Saturday, June 30, 2012

The Obamacare Ruling & Why the Fight for Health Care Reform Is Far From Over

The much awaited Supreme Court ruling on the Affordable Care Act (ACA), also known as Obamacare, was released on Thursday (see here). Like most Supreme Court votes, it was 5-4, but not in the direction I was hoping because the law was upheld. What made it aggravating is that Justice Kennedy was on board to have the whole thing repealed; it was Justice Roberts who sided with the liberal judges. Not only was Roberts' vote unexpected, but so was the reason for upholding it. The Court ruled that it violated the Commerce Clause, as well as the Necessary and Proper Clause. The fact that one cannot be coerced to buy something or that government cannot regulate inactivity seemed like a victory for limited government and federalism. However, it's a hollow victory because the ACA was upheld as a tax.

The fact that it was upheld as a tax irks me for three reasons. The first has to do with the Anti-Injunction Act (AIA), which states that one cannot sue over a tax before it has been enacted. Whether the ACA were covered under the AIA was the topic of the first day of the proceedings. If Obamacare were a tax, then the subsequent proceedings would have been postponed until 2014. However, for purposes of the AIA, Obamacare was not considered a tax. When Roberts wrote the majority opinion, Obamacare somehow became a tax. I guess that means that Obamacare is not a tax, except when it is a tax.

My second issue is with the constitutionality of taxation. Under the Constitution, any taxation performed by Congress has to be enumerated. Article 1, Section 9, Clause 4 of the Constitution states that direct taxes, which are assessed on persons or their property, need to be apportioned. The Spending Clause (Article 1, Section 8, Clause 1) applies to indirect taxation. You also have to contend with the General Welfare and Uniformity clauses, neither of which can be ascribed to the ACA. Finally, there is the income tax under the Sixteenth Amendment. The individual mandate is triggered by a non-purchase of insurance. As such, it doesn't qualify under any of these enumerated taxes, which means that there is no constitutional basis to define the individual mandate a tax. There is a difference between a mandate and a tax, and the fact that Roberts used cryptic language to inaccurately label it as a tax is egregious.

Third, one of Obama's major selling points was the ACA was not a tax (see video below). Why? If it were, it would have been way too unpopular and would have never passed Congress. The Supreme Court actually did the dirty work of the bait-and-switch, and thus had a hand in enacting one of the largest tax hikes in American history.

This bill did a bang-up job eroding individual liberties. For the first time in this country's legal history, the Supreme Court has found a way to regulate inactivity and coerce economic activity. Congress' taxation powers have been greatly expanded because all Congress has to do is pass a "mandate," send it to the Supreme Court, and have it ruled as a tax. The Supreme Court sent the message that labels do not matter, and that the government de facto has no limits. It was a sad day for economic freedom, and trust me when I say that the ruling infuriated me. After some time, I "breathed and counted to ten" and subsequently realized that there are reasons to feel that all is not lost.

1) It doesn't seem like a huge victory to have Obamacare pass as a tax, as opposed to being acceptable under the Commerce Clause. It might not seem like a major difference to simply pay a non-coercive tax versus having to deal with jail time or other punishments that could have come with a mandate. However, when Congress tries to enact new social initiative programs in the future, they will have to be considered a tax. Even if Congress decides to ignore this established judicial precedent, any future program that remotely has any provisions related to any taxing authority (e.g., IRS) will undergo as much scrutiny as a regular tax does, which is great because it's politically more difficult to pass a tax than a regulation.

2) There is real potential to take the momentum and use it to fight for liberty. And I'm not even talking about the presidential election, although the ruling will make it easier for Romney to win the election because Obama promised that he wouldn't raise taxes on the middle class. The ruling drew a clear line as to what the Commerce Clause does. The ruling brought back the importance of federalism. This could very well revive the momentum of the Tea Party or have the GOP do some soul-searching on what it actually means to be a party of less taxes and limited government. In short, this can become a cause célèbre for libertarians and fiscal conservatives, and can thus bring the scope of government power as a central political issue.

3) Repealing the ACA just got easier. There are currently 53 Democrats, 47 Republicans, and 2 Independents in the Senate. This Senate election is important because you only have 10 Republicans up for re-election, whereas 23 Democrats and both of the seats for the Independents are up for grabs. Normally, the Republicans would need 60 votes to get past the filibuster, and gaining 13 seats seems unlikely. However, since the Supreme Court ruled the ACA as a tax, it can be repealed through a reconciliation bill, which only requires a simple majority. The House is likely to keep their majority. The catch is with who is sitting in the Oval Office in 2013. If Obama is still in office and the reconciliation bill managed to get passed, there is no way he would sign off on repealing his presidency-defining "achievement." It would get vetoed and a two-thirds majority would be required from both the Senate and the House, which would most likely not take place. If Romney gets elected, he said he would repeal it.

4) While many conservatives and libertarians were bemoaning the upholding of the individual mandate, as they rightfully should, not much attention was brought on the Supreme Court's ruling on Medicaid. Obamacare had mandated that if states did not greatly expand their Medicaid programs to include 133% of the federal poverty level, the federal government would cut off all federal Medicaid funding [that was previously promised]. According to the Left-leaning think tank Center of Budget and Policy Priorities (CBPP), 13% of state budgets on average are allocated to Medicaid, so we're talking a sizable budgetary amount. In a 7-2 ruling, the Supreme Court ruled that such a mandate was highly coercive, and that states had the option of opting out of the Medicaid expansion. Since this Medicaid expansion is one of the two major components (the other one being the health insurance exchanges) of this bill, states that don't want to expand their Medicaid programs can refuse funding, which would reduce Obamacare's potency and could very well make it even more ineffective.

Under the ACA, states can also refuse to create health insurance exchanges, which act as the conduit of the individual mandate. As Cato Institute scholar Michael Cannon explains in the video below, if states reject Medicaid expansion in addition to not setting up health insurance exchanges, the bill becomes so watered down that it practically acts as a repeal. Considering that 26 states filed the lawsuit against the federal government, largely due to the Medicaid expansion, it is not unreasonable to surmise that some, if not all, of those states would use these firewalls to impede Obamacare.

The Supreme Court ruling was anything but the "final say." There are many factors into getting this monstrosity partially or entirely repealed. Time will tell as to what its fate will be. Regardless, this bill only raises costs while doing nothing to address health care quality or the doctor shortage. Obamacare is nothing more than a sorry excuse of a policy based on broken promises. From the recently published CBO report, we know that the ACA is going to cost us way more (see Table 4) than the initial $900 billion Obama promised, and we know that although Obama promised that everyone would keep insured, there is actually a net loss of people insured (p. 4). Obama also promised that this bill would decrease insurance premiums by $2,500 per annum upon its enactment. A study done by the Kaiser Family Foundation found that in 2011, the first year of Obamacare, insurance premiums actually increased by 9%, which is higher than the average increase that has occurred within the past decade. Kaiser stated that Obamacare accounted for an increase of 1-2 percentage points, but isn't an increase the opposite of a decrease, which just means Obama lied again? And don't forget the whole thing about the ACA not being a tax. America doesn't need to deal with this. America needs real health care reform, and I hope that someone drafts and enacts it sooner rather than later.

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