OP-ED

Why Bother With Government?

On Friday, a federal Court of Appeals held unconstitutional a central feature of the new healthcare law-its requirement that almost all Americans obtain healthcare insurance through private insurance markets. This ruling came only days after the debt-ceiling debacle — a “tempest in a tea party” — during which our country’s credibility for honoring its debts was held hostage to the conviction that tax revenues should regularly ratchet down, but never up. Both the subtext of the majority’s opinion in the healthcare case and the anti-tax fervor evident in the debt-ceiling debate share a common underlying philosophy: the belief that government activity is largely hostile to prosperity and the pursuit of happiness, and therefore the less of it, the better. But this view of government is incorrect.

Government, to paraphrase Congressman Barney Frank, is just the name we give for the things we the people decide to do together. And taxes in turn are just the amounts we chip into the collective pot to buy whatever package of goods and services that we have agreed to purchase collectively.

In ordinary commercial settings, the private sector is more efficient at allocating scarce resources than is the government, which is why the United States relies so heavily on private markets. So why should we bother to do things together through the mechanism of government? One answer is that only government can address an “incomplete” market, which occurs when the private sector cannot or does not provide a market solution to an economic problem. Healthcare insurance is a classic case of an incomplete market that results in real economic burdens.

You cannot today buy the sort of private healthcare insurance that one would expect to find if private markets always provided a complete suite of rational solutions. That product would be “permanent” healthcare insurance, analogous to permanent life insurance, in which an individual could contract today for a non-cancellable policy that would provide specified medical care benefits for the individual’s life, in return for annual insurance premiums.
Such a market does not exist because of adverse selection (the phenomenon that those individuals who knock on an insurance company’s door are more likely to be sick than those who never give healthcare insurance a moment’s thought), because the annual premium for permanent healthcare insurance would be very high for a young person, relative to the cost of a one-year policy, because healthcare technology and costs rise at unpredictable rates (while life insurance pays off a fixed amount), and because everyone knows that in the end government (that is to say, all of us, together) will provide at least some minimum level of care for the uninsured. As the majority admitted in Friday’s Court of Appeals decision, this last point explains why voluntary federal flood insurance has been a failure — homeowners have no reason to buy insurance when they know they will always be bailed out through government “disaster relief.”

It is precisely because private healthcare insurance markets are unavoidably incomplete that every developed country other than the United States has some form of mandatory health insurance plan. The reasoning is simple: if you can get everyone into the insurance pool — the young and healthy as well as the old and sick – then healthcare costs can be broadly shared, and thereby made affordable. The young and healthy “overpay” today, in return for receiving guaranteed coverage for their future selves, when they in turn will be old and sick.
By requiring universal participation in healthcare insurance, government thus can create the very product that the private sector cannot (because of adverse selection, etc.) — permanent health insurance, in which your premium reflects not just the cost of covering you today, but for your entire lifetime. Why should it be unconstitutional for all of us to solve this problem in this way? The appellate court majority’s answer hinges less on constitutional bedrock doctrines than it does on alleged terminological foot-faults by Congress.

One of Congress’s principal errors, according to the majority opinion, was to impose a “mandate” that each of us purchase private insurance, or face a “penalty” for failing to do so. Had Congress imposed a “tax” rather than a “penalty,” the result apparently would have within its power — even though under the design of the legislation the “penalty” in question in fact will be collected through the personal income tax system, just like the rest of an individual’s income tax obligations.

In other words, the majority would agree that government (that is, all of us acting together) can collect taxes from all Americans in amounts equal to the required insurance premiums to fund affordable healthcare, and then use those tax revenues to subsidize medical care provided by private healthcare professionals. In fact, we do just that for a subgroup of Americans today — we call it Medicare!

And if in turn Congress were to grant to an individual who provided proof that she had obtained qualifying private insurance a tax credit in an amount equal to her tentative healthcare tax liability (so that net she would owe no tax), surely that liberty-enhancing grant of additional personal flexibility to buy any private insurance policy that she preferred would raise no constitutional issue at all. Yet this hypothetical tax-and-credit system is the economic equivalent of the “mandate” that the court struck down as unconstitutional, because under either formulation individuals can either procure qualifying private health insurance or incur a tax liability.

In contrast to the Medicare model, the new law eliminates the mandatory channeling of money into government in the form of taxes (except for those who do not choose a private plan on their own) and the disbursement of those taxes back out to the people in the form of healthcare subsidies. Yet in the view of the majority opinion, this reduction in government’s involvement, when compared to Medicare, somehow made the legislation into a “wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives.”

In the end there are two great ironies at work here. First, if Congress had followed the tax-and-subsidy Medicare model for financing universal healthcare, the new healthcare legislation plainly would be constitutional. The majority opinion in Friday’s Court of Appeals case effectively argues that Congress, by trying to reduce the role of government when compared with that model (and, it must be admitted, being too cute in using the word “penalty” to describe what plainly operates in fact as a tax on individuals who do not buy their own insurance), somehow converted a constitutional law into an unconstitutional assertion of a novel authority. We now must hope that the Supreme Court will see past the formalism of this analysis and conclude that the legislation in substance is completely constitutional.

The other irony at work is that the principal driver of our worsening federal deficit is healthcare. According to the OECD, the United States in 2009 spent 55 percent more per capita on healthcare than did the next most profligate developed country (Switzerland). Of that total, government programs provided larger subsidies per capita than did those in any other developed country except Norway. Yet our system does not thereby obtain any better health outcomes: U.S. life expectancies at birth are far below those of Australia, or France, or the U.K., or even poor beleaguered Greece.

The healthcare legislation was our first serious effort to grapple with the problem that our current healthcare system (including the healthcare insurance market) will bankrupt us if left to continue on the same path, while delivering poor value along the way. The legislation might not be perfect, but the nonpartisan Congressional Budget Office concluded that it would reduce the deficit over the next ten years and have an increasingly positive impact in years thereafter.

By striking what they naively think to be a blow for personal liberty and small government, those who seek to undo the legislation in reality are proposing to dig the government’s deficit hole that much deeper. If the Supreme Court does not reverse this most recent decision, the end result will be that one day in the near future we all be required to pay higher taxes to climb out of this latest deficit hole of our own making.

Edward D. Kleinbard is a Professor of Law at University of Southern California Gould School of Law, and former Chief of Staff of the U.S. Congress’s Joint Committee on Taxation.

This post first appeared at The Huffington Post.

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  2. Peter you read your own link?

    Such tax filers probably have big portfolios and big investment losses from the 2008 financial crisis. They are also more likely to be retired or self-employed, and may be charitably inclined.

    Williams offered a hypothetical example: A retired person with $10 million invested in municipal bonds paying 5% interest, or $500,000 a year.

    To look at one year of tax returns is very simplistic and unscientific. You need to look at people over multiple years and then the details on why they didn’t pay income tax. Wealth is very fluid, most people are only in the top tax bracket for 1 or a couple years.

    This is why liberals always screw everything up, you don’t know how to look at the complete picture. For example I could open a business and invest 10 million over 10 years. After a decade of losing money I give up and sell off. Simple minded liberals will see my 8 million dollar cash out as a windfall salary and want to tax it at 37% or what ever number your at these days. Your ignorant of the fact that 8 million still represents a 2 million dollar loss. After your taxes I would net only 5+ million. And you wonder why people aren’t starting businesses and investing with Liberals in power……

    Not nearly as simple as you though, now your turn, justify why 63 million people aren’t contributing

  3. ” I don’t think that today’s Tea Party stands for a balanced view of central government, as much as it stands for getting Obama out of office at whatever cost, including imploding the entire country.”

