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Tag: The ACA

Will Obamacare Drive Out Employer-Sponsored Insurance?

• 23

By David Dranove

Many opponents of Obamacare claim that large employers will drop employee health coverage in droves. The Wall Street Journal has made this argument a centerpiece of its opposition to the health exchanges. The argument has some face validity – employers that drop coverage can save about $10,000 per employee in insurance costs but only have to pay fines of $2000 per employee. What employer would not want to save $8000 per employee?

Supporters of Obamacare argue that if employers do not pay for insurance, they will have to increase wages. This will temper the incentives of employers to drop coverage. This follows from a classic model in labor economics that says that employers have to give workers a competitive wage/benefits bundle, and that the mix of wages and benefits is largely fungible. Thus, if benefits fall by $10,000, wages will increase by about the same amount. The theory is well accepted.

While it has been difficult to construct empirical tests of this theory, the available evidence is largely supportive (though the evidence of 1:1 fungibility is less compelling than the evidence of some degree of fungibility.) This may explain why the Congressional Budget Office predicts that only a few million workers will lose their employer sponsored coverage and get pushed onto the exchange. Even so, the Wall Street Journal and others have dismissed this theory and evidence, arguing that employers who drop coverage will pocket the full savings and therefore than tens of millions of workers will be affected.

I want to propose a simple test of the naysayers’ position. The test relies on evidence that the Wall Street Journal and others should find unimpeachable –stock market valuations. This is a quick and dirty test but the results are so compelling that I think it is sufficient.

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The Broccoli Mandate

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By Avik Roy

If you’ve been paying attention to the debate over the constitutionality of the health reform law, you’ve probably heard mention of the hypothetical “broccoli mandate.”

The question, if the federal government can make everyone buy health insurance at a particular coverage level and type, can it make everyone buy anything?

For example, could the federal government require everyone to buy a certain amount of broccoli every year, and assess penalties for a failure to do so? After all, like health insurance, broccoli has the potential to improve health, thereby reducing health care spending and perhaps enhancing economic productivity of the workforce. If the argument works for health care, why not for broccoli?

More to the point: What about the real “broccoli mandate” that the administration is already enforcing?

The idea of a broccoli mandate is a whimsical way of making a serious point.

Both as originally written and subsequently amended, the Constitution is structured under the assumption of limited government – the idea that the federal government’s power is limited to those powers specifically designated as such. Anything else a government might do is either given to the states (for example, highway patrol) or prohibited to government entirely (for example, infringing freedom of speech). The point made by raising the prospect of a “broccoli mandate” is to point out that a few of the powers granted to Congress – such as the regulation of interstate commerce – have been interpreted so broadly over the last several decades that the very idea of limited government has been called into question.

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What About the Employer Mandate? Companies Watching Supreme Court Case

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By James Klein

Next week the U.S. Supreme Court will hear 6-1/2 hours of oral arguments concerning the challenges to the Patient Protection and Affordable Care Act (PPACA). This is the most time the high Court has devoted to oral arguments since the 1966 challenge to the Voting Rights Act. Virtually all attention has been on the central question – whether Congress exceeded its Constitutional authority by requiring virtually all Americans to obtain health coverage.  Yet, that is only one of four questions the Court will consider. The other three have received scant attention. And the answer to one of them could have far-ranging consequences for millions of Americans whose coverage is provided by their employers.

The threshold question is a procedural one: whether it is premature for the Court to even consider the case since the PPACA tax/penalty for not obtaining health coverage will not be imposed until 2015, when Americans who fail to obtain coverage in the previous year file their income tax returns. Another question invokes the Constitution’s “Spending Clause” to determine if the Federal funds available to pay for PPACA’s expansion of Medicaid impermissibly coerces – rather than just encourages – the States to comply with the Medicaid provisions. Unexpected decisions on either of these two questions are “wild cards” that could leave the viability of the law in doubt.

The question receiving greatest media scrutiny is whether the Constitution’s “Commerce Clause,” from which Congress derives authority to regulate interstate activity, allows the federal government to require Americans to purchase health coverage. In essence, is declining to obtain health insurance (even though one will still presumably obtain health services) “activity” or “inactivity?”

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The Five Tax Hikes in Obamacare that Most Hurt Seniors

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By Grover Norquist

The jobs-killing Obamacare law contains 20 new or higher taxes on American families and employers. Many of these tax increases fall on families making less than $250,000 — a direct violation of candidate Obama’s promise not to raise “any form” of taxes on these families. In less than a week, the second anniversary of Obamacare being signed into law will take place. The Supreme Court will be hearing oral arguments about the constitutionality of Obamacare next week.

Out of the 20 new or higher taxes in Obamacare, there are five that fall most directly on seniors.

The first is the excise tax penalty for failure to comply with Obamacare’s individual mandate. Many seniors face a coverage gap between retirement and Medicare eligibility. Obamacare raises taxes on these younger seniors by punishing them if they don’t purchase “qualifying health insurance.” Set to go into effect in 2014, the excise tax penalty for mandate non-compliance will in 2016 rise to 2.5% of adjusted gross income for a senior couple (or $1,390 for those making less than $55,600).

