What The SCOTUS Ruling Means For Healthcare

The Supreme Court has upheld the Affordable Care Act (ACA), a frustrating situation in which conservatives won the policy battle, but lost the war over the Act.  In particular, the Court held that Congress cannot use the Commerce clause to compel commerce.  The individual mandate qua mandate is unconstitutional.  However, the Congress has the right to impose taxes (if not punitive and excessive), which permits the Obama administration to add a tax on millions of uninsured Americans in addition to the ACA’s already-massive tax burden on the middle class.

The Court ruled that a Medicaid expansion could be an unconstitutional federal coercion of the states, but this expansion does not have a penalty large enough to pass that threshold.  Interestingly, the Court opened up the possibility that governors could refuse the Medicaid expansion.  Those same individuals would then be eligible for subsidies in the exchanges.  If all the governors refused the expansion, and if individuals take up subsidized insurance the federal cost heads even farther north.

In a bit of a pyrrhic victory, the Forum’s amicus briefs, signed by over 200 economists, were cited twice in the Court’s dissenting opinion.  (See my amicus brief.)

The field of play now shifts from a legal battle to a policy debate.  In addition to the Court’s endorsement of the policy foundations of the challenge to the ACA, the fundamental policy flaws remain.

The ACA remains a damaging, anti-growth vehicle for taxation.  The so-called Medicare surtax increases marginal tax rates on the return to saving, investment, and innovation.  The medical device tax will hurt innovation and cost jobs.  A bill to repeal it is gathering dust in the Senate.  Also, the insurers fee – the “premium tax” – will roil insurance markets, disrupt patient-provider relationships, and the vast majority of the burden will fall on the middle class.

The ACA remains an unwise expansion of entitlement programs at a dangerous fiscal moment in U.S. history.  The U.S. has suffered a downgrade, has a debt-to-GDP ratio over 100 percent – a level historically associated with 1 percentage point slower growth and a heightened probability of financial crisis – and faces a spending-driven explosion of debt over the next decade.  Also, the ACA does not reform Medicare, which has a cash-flow deficit of nearly $300 billion annually and is responsible for one-fourth of all federal debt since 2001.

Finally, the ACA is a vast regulatory expansion.  The overall regulatory burden has cost the private sector and states $21.9 billion thus far.  The regulations are so extensive that HHS has missed 20 of 42 deadlines.  The medical-loss ratio (MLR) regulation harms insurance innovation.  And the Independent Payment Advisory Board is a bureaucratic intrusion on seniors’ care that will harm medical innovation.

Americans wanted real healthcare reform in 2009 that provided quality care at lower cost and better health insurance options.  They did not want a costly government intrusion that threatened private coverage and promised a legacy of debt to the next generations.  The policy battle is to give Americans the healthcare reform they wanted and still deserve.

Douglas Holtz-Eakin is president of the American Action Forum. He served as director of the Congressional Budget Office from 2003 to 2005. This post first appeared at the American Action Forum.

3 replies »

  1. You write that the mandate’s tax which is tiny ($95 for an indivdual in 2014) is ” in addition to the ACA’s already-massive tax burden on the middle class.”

    The only other tax in the Affordable Care Act is on people in the top 3% (on top 3 steps of a 100 step income ladder.’

    Clearly,this is not the middle class.

    By distorting facts, you only undermine your cause.

  2. Your American Action Forum piece on the premium tax is cogent and thorough, except for one thing —

    the tax is intended to raise just $16 billion a year.

    Total health insurance premiums in the US for persons under age 65 is at least $800 billion a year.

    How can a 2% tax disturb markets very much at all?

    I am not saying that such disturbance is impossible — I am just saying that i need to be convinced.

    Incidentally, the ACA legislation had a whole grab bag of trivial, counter-productive, and almost insulting revenue raisers so that the sponsors could say that they were not “raising taxes.” (and I am someone who supports the ACA).

  3. Your arguments are specious. We are already paying for others’ medical care through our own ever-rising insurance premiums (Clearly you must not pay your own premiums as I do). Read the SCOTUS opinion itself:

    ” The net result: Those with health insur­ ance subsidize the medical care of those without it. As economists would describe what happens, the uninsured “free ride” on those who pay for health insurance.”

    Please deal with reality as it is rather than as you would like it to be.