plays Doctor (and God)

Good Morning!

I’ve got all kinds of personal reasons to hope that  when the Supreme Court decides King v. Burwell next month that one just one Republican-appointed justice will consider the complaint trivial and it will be dismissed.  That’s because I will be among the millions of people that will lose their health care.   Jonathan Chait-writing for New York Magazine--wonders if that’s really what Republicans want in the year running up to a Presidential election.

Next month, the Supreme Court will rule on King v. Burwell. If all five Republican appointees support the plaintiffs (there’s no chance any of the Democrat-appointed justices will take the lawsuit seriously), some 7 million Americans will quickly lose their insurance. The prospect that this will occur has induced a wave of panic — not among the customers at risk of losing their insurance, who seem largely unaware, nor even among Obamacare’s Democratic supporters, but among Republicans. The chaos their lawsuit would unleash might blow back in a way few Republicans had considered until recently, and now, on the eve of a possible triumph, they find themselves scrambling to contain the damage. It is dawning on the Grand Old Party that snatching health insurance away from millions of helpless victims is not quite as rewarding as expected.

Unlike the Obamacare lawsuit that failed three years ago, the latest case is not based on a radical legal theory. Instead it is based on a novel reading of legislative history. The law allows states to set up their own exchanges to sell insurance to those who don’t have it through employer coverage, Medicare, or Medicaid. If states don’t establish an exchange, the federal government sets one up for them and, as it does with the state exchanges, offers customers tax credits. The trouble is that the law authorizing tax credits defines the exchange as “established by the state.” This ambiguity — does “by the state” not also mean the federal government? — was a technical omission. Many other parts of the law indicate its intent to make tax credits available to customers on the federal and the state exchanges alike.

The plaintiffs are led by a Vietnam veteran in Virginia named David King who makes $39,000 a year and objects to having to purchase insurance on a federal exchange. He would be exempt from this requirement were he not eligible for the tax credit — his $275 monthly payment would rise to a disqualifyingly unaffordable $648 — and this exemption, his lawyers argue, was exactly Congress’s intent. Without tax credits, the insurance would be unaffordable to most customers, triggering an actuarial death spiral that would destroy the individual insurance market in any state that attempted it. The plaintiffs insist Congress created the threat of self-destructing federal exchanges to coerce states into creating their own. (Disregard the copious evidence that the law’s drafters, and officials at the state level in both parties, believed federal exchanges would include tax credits.)

The lawsuit works more on the level of an elaborate prank than as a serious reading of the law. And yet it stands at least some chance of success — it only needs to persuade Republican-appointed judges. That prospect has grown suddenly unnerving because, unlike previous Republican efforts to strangle the law, the current one comes as Obamacare is functioning extremely well. Premiums on the exchanges have come in well under projected costs, customers report higher satisfaction with their coverage than those who have employer-sponsored insurance, and overall medical costs have grown far below the projected rate. It is one thing to take away a scheduled future subsidy, of which most intended beneficiaries are unaware. It is quite another to take away a benefit they’re already using.

Can you imagine the optics of people being taken off chemotherapy, dialysis, or insulin shots? So, Republicans are gearing up a way to blame it on Obama or trying to find a way to get the extreme right to compromise and provide a short term extensions of the credits should SCOTUS agree with the plaintiffs.

Senator Ben Sasse of Nebraska has likewise warned that a successful lawsuit would create problems. “Chemotherapy turned off for perhaps 12,000 people, dialysis going dark for 10,000. The horror stories will be real,” he wrote in a Wall Street Journal op-ed. For decades, medical deprivation of this sort used to be a uniquely American fact of life, at least among industrialized countries. Obamacare has turned it into something different: an actual political problem for opponents of universal health insurance.

Neither Johnson nor Sasse has a real plan designed to stop those horrors from taking place. Instead, their aim is to give Republicans a way to divert the blame onto Obama. The party is circulating contingency plans to temporarily restore the tax credits in exchange for crippling the law in other ways. Phil Gramm, the former Republican senator turned conservative-think-tank “visiting scholar” and financial-industry lobbyist, has proposed that Republicans pass a bill to temporarily extend the credits in return for eliminating the law’s regulations prohibiting insurance companies from rejecting old or sick customers. Competing proposals by Johnson and Sasse would likewise weaken Obamacare’s insurance regulations, ultimately destroying the law’s functionality. Gramm evenacknowledges that his plan “would put Obamacare on the path to extinction.” Obviously, Obama is not going to sign a bill that puts Obamacare on the path to extinction. The purpose is simply to give Republicans a talking point — they can say they passed a bill and blame Obama for vetoing it. But odds are that Republicans will fail to unify around a bill that can pass both houses of Congress with only Republican votes, because some will deem even a bill that causes Obamacare’s eventual demise unacceptably conciliatory.

