Tag: Obamacare

IRS Illegally Expands Obamacare

To encourage the purchase of health insurance, the Affordable Care Act added a number of deductions, exemptions, and penalties to the federal tax code. As might be expected from a 2,700-page law, these new tax laws have the potential to interact in unforeseen and counterintuitive ways. As first discovered by Michael Cannon and Jonathan Adler, one of the new tax provisions, when combined with state decisionmaking and Interal Revenue Service rulemaking, has given Obamacare yet another legal problem.

Here’s the deal: The legislation’s §1311 provides a generous tax credit for anyone who buys insurance from an insurance exchange “established by the State.” The provision was supposed to be an incentive for states to create their own exchanges, but only 16 states have opted to do so. In the other states, the federal government established its own exchange, as another section of the ACA specifies. But where §1311 only explicitly authorized a tax credit for people who buy insurance from a state exchange, the IRS issued a rule interpreting §1311 as also applying to purchases from federal exchanges.

This creative interpretation most obviously hurts employers, who are fined for every employee who receives such a tax credit/subsidy to buy an exchange plan when their employer fails to comply with the mandate to provide health insurance. But it also hurts some individuals, such as David Klemencic, a lead plaintiff in one of the lawsuits challenging the IRS’s tax-credit rule. Klemencic lives in a state, West Virginia, that never established an exchange, and for various reasons he doesn’t want to buy any of the insurance options available to him. Because buying insurance would cost him more than 8% of his income, he should be immune from Obamacare’s tax on the decision not to buy insurance. After the IRS expanded §1311 to subsidize people in states with federal exchanges, however, Klemencic could’ve bought health insurance for an amount low enough to again subject him to the tax for not buying insurance.

Klemencic and his fellow plaintiffs argue that they face these costs only because the IRS exceeded the scope of its powers by extending a tax credit not authorized by Congress. The district court rejected that argument, ruling that, under the highly deferential test courts apply to actions by administrative agencies, the IRS only had to show that its interpretation of §1311 was reasonable—which the court was satisfied it had.

Cato and the Pacific Research Institute have now filed an amicus brief supporting the plaintiffs on their appeal to the U.S. Court of Appeals for the D.C. Circuit. While it is manifestly the province of the judiciary to say “what the law is,” where the law’s text leaves no question as to its meaning—as is the case here with the phrase “established by the State”—it is neither right nor proper for a court to replace the laws passed by Congress with those of its own invention or the invention of civil servants. If Congress wants to extend the tax credit beyond the terms of the Affordable Care Act, it can do so by passing new legislation. The only reason for executive-branch officials not to go back to Congress for clarification, and instead legislate by fiat, is to bypass the democratic process, thereby undermining constitutional separation of powers.

This case ultimately isn’t about money, the wisdom of individual health care decisionmaking, or even political opposition to Obamacare. It’s about who gets to create the laws we live by: the democratically elected members of Congress or the bureaucrats charged with no more than executing the laws that Congress passes and the president signs.

Halbig v. Sebelius will be heard by the D.C. Circuit on March 25 (the same day that the Supreme Court hears the Hobby Lobby contraceptive-mandate cases).

New CBO Numbers Show a Remarkably Simple Path to a Balanced Budget

A just-released report from the bean counters at the Congressional Budget Office is getting lots of attention because the bureaucrats are now admitting that Obamacare will impose much more damage to the economy than they previously predicted.

Of course, many people knew from the start that Obamacare would be a disaster and that it would make the healthcare system even more dysfunctional, so CBO is way behind the curve.

Moreover, CBO’s deeply flawed estimates back in 2009 and 2010 helped grease the skids for passage of the President’s failed law, so I hardly think they deserve any applause for now producing more realistic numbers.

But today’s post isn’t about the Obamacare fiasco. I want to focus instead on some other numbers in the new CBO report.

The bureaucrats have put together their new 10-year “baseline” forecast of how much money the government will collect based on current tax laws and the latest economic predictions. These numbers show that tax revenue is projected to increase by an average of 5.4 percent per year.

As many readers already know, I don’t fixate on balancing the budget. I care much more about reducing the burden of government spending and restoring the kind of limited government our Founding Fathers envisioned.

But whenever the CBO publishes new numbers, I can’t resist showing how simple it is to get rid of red ink by following my Golden Rule of fiscal restraint.

George F. Will Weighs in on the Halbig Cases

Last year, along with Jonathan Adler, I published this law-review article that explains how the IRS has now begun to tax, borrow, and spend hundreds of billions of dollars ultra vires – that is, without any statutory authorization from Congress. Today, George F. Will writes about our research, and the lawsuits that have sprang from it, in his syndicated column: 

Someone you probably are not familiar with has filed a suit you probably have not heard about concerning a four-word phrase you should know about. The suit could blow to smithereens something everyone has heard altogether too much about, the Patient Protection and Affordable Care Act (hereafter, ACA).

