WASHINGTON—Health and Human Services Secretary Sylvia Mathews Burwell said Thursday that a potential Supreme Court decision voiding the health law’s tax credits would create widespread disruption, but that federal officials were prepared to work with states to mitigate the effects.

A move by the court to strike a key component of the 2010 federal health-care overhaul could mean “the number of uninsured would jump dramatically” and that a “death spiral” would ensue in insurance markets in most of the country, she said, as sicker people kept coverage and healthier ones dropped it.

The federal government has provided tax credits to help low- and moderate-income consumers pay for health premiums in about three-dozen states through the HealthCare.gov website. The Supreme Court is set to rule later this month on whether the language of the Affordable Care Act restricts the credits to residents of the handful of states that opted to run their own insurance sites, officially called exchanges.

Secretary of Health and Human Services Sylvia Burwell said she was hopeful that more states will follow Indiana’s example and expand Medicaid. She spoke at a breakfast hosted by the Wall Street Journal Thursday.

“We believe we hold the right position,” Ms. Burwell said at a breakfast hosted by The Wall Street Journal. But “if that’s what the courts decide, we can’t undo the massive damage.”