Hospitals that treat many poor and uninsured patients were expected to face tough financial times in states that did not expand Medicaid under the federal law known as Obamacare.

That’s because they would get less Medicare and Medicaid funding under the Affordable Care Act, while still having to provide high levels of charity care.

But in some of the largest states that did not expand Medicaid, many safety-net hospitals fared pretty well last year — even better than in 2013 in many cases, according to their financial documents. KHN looked at the performance of about a dozen such hospitals in Florida, Texas, Georgia, Tennessee, South Carolina, Virginia and Kansas, which released their 2014 financial results.

An improving economy was the single, biggest reason shared by all of the strongly performing hospitals because it helped reduce the number of patients who couldn’t pay their bills and increased local property and sales tax revenues earmarked for publicly supported hospitals.

Another factor for some hospitals was the increase in insured patients who bought coverage through the health law’s insurance exchanges. For instance, Fort Lauderdale, Fla.-based Broward Health saw a 30 percent drop in charity care, which officials attributed to seeing more insured patients.

Still, the biggest fiscal challenges lie just ahead — with significant Medicaid funding cuts starting late next year under the Affordable Care Act. The health law’s drafters anticipated the number of uninsured Americans to decrease dramatically, in part because they expected a nationwide expansion of Medicaid. Therefore, beginning in October, 2016, the law calls for cuts to special Medicaid funding for hospitals that typically see a disproportionate share of the poor. In addition, other Medicaid funding that supports indigent care in certain states (and that predates the 2010 health law) is slated to expire in Florida in June and in Texas, next year.

“We are still very early in the Affordable Care Act, and one year does not make a trend,” cautioned Daniel Steingart, an analyst with Moody’s Investors Service. “Just because they got though this period, does not mean they do not have more financial pain to come.”

So-called safety-net hospitals, many of which are supported by local or county taxpayers, often struggle financially because they see a high proportion of patients that are either uninsured or enrolled in Medicaid, the state-federal program that pays less money than Medicare or private insurers.  The hospitals face added pressure from providing high-cost and traditionally money-losing services such as trauma and burn care. They also have the expense of training doctors.

Nonprofit hospitals need to make enough money to buy new equipment, expand programs and meet rising labor costs.  The average nonprofit hospital makes about a 3 percent profit margin, Steingart said.

In the past decade, two of the nation’s largest public safety-net hospitals — Grady Memorial Hospital in Atlanta and Jackson Memorial Health System in Miami — were on the verge of financial collapse but recovered after major management changes and increased public support.

Last year, the county-owned Jackson finished its second consecutive year with about a $51 million surplus on about $1 billion in revenue, in part as a result of increased county sales-tax revenue going to the health system and tighter expense management. Jackson’s operations are supported by a sales tax in Miami-Dade County.

Grady’s profit increased to nearly $30 million through November last year, up from $17 million for the same period in 2013.

Several other safety net facilities in states that did not expand Medicaid had profits in 2014, according to financial reports, including:

— Broward Health, which runs four hospitals, saw $69 million in profit in the 2014 fiscal year that ended June 30, compared to $59 million a year earlier, on about $1 billion in revenue. That included support from local taxpayers.

— Orlando Health, a six-hospital system in central Florida, saw its profit grow to $161 million in the fiscal year that ended in September, up from $32 million the year before, on about $2 billion in revenue. Its vice president of finance, Paul Goldstein, cited the improving economy, an increase in the number of privately insured patients and the financial performance of recently purchased doctors’ groups.

— Tampa General posted a $49 million profit last year, up from $31 million the year before, on $1 billion in operating revenue. Its operating margin was 4.5 percent.

— Chattanooga, Tenn.-based Erlanger Health posted a $20 million profit for the six months that ended Dec. 31, on revenue of $336 million, after factoring in local tax support, compared to losing $1.5 million in the same period a year earlier.

— Greenville Health System in South Carolina made a $63 million profit in the fiscal year that ended Sept. 30, down slightly from $80 million the prior year. The system had about $1.8 billion in revenues.

“Safety nets are doing everything they can to hang in there,” said Beth Feldpush, senior vice president at America’s Essential Hospitals, which represents about 250 safety-net hospitals.

