How Republicans Can Cut through the Obamacare Chaos after King v. Burwell

The Supreme Court’s ruling in the case of King v. Burwell will come out within the next three months.  Because the Obama administration did not follow its own law as passed by congressional Democrats and signed by President Obama, that decision will turn Obamacare inside out, creating chaos in health insurance and health care.

The Obamacare law provides for substantial federal subsidies to help pay for health insurance purchased on a health exchange established by a state.  But if a state does not successfully establish an exchange, the Obamacare law provides that the secretary of HHS can establish a federal exchange for the state.  The plain text of the Obamacare law, however, pointedly does not provide the Obamacare subsidies for health insurance purchased on such a federal exchange.

The Obama administration wizards designing Obamacare have already told us why they wrote Obamacare that way.  Under the Constitution, the federal government does not have the power to order states to establish exchanges.  So they limited the health insurance benefits under Obamacare to exchanges established by the states to give the states an irresistible incentive to establish their own state exchanges, so their citizens could get their Obamacare benefits.

But the wizards did not recognize that Obamacare would be so unpopular that 34 states would refuse to set up state exchanges anyway.  Two more states tried to set up Obamacare exchanges but failed and gave up.  So only 14 states established Obamacare exchanges, and 36 did not.

But President Obama does not take such personal rejection very well.  So he ordered the IRS to issue a regulation that the Obamacare health insurance subsidies, which are in the form of tax credits, would be provided for health insurance purchased on either exchanges established by the states or exchanges established by the federal government, the Obamacare law to the contrary notwithstanding.  The Democrats impeached Nixon to establish the principle that the president is not above the law, and must obey it, and since then have established that this principle applies only to Republican presidents, not to Democrat ones.

What made this presidential misconduct subject to legal challenge is that the Obamacare statute also provides that the employer mandate and the individual mandate apply only where the Obamacare health insurance subsidies apply.  That gave parties subject to the employer mandate and the individual mandate sufficient injury to have legal standing to challenge the IRS misinterpretation of the law in court.

If the Court rules by this summer for the petitioners in King v. Burwell, the Obamacare health insurance subsidies will be struck down in the 36 states that do not have state exchanges.  Moreover, the employer mandate and the individual mandate will be effectively shut down in those 36 states as well.  That is what I expect the Court to do.  The statutory language is unambiguously clear, and governs in this case.  The IRS regulation that extended the Obamacare subsidies to the federal exchanges, and all 50 states, is illegal under federal law, and must and will be struck down.

The question is, what should the Republican Congress, and the mostly Republican governors and state legislatures, do, then, to fix the supposed problem such a decision will create – effectively dashing Obamacare in at least 36 states?  Democratic Party-controlled media will join President Obama and congressional Democrats wailing about millions of sick people in 36 states who could no longer afford costly Obamacare health insurance without the Obamacare subsidies.  That Obamacare health insurance is so costly because the Obamacare federal overregulation adds so much cost to the insurance. 

The villains in this morality play will be Republican governors and legislators who will not support establishing state exchanges to restore Obamacare in their states, and congressional Republicans who will not just change federal law to re-establish Obamacare in all 50 states.  But Republicans cannot possibly be so silly as to give in to these Obama Democrat demands.

Republicans and conservatives should use Obama’s defeat in King v. Burwell to embark on the political offensive against Obamacare.  Instead of caving in to Obama Democrat demands, Republicans and conservatives need to go on the offensive by demanding that Democrat governors and legislatures in blue states repeal their state exchanges, on the grounds that such will abolish the unpopular and economically counterproductive employer and individual mandates.

Congressional Republicans should also pass federal legislation that would ramp up this counterattack on Obamacare.  Since states without state exchanges will then have opted out of the benefits of Obamacare, congressional Republicans should pass legislation providing that the citizens of those states have opted out of the Obamacare taxes as well.  That includes a 3.8% surcharge on capital investment (capital gains and corporate dividends) and a 30% increase in their Medicare payroll taxes.  The Obamacare tax on medical device manufacturers and health insurance would also be abolished in those states, along with all other Obamacare taxes.

In addition, the new federal legislation should also provide that all the federal Obamacare regulations shall also not apply in states without state exchanges.  Those states will be considered to have opted out of the Obamacare regulation as well.  Those states can then go back to their original state regulation of health insurance.  Of course, the individual mandate and the employer mandate would no longer apply in those states, either.

