John Goodman is correct that ObamaCare’s individual mandate — and Kathleen Sebelius’s power to make the mandate more burdensome at whim — threaten the continued existence of health savings accounts (HSAs). But ObamaCare’s price controls are no less a threat.
The new law requires insurers to charge enrollees of the same age the same average premium, regardless of health status. That’s a price control, and it will cause premiums for healthy people to rise dramatically and thus lead to massive adverse selection. Healthy people will gravitate to less-comprehensive insurance — in particular, HSA-compatible high-deductible plans — where the implicit tax is smaller.
As premiums for comprehensive plans spiral upward (ultimately causing comprehensive plans to disappear) and as ObamaCare proves more costly than projected, supporters will be desperate for new revenue. They will call for the elimination of both HSAs and high-deductible health plans on the grounds that those products — not the price controls, mind you — are causing the market to unravel.
HSAs allow young and healthy consumers to avoid the raw deal that ObamaCare offers them. And that’s precisely why ObamaCare’s supporters will try to kill HSAs. We will end up repealing one or the other.
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Update on the Legal Challenges to Obamacare
Since I first issued my challenge to debate “anyone anytime anywhere” on the (un)constitutionality of Obamacare, a lot has happened. For one thing, Randy Barnett and Richard Epstein, among many others, have published provoctive articles looking at issues beyond the Commerce Clause justification for the individual mandate — such as the argument that Congress’s tax power justifies the mandate penalty and that the new Medicaid arrangement amounts to a coercive federal-state bargain. (Look for to a longish article from yours truly due to come out in next month’s issue of Health Affairs.) For another, as Michael Cannon noted, seven more states — plus the National Federation of Independent Business and two individuals — have joined the Florida-led lawsuit against Obamacare. Perhaps most importantly, such legal challenges are gaining mainstream credibility.
Here’s a brief look at some important legal filings from the past 10 days:
- On May 11, the U.S. government filed a response to the Thomas More Center’s lawsuit asking a federal court in Michigan to enjoin Obamacare on various grounds, including, distinct from other suits I’ve seen, religious liberty violations from having to pay for abortions. The government argues that the plaintiffs lack standing because it’s unclear whether the individual mandate will harm them and in any event this provision doesn’t go into effect until 2014 at the earliest. The government also predictably argues that the mandate is a valid exercise of Congress’s power to regulate interstate commerce and to provide for the general welfare. There is nothing surprising here and we now await the court’s preliminary ruling.
- On May 12, the U.S. Citizens Association (a conservative group) and five individuals filed a new suit in Ohio, as Jacob Sullum notes. In addition to the government powers arguments that are being made in most Obamacare lawsuits (most notably the state suits), this suit claims a violation of: the First Amendment freedom of association (the government forces people to associate with insurers); individual liberty interests under the Fifth Amendment; and the right to privacy under the Fifth Amendment’s liberty provision, Ninth Amendment retained rights, and the rights emanating from the First, Third, Fourth, Fifth, and Ninth Amendments (such is the Court’s convoluted jurisprudence in this area). I’ll add that the attorney filing this suit, Jonathan Emord, worked for Cato over 20 years ago.
- On May 14, Florida filed an amended complaint that, along with adding seven states, two individuals, and the NFIB — so all potential standing bases are covered — beefs up relevant factual allegations and, most importantly, shores up a few legal insufficiencies to the previous claims. This is a solid complaint, and alleges the following counts: (1) the individual mandate/penalty exceeds Congress’s power under both the Commerce Clause and taxing power and, as such, violate the Ninth and Tenth Amendments; (2) the mandate violate’s the Fifth Amendment’s Due Process Clause; (3) the mandate penalty is an unconstitutional capitation or direct tax because it is unapportioned; (4) the Medicare expansion constitutes a coercive federal-state bargain that commandeers state officials; (5) a different formulation of coercion/commandeering; and (6) interference with state sovereignty and functions under the Tenth Amendment. After further briefing, oral arguments on the government’s expected motion to dismiss are scheduled for September 14 in Pensacola.
- At least one enterprising analyst has determined that the 2,400-page bill lacks a severability clause. This means that if one part of the bill is struck down as unconstitutional, the whole thing falls! — and would mean that the drafters committed legal malpractice of the highest order. I guess it goes to show that nobody has read the whole thing.