Twenty-eight states have expanded Medicaid under the health law since the Supreme Court ruled the provision optional in 2012. Medicaid enrollment has increased nationally by almost 11 million since October 2013. Most of the drop in uninsured nationally is attributed to people gaining Medicaid coverage.

Not all safety-net hospitals did well last year.  County-run Harris Health System in Houston is facing a $14 million budget shortfall and recently announced plans to lay off 108 workers. Officials blame Texas’ decision not to expand Medicaid and decreased payments from other federal programs. Nearly two-thirds of Harris’ patients are uninsured— a far higher percentage than at most safety-net hospitals.

Chief Financial Officer Michael Norby said the hospital has seen a nearly 2 percentage point increase in privately insured patients as a result of the health law. Even so, only 3 percent of its patients are privately insured. “We are significantly challenged as we go forward,” Norby said.

Parkland Health and Hospital System, which is supported by Dallas County property taxes, managed to finish in the black, but saw its profits decline from $43.4 million in 2013 to $1.4 million in 2014.

Meanwhile, safety-net hospitals in Florida fear what will happen after June 30 when $2 billion in federal funding expires under an agreement between the state and the federal government. Under such agreements, the federal government supplies billions of dollars in special Medicaid dollars to certain states including Florida, Texas and California to support hospitals with large number of Medicaid and uninsured patients.

“Without those dollars we have an unsound system,” said Tony Carvalho, president of the The Safety Net Hospital Alliance Of Florida.

While Miami-based Jackson Health is financially healthy now, Chief Financial Officer Mark Knight worries about the end of that federal waiver funding in June, which contributed $160 million to his budget this year. “We could not continue to serve and maintain current capacity … without that money,” he said.

In 2014, Florida safety-net hospitals also benefited from a strong tourist season and lower unemployment rates, Carvalho said.

The improved economy also helped many safety-net hospitals that are supported through local property and sales taxes, such as Broward Health and Jackson Memorial, said David Gruber, managing director of research at Alvarez & Marsal consulting firm.

A recent report by the firm predicted the nonprofits would face major financial threats as a result of health law funding cuts, particularly in states that do not expand Medicaid. “Safety-net hospitals are now operating in the untenable crosshairs of economic distress and health care reform,” the report said.

Greenville Health has kept in the black partly by finding ways to trim charity care costs, said Chief Financial Officer Terri Newsom. The South Carolina hospital has hired case managers to oversee care to some of the uninsured patients who show up regularly at its emergency department.  It also launched a program to divert ambulances with patients who do not have medical emergencies to urgent care centers.

Though the hospital worked to get people signed up for Obamacare plans, it only saw a 1 percent drop in uninsured numbers last year. Nonetheless, administrators say the health system is in good shape. “We are in stable health and making the right investments,” Newsom said.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

UPDATED MARCH 3, 2015

If you’re uninsured, you may have questions about possible penalties for not having coverage. The fine may be bigger than you expect. Here are the details:

Is everyone required to have health insurance or pay a fine?

Most people who can afford to buy health insurance but don’t do so will face a penalty, sometimes called a “shared responsibility payment.” The requirement to have health insurance, which began in 2014, applies to adults and children alike, but there are exceptions for certain groups of people and those who are experiencing financial hardship.

What kind of insurance satisfies the requirement to have coverage?

Most plans that provide comprehensive coverage count as “minimum essential coverage.” That includes job-based insurance and plans purchased on the individual market, either on or off the exchange. Most Medicaid plans and Medicare Part A, which covers hospital benefits, count as well, as do most types of Tricare military coverage and some Veterans Affairs coverage.

Insurance that provides limited benefits generally does not qualify, including standalone vision and dental plans or plans that only pay in the event someone has an accident or gets cancer or another specified illness.

If I don’t have health insurance, how much will I owe?

For 2014, the penalty is the greater of a flat $95 per adult and $47.50 per child under age 18, up to a maximum of $285 per family, or 1 percent of the portion of your family’s modified adjusted gross income that is more than the threshold for filing a tax return. That threshold is $10,150 for an individual, $13,050 for a head of household and $20,300 for a married couple filing jointly.

For 2015, the penalty increases to $325 per adult or 2 percent of income, and in 2016 it will be the greater of $695 or 2.5 percent of income.

