Fox News is reporting on an unsubstantiated rumor that the Obama administration has a “secret plan B” to deal with the fallout of an upcoming Supreme Court case that could invalidate tax credits for millions of Americans. But administration officials have repeatedly denied that such a plan exists -- and there is little the administration could do to restore the credits if the court strikes them down.

On March 4, the Supreme Court will hear King v. Burwell, a case that could block the availability of health care subsidies for consumers who purchased insurance over the federal exchange, which operates as the sole health insurance marketplace in the 37 states that don't operate their own. The lawsuit is based on a right-wing misinterpretation of the Affordable Care Act (ACA) that claims that the law allows the IRS to provide tax credits only to those who bought insurance over “Exchanges established by the State,” and not the federal government. In addition to the congressional authors of the ACA, the vast majority of health and legal experts agree that this strained reading of the law is not only incorrect, but contrary to the way the Supreme Court generally interprets statutes -- as a whole, and in context.

Despite the lawsuit's clear flaws, right-wing media have acted as a booster for its potential to gut the ACA -- and only recently figured out that without the subsidies, millions of Americans would be faced with ruinous health care costs. As The New York Times explained, “if the court decides to limit federal tax credits, the result could essentially be the creation of two American health care systems. The haves -- in mostly Democratic states -- may not be impacted, while the have-nots -- in 37 mostly red states -- could face spiraling costs.”

But now Republicans are attempting to shift the blame to the Obama administration by claiming that the administration actually does have a super-secret contingency plan, and multiple statements to the contrary are an effort “to influence the court ahead of the March 4 arguments,” according to The Hill.

Even though the administration has said that there is no such plan -- secret or otherwise -- Fox News was happy to pass along this unsubstantiated rumor on the February 26 edition of America's Newsroom. In a report about a congressional hearing on the ACA, Fox's Doug McKelway stated that Health and Human Services Secretary Sylvia Burwell would be facing questions about the administration's “contingency plans” if the tax credits are struck down. McKelway went on to report that “there are rumors circulating that senior HHS officials do have a secret plan B should the Supreme Court rule against Obamacare”:

In a February 24 letter to Congress, Burwell wrote, “We know of no administrative action that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision” by the Supreme Court in King. Experts also agree that there is little the federal government could do to remedy the Supreme Court's decision without facing further legal challenges. In an opinion piece for the New England Journal of Medicine, public health professor David K. Jones and law professors Timothy Jost and Nicholas Bagley explained that “any attempt to work around King is sure to face legal challenges, which would introduce additional uncertainty and delay”:

If the IRS rule is invalidated -- and absent effective contingency planning -- a state that has declined to create its own exchange probably won't be able to stave off the immediate destabilization of its insurance market. The Court will probably release its opinion in late June; its decision will take effect 25 days later. At that point, if the challengers prevail, the U.S. Treasury will probably have to stop issuing tax credits to users of federal exchanges. Enrollees who are unable or unwilling to pay the full cost of their insurance premiums could see their coverage terminated, perhaps as soon as 30 days after they fail to make a payment. Those who retain insurance are likely to be sicker than those who drop coverage, which will skew the risk pools and expose insurers to large, unanticipated losses.

[...]

Recognizing the difficulties involved in shifting from federal to state exchanges, some observers believe that HHS might deem the seven states with “partnership exchanges” -- federally established exchanges partly operated by the states -- to have “established” their own exchanges. Any such move, however, could provoke an immediate and forceful legal challenge. Because partnership exchanges were meant to provide an option to states that declined to establish their own exchanges, it would be awkward for the agency to now treat state cooperation as tantamount to establishment. Even if the move passed legal muster, changing the rules for partnership exchanges would still leave 27 states without recourse.

Other observers have suggested that states might seek “state innovation waivers” under the ACA. A waiver allows a state to sidestep certain ACA requirements -- including the exchange and premium-tax-credit provisions -- in favor of an alternative plan offering similarly comprehensive and affordable coverage. The federal government would then pay the state the same amount of money that its residents would have received under the ACA without a waiver. Per the ACA, however, waivers cannot take effect until 2017, which would leave long coverage gaps. Worse, if the King challengers prevail, people in states without their own exchanges would not be entitled to receive any money in tax credits. Arguably, then, none of that money would be payable to those states under a waiver. Although the administration might have the legal flexibility to avoid this constraint, the operative word here is “might.” Any attempt to work around King is sure to face legal challenges, which would introduce additional uncertainty and delay.

Photo via Flickr/Supermac1961 under a Creative Commons License.