Tag: employer mandate

The Reid Individual Mandate: An Affront to the Constitution

Cato chairman Bob Levy and I have an oped in today’s Philadelphia Inquirer explaining why the individual mandate in Majority Leader Harry Reid’s (D-NV) health care bill is unconstitutional.  (Our colleague Ilya Shapiro blogs about a similar piece by our colleague Randy Barnett.)

In sum, supporters of an individual mandate claim that two powers granted to Congress by the states in the Constitution — the Commerce Clause and the taxing power — give Congress the legal authority to force Americans to purchase health insurance.  We reject both theories.

First, the behavior that Congress seeks to regulate — the non-purchase of health insurance — is neither interstate, nor is it commerce.  Unfortunately, under the Supreme Court’s tortured interpretation of the Commerce Clause, that isn’t dispositive, so we explain why even the Court’s Commerce Clause jurisprudence doesn’t allow for an individual mandate.

Second, the individual mandate cannot be justified by pointing to Congress’s taxing power, because the tax it would impose is neither an excise tax, nor an income tax, nor a direct tax apportioned according to population.

Game over.  All your base are belong to us.

We’ve already received many responses to the oped, some of them intelligent.  One reader asks how we can describe the non-purchase of health insurance as “a non-act that harms no one”:

We all know that when folks without insurance go to the emergency room, those of us with insurance are harmed in the form of higher premiums.

Originally, we had included a section expanding on our “harms no one” claim that would have addressed this point, but we dropped it for brevity.  Here it is:

Most uninsured people don’t end up in an emergency room.  As for those who do, research shows that the uninsured as a group more than pay their own way. Many simply pay their bills without imposing costs on anyone. And because they typically pay premium prices for medical care — far more than is ordinarily reimbursed by public or private insurance — they more than offset the cost of uncompensated care to the uninsured overall, according to MIT economist Jonathan Gruber and others.

Even if we ignore that evidence, uncompensated care to the uninsured accounts for about 2.2 percent of national health expenditures.  The left-leaning Urban Institute writes, “Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurers in the form of higher charges.”  That’s hardly a crisis.

And think about it: an uninsured person is wheeled into an emergency room, unconscious and bleeding.  Is this person able to harm anyone?  Is this person in a position to impose costs on you?  Of course not.

What imposes costs on you are the laws that require the doctors and hospitals to treat those patients without regard to ability to pay — and the ethical codes that would impel doctors to treat them even if there were no such laws.  If you have a problem with those laws/codes, make them the focus of your ire.  If you support them, surely you can’t be upset that they increase your premiums by 1.7 percent.  Isn’t that a small price to pay to live in a compassionate society?

But if you’re still angry about that 1.7 percent, bear in mind that the Reid individual mandate — which is essentially a bailout for private health insurance companies — would increase the cost of insurance for some people by 30 percent and would require additional taxes on top of that.

Fortunately, there are much better ways to reform health care.

Health Care: Not Close to Over

The fat lady hasn’t even started to warm up yet.

The narrow 220-215 victory in the House on Saturday night was a step forward on the road to a government takeover of the health care system.  But as close and dramatic as that vote was, that was the easy part.  The Senate must still pass its version of reform—which will not be the bill that just passed the House.  Nancy Pelosi was, after all, able to lose the votes of 39 moderate Democrats.  Harry Reid cannot afford to lose even one.  A conference committee must reconcile the two vastly different versions.  And then, Pelosi must hold together her 3 vote margin of victory (if it gets that far).  Yet several House Democrats who voted for the bill on Saturday said they did so only to “advance the process.” Their vote is far from guaranteed on final passage.  And, House liberals are almost certain to be disappointed by the more moderate bill that may emerge from the conference.

Among the more contentious issues:

Individual Mandate: This should’ve been low-hanging fruit. Democrats agreed on a mandate early in the process. But it became increasingly plain that a mandate would hit those with insurance as well as the uninsured – forcing people who are happy with their plan to switch to a different, possibly more expensive plan. With this mandate now being seen as a middle-class tax hike, qualms have developed.  The House bill contains a strict mandate, with penalties of 2.5 percent of income backed up by up to five years in jail.  The Senate Finance Committee, on the other hand, watered down the mandate’s penalties and delayed the mandates implementation.

Employer Mandate: The House bill also contains an employer mandate, a requirement that all but the smallest employers provide insurance to their workers or pay a penalty tax of up to 8 percent of payroll.  The Senate,  looking at unemployment rates over 10 percent, seems unlikely to include an employer mandate.