The $95 penalty has gotten a lot of press, but many people will be paying substantially more than that. A single person earning more than $19,650 would not qualify for the $95 penalty ($19,650 – $10,150 = $9,500 x 1percent = $95). So the 1 percent penalty is the standard that will apply in most cases, say experts. For example, for a single person whose modified adjusted gross income is $35,000, the penalty would be $249 ($35,000 – $10,150 = $24,850 x 1percent = $249).

The penalty is capped at the national average price for a bronze plan, or about $9,800, according to Brian Haile, the former senior vice president for health policy at Jackson Hewitt Tax Service. The vast majority of taxpayers’ incomes aren’t high enough to be affected by the penalty cap, he says.

Many more people will be able to avoid the penalty altogether because their income is below the filing threshold.

If I owe a penalty for not having insurance in 2014, how do I pay it?

If you had health insurance for only part of 2014 or didn’t have coverage at all, you’ll have to file Form 8965, which allows you to claim an exemption from the requirement to have insurance or calculate your penalty for the months that you weren’t covered.

What if I just realized I face a penalty for 2014. Can I do anything to avoid a penalty next year?

Open enrollment for 2015 coverage ended Feb. 15 but there is  a special enrollment period from March 15 to April 30 for uninsured consumers who are just learning of the penalty. That provision applies only to people in the 37 states that use the federal exchange, healthcare.gov, but many of the states running their own health marketplaces have made similar offers.

Are there other circumstances that allow me to get insurance outside the annual open enrollment period?

Yes. If you have a change in your life circumstances such as getting married, adopting a child or losing your job and your health insurance, it may trigger a special enrollment period during which you can sign up for or change coverage and avoid paying a fine. In addition, if your income is low and meets guidelines in the law, you can generally sign up for your state’s CHIP or Medicaid program at any time.

I was uninsured last spring and signed up on the exchange in March 2014 for a plan that started May 1. Will I owe a penalty for the first four months of the year?

No. In October 2013, the Department of Health and Human Services released guidance saying that anyone who signed up for coverage by the end of the open enrollment period on March 31 would not owe a fine for the months prior to the start of coverage.

What if I have a gap in coverage after open enrollment ends? Will I have to pay a fine?

It depends. If the gap in coverage is less than three consecutive months, you can avoid owing a penalty. Subsequent coverage gaps during the year, however, could trigger a fine.

If you have coverage for even one day during a month, it counts as coverage for that month. The penalty, if there is one, would be calculated in monthly increments.

Are parents responsible for paying the penalty if their kids don’t have coverage?

They may be. If you claim a child as a dependent on your tax return, you’ll be on the hook for the penalty if the child doesn’t have insurance. In cases where parents are divorced, the parent who claims the child as a tax dependent would be responsible for the penalty.

Who’s exempt from the requirement to have insurance?

The list of possible exemptions is a long one. You may be eligible for an exemption if:

–Your income is below the federal income tax filing threshold (see above).
–The lowest priced available plan costs more than 8 percent of your income.
–Your income is less than 138 percent of the federal poverty level (about $16,105 for 2015 coverage for an individual) and your state did not expand Medicaid coverage to adults at this income level as permitted under the health law.
–You experienced one of several hardships, including eviction, bankruptcy or domestic violence.
–Your individual insurance plan was cancelled and you consider plans on the marketplace are unaffordable.
–You are a member of an Indian tribe, health care sharing ministry or a religious group that objects to insurance.
–You are in jail.
–You are an immigrant who is not in the country legally.

For a more complete list go to the exemptions page at  healthcare.gov or the questions and answers page on shared responsibilities provisions on the IRS website.

When should I claim or file for an exemption?

There’s no one-size-fits-all answer. You can claim some of the exemptions when you file your tax return in 2015, but for others, you will have to complete an exemption application available at healthcare.gov.

Are U.S. citizens living overseas subject to the penalty for not having insurance?

If you live abroad for at least 330 days during a 12-month period, you aren’t required to have coverage in the States.

What happens if I don’t pay the penalty?

The IRS may offset your income tax refund to collect the penalty, but that’s about it. Unlike other situations where the tax agency can garnish wages or file liens to collect unpaid taxes, the health law prohibits these activities in cases where people don’t pay the penalty for not having insurance.

