Obamacare: The Aftermath


Since many have asked my what I think about Obamacare and the recent Supreme Court ruling, I thought that I might provide my views on the topic.

In the first place, the law is obviously unconstitutional. The federal government cannot compel you to buy something. There is simply no universe in which someone can read our Constitution and come to the conclusion that the Constitution gives the government that power over its citizens.

Secondly, if Obamacare is a tax, then the lawsuit before the Supreme Court would have been dismissed, because according to the Anti-Injunction Act Donald Verrilli argued before the Supreme Court that the individual mandate is NOT a tax. However, in order to find the bill constitutional, Roberts had to treat it as though it was a tax. But wait a minute. The Anti-Injunction Act says that you cannot contest a tax bill until the tax is paid. Therefore, if Obamacare was a tax, then the case should have been dismissed til the tax was collected. Thus for the sake constitutionality, Obamacare is a tax, but for the sake of litigating it, it is not a tax. Roberts tried to have it both ways, but he can’t. This is the reason why legal pundits all over the US are troubled by Robert’s garbled, self-contradictory opinion. If this was a principled ruling then why did it make no internal sense.

Third, Obamacare is unworkable. In the words of Holman Jenkins of the Wall Street Journal, Obamacare is “upheld and doomed.” The problems with Obamacare are four-fold and they are :

1. Taxes

Besides being a massive federal power grab, Obamacare contains one of the largest tax increases ever imposed on the American economy. These tax increases come at a time when job growth should be the nation’s number one priority.. The tax sections of Obamacare begins with an increase in the Medicare payroll tax of 0.9 percent for individuals with incomes above $200,000 ($250,000 for couples) in 2013. Needless to say, this tax will depress the demand for labor at a time when job creation is critical in order to for jump-start the economy. Some might think that this tax will not hit the middle class because of the relatively high initial income thresholds, but they are wrong. These income thresholds were purposely not indexed to inflation. Therefore, as the years pass, more and more middle-income families will cross the thresholds because of normal wage growth.

Obamacare also includes an additional 3.8 percent tax on investment income; a new 2.3 percent excise tax on medical devices that will reduce the size of the industry. It also includes taxes on the drug and insurance industry that will be passed on to consumers in the form of higher premiums; and a tax on high-premium insurance plans that will also be passed on to consumers.

2. Deficits and Debt

Obamacare will exacerbate our nation’s already alarming entitlement spending and debt crises. The dramatic rise in spending on Medicare and Medicaid already is pushing the federal budget to the breaking point. Obamacare makes the problem much worse since it adds two new additional entitlement programs in the form of a massive Medicaid expansion and a new premium credit entitlement for households with incomes between 138 percent and 400 percent of the federal poverty level. These two entitlement expansions are expected to add a minimum of 35 million Americans to the entitlement rolls when phased in, at an expense of more than $200 billion annually by the end of the decade (CBO, Letter to House Speaker Nancy Pelosi, March 20, 2010, Table 4.).

Obamacare was sold by means of offsetting cuts in Medicare that supposedly would pay for it. Unfortunately, the Medicare cuts have been exposed as unrealistic because they would result in Medicare paying even less for medical services than Medicaid does today. (John D. Shatto and M. Kent Clemens, “Projected Medicare Expenditures Under Illustrative Scenarios with Alternative Payment Updates to Medicare Providers,” Office of the Actuary, Centers for Medicare and Medicaid Services, May 18, 201). This would severely jeopardize seniors’ access to care. Even worse, the offsetting cuts were made, the savings are double-counted under Obamacare, and are used once to pay for future Medicare commitments that are today counted as unfunded governmental liabilities, and then a second time to supposedly cover the costs of Obamacare’s entitlement expansions (Charles Blahous, “The Fiscal Consequences of the Affordable Care Act,” The Mercatus Center of George Mason University, 2012). Since money cannot be used twice, Obamacare will add hundreds of billions of dollars in new debts this decade, and trillions over the longer term (James C. Capretta, “The Medicare Trustees’ Report and the $8.1 Trillion Double-Count,” The Weekly Standard Blog, April 24, 2012).

3. Individual Mandate

The individual mandate hands immense regulatory power to the Department of Health and Human Services (HHS). According to Obamacare, HHS controls just about every aspect of the nation’s health system. In January 2012, the Administration announced that it planned to use that power to impose new benefit requirements on all employer-sponsored insurance in the name of “preventive health services” (now frequently termed the “HHS mandate”).

Additionally, the regulations issued by the Administration in this regard would require all employers, including religious employers such as Catholic hospitals and universities, to cover abortifacient products, contraceptives, and sterilization procedures in the health plans they offer to workers. By requiring all employers to offer these products and services in their health insurance policies, they would directly violate the religious liberty rights of thousands of religious institutions around the country.

4. The Bureaucratic Micromanagement of American Health Care

The bulk of Obamacare is based on the theory that the federal government has the capacity and know-how to micromanage American health care. This is the basis for the provisions that establish an unaccountable and unelected board—the Independent Payment Advisory Board (IPAB)—to oversee all aspects of how Medicare is run. It is also the theory behind Accountable Care Organizations (ACOs), which are authorized in Obamacare to give the federal government a new role in influencing how doctors and hospitals are organized to deliver care to seniors.

Unfortunately and contrary to socialistic preconceptions, the government is NOT adept at micromanaging how health care or any other aspect of people’s lives. When the government is given this much authority and discretion, it does not result in higher-quality care for patients. Instead, it leads to price controls and one-size-fits-all regulations that misallocate resources and lead to access problems. Obamacare compounds the problem since it creates massive new and costly bureaucracies at the federal and state levels of government that will become permanent and unresponsive centers of power. The IRS and HHS will grow. A new agency in HHS is slated to spend $10 billion supposedly testing new ideas, but already there is indication that the money is being wasted on projects driven more by politics than substance.

Obamacare is also pours hundreds of millions of dollars into the states to coax them into building the “exchanges” that will become the foundation of the Obamacare edifice. These exchanges, far from fulfilling the supposed mission of fostering a dynamic marketplace, will be the means by which the federal government will extend its reach to every corner of the health sector. Every American who does not obtain his or her insurance through an employer will have little choice but to go through Obamacare’s exchanges.   It will only be a matter of time before the federal government uses its new powers to impose even more top-down cost controls on the health system, to the detriment of the quality of American health care.

Obamacare is a disaster. Had the Supreme Court ruled properly, we would be out of this mess, but as it sits now, repeal – complete and total repeal – is the only answer.