Tag: ppaca

‘The IRS Overstepped Its Bounds and Lacked the Power to Rewrite the Law’

Of course, that is just Reuters paraphrasing me:

Under the new healthcare law, individuals can shop and purchase health insurance through government-created exchanges. If a state refuses to set up its own exchange, the law allows the federal government to set one up instead. Due to a glitch in the original statute, individuals are only eligible for a tax credit if they buy insurance through a state exchange, not a federal one. That allows states to disrupt the system by refusing to set up their own exchanges. To fix this technical problem, the Internal Revenue Service issued a new rule, making the tax credit available for people who purchase insurance on federal exchanges. Conservative watchdogs, including Michael Cannon of the Cato Institute, say the IRS overstepped its bounds and lacked the power to rewrite the law. While no lawsuit has been filed yet, “we’re watching the whole exchange issue now,” said Diane Cohen of the Goldwater Institute.

One addition and three corrections.

  1. By spending that money illegally and issuing those illegal tax credits, the IRS is also triggering an illegal tax against employers (i.e., ObamaCare’s employer mandate).
  2. It’s not a “glitch.” It is a deliberate design feature.
  3. When the IRS lacks statutory authority to tax people or spend taxpayer dollars, but does both anyway, that lack of authority is not “technical problem.” It is called “taxation without representation.” And it is a very bad thing.
  4. I am not a conservative.

Maryland’s, Um, Enthusiasm for an ObamaCare Exchange

The Washington Post reports, “Few states have been as enthusiastic about the Affordable Care Act as Maryland.” For example, Maryland Lt. Gov. Anthony G. Brown (D):

We regulate markets. We have never created markets…

I’m confident we will be successful, but it doesn’t come without a healthy dose of concern that when this thing goes live, it will do what it is intended to do.

Odd way to express enthusiasm, really.

ObamaCare Lost on the Medicaid Mandate & Commerce Power. It May Yet Lose on the Tax Power.

Supporters of the Obama health law are incorrectly reading the Supreme Court’s ruling as a victory.

First, the ruling severely limited the Obama health law’s Medicaid expansion, effectively giving states the green light to refuse to expand their Medicaid programs. Coupled with the fact that the statute already enables states to block the other half-trillion dollars of new entitlement spending, the law is in a very precarious position.

Second, the Court ruled 5-4 that the individual mandate is not a legitimate use of the Commerce Power. That too is a defeat for the government, even if it is of no immediate consequence.

Third, while the Court upheld the individual mandate as a tax, that ruling may be vulnerable to legal challenge.

Chief Justice Roberts wrote, “The Federal Government ‘is acknowledged by all to be one of enumerated powers,’” and, “The Constitution’s express conferral of some powersmakes clear that it does not grant others.” So it is interesting that Roberts did not specify exactly what type of constitutionally authorized tax the mandate is.

As Cato chairman Bob Levy wrote in 2011, that’s not an easy thing to do:

Assume, however, the Supreme Court ultimately disagrees and finds that the penalty for not purchasing health insurance is indeed a tax. Nevertheless, say opponents of PPACA, the tax would be unconstitutional. They underscore that taxes are of three types—income, excise, or direct. Each type must meet specified constitutional constraints. Because the mandate penalty under PPACA does not satisfy any of the constraints, it is not a valid tax.

Income taxes, authorized by the Sixteenth Amendment, must (by definition) be triggered by income. Yet the mandate penalty is triggered by the nonpurchase of insurance. Except for an exemption available to low-income families, the amount of the penalty depends on age, family size, geographic location, and smoking status. So the penalty is not an income tax.

Excise taxes are assessed on selected transactions. Because the penalty arises from a nontransaction, perhaps it qualifies as a reverse excise tax. If so, it has to be uniform across the country (U.S. Const., Art. I, sec. 8). But the penalty varies by location, so it cannot be a constitutional excise tax.