This story was originally published March 24, 2014.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

In their latest attack on the Affordable Care Act, House Republicans are questioning why the Obama administration transferred money last year from the National Institutes of Health and the Centers for Disease Control and Prevention to pay for the operation of the federal health insurance marketplace.

“Now it appears that we are robbing Peter to pay Paul in order to finance the disaster that is healthcare.gov,” said Rep. Jody Hice, a Republican congressman from suburban Atlanta.
Hice complained at a hearing last week that the Department of Health and Human Services shifted millions of dollars last year from those agencies to help pay the $1.4 billion cost of running the insurance marketplaces in 37 states, according to an HHS spending document.

But HHS officials say they have authority to move money between agencies that are under their jurisdiction. And they note that only about 0.25 percent of each department’s funding – about 50 in all, including global health and AIDS and substance abuse treatment programs — was used to finance the exchange.

Congressional Democrats did not appropriate sufficient funding to support the startup and operation of the federally run exchange, partly because they expected most states to run their own marketplaces. More than three dozen states decided to rely on the federal government, leaving HHS scrambling to find money to do the job. In 2013, HHS took $454 million from the $15 billion Prevention and Public Health Fund, created by the health law, and $158 million from the health law’s Health Insurance Reform Implementation Fund, according to the Congressional Research Service.

In 2014, the single largest dollar amount that was transferred within HHS — $34.2 million — came from the Low Income Home Energy Assistance program, which helps poor people heat their homes in winter. Another $12 million came from the National Cancer Institute and nearly $11 million came from the National Institute of Allergy and Infectious Diseases. In contrast, the state-run exchanges received an “indefinite appropriation” from Congress to support their operations until this year when they were supposed to become self-sufficient. However, the federal exchange could not tap that money. Both the state and federal exchanges are also supported by premium taxes paid by those buying health plans in the marketplaces.

HHS officials say they have used their authority to transfer funds from one budget category to another when faced with pressing needs before, including paying for cybersecurity protection, caring for unaccompanied children caught crossing the U.S.-Mexico border and helping states provide medicines to individuals living with AIDS.

Sabrina Corlette, senior research fellow at Georgetown University, said the Obama administration is doing the best it can with funding limitations from the law and a resistant Republican controlled Congress. “A successful launch of the exchanges and health reform in general is a huge priority for the administration and in their first year of operation the user fees (from the exchange) are not completely covering their costs,” she said.
“They are having to run exchanges in more states than anyone anticipated …and they did the best they could with the cards they were dealt,” Corlette said.

Joe Antos, a health economist at the conservative American Enterprise Institute, agrees that officials can shift money between departments within their jurisdiction.

“There is no issue on whether they have the authority to do this,” he said, “but the question is whether this is the best way to fund the federal exchange.”

Antos questioned whether the federal exchange is costing the federal government more money not just because more states are using it than originally envisioned, but because of the technological problems that caused sign-up delays during the first open enrollment period in the fall of 2013.

President Barack Obama’s 2015 fiscal year budget proposed about $1.8 billion to operate the federal exchange, of which nearly $1.2 billion would come from the premium tax and $629 million would come from Centers for Medicare & Medicaid Services, according to a Congressional Research Service report last October.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

When my mother, Pauline, was 70, she lost her sense of balance. She started walking with an odd shuffling gait, taking short steps and barely lifting her feet off the ground. She often took my hand, holding it and squeezing my fingers.

Her decline was precipitous. She fell repeatedly. She stopped driving and she could no longer ride her bike in a straight line along the C& O Canal. The woman who taught me the sidestroke couldn’t even stand in the shallow end of the pool. “I feel like I’m drowning,” she’d say.

A retired psychiatrist, my mother had numerous advantages — education, resources and insurance — but still, getting the right diagnosis took nearly 10 years. Each expert saw the problem through the narrow prism of their own specialty. Surgeons recommended surgery. Neurologists screened for common incurable conditions.

The answer was under their noses, in my mother’s hunches and her family history. But it took a long time before someone connected the dots. My mother was using a walker by the time she was told she had a rare condition that causes gait problems and cognitive loss, and is one of the few treatable forms of dementia.

“This should be one of the first things physicians look for in an older person,” my mother said recently. “You can actually do something about it.”

‘Did Mom Tell You? She Fell Again.’