    Then why would they run primary challenges to Republicans and why would they put fringe candiates like Angle and O’Donnel up when RINOs could have won without doubt. This is a clear example of your opinion supporting your bias. Any RINO could have wont the 2010 elections but they were willing to lose the seat rather then sit another RINO. Tea Party has clearly acted more independently then your know or admit. They are just as willing to go after Republicans as they are Obama.

    FYI our country is already imploding, 100 trillion in unfunded promises, how much more implosion does it need?

    ” today’s left is arguing for social programs and raising revenues to fund them, while the right is fighting hard to keep the money from flowing to those programs.”

    What you leave out is very telling. The Left has and is pushing this agenda at the federal level instead of the state level where it belongs. This goes along with Tim’s point that the left is miss using the federal government to confiscate the goods and labor of those they disagree with. This is exactly what the founding fathers tried to protect us from. If MA wants to implement Universal healthcare then go ahead that is their right. Don’t try twisting the constitution to force the entire nation to do so.

    How can you compare murder of a baby to taxes to implement national healthcare? We are all CREATED, not born, with certain rights, one of those is life itself, one is not healthcare, welfare, education, or any of the other liberal goals.

    “The only “liberties” that seems to apply equally to all, are keeping one’s money and guns out of government reach..”

    You mean those liberities that the constitution actually grants versus those later “found”. The Federal goverment, versus the state democracies, was designed to be very limited and to guarantee very few but very specific and important rights and liberities. The left has ran all over the founding fathers idea for a stable federation.

  4. Thank you for the welcome, Tim, but I don’t think that today’s Tea Party stands for a balanced view of central government, as much as it stands for getting Obama out of office at whatever cost, including imploding the entire country.

    Leaving that aside, I also don’t think liberals have a visceral hatred for the Constitution. I most certainly do not. I also find it interesting that the folks that argued for increased Federal power in the 18th century were not what you would call “liberal” today. It was the “left” of those days that insisted on limited government.

    But times have changed, and today’s left is arguing for social programs and raising revenues to fund them, while the right is fighting hard to keep the money from flowing to those programs.
    Simultaneously, those fighting hard to keep the government out of their wallets are fighting equally hard to insert the government into people’s beliefs, bedrooms and even into people’s physical bodies.
    The only “liberties” that seems to apply equally to all, are keeping one’s money and guns out of government reach..

    I believe the modern conservative right is of the opinion that conservative policies, no matter how intrusive, are Constitutional because they fit in with the social and moral beliefs of 200 years ago, while anything that redirects money to vulnerable populations, or could be construed as indiscriminate social benefits is not Constitutional, because Madison never considered such thing.

    I don’t think you can have it both ways.

  5. I haven’t seen this get any mention in the press. This entire debate is all becuase they didn’t want to call it a tax. They tried playing politics and having it both ways and got burned. Now we have a constitutional crisis becuase of game playing.

  6. No, I am not suggesting that it would be unconstitutional. I don’t even know if the penalty as it stands will be found unconstitutional.

    I am suggesting that if the government wants to raise revenues, it should call it tax and if it wants to influence behavior by means of sticks and carrots, it should call it what it is, and let the dice roll. Which is what they did in this case, so going back now and tinkering with terminology to find ways around it seems a bit dishonest to me.

    The alternative of course is to tax and provide service in return. I still think that the public option would have been, and it may still turn out to be, the cleanest way to go.

  7. “I believe that government is (or should be) just another name for all of us doing things together. But there needs to be a limitation to what all of us together can dictate to any one of us individually.”

    Margalit, welcome to the oldest party, the Tea Party. But you swallowed a big assumption there. If you describe a thing by leaving out the one feature of the thing that makes it different from all other things, you are either a simpleton or a con man. Mr. Frank may be both.

    “…just a name for all of doing things together…”. Right, and a musket is just a stick with fire on one end. Honestly, what could be a more superficial, obtuse reading of political history than that? The people who put such sweat and blood into writing the Federalist papers and the Constitution knew one thing for sure, and that is that government is NOT “just a name for all of us doing things together” — that is an ice cream social or a bowling league. The one thing it is not, is a government.

    Obviously, the only thing that makes government different from any other institution is that it holds the power of coercion. If it did not, we would not be talking about it. So, to be stated accurately, government is “just a name for all of us doing the things that we’re going to force, on pain of loss of life and property, the dissidents to go along with”. If this distinction between coercion and voluntarism seems trivial or pedantic to you, all that means is that you are genetically dictatorial, and I don’t want you for my neighbor.

    The entire debate in the late 18th century was on how to limit the central government — how to make it different from a divine-right monarchy. It was THE subject. Indeed, if there is no limit to what the government can do, then there is no need for a written Constitution. This is why the left hates, with a visceral hatred, the very idea of control by a 200 year old document. They long, with a sublimated religious longing, for complete control, and the one thing standing between them and their religious vision is the need to constantly argue about what some white guys wrote with a quill pen. In their minds, there is no moral reason not to just dispense with it all, and say whatever the majority wants is what everyone will do — or go to jail. And that is what Madison worked very hard to make impossible, and what this debate is about, not the difference between a tax, a penalty, an incentive, or a dormouse.

    Most people agree we have to tax each either, true. And the Constitution obviously gives the people the power to tax each other. But to argue that this makes any imagined tax “constitutional”, and then it’s only a minor transformation to make all control “constitutional”, is to use the trees to kill the forest — the entire purpose of the document was to constrain the power of the government. Any interpretation that gives Congress the power to control any part of your life can safely be labeled “sophistry”, and then analyzed. You don’t have to know exactly where the edge of the cliff was to know you are now in mid-air.

    By the way, it was no comfort to the founders to think that the formerly monarchical power was to be vested in the majority. They considered that, and said no, and separated the powers precisely to produce the gridlock that would make it hard for the majority to coerce the minority. (“A republic, if you can keep it.”)

    The people now crying about broken politics are the same people who say “we won” when they win, and who called Bush ‘Hitler” for poking into their library lists. Apparently, it’s “general welfare” when the left seizes your property, but its “fascism” when the right reads your mail.

    Hypocrites. Monarchists.

    Now, here we are, on the verge of hard-wiring into our body of law the logic that the government has no moral limit on its power. Both sides in this argument know that if Congress can make you buy health insurance then Congress can make you eat your peas.

    (Donning tri-pointed hat:)

    NO!

  8. Margalit, are you saying that a tax break is unconstitutional whenever it is paid for via taxes at the same time that the tax break is enacted? Yet the same tax break is constitutional if it is paid for via deficit and then revenue is raised at some other time?

    I don’t think any court will ever follow that doctrine, but even if it did, it would be a rather meaningless constitutional restriction. It’s pretty easy to get around it.

  9. “what part of one nation under God aren’t you getting?”

    That’s the “Pledge of Allegiance” Nate, not the Constitution. That phrase was added in 1954, you can look at the history of why. Challenges to political meetings that start with a Christian prayer (said by a political office holder), or any other religion, are being challenged under the Constitution, so we’ll see how it works out.

  10. Paolo,
    First, my apologies for mistakenly addressing Peter in my previous response to your comment.

    It all boils down to whether this is a penalty or an incentive. It is a bit like the chicken and the egg, but it is important to define which came first.

    I do agree that if the bill granted a deduction, from current tax levels. to those who purchase insurance on the individual market (as you suggested above), the constitutionality issue would probably not have been raised, and it would have been comparable to deductions for mortgage, charity, education or energy efficient purchases. I would classify these as incentives, since they were not immediately preceded by a tax increase to compensate the government for losses incurred due to inactivity.
    But if you raise taxes across the board (fictitiously) and then deduct the increase for all folks that buy or otherwise obtain insurance (with a double delight for employer provided insurance), no matter how much they paid for that insurance (different than all other deductions), then this still counts as a penalty in my book.

