What Would Happen if the Supreme Court Struck Down Health Care Reform?

This weekend, I had a conversation with someone non-crazy who thinks there is a not-insignificant chance that the Supreme Court will overturn health care reform, or at least the individual mandate (it's not clear what happens to the rest of the law if the mandate goes down; there's some possibility that this would invalidate the entire law).  Mind you, this person was not suggesting that the chances were, say, 85%; more like 25%.

But in a case like this, 25% is a big chance.  So we spent a bit of time speculating about what would happen next.

We know what happens if the court simply invalidates the mandate:  you get New York State, where the cost of insurance spirals out of control, until the few remaining people in the individual market are so sick that the death spiral bottoms out.  Adverse selection does have its limits, which is why, even before lemon laws, there was a market (however imperfect) for used cars.

What happens after that?  That would leave politicians deciding whether to repeal the most popular features, or end individual health insurance as we know it.  Fun choice.  My guess is that we'd get some weird hybrid model of corporate and state-sponsored insurance--but the state sponsored insurance would probably itself be overwhelmed by adverse selection, or (if we simply funded universal coverage out of tax dollars), by employers dumping their employees onto the public plan.  But I have no idea where the money would come from.

But what if the whole thing goes?  I don't see a way forward for anything that current progressives think of as health care reform; it basically precludes the Netherlands model, and possibly most of the other European models, though I have to think more about the latter before I'm sure.  But there's a strong possibility that any ruling that eliminated the individual mandate would make anything but single payer or a national health service illegal.  Ironically, a conservative court might push health policy to the left.

Or maybe a better way to put it is that it would polarize the choices:  incremental tweaks, or single payer. (I assume, perhaps incorrectly, that our legislators would not pursue the folly of guaranteed issue and community rating without a mandate).  Where would it go?

Not, I think, in the direction of single payer.  The bill would be staggering.  Yes, yes, I know you want to raise taxes to pay for it, but the price tag would still give American voters sticker shock.  You'd never get it through the Senate unless the composition of that august body radically changed.

My hope is that in this unlikely event, it would open the way for something more like what I've proposed:  catastrophic income insurance for everyone (i.e., the government will cover health care costs above some fairly high percentage of your income), with less support for first-dollar coverage. 

But that's a pretty wan hope.  And unless these lawsuits clear the court systems before 2014, the dislocations would be massive.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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