Obamacare faces Supreme test – Pacific Research Institute

Obamacare faces Supreme test

The Supreme Court on Monday begins hearing what could be one of the most important cases in our country’s history. The nine justices are set to determine the constitutionality of the “individual mandate” included in the president’s health care bill, passed two years ago this month.

The mandate requires that all adults purchase health insurance or pay a penalty/tax. Proponents of the health care law say that the specific policy outcome the individual mandate is designed to achieve establishes its constitutionality under the Constitution’s Commerce Clause, which gives Congress the power to regulate interstate commerce.

But there is a major problem here: according to the government’s own data, it won’t achieve those ends.

My organization, the Pacific Research Institute, in conjunction with Docs4PatientCare, the Benjamin Rush Society, the Galen Institute and Angel Raich, a cancer patient who played an important role in the previous Supreme Court case dealing with the commerce clause (Gonzales v. Raich) – which dealt with the growing of marijuana for personal medical use – have submitted an amicus brief. We detail in the brief the precise ways in which the individual mandate fails to meet its key mission – reducing the cost of uncompensated care and shifting the cost from the uninsured to the insured.

Under the federal law EMTALA, hospitals are required to treat anyone who shows up at an emergency room. But for those without insurance, it has the effect of dramatically raising insurance rates for those who have insurance coverage.

The Kaiser Commission on Medicare and the Uninsured estimates that about 50 million uninsured Americans are responsible for about $43 billion annually in uncompensated care. To cover the costs of the uninsured, the average American family pays an additional $1,000 in the cost of their insurance.

The idea behind the individual mandate was that it would dramatically reduce the number of uninsured, thereby dropping the cost of uncompensated emergency room care and hence lowering overall insurance premiums for the insured.

The requirement’s advocates have invoked the Constitution’s commerce clause as justification for the government stepping in and fixing the problem of cost shifting. So if it can be shown that the individual mandate doesn’t actually fix the problem of uncompensated care – or, even worse, actually exacerbates the problem – then the government’s case disintegrates.

And exacerbate the problem is precisely what the individual mandate does. The bulk of the newly insured under this rule are going to obtain their coverage through Medicaid, the program for low income Americans. It is estimated that the mandate only changes the behavior of 16 million uninsured who consume at most $9.5 billion in uncompensated care. Because only 6.5 million of the 16 million uninsured will enroll in Medicaid, rather than obtain private insurance, they will actually consume more uncompensated care than the entire 16 million people did without insurance. This results in a net increase in uncompensated care of $3 billion.

This is hardly the result that the designers of the Patient Protection and Affordable Care Act expected when they rolled out the bill.

This program funded jointly by the federal government and the states for low-income Americans will, according to the Congressional Budget Office, cost in excess of $800 billion by 2022, almost double the cost today. Medicaid is now a bone fide middle-class entitlement.

And here’s the problem. Medicaid reimbursement rates to doctors, hospitals, nurses, and other care providers on average are 72 percent lower than the amounts paid for treating our seniors on Medicare, which itself pays only 80 percent of that paid to private insurers. On average, Medicaid reimburses at only 58 percent of what private insurers pay. Because of these low rates many doctors in this country actually lose money by treating patients enrolled in the program and as a result refuse to treat such patients.

Hospitals respond to artificially low Medicaid compensation precisely the way they respond to uncompensated emergency room care – they raise prices for everybody else.

The mandate therefore fails to achieve the very policy goal its own proponents have proffered. There is a deep disconnect between the problem that “reformers” have identified as grounds for congressional action under the commerce clause, and the actual effect of their preferred policy.

This week the Supreme Court has a once-in-a-generation opportunity to right an egregious legislative wrong. The individual mandate was a bad idea in conception and will prove disastrous in execution. It should be struck down as unconstitutional.


Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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