    If, for example, the government decided that folks should buy houses in order to revive the market right now, and used the same tactics as they are proposing to use for health insurance – either penalizing non-buyers, or raising and waving taxes for home owners (again, double prize for mortgage holders) – would that be an acceptable situation?

    [BTW, you escape the penalty for not buying a house by having too little income as well]

    I made an assumption above, which is obviously incorrect, that if we look at this as a tax, then, by definition, it is intended to raise revenue. Accounting for the automatic deduction and accounting for the dollar amount of the mandate and accounting for the impossibility to actually collect on a large enough scale, the revenue is negligible. So how can we in all honesty refer to this exercise as taxation?

  11. “As long as I keep my wallet zipped in my pocket, there is nothing the government can do.”

    Not true. Every year you pay income taxes, and if you don’t purchase a mortgage, or an HSA, or a solar panel you’ll have more money taken from your wallet than if you did buy any of those products. Exactly the same thing that will happen after 2014 if you choose not to purchase health insurance.

    Furthermore, the insurance mandate is weaker than existing income-tax based incentives. There are quite a few ways to be exempt from the mandate, including not making enough income. There is no way to circumvent the penalty for not having purchased a mortgage.

  12. Right. I bow in humble deference to your comprehensive knowledge of EVERYTHING, which enables you to personally diss and dismiss everyone else who posts articles or commentary here.

    Carry on/

  13. ” this concept to require we buy vegetables to improve our health”
    ___

    If my BMI, as recorded in the Vitals data in my doc’s certified EHR, exceeds 26, Michelle Obama and her Celery Stick Police will be a’knoockin’ forthwith.

  14. SCOTUS has already ruled on school drug testing (see Vernonia v Acton). Scalia, who angrily railed against suspicionless drug testing in Skinner v Railway on “provacy” grounds, blew of the school thing on the grounds that “hey, they’re just KIDS, they don’t have full constitutional rights.

    Y’see, you have full constitutional rights from the “moment of conception” until birth, then they become lesser until you’re 18.*

    How do I feel about it? I’m against it. It’s mostly a symbolic “solution” in search of a problem, it’s “corporate welfare” (easy high volume money for the clinical labs).

    Voluminous detail in my thesis on all the issues: prevalence, methodological, Constitutional, and ethical.
    ___

    *Scalia — to his credit — says that the Constitution is silent on fetal “personhood” and abortion. For details, see my blog post here:

    http://bgladd.blogspot.com/2008/04/diploid-dave-et-al.html

  15. um no one said all DOE contractors not employees, would be, see the reference to hundreds of thousands not millions. And who said anything about cost plus?

    Sounds like you need to get out more and read some more as well.

  16. How do you feel about schools testing all kids and disaplining those who fail even if use was off campus and had nothing to do with school. I think BG or one of the GV schools was doing it.

  17. odd you pick the republican Bush to follow up with another Obama constitutional violation. Wouldn’t the more likly scenerio be Obama or the next Democrat builds on this concept to require we buy vegetables to improve our health which will help lower the cost of ObamaCare which blows way out of budget. Or the next time a Democrat takes over a car company wouldn’t it be helpeful to require we buy electric cars from said tooken over company?

    When government is the sole insurer of everyone do we really trust them to not tell us what to eat, how much exercise to get, and manage our lives to the smallest detail?

  18. “The only good mechanism we have to ensure that this power does not get abused is to vote for politicians who use this power wisely.”

    Wouldn’t a smarter solution be to have a limited government that didn’t dictate any of these life soltutions to us? Further any personal fredoom we do cede be done to the state and not the federal government? The more authority and opportunity to provide to government the more tempting people will misuse that power to their personal advantage or belief.

    FYI ethanol in gas is great for our GDP and trade deficit more then it is for Iowa farmers. Do the math and see what happens if we replaced Ethanol with normal gas. 30 million Iraq’s and 5? million Afganastanies did pretty good with the whole war thing as well.

    Seems like we need some sort of equal protection protection in our old constitution. Something like government can’t treat or tax one citizen different then another, if only our forefathers had thought of that.

  19. We are a christian nation Peter, what part of one nation under God aren’t you getting? Of course they are going to pray to Jesus. We aren’t a muslim nation, where do you see one nation under Mohammad in any of our founding documents? The fact that we allow people to pratice other religions doesn’t change we are a christion nation.

  20. Peter, regarding use of tax revenues, yes, I agree, the only way for citizens to regulate that is by voting, and I wish people would get of their a**es and go vote because if they would have done that in 2010, we would have been able to avoid much of the damage done by a loud minority stuck at a developmental stage of the “terrible twos”.

    As to private purchases, the government today can force me to buy certain things and not others, if and only if, I decide of my free will to buy. As long as I keep my wallet zipped in my pocket, there is nothing the government can do. There is no law that I have to purchase a certain amount of ethanol every day. It may seem a minor thing to you, but I think the philosophical difference is huge, as are the practical implications.

    I find the argument that since the government has never done anything like this before, we should trust that it will never do this again (other than just this once) incredibly naive, particularly when coming from great legal minds. If this little experiment goes well, what’s to stop the next President Bush from just mandating that you go out and spend at least $100 on non-perishable goods, instead of just advising us to go to the mall in the face of foreign attack on our soil?

    We have a line in the sand now, and I prefer to not move it back. If there are infinite ways for the government to go around it, then why is it imperative to go right through it? And if the government has many ways to do the wrong thing, why should we supply yet one more way?

  21. The constitution is just a vehicle that closes the argument by giving the final (in relative terms) ruling to a body that may or may not have enough wisdom and backbone to do the right thing. You could replace the constitution with the Bible and have as much interpretation for doing good or evil. I revert back to my example of Dred Scott which was based on the Constitution of the time. Amendments try to get it right depending on the political climate that created the amendment. The 18th Amendment established prohibition, the 21st repealed it.

    If the Supreme Court was not a political body defining a legal set of interpretable rules then why so much political jockeying by the left and right on Justice appointments. Why is it I always know how Justice Thomas is going to rule?

  22. “There can be no exceptions. If we start making exceptions, we become that which we fear most, and we trigger a see-saw of chipping away from the left and from the right until there’s nothing left.”
    ___

    Agreed. But, what constitutes an “exception” is itself frequently the subject of loud and protracted wrangle.

    Have you heard of the accrued “administrative exceptions” case law departures from the 4th Amendment’s Probable Cause and Warrants requirements?

    Take the example of mass non-cause workplace (and school) drug testing. From my 1998 grad thesis:

    “…It is simply beyond dispute that our government is deeply involved in the marketing of drug testing in all workplace domains, public and private-sector. Anyone in need of more evidence need only examine the activities of The National Alliance for Model State Drug Laws (click here), a federally-funded non-profit tax-exempt § 501(c)(3) “charitable organization” whose mission is to help state legislatures enact comprehensive anti-drug laws that include indiscriminate drug testing of private sector employees.The supposedly public/private distinction delineating the boundary of the reach of the Fourth Amendment has beeen hammered into oblivion.

    [2] Whether the state or its designee has a compelling interest sufficient to trump individuals’ privacy rights. This question turns on empirical assertions of exigency: are the nature, extent, and cost of drug abuse in fact sufficiently adverse to warrant extreme measures? As we have seen elsewhere in this work, the pertinent characteristics and aggregate severity of the drug problem—and the likelihood that indiscriminate drug testing can serve as a significant deterrent—are hotly disputed by a host of competent researchers. Moreover, laws exist to deal with the “problem.” Twentieth century American law enforcement agencies bear no resemblance whatever to their feeble 16th century constabulary antecedents. Enforce the law within the law; extrajudicial measures are beyond the pale of Constitutional legitimacy.

