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The Supreme Irony Of King V. Burwell

Blue staters help pay for the Obamacare red staters could lose.
The Supreme Irony Of King V. Burwell
Image from: Commonwealth Fund

From the very beginning of the debate over what would become the Affordable Care Act, the conservative crusade to kill health care reform has been defined by an inescapable irony. For years, health care has been worst in those reddest of states where Republicans poll best. Study after study has shown that red state health care systems are plagued by the highest uninsured rates, the least access to care and the unhealthiest residents.

But with the Supreme Court soon to rule on the fate of Obamacare's subsidies in the 34 states that chose to have the federal government run their insurance exchanges, another irony of all-out GOP obstructionism could be revealed as well. If the Roberts Court sides with the plaintiffs in King v. Burwell, it's not just that red states will be hardest hit as some 6.4 million Americans lose their ACA subsidies. As it turns out, blue state taxpayers have been picking up a disproportionate share of the tab for them.

Of course, the inevitability of this dynamic was never a secret. On May 31, 2009, almost a year before the President signed Obamacare into law, Alec MacGillis explained in the Washington Post how national health care form would ultimately have to work--and have to be funded. "Who will pay for universal health care?" MacGillis asked and then answered, "Blue states more than red":

Health-care reform may be overdue in a country with 45 million uninsured and soaring medical costs, but it will also represent a substantial wealth transfer from the North and the East to the South and the West. The Northeast and the Midwest have much higher rates of coverage than the rest of the country, led by Massachusetts, where all but 3 percent of residents are insured. The disproportionate share of uninsured is in the South and the West, the result of employment patterns, weak unions and stingy state governments. Texas leads the way, with a quarter of its population uninsured; it would be at the top even without its many illegal immigrants.

MacGillis was right on both counts in predicting what he called "A Red State Booster Shot." As a March 2012 Gallup survey later revealed, led by the 28 percent of residents without insurance coverage in Texas, an "uninsured belt" wrapped across the solidly Republican south. Nine of the best performing states, led by Massachusetts at just 4.9 percent uninsured, voted for Barack Obama in 2008 and 2012.


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Image from: Gallup

Image from: Gallup

But merely tallying up the ranks of the uninsured understates the magnitude of the health care horror story in Red State America. In its 2014 state health care scorecard, the Commonwealth Fund measured performance in providing health care access, prevention and treatment, avoidable hospital use, equity across income levels, and healthy lives for residents. Again, all of the top 10 performing states voted for Barack Obama in 2008 and 2012, 9 of the 10 cellar-dwellers backed Republican Mitt Romney. Texas, which then Governor and 2016 White House hopeful Rick Perry claimed in 2010 had the best health care system in the nation, is ranked a moribund 44th.

When the Commonwealth Fund in 2012 instead broke the nation into 306 "local areas," the results were much the same. Twenty eight of the top 30 voted for Barack Obama. All of the lowest ranked 10 percent voted for Mitt Romney.

Image from: Commonwealth Fund

But if red state residents would be the biggest Obamacare winners, their blue state neighbors would be picking up more than their share of the cost. Part of the reason has to do with how the ACA is paid for. The other part has to with history. For years, federal spending has been defined by "red state socialism," the one-way flow of tax dollars from Democratically-controlled to states to pay for services for red state residents.

There has been no shortage of analyses confirming the dynamic of red state socialism. In 2007, for example, the Tax Foundation looked at 2005 data of federal taxes paid versus federal spending received. As the table below shows, many of the usual red state suspects top the list of recipients of Uncle Sam's largesse:

Image from: Tax Foundation

More recently, the financial site Wallet Hub ranked its most and least "dependent states" for 2015. Looking more broadly at four different indicators (federal dollars received, federal tax dollars paid, number of federal employees and percent of state budget accounted for by federal dollars), the analysis produced a similar result. Higher-income, generally blue states were the "givers," while poorer, generally red states were the "takers." (It should be noted that Republican-dominated states like Texas and North Dakota where energy production is king were on the positive side of the ledger.)

The funding mechanisms for the Affordable Care Act are no exception to the rule. As the nonpartisan Congressional Budget Office (CBO) informed Speaker John Boehner in July 2012, Obamacare would actually reduce the national debt over the ensuing decade. Its combination of $741 billion in spending cuts (primarily from hospitals and Medicare Advantage providers) and hundreds of billions in new tax revenue were forecast to more than offset its costs. And key among them, like the tax on so-called "Cadillac" health care plans and the 3.8 percent surtax on investment incomes for those earning over $200,000 a year, are measures that will disproportionately hit wealthier Americans. And they generally live in bluer, more Democratic states.