Direct taxes are assessed on persons or their property. Because the penalty is imposed on nonownership of property, perhaps it could be classified as a reverse direct tax. But direct taxes must be apportioned among the states by population (U.S. Const., Art. I, sec. 2). The mandate penalty is assessed on individuals without regard to any state’s population. Hence, it is not a lawful direct tax.

On the last point, Roberts agreed: ”A tax on going without health insurance does not fall within any recognized category of direct tax.” But then what kind of constitutionally authorized tax is it?

The dissent suggests the Court has given this issue scant attention:

Finally, we must observe that rewriting [the mandate] as a tax in order to sustain its constitutionality would force us to confront a difficult constitutional question: whether this is a direct tax that must be apportioned among the States according to their population. Art. I, §9, cl. 4. Perhaps it is not (we have no need to address the point); but the meaning of the Direct Tax Clause is famously unclear, and its application here is a question of first impression that deserves more thoughtful consideration than the lick-and-a-promise accorded by the Government and its supporters. The Government’s opening brief did not even address the question—perhaps because, until today, no federal court has accepted the implausible argument that [the mandate] is an exercise of the tax power. And once respondents raised the issue, the Government devoted a mere 21 lines of its reply brief to the issue…At oral argument, the most prolonged statement about the issue was just over 50 words…One would expect this Court to demand more than fly-by-night briefing and argument before deciding a difficult constitutional question of first impression.

There is even less discussion about what type of constitutionally authorized tax the mandate is.

I’m not a lawyer. But it seems to me there may be room here for the same individual citizens who brought this case to again file suit against the federal government for trying to impose an unconstitutional tax. It may seem unlikely that Roberts would reverse himself on the Tax Power issue. Then again, since he never specified what type of constitutionally permissible tax the mandate is, perhaps voting to strike the mandate would not be reversing himself.

The IRS’s Illegal Employer Tax

With all eyes on the Supreme Court, whose ruling on ObamaCare’s individual mandate could come as early as today, almost no one noticed that last month the IRS imposed an illegal tax on employers of up to $3,000 per worker.

Jonathan Adler and I explain in today’s USA Today that this illegal tax is the indirect but very real result of the IRS offering ObamaCare’s tax credits and subsidies in health insurance “exchanges” created by the federal government, even though ObamaCare restricts those entitlements – explicitly, laboriously, and unambiguously – to Exchanges established by states.

That illegal action has the effect of imposing ObamaCare’s $2,000-$3,000 per worker tax (i.e., the “employer mandate”) on employers who otherwise would be exempt (i.e., employers in states that do not create an Exchange). Perhaps President Obama thought “taxation without representation” would be a winning campaign slogan.

If the Supreme Court fails to strike down ObamaCare’s employer mandate, Exchanges, and health insurance tax credits and subsidies, this thoroughly unconstitutional IRS rule will begin illegally taxing employers in 2014.

Reps. Scott DesJarlais (R-TN) and Phil Roe (R-TN) have introduced a resolution under the Congressional Review Act that would block the rule. Barring that, expect more angry employers to haul ObamaCare into federal court.

Adler discusses the IRS rule here:

The Decision Is Whether We Will Reform Health Care with Our Eyes Open

Donald Berwick may have mastered the science of health care management and delivery. (I for one would jump at the chance to enroll my family in the Berwick Health Plan.) But his recent oped in the Washington Post shows he has yet to absorb the lessons that economics teaches about government planning of the economy, such as through ObamaCare.

Berwick, whom President Obama recess-appointed to be administrator of the Centers for Medicare & Medicaid Services (CMS), sets out to defend ObamaCare from a fairly devastating critique by Robert Samuelson a few days earlier. Berwick responds, in essence, nuh-uh:

I saw how this law is helping tens of millions of families and is finally putting our health-care system on the right track…I have seen how improving care can reduce costs dramatically.