Scott Pruitt and some kindred spirits might accelerate the ACA’s collapse by blocking another of the Obama administration’s lawless uses of the Internal Revenue Service. Pruitt was elected Oklahoma’s attorney general by promising to defend states’ prerogatives against federal encroachment, and today he and some properly litigious people elsewhere are defending a state prerogative that the ACA explicitly created. If they succeed, the ACA’s disintegration will accelerate.

Pruitt is the plaintiff in, well, Pruitt v. Sebelius. I call these “the Halbig cases,” because even though Pruitt was first out of the gate, Halbig v. Sebelius is the farthest along of the four lawsuits that have been filed so far. 

Over at DarwinsFool.com, I tweak a couple of things Will writes about these cases, and give a little more context. For example, it’s not just four little words that prevent the IRS from taxing, borrowing, and spending those billions of dollars. It is a tightly worded set of eligibility rules that unequivocally precludes what the IRS is trying to do. Also, it is not accurate to say that these lawsuits would blow ObamaCare to smithereens. For more, including a classic Ferris Bueller clip, see here.

And click here for a comprehensive list of reference materials and commentary about the Halbig cases. 

The More We Learn about ObamaCare, the Less the President Wants to Discuss It

Remember how the more we learned about ObamaCare, the more we would like it? Well, it seems the more we learn about this law, the less President Obama wants to talk about it. He relegated it to just a few paragraphs, tucked away near the end of his latest State of the Union political rally speech. And while he defended the law, he closed his health care remarks by begging Congress not to repeal it, and asking the American people to nag each other into buying his health plans.

My full response to the president’s health care remarks are over at my Forbes blog, Darwin’s Fool. Here’s an excerpt:

Note what the president did not say: he did not say that [Amanda] Shelley would not have gotten the care she needed. That was already guaranteed pre-ObamaCare. If ObamaCare saved Shelley from something, it was health care bills that she couldn’t pay. It’s impossible to know from this brief account just how much that might have been. But we can say this: making health care more affordable for Shelley should not have cost anyone else their job. It may be that ObamaCare doesn’t reduce bankruptcies at all, but merely shifts them from medical bankruptcies to other types of bankruptcies because more people cannot find work.

Read the whole thing.

Actually, I should amend that. Making health care more affordable will cost some people their jobs, and that’s okay. Progress on affordability comes when less-trained people (e.g., nurse practitioners) can provide services that could previously be provided only by highly trained people (e.g., doctors). When that happens, whether enabled by technology or removing regulatory barriers, prices fall – and high-cost providers could lose their jobs. The same thing has happened in agriculture, allowing food prices to drop and making it easier to reduce hunger. My point was that we should not be making health care more affordable for Ms. Shelley by taxing her neighbor out of a job.

“We have to pass the bill to find out what’s in it”

The Affordable Care Act is like a big box of Christmas presents: you keep rummaging around in the peanuts and find hidden treasures. Or hidden costs, as it were. Here’s one I hadn’t heard of until today:

Office workers in search of snacks will be counting calories along with their change under new labeling regulations for vending machines included in President Barack Obama’s health care overhaul law.

Requiring calorie information to be displayed on roughly 5 million vending machines nationwide will help consumers make healthier choices, says the Food and Drug Administration, which is expected to release final rules early next year. It estimates the cost to the vending machine industry at $25.8 million initially and $24 million per year after that, but says if just .02 percent of obese adults ate 100 fewer calories a week, the savings to the health care system would be at least that great.

The rules will apply to about 10,800 companies that operate 20 or more machines. Nearly three quarters of those companies have three or fewer employees, and their profit margin is extremely low, according to the National Automatic Merchandising Association. An initial investment of $2,400 plus $2,200 in annual costs is a lot of money for a small company that only clears a few thousand dollars a year, said Eric Dell, the group’s vice president for government affairs.

“The money that would be spent to comply with this - there’s no return on the investment,” he said.

In my experience, vending machines shuffle their offerings fairly frequently. If the machine operators have to change the calorie information displayed every time they swap potato chips for corn chips, then $2,200 seems like a conservative estimate of costs. But then, as Hillary Clinton said when it was suggested that her own health care plan would bankrupt small businesses, “I can’t be responsible for every undercapitalized small business in America.”

Obamacare’s Atomistic Individualism

Lots of people are engaging in mockery and schadenfreude over the New York Times report that 

Many in New York’s professional and cultural elite have long supported President Obama’s health care plan. But now, to their surprise, thousands of writers, opera singers, music teachers, photographers, doctors, lawyers and others are learning that their health insurance plans are being canceled and they may have to pay more to get comparable coverage, if they can find it.

It’s a liberals’ nightmare:

It is not lost on many of the professionals that they are exactly the sort of people — liberal, concerned with social justice — who supported the Obama health plan in the first place. Ms. Meinwald, the lawyer, said she was a lifelong Democrat who still supported better health care for all, but had she known what was in store for her, she would have voted for Mitt Romney.

It is an uncomfortable position for many members of the creative classes to be in.

