Friday, June 29, 2012

Roberts Left Obamacare Broken. It is Obama Who Must Now Fix It.

Conservatives are criticizing Chief Justice John Roberts for not voting with the conservative branch of the Supreme Court and declaring the entire Affordable Care Act unconstitutional.  Now that a day has passed on the decision conservatives should evaluate what really happened in the Roberts’ decision.

First, the Court reframed the mandate to participate in Obamacare as a tax.  If you don’t have medical coverage, the IRS will impose a tax.  John Hennessey has some interesting facts about how the tax will work.   There will 21 million uninsured Americans, and of this number, 3.9 million will be subject to the tax.  This includes 400,000 people who make less than $11,800.  The tax will be $750 per adult and $375 per child each year.   This will raise between $2 to $ 3 Billion per year, which will not cover the health care cost of 3.9 million people.  Further, as Hennessey points out, since the mandate is now a tax, there is no longer a moral stigma not to buy a health care policy from a carrier.   The exercise of determining whether to buy one or not will become a simple cost-benefit analysis for most people, and since the costs of the penalty tax are far less than the cost of most policies, then it is fair to say that the number of people electing to pay the penalty will rise much higher than the current projected number of 3.9 million.  The result will be that the costs of health care for this group that exceed the corresponding tax revenues that the government will now pick up will be seriously high.

Second, the Court enabled the States to opt out of the plan when it comes to Medicaid.  There were 26 States who objected to the Obamacare provisions that required them to increase their participation in Medicaid or suffer penalties.  If the States did not invest additional dollars in Medicaid, they would loose the ability to participate in the Medicaid altogether.  The Court stuck down the penalties and States can continue their participation in Medicaid at current levels.   This will apply to most of the 50 States.  Even those who did not join the 26 States who petitioned the Court will see that the advantages of not raising support levels to balance their budgets.   The higher support levels will transfer to the Federal Government.  This increases the cost of Obamacare considerably.

These two facts by themselves mean that Obamacare is broken.  It will run huge deficits.  Yesterday, Senator Lindsey Graham from South Carolina said he wanted the Congressional Budget Office (CBO) to re-evaluate the cost of Obamacare under the new financial conditions that the Court imposed yesterday.  When the program passed the Senate the CBO said that the program would be revenue neutral, meaning the costs and the revenues would be equal and the Obamacare would not run a deficit.  That can no longer be said and we need a new cost analysis.

Since Obamacare is broken, it is up to President Obama to fix it.  It is his singular accomplishment and he sold it on the condition that it would not contribute to the national debt.   Since it will contribute to the debt, he must propose changes that will fix it.

Now for the politics of this.  Governor Romney, the presumed Republican Presidential candidate said that he wants to “Repeal and Replace” Obamacare.  The press is starting to question him as on what he will use as a replacement for Obamacare.    Fair Question.   But it is also a fair question to ask President Obama how he will fix his own Obamacare to bring it back to being deficit neutral.  This is the way he sold it, and he should fix it.

This is no small task for the President.  Republicans are angry at the President for his remarks from March 2009 when he said the mandate was not a tax and then he defended the mandate before the Court on the basis that it was a tax.   Senator Graham said that if he defended it before the Senate as a tax it would have received only 10 votes and would not have passed.  Clearly, the President has a credibility problem.  Add to this that he has not been serious about restraining the growth in the national debt, and his refusal to recognize that Obamacare has been a deterrent to job growth, and one can conclude that he has a major re-selling problem.

It was Queen Victoria’s favorite Prime Minister Benjamin Disraeli who said that inside every success lie the seeds of tomorrow’s problems.  Apparently, tomorrow has come for Obamacare.

On a related topic, I recommend George Will’s column on how the Court restricted the use of the interstate commerce clause for the mandate.  It is available at this link.

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