Berwick fails to see the world of difference between those two statements. Yes, in his private-sector work, Berwick has helped hospitals save more lives, kill fewer people, and save money in the process. I’m pretty sure he has saved more lives than I ever will.

But all he saw from his perch at Medicare’s helm was people happy to receive checks from the government, and a bunch of well-meaning bureaucrats setting goals. He did not see the costs imposed by those subsidies. As for goal-setting, this one sentence captures it all:

The CMS, for example, has set ambitious goals to reduce complications that, if met, would save 60,000 lives and $35 billion in just three years.

If. Met. A recent Congressional Budget Office review of Medicare pilot programs showed that Medicare bureaucrats set goals all the time. They never achieve them.

Berwick’s claim that ObamaCare “cracks down hard on waste and fraud” because “Last year the government recaptured a record $4 billion” is even more ridiculous. The official (read: low-ball) estimates are that CMS loses $70 billion per year to fraud and improper payments. The best evidence suggests that wasteful spending approaches $200 billion per year in Medicare alone. All that money that comes from you, John Q. Taxpayer. Berwick knows all these things. Yet he thinks you should be impressed that recovering a measly $4 billion is the best the government has ever done.

Berwick would never tolerate such willful blindness, shoddy reasoning, and (surprise!) poor results if it were his own money on the line. Which is exactly the point. In a free market, people spend their own money. At Medicare, Berwick spent, and ObamaCare continues to spend, other people’s money.

That is the main reason why markets are smart and government is stupid. And why otherwise smart people like Berwick can afford to keep their eyes shut.

New Hampshire’s Democratic Governor Signs GOP Bill Blocking ObamaCare Exchange

It is becoming apparent even to members of the party that gave us ObamaCare that helping to implement the law by establishing a health insurance Exchange is a bad deal for states. Yesterday, NewHampshireWatchdog.org reported:

Governor Lynch blocks Health Insurance Exchange for NH

(CONCORD) Governor John Lynch [D] this morning signed legislation blocking implementation of a health insurance exchange in New Hampshire. The Obama Administration has been urging states to set up exchanges under the Patient Protection and Affordable Care Act, known as ObamaCare.

Lynch has supported setting up a New Hampshire exchange, including the proposal in his State of the State address in February. Senate legislation setting up an exchange, SB 163, won Committee approval in January before stalling on the Senate floor. Opponents argued that a state-run exchange would put New Hampshire taxpayers on the hook for the costs of administering much of the federal health care law, while giving the state little flexibility from federal mandates.

Representative Andrew Manuse (R-Derry) introduced HB 1297 to prevent state officials from setting up an exchange without legislative approval. Josiah Bartlett Center President Charlie Arlinghaus led the charge for the bill, arguing that if federal officials wanted to set up a New Hampshire insurance exchange, they could pay for it themselves. (The Josiah Bartlett Center for Public Policy is the parent organization of New Hampshire Watchdog.)

Under the new law, state health and insurance officials may share information with their federal counterparts but may not take any steps to implement a state-controlled insurance marketplace.

Governor Lynch’s office did not respond to requests for comment on HB 1297.

It does not speak well of ObamaCare that Democrats are heading for the exits.

In this video, I explain why all states should flatly refuse to create an ObamaCare Exchange:

For the true ObamaCare junkies, I include my oral and written remarks to New Hampshire legislators back in February about the dangers of creating an ObamaCare Exchange (non-junkies should just stick to the above video):

And let’s not forget Jonathan Adler’s latest take:

Adler on How the IRS Is Rewriting ObamaCare to Tax Employers

Jonathan H. Adler is the Johan Verheij Memorial Professor of Law and director of the Center for Business Law and Regulation at Case Western Reserve University.  In this new Cato Institute video, Adler explains how a recently finalized IRS rule implementing ObamaCare taxes employers without any statutory authority.

For more, see this previous Cato video, “States Should Flatly Reject ObamaCare Exchanges”:

See also our November 2011 op-ed on this IRS rule that appeared in the Wall Street Journal.