Adverse King v. Burwell ruling could cut healthcare spending by $7.5B

If the U.S. Supreme Court returns an adverse ruling in the King v. Burwell case later this month, economists say it could lead to billions in lost healthcare spending, Reuters has reported.

Health insurance exchange-based enrollees in states where the federal government operates the exchange will spend about $22 billion on healthcare this year if the subsidies stay in place, according to the wire service. Forbes magazine reports the total allocation to subsidies is about $21.5 billion.

But if the Supreme Court strikes down premium subsidies in states that do not operate their own health insurance exchanges, it could lead to at least $7.5 billion in lost healthcare spending, with much of it lost at the hospital level, economists predict. 

"There will absolutely be these second-order effects," Larry Levitt, senior vice-president at the Kaiser Family Foundation, told Reuters. "A reasonable assumption is that (spending on) healthcare by people who lose their existing subsidies will drop by at least half."

Hospitals have been a giant beneficiary from the Affordable Care Act (ACA) with many reporting significant drops in levels of uncompensated care. Recent data indicates that uncompensated care levels will likely drop by $5.7 billion this year, although much of that is in states that expanded Medicaid eligibility. A recent study by Avalere Health concluded that if the Supreme Court strikes down the subsidies, the average individual premium would go up by $3,300, and many consumers would abandon their coverage.

But other industry observers believe the subsidies will remain in place even if the Supreme Court strikes them down. Joseph Antos of the right-of-center American Enterprise Institute told Reuters that the government will find some way to extend the subsidies and the impact on healthcare spending will be short-lived.

To learn more:
- read the Reuters article 
- check out the Forbes article

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