At that point, it will fall to the states to either establish their own exchanges or watch their individual-insurance markets collapse. Neither option is terribly attractive for Republicans. The former means surrender. Doing nothing means sowing chaos, deprivation, and death. Will Republicans let this happen?

Legal Analyst and Lawyer Jeffrey Toobin has a lengthy article in The New Yorker examining the issues.

So that’s the theory: millions will suddenly be uninsured, and will blame Republicans. As Harry Reid, the Democratic leader in the Senate, put it recently, “I don’t think they will [win the case]. If they do, that’s a problem that the Republicans have.”

No, it’s not. If the Obama Administration loses in the Supreme Court, the political pain will fall almost exclusively on the President and his Party. To paraphrase Colin Powell and the Pottery Barn rule, President Obama will have broken health care, so he owns it. To the vast mass of Americans who follow politics casually or not at all, Obamacare and the American system of health care have become virtually synonymous. This may not be exactly right or fair, but it’s a reasonable perception on the part of most people. The scope of the Affordable Care Act is so vast, and its effects so pervasive, that there is scarcely a corner of health care, especially with regard to insurance, that is unaffected by it. So if millions lose insurance, they will hold it against Obamacare, and against Obama. Blaming the President in these circumstances may be unfair, but it’s the way American politics works.

Republicans, of course, will encourage this sentiment. The precise legal claim in King v. Burwell is an esoteric one. It is not based on a claim that Obamacare is unconstitutional. (The Supreme Court upheld the constitutionality of the law three years ago.) Rather, the central assertion by the plaintiffs is that the Obama Administration violated the law itself. In any event, the subtlety of the issue at the heart of the case will surely be lost in its aftermath. The headlines will read, correctly, “Court rules against Obamacare,” and this will be all that matters. The Republicans will argue that the Supreme Court showed that the law was flawed from the start, that the Obama Administration is lawless, that a full repeal of the law is the only appropriate response to the Court’s decision—and that the millions who lose their subsides should blame the sponsor of the law. Watch for references to a “failed Presidency.” There’ll be plenty of them.

Understandably, perhaps, the Administration has courted this kind of reaction. Better than anyone, Administration officials know the scale of the problems that would be created by a loss in the Supreme Court. Advertising this possibility makes sense as a litigation strategy; Obama officials don’t want to make it easy for the Supreme Court to rule against them. In testimony before Congress and elsewhere, Sylvia Burwell, the Secretary of Health and Human Services (and the defendant in the case), said that the Administration has no contingency plan for an adverse ruling in the Supreme Court. But playing chicken with the Justices only works if it works. If the Supreme Court strikes down the subsidies, the Administration will also have to answer for why it didn’t prepare for this possibility.

 “Conservatives” have tried to laugh off the concerns.

 A few weeks ago, the Heritage Foundation’s Edmund Haislmaier published an “Issue Brief” entitled “King v. Burwell: A Loss of Subsidy Does Not Mean a Loss of Coverage.” That’s a provocative title, considering 87 percent of the 8.8 million enrollees from federal exchanges receive those tax credit subsidies, meaning they have low or moderate incomes.

Haislmaier recently was seen saying it’s “premature” to conclude the huge drop in the uninsured rate since Obamacare passed is the result of Obamacare passing. In this brief, he correctly points out the Affordable Care Act and previous federal and state laws would enable current Obamacare enrollees to switch to some other form of health insurance if the lawsuit he supports succeeds in making their current plans unaffordable. (The brief also chides low-income people for using their subsidies to buy “king-crab-legs-and-steak” insurance rather than take the cheapest possible “powdered-milk-and-frozen-peas” plans.)

“In sum, should the Supreme Court’s eventual ruling in King v. Burwell result in people losing insurance subsidies, the affected individuals will have options for maintaining their coverage or choosing replacement coverage,” Haislmaier wrote. There’s even a chart.

Is that good news for people at risk of losing their health insurance subsidies? Maybe not. “Of course, some might still not be able to afford the unsubsidized premium even if they switched to a less expensive plan,” Haislmaier adds as a disclaimer. Of course.

That seems like it could be a problem, since 83 percent of Obamacare enrollees on the federal exchanges have annual incomes of 250 percent of the federal poverty level or less, which works out to no more than $23,450 for a single person, according to Avalere Health, a consulting firm. In other words, these aren’t Americans with a lot of extra money. And the average value of the tax credits they stand to lose is $263 a month, a substantial amount for people at this income level.