The falls started in 2004. My mother fell in the bedroom of her Bethesda home. She fell in the airport while returning from a trip to see my sister. Sometimes she told me, and sometimes a sibling would call or e-mail. “Did Mom tell you? She fell again.”

Millions of older adults fall every year, but it was my mother’s uneven gait that tripped her up. She was unsteady on her feet; the slightest incline threw her off stride. Sometimes she quickened her pace involuntarily. Sometimes she bent over before straightening back up.

She went to doctor after doctor. “I want a diagnosis,” she would say before the next appointment with a neurologist, geriatrician, urologist or orthopedist. “I’m convinced this is something organic — that it has an underlying biological cause.”

A series of neurological evaluations ruled out the obvious suspects: My mother didn’t have the tremor typical of Parkinson’s, a devastating, progressive disorder, and she did well on cognitive tests, so it wasn’t Alzheimer’s disease.

Next, my mother went to see an orthopedic surgeon. He said she had stenosis, or a narrowing of the open spaces of the spine, and recommended surgery. She underwent a complicated, potentially dangerous back operation, and she seemed to be walking more smoothly afterward — for a few months.

As time went by, though, she developed other symptoms. Perhaps because she wasn’t exercising, her blood pressure went up. She gained weight and was at risk for diabetes. She developed a persistent hacking cough, but no one could identify the cause since her lungs were clear.

She was also having trouble getting to the bathroom on time, so she had more surgery, this time to implant mesh designed to alleviate urinary incontinence. Medicare and private insurance picked up the tab, but once again the relief was temporary.

The bad news was that it had taken so long to get the diagnosis that some of the damage may be irreversible.

My mother had always been terrified she would lose her memory. Her mother, Helen, who died in 1988, had spent the last five years of her life bedridden, unable to walk and oblivious to her surroundings. Any physician who took a careful family history would know that my mother suspected Helen’s dementia was caused by normal pressure hydrocephalus, or NPH, a buildup of cerebrospinal fluid in the brain that causes difficulty walking, urinary incontinence and cognitive loss, in that order.

When my mother met with specialists, she floated the idea that she might have NPH. In some ways, she hoped that was the diagnosis, because it often can be treated by implanting a small shunt into the brain to drain off the excess fluid.

Around this time, another neurological evaluation that included MRI scans of the brain revealed that my mother had enlarged ventricles. Ventricles are the cavities in the brain that are filled with cerebrospinal fluid, and their enlargement suggested any number of conditions, including brain atrophy and Parkinson’s. They are also considered a red flag for NPH.

A neurologist in Bethesda had briefly considered NPH. He had done a spinal tap to withdraw a small amount of cerebrospinal fluid but ruled out the diagnosis when he saw no immediate improvement in my mother’s gait. But he may not have withdrawn enough fluid to see a change, experts told me.

One feature of NPH is passivity. My mother was forgetful at times, but what was more striking was her lack of initiative.  She didn’t make plans as she used to. She’d start a knitting project and drop it. She may have been less aggressive than normal about pursuing her hunch about NPH being the source of her trouble. “One doctor told me, ‘This doesn’t run in families,’ ” she said.

‘We Believe It’s Overhyped’

Two years ago, doctors finally got it right.

My mother and stepfather had gone to visit friends in Gainesville, Fla. They urged her to make an appointment at the University of Florida’s Center for Movement Disorders and Neurorestoration.  Doctors there suspected NPH as soon as they saw my mother walk across the room. They recognized the shuffling gait and what they call “magnetic” footsteps that seemed glued to the floor.

They sent her for additional tests, including a spinal tap to see if her walking improved after a large amount of cerebrospinal fluid was withdrawn — it did — and another imaging scan to rule out the possibility that the buildup was caused by an obstruction, such as a tumor.

Inserting a shunt is a dangerous operation: A thin tube is implanted in the brain to drain excess cerebrospinal fluid and release it into the abdomen.

“For some patients, [the surgery] can be life-changing,” said Michael Oaken of the movement disorders center. But it is a high-risk operation, he said, especially in the elderly.  About a third of patients who have shunt surgery experience a complication, such as an infection or a brain bleed that can lead to brain damage or death. “You have to be careful. A lot of people are shunted inappropriately,” Oaken said.

Why was my mother’s diagnosis missed by so many, and for so long?

