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2015: The ObamaCare Crucible

2015: The ObamaCare Crucible

Tevi Troy

The Affordable Care Act, otherwise known as ObamaCare, has had a tough run of it since being signed into law nearly five years ago. It has faced constitutional challenges, voters ousting congressional Democrats who supported it, and the disastrous rollout of its federal website in October 2013. This past fall, supporters launched a public-relations campaign dedicated to the proposition that things were finally going well for ObamaCare’s 7 million sign-ups, but their campaign was derailed when the Obama administration admitted that it had added 400,000 dental patients to the roster of health-insurance enrollees to falsely claim it had reached the 7 million number.

It is likely that ObamaCare’s low point hasn’t been reached. The year 2015 is shaping up to be the ACA’s worst yet. A confluence of events will have significant implications for the law’s ultimate disposition and may give the law’s opponents their best chance to date to relieve the American people from some of its most crushing burdens.

First, and most obvious, the ACA will face the implacable opposition of GOP majorities in both houses of Congress for the first time since its passage in March 2010. These majorities came about as a result of successive midterm elections. The first, in 2010, won the GOP the House of Representatives and was largely about the Affordable Care Act; indeed, fully one-third of the Democrats’ losses in that election can be attributed to voter dissatisfaction with the health-care law.

The recent 2014 midterm elections saw a wave that carried Republicans into the Senate majority. ObamaCare was a major factor in this election as well. During the key preelection weeks of October 6–12 and October 13–19, ObamaCare was the No. 1 issue in Republican ads. In those two weeks, Republicans ran more than 23,000 anti-ACA ads, outstripping the second leading topic by 25 percent. And, as Jeffrey Anderson pointed out in the Weekly Standard, in the week of October 6–12, beleaguered Democrats actually supplemented the GOP’s anti-ACA message with 500 anti-ACA ads of their own.

Nearly half of the 2014 voters (48 percent) thought that the ACA went “too far,” compared with only 21 percent who thought it was just right. Discounting those who thought the ACA did not go far enough (just about all of whom, it could safely be said, voted for the Democrats), the voters who might have even considered voting for GOP candidates were overwhelmingly against the ACA and its deleterious impact. As of the first of this month, 29 senators who voted for the Affordable Care Act are no longer in the United States Senate; this number includes 15 who were voted out in favor of Republicans. Overall, since its passage, the GOP has gained a net 14 Senate seats and 70 House seats.

The elections proved, yet again, that the politics of health care do not favor the Democrats (a history I detailed in an April 2010 article for this magazine entitled “Health Care: A Two-Decade Blunder”). Following the elections, even Senator Charles Schumer, a usually loyal member of the Senate Democratic leadership, felt the need to acknowledge that the pursuit of Obama-Care had harmed his party politically. “Unfortunately, Democrats blew the opportunity the American people gave them,” Schumer said in a well-publicized speech. “We took their mandate and put all our focus on the wrong problem—health-care reform.”

While ObamaCare now appears to be a divisive affair among Democrats, opposition to it is a unifying one for Republicans, in contrast to other more contentious intra-party problems from foreign policy to social issues. These two factors mean that the GOP has a united caucus in dealing with an issue in which they have 60–40 support from the American people. The Republicans have every incentive to continue to press the matter, forcing congressional Democrats, the Obama administration, and 2016 Democratic candidates such as Hillary Clinton to shoulder the Obama-Care burden. And the GOP will do so in an environment in which Democrats no longer have much reason for fealty to President Obama, both because of his lame-duck status and because his policies have led to the sharp drop in Democratic members of the House and Senate.

The new GOP majorities are sure to offer multiple challenges to the ACA. First, it will almost certainly be subjected to another vote for its being repealed in its entirety. Many in the mainstream media scoff at the repeal votes, given that they would be unlikely to pass the Senate and, even if they did so, would be vetoed by the president. Still, they have an importance that goes beyond symbolism. First, nearly all elected Republican legislators see themselves as dedicated ACA opponents. Many GOP legislators are deeply aware that running against the ACA got them elected in the first place, a fact that creates structural and psychological incentives for them to persevere in trying to repeal the law. Second, opponents of the ACA can and likely will take comfort in seeing progress when it comes to repeal, with a hopeful harbinger for the future: In 2011, only the House voted to repeal the law. In 2015, both the House and the Senate will vote for repeal.

Once the effort plays itself out, GOP members can go back to their constituents and show that they did what they could to push for repeal. After that, Congress can take up a number of what Senate Majority Leader Mitch McConnell has called “deeply, deeply unpopular” elements of the ACA.

