June 25, 2015

Mercatus' Graboyes on King v. Burwell

Robert Graboyes

Former Senior Research Fellow
Summary

The ACA is a massive law, written and passed in haste. Such procedural shortcuts yield unintended consequences and pose unanticipated risks to the American people. The real lesson of King v. Burwell is that transformative legislation should never be written or passed in extreme haste, nor imposed by a single party. Ignoring those principles assures that the Affordable Care Act will remain bitterly contentious and subject to additional litigation for years to come.

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Robert Graboyes, a health care economist at the Mercatus Center at George Mason University, had this to say about today's King v. Burwell ruling:

King v. Burwell is over. The Court has ruled for the defendants (Burwell), and from a rule of law perspective, that's an unfortunate outcome. But as for the fundamental dynamics of U.S. health care, the case was never going to change much. Since World War II, Left and Right have fought bitterly—and almost exclusively—over how to divide up existing health care resources through health insurance coverage. Both sides have obstructed the development of newer, better, and less expensive modes of care—technologies that can bring better health to more people at lower costs, year after year. (For a fuller explanation, see my work, "Fortress and Frontier in American Health Care")

Nevertheless, King v. Burwell was an important case. As written, the Affordable Care Act (ACA) offers insurance subsidies only in states that establish their own health insurance exchanges—not in those using the federal government's healthcare.gov exchange. But when most states declined to establish exchanges, the Administration decided to distribute subsidies through the federal exchange without clear legal authorization. Today's ruling means the federal government can continue paying subsidies as interpreted, not as written.

With this ruling, the ACA’s status quo remains. In all states (and D.C.), ACA subsidies will be available to individuals. The ruling also preserves the employer mandate (which imposes significant financial and administrative costs on employers) and the individual mandate (which orders Americans to either buy insurance or pay a tax for not doing so).

However, the ACA is still a troubled law. While healthcare.gov’s consumer interface is operational, much of the site remains dysfunctional. Oregon spent $300 million only to have its exchange completely collapse. That state now uses healthcare.gov. Hawaii is terminating its failed exchange. Vermont recently abandoned its exchange-centered single-payer system. Exchanges in California, Colorado, Maryland, Massachusetts, Minnesota, and several other states are suffering serious financial and operational stress. Health insurance premiums nationwide are rising rapidly, and 2017 will likely see huge increases as federal subsidies to insurers end.

The ACA is a massive law, written and passed in haste. Such procedural shortcuts yield unintended consequences and pose unanticipated risks to the American people. The real lesson of King v. Burwell is that transformative legislation should never be written or passed in extreme haste, nor imposed by a single party. Ignoring those principles assures that the Affordable Care Act will remain bitterly contentious and subject to additional litigation for years to come.

For more information, please contact Kyle Precourt at (703) 993-8196 or Camille Walsh at (703) 993-4895.