Wednesday, December 24, 2014

Republicans Will Be Screwed No Matter How the Supreme Court Rules On Obamacare Subsidies

The Supreme Court recently announced that they will be hearing arguments challenging the distribution of subsidies in Obamacare in March. If the plaintiffs are successful, this would mean that citizens of any state that doesn't have their own state run exchange will not be able to qualify for subsidies. This would result in millions of people who will no longer be able to afford health insurance. Conservatives, as you would probably expect, are salivating at the idea of the Supreme Court ruling in their favor..

But here's the thing. Even if the Supreme Court sides with conservatives, this wouldn't exactly be a slam dunk for the movement. Why? Because the Republican Party would find itself in a new, and arguably worse predicament.

Republicans may despise Obamacare, but it had one dirty little secret. Interestingly enough, it turns out that Obamacare was, in a way, a pretty sweet deal for Republican states. How so? As Ezra Klein explains:

For a bill that passed without a single Republican vote, Obamacare sure treats red states well. The law takes more money from blue states than from red states and it spends more money in red states than in blue states. It is, as Alec MacGillis wrote in the Washington Post at the time, "a rare triumph of principle over parochialism."
It wasn't just the spending side. Obamacare also favored Red states when it came to taxation as well:

So all else equal, a bill that spends its money covering the uninsured is going to spend more money in red states than blue ones. But all else isn't equal. The way Obamacare pays for itself also favors red states.
One of Obamacare's major pay-fors is a 3.8 percent tax on investment income earned by richer taxpayers. This hits blue states harder than red states because blue states are, well, richer. Of the 25 states with the highest median income, 19 voted for Obama in 2012.
Another way Obamacare funds itself is through its tax on "Cadillac" health-care plans, which begins in 2018. The tax is really just a levy on very generous employer-provided plans — which are more common in blue states, with their history of unionization, than red ones. That means the Cadillac tax will hit harder in blue states than red ones.

Now I gotta say, as far as tyranny goes, it could be worse. But that's where things start to get fun.  See, if the Supreme Court rules the way most Republicans want them to, they might not end up popping the champagne corks so quickly:

But after the Supreme Court's ruling, Republican governors and legislatures in state after state rejected the expansion. Rejecting the Medicaid expansion, however, doesn't exempt a state from the taxes and spending cuts Obamacare uses to fund the Medicaid expansion. A September analysis from McClatchy estimated that "if the 23 states that have rejected expanding Medicaid under the 2010 health care law continue to do so for the next eight years, they’ll pay $152 billion to extend the program in other states — while receiving nothing in return." That's a helluva gift from (mostly) red states to (mostly) blue ones.
Now the Supreme Court will take up King v. Burwell, in which the plaintiffs argue that the text of the Affordable Care Act makes it illegal for subsidies to flow through federally-run exchanges. If they're successful, then it will be possible for a state that opposes to Obamacare to withdraw from both the Medicaid expansion and the exchange subsidies — that is to say, from pretty much all of Obamacare's benefits. But they will still pay all of its costs. They will still pay the law's taxes and their residents will still feel the law's Medicare cuts. Obamacare will become a pure subsidy from the states that hate the law most to the states that have embraced it. It's like a fiscal version of reverse psychology.

Yes, the Republicans have put themselves into quite the pickle. If they lose in the Supreme Court, Obamacare will continue to happily chug along as it's been doing, gradually providing more and more people health care. If they "win" however, they'll wind up "rewarding" their constituents by having them subsidize health care for Democrats without getting anything in return.

I'd imagine most Republicans aren't exactly aware of the ramifications of taking on this provision. But even when they're finally clued in, will they attempt to pass legislation to return things back as they were (and should have remained to begin with)?

It's actually a pretty tough call. Republicans have generally been good about shielding their base from their own terrible policies (see how Romney/Ryan protected people over 55 from their draconian cuts to medicare, but screwed over everyone younger). Republican politicians may hate the idea of government spending money on social programs, but they don't mind as much as long as it's spent on other Republicans (welfare for me, not for thee).

Yet despite that, multiple Republican governors have refused to expand medicaid, turning away up to billions of dollars in otherwise free money because they simply despise Obama. The hatred that this president receives from these people is just staggering, and they would cut off their nose, ears and eyes to spite their face.

There is also the possibility that Republicans are perhaps hoping that the insurance market going into a death spiral in Red states may have reverberations in Blue states as well (because many major insurance companies sell plans in multiple states). There's little doubt that insurance is gonna sky rocket in places like Texas and South Carolina, but I honestly don't know how badly that would effect plans in California or Massachusetts. 

March is going to be a hell of a month.

1 comment:

  1. Some math may be required: If the exemption covers only a few months of the year, the individual is responsible for calculating how much of the penalty he or she will owesign up for obamacare 2015