The tortuous roots of the individual mandate will be tested this week as the Supreme Court hears oral arguments in the case regarding the Patient Protection and Affordable Care Act (PPACA), but it’s only one of the pieces the Justices will be hearing about the law.
In advance of the oral arguments, Government Health IT Editor Tom Sullivan spoke with John Graham, director of healthcare studies at the Pacific Research Institute about the individual mandate’s impact in Massachusetts, the state where former Gov. Mitt Romney signed a law passing such a mandate. Graham commented on how President Obama following that path could prove a mistake to both the health reform law and his reelection bid. he also pointedd to inherent landmines in the law.
Q: Why, since the individual mandate was originally a conservative idea, is it now so controversial?
A: This is one of the reasons why there’s so much confusion among the Republicans, especially now with the primaries. The source was really The Heritage Foundation, Stewart Butler, but they have rescinded that support. It’s obsolete, kind of like saying ‘I supported something in 1990 and if I’ve changed my mind since then it’s a little unfair to hold it against me.’ If you go to the website there’s an edict of revocation of their support for the individual mandate. So that’s why you go back and see Gingrich in the past expressing support for it. The political history is that during HillaryCare they thought they needed an alternative to a government run system, so there was a point when they threw up an individual mandate. But here’s the problem: The individual mandate, economically, is just a tax hike. The assertion by Governor Romney that there’s a bunch of freeloaders who are not health-insured and are abusing the system is unfounded in the evidence.
Q: Then what’s the reality in Massachusetts?
A: Most uninsured people are low-income so they can’t pay their bills anyway. Most high-income people, or even middle-income, have health insurance. So the people who are causing the problem are eligible for Medicaid but not enrolled and the other ones you can go after for the cost of their care, but you’re not going to get any money anyway. So it’s kind of pointless and that’s why you see the consequences in Massachusetts because if you’re a conservative like Governor Romney and you want universal coverage you can’t propose that the government universally cover everybody because that’s not conservative. So you assert an individual mandate based on the fiction that there’s a whole bunch of freeloaders that are going into emergency rooms and they cold pay their medical bills but they’re not. There’s not evidence supporting that.
[See also: Top lobbyists prep for Supreme Court healthcare decision.]
We have a huge Medicaid program and in Massachusetts since they passed the Romneycare bill, when you look at the uninsured people in Massachusetts and there were very few uninsured people in Massachusetts as a proportion of the population at the time, I think if you say ‘we’re going to fill in the gap. We’re going to impose universal care on people,’ and then the next step is that most people can’t satisfy the mandate because healthcare is so expensive they can’t afford it you say ‘oh, then, we’ll subsidize you,’ net-net the fraction of people who will pay the mandate penalty is going to be trivial versus the number of people who will get subsidies.
Q: What are the ramifications of that?
A: If you look at Massachusetts, spending has gone up half-again as fast as other states. Most people who are getting coverage through the Commonwealth Connector or whatever, they’re not paying a penalty, they’re receiving subsidies. So it’s absurd to consider the penalty as anything more than a sur-tax on high-income earners who don’t have health insurance, of whom there are very, very few people. So it’s a fundamental plank of the judicial lawsuits against Obamacare. They didn’t frame it as a tax in the PPACA legislation, they framed it as a mandate, as a penalty, then that goes beyond the Constitution. If they framed it as tax, if they tacked it onto the Social Security Act like they tacked Medicare onto the Social Security Act, the people on my side of the fight would not have had a whisper of a chance in the Supreme Court. But because they framed it as a penalty, which is almost unheard of, they’ve kind of gotten themselves into a box here.
Q: So that could potentially become a mistake on their part?
A: That’s one of their mistakes. The whole thing is a big mistake. But judicially it looks like the big mistake was to impose an individual mandate that goes beyond any enumerated congressional power. Conservatives are very big on that, liberals are not, and it’s only in the last few years that conservatives and libertarians have had any success on the Supreme Court. For many years it was just thought that Congress could do whatever Congress wanted and the enumerated powers were no longer relevant. But since certain people in the federal judiciary have knocked that back, here we are. We never thought we’d be in the Supreme Court and I think it invites the question: President Obama doesn’t have any problem proposing higher taxes on higher income people, so why did they define it as a mandate or a penalty in the bill and not a tax hike? It was so he could go on the campaign trail and say Obamacare is Romneycare. It’s kind of understandable that Governor Romney is tripping all over this issue and it plays to Obama’s strengths. Obama can say legitimately ‘this is a Republican thing, the individual mandate. It came out of the Heritage Foundation, was signed by a Republican governor in Massachusetts, so what are you guys whining about?’ In the political sense, the Democrats did it right. They did it very cleverly and took an argument away from us – or at least they took an argument away from Governor Romney, they didn’t take it away from the rest of us. Judicially, obviously, it’s causing them problems.
Q: The Supreme Court is not just about the individual mandate. There’s also the Medicaid piece…
A: The law is inherently contradictory. It has land mines. I’ll give you three examples. First, although Secretary Sebelius has pretty broad authority to give implementation grants to states to get exchanges up and running, she doesn’t have any spending authority to create federal exchanges. Second, she has – and this is a funny thing in the law – the second thing is that any carrier operating in an exchange has to be licensed by the state. So a state like Texas or Florida that is absolutely hostile toward Obamacare, they can threaten to revoke the license of a carrier that proposes to operate within an exchange. That would be a heck of a fight to see. And, third, the tax credit, the key thing of Obamacare, can only go through state exchanges, they can’t go through a federal exchange. This was discovered by Michael Canon of the Cato Institute. The IRS is writing regulations about how to channel tax credits through exchanges and Canon pointed out to them publicly that the law does not allow tax credits to flow through a federal exchange and the IRS said ‘that’s just a technicality we’ll work around that.’ The law is what the law is, it’s not for us to read the minds of the people who passed the law.