The first aspect of the law the GOP will probably address is the “medical-device tax.” This 2.3 percent tax on medical devices is supposed to bring in $30 billion in revenue, but it is better understood as a tax on innovation. One of the reasons it is the bill’s most politically vulnerable aspect is that some Democrats, including Minnesota Senators Al Franken and Amy Klobuchar, join the Republicans in opposing it. (Minnesota happens to be the capital of the medical-device industry.)

Another likely GOP target is the way ObamaCare defines the full-time work week as 30 hours long. This definition—25 percent lower than the 40-hour standard—is designed to make more employers subject to the mandate requiring them to provide health insurance lest they incur a fine. In so doing, the law provides an incentive for employers to keep workers under the 30-hour threshold. It, too, has generated bipartisan opposition.

Then there is the so-called Cadillac tax, an extra excise impost on high-value employer health-care plans. Its perverse incentive encourages employers to reduce the value of their health-care plans, lest they be subjected to the tax, by increasing the amounts of the copays and deductibles shouldered by employees. Thus, a tax intended to fall upon employers will actually hit employees in the form of higher costs and lower compensation packages. Employers dislike the Cadillac tax, but perhaps more important for the politics in 2015, labor unions abhor it as well. Together, they can form a powerful coalition against this tax.

It is possible that none of these changes will get signed into law by President Obama. He has the veto pen, and both the House and Senate lack the two-thirds majorities necessary to override him. But the fact that these matters, and others like them, will be on the legislative agenda will keep ObamaCare on the defensive. President Obama can engage in a holding action to protect the ACA from legislative changes over the next two years. But he cannot hold off changes forever, and it is a near certainty that the next president, from whichever party, will be far more open to significant alterations.

ObamaCare will also face a new crucible in the Supreme Court, which will hear King v. Burwell in the spring and decide on it in June. The case asks whether participants in health-care exchanges run by the federal government rather than the states can receive subsidies with which to purchase health insurance. This is an issue because the text of the legislation explicitly says that subsidies shall be available in exchanges “established by the State.” The text does not call for subsidies in exchanges established by other entities.

The question would not have been relevant if all 50 states had established exchanges, as the Obama administration wanted them to do. But the vast majority of states chose not to. Most governors opted to avoid the ACA’s many restrictions and instead let the federal government create the exchanges. And so, despite the clear language of the bill’s text, the Obama administration chose to interpret the law to mean that participants in any exchange—whether established by states, the federal government, or some kind of hybrid of the two—were eligible for subsidies. Since only 14 states (including the District of Columbia) set up their own exchanges, the subsidy is now in limbo in more than 30 states without state exchanges—until the Supreme Court makes its decision.

It was only a little more than two years ago that ObamaCare survived a constitutional challenge at the Supreme Court by the narrowest of margins, and only because Chief Justice John Roberts reportedly decided to switch his vote. Roberts did, however, go along with two significant changes to the law that altered it in important ways. He limited the law’s ability to punish states that failed to follow its Medicaid provisions, and he deemed the law’s individual-mandate fee a tax, not a penalty.

These limitations suggest that Roberts should not be considered a reliable vote for the administration on King v. Burwell. If Roberts and four other justices side with the plaintiffs this coming June, the ACA will still be in effect. The way the law functions going forward will be vastly different, to be sure, but the concern Roberts expressed in his 2012 decision about overturning duly passed legislation would not be triggered.

Such a decision would have enormous implications for both the ACA and for our health-care system as a whole—beyond even what most analysts realize. If the conservatives win in King v. Burwell, the Court will have eliminated subsidies in more than 30 states. Such a move would affect approximately 13 million subsidy recipients in 2016, according to the Kaiser Family Foundation. The subsidies are vital to the ACA not only because they make it easier to purchase insurance, but because they mask the true price of the insurance offerings in the exchanges. The oft-heard complaint that required individuals to enter their personal information before getting a price on insurance plans revealed a key feature, not a bug, of the system. It was designed to prevent the kind of sticker shock that would deter individuals from shopping for plans that were becoming increasingly expensive.

Beyond the removal of the subsidies, a pro-plaintiff decision in King v. Burwell would have another important implication. The individual and employer mandates force individuals to purchase, and employers with more than 50 employees to provide, health insurance. These are both linked to the existence of subsidies in the states. If the states without state exchanges no longer provide subsidies, they would also no longer have an employer mandate. The individual mandate would also not apply in many cases, specifically where the cost of the cheapest qualifying health-insurance policy amounts to more than 8 percent of an individual’s income.