    [3] Whether the privacy intrusions are minimal relative to legitimate state interests. Constitutional validity should not be regarded as a function of the proximal “severity” of the intrusion. Yes; collection of a urine sample is less invasive than that of an IV blood sample, and far less invasive than, say, forced stomach pumping or body cavity examinations in search of contraband. But “loss of privacy” need not even entail physical contact and/or bioassay. If an unmarked police van outfitted with the latest surveillance technology monitors your house without cause, its operatives capable of listening to your most intimate conversations and monitoring your movements via ultrasonic, infrared, or other imaging equipment, your privacy has been violated as surely as had your blood been drawn or stomach forcibly evacuated—and arguably all the more reprehensibly for the stealth employed.

    [4] The purpose of the testing. Prosecutorial or “administrative?” Following a trend developed in the lower courts over the last generation, the Supreme Court has allowed “administrative” or “special needs” exceptions to the “probable cause” and “warrant” requirements of the Fourth Amendment. In short, since positive drug test results are supposedly “confidential” and not referred for prosecution—despite the fact that they constitute “scientific evidence” of recent criminal conduct—the Court majority finds them acceptable as mere non-discretionary and “evenhanded” administrative functions for which the probable-cause evaluating function of the magistrate is rendered unnecessary. In Skinner v. Railway, Justice Kennedy sings the praises of this curious nuance of evenhandedness, arguing that “arbitrary” would be his (hallucinatory) spectre of magistrates abusing their power by opting to “arbitrarily” issue warrants without cause against targeted individuals. Better to trade in this type of speculative (and preposterous) arbitrariness for the operational evenhandedness of indiscriminate investigation…”
    ___

    http://www.bgladd.com/drugwar/chapter4.htm

    Today, we see all these loud, angry, ignorant people with their placards and funny hats and colonial outfits, for whom it never suffices that any policy with which they disagree is unwise, ineffective, or otherwise wasteful. It’s always gotta be glandularly “Unconstitutional.”

  23. Margalit – I don’t quite understand what constitutional freedom you are trying to defend.

    Government today already can force you to buy ethanol in your gasoline, which favors private corn farmers in Iowa. It forces you to finance wars that favor private corporations like Haliburton. It can use eminent domain to force people out of their property and give it to other private owners. It can take your Medicare taxes and give them to private Medicare Advantage providers. It can simply give money to any private sector it wants to favor/protect via defense, research, or infrastructure spending.

    And if you look at spending through the tax code, government is already penalizing anyone who doesn’t have a mortgage, or anyone who doesn’t buy employer-based health insurance, or anyone who doesn’t install solar energy panels on their rooftops.

    Government has plenty of constitutional powers to force you into economic activity that favors other private individuals and corporations. This is nothing new. The only good mechanism we have to ensure that this power does not get abused is to vote for politicians who use this power wisely. A constitutional restriction on government not being able to “mandate” a purchase of a private product is a useless protection since there an infinite ways for a future government to get around it.

  24. Peter, there have always been those who chose to defend some liberties and oppose others based on their personal views and values. In my opinion these people are not committed to the spirit of the Constitution. They are only committed to their own beliefs and are using the Constitution to promote and enforce those beliefs on others. Democracy in general is very vulnerable to such efforts and the Constitution is its best weapon in this country. We are ill advised when we try to minimize its importance because Democracy is, and will increasingly be, facing great dangers from global corporations.

    I know I have some strange bedfellows right now, but if you are committed to protecting the freedoms embedded in that 200 years old document, you have to stand up whether you are protecting something aligned with your personal beliefs or not. There can be no exceptions. If we start making exceptions, we become that which we fear most, and we trigger a see-saw of chipping away from the left and from the right until there’s nothing left.
    I find that prospect more frightening than the health care “crisis” and the budget “crisis” put together.

  25. Nice. All of it irrelevant to my point.

    Were my wife to lose her job, DOE would henceforth be on the hook for ZILCH regarding her. It’d be once again back off to 100% out-of-pocket premiums COBRA land.

    Moreover, fyi, not all DOE (or any other agencies’) contracts are “cost-plus” by any means. Ever heard the phrase “fixed-price”?

    “I seem to recall hundreds of thousands of private contractors also have health insurance for life paid by DOE.”

    Funny that I’ve not run into any of these people. The “for life” part.

  26. “An invocation is neither an establishment of religion or a prohibition of free exercise.”

    Funny how the invocation is always Christian and very often espouses Jesus as Lord – ever think that maybe Jews attend local meetings. Guess who’d scream the loudest about separation if a Muslim invocation was used.

    I guess you can’t comprehend.

  27. no peter i said the exact opposit everyone is free to think what they want but this is a nation founded under god. israel allows muslims and christians to live and pratice ib their jewish state, its still a jewish state

  28. Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof

    Name once this has ever been done peter. An invocation is neither an establishment of religion or a prohibition of free exercise.

    How do people get as misguided and negativly educated as you? Its a 200 year old document easily found on the internet. Is it really to much to ask maybe you read it before running at your mouth?

    http://www.usconstitution.net/const.html#Am1

  29. you also need to have someone teach you the difference between faith in god and religion, the constituion says a church like the church of england or the roman catholic church will not be favored on over the other, this has always been a nation under god.

    Since you can’t grasp the difference between church and religion you will never grasp this

  30. Peter always the simpelton. I don’t have a church Peter. In fact I take issue with the way most Church’s have distroted their faith for power and money. Religion and church are not one in the same.

    Try not to be such a projectionist idiot. I have no problem saying what I think, I don’t need someone like you to make things up for me

  31. No one is going to force your church Nate to marry same sex, like no one is forcing your church to recognize women as equals in the church. I also doubt the church will be forced to hire gays, if a gay even wanted to work there.

    But I understand the reluctance of Catholics to agree with the emancipation of gays as they have always fought against alternate thought and freedom of the individual to think, act and believe differently than the Catholic Church. 600 years of brutal inquisition proved that as is the enabling of pedophiles in the church.

    As for a state religion, you simply only need to attend one of hundreds of local government meetings to listen (forced) to invocations to God and Jesus. Tell me NASCAR doesn’t force feed the “state religion” of Christianity. Seems your great “Constitution” doesn’t mean much then does it.

  32. “Take a typical for-profit insurer with a long run average net income of 5%. A 5% profit off $6,000 in premium is more than a 5% profit off $5,500 in premiums.”

    This is why out of pocket spending has decreased from 50% to 13% today. Insurers ideally would like people to buy 100% no out of pocket plans and those plans covered everything the law would allow. The higher the premium the higher their retention.

    Its why insurers love the preventive mandates but people schooled in insurance shake their head at the stupidty of the Obama Admin. For effective cost insurance it needs to be insurance not a wealth redistribution financing mechanism.

  33. “public health benefits are well beyond the reach of a health care system characterized by the complexities of medicine and conflicts of multiple parties working at economic cross-purposes.”

    Could you please ask Kleinke how the worker comp market functions then. Medical economist, thats someone that has never worked in the field but spent a number of years in academia though so they feel qualified to write on the subject?

    This is the type of error someone that has never worked in the business makes.