Why does Obamacare raise taxes on seniors just as they are entering retirement? Many of these seniors will face this “stick” but find themselves with too much income to qualify for the “carrot” of tax credits to purchase Obamacare health insurance plans in an exchange. Many will be forced to keep working just to avoid paying this tax.

The second tax hike on seniors is the so-called “Cadillac Plan” excise tax. Starting in 2018, Obamacare imposes a whopping 40% excise tax on high-cost (“Cadillac plan”) health insurance plans. This is defined for seniors as a plan whose premiums exceed $29,450 for a family plan, or $11,500 for a single senior. Seniors often face higher costs in health insurance premiums due to chronic health conditions and other risk factors. This tax will fall almost exclusively on the seniors with the greatest health insurance needs.

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Why Are Primary Docs Thinking About Leaving Medicine?

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By Aaron Carroll, MD

As you can imagine, I spend a lot of time with physicians. As a group, they sure do like to complain. Yet, medical school applications are strong, and residency spots are still competitive. So I take cries of “they’re all going to quit” with a grain of salt.

That said, I also like data. So it’s worth checking in every once in a while to see what physicians, as a group, are thinking. There’s a study in the Journal of Primary Care and Community Health that does just that:

The status of the primary care workforce is a major health policy concern. It is affected not only by the specialty choices of young physicians but also by decisions of physicians to leave their practices. This study examines factors that may contribute to such decisions. We analyzed data from a 2009 Commonwealth Fund mail survey of American physicians in internal medicine, family or general practice, or pediatrics to examine characteristics associated with their plans to retire or leave their practice for other reasons in the next 5 years.

What did they find? More than half of physicians age 50 and over had plans to leave their practice in the next 5 years, or weren’t sure about staying in practice. No physicians age 35-49 had plans to retire, but 20% weren’t sure they’d stay in practice. I take such numbers with a grain of salt, though. That’s partly because, as I said above, doctors like to complain. That’s also because saying what you are going to do in the future is not the same as what you will actually do. In case people hadn’t noticed, the job market isn’t too awesome out there. I think many physicians are delusional if they think they can just quit practicing medicine and find another lucrative job.

But I think that the reasons that primary care docs say they might quit are illuminating. Those reasons are likely the things that make them unhappy about practicing, and we can definitely learn from that.

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In Defense of Paul Ryan’s Budget Plan

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By Isabel Sawhill

I once called an older version of Paul Ryan’s budget plan “voodoo economics.” But you have to admire him. He has just released a new plan that slashes the deficit from 8 percent of GDP to around 1 percent by the end of the decade while simultaneously keeping revenues at 18 percent of GDP over the decade, very close to their historical average. To be sure, the specific policies required to get there are not well specified and there is much that I don’t like, such as the assumption that we don’t need new revenues to close the fiscal gap; still, after reading the “Path to Prosperity” I came away with a sense that there is food for thought, worthy of further discussion and debate, in this document.

I came to this conclusion after reading the section of the document called “repairing the safety net.” I had figured out that a lot of the savings in this plan had to come from slashing programs for the poor so I expected to be horrified by what I read. I am not in favor of cutting programs for the poor, especially in a plan that reduces taxes for the wealthy and leaves Social Security virtually untouched. Instead, I found myself at least intrigued with the arguments that I found in this section of the plan. They are thoughtful, well-articulated, and worthy of further debate.

One argument is that federal subsidies for safety net programs encourage states to spend more than they otherwise would. Another argument is that federal dollars come with federal prescriptions and paperwork that stifle state innovation and efficiency. A third argument is that these programs undermine efforts by civic or faith-based groups to play a stronger role. A fourth argument is that some of these subsidies (for example, Pell grants) simply bid up prices (for college tuition). A fifth argument is that we have too many overlapping and complex programs with similar purposes (job training being a great example). A sixth argument is that assistance should be made conditional on personal responsibility—for example, being engaged in work or job training if you are receiving government assistance. This model of conditional assistance was a key element in the largely successful 1996 welfare reform law and could be expanded to other programs. Finally, the plan emphasizes the importance of upward mobility—a goal which I think many can embrace.

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Rejecting Affordable Care Act Is Rejecting Constitution

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By Akhil Amar and Todd Brewster

Next week, while the Republicans continue their search for a candidate to stand against President Obama in the fall election, the president’s central legislative triumph – the Patient Protection and Affordable Care Act of 2010 – will come before the Supreme Court. The justices have the power to declare the law unconstitutional and thereby kill “Obamacare” before it even leaves the birthing chamber. While some believe that such an outcome would be proper, we disagree. A court decision overturning the Affordable Care Act would be an egregious misreading of the Constitution.

The critics’ central constitutional claim is that the 2010 law’s individual-mandate provision exceeds Congress’ regulatory authority. In essence, this provision requires a broad swath of Americans to procure health insurance conforming to certain federal standards. Those who do not procure this insurance must generally pay a “penalty” to the IRS.

