The Very Puzzling Political Economy of King v. Burwell: Focus
Ezra Klein, one of the viri illustres making us hope that the press corps over the next generation will actually be a net plus to the nation (cough, Judy Miller of the New York Times; cough, Fred Hiatt of the Washington Post) has a good post that, I think, misses one important point:
…if the mandate was repealed, it would cripple the law…. The White House would have to agree to… at least root-and-branch reform. The challenge to Obamacare’s subsidies makes less political sense: if the subsidies are ripped out of federal exchanges, it will only cripple the law in red states… [which] will be left with a policy disaster–and a hefty bill…. Republicans in those states will still be paying the taxes and bearing the spending cuts needed to fund Obamacare. They just won’t be getting anything back. So the Republican plan… to fight Obamacare is for Republicans to rip themselves off…. This is why the GOP’s political strategy is so bizarre…. The GOP is taking its own voters-—along with million of poorer people who live in Republican states–hostage…. Democrats might want to deal on Obamacare because they want, as a moral matter, to cover poorer people in red states. But on a practical level, the post-King status quo is a much bigger disaster for Republican states than Democratic ones.
All this makes sense. But what it misses is that the original Republican challenge to ObamaCare was two-pronged: an attack on the mandate and thus on the functioning of the exchanges, yes; and also an attack on the Medicaid expansion. The attack on the mandate failed. The attack on the Medicaid expansion succeeded.
This then left Republican governors and legislators in red states with a big problem: if they used the freedom John Roberts had given them when he rewrote the law from the bench to accept the Medicaid expansion, they became complicit in the implementation of the hated ObamaCare (never mind that it was really just the loved RomneyCare with the serial numbers filed off). If they rejected the Medicaid expansion, they taxed their own people in order to pay for health treatment for the poor and working poor, for topping-off hospital budgets, and for raising doctors’ incomes in blue states. The Republican governors and legislators of the red states have already fixed the question of whether their strategy to fight ObamaCare is simply to rip the people they represent off. And they have, for the most part, with some hesitation, already decided: “Yes it is.”
From the perspective of any state-level decision-makers, both the Medicaid expansion and the exchange subsidies are free money for their constituents. And both are free money for a wide range of constituencies within their states.
- One-third of Medicaid-expansion dollars are spent on providing extra health care for the poor (who in red states are, I must note, 70% white)
- One-third are spent on hospitals (which then flow to all hospital stakeholders, from patients and nurses to doctors and administrators and health-insurance companies).
- And one-third boost the incomes of doctors.
It is even more such the case as far as the exchanges are concerned: As best as I can figure out, the benefits from having the exchanges up and running flow:
- about one-third to middle-class residents who do not work for large bureaucracies and thus benefit from a well-functioning marketplace,
- one-third to the working poor recipients of exchange subsidies,
- and one-third primarily to the insurance companies that receive the subsidies and secondarily to other health-sector providers.
It is from a political-economy standpoint very strange. “We bring home free money from the feds for our state” is not a losing argument for any state-level politician. Maybe you could argue against accepting free money from the feds if it all went to “moochers”. But insurance companies and doctors are not usually thought of as core Democratic Party constituencies.
Yet the fallout from King v. Burwell may well make them so…