    “Actually, it can and will go on like this forever, absent any major intervention by the nation’s largest health care purchaser—the U.S. government…”

    Its government intervention that has lead up to the collapse and any collapse will be the result of government action not private insurance. Private Insurance is sustainable becuase it doesn’t carry debt past 12 months in most cases. Any cost increase and budget issues are dealt with now. That leads to some wild bumps in cost or drops in benefits but it can continue forever.

    Government on the other hand collects premiums/taxes now and spends all of that or more on benefits on other programs while promising future benefits. Some of these promises are explicit and others are not. Its this unfunded liability that can and will cause a collpase, when government can’t provide the medicare benefits it promised to those that paid medicare taxes for 50 years there will be hell to pay. Depending how many people have been forced into this ponzi scheme when it finally implodes will determine the seriousness of the collapse. If we have a healthy private market of 200 million people it could pick up most of the pieces of the government failure. If we have 70 million covered by Medicare, another 100 million on Medicaid and only 130 million with private insurance the market wont be sufficient to pick up the government failure.

    That Bobby is the difference between someone that works in a system and someone that sits on the sideline studying it

  34. do you hear that Bobby?

    Its comming for you….another big ole correction about to drop on yo a$$

    http://www.allbusiness.com/government/government-bodies-offices/11508979-1.html

    DOE is ultimately responsible for reimbursing its contractors for allowable pension and postretirement benefit plan costs, and records a liability or asset in its financial statements for the funded status–plan obligations less plan assets–of these benefit plans. When these contracts are recompeted or expire, it is DOE’s policy to ensure the continuation of these benefits–and the reimbursement of related costs–for incumbent contractor employees and eligible retirees by, for example, transferring benefit plan sponsorship responsibilities to a successor contractor or related company.

    DOE reimburses these contractors for allowable costs, including the costs of providing pension and other postretirement benefits, such as retiree health care plans. Since the economic downturn, DOE has had to devote significantly more funding toward reimbursing these benefit costs, in part because of a decline in interest rates and asset values that has increased contractor pension contributions. In a challenging budgetary environment, further growth in these costs could put pressure on DOE’s mission work. GAO was asked to report on (1) the level of control DOE has over contractor pension and other postretirement benefit costs under its current business model and (2) the changes DOE has adopted since the national economic downturn to manage those costs and the extent to which those changes have enhanced its approach.

    Since the economic downturn deepened in 2008, DOE has taken steps to enhance its management of contractor benefit costs–particularly for contractor pensions–but has not comprehensively reviewed its approach to managing its contractors’ other postretirement benefit costs, such as retiree health care coverage.

  35. Peter a ban on same sex marriage is more then a ban, the alternative to a ban is government forcing people to recongize it. I don’t think 90% of those opposed to gay marriage would care what the gay couples did as long as they weren’t forced to recognize it. i.e. the catholic church being forced to cover gay couple on their insurance.

    Can you link to anything showing them wanting a state religion?

  36. Margalit, I agree in limiting power of government and would have preferred a tax for health care as I don’t agree with mandating some of us to buy the most expensive system in the world when the majority gets their coverage subsidized tax free through employment . But because this country can’t see past the word “tax” we’d never get universal health care, nor would we get a chance to lower costs if we just continue to push people out of coverage who can’t afford the premiums. I guess you could argue that Libertarians could refuse to buy coverage and pay the penalty to satisfy their ideology.

    You have to wonder why many of the same people who oppose this mandate because of the need to limit government control of our private lives also want government to ban same sex marriage, and when courts rule that “unconstitutional” want the constitution changed. They also want Christianity to be the state religion.

  37. “but anyone who doesn’t know the history of how private insurance actually succeeded for about 5 years at cost control in the 1990s and then largely abandoned those efforts starting around 1999 really shouldn’t be pronouncing on the forces driving health insurers. It’s both better and worse than you think.”
    ___

    Thanks, Jonathan.

    Read Kleinke. Better yet, watch his entire 2004 Medco live presentation series on YouTube (about an hour, total), which addresses the evolution of U.S. health care coverage from WWII on (to 2004 anyway).

    I don’t think I’m misreading Kleinke, and I have the greatest respect for his acumen. He’s a medical economist. I am not, admittedly.

    Aslo, admittedly, the Kleinke Health Affairs paper I cited was focused on HIT specifically rather than the market economics in general.

  38. BobbyG, you’re really oversimplifying here. First, it can’t be the number of transactions that insurers care about, but the cost of them. Quantity only matters to an insurer to the extent that it brings higher costs. Insurers are in fact eager to have more of certain types of claims (filling maintenance meds, etc.) because they are associated with lower costs. Better to have 10 claims for a drug refill than 1 DRG or payment for a hospital admission.

    Second, if you rephrase the insurers’ goal (sole? dominant?) as to “reduce the cost of transactions or eliminate them altogether,” they must be counted as dismal failures. As you know, we have by far the most expensive system in the world. So, the truth is that this is not the only goal insurers have, and often not even the most important.

    An insurer typically cares about the cost of its claims relative to other insurers, not relative to an absolute number. In fact, if we haven’t reached an unsubstainable level, it is better for a for-profit insurer if claims costs actually go up each year, because then premiums go up enough to cover the cost.

    Take a typical for-profit insurer with a long run average net income of 5%. A 5% profit off $6,000 in premium is more than a 5% profit off $5,500 in premiums. On the other hand, if your claims cost for equivalent benefits is 10% higher than your close competitor, you will need to face choices like: eat all your profit and have 5% higher premium (on average) and still gradually lose business, or, have a negative margin of 5% in order to match prices while you figure out how to fix your UM or network issues, or hope that your competitor will decide to get greedy and go after 15% net margins so that you can continue to do business as usual for your 5% net margin. (I’m ignoring the effect of taxes here for simplicity.)

    I won’t go into the details here, but anyone who doesn’t know the history of how private insurance actually succeeded for about 5 years at cost control in the 1990s and then largely abandoned those efforts starting around 1999 really shouldn’t be pronouncing on the forces driving health insurers. It’s both better and worse than you think.

  39. “I seem to recall hundreds of thousands of private contractors also have health insurance for life paid by DOE.”
    ___

    Well, I can tell you first hand that THAT is not true. My wife has worked for DOE contractors since 1985 (and still does; her current work is for DOE, DOD, Army Corp, EPA, and TSA).

    Not true.

  40. if permenant insurance doesn’t exist why when you yahoo serach are their 1.4 million results discussing the pros and cons of gurantee renewable policies? For not existing they get as much talk as UFOs

  41. Don’t all full time federal employees have health insurance for life provided by private insurance companies?

    I seem to recall hundreds of thousands of private contractors also have health insurance for life paid by DOE.

  42. I can think of a few dozen unions that offer permanent health insurance, once you qualify your covered for life along with your spouse. I would go so far as to say Kleinbard that right now there are millions of Americans that have the permanent insurance you claim doesn’t exist.

  43. Its always fun to watch people like Kleinbard that don’t know anything about insurance run their mouths about insurance.

    “debts was held hostage to the conviction that tax revenues should regularly ratchet down,”

    Apparently Kleinbard isn’t intelligent enough to know the difference between revenue and rate. Or he is just dishonest blogger. No one has a problem with revenue increasing, as long as it does so in conjunction with an increase in GDP. We all want a prosperous and growing country, except Obama and some of the other liberals, and expect with growth and prosperity tax revenues will increase. What people object to is tax revenue growing substantially faster than the wealth it is taxing.

    “But this view of government is incorrect.”

    How is one’s view/opinion incorrect? Ah that’s right people like Kleinbard expect to dictate their opinions on others, anyone that doesn’t believe as they are told are incorrect.

    “Government, to paraphrase Congressman Barney Frank, is just the name we give for the things we the people decide to do together.”

