Heritage: A simple way to solve the problem if King v. Burwell strikes down ObamaCare subsidies

With a ruling coming soon in the King v. Burwell case, the nation is preparing for what will happen if the Supreme Court decides ObamaCare actually means what it says, and that the federal government cannot subsidize premiums bought on the federal exchange. Lots of speculation is underway concerning what to do if people lose their subsidies.

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But the Heritage Foundation has looked at the issue from another direction, and their work makes it clear that the political class and the media are getting it backwards. Yes, ObamaCare policies will become ridiculously unaffordable for millions of people if the subsidies on the federal exchanges are wiped out. But the affordability problem stems not from the elimination of the subsidies. It stems from the ObamaCare provisions that jacked up the premiums in the first place. And that's where Congress could and should attack the problem:

In considering its response, Congress should keep in mind both that a fundamental flaw of the ACA was its imposition of new regulations that made health insurance more expensive for millions of Americans and that, in large part, the ACA’s health insurance subsidies are intended to mask this effect. Based on our analysis, exempting affected individuals and health plans from the biggest ACA insurance mandates could result in reductions of as much as 44 percent in premiums for younger adults and about 7 percent for pre–retirement age adults. Consequently, any congressional response should first focus on exempting individuals, employers, and insurance plans in states without state-run exchanges from the ACA regulations and mandates that increased health insurance premiums to start with. Making the reduction of coverage cost the top priority is also a first step toward a post-Obamacare market in which more affordable coverage reduces the number of individuals who might need assistance, as well as the size and scope of such assistance. Removing these costly mandates would also remedy one of the biggest inequities created by the ACA: Millions of Americans who have been forced to pay more for health insurance as a result of the ACA’s mandates and regulations do not qualify for any offsetting subsidies. In fact, the number of such individuals is three times greater than the number of those whose eligibility for ACA subsidies is at issue in the King case.

Be sure to click the link and read the whole thing, as the authors go into much greater detail about why each of these provisions artificially increased premium costs. The bottom line is the same thing we've been talking about ever since ObamaCare was first proposed. You cannot mandate greater benefits while eliminating age distinctions and adjustments for pre-existing conditions, and expect anything but an absolute explosion in costs and premium levels. The Democrats did here what economically ignorant politicians always do. They looked at certain dynamics of the market that bother people and said, "That's not right, we'll outlaw that," without understanding why those things happen (or without caring). So they intervened in a market to achieve a political goal, and in the process threw it entirely out of whack. Politicians tend to think that any time ordinary people face a price increase or an issue with service, it's because the provider is mean or greedy or evil. They don't understand that both parties in an economic relationship tend to respond rationally to the dynamics of a situation, and that everyone is better off if politicians get out of the way and let people work things out for themselves. ObamaCare represents a gigantic move of the political class to do exactly the opposite of that - and the results have been exactly what you'd expect. Sure, more people are "covered," which the politicians and the media think equals success. But they're also trapped in a system that's economically irrational and subject to never-ending political manipulation as its confused creators forever tweak and fiddle with the monster they created. The changes suggested by Heritage make sense as a short-term fix. The only long-term answer is to completely repeal it, and to replace it with a system in which the primary economic relationship is directly between patients and doctors, with third parties involved only when absolutely necessary. You'll see lots of opposition to that because so many people are profiting from the status quo, but for the benefit of patients and the quality of care, it's the right way to go.