Now, there's nothing wrong about "red state socialism." On the contrary. Americans' access to health care, education, housing, retirement and other vital resources shouldn't change when they cross a state line. So when federal taxpayers in deep-pocketed states like Maryland, Massachusetts and Connecticut help underwrite social services in Louisiana, Alabama and Mississippi, that is as it should be.

Just as long as we all acknowledge it.

And that certainly is the case with the expansion of Medicaid, especially had every state accepted it after the Supreme Court's 2012 decision in the NFIB v. Sebelius case. Fully-funded by Uncle Sam through 2017 and covering up to 90 percent of the cost after that, Obamacare's Medicaid expansion would have dramatically reduced the ranks of the uninsured while lowering states' previous costs for uncompensated care. Kentucky and Arkansas, two of the worst performers in the Commonwealth Fund's ranking, enjoyed the biggest drops in uninsured thanks in part to the expansion of Medicaid. (And as previous analyses predicted, even with the need to pay 10 percent of the Medicaid expansion in the future, Kentucky will save money as the Blue Grass State attracts new jobs and lower the cost of care for the once-uninsured.) But states like Texas and Florida said no, leaving millions needlessly uninsured and condemning thousands to die each year.

As ACASignups has documented, roughly 32.5 million people have obtained health insurance thanks to Obamacare. Some 13.9 million of them got covered through the expansion of Medicaid and the State Children's Health Insurance Program (CHIP). And while 8.2 million bought "qualified health plans (or QHPs) separately from the online insurance marketplaces, another 10.3 million purchased them from the state and federal exchanges. Most of them--roughly 80 percent--received federal subsidies to enable them to do so.

But if the Supreme Court in King v. Burwell decides that Congress did not mean what all involved say it meant about health insurance exchanges "established by the state," millions of those Americans stand to lose their subsidies. It won't matter that former CBO Director Douglas Elmendorf ("It was a common understanding on the Hill, again on both sides of the Hill, on both sides of the aisle, in late 2009 and early 2010, that subsidies would be available through the federal exchange as well as through state exchanges") or what Maine Republican Senator Olympia Snowe said about the idea of limiting subsidies only to state-run exchange ("never part of our conversations at any point"). Unless Congress were to act immediately in the wake of a Supreme Court ruling against the Obama administration, as many as 6.4 million (according to CMS and the Kaiser Family Foundation), 7.5 million (Commonwealth Fund) or even 8.2 million people (Urban Institute) would no longer be able to afford their health insurance. And over the time, the adverse selection process of younger, healthier Americans forgoing insurance while the older and sicker try to maintain coverage would lead to an Obamacare "death spiral" as premiums skyrocketed.

Image from: Kaiser Family Foundation

Image from: Kaiser Family Foundation

It's not just the reddest of states among the 34 which opted to use the federal marketplace for their exchanges. As Greg Sargent pointed out in the Washington Post this week, many of the nation's most hotly contested battleground states for 2016--some of which currently have GOP governors despite voting for Obama for President--will be hit hardest if the Supremes strike down ACA subsidies in King v. Burwell:

-- In Florida, 1,324,516 people are at risk of losing subsidies. If that happens, they would be hit by an average 359 percent premium increase.

-- In North Carolina, 458,738 people are at risk of losing subsidies. They'd be hit by an average 336 percent premium increase.

-- In Pennsylvania, 348,823 people are at risk of losing subsidies. They'd be hit by an average 177 percent premium increase.

-- In Virginia, 285, 938 people are at risk of losing subsidies. They'd be hit by an average 287 percent premium increase.

-- In Wisconsin, 166,142 people are at risk of losing subsidies. They'd be hit by an average 252 percent premium increase.

-- In Ohio, 161,011 people are at risk of losing subsidies. They'd be hit by an average 190 percent premium increase.

-- In Indiana, 159,802 people are at risk of losing subsidies. They'd be hit by an average 271 percent premium increase.

With the Senate up for grabs in 2016, Majority Leader Mitch McConnell (R-KY) may come to regret his December wish for Obamacare that the Supreme Court of the United States "may ultimately take it down." His confused GOP colleagues in both Houses of Congress don't know quite what to do. Actuarial reviews of various post-King plans considered by Republicans on Capitol Hill, Sargent reported, show the GOP response could actually make things worse. Meanwhile in the House, Paul Ryan and friends want to wait until after the Supreme Court weighs in to announce what fix--if any--the GOP might propose. Their secrecy, while cowardly, is understandable. As Joan McCarter explained:

It's becoming crystal clear that what Republicans fear isn't the possibility of their voters losing health insurance. It's that they'll be blamed for it.

Blamed, indeed, for denying health insurance coverage overwhelmingly for red state residents paid for in part by blue state taxpayers. All of which suggests that five years after its passage, the Republican reaction all along to Obamacare shouldn't have been "repeal and replace," but "thank you."

(This article also appears at Perrspectives.)

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