The Public Option: The House included, if not a “robust” public option, at least a semi-robust one.  But moderate Democrats in the Senate are clearly not on board.  Joe Lieberman (I-CT) says that he will join a Republican filibuster if the public option is included.  Harry Reid is trying various permutations: a trigger, an opt-in, an opt-out.  But as of now there is not 60 votes for any variation.

The Sheer Cost: Fiscal hawks like Sen. Evan Bayh (D-IN) say they will not support a bill that adds to the deficit or spends too much.  But the house bill cost a minimum of $1.2 trillion.

Taxes: The House plan to add a surtax on incomes of $500,000 or more a year has no support in the Senate. At the same time, the Senate plan to slap a 40 percent excise tax on “Cadillac” insurance plans is unacceptable to key Democratic constituencies like labor unions.

Abortion: Conservative Democrats insisted on a strict prohibition on the use of government funds for abortion.  The bill could not have passed without the inclusion of that provision.  House liberal swallowed hard and voted for the bill, despite what they called “a poison pill” anyway with the expectation that it will be removed later.  If the final bill includes the prohibition at least a couple liberals could defect.  If it doesn’t, conservative Democrats won’t be on board.

Immigration: The Senate Finance Committee included a provision barring illegal immigrants from purchasing insurance through the government-run Exchange.  The House Hispanic Caucus says that if that provision is in the final bill, they will vote against it.

As if these disagreements among Democrats wasn’t bad enough, public opinion is now turning against the bill.

President Obama has called for a bill to be on his desk before Christmas—the latest in a series of deadline that are so far unmet.  It is hard to see how Congress can meet this one either.  The Senate has not yet received CBO scoring of its bill and is not prepared to even begin debate until next week at the earliest.  That debate will last 3-4 weeks minimum, assuming there are 60 votes for cloture.  That means, the bill cant’ go to conference committee until mid-December, even if everything breaks the way Harry Reid wants.  Privately, Democrats are now suggesting late January, before the State of the Union address, is the best they can do.

The fat lady can go back to sleep—this isn’t over yet.

Nobody Considers Health Insurance Mandates a Tax? Really??

As my colleague Jeffrey Miron noted earlier today, when grilled by George Stephanopolous on whether the so-called “individual mandate” is a tax increase, Obama replied, “Nobody considers that a tax increase….You can’t just make up that language and decide that that’s called a tax increase…My critics say everything is a tax increase.”

Where do Obama’s critics get these wacky ideas?  From a bunch of nobodies, that’s who!

Princeton economist Uwe Reinhardt, quoted by Larry Summers (1987):

[Just because] the fiscal flows triggered by mandate would not flow directly through the public budgets does not detract from the measure’s status of a bona fide tax.

Economist Larry Summers, Obama’s National Economic Council chair (1989):

Economists have generally devoted little attention to mandated benefits regarding them as simply disguised tax and expenditure measures… Essentially, mandated benefits are like public programs financed by benefit taxes… [If] the mandated benefit is worthless to employees, it is just like a tax from the point of view of both employers and employees…There is no sense in which benefits become ‘free’ just because the government mandates that employers offer them to workers.

Columbia University economist Sherry Glied, Obama’s appointee to HHS Assistant Secretary for Planning and Evaluation, in the New England Journal of Medicine (2008):

The mandate is in many respects analogous to a tax. It requires people to make payments for something whether they want it or not. One important concern is that the government will provide insufficient funds for the subsidies intended to accompany the mandate. In that case, the mandate will act as a very regressive tax, penalizing uninsured people who genuinely cannot afford to buy coverage.

Congressional Budget Office (2009):

Under some proposals, firms would be required to make payments to the federal government if they chose not to offer health insurance to their employees, and individuals who did not comply with the requirement to  obtain insurance would have to pay a penalty. Such payments would be equivalent to a tax or a fine, and the government’s receipts should be recorded in the budget as federal revenues.

Here’s a question: if an individual mandate is not a tax, why exempt anybody?  If an employer mandate isn’t a tax, why exempt small businesses?

Obama’s Health Care Speech in Plain English

health care addressHell of a speech last night, eh?  Here are a few of my favorite gems.

Under this plan, it will be against the law for insurance companies to deny you coverage because of a pre-existing condition.

Translation: I, Barack Obama, ignoring thousands of years of failed price-control schemes, will impose price controls on health insurance. I will force insurers to sell a $50k policies for $10k. What could go wrong?

We were losing an average of 700,000 jobs per month.

True. And your employer mandate would kill hundreds of thousands of low-wage jobs that would never come back.

They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime.   We will place a limit on how much you can be charged for out-of-pocket expenses…. And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care.