“We are the Obama people,” said Camille Sweeney, a New York writer and member of the Authors Guild. Her insurance is being canceled, and she is dismayed that neither her pediatrician nor her general practitioner appears to be on the exchange plans. What to do has become a hot topic on Facebook and at dinner parties frequented by her fellow writers and artists.

“I’m for it,” she said. “But what is the reality of it?”

But I noticed something that I haven’t seen any comments on: the way the Affordable Care Act is forcing people out of group plans and forcing them to enter the health insurance system as individuals:

They are part of an unusual, informal health insurance system that has developed in New York, in which independent practitioners were able to get lower insurance rates through group plans, typically set up by their professional associations or chambers of commerce. That allowed them to avoid the sky-high rates in New York’s individual insurance market, historically among the most expensive in the country.

But under the Affordable Care Act, they will be treated as individuals, responsible for their own insurance policies. For many of them, that is likely to mean they will no longer have access to a wide network of doctors and a range of plans tailored to their needs. And many of them are finding that if they want to keep their premiums from rising, they will have to accept higher deductible and co-pay costs or inferior coverage.

Libertarian scholars stress the importance of civil society. I wrote about it in Libertarianism: A Primer. David Beito wrote a whole book on the mutual aid associations that brought people together in social groups were replaced by “impersonal bureaucracies controlled by outsiders.” Tocqueville and his modern followers extolled the virtues of “mediating institutions” that stood between the lone individual and the all-powerful state.

Now it seems that Obamacare, perhaps unintentionally, is destroying some of those mutual aid organizations, those mediating institutions, in order to force individuals to deal directly with the state and/or the vast insurance corporations.

Left-liberals often accuse libertarians of favoring “atomistic individualism” – an absurd charge about people who regard cooperation as so essential to human flourishing that we don’t just want to talk about it, we want to create social institutions that make it possible. But now it seems we have another example of a big-government, left-liberal policy that is pushing people away from cooperation and community and toward atomistic individualism.

Obamacare’s Top 10 Constitutional Violations

Two years ago this week, I published an op-ed called “President Obama’s Top 10 Constitutional Violations.” Although it didn’t go into depth about any particular issue, it struck a chord (note to aspiring pundits: readers and media bookers like lists, particularly at year’s end).

There’s so much material to choose from for an updated piece on which I’m long overdue, but in the meantime the House Judiciary Committee had an important hearing last week on the president’s constitutional duty “to take care that the laws be faithfully executed.” My colleagues Michael Cannon and Nicholas Quinn Rosenkranz testified, as did GW law professor Jonathan Turley (who voted for Obama in 2008 and is not known to be libertarian or conservative), and their devastating testimony is a collective tour de force regarding this administration’s incredible and unconstitutional power grab. (My friend and frequent sparring partner Simon Lazarus of the Constitutional Accountability Center also testified, on the other side, offering a valiant if ultimately insufficient defense.)

Given the state of current affairs, the hearing focused on Obamacare, whose problematic rollout should have come as no surprise to those who follow this blog. Quite apart from the healthcare.gov fiasco – incompetent, sure, but it’s not unconstitutional to have a bad website – you simply cannot require expansive health “insurance” for all without regard to preexisting conditions and expect insurers not to cancel nonconforming policies or increase premiums. (Forget never running a business or caring about the Constitution; has nobody in the White House ever taken an economics class?)

After watching snippets of the hearing and reading the written testimony, I thought maybe I should start my “top 10 constitutional violations” update with the Affordable Care Act alone. But it seems that I’m not the only one thinking along these lines. Hot off the presses, at 10am today, the office of Senator Ted Cruz (R-TX) released its second report on “The Obama Administration’s Attempts to Expand Federal Power” – the first was on the Supreme Court’s unanimous rejection of the Justice Department’s more outlandish positions, a trend I’ve written about as well – titled “The Administration’s Lawless Acts on Obamacare and Continued Court Challenges to Obamacare.”

Here are the seven items the new Cruz report highlights:

Category One: Implementation Contrary to Statutory Text

  1. Unilateral grant of a one-year delay on all Obamacare health insurance requirements.
  2. Unilateral delay of the employer mandate.
  3. Unilateral delay of out-pocket caps.
  4. Allowing congressional staff to continue on government-subsidized health care.

Category Two : Pending Court Challenges

  1. Violates the Origination Clause because it’s a revenue-raising bill that originated in the Senate.
  2. Contraception/abortifacient mandate violates religious liberties.
  3. Expansion of employer mandate’s penalty through IRS regulation.

Add to those the individual mandate (which the Supreme Court struck down before Chief Justice Roberts rewrote and upheld the provision as a tax), the coerced expansion of Medicaid (which the Court made voluntary), and the Independent Payment Advisory Board (litigation ongoing), and you’ve got an even ten. And that’s without straining to find the constitutional defects buried in thousands of pages of legislation and hundreds of thousands of pages of regulations.

Forget PPACA, ACA, and Obamacare; what people really ought to call the healthcare law is the “Constitutional Scholar Full Employment Act.”