    When did we the people decide to turn Indymac over to Soros and pay him to take people’s homes? When did we the people decide to bail out the banks and screw the people(ourselves)? When did we the people decide to send billions to China in development aid while they hold trillions of our debt? Frank and Kleinbard naively seem to believe there is no corruption. If there was no corruption why are so many politicians in American in Jail and why have so many governments been overthrown throughout history?

    It’s the fact that so many people have not agreed to ObamaCare that there is a problem, ObamaCare was dictated on the people not approved by them. MassCare would be an example of an agreed upon HealthCare system financed by taxes which where agreed to by the public. Why not allow the States to enact their own systems as the constitution calls for….thats right because your trying to dictate something against the will of the people.

    “One answer is that only government can address an “incomplete” market, which occurs when the private sector cannot or does not provide a market solution to an economic problem.”

    When the private sector cannot or does not provide a solution is incomplete, you seem to have forgot is prevented from. The correct statement is only government can address an incomplete market they create. Sorta self serving when you correctly state it. Every market has the ability to be incomplete when you allow government to prevent private sector from serving it. And this to a degree is what the courts are addressing, The power of government would be endless if it was allowed to lock out the private sector for the benefit of government whenever it wished to control a market. This sort of unbridled power is strictly forbidden in the constitution and exactly what the founders desired to prevent by granting power to the states not the federal government. Something a professor of law should know, even one that teaches at Gould.

    “You cannot today buy the sort of private healthcare insurance that one would expect to find if private markets always provided a complete suite of rational solutions.”

    How does someone that doesn’t know anything about insurance know what sort of insurance one would expect to buy? We already have “permanent” healthcare insurance, Has Kleinbard never heard of HIPAA? Has he never seen state insurance law for individual policies? Kleinbard besides not seeming to understand how insurance works doesn’t appear to know his history either. A market is not incomplete if it doesn’t offer a product no one wants. No one is willing to pay the premium for a policy that has unlimited coverage 50 years from now. Private sector could sell a policy with a defined benefit 50 years from now, like life or an annuity, but no one is looking to purchase that either and the government doesn’t allow it. At least your not allowed to call it healthinsurance. Its clear to anyone that knows insurance Klienbard is completely wrong about that the private sector has failed to do and what government has distorted in their effort to control it.

    Kleinbard also doesn’t understand what adverse selection is or how it works nor its effect on insurance, which raises the question for knowing nothing about insurance what compelled him to write so much on insurance. As long as insurers can charge a premium to cover the risk they are assuming the health of the individual doesn’t matter. Adverse selection is a government created phenomenon, it is when insurers are prevented by law from charging a premium equal to the risk. Remove the mandate that insurers sell a policy at a known loss to someone that waited till they were sick and there is no such things as adverse selection.

    “because the annual premium for permanent healthcare insurance would be very high for a young person, relative to the cost of a one-year policy, because healthcare technology and costs rise at unpredictable rates”

    Kleinbard is done in again by his ignorance of insurance. The premium for a plan of defined benefits is predictable as long as the benefits are defined. It’s the requirement that new benefits be added, i.e. new drugs that don’t exist today or types of surgeries, that throws it off. You can’t insure something that doesn’t exist. If insurers were allowed to sell a policy that covered known treatments and services it could be done. Or if they were allowed to sell a policy that paid a scheduled benefit, i.e. like critical illness policies, if you get cancer you get $50,000 for treatment. It would then be up to the individual to make sure their care fell within that 50K or an amount they could afford.

    “and because everyone knows that in the end government (that is to say, all of us, together) will provide at least some minimum level of care for the uninsured.”

    We don’t know this at all, what we do know is government has already made 100 trillion in promises it can’t keep. An empty promise is just that an empty promise.

    “homeowners have no reason to buy insurance when they know they will always be bailed out through government “disaster relief.”

    Except they aren’t always bailed out, if your politically useful you get bailed out. There are floods along the Mississippi every year where unneeded homeowners are not bailed out. If the Media and politicians don’t need you then you get nothing.

    “It is precisely because private healthcare insurance markets are unavoidably incomplete that every developed country other than the United States has some form of mandatory health insurance plan.”

    If it is Mandatory why does Germany have 45,000 uninsured? What Kleinbard doesn’t discuss is the unsustainable debt all these countries have. They have a system that covers everyone know, at a financial cost that is collapsing many of these nations. The US sacrificed universal coverage and until recently had a debt level compared to GDP a fraction of most of these other nations. Could we implement a universal system that covered everyone, sure, for 40-50 years then we to would be bankrupt. We have a pilot program that turned out the exact same way, Medicare.

    “if you can get everyone into the insurance pool — the young and healthy as well as the old and sick – then healthcare costs can be broadly shared, and thereby made affordable.”

    Again an ignorance of insurance. Pools enter death spirals for many reasons, universal coverage in no way prevents a death spiral. See NHS for a prime example of this. Healthcare cost are affordable when consumption is in line with spending. If the old and sick consume more then the young and healthy are willing or able to pay, which they always do, your system falls apart. This is the folly of subsidizing.

    “The young and healthy “overpay” today, in return for receiving guaranteed coverage for their future selves, when they in turn will be old and sick.”

    Except there is no guarantee. In fact we know from Social Security and Medicare the only guarantee is we won’t get what we were promised. This is why you don’t allow government to make these promises, they always fail to deliver.

    “permanent health insurance, in which your premium reflects not just the cost of covering you today, but for your entire lifetime.”

    This is just being stupid, when in the history of Medicare has the premium ever reflected the cost of care received. Medicare is so heavily subsidized it’s not even insurance, if Medicare was an insurance company it would have the worst loss ratio ever. How could an educated person even make this claim?

  44. Not quite irrelevant, and I am not a true blue Libertarian. I believe in big government and regulation and welfare and social programs, and I believe that government is (or should be) just another name for all of us doing things together. But there needs to be a limitation to what all of us together can dictate to any one of us individually.

    In my opinion there is a huge difference between regulating what manufacturers make available for purchase, and mandating actual purchase of those goods and services.

    I think it is imperative that everybody has health insurance and it is necessary that everybody chips in as best they can to this end. But I don’t think that the end justifies the means proposed in this legislation.

  45. Paolo you might want to freshen up on insurance law. Individual policies are guarantee renewal unless the carrier exits the market then their are provessions for affected memebrs to get coverage from remaining insurers.

  46. “We’re debating whether or not a tax with a deduction for having insurance is functionally equivalent to no tax but an equivalent penalty for NOT having insurance. They are functionally equivalent if not legally equivalent.”

    It cannot be equivalent since half the country pays no income tax and files no return. Or are you mandating annual interface with Uncle Barack?

  47. I notice you NEVER respond to the substantive, linked policy comments i post. The fact that I have snarky Photoshop fun episodically is irrelevant. Humorlessness is not a prerequisite for “seriousness.”

    Since you bring it up, albeit “O/T,” here’s my latest.

    http://www.bgladd.com/DrBachmann.jpg

    OK, now, back to the point. “Why Bother With Government?”

    Repost:

    “Human affairs get regulated one way or another. By Tooth& Claw Might Makes Right, The Rule of Gresham’s Law (the bad driving out the good, as we have just again witnessed), or effective regulation in service of the public interest (as difficult as it may be to enact and sustain).

    Markets properly exist to serve humanity, not the other way around, for, if you believe the latter, then you believe in Might Makes Right. It’s been a long, arduous climb up out of the Social Darwinian muck in pursuit of broad human justice…”

    Cheers

  48. Excuse me, you have me confused with someone who is interested in your opinion. Sophomoric, like you as a prime example?

