The GOP's Dilemma: Is Obamacare Too Big to Fail?

King v. Burwell could put Republicans in an awful spot.

Not so long ago, Republicans were actively celebrating the potentially deadly blow the Supreme Court could deliver to Obamacare by deciding for the plaintiffs in King v. Burwell and related cases. That was understandable, but probably not very smart.

The challengers in these cases argue that the Affordable Care Act does not authorize exchange subsidies in states that rely on federal health-insurance exchanges. Many people on the right were very pleased when the Supreme Court decided to grant cert in this case; without exchange subsidies in over thirty states, little would remain of President Obama’s comprehensive health-care reform effort.

Today, some Republicans have rightly started to worry what will happen if the Supreme Court does indeed side with the plaintiffs. It would be a mess, and although President Obama and his acolytes are ultimately responsible for causing it, congressional Republicans, now in control of both House and Senate, will be responsible for dealing with it, unless the states manage to rapidly set up their own exchanges. (Good luck, Oregon. Safe travels, Republican governors and legislatures who want to rescue Obamacare.) They face three deeply unattractive options.

The first option is to do nothing. Doing nothing is the easiest way for Republicans to live up to their long-standing promise to disembowel the Affordable Care Act. It would also victimize millions of people, mostly in red states, who are counting on subsidies to continue buying health insurance. That could easily be depicted as unfair. Republicans could attempt to blame Democrats—but it would be hard, if not impossible, to get any mileage out of such attempts. It will, after all, be Republicans who litigated against these subsidies, Republican judges who decided to get rid of them, and Republican elected officials who celebrated their disappearance. Meanwhile, Democrats will be clamoring for restoration; Democrats will be showcasing people who lost their plans, even though they liked their plans; and Democrats will point to cancer patients whose treatment was or will be interrupted. Living up to years of campaign promises would require a united Republican front under a relentless barrage of viciousness in the middle of presidential-primary campaign season. Unity is possible, but it won’t be easy to achieve.

The second option is to replace Obamacare with something else. The most prominent current alternative appears to be to replace the individual mandate tax with an individual mandate subsidy. The Burr-Hatch-Upton bill, for example, would give people a sizable tax credit with which to buy health insurance, but only if they do indeed purchase health insurance. Nomenclature aside, it is easy to show that the financial implications of such a subsidy are identical to those of an Obamacare-style individual mandate tax—for taxpayers, the uninsured and the insured alike. It is hard to see how such a superficial fix would satisfy conservatives who have been promised repeal for years. And even if it did, President Obama would veto Republican efforts to fundamentally rewrite the law, forcing Republicans to either do nothing (see above), or to turn to a third option.

This third option would be to expand Obamacare as it would stand after the Supreme Court finds for King et al (i.e. the plaintiffs). There are two ways to do this: subsidies for state systems and restoring the subsidies for people on federal exchanges. The first option would give the states more leeway on how to spend federal money than the current system, but otherwise would federalize the financial responsibility for universal health insurance, much like Obamacare does. The second option would either temporarily or permanently extend the system of exchange subsidies to states without a state exchange, perhaps under a different name. This would effectively constitute a massive expansion of Obamacare. (A side point: It is not clear how Republicans would choose to pay for either of these two options, but it would not be out of character for President Obama to demand that at least some of these Obamacare expansions be funded with new tax revenue.) This third option may well be perceived by the conservative base as straight-up betrayal.

All three of these options sound terrible, and the best outcome for Republicans, who want to win the 2016 presidential election, may well be for the Supreme Court to side with the administration.

Stan Veuger is an economist and resident scholar at the American Enterprise Institute.

Image: Flickr/House GOP