The key implication of those regulatory changes is that all the Obamacare increases in the cost of health insurance will be reversed as well.  And without those Obamacare cost increases in health insurance, the Obamacare subsidies would no longer be needed, either, at least among those who are not poor

For the poor and needy, the legislation should further provide for block granting Medicaid back to the states, exactly as the enormously successful 1996 welfare reforms for the former Aid to Families with Dependent Children (AFDC) program did.  The new federal block grants to the states for Medicaid should include the Obamacare Medicaid expansion funds for all states, as an inducement to states to support the block grant reforms.  That would be scored by CBO as a sharp reduction in federal Medicaid costs overall.

States would ideally use their resulting new control over Medicaid to provide for Medicaid benefits in the form of health insurance vouchers that the poor could use to help buy the health insurance of their choice, including Health Savings Accounts.  That would vastly improve health care for the poor, who cannot get timely, essential health care through Medicaid today because the states so badly underfund payments to doctors and hospitals for health care provided under Medicaid.  Private insurers, by contrast, must adequately compensate doctors and hospitals to be able to attract health insurance customers in the competitive marketplace.

The Medicaid block grants should also include the funding for the State Children’s Health Insurance Program (SCHIP), which the states could also then run in conjunction with their new Medicaid programs.  States should also be authorized to use some of those Medicaid block grant funds to establish state uninsurable risk pools, where those uninsured who cannot get private health insurance because they contracted highly costly diseases like cancer or heart disease while uninsured can be assured of coverage for such pre-existing conditions.

Republicans and conservatives who can’t or won’t vigorously and articulately argue the case for these Obamacare reforms should be replaced with new leadership.  We must also present and argue for the full Patient Power, free-market health care vision that will replace Obamacare once the currently serving Great Mistake in the White House is replaced with new leadership next year as well.

Sure, Obama could veto this King v Burwell fix for his broken, failed Obamacare program.  But he and his pajama boys would then have to live with his Obamacare disaster for another year or so, until another President can be elected.  Such an Obama veto would further clarify for the public what is at stake in that election, which cannot come too soon.

Peter Ferrara served in the White House Office of Policy Development under President Reagan, and as associate deputy attorney general of the United States under President George H.W. Bush.  He is currently a senior fellow for the Heartland Institute and senior policy advisor for budget policy and entitlement reform for the National Tax Limitation Foundation.  He is recently the author of Power to the People: The New Road to Freedom and Prosperity for the Poor, Seniors, and Those Most In Need of the World’s Best Health Care, published by the Heartland Institute.  He also wrote an amicus brief on behalf of the Heartland Institute filed with the Supreme Court in King v. Burwell.

The Supreme Court’s ruling in the case of King v. Burwell will come out within the next three months.  Because the Obama administration did not follow its own law as passed by congressional Democrats and signed by President Obama, that decision will turn Obamacare inside out, creating chaos in health insurance and health care.

The Obamacare law provides for substantial federal subsidies to help pay for health insurance purchased on a health exchange established by a state.  But if a state does not successfully establish an exchange, the Obamacare law provides that the secretary of HHS can establish a federal exchange for the state.  The plain text of the Obamacare law, however, pointedly does not provide the Obamacare subsidies for health insurance purchased on such a federal exchange.

The Obama administration wizards designing Obamacare have already told us why they wrote Obamacare that way.  Under the Constitution, the federal government does not have the power to order states to establish exchanges.  So they limited the health insurance benefits under Obamacare to exchanges established by the states to give the states an irresistible incentive to establish their own state exchanges, so their citizens could get their Obamacare benefits.

But the wizards did not recognize that Obamacare would be so unpopular that 34 states would refuse to set up state exchanges anyway.  Two more states tried to set up Obamacare exchanges but failed and gave up.  So only 14 states established Obamacare exchanges, and 36 did not.

But President Obama does not take such personal rejection very well.  So he ordered the IRS to issue a regulation that the Obamacare health insurance subsidies, which are in the form of tax credits, would be provided for health insurance purchased on either exchanges established by the states or exchanges established by the federal government, the Obamacare law to the contrary notwithstanding.  The Democrats impeached Nixon to establish the principle that the president is not above the law, and must obey it, and since then have established that this principle applies only to Republican presidents, not to Democrat ones.

What made this presidential misconduct subject to legal challenge is that the Obamacare statute also provides that the employer mandate and the individual mandate apply only where the Obamacare health insurance subsidies apply.  That gave parties subject to the employer mandate and the individual mandate sufficient injury to have legal standing to challenge the IRS misinterpretation of the law in court.

If the Court rules by this summer for the petitioners in King v. Burwell, the Obamacare health insurance subsidies will be struck down in the 36 states that do not have state exchanges.  Moreover, the employer mandate and the individual mandate will be effectively shut down in those 36 states as well.  That is what I expect the Court to do.  The statutory language is unambiguously clear, and governs in this case.  The IRS regulation that extended the Obamacare subsidies to the federal exchanges, and all 50 states, is illegal under federal law, and must and will be struck down.

