A federal judge is hearing arguments that health care reform violates the constitution. In particular, states are challenging the requirement for individuals to buy health insurance. How key is this requirement for the entire law? How nervous should reformers be?
Let's step back. You can think about the health care overhaul signed by President Obama this year like a three-legged stool supporting universal quality health care. The law (1) requires everybody to buy care to spread costs, (2) prohibits insurance companies from denying sick customers and (3) gives money to folks who can't afford insurance. Without the first leg, insurance companies would jack up premiums even higher. Without the second leg, insurance companies could continue to deny coverage. Without the third leg, families could go bankrupt from being forced to spend too much on insurance.
That's why the legal case against Leg One, the universal insurance requirement, is important. Currently the law says that if you don't buy health insurance, the government will fine you. The legal challenge against that penalty falls under the Commerce Clause, which allows the federal government to make laws that impact inter-state commerce. Health care is almost surely "inter-state," since Americans move between states all the time. But is not buying health care a commercial activity, or is it, by definition, inactivity?
That's for lawyers to lawyer and judges to judge. But what happens if judges find against the administration and lop off Leg One? The government will look for some way, besides a universal mandate, to force everybody to give up some money for health care. Quite often, "some way...to to force everybody to give up some money" is called a "tax." So Matt Yglesias says health care reform won't necessarily fall, because the government can always turn the punitive health care fine into a broader health care tax. He explains:
If Justice Kennedy says congress can't incentivize insurance purchasing through this channel, congress can instead raise taxes on everyone and then immediately return the tax in the form of a "health care voucher." Nobody will be mandated to use the voucher on an ACA-compliant insurance plan, but as the voucher will be non-transferrable and generally worthless for any other purpose the incentive will be created.
Technically, I suppose that it is possible to create a new tax that would come back to tax payers in the form of a health care voucher. Essentially, the government here would act as a clerk, accepting money and turning it into a ticket that gets Americans into the amusement park of our health care system. But there are two things I'm not clear about here. First, Americans spend inconsistent amounts of health care out-of-pocket because most of the insured get their tax-deductible plans through their employer. So why would they accept a tax that would only come back to them as a ticket for health payments?
Second, any plan that begins "congress can instead raise taxes on everyone" should give Democrats nightmares. Congress does not like raising taxes, especially on everyone. See, for evidence, the last 20 years of American democracy. Conservative Reihan Salam loves Yglesias' idea precisely because it would make the cost of universal health care seem extraordinary, even though most of the money would be moving from our wallets back to our wallets. Congress might balk at the new tax, causing insurance companies to complain that they're being forced to provide expanded services without the guarantee of an expanded consumer base. Not a pretty picture.
I'm doubtful that the courts will overturn health care reform but uncertain that a vote against Obama's insurance mandate can be easily fixed.
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