Finally, if anybody is reading this is in Seattle, I’ll be debating Obamacare at the University of Washington Law School next Thursday, May 27 at 4:30pm. This debate, sponsored by a number of groups, including the law school itself and the Federalist Society, is free and open to the public. For those interested in other subjects, I’ll be giving a different talk to the Puget Sound Federalist Society Lawyers Chapter the day before at 6:30pm at the Washington Athletic Club ($25, rsvp to Michael Bindas at mbindas@ij.org). The title of that one is “Justice Elena Kagan? What the President’s Choice Tells Us About the Modern Court and Confirmation Process.” Please do introduce yourself to me if you attend either event.
Study: Medicaid Provides Lower-Quality Care
The Congressional Budget Office estimates that by 2019, ObamaCare will cover 32 million U.S. residents who would otherwise have been uninsured. Half of those coverage gains would come from expanding the Medicaid program, which has been criticized for poor-quality care.
A new study in the journal Inquiry gives another indication that Medicaid provides low-quality care:
we find that uninsured and Medicaid patients are treated by lower-quality physicians both because of the hospitals these patients attend and because of sorting within hospitals…Our study concluded that patients in government hospitals that treat large numbers of uninsured and Medicaid patients are least likely to be treated by a board-certified or top-trained physician.
The study has plenty of limitations. For one, physician training is an input, not an output. What matters are health outcomes, and so it will be interesting to see what the Oregon Health Study has to say about Medicaid’s effects on health.
Related Tags
Pelosi: ObamaCare Helps Artists Avoid Hassle of Working
ObamaCare creates incentives not to climb the economic ladder. It also creates incentives not to work at all; able-bodied people can quit their jobs, safe in the knowledge that the suckers working man will foot the bill for any health care they may need. House Speaker Nancy Pelosi thinks that’s a not a bug, but a feature of the new law, at least if those able-bodied non-paycheck earners are artists. (HT: CNS News.)
Repeal the bill.
Related Tags
NFIB: ObamaCare Is Unconstitutional, ‘Threatens Individual Freedom’
The National Federation of Independent Business — the nation’s largest small-business lobby — will join the lawsuit that 20 attorneys general (including one Democrat) have brought against ObamaCare.
According to the Associated Press, NFIB found ObamaCare’s individual mandate particularly offensive:
The National Federation of Independent Business will join the argument that Americans cannot be required under the Constitution to obtain insurance coverage, the group’s president, Dan Danner, said in an interview…
The new law allows government “to regulate you just because you exist,” said Danner. “If you can regulate this, where do you stop? Do you tell people, ‘We are going to mandate that everybody exercise?’ We think this is an overreach by the government. It goes too far, and threatens individual freedom.” [Emphasis mine.]
Repeal the bill.
Ask Kagan about ObamaCare
Senate Judiciary Committee members should be sure to ask Solicitor General and Supreme Court nominee Elena Kagan, during her upcoming confirmation hearings, whether she or her office played any part in crafting ObamaCare or the administration’s defense to the lawsuits challenging that law. If Kagan helped to craft either, that would present a conflict of interest: when those lawsuits reach the Supreme Court, she would be sitting in judgment over a case in which she had already taken sides.
Though the Solicitor General deals with appellate matters, it is certainly possible that Kagan was consulted during the drafting of the law or the administration’s legal strategy for defending it.
The Senate Democrats who drafted ObamaCare took pains to protect it from a constitutional challenge. The law contains several pages of findings designed to show that the Constitution’s commerce clause authorizes Congress to force Americans to purchase health insurance. It would have been prudent for Senate Democrats to ask the government’s top appellate lawyer, who belongs to the same political party, whether they had done all they could to protect the “individual mandate” from a constitutional challenge.
Opponents began filing legal challenges to ObamaCare just minutes after President Obama signed it into law, and seven weeks before he announced Kagan’s nomination. On Tuesday, the Obama administration filed its first response, to a private lawsuit. According to the Associated Press, that filing “is to be followed in coming weeks and months by federal government court responses to lawsuits filed by many states.” Regarding the case filed by 13 (soon to be 20) state attorneys general, The New York Times reports, “Some legal scholars, including some who normally lean to the left, believe the states have identified the law’s weak spot and devised a credible theory for eviscerating it.” It is not certain, but it is certainly possible that the Office of the Solicitor General was consulted on the government’s response to lawsuits that would likely reach the Supreme Court.
