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Tag: Individual mandate

My Initial Reaction to the Supreme Court Decision

Soon the healthcare blogosphere will be filled with reactions to the Supreme Court decision on the Affordable Care Act. Rather than see my own blog lost amidst hundreds of others, I thought it best to preempt the competition, so to speak, and offer my reactions now.

The 5-4 decision should not have surprised anyone. Many Americans will conclude (and not without reason) that most justices based their vote on whether they supported the ACA and not on whether its provisions violated the Constitution. I also have little doubt that as we move forward, many Americans will blame the court’s majority and their political allies if healthcare spending continues to rise unabated.

The justices offered thought provoking arguments on both sides of the case. While the media has focused on a couple of snarky comments written by Justice Scalia, I was particularly struck by an economic argument made by Justice Ginsberg. She notes that there is no meaningful economic difference between collecting a general tax from the entire population and then offering a rebate to individuals who purchase a specific good, and collecting a limited tax from individuals who do not purchase that good.

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Awaiting the Court’s Decision on Healthcare

The Supreme Court has already decided the fate of the health reform law, and in a few short weeks the rest of us will know whether it is upheld, struck down entirely, or badly damaged. Of the possible decisions, four are the most likely and each would have significant ramifications.

1)  The Court could uphold the law. Prior to oral arguments, this was the conventional wisdom. Justice Anthony Kennedy’s stinging questions led many to change this view, but he has surprised Court watchers before.

If he springs another surprise and supports the individual mandate, the law’s implementation would continue unabated. States that have waited for the Court’s decision would start moving on exchanges and essential benefits.

HHS would issue more regulations: on subsidies, employer penalties, insurance requirements, and others. However, it is common knowledge that many of the more controversial rules are being slow walked until after November 6th so as to not complicate President Obama’s reelection chances.

Upholding the law would certainly raise the stakes of the November elections. Should Democrats hold the Senate and/or President Obama win reelection, it’s likely the law would be permanently ensconced. On the other hand, should Republicans control the House and Senate and Governor Romney win the presidency, they will try to repeal the law or gut it through budget reconciliation before major provisions take effect in 2014.

But based on the “train wreck” of oral arguments, it seems unlikely that the law will escape the Court unscathed. It is more likely that the law will be damaged.  The question is, to what extent?

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Health Care and Constitutional Chaos

The Supreme Court’s decision on the constitutionality of the Affordable Care Act (ACA) will likely be handed down on the last day of this year’s term. If the Court finds that the ACA—either in whole or in part—violates the Constitution, the health care industry will be shaken to its core. And, no matter what legal justification the Court uses to invalidate the ACA, the structure of constitutional law will be severely undercut. The resulting medical and legal chaos will be expensive, divisive, and completely unnecessary. Nothing in the text, history or structure of the Constitution warrants the Court overturning Congress’s effort to address our national health care problems.

For the health care industry, a decision striking down the entire ACA would be an absolute disaster. Physicians, hospitals, and private companies have been shifting how they practice medicine in anticipation of the ACA’s implementation. They’ve been creating accountable care organizations,[1] envisioning a significant reduction in uncompensated care, and enjoying increased Medicare and Medicaid reimbursement in primary care settings.[2] That will all vanish if the ACA is struck down. Moreover, seniors will pay more for prescription drugs and young adults will be taken off their parents’ insurance. The private insurance industry, which has seen its market shrink significantly over the last decade,[3] will see a real chance to reverse that trend disappear. According to one estimate, if the ACA is overturned, insurers may lose over $1 trillion in revenues between 2013 and 2020.[4]

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The Psychology of the ObamaCare Debate

“How can the government make us buy health insurance?  What gives them that right?”

Sitting on my left while our airplane raced above the clouds, Elizabeth was clearly upset about Obamacare.  She wondered why the bill had to be so long, and why Obama would endorse a plan that doubled her health insurance costs.  But nothing vexed her more than the individual mandate.

At least that’s what I though until I spoke with her at greater length, and she revealed a profound truth to me about people’s attitudes towards the mandate and towards Obamacare more generally: she showed me that deep down she liked the idea of the mandate, once she realized its important role in accomplishing goals people on all sides of the political spectrum care about deeply.