    And, per the way our alleged representatives in the legislative and executive branch handled themselves just with the debt ceiling matter, I think I have the right to interpret their sophomoric behaviors as that of lawyers with outrageous extremist attitudes that benefit no one but themselves and their special interest groups. Which is not the kind of attitude and behavior for those with needs in health care.

    You know, the more you come back with your lame retorts, I wonder what are your special interests in your attacks.

    But, come back when you act like a senior in the debate, not a sophomore.

  49. Funny coming from the guy who condescendingly posts photoshopped pictures of people he disagrees with as a comment. I guess that’s not “sophomoric” though is it?

    Perhaps we should just sit back and allow your intellectual virtue wash over us.

  50. “because you are not mandated to buy a car in the first place.”

    Irrelevant in this modern world unless you are a true blue Libertarian. Our whole society is built on access to or owning a car – so to say, hey, just walk or take that non-existent public transit is not the realistic option. By and large to have a successful life you are pretty limited with not buying a car. What’s your argument to paying for food with health, safety and labor regulations required from farm field to transport to distribution that add to the price, you’re not mandated to buy food, or just grow your own?

  51. Peter, I was comparing a mandate to buy, to a tax deduction to encourage buying, and I don’t think those two mechanisms are equivalent.

    As to mandatory safety and other features in a car, that is not the same as the health insurance mandate either because you are not mandated to buy a car in the first place. The automobile regulations would be the same as regulations imposed on health plans, such as pre-existing conditions, life time caps, preventive care, etc.

    I am more than supportive of government regulating products.I am not at all supportive of government forcing people to buy those products.

  52. “Jail is a consequence of a finding in court, not mandated by Congress.”

    A finding of a court is also the result of malpractice awards. You however would find it acceptable if congress mandated no consequence for your medical actions.

  53. Cigarette taxes have not been a topic, but they should not tax cigarettes.

    Jail is a consequence of a finding in court, not mandated by Congress.

    Pollution control has been totally politicized. Just pay Al Gore for carbon credits and burn on.

    Go, Margalit. You are on fire.

    All the libs are imploding here.

  54. “Giving people who choose to buy a car a tax break if they buy a fuel efficient one is not like mandating that everybody buys a fuel efficient car or pay a penalty (including those who don’t want to buy a car in the first place).”

    Federal mandates on safety, fuel efficiency and pollution controls to manufacturers IS mandating everyone to buy and pay for those mandates. An individual is not allowed by law to order a car without those features or import one from a country where those features are not included.

    “This is not the function of government, to achieve a certain behavior from the population.”

    Are you hearing what you are posting? Cigarette taxes, pollution control violation penalties, safety violation penalties, etc, etc, etc, not to mention jail penalties for all sorts of “behavior”.

  55. This is a good example Jonathan, I think I understand what spike was saying now. You create a fictitious tax increase that will be immediately deducted for all those who buy insurance, effectively creating the “penalty” for non buyers, correct?

    I guess that would be indeed equivalent to the mandate, but I think even if written this way, the law would have been challenged in the courts. Unlike Paolo’s suggestion, there is something wrong with the MO of this process. To use the unfortunate broccoli example, if the government decides one day that everybody should buy broccoli, all they have to do is raises taxes by a flat amount across the board and automatically deduct the increase for broccoli buyers. So it’s not a penalty; it’s an incentive. Much like the various wellness programs out there.

    Wouldn’t it be simpler, more logical and straightforward to use the taxes collected this way to actually provide insurance, or access to highly subsidized insurance, through a public option, while providing deductions to those who choose to buy on the private market?

  56. One hardly knows where to begin with the sophomoric likes of people like you.

    “All government is in the end is a bunch of lawyers with egos that define narcissism and antisocial behaviors”

    Right. Just throw up your hands. ALL government.

    So, life is pretty pointless, ‘eh?

  57. Margalit, consider Medicare. Here there are both tax and penalty components. You pay the tax during your working career, but it does not actually buy you insurance (maybe part A is opt-out, but parts B, C and D are opt-in). Instead, in effect, the tax buys you access to heavily subsidized insurance in your old age. So here we have a tax to fund social insurance without automatic inclusion in coverage.

  58. All government is in the end is a bunch of lawyers with egos that define narcissism and antisocial behaviors who are now trying to control the last element of society they have no business being involved in as a whole.

    Individualism and autonomy are curse words to this group. Which is the basis to health care when done right. And all of you arguing to allow these politicians to carry out this perverse intrusion into health care, people who will never be impacted by this sham of legislation, are living out the line from the last Star Wars movie, Revenge of the Sith, when Padme says “So this is how the end of democracy sounds, to thunderous applause.”

    You know, if you switch around the letters of Sith but keep the “S” first, you really spell out what is the title of what the democrats have done, the Revenge of the S–t. My, how being out of power for 12 years will really sharpen those blades of retribution. To that commenter out there who is quick to retort when I remind you all of Ms Pelosi’s famous statement of the need for passing this legislation, she should have just said, “I will not be ignored” and then just as well flung the rabbit carcass out at the media.

    Fatal Attraction fans get the drift!!!

  59. Paolo & spike,

    Leaving money on the table is not the same as taking money out of your wallet and placing it on the table. Giving people who choose to buy insurance a tax break is a far cry from mandating that people buy insurance and penalizing those who don’t. Giving people who choose to buy a car a tax break if they buy a fuel efficient one is not like mandating that everybody buys a fuel efficient car or pay a penalty (including those who don’t want to buy a car in the first place).

    Also, creating a tax break could not have been represented as a form of universal coverage. And revenue is not really a separate issue because if they went the tax break route without increasing taxes in general, PPACA would have become a more expensive proposition. And increasing taxes in general without increasing benefits to those taxed is a non-starter.

    As for the “brand new “health care tax” on all 300 million Americans”, that should not have been a problem if all 300 million Americans received that elusive permanent health insurance in return.

  60. “unregulated market”

    That very phrase is a contradiction in terms. Human affairs get regulated one way or another. By Tooth& Claw Might Makes Right, The Rule of Gresham’s Law (the bad driving out the good, as we have just again witnessed), or effective regulation in service of the public interest (as difficult as it may be to enact and sustain).

    Markets properly exist to serve humanity, not the other way around, for, if you believe the latter, then you believe in Might Makes Right. It’s been a long, arduous climb up out of the Social Darwinian muck in pursuit of broad human justice (as proffered, e.g., in our Cosntitution).

    In a world approaching 8 billion people, this fatuous, false dilemma notion that “unregulated markets” are the ethical end and superior means of advancing civilization is naive beyond words.

  61. Kleinke, 2005:

    “All but the most zealous free-market ideologues recognize that some markets simply do not work. Indeed, reasoned free-market champions often deconstruct specific market failures to elucidate normal market functioning…

    …public health benefits are well beyond the reach of a health care system characterized by the complexities of medicine and conflicts of multiple parties working at economic cross-purposes.5 They are trapped outside the economic equation, positive externalities of a stubbornly fee-for-service health care system that inadvertently
    rewards inefficiency, redundancy, excessive treatment, and rework…

    …The first step in understanding the real intractability of the problemis ignoring the rhetoric. There is a veritable cottage industry involving the articulation of moral outrage over the health care quality “crisis,”much
    of it public relations spadework for someone’s political or commercial ambition and most of it culminating in a the naïve insistence that the system is on the verge of collapse and cannot go on like this. Actually, it can and will go on like this forever, absent any major intervention by the nation’s largest health care purchaser—the U.S. government…

    …The principal goal of the consumer finance industry is to increase the number of transactions. By contrast, the principal goal of the health insurance industry is to slow down transactions or lose them altogether.12 Anyone who believes otherwise is ignorant of the central metric bywhich a health insurer is judged byWall Street: its “medical loss ratio.” This accounting term describes the percentage of the insurer’s premiums paid out in medical claims. The lower the medical loss ratio, the higher the insurer’s profits and, in turn, its stock price. The conflict between this metric and the other business objectives of an insurer is the active fault line running beneath the entire health insurance industry…”

    http://www.chimss.org/downloadlibrary/doclibrary/Kleinke.pdf

  62. Do you know of any place in the world that offers “permanent” health insurance as defined above without government regulation? If not, then that market is incomplete.

