ObamaCare, economics and the Constitution

With a minimal understanding of economics, it should become apparent quite quickly that ObamaCare makes for bad health care policy. But there’s more. Specifically, does ObamaCare make for bad law in the sense that it violates the Constitution?

The Supreme Court has agreed to hear the case on the constitutionality of President Barack Obama’s health care law. Arguments before the court are scheduled for March. It’s typical that arguments before the court are heard for 60 minutes. But in this case, exhibiting the enormity of the issues at hand, more than five hours have been set aside. A ruling is expected by June 30.

On economics and health care policy, a quick refresher is in order.

Just consider the assorted tax increases. These include a 10 percent levy on indoor tanning services imposed in 2010. This year, pharmaceutical manufacturers got hit with a new tax on revenue, raising $2.5 billion for 2011, $2.8 billion per year for 2012 and 2013, $3 billion per year for 2014 through 2016, $4 billion for 2017, $4.1 billion for 2018, and $2.8 billion for 2019 and afterwards.

In 2013, not only does a 2.3 percent tax on medical device makers kick in, but so do increases in Medicare income tax. For individuals earning more than $200,000 and couples more than $250,000, a 0.9 percent surtax is imposed, as is a new total tax of 3.8 percent on unearned income, including capital gains and dividends.

For good measure in 2014, a new tax will be imposed on health insurers, raising $8 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017, $14.3 billion in 2018 and indexed to medical cost growth from that point onward. And a 40 percent excise tax is scheduled to hit so-called “Cadillac” health plans in 2018.

What do these tax increases mean? Quite simply, costs will rise for the industries targeted — tanning, prescription drug, medical device and health insurance providers — and their customers and employees, which mean fewer resources available for investment and innovation. Similarly, higher income taxes will reduce resources available for investing, saving and consuming, which has negative effects throughout the economy.

There’s more, of course. On the regulatory front, for example, an unprecedented barrage of regulation will be imposed in 2014. This includes an individual health insurance mandate requiring most individuals to obtain government-defined health insurance coverage or pay a penalty; an employer mandate requiring employers with 50 or more employees that fail to offer government-approved health coverage to pay a penalty for each full-time employee over the first 30 as long as one employee receives a subsidy; a guaranteed-issue mandate on insurers, as well as limiting the ability to price plans; and implementation of health insurance exchanges, which will serve as vehicles for additional regulations and mandates.

This regulatory mess inevitably means driving up the costs of health care coverage and the costs of doing business, including hiring workers.

Finally, federal government spending will increase tremendously under ObamaCare. Considering that the bulk of ObamaCare kicks off in 2014, 10-year estimates starting at that more legitimate point put taxpayer costs in the range of $2.5 trillion to $3 trillion, as opposed to the $1 trillion costs heard from advocates during the debate over ObamaCare.

In addition, the expansion of Medicaid means increased costs for the states, with the Congressional Budget Office recently putting the estimate at $60 billion though 2021. A new joint congressional committee report by the Senate Finance Committee minority and House Energy and Commerce Committee majority conservatively estimates that PPACA will cost state taxpayers at least $118.04 billion through 2023.

So, based on economics, ObamaCare should be tossed out. And considering that opposition to the measure remains strong among voters, as illustrated in polling, repeal remains a distinct possibility depending on how the November 2012 elections turn out.

In the meantime, though, comes this case before the Supreme Court. It focuses on three main issues.

First, and most important from a constitutional standpoint, is the aforementioned individual mandate requiring that individuals have or purchase health care coverage, or, if not, pay a penalty. If allowed to stand, this federal requirement for individuals to participate in a commercial activity would mean an astounding and dangerous expansion of federal power — far beyond anything provided in the Constitution.

Second, is the nature of the Medicaid provisions constitutional? In effect, the law is written in a way whereby the states either have to cover the formidable costs of expanding Medicaid coverage or face losing all Medicaid funding. Does the degree of coerciveness here violate state sovereignty?

Third, if the individual mandate is found unconstitutional, does that mean the entire law should be found unconstitutional? The Wall Street Journal recently editorialized: “The Obama administration’s answer to the law’s multiple discrepancies, contradictions and nuances has been to go all-in on the argument that overturning the mandate will overturn the entire law. It’s true that without the mandate the law is unlikely to work, but the law is such a Rube Goldberg contraption that it won’t work with the mandate. We’d like to see the entire law overturned, but the mandate deserves its own constitutional judgment. It shouldn’t be found constitutional merely because Justice’s lawyers say its excision would ruin the entire law. Congress can’t drop unconstitutional provisions into laws hoping that the court will bless them simply because not doing so would invalidate the larger law.”

Contrary to the Obama administration using this as a threat, it could be argued that since Congress was unlikely to pass much of the law without the individual mandate and since that mandate can’t pass constitutional muster, then the entire law should be tossed out — that this would be the right thing to do.

At the very least, the individual mandate must be found unconstitutional if the words in the Constitution are to have any meaning. Unfortunately, though, judicial activism creates the distinct risk justices will replace the plain meaning and intent of the Constitution with their own preferences.

In the end, bad economics and constitutional violations (whether acknowledged by the Supreme Court or not in the end) mean that our post-November 2012 elected officials should repeal this entire mess and get back to reforms that make economic sense, will actually make health care coverage and services more affordable and accessible and conform to the Constitution.

Website:
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. Reach him through the Web site at www.sbecouncil.org.
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Posted by on Dec 6 2011. Filed under Contributors. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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