Translation: Boy! Are we going to force you to buy a lot of coverage!

I will make sure that no government bureaucrat or insurance company bureaucrat gets between you and the care that you need.

…except for the bureaucrats I proposed to put between you and your doctor.

Some… supported a budget that would have essentially turned Medicare into a privatized voucher program. That will never happen on my watch. I will protect Medicare.

Translation: I will never let seniors control their own health care dollars. I will never give up Washington’s control over your health care decisions.  Mmmmuuuuhahahahahaha!

…there are too many Americans counting on us to succeed.

Translation: There are too many lobbyists counting on me to succeed: drug-industry lobbyists, health-insurance lobbyists,  physician-cartel lobbyists, large-employer lobbyists, hospital lobbyists….

It’s a plan that asks everyone to take responsibility for meeting this challenge – not just government and insurance companies, but employers and individuals.

Translation: I’m going to tax the hell out of you, but I don’t want you to notice how much I’m going to tax you. So I’m going to tax employers and insurance companies, and they’re going to pass the taxes on to you. Most of the taxes won’t even show up in the government’s budget. It’s all very clever. No, seriously – just ask my economic advisor Larry Summers.

It’s a plan that incorporates ideas from Senators and Congressmen; from Democrats and Republicans – and yes, from some of my opponents in both the primary and general election.

Translation: I may have savaged your ideas in the past, called them irresponsible…risky…dangerous…whatever. But that wasn’t about principle; I just wanted to become president. Now that I’m president, I need a win. So you’ll help me, won’t you? Hey, where’s Hillary?

Cato Institute to Launch Ad Campaign Against Government-Run Health Care

The Cato Institute will launch an ad campaign Thursday highlighting under-reported poll data showing Americans’ concerns that current health care reform plans will raise costs, limit choice and reduce the quality of their health care.

The campaign will feature full-page ads in major national newspapers, in addition to radio spots focusing on why government-run health care cannot address the problems of growing costs and lack of coverage for many individuals and families. The campaign will expand in the weeks ahead.

“Our goal is to help the American public navigate terms like ‘a public plan’ and ‘individual or employer mandates’ to understand what is really happening here,” said Ed Crane, founder and president of the Cato Institute. “The bottom line is, most of the plans coming from the White House and congressional leadership will result in a government-run health care system that is really not the best option for most Americans.”

A poll by the Washington Post and ABC News conducted June 18-21 showed that 84 percent of respondents were “very” or “somewhat” concerned that “current efforts to reform the health care system” would increase their health care costs. The survey also showed that 79 percent of respondents were concerned that current efforts would limit their choices of doctors or medical treatments.

As part of the campaign, Cato is running radio ads in major cities across the country. You can listen to them below, and embed them on your own blog using the code on the official campaign site.

Who Pays?

Download the MP3

Who Decides?

Download the MP3

Cato has also created a new website, Healthcare.cato.org, to promote more free market-oriented health care reform proposals.

My Question for the President

President Obama will hold a press conference tonight to answer questions about his health care reform proposal. This is what I would ask him:

Mr. President, during your campaign, you said, “I can make a firm pledge…Under my plan, no family making less than $250,000 a year will see any form of tax increase.”  You also said that “no one will pay higher tax rates than they paid in the 1990s.”

Your National Economic Council chairman, Larry Summers, has written that employer mandates “are like public programs financed by benefit taxes.”  Under the House health reform bill, an uninsured worker earning $50,000 per year, with no offer of coverage from her employer, would face a 15.3-percent federal payroll tax, a 25-percent federal marginal income tax rate, an 8-percent reduction in her wages (to pay the employer penalty), plus a 2.5 percent uninsured tax.  In total, her effective marginal federal tax rate would reach 50.8 percent.

Do you stand by those pledges, and would you therefore veto any employer mandate or individual mandate as a tax on the middle class?

(Add it to the questions I posed here and here.)

Who’s Blogging about Cato

Here’s a roundup of bloggers who are writing about Cato research, commentary and analysis. If you’re blogging about Cato, cmoody [at] cato.org (let us know.)

  • Freedom Politics blogger Thomas J. Lucente Jr. cites foreign policy expert Christopher Preble in a post about the U.S. military withdrawal from Iraq.
  • Writing about the political situation in Honduras, Patrick Murphy draws from Juan Carlos Hidalgo’s analysis on the president’s removal.
  • At the Americans for Tax Reform blog, Tim Andrews cites David Boaz’s post that lists the “taxes proposed or publicly floated by President Obama and his aides and allies.”
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