If Kagan played a role in drafting ObamaCare or formulating the administration’s legal defense, and is confirmed by the Senate, propriety would dictate that she recuse herself from any challenges to that law that reach the high court. Supporters and opponents alike should be interested to know whether the Court will judge ObamaCare with nine justices on the bench, or eight.
A Response to Jonathan Gruber on ObamaCare & Health Care Costs
In this week’s New England Journal of Medicine, MIT health economist and Obama administration consultant Jonathan Gruber responds to claims that ObamaCare will increase health care costs. Gruber acknowledges the Obama administration’s estimates that ObamaCare will increase health care spending, but compares that to the administration’s estimate that 34 million otherwise uninsured U.S. residents will obtain coverage under the law:
[B]y 2019, the United States will be spending $46 billion more on medical care than we do today. In 2010 dollars, this amounts to only $800 per newly insured person — quite a low cost as compared (for example) with the $5,000 average single premium for employer-sponsored insurance.
What a bargain! Of course, Gruber is being sneaky. The cost per newly insured person is not $800. It will be higher than $5,000. But only $800 of that cost will appear as new health care spending. The rest of that cost will be borne largely by people who already had coverage, but find their access to care reduced. These include Medicare enrollees who will receive fewer benefits through (or who will be ousted from) their private Medicare plans; Medicare enrollees who will have a harder time accessing care because some hospitals, skilled nursing facilities, home health agencies and other providers “might end their participation in the program,” according to the Obama administration; and maybe even some (currently) privately insured people who find themselves in Medicaid. (The administration itself says it is “probable” that ObamaCare “could result…in some of this demand being unsatisfied.”) Other costs include the economic growth and opportunity that is destroyed by ObamaCare’s tax increases, and the costs associated with trapping workers in low-wage jobs.
And that’s if everything goes as planned. Gruber remains convinced that future Congresses will not undo ObamaCare’s tax increases or downward adjustments to Medicare’s price controls, as Congress has consistently undone scheduled reductions in the prices that Medicare pays physicians. Gruber’s sometime employer — the Obama administration — itself contradicts his argument when it writes that the bulk of those reductions in Medicare spending are “doubtful” and “unrealistic.” Gruber inadvertently shows why critics are right to be skeptical about the tax increases and spending reductions when he writes:
The cuts in spending and increases in taxes are actually “back-loaded,” with the revenue increases rising faster over time than the spending increases, so that this legislation improves our nation’s fiscal health more and more over time.
The fact that the austerity measures had to be backloaded is a sign of their implausibility. If they were popular, they could take full effect tomorrow. But their implementation had to be delayed to head off significant political resistance — resistance that will express itself between now and when those austerity measures take effect.
On the broader issue of reducing the growth of health care spending, Gruber claims that ObamaCare “cautiously pursue[s] many different approaches toward cost control and stud[ies] them to see which ones work best.” Yet each approach is all but guaranteed to fail. The tax on high-cost health plans? Unlikely to survive. (But at least Gruber now admits it is a tax.) The rationing board designed to curtail each congresscritter’s ability to keep the money flowing to health care providers in their districts? Also unlikely to survive, for obvious reasons. Pilot programs experimenting with different government price and exchange controls? Even successful pilot programs get nixed. Comparative-effectiveness research? A pipe dream that fails every time the government tries it.
To the extent that these spending cuts fail to materialize, health care spending will rise, and deficits will deepen. Congress will need to impose additional tax increases, and/or find sneakier ways to ration medical care curb health care spending. Gruber’s Massachusetts enacted ObamaCare four years ago, and that’s exactly what state officials are doing.
Since President Obama signed this law, the Congressional Budget Office has announced that its cost, including the so-called “doc fix” and spending subject to appropriations, is already about $200 billion higher than previously believed. As I’ve written elsewhere:
ObamaCare would create new constituencies for government spending, hook existing constituencies on even more government spending, and promise implausible cuts in existing subsidies to constituencies that are highly organized and vocal.
Gruber gets chutzpah points for arguing that the same law would actually contain health care costs.