The question is, what should the Republican Congress, and the mostly Republican governors and state legislatures, do, then, to fix the supposed problem such a decision will create – effectively dashing Obamacare in at least 36 states?  Democratic Party-controlled media will join President Obama and congressional Democrats wailing about millions of sick people in 36 states who could no longer afford costly Obamacare health insurance without the Obamacare subsidies.  That Obamacare health insurance is so costly because the Obamacare federal overregulation adds so much cost to the insurance. 

The villains in this morality play will be Republican governors and legislators who will not support establishing state exchanges to restore Obamacare in their states, and congressional Republicans who will not just change federal law to re-establish Obamacare in all 50 states.  But Republicans cannot possibly be so silly as to give in to these Obama Democrat demands.

Republicans and conservatives should use Obama’s defeat in King v. Burwell to embark on the political offensive against Obamacare.  Instead of caving in to Obama Democrat demands, Republicans and conservatives need to go on the offensive by demanding that Democrat governors and legislatures in blue states repeal their state exchanges, on the grounds that such will abolish the unpopular and economically counterproductive employer and individual mandates.

Congressional Republicans should also pass federal legislation that would ramp up this counterattack on Obamacare.  Since states without state exchanges will then have opted out of the benefits of Obamacare, congressional Republicans should pass legislation providing that the citizens of those states have opted out of the Obamacare taxes as well.  That includes a 3.8% surcharge on capital investment (capital gains and corporate dividends) and a 30% increase in their Medicare payroll taxes.  The Obamacare tax on medical device manufacturers and health insurance would also be abolished in those states, along with all other Obamacare taxes.

In addition, the new federal legislation should also provide that all the federal Obamacare regulations shall also not apply in states without state exchanges.  Those states will be considered to have opted out of the Obamacare regulation as well.  Those states can then go back to their original state regulation of health insurance.  Of course, the individual mandate and the employer mandate would no longer apply in those states, either.

The key implication of those regulatory changes is that all the Obamacare increases in the cost of health insurance will be reversed as well.  And without those Obamacare cost increases in health insurance, the Obamacare subsidies would no longer be needed, either, at least among those who are not poor

For the poor and needy, the legislation should further provide for block granting Medicaid back to the states, exactly as the enormously successful 1996 welfare reforms for the former Aid to Families with Dependent Children (AFDC) program did.  The new federal block grants to the states for Medicaid should include the Obamacare Medicaid expansion funds for all states, as an inducement to states to support the block grant reforms.  That would be scored by CBO as a sharp reduction in federal Medicaid costs overall.

States would ideally use their resulting new control over Medicaid to provide for Medicaid benefits in the form of health insurance vouchers that the poor could use to help buy the health insurance of their choice, including Health Savings Accounts.  That would vastly improve health care for the poor, who cannot get timely, essential health care through Medicaid today because the states so badly underfund payments to doctors and hospitals for health care provided under Medicaid.  Private insurers, by contrast, must adequately compensate doctors and hospitals to be able to attract health insurance customers in the competitive marketplace.

The Medicaid block grants should also include the funding for the State Children’s Health Insurance Program (SCHIP), which the states could also then run in conjunction with their new Medicaid programs.  States should also be authorized to use some of those Medicaid block grant funds to establish state uninsurable risk pools, where those uninsured who cannot get private health insurance because they contracted highly costly diseases like cancer or heart disease while uninsured can be assured of coverage for such pre-existing conditions.

Republicans and conservatives who can’t or won’t vigorously and articulately argue the case for these Obamacare reforms should be replaced with new leadership.  We must also present and argue for the full Patient Power, free-market health care vision that will replace Obamacare once the currently serving Great Mistake in the White House is replaced with new leadership next year as well.

Sure, Obama could veto this King v Burwell fix for his broken, failed Obamacare program.  But he and his pajama boys would then have to live with his Obamacare disaster for another year or so, until another President can be elected.  Such an Obama veto would further clarify for the public what is at stake in that election, which cannot come too soon.

Peter Ferrara served in the White House Office of Policy Development under President Reagan, and as associate deputy attorney general of the United States under President George H.W. Bush.  He is currently a senior fellow for the Heartland Institute and senior policy advisor for budget policy and entitlement reform for the National Tax Limitation Foundation.  He is recently the author of Power to the People: The New Road to Freedom and Prosperity for the Poor, Seniors, and Those Most In Need of the World’s Best Health Care, published by the Heartland Institute.  He also wrote an amicus brief on behalf of the Heartland Institute filed with the Supreme Court in King v. Burwell.