We were flying towards North Carolina the day before the Supreme Court held its oral arguments on Obama’s healthcare plan.  Elizabeth had heard a great deal about the mandate.  She read The Wall Street Journal regularly, in part because it was so relevant to her work in banking.  And she enjoyed watching Bill O’Reilly on Fox News, but not Hannity, who she thought was “too extreme”.  She was by no means a conservative extremist.  She had major concerns about the banking industry for example, and as a Christian felt strongly that income inequality is a moral problem that neither party was addressing in an effective manner.  But she was solidly Republican, no doubt about that, and she agreed with most people in that political party that Obamacare was hurting the economy.  And above all she believed the health insurance mandate was “un-American.”

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A Response to Critics on the Founding Fathers and Health Insurance Mandates

Last week, I wrote an article describing several purchase mandates adopted by the framers in early Congresses, including two medical insurance mandates imposed on shipowners and seamen. These examples rebut the claim by challengers to Obamacare that purchase mandates are wholly unprecedented in a way that allows us to infer they are unconstitutional, a claim on which they rely heavily because there is no text, history, or case law that affirmatively supports a ban on purchase mandates.

Not everyone agrees with me. Some comments to my article, here and elsewhere, have suggested that these early medical mandates are distinguishable from Obamacare because they reflect Congress’ power to enact maritime law, not its power to regulate commerce. But the Constitution’s list of congressional powers nowhere includes a maritime law clause. Early Supreme Court cases all held that the Commerce Clause was what gives Congress the power to enact maritime law. For example, in The Daniel Ball, a case decided in 1871, the Court stated that navigable waters form “a continued highway for commerce, both with other States and with foreign countries, and is thus brought under the direct control of Congress in the exercise of its commercial power. That power authorizes all appropriate legislation for the protection or advancement of either interstate or foreign commerce…” In The Lottawanna, the Court held that it was under this commerce clause power that Congress had enacted statutes that determined “the rights and duties of seamen” and “the limitations of the responsibility of shipowners.” These early medical mandates were thus enacted under the very Commerce Clause at issue in the Obamacare case.

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If the Supreme Court Kills ObamaCare, Should We Thank Mitt Romney?

There is no doubt that the campaign to “repeal and replace” ObamaCare will have its weakest standard bearer if Mitt Romney becomes the Republican candidate for President. His embrace of an “individual mandate” to buy health insurance or pay a penalty, as legislated in his 2006 Massachusetts health reform, is anathema to those faithful to the ideal of limited government. When Mr. Romney declares that he will issue a universal waiver from ObamaCare’s regulations as his first executive order, the people who should be voting for him fear that such action would be a substitute for repeal, instead of a preparation for it. (Do these folks really think a clean repeal bill, like the one passed by the House of Representatives in January 2010, will be on the president’s desk on inauguration day?)

But maybe we should look at it another way: If Mitt Romney had never signed his 2006 law (which was motivated, as the president’s men are so fond of telling us, but an idea generated at The Heritage Foundation), those of us committed to defeating ObamaCare would never be in the fortunate position we are today – the whole, ungodly mess hanging by a thin thread after a brutal hazing in the Supreme Court last week.

Without Massachusetts’ 2006 law, there is almost no likelihood that the Democrats would have written an individual mandate into the bill. Instead, they would have just hiked taxes. The only reason they painted a thin varnish of so-called “individual responsibility” onto the bill was so that they could pin some of the blame on Mitt Romney and certain conservatives who had embraced it. As noted by Avik Roy, the individual mandate was traditionally anathema to liberals, who prefer straight-forward tax hikes.

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What to Do on the Day After ObamaCare

Two weeks ago, the Supreme Court heard arguments on the constitutionality of the administration’s health law, aka ObamaCare. Opponents are giddy with the possibility that the law might be struck down.

But what then? Millions of uninsured, both those who choose not to purchase coverage and those who can’t due to pre-existing conditions, will still be with us. The rising costs and inefficient delivery of health care will still be with us.

The country can have a vibrant market for individual health insurance. Insurance proper is what pays for unplanned large expenses, not for regular, predictable expenses. Insurance policies should be “guaranteed renewable”: The policy should include a right to purchase insurance in the future, no matter if you get sick. And insurance should follow you from job to job, and if you move across state lines.