If both the subsidies and the mandates disappear from ObamaCare, what would be left? There would be a host of taxes, including the medical-device tax and the Cadillac tax. There would also be a host of regulations, including the requirement that people up to age 26 can remain on their parents’ insurance, as well as the guarantee that people cannot be dropped for preexisting conditions. There is also the Medicaid expansion, which most, but not all, states undertook, in part because the federal government is paying all the bills for the expansion until 2018.

In some ways, the removal of the mandates and the subsidies in some states would establish a federalist experiment whereby the most Democratic states would embrace all aspects of the ACA while most others would go in another direction. Over time, such a contrast could prove quite informative regarding how health care would fare in competing laboratories of democracy.

The key claim of administration proponents in King v. Burwell is that it should be obvious to everyone that the legislation is intended to provide subsidies to any and all ACA exchanges. That is not only contradicted by the text of the law, but also by one of the law’s most outspoken proponents. Jonathan Gruber, the self-proclaimed “architect” of the ACA, became nationally infamous in November 2014 when a citizen, outraged by the increase in the cost of his health care, found footage of Gruber’s appearances in panel discussions and speeches over the past few years. In those appearances, Gruber actually touted the fact that the law was expressly written to drive states to set up exchanges since not doing so would disadvantage the state relative to the states that did create their own. As Gruber put it in a 2012 speech, “If you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits.” In Gruber’s analysis, limiting subsidies to exchanges “established by the State” was by design. It was designed to encourage states to create the exchanges themselves and not to rely on the federal government to do it for them.

In other videos, Gruber offered uncomfortable revelations from inside the policymaking apparatus. He explained to his audiences that when the law was being shopped around Congress in 2009 and 2010, it was becoming so costly that he and his fellow architects needed to engage in policy legerdemain to get their way. Gruber said that a “lack of transparency” was a “huge political advantage” in passing the bill due to the “stupidity of the American voter.” He also dismissed people who cited objections to the law by saying they reminded him of his “adolescent children.”

Gruber explained that the Cadillac tax was something of a Trojan horse as well. The administration, he said, had to deal with the reality that taking away tax breaks for health care was unpopular: “You just can’t get [it] through. It’s politically impossible.” This forced the administration to pursue the policy in an indirect way, one that would appear to put the burden on companies but would in fact hit individuals: “We just tax the insurance companies, they pass on higher prices, that offsets the tax break we get, it ends up being the same thing. It’s a very clever, you know, basic exploitation of the lack of economic understanding of the American voter.”

The impact of the Gruber videos cannot be overstated. Even liberals such as Ezra Klein had to acknowledge that, at least for the ACA’s critics, “Gruber’s comments were a huge deal.” Gruber had been one of the law’s leading proponents, pocketing $400,000 from the Obama administration in consulting fees regarding the law (twice what cabinet secretaries make annually) and millions more in consulting fees from states for his help in setting up their exchanges. Simply put, this key figure openly trumpeted the fact that the only way the Obama administration was able to pass the law was by intentionally misleading the American public.

Both President Obama and outgoing House Speaker Nancy Pelosi felt the need to disavow Gruber. Neither handled it well. “I don’t know who he is,” Pelosi claimed, but it did not take long for a 2009 video to emerge in which Pelosi praised “Jonathan Gruber of MIT’s analysis of what the comparison is to the status quo versus what will happen in our bill.” Obama’s disavowal was equally lame: Gruber was just “some adviser who never worked on our staff,” the president said. It is true that Gruber was not a full-time employee, but he was paid far more than one, and by multiple agencies. He was touted by the administration and visited the White House more than 20 times.

Thanks to the administration’s many friends in the media, the Gruber story itself will not cause as much damage as it would if the videos had caught a Republican making similarly offensive comments. But the perception of an arrogant elite foisting a costly and unpopular bill on a resistant American public will be hard to erase. Gruber’s comments seemed at heart the purest example of modern, activist liberal thinking: We, the elites, know what is good for the people, but it is too difficult to explain to the hoi polloi. It must be foisted upon them for their own benefit.

As it turns out, the future of the ACA will not be determined by arrogant MIT professors who look down on the American people, but by the American people themselves, through their chosen representatives. The people will continue to judge the law based on what it costs them, whether the goals of near-universal coverage are met, and whether they will be able to keep the insurance they originally had. They will make their views known, in 2015 and beyond.

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