A friend whose mother was diagnosed with NPH by a gerontologist early on in the course of her disease told me the doctor made the diagnosis after seeing a story about NPH on “60 Minutes.”

But for many physicians, “the possibility just doesn’t come to mind,” said Michael Williams, who serves on the medical advisory board of the Hydrocephalus Association, an advocacy organization, because it’s so rare.

Physicians are trained to search for the most obvious, common conditions first. Although NPH was first described in 1965 and is taught in medical schools, the diagnosis is controversial, even contentious. There is no definitive test, and some experts have questioned whether it is a real syndrome. Studies of patients who had shunts inserted have had mixed results, and randomized controlled studies will probably never be done, both for logistical and ethical reasons.

Daniele Rigamonti, a neurosurgeon at Johns Hopkins School of Medicine who wrote and edited a textbook about NPH, is convinced that it is underdiagnosed and that many nursing home residents who seem to have Alzheimer’s or Parkinsons’ dementia may actually have NPH.  He says it’s important to diagnose it early, before the buildup of pressure on the brain causes damage as the enlarged ventricles displace and compress adjacent brain tissue.

“To wait for the full triad [of symptoms] is foolish,” he said, referring to the three symptoms that define NPH: gait disturbance, incontinence and dementia. Even though it is a challenge to diagnose NPH when the only symptom is gait impairment, he said, “you don’t wait for a cancer to metastasize and spread to the brain before you recognize it.”

Bryan Klassen, an assistant professor of neurology at Mayo Clinic, is not convinced. He contends NPH is extremely rare and is not being missed.

“We believe it’s overhyped,” he said, adding that the surgery is dangerous, “and a lot of the time the results are underwhelming.”

Lasting Improvements

My mother had shunt surgery two years ago, when she was 79 years old. The surgery lasted less than an hour and a half. I’m only writing about it now because surgical interventions, like sugar pills, can have placebo effects that don’t last very long. But I noticed a change immediately.

My mother went home the day after surgery, and my stepfather brought flowers. And then my mother did something that she hadn’t done in years: She walked over to the kitchen counter, gently removed the flowers from the paper wrapping, clipped and cut the stems and arranged them in a vase in a striking arrangement. She had always had a flair for flower arranging but hadn’t seemed interested for quite a while.

Today she is dramatically improved; her walking, memory and concentration are all better. Still, I can’t help wondering: Did the delayed diagnosis result in some permanent cognitive impairment?

She’s much less passive and can actually be very persistent. She asked me to write this article to inform people about NPH. “Have you written the article yet?” she asked recently when I called. “Please, write it.”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

BURNSVILLE, N. C.—It’s been a bitterly cold winter in the Blue Ridge Mountains for Julia Raye and her 13-year-old son, Charles. But despite the punishing weather, 2015 has been looking good: Raye is finally able to afford insulin and the other medications she needs to keep her diabetes under control.

She’s a self-employed auditor who relies on a $400 per month government subsidy to afford the private health plan she bought on healthcare.gov, the online federal marketplace for health insurance.

Before the Affordable Care Act made tax credits available to low- and moderate-income workers, Raye was uninsured. Back then, just one of her diabetes medications cost her $320.

“During that time, I had no insurance, and I really wasn’t taking my medicine. There were times when my sugars and things would get up to 600,” Raye said. “I remember getting to a point where the ambulance had to go take me in because I was pretty much in a diabetic shock.”

On Wednesday, the U.S. Supreme Court will hear oral arguments in a case that could cripple the Affordable Care Act and imperil financial assistance to 8.2 million health insurance shoppers like Raye in the states that rely on the federal health insurance exchange.

Since January 2014, Raye has had steady insurance, paying just $30 a month, while her son was covered by Medicaid, the public insurance program for low-income people. Treating her diabetes has improved her vision and the numbness in her feet, and, at age 48, she has gotten a long overdue mammogram.

Raye says she is watching the latest legal challenge to the Affordable Care Act with growing anxiety. If the court wipes out her subsidy, Raye says she wouldn’t be able to pay for treatment. Her diabetes would again worsen, she would be unable to work and she and her son would face financial ruin, she says.

In North Carolina, nine out of ten people who buy health coverage on the federal exchange receive a subsidy. If large numbers of people here and in other states lose financial assistance and drop their insurance, health policy researchers say insurance markets will be thrown into disarray.

