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The Economist: The Affordable Care Act Lives!!

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The author of this entry is responsible for this content, which is not edited by the Wilson County News or
Dr. M. Ray Perryman
July 1, 2015 | 2,593 views | Post a comment

The Supreme Court recently upheld an important aspect of the Affordable Care Act (ACA or Obamacare). At issue were federal tax credits for more than six million Americans who live in states where a state exchange has not been established (including Texas and 33 other states) and instead purchase through a federal marketplace. Had the decision gone the other way, the underpinnings of much of the Act would have been removed and a period of chaos in the health care system could well have ensued.

Unfortunately, the ACA was drafted in such a way that it included imprecise language that is subject to some interpretation. The Act indicates that subsidies in the form of tax credits were allowed for people to offset costs of insurance purchased on "established by the State." One interpretation (the one espoused by challengers to the law) is that the subsidies do not apply to purchases from the federal system, since that’s clearly not “established by the State.” The other side of the argument is that the intent of the law is clearly to offer the subsidies to all who qualify regardless of the presence of a state exchange.

The IRS (Internal Revenue Service) ruled in 2012 that the tax credits were available on both the State and federal exchanges, saying that taxpayers are eligible for the credit if enrolled in an insurance plan from either type of exchange. Various challenges to the rule and court decisions followed, with the issue ultimately rising to the Supreme Court.

Because the vast majority of people who buy insurance on the federal exchange do so with tax credits, the question of their validity is a major issue. If the subsidies went away, it is reasonable to assume that many of these individuals would no longer be able to purchase insurance. Unless Congress or State legislators stepped in, a rapid and sudden jump in the number of uninsured would be an almost certain outcome and massive investments around the exchanges would have been jeopardized.

The entire system of health care provision would be challenged to provide care to millions more uninsured people. Moreover, these people would see their access to care decrease with the loss of insurance coverage, often being relegated to emergency rooms for even minor ailments. Such a scenario would not be pretty and could well have led to a hodgepodge of inefficient alternatives. In fact, many of the most ardent critics of the ACA among elected officials were secretly hoping that the law would be upheld, thus providing them with the opportunity to continue to complain without having to craft a workable replacement.

As the Supreme Court’s affirming opinion phrased it, the “Affordable Care Act contains more than a few examples of inartful drafting.” The ruling on the case was six in favor and three against affirming the judgement of the United States Court of Appeals for the Fourth Circuit, which upheld the subsidies.

In affirming the subsidies, Chief Justice Roberts wrote that the Court “must respect the role of the Legislature, and take care not to undo what it has done.” He went on to note that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” and that the Court should “interpret the Act in a way that is consistent with the former and avoids the latter.” Justice Scalia issued a strong dissent, but, whatever your view of the Act, it does seem inconceivable that Congress would deliberately pass something that was inconsistent and unworkable on its face.

Just as the Supreme Court justices were divided, public opinion regarding the Affordable Care Act also remains divided. In its June survey, the Kaiser Family Foundation found that 42% of American adults had an unfavorable view of the ACA, while 39% had a favorable view. Over the past five years, only a handful of the surveys indicate more favorable than unfavorable opinions, the split is usually fairly even.
While Americans are clearly in favor of better access to health care regardless of income level, we remain sharply divided on the ACA as a way to accomplish this goal. That is indeed a legitimate debate to have. From a purely economic perspective, parts of it are very beneficial and other aspects of it are mathematically unsustainable without modification. Now that the Court has weighed in, hopefully folks on all sides can move past the issue of whether or not there will be an ACA, and set about the business of working in a constructive manner to address its flaws and make it more capable of meeting long-term needs in an affordable and sustainable manner.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group ( He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.
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