Updating Obamacare's Damage Estimates

COMMENTARY Health Care Reform

Updating Obamacare's Damage Estimates

Jul 13th, 2012 2 min read
Robert E. Moffit, Ph.D.

Senior Fellow

Robert E. Moffit is a senior fellow in The Heritage Foundation's Center for Health Policy Studies.

Following the Supreme Court’s Obamacare ruling, the Heritage Foundation’s Health Policy Director Nina Owcharenko says that Washington policymakers must revisit their cost, coverage, and spending projections. Coincidentally, the Congressional Budget Office (CBO) announced their updated analysis is to be released the week of July 23. Get ready.

First, forget CBO’s initial ten-year estimate of 32 million newly insured, with new Medicaid enrollment accounting for roughly half of the coverage. Because Congress enacted a mandatory Medicaid expansion that the Court declared unconstitutional, that number will shrink. The only question is by how much. Congressional liberals did not design seamless coverage based on personal choice of plans. Poor people get Medicaid under the law, whether they like it or not; and now some of them won’t get coverage at all. So, we have a new “donut hole.”

Second, forget CBOs initial estimates on compliance with the individual mandate. At first, CBO said just 4 million a year would pay the “penalty.” But Chief Justice Roberts’s bold rewrite of the mandate as a “tax” introduces a very different dynamic: “Imposition of a tax . . . leaves an individual with a choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.” And while persons might be fearful of incurring a “penalty” for unlawful behavior, even without criminal sanctions, they may respond differently to an optional “tax.” They simply decide whether they want the government- approved insurance and its taxpayer subsidies or whether they would rather pay the “tax.”

Urban Institute analysts estimate that about 33 percent of Americans are “exempt” from the “tax,” mostly because of their low income. Some of us are uninsured and most of us get coverage through our employers. But employers can always drop workers’ coverage, and will have powerful new incentives to do so. The newly dumped workers will get taxpayer subsidies for insurance in the government exchange, thus hiking the law’s cost. If they don’t like the “mandatory” insurance, they could pay the minimal “tax,” and save thousands of dollars per year in insurance costs. They could always rely upon the emergency room, or just buy coverage when they get sick and drop it again when they get well.

Not “like” the insurance? Yep. Another fly in the buttermilk is that nasty HHS benefit mandate requiring Americans to fund abortion-inducing drugs, among other things. Forcing persons to comply with rules that are unethical or violate their religious convictions is ugly business. Offended employers (not just Catholics) could drop the feds’ required coverage. By 2014, these firms would decide whether to pay the employer “tax penalty,” while like-minded workers could pay the individual “tax” for reasons of conscience. These workers could go bare, get some sort of “bootleg” insurance, or make some financing arrangement more economically or ethically acceptable.

Coercion begets contempt. Compulsory “pay offs” — in taxes or penalties — only render the law all the more odious. When Prohibition ended, H. L. Mencken, the great American essayist, sauntered down to the local bar and ordered a tall, cool glass of water, proclaiming it his first drink of water in years. CBO can’t measure such sentiments, but they’re real.

Sailing an ocean of uncertainties, CBO may chart a course with a range of estimates on spending and taxpayer costs, reflecting different assumptions. While they’re at it, CBO could also generate a per capita ten-year cost of the newly insured. Whatever they do, expect higher costs, more uninsured, or both.

First moved in National Review

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