“If you imagine someone who’s paying a hundred bucks a month and, all of a sudden, it’s $415 a month, which would be the average impact, then you could imagine some people are going to stop paying,” said Donald Taylor, an associate professor of public policy at Duke University. “You would imagine that the ones who wouldn’t stop paying would be the people who are the sickest, who need the insurance the most. And when you have only the sick people enrolled, that’s when you have what’s called death spiral.”

Health care economists say that would likely happen across the country. In three dozen states, the insurance marketplaces are run by the federal government because state lawmakers opted not to set up their own. If the Supreme Court wipes out financial help for those shoppers, the number of uninsured is expected to rise by 44 percent. The fallout would be heavily concentrated in the South: estimates show that of those who could become uninsured, 62 percent live in Southern states and 61 percent are white.

The Supreme Court last considered the Affordable Care Act three years ago in a case challenging the law’s constitutionality. Some court watchers say the fact that the justices agreed to hear this case—which many legal scholars considered a trivial statutory flaw—shows a renewed desire by the Court’s conservatives to upend the health law.

The lawsuit arose after a group of conservatives dissected the law after its passage. They noticed a six-word phrase that said financial assistance would be available to those who bought health plans through “an exchange established by the state.”

Michael Cannon, director of health policy studies at the Cato Institute, a conservative think tank, says the lawsuit “is about is the latest and most dangerous in a long line of false promises that the president had made about Obamacare. And this is not just a false promise, it’s also an illegal one.”

For its part, the Internal Revenue Service concluded Congress never intended to limit subsidies to shoppers only in state exchanges, and it issued a rule making them available in all states.

“With a colleague, I blew the whistle on this, and we complained the administration had no authority to do this,” Cannon said. “We began doing the legal research, we found out that this was actually an intentional feature of the law that the president was trying to rewrite.”

Rep. Sandy Levin, a Democrat from Michigan who chaired the Ways and Means Committee during passage of the health law, disputes Cannon’s assertion.

“That is just totally wrong,” Levin said. “I think the letter of the law, when you read the entire law, says that these credits were to be available to everybody, whatever exchange they were in.”

Even those who objected to the law never raised those concerns, he said. “What the opponents are trying to do is to look for any hook they can find, and the court should not allow them to find a hook that isn’t in existence that would tear apart the entire law.”

In Raleigh, N. C., that is exactly what Anna Beavon Gravely hopes will happen. Gravely is a community activist at North Carolina Family Action, a conservative political group. Now 26 years old, she has had to buy insurance on her own for the first time and was shocked by the cost.

“I don’t really see the return on it,” Gravely said. “It’s one thing to have [to] pay a monthly amount for cable or for Netflix, or HuluPlus, or a gym membership, because you’re getting something out of that. I feel like I’m not really getting anything out of my virtually $200 a month.”

Gravely says she rarely visits a doctor and doesn’t want the added benefits that the health law requires insurers to offer, including mental health and maternity coverage. She hopes the Supreme Court declares North Carolinians ineligible for financial assistance.

“I think that will help a lot of people understand the true cost of health care and what this does, how it’s driving up costs,” Gravely said. “It’s increasing the burden on middle-class families, on individuals like me who just want to have a plan that fits them and where they are in their life.”

More than four hours west of Raleigh, in the Blue Ridge Mountains, Julia Raye says health insurance was plenty expensive before the health law, when pre-existing conditions, including her diabetes, were not covered.

“I want to be able to go out and buy insurance,” Raye said. “But when they come back with figures like $800 a month, that is not logical. It’s half of what I bring in a month. I need this subsidy. This is what makes me be able to subsist. And there’s just no way I could function without it.”

After the Supreme Court hears oral arguments on Wednesday, a decision is expected by the end of June.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Transcript:

MARY AGNES CAREY: Welcome to Health on the Hill, I’m Mary Agnes Carey. The Affordable Care Act is headed back to the Supreme Court.  At stake are millions of subsidies that help people in more than three-dozen states afford health care coverage. Julie Rovner, a senior correspondent for Kaiser Health News, joins me now to discuss the case.  Hi Julie.

JULIE ROVNER: Hi, Mary Agnes.

MARY AGNES CAREY: What’s this all about? Lay out the case for us.

