Ezra Klein: King wouldn't kill the ACA, but it would let the states kill it.

Over at Vox this morning, Ezra Klein has a good "big picture" look at the true impact of the plaintiffs winning King v. Burwell which goes beyond the specific numbers of people impacted or the dollar amounts involved. His main point, which I generally agree with, is that while the results would be pretty horrible, they wouldn't result in the law being repealed any more than the Medicaid expansion ruling did. In Klein's view, at worst (which, he admits, would be pretty bad), the 2-tier healthcare split between rational & irrational states would deepen...but only temporarily.

So King can't destroy Obamacare. What it can do is let Republican elected officials destroy Obamacare in states where they have a majority. That's a very different thing, and it will lead to very different political dynamics.

For the most part I agree with him, but there's two things I wanted to call attention to: One which he doesn't mention, another which I feel he shouldn't have.

First of all, while he discusses the first major consequence (6.5 million people directly losing their tax credits and, almost certainly, their coverage as a result) and the second major one (an additional 6-7 million facing massive rate hikes, thus causing many of them to lose their coverage as well), he left out the third (highly unlikely but still potential) one: It's conceivable that the ruling could be made retroactive, meaning that millions of people--some of whom are no longer part of the first 6.5 million--would be required to pay back every dime they've received in tax credits over the past year and a half. This would be truly catastrophic...and I can't even fathom how it could be done logistically, even setting aside the morality or legality of doing so.

I understand why he didn't mention it; it sounds so outlandish to most folks that the only ones who seem to be talking about it are Michael Cannon (one of the leads behind the King lawsuit)...and myself. The reason I'm bringing it up is because no matter how unlikely it may seem, I think it's important that people at least be aware of the true worst-case scenario. I just attended the annual Society of Actuaries conference and was a bit surprised to find out that no one there was even aware of this as a possibility. I guess that's understandable since the "retroactive clawback" side has nothing to do with their line of work, but still.

The one item I disagree with Klein on comes near the end of his piece, where he lays out what he feels are the 3 possible post-King outcomes (assuming the plaintiffs win, that is). He states:

The prospect of a Republican president might push congressional Republicans to pass a temporary fix for Obamacare — something that stabilizes subsidies for two years but forces a solution in 2017. (Sen. Ron Johnson, a Wisconsin Republican, has a bill along these lines.)

I was surprised that he used Johnson's bill for this example, because that's not what his bill would do at all.

Yes, Johnson's plan would indeed extend tax credits by 2 years...and if kicking the ball down the field for a couple of years was all that it did, with no other significant changes, I could live with it (not saying I'd be happy about it, but that would at least be acceptable, effectively amounting to the Court ordering a 2-year "stay" on their ruling).

However, that's not even close to everything Johnson's bill would do:

• First, the credit extension would only apply to those currently enrolled in ACA exchange policies. No new enrollees would receive them, which means practically no one else would enroll in those policies. That, in turn, means that the exchanges in the impacted states would have their paying customer ramp-up cut off. Right now the risk pools in most states are still skewed more towards the pricier-to-treat patients, with the "young invincibles" still not making up quite enough of the mix. The hope was that the increased penalties and streamlining of the process would resolve this issue in the 3rd and 4th years of open enrollment, but with the subsidy spigot being cut off, enrollments would stagnate where they stand now. The attrition factor alone would make the problem even worse. Normal life changes (gaining a job with ESI, moving to a new state, etc) mean that a certain percentage of those currently enrolled would drop out over the next couple of years anyway.

• Secondly, Johnson's plan would repeal the individual mandate, which in turn would cause premium hikes since it would further discourage healthier folks from enrolling.

• Third, the immediate mandate repeal as well as the eventual tax credit cut-off would apply to every state, not just those without their own exchange, meaning that Johnson's plan would be worse than doing nothing for the other 17 states.

I know Klein wasn't trying to praise Johnson's plan here, but even a casual mention of it as a "2 year fix" is dangerous, as it makes it sound like something somewhat reasonable when it's nothing of the sort.