    You may argue against that form of insurance. Perhaps you think it’s better for people to buy medically underwritten insurance every year. That’s your choice. But you can’t argue that an unregulated market will deliver “permanent” health insurance because it never has, here or anywhere.

  63. “Get out of the way and let the market form and work.”
    ___

    Right. J.D. Kleinke eviscerated that assertion years ago. As did, Einer Elhauge in 1994.

  64. Except for payroll taxes and some fees, most forms of taxation are not tied to specific spending needs. Government today gives out all sorts of tax breaks for all sorts of behaviors including getting employer-based health insurance. There is no specific tax related to the cost of that tax break.

    Congress could have simply given a tax break to families insured in the individual market and it would have accomplished the same financial result as the mandate penalty. The decrease in revenue could have been offset with additional taxes or not. The revenue issue is an independent matter.

    The individual mandate is the least intrusive mechanism to create the “permanent” insurance market described by Dr. Keinbard.

  65. “The rationale behind all of this was not that it pay for your insurance but that it compel the public to follow the desired behavior, i.e. buying insurance themselves.”

    Nobody elected pavlov president. This is the problem in its least common denominator. This is not the function of government, to achieve a certain behavior from the population.

    As for Barney Frank, those things we choose to do together not prohibited by the constitution are government. Everything else from a “majority” is tyrranny. What was that about protecting the individual from the tyranny of the majority?

    “We need to quit playing games with words and legal terms and enact tax-financed universal health care in this country as soon as possible. There is no other sustainable, equitable and cost-effective solution.” This is not sustainable, not equitable and not cost-effective. Otherwise you are correct.

    As for the post itself, it is full of incorrect assumptions and reaches faulty conclusions. The only reason any market is “incomplete” in this country is because of government meddling and regulation. Get out of the way and let the market form and work. Allow balance billing. Put the consumer back in the role of determining value and paying for it. Take the government out of the exam room.

    Costs will not go down until government is leashed and muzzled.

  66. The rationale behind all of this was not that it pay for your insurance but that it compel the public to follow the desired behavior, i.e. buying insurance themselves.

    You would opt for a tax because it’s unambiguously Constitutional for the Congress to tax people.

    You would call it a penalty because you wouldn’t want a campaign ad against you saying that you created a brand new “health care tax” on all 300 million Americans.

    But it was never designed to pay for anyone’s insurance.

  67. “a tax with a deduction for having insurance”

    Is this a general tax increase or a tax that buys you insurance?

    If it does buy you insurance, then the two are not equivalent. If it buys you nothing then the two are indeed equivalent, but I don’t understand the rationale for that “tax”. Is it just some type of revenue increase?

  68. Margalit, you’re switching the argument and are not responding to Dr. Kleinbard’s post.

    We’re not debating whether the penalty is enough to fund health insurance. It’s clearly not.

    We’re debating whether or not a tax with a deduction for having insurance is functionally equivalent to no tax but an equivalent penalty for NOT having insurance. They are functionally equivalent if not legally equivalent.

  69. “As our Bataan death march through yet another Presidential election cycle begins – the question now is – will this make the calendar for an actual SCOTUS decision before November 2012?”
    ___

    I would think they’ll hear it this fall, and rule late spring 2012.

    “Bataan death march through yet another Presidential election cycle ”

    I love that.

    It’s become all about campaigning, not about governing. We get — at best anymore — one year of actual attempts at governance followed by three of election cycle antics.

  70. “We need to quit playing games with words and legal terms and enact tax-financed universal health care in this country as soon as possible. There is no other sustainable, equitable and cost-effective solution.”
    ___

    I could not agree with you more. Nonetheless, I will (sadly) not be holding my breath.

  71. The effect is not identical.
    Paying the penalty “tax” does not provide one with any type of health insurance. You cannot take the IRS receipt to your hospital and expect them not to bill you later, at full price.
    They could have made it a mandatory tax for the purpose of compensating the government for all the free care it finances, but this is not equal to universal coverage, and I doubt very seriously that anybody (left or right) would have voted for such a loosely defined tax increase.

    I agree that Professor Kleinbard’s post is well written and well reasoned, and I should have prepended my comment with this statement. However, I disagree with the main thesis.

    We need to quit playing games with words and legal terms and enact tax-financed universal health care in this country as soon as possible. There is no other sustainable, equitable and cost-effective solution.

  72. Great arguments – both sides (Edward D. Kleinbard and Margalit Gur-Arie’s rebuttal). I do think it’s important to emphasis Mr. Kleinbard’s key point that this is our first serious effort at grappling with a huge problem that has the potential to bankrupt us. Like most legislation, this version isn’t perfect and a key piece may not survive. What it has done – and will continue to do – is elevate the debate in a way that makes fundamental healthcare reform a part of any legislative solution across much broader agendas (fiscal, social and legal to name three). It may not be the revolution we thought was possible – but it’s still a really big evolutionary step.

    Margalit’s logic is also correct – and trying to cram ill-defined legislation through SCOTUS is neither desirable – nor likely to succeed. But here’s the thing … we have to start somewhere. Status quo is not an option. We have to move this beastie from sheer volume – to value. The individual mandate may be at risk, but other, equally large pieces of PPACA are likely to survive. Under different (now more dire) financial conditions the legislative debate could (at least theoretically) wind up with a more comprehensive solution. Given our financial straits – and with parts of PPACA intact – we have the basis for a new debate – with (quite possibly) something better than the individual mandate.

    As our Bataan death march through yet another Presidential election cycle begins – the question now is – will this make the calendar for an actual SCOTUS decision before November 2012?

  73. Not to disparage Professor Kleinbard’s point, because I think this is an excellent post, but he could have summed it up as saying “if they’d made it a mandatory tax with a deduction for having insurance rather than a penalty for NOT having insurance, we wouldn’t be having this discussion.”

    Which he did say but obviously there was other stuff in there too. There’s nothing “painfully reasoned”, or “convoluted” about that.

    I agree they should have had the courage of their convictions and fearlessly advocated for a “tax”, but the Supreme Court could reason that the effect is identical minus some extra red tape the way it was done.

  74. It is not the Supreme Court’s job to squeeze in ill-defined Congressional laws. It is Congress’ responsibility to formulate laws that do not require convoluted explanations of what they might have been if they were written differently, like the one above.

    The individual mandate as defined today is not a tax. Paying the penalty does not provide one with health care coverage. The cost of buying insurance on the individual market depends on age, gender, health status, and other demographics – surely this is not how taxes are calculated in this country. Generally speaking, citizens have no idea what it would cost to buy insurance and have no control on how premiums would change over time. You cannot vote for premium increase/decrease.

    The individual mandate, as written, not as painfully reasoned above, is handing citizens over to private corporations, to exploit as those corporations see fit, under federal penalty.

    If Congress wanted to finance complete health care through taxation, then that is what the law should have said. It would not be winding its way through courts now, if this administration had the courage of its convictions during the time when it held super-majorities in both houses.

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