A House Budget Response to High Court Ruling on Health Subsidies?

While the Supreme Court weighs King v. Burwell–the lawsuit questioning the federal government’s authority to provide financial assistance to people who buy insurance in the 37 states using federally operated insurance exchanges–many have focused on potential responses to the outcome. Language in the budget resolution unveiled this week appears to lay the groundwork for the House of Representatives to address this ruling through budget reconciliation procedures.

Section 2002 of the budget conference report lays out special procedures for budget reconciliation in the House. That section instructs the House Budget Committee chairman to use the Congressional Budget Office’s March 2015 budgetary baseline “if the estimates used to determine the compliance of such measures with the budgetary requirements included in this concurrent resolution are inaccurate because adjustments made to the baseline are inconsistent with the assumptions underlying the budgetary levels set forth in this concurrent resolution. Such inaccurate adjustments made after the adoption of this concurrent resolution may include selected adjustments for rule-making, judicial actions, adjudication, and interpretative rules that have major budgetary effects and are inconsistent with the assumptions underlying the budgetary levels set forth in this concurrent resolution.”

Simply put: This language allows the Budget Committee chairman to disregard the potential budgetary impacts of “judicial actions” and “adjudication”—such as a Supreme Court ruling in King v. Burwell—that take place after a budget is adopted. CBO is directed to do likewise.

Here’s how it might work. After the court’s ruling in King v. Burwell is issued, CBO would probably update its spending estimates to reflect any fiscal implications arising from the ruling. In the summer of 2012, the Supreme Court’s ruling in National Federation of Independent Business v. Sebelius made Medicaid expansion optional for states; CBO said three weeks after the ruling that this change would reduce projected spending on the law by $84 billion over 10 years.

If the court strikes down federal insurance subsidies, CBO is likely to reduce its spending estimates for the health-care law, to reflect fewer people receiving subsidies, and could also reduce its revenue estimates because fewer people receiving subsidies would eliminate the employer and individual mandate penalties in many cases. Once CBO revises its baseline, any legislative action restoring prior spending levels—whether as a temporary transition to prevent dislocation for those who purchased coverage through the exchanges, a block grant to states providing additional flexibility, or a permanent extension of subsidies—would ordinarily be scored by CBO as increasing both spending and the deficit.

But the language in the budget resolution would allow the House Budget Committee chairman to revert to the pre-King baseline—meaning that legislation designed to address the ruling would not be scored as a spending increase and could be scored as a spending cut, when compared to the spending baseline currently in effect.

The resolution applies these special procedures only in the House; other procedural hurdles could apply in the Senate. But the inclusion of this language in the budget suggests that the House leadership wants to address any King v. Burwell ruling legislatively—and do so through budget reconciliation.

This post was originally published in the Wall Street Journal Think Tank blog.