Obama wins health care battle, but the war rages on

Last week’s 5-4 Supreme Court ruling did not turn President Barack Obama into the Duke of Wellington, the victor of Waterloo (though Chief Justice Roberts did a good impression of Marshal Blucher, the duke’s Prussian saviour). Nor did Obamacare’s Republican opponents suddenly see themselves as Napoleon’s defeated troops.

Neither side believes the epic health care struggle is over; rather, it increasingly looks like a war of attrition. This holds true both for the politics of Obamacare, which is as acidic as ever, and also for implementation of what is a mind-bogglingly complex law. If a law’s worth is judged by whether it can survive and then change things for the better, it is too soon to claim victory.

Last week, America’s third branch of government tossed the health care grenade back to the first and second branches. Neither Obama nor his Republican challenger Mitt Romney want to turn the upcoming election into a referendum on health care. Romney wants to play down the fact that he has mapped out only the first half of the pledge to “repeal and replace” Obamacare. Obama does not want to advertise his authorship of a law that remains widely unpopular.

But the law will nevertheless face a crossroads in November. If Obama wins, it will survive; and if Romney wins, it will come under possibly fatal assault. Without 60 votes in the Senate, Romney would have difficulty repealing it in full. Only measures that have a direct fiscal impact can be passed by a simple 51-49 majority.

Happily for Romney, that would include the most unpopular bits, such as the fine that people who forego insurance would have to pay, which Chief Justice Roberts last week helpfully reclassified as a “tax” (making it constitutional, in his eyes, rather than desirable). If he is wise, Romney will retain the most popular features of Obamacare, such as the ban on insurance companies denying coverage to those with pre-existing conditions. Even a fully Republican-controlled Congress will be hard-pressed to get rid of that. But the “tax”, which is the wellspring of Obamacare, will probably disappear under a Romney administration. Much else will then unravel.

What if Obama wins? The law then faces a different category of problems. First, it only comes into effect in 2014 and few states are anywhere near to setting up the insurance exchanges they are required to create under the law. Indeed, roughly half of them — those with Republican governors and attorneys-general — remain bitterly opposed to the exchanges and most other features of the law.

Last week, the Supreme Court gave them wiggle room when it said states could reject the part of the law that expands the pool of people eligible for Medicaid subsidies. Unlike Medicare, which is a national programme for the elderly, Medicaid is administered by the states. It is also one of the main vehicles by which Obamacare will reduce the number of uninsured Americans (which today stands at roughly 50 million).

Some states, such as Rick Perry’s Texas, are likely to make the most of that new loophole. This could sharply reduce the estimated 30 million who would get insurance if Obamacare were implemented in full. But even if all states adopted all the law’s measures with joy in their hearts, it would be many years before Americans saw real benefits.

In other words, Obamacare will remain vulnerable until the next election at least.

According to the Congressional Budget Office, 20-23 million of the bill’s beneficiaries — the large majority — will obtain coverage only after 2016. Nor is the law likely to be wildly popular by then. By the end of Obama’s second term, the proportion of Americans who will be uninsured — now at more than one in seven — will not yet have fallen sharply. It will be rash to assume the six out of seven who do have insurance will feel more positive by then. They may well feel worse.

Given that there will be multiple criteria on deciding who qualifies for a sliding scale of subsidies and given that the law’s interpretation may vary considerably from state to state, forecasts of Obamacare’s impact range wildly. Some believe it will slow US health care inflation and reduce costs for everyone. Others do not. But most assume it will do little to slow the rate at which employers are opting out of providing health insurance for their employees.

Indeed, it is more likely to accelerate employer flight. With or without Obamacare, Americans will continue to move into a brave new world where they will increasingly have to rely on their own wits — and the integrity of their public regulators — to get good and affordable health care.

These are a lot of ifs. And it does not yet feel like the American public has made a final choice on the future of US health care. If put into practice, Obamacare will turn America’s byzantine health care system into something more humane and hopefully less expensive. It will also make it even more byzantine. Within the foreseeable future, however, it seems unlikely it will radically transform things.

Last week, Obama won a famous battle. He was right to celebrate. But the war is still some way off from a conclusion.

— Financial Times