All eyes are on the Supreme Court on Wednesday, as the justices prepare to hear oral arguments in King v. Burwell, a case that could eliminate the tax subsidies that help millions of Americans afford Obamacare plans in 34 states across the country.
In the lead-up to the case, most of the national focus has centered on the estimated eight million people who could lose access to insurance if the plaintiffs prevail. There’s a lot at stake for them in the pending Supreme Court challenge. But if the justices rule to eliminate subsidies in more than half of the states in the country, the dramatic shift in the health care industry would also have serious ripple effects.
Dismantling the provisions in the law that were intended to help extend insurance to low-income Americans has a direct impact on the health care providers who were expecting to gain more patients under Obamacare. As researchers from the Commonwealth Fund point out, if the Supreme Court eliminates subsidies in the 34 states with federally-run marketplaces, it will mark the second time that the justices have intervened in the health law in a way that undermines hospitals.
Obamacare’s coverage expansion was supposed to benefit hospitals, and particularly the safety net providers called “Disproportionate Share Hospitals” that serve a large number of low-income and rural Americans. Those hospitals have historically operated on a loss because their struggling patients can’t always pay their bills. But if their patients gain insurance under Obamacare — either through the Medicaid expansion or through the state-level marketplaces — they’ll stop providing so much uncompensated care and start making a little more money.
Without profiting from patient bills, safety net hospitals are dependent on specific federal funding, called DSH reimbursements, to keep running. Since the Affordable Care Act assumed the bulk of the patients who rely on safety net hospitals would gain insurance, those reimbursements were reduced under the law.
Enter the Supreme Court. In 2012, when the justices upheld the bulk of the Affordable Care Act but ruled that its Medicaid expansion should be optional, safety net hospitals were suddenly put in jeopardy. GOP-led states across the country refused to expand Medicaid, but the DSH funding cuts were already looming. Since then, the Obama administration has struggled to figure out how to implement the cuts without penalizing the states that have resisted Medicaid expansion.
Rural hospitals have begged Republican leaders to change their minds on the Medicaid provision in the law, warning that failing to expand the public health program would forgo billions of federal dollars and leave them with too little funding to keep operating. But many red states haven’t budged, and charity hospitals in places like Tennessee, Georgia, North Carolina, and Louisiana have been forced out of business as their funding hasn’t kept pace with their operational costs. A total of 43 rural hospitals have closed since 2010, something that often increases mortality rates among low-income people and people of color.
Now, as a different aspect of the law’s subsidized health coverage — the tax credits available to help people purchase private plans — comes before the Supreme Court, this scenario threatens to repeat itself.
If the Court rules in a way that creates a patchwork of Obamacare subsidies that differ across the country, just like the current patchwork of expanded Medicaid programs, some of the deeply entrenched health disparities between red states and blue states threaten to get even worse. Without subsidized marketplace coverage, the ranks of the uninsured will swell by millions, putting an even bigger strain on safety net hospitals in the 22 states that haven’t expanded Medicaid.
“At a minimum, hospitals and clinics that survive would have to reduce the scope of public health and prevention services they provide in order to redirect their limited resources to treating acute health problems of newly uninsured patients,” the Commonwealth researchers write. “Federally subsidized community health centers, which are required to provide primary care to patients regardless of their ability to pay, would suffer similar problems.”
As Reuters reports, doctors across the country are already preparing contingency plans in case the Supreme Court eliminates subsidies and their patients get kicked off of their plans. Some of them are working to line up appointments at free clinics for chronically ill patients who will still need to get health services from somewhere. But, if the Supreme Court keeps chipping away from the pool of insured people who were supposed to help ease the burden on those safety net providers, it’s not clear that those clinics will be able to handle it.
“The experience of hospitals in States that have declined to expand Medicaid offers a preview of what could follow if subsidies are stripped away,” several hospital trade groups argued in a brief filed with the Supreme Court urging the justices to rule against the King plaintiffs. “At the end of the day, hospitals must be allowed to cover their costs. If they cannot, patients will suffer in the long run.”