There’s a lot of variation in the price of health insurance, but a look at national average premiums and cost-sharing requirements illustrates what the “Let them eat Bronze plans” line of thinking ignores.

A 40-year-old at the poverty line, which is $11,770 for a single person, would pay $20 a month for a mid-tier Silver plan with tax credits. That amounts to about 2 percent of her annual income. Take away the subsidies, and her premiums jump almost 14-fold to $276 — or about 28 percent of her income.

What about dropping down to a lesser Bronze policy with higher out-of-pocket costs like deductibles?

That would cost almost 11 times as much as the subsidized Silver plan, at $213 a month, or about 22 percent of her income. Another person making twice as much money as her would see his premiums for the same Silver policy rise by 80 percent, which would eat up 14 percent of his income. His premiums would rise by 39 percent if he switched to a Bronze plan, which would cost him 11 percent of his yearly earnings.

Even opting for a slimmer policy might not make sense for lower-income people, considering how much more Bronze policyholders have to spend before their coverage kicks in. For example, the average deductible for an individual Bronze plan is $5,181, compared to $2,927 for a Silver plan, according to Health Pocket.

And this doesn’t even factor in the effects of a second type of subsidy only available to people earning up to 250 percent of poverty, which reduces their out-of-pocket health care expenses, and which also would go away in the high court rules for the plaintiffs.

Some are seeing this as the classic American “State’s Right’s” argument that has been responsible for–among many other things–the Civil War.

But what may eventually prove to be the key line of questioning may have been kicked off by Justice Sonia Sotomayor, who expressed concern about the consequences of a ruling for the challengers.  If a state’s residents don’t receive subsidies, she told Carvin, it will lead to a “death spiral”:  because a large group of people in those states will no longer be required to buy health insurance, but insurers will still be required to offer insurance to everyone, only sick people will buy health insurance.  And that will cause everyone’s insurance costs to rise, leading more people to drop out of the insurance market.  States will then feel like they have no choice other than to establish their own exchanges to ward off the “death spiral” – a scenario that is so coercive that it violates the Constitution.

Perhaps critically for the government, Justice Anthony Kennedy – who is often regarded as a strong supporter of states’ rights – also expressed concern about the possibly coercive effect of a ruling for Carvin’s clients.  There is, he told Carvin, “something very powerful to the point” that if the challengers prevail, the states have to choose between the death spiral and creating an exchange.  “There’s a serious constitutional problem,” he concluded.  (Carvin tried to downplay this concern by telling Kennedy that the government had not raised this issue, but Kennedy quickly retorted that “we sometimes think of things the government doesn’t argue.”)

Like Carvin, Solicitor General Don Verrilli – the government’s top lawyer at the Supreme Court – also faced questions about the challengers’ right to sue.  But between his acknowledgement that, as Carvin had asserted, a veteran who had only served a short time would not be eligible for free health care and the lack of certainty about the plaintiffs’ 2014 annual incomes (which would determine whether they would be required to buy health insurance at all), the issue didn’t seem to have much traction with the Justices.

On the merits of the challenge to the subsidies, Verrilli faced repeated questions from Justices Scalia and Alito, who were both obviously skeptical of the government’s arguments.  Scalia pushed back against Verrilli’s argument that the challengers’ reading simply doesn’t work, while – by contrast – the government’s interpretation accounts for the ACA’s structure and design.  The question, Scalia admonished Verrilli, is not what Congress intended; the question is what it actually wrote in the statute.  But in any event, Scalia queried a few minutes later, if the Court were to rule for the challengers, did Verrilli and the government actually expect Congress to “really just sit there while disaster ensues?”  (Based on Verrilli’s response – a dubious “This Congress?” – the answer appeared to be yes.)

Justices Alito and Scalia also contested Verrilli’s assertion that, had Congress actually intended to force states to choose between setting up their own exchanges and depriving their residents of subsidies, it would have done so more clearly.  Scalia asked rhetorically why, because the ACA is “not the most elegantly drafted statute,” would it “be so surprising” if Congress didn’t make the states’ obligations obvious?  Alito added that, if Congress didn’t want to limit the subsidies to the residents of states that had set up their own exchanges, it could have used more precise language to do so – as it did, for example, in making clear that the District of Columbia (which is not a state) nonetheless qualifies as a “state” for purposes of the ACA.

So, we’re down to brass tacks again. Will the ACA go down on a technicality which, essentially, is what the law is all about?

What’s on your reading and blogging list today?