Why don’t we have such markets? Because the government has regulated them out of existence.

Most pathologies in the current system are creatures of previous laws and regulations. Solicitor General Donald Verrilli explained as much in his opening statement to the Supreme Court: “The individual market does not provide affordable health insurance,” he noted, “because the multibillion dollar subsidies that are available” for the “employer market are not available in the individual market.”

Start with the tax deduction employers can take for their contributions to group health-insurance policies—but which they cannot take for making contributions to employees for individual, portable insurance policies. This is why you have insurance only so long as you stay with one employer, and why you face pre-existing conditions exclusions if you change jobs.

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The Supreme Court on Moral Hazard

I have had to take some time off for the funeral of someone very near to me, so I have not had a chance to comment on the Supreme Court hearings. Nor do I have much time to do so now. But I would like to comment on Justice Alito’s line of questioning about burial insurance. His questioning was in response to one argument used to justify the purchase mandate, namely that sick individuals will receive medical care at someone else’s expense and therefore there is an economic justification for mandating the purchase of health insurance in order to prevent free riding. Alito noted that individuals who did not provide for their own burials will still be buried at taxpayer expense. This is another form of free riding. If the Supreme Court were to uphold mandatory purchase of health insurance, could Congress not also mandate purchase of burial insurance?

Solicitor General Donald Verrilli seemed surprised by Alito’s questions and did not provide a good answer. Yet these questions strike at the heart of the case and at deeper economic issues. There is a direct analogy between the market for burials and the market for healthcare. Just as some patients free ride off of the generosity of others, some deceased do the same thing. By extension, any time that a good is provided at a price below cost, whether by the government, a charity, or any other organization for that matter, we can expect a certain degree of moral hazard behavior. Some individuals who ought to purchase the good themselves will instead free ride on the generosity of others.

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If the Supreme Court Rules Against the Obama Administration …

If the Court throws out both the “individual mandate” (the rule requiring that virtually all Americans buy insurance, or pay a fine), and the provision that insurers must cover all applicants, and cannot charge higher premiums, even if a new customer has just been diagnosed with cancer?  This might sound like the end of reform, but in fact, many of the most valuable reforms in the legislation would almost certainly still stand–including those that will change the way we pay for care, reducing costs, while lifting quality. Under the Affordable Care Act (ACA), hospitals will continue to find ways to reduce preventable errors–or face financial penaltie.. Doctors who succeed in managing chronic diseases, keeping their patients out of the hospital, will receive rewards. Medical students willing to practice in underserved areas “Where No One Else Will Go” will receive scholarships, and their ranks will grow. New funding will double the capacity of Community Health Centers that can provide medical homes for many who now receive their care in an ER. Reform will go forward.

There is, of course, the possibility that the court could declare the entire Affordable Care Act unconstitutional, but this seems extraordinarily unlikely. Too many planks in the law already are being implemented, and patients are benefiting.  As Henry J. Aaron pointed out in an earlier post on this blog, overturning the law would be an “Rx for Chaos.”

Still, even if the judges “only” throw out  the mandate and the requirement that insurers cover everyone, the results will be, as former Obama administration adviser  Ezekiel Emanuel recently put it in a New York Times opinion piece “less than optimal.” (Unlike Rahm Emanuel, Zeke is known for understatement.)

Under this scenario, premiums for those who do buy insurance would climb because, without the mandate, insurers could no longer count on millions of new, healthy customers.  Instead of “the 32 million Americans predicted to gain coverage under the health insurance reform act, only around 16 million Americans would gain coverage,” observes Emanuel.

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What If the Supreme Court …

Consider these two scenarios.

What if the Supreme Court:

1). Strikes down the requirement that everyone buy insurance, or pay a penalty (a.k.a. “the individual mandate”), but leaves in place the rule that insurers are required to insure everyone — including those who are suffering from a preexisting condition?

or 2). Throws out both the individual mandate and the provision which says that insurers cannot either deny coverage , or charge higher premiums, if someone is already sick?

Begin with the first scenario: you are not forced to buy insurance, but when you get sick, insurers will be forced to cover you, charging the same rates they charge healthy people in your community (a.k.a. “community rating”).

What would happen?

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