JULIE ROVNER: Well, it’s certainly not about the constitutionality of the Affordable Care Act. A lot of people are saying that. This is what’s known as a statutory interpretation case, something else that the Supreme Court tends to do when there’s an argument over what Congress meant.  Basically, the Supreme Court acts as a referee. And that’s basically what they’re doing here.

MARY AGNES CAREY: And what are the legal arguments on both sides?

JULIE ROVNER: Well, the challengers in this case say the phrase “established by a state” means that only tax credits that are given out in state exchanges are allowed. And that means, as you mentioned, more than three-dozen states that are using the federal exchange, healthcare.gov, can’t provide tax credits to people. Now they say Congress intended to do this in an effort to pressure states to create their own exchanges.  Those on the other side, including the government and the people who wrote the law say that’s not the case at all. It was just sort of an odd way that sentence was written and Congress always intended for tax credits to be available to everyone regardless of whether the exchange was established by a state or the federal government.  And that’s basically what’s at stake here.  We’re looking at a regulation by the Internal Revenue Service that implements that portion of the law that tax credits and the IRS said that everyone should be able to get those tax credits.

MARY AGNES CAREY: Everyone to receive them whether in the state or the federal exchange.

JULIE ROVNER: That’s right. Everybody who’s eligible regardless of who’s running the exchange.

MARY AGNES CAREY: So what happens if the court rules that people in the federal exchanges can’t get these subsidies any longer?

JULIE ROVNER: Well both sides agree on this; and the answer is basically chaos. It would be kind of a mess. Several states actually tried to reform what’s called the non-group market, the individual insurance market, by making insurance available to people with pre-existing conditions but without help for other people to buy insurance or to require them to buy insurance. And it did not work very well. In Kentucky, basically every insurer left the state when they tried it in the 1990s. There are various estimates. Somewhere around 7.5 million people would likely lose their subsidies. Because of the way the law is written, if insurance costs more than 8 percent of your income, you’re not required to buy it. So most of those people would not buy insurance. They wouldn’t have to. The people who would buy insurance are probably the people who need it the most. That would result in a risk pool that is sicker and therefore premiums would have to go up. Estimates are that premiums would go up somewhere in the neighborhood of 35 to 45 percent. Obviously for people who were getting subsidies, their costs would go up enormously. The average subsidy is about $268 and that covers somewhere in the neighborhood of three-quarters of their premium. So they would basically be priced out of these markets. Insurance companies are very worried about this. Hospitals and other health care providers are also worried about this. They’ve all written amicus briefs to the court saying this would be a real disaster if the subsidies were not available in these states where the federal health exchange is being used.

MARY AGNES CAREY: So on Wednesday we’ll have the oral arguments and then the judges begin their deliberations. Take us through some of the issues that guide those deliberations.

JULIE ROVNER:  Well as I mentioned this is what’s called a statutory interpretation case. They have to decide whether Congress intended for the subsidies to be available in the state and federal exchanges or just in state exchanges. And mostly when they get these cases, they use what’s called Chevron Deference, that’s a reference to a 1984 case. The way it works is that first it’s a two part test. They look at the language of the law and they say, “Is it straightforward or is it ambiguous?” If they find it ambiguous, then they are suppose to defer to the agency, in this case the IRS, as long as the IRS’ interpretation isn’t unreasonable. That’s why the challengers in this case are trying to make the case that Congress intended for the tax credits to be denied to people using the federal health exchange because that would make the IRS’ interpretation unreasonable, because only if the interpretation is unreasonable, would the Supreme Court then overrule it.

MARY AGNES CAREY:  There’s also some issue involved where if the federal government is going to change something with the states, they have to tell the states they’re doing that. That’s one of the issues here.

JULIE ROVNER: That’s right, a number of states in their court filings are saying that when they were deciding whether or not to have a state exchange, they didn’t know, no one ever told them there was a possibility that their residents wouldn’t get these tax credits if they didn’t create an exchange and that’s a violation of other sort of previous court rulings that said you can’t limit things, that you can’t limit what they states get if you don’t tell them what their options are. And frankly as someone who covered this law from its inception, I certainly never heard anybody talk about the idea that only states exchanges would have access to the tax credits. It simply was never discussed.

MARY AGNES CAREY:  Thank you so much Julie Rovner, Kaiser Health News.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.