Opponents of Obamacare recieved two pieces of good news in early November.
First, voters on November 4 sent to Washington, DC a Senate majority committed to repealing the law, joining a House majority that has voted for repeal several times in the past four years.
Then, on November 7, the U.S. Supreme Court announced it would hear the case of King v. Burwell, which could fundamentally undermine Obamacare by, ironically, upholding the law as written, passed, and signed by the president.
The Supreme Court will probably rule in late June of next year, and if it decides tax credits to purchase health insurance are available only through exchanges established by the states, Obamacare opponents will achieve a major victory.
The dispute in King is fairly simple. The actual text of the law states tax credits for indivudals to purchase health insurance are avalable only through an Obamacare exchange “established by the state.” More than 30 states have chosen not to set up exchanges, instead allowing the federal government to do so.
Ignoring the language of the law, the Obama administration decided to give tax credits through the federally established exchange. This triggered several lawsuits, with two courts ruling to uphold the law as written, thereby preventing tax credits from being applied to individuals who signed up through the federal exchange, while a third court sided with the administration’s argument Congress simply forgot to write into the law that tax credits could be given through federal exchanges.
It’s easy to predict how President Obama and his allies will react if the Supreme Court rules against their expansive interpretation of Congress’ intent and declares the law should be administered as written. They will bludgeon Republicans for months or years for “taking away health care from millions of Americans,” even though the truth is it’s entirely the fault of the Democrats who hastily passed and signed the law without reading it—not a single Republican voted for it.
This firestorm will put intense pressure on Congress and Republican governors and state legislators to rewrite the law to Obama’s liking and create state exchanges where they haven’t been established. To avoid this demagoguery, Congress should pass legislation authorizing tax credits in states that don’t set up exchanges, since they will be the only ones affected by the ruling. But here’s the catch: While making the tax credits available to everyone in states with federal exchanges, they should not be made available through the federal exchanges. Nor should those credits be based on the current convoluted formula that gives aid to some people while leaving others out.
Instead, Republicans should pass legislation that gives tax credits along the lines they have long proposed—in a lump sum given directly to individuals who buy insurance in the individual market.
Several such proposals have already been offered. The 2017 Project proposes tax credits based on age. Those under age 35 would receive a $1,200 tax credit, those over 50 would get a $3,000 tax credit, and those in between would receive $2,100. The concept is straightforward: give people a tax credit for buying health insurance, and then get out of the way.
Congress would have to do more than just give tax credits, of course. The legislation should also repeal the law’s benefit mandates that, for example, require 61-year-old women to pay for maternity coverage. This will lower insurance costs and make those refundable tax credits go much further.
If President Obama becomes desperate to sign something that preserves at least part of his signature domestic legacy, Republicans might even be able to get real Medicaid reform into the legislation. The gold standard would be block grants giving states greater authority to experiment and design their own health programs for the poor based on local needs, not federal dictates.
The beauty of this approach is that it will turn the table on Obama and his allies when they demand the Republican Congress “fix” the problem the GOP had nothing to do with creating. If Republicans pass legislation authorizing refundable tax credits in states that didn’t set up exchanges, suddenly it will be Obama and his veto pen that are “taking health care away from people.”
The Supreme Court may hand Republicans a once-in-a-lifetime opportunity next June to get market-oriented health reform passed and signed by a leftist president. The leverage they would have over the president will be significant, and they must not let this opportunity slip through their fingers.
Sean Parnell ([email protected]) is a research fellow for health policy at The Heartland Institute.
