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Will the Supreme Court move America closer to two-class healthcare?

Will the Supreme Court move America closer to two-class healthcare?
The dark purple swath shows where state governments have done the least for their sickest and poorest residents. (HHS)

The chart at the top of this post identifies the black hole of American healthcare: The highest death rates are in a swath of states across the Deep South.

Within a rough range, these rates match more specific metrics of health generated by the Department of Health and Human Services, such as the prevalence of strokes, obesity and hypertension. As a proxy for the efforts of state governments to improve the health status of their residents, the death rates tell a dismal story. In general terms these are the states with some of the highest ratios of medically uninsured residents and the greatest resistance by elected officials to take advantage of the Affordable Care Act by expanding Medicare and creating their own insurance exchanges.

Now the Supreme Court, by taking up the infamous King/Halbig lawsuits aimed at eliminating federal insurance subsidies for residents of states without a state exchange, is threatening to give those statehouses, almost universally controlled by Republicans, another tool to make their citizens worse off. All they need to do is refuse to convert their federal exchanges to state exchanges, which in most cases can be done by a legislative vote and the stroke of a pen--and at no cost to their state budgets. (Technically, the court agreed to review King vs. Burwell, which comes from the federal appellate court in Richmond, Va.; but the issue of the applicability of the subsidies typically is known as Halbig, after a case heard by the federal appellate court in Washington, D.C.)

The U.S. already labors under a two-class healthcare system -- states that have refused to expand Medicaid are in the second class. If the Supreme Court rules against federal subsidies in the 36 non-exchange states and those states don't respond, the second class will fall further behind the rest of the country. That's an estimated 7 million people at risk of losing affordable health coverage. 

There's no point here in rehashing the arguments against the King/Halbig lawsuits, which have elevated an obvious drafting error in one paragraph of the Affordable Care Act into a mortal threat to health reform. For cogent analyses, consult these posts by Nicholas Bagley of the University of Michigan, Abbe Gluck of Yale, Joey Fishkin of the University of Texas, and Jonathan Cohn of The New Republic.

Because it's plain that Congress intended the subsidies to apply to all low- and middle-wage Americans who met the income thresholds, it's fair to characterize the right-wing attack on the subsidies as political and ideological, as many of the above analyses do. What's even more important is to examine the effect of an adverse ruling and the paths to counteracting it.

One path goes through Congress. The King and Halbig cases turn on a single ambiguous phrase of a type that routinely crops up in legislation; almost invariably, these are resolved by a sort of legislative Wite-Out --an amendment to fix the working. In this case, however, GOP intransigence has made that impossible. Congressional Republicans have refused to take up the ACA for any purpose except to repeal it entirely.

Now that the GOP controls the House and the Senate, some Washington pundits say the party may be ready to negotiate rather than obstruct. The outlines of an ACA deal are easy to find. The GOP dearly wants to eliminate the ACA's medical device tax and its employer mandate. Neither change would fundamentally harm the ACA's ability to bring affordable insurance to the uninsured masses, and both are favored by many Democrats. So give them to the Republicans--in return for a legislative fix to the subsidy language. Everyone knows that President Obama won't sign anything that undermines the ACA, but here's betting that this is a deal he'd make.

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What if Congress can't make this deal? Then the ball is in the states' courts. As we noted last week, the 36 states where the subsidies hang in the balance could nullify an adverse court ruling in advance simply by establishing nominal state exchanges, which they could immediately turn over to the federal government to operate.

The problem there is that many states without their own exchanges have been adamantly opposed to allowing the ACA to operate effectively within their borders. Of the 10 states Gallup identified in 2011 as having the highest percentage of uninsureds--Texas, Mississippi, Alaska, Florida, Oklahoma, California, Louisiana, Arkansas, North Carolina and Georgia--all but California and Arkansas refused to expand Medicaid. And all but California and Arkansas failed to establish their own state exchanges, even in a partnership with the federal government.
And what do you know? Both those states were among those with the sharpest drops in uninsured percentages in the country this year: Arkansas went from an uninsured rate of 22.5% in 2011 to 12.4% at mid-year 2014, according to Gallup. In California the rate fell from 22% in 2013 to 11% in 2014, according to the Commonwealth Fund. Those ratios would place both states among those with the lowest rates of residents without insurance. 
Even an adverse court ruling on the King/Halbig issue isn't likely to destroy the ACA; states with state-sponsored exchanges include some of the most populous in the union, including California, Illinois, New York, Massachusetts and Michigan. That's almost certainly a critical mass of ACA-compliant states for the law to remain functional within their borders. And in many others, agitation from the millions of voters at risk of losing health coverage they will have enjoyed for at least a year before the court ruling comes down may well influence their legislators and governors.

Michigan's Bagley observes, accurately, that there's little for conservatives to gain from a victory at the court on King/Halbig. The ability of deep red/Deep South states to deny their citizens federal tax subsidies is a poisoned chalice, since it hurts those citizens by blocking what is exclusively federal money. By doing so, moreover, they ensure that more of their own residents' tax money flows out of their states to benefit residents elsewhere. Many conservative states already have thrown in the towel on the Medicaid expansion, accepting the heavy federal funding for the expansion, if belatedly.

So the tax subsidy issue is turning into an intelligence test for state politicians: are they so stupid that they'll cling to their ideological opposition to Obamacare even if it hurts millions of people? This is where the shots fired in the name of politics meets the answering volley of morality. As Bagley writes, "I wonder if the challengers have given enough thought to the people--real people, with real health problems, and a real need for insurance--who could be caught in the crossfire."

Keep up to date with the Economy Hub. Follow @hiltzikm on Twitter, see our Facebook page, or email mhiltzik@latimes.com.

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