Had the bill explicitly used the word “tax” instead of “penalty,” the fatal flaw of the constitutional challenge would be obvious to all. The Constitution undeniably gives Congress sweeping power to tax. And if Congress can tax a person, and then use that tax money to buy a health-care package for that person’s benefit, why can’t it simply direct the person to procure the package himself, or else pay a higher tax?

Of course, tax is a word that lawmakers try to avoid at all costs, and so the euphemistic penalty won the day. Yet, as Shakespeare reminds us, “a rose by any other name would smell as sweet.” Here, penalty and tax are simply two ways of saying the same thing.

Indeed, the Constitution itself does not always use the T-word when referring to taxes, broadly defined. It also uses the words excises, duties, and imposts in the opening sentence of Article I, Section 8, and elsewhere refers generally to all generic “Bills for raising Revenue.” The important thing here is not the term, but how the actual instrument functions, and clearly Obamacare functions as a tax – as a revenue measure. In perfect synch with the Constitution’s key word, revenue, the penalty section of Obamacare is in fact codified in title 26 – the Internal Revenue Code. The “penalty” is paid to the IRS via forms administered by that very same IRS.

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If Mandate Is Defeated, Obama Will Need Help From Allies to Salvage Health Law

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By Jordan Rau

When Barack Obama ran for president in 2008, he insisted the nation could fix its health care system without requiring everyone to carry insurance. As the Supreme Court prepares to weigh in on the health law, Obama is facing the possibility that he may have to make good on his campaign claim.

Experts consider the requirement to hold insurance, known as the individual mandate, to be the most legally vulnerable part of the law.

The administration argues that the law’s main goal of providing health coverage to 30 million additional Americans could not be achieved without the mandate because too many healthy people would refuse to obtain insurance, leaving primarily sick people in the insurance pools and driving up premium costs. Obama came around to this viewpoint after he was elected.

There are ways that Obama—if he’s re-elected — might be able to salvage the law even if the court strikes down the individual mandate but leaves the rest intact, health policy experts say.

These fixes would create financial incentives for people to not delay enrolling in insurance.

One such approach would be similar to what happens in Medicare’s Part B program, where people who wait too long to sign up for physician coverage must pay higher premiums.

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Why States Should Move Forward with Health Insurance Exchanges

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By David Merritt

Imagine that you’re being required to buy a car. You will have to pay for most of it, but you can’t choose exactly what you want. There are so many restrictions on your options that you’re forced to choose from a few used, four-cylinder, two-door sedans with manual transmissions. And there’s one more catch: If you don’t choose one yourself, the dealer will decide for you.

It’s not an enviable position to be in, but most of us would grudgingly decide that if we have to get one of the cars, it’s better to have a small say in what we get than to have someone else decide for us.

This is the same predicament that many state policymakers find themselves in regarding the creation of health insurance exchanges.

Health insurance exchanges are a key part of the health reform law. Supporters argue that exchanges will provide consumers with valuable information on their coverage options, while at the same time providing stricter regulation of health insurers. They are also the only way people can benefit from the lavish subsidies included in the law.

On Monday, the Department of Health and Human Services released a final rule governing the exchanges. The rule sets an ambitious timeline for getting the exchanges up and running in every state by January 1, 2014. Between now and then, states can either build their own exchanges and tailor them as much as federal law will allow or decide not to build exchanges at all.

But there’s a catch: If states don’t build their own exchanges, the federal government will do it for them.

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Defending the Affordable Care Act

• 19

By Merrill Goozner

What will they do? The Supreme Court (more or less) that gave us Bush v Gore in 2000 will later this month hear arguments by states challenging the Affordable Care Act, a.k.a. health care reform. The heart of the legal challenge raised by conservative state attorneys general is whether the individual mandate is constitutional. What happens if the Supremes say no? Does the entire law fall, or just the mandate?

The issue for lawyers is called “severability.” Did Congress when passing the law believe the mandate was necessary to the smooth functioning of the rest of the law? Clearly there are large swaths of the law for which the mandate is largely irrelevant: the physician payments sunshine act (disclosure of drug company payments to doctors); the creation of the Patient Centered Outcomes Research Institute to conduct comparative effectiveness research; the numerous payment pilot projects; and more.

But on the core question of the law’s desire to expand coverage for the uninsured and set minimum insurance standards like forcing insurance companies to guarantee policies to all comers at non-discriminatory rates, the issue of the mandate’s necessity becomes murkier. The Obama administration is simultaneously arguing that it is crucial to the law’s smooth functioning, yet isn’t necessary. How can both be true? Here’s how two physicians, Samuel Y. Sessions and Allan S. Detsky, writing in the New England Journal of Medicine explain the seeming contradiction:

Arguing that the mandate is constitutional under the Commerce Clause requires taking the position that it is “essential” to the statutory scheme, whereas arguing that it is severable dictates the seemingly opposite position that the ACA is “capable of functioning without it.” Politically, making both arguments may be awkward, which may be one reason why the administration endorses partial severability. Legally, however, the positions are consistent: the mandate may be an important part of the statutory scheme, and thus constitutional, but not absolutely vital, and hence completely severable.

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