The Individual Health Insurance Mandate and Taxes
One day soon, I would like to walk into my neighborhood supermarket, load up my cart with goodies and walk out the door. When I’m confronted by security about the matter of paying for the stuff, I’ll just tell them to make everyone else in the store pick up the tab. If I lived in Virginia, I’d tell ‘em to go see Attorney General Ken Cuccinelli, who says I don’t have to pay.
Well, that's not exactly what he says, but bear with me. Cuccinelli is one of 11 GOP state attorneys general arguing that it is unconstitutional for the federal government to require everyone to buy health insurance (as the new health law does). Virginia, indeed, has gone a step further and made it illegal to require anyone to buy health insurance.
I won’t get into the constitutional issues (they are way beyond my pay grade), but the economics is worthy of note. And my crude grocery store example gets to the core of the debate over whether the government can “make” us buy health insurance by taxing us if we don’t.
Conservatives like to argue that health care is not a right. But, in fact, it is. For years, federal law has required most hospitals to accept patients into their emergency rooms whether or not the sick and injured have the means to pay. If you run your car off the road and break your leg, the EMTs don’t demand to see your insurance card or ask, “credit or debit?” They trundle you off to the nearest hospital–which must fix you up.
This care is, of course, not free. Those of us who are insured pay for it. Indeed, the medical business survives on the black art of cost-shifting—that is to say, spreading the costs of those who can’t (or won’t) pay to those who can.
Thus, a modest proposal: Virginia and other states that ban the individual mandate should also exempt hospitals and physicians from any obligation to treat the uninsured. EMTs should demand upfront cash before scraping you off the road. You pays your money, as they say, and you takes your choice.
Keep in mind the rest of us are taxed by Mr. Cuccinelli’s unwillingness to buy insurance in other ways as well. For instance, if the young and healthy refuse to purchase coverage until they need care, premium prices for the rest of us rise. In that world, I will, in fact, be paying a tax on your refusal to buy insurance. Under the new law, you pay the tax. That, it seems to me, is how the incentive ought to work.
Finally, I can’t help but wonder if states barring the mandate could find themselves with no insurance coverage at all. Here’s why: Insurers would still be required to sell to all comers and still could not underwrite for health status (another key provision of the new health law). If they must sell to all, but only the sick buy, the insurance market will fall into what is happily called the death spiral. Premiums will keep rising as only those most in need of insurance buy, until coverage becomes unaffordable for nearly everyone and insurers finally abandon the market. Remember, in the health debate it was the insurance industry, not those wacky Democrats, that demanded tough penalties for non-buyers.
Lots to chew over here. Meanwhile, I’m off to the grocery store.
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This care is, of course, not free. Those of us who are insured pay for it. Indeed, the medical business survives on the black art of cost-shifting—that is to say, spreading the costs of those who can’t (or won’t) pay to those who can.
Your grocery store analogy is fatally and tragically flawed. Just awful. The main thrust of your article – “federal law has required most hospitals to accept patients into their emergency rooms whether or not the sick and injured have the means to pay” – is at best a misrepresentation; at worst it's a guess you made without taking the time to research your main point.
There is so much factually incorrect, logically flawed, and poorly written in this article that I'm shocked it hasn't been pulled from the site.
The idea of a mandate is not a bad idea. But when the penalty is so low, it encourages potential problems, and ultimately, the dismantling of our current health care system.
The government can absolutely require that you get rid of your automobile – or at least make your operation of it contingent on a safety and emissions inspection. I spent an hour yesterday taking care of such things. They could ban them on public roads and ban the fuel that produces pollution under both the “post roads” and “interstate commerce” clauses of the Constitution. You may claim that this is Socialism, but your quarrel would be with Messrs. Madison, Hamilton and Adams, not Mr. Obama.
If health care isn't a right, then explain EMTALA?
Health care is not “in fact” a right. Not according to the concept of rights in our Constitution. Just because the government requires that health care be provided in emergency rooms does NOT make it a right. It is a service or a good. Health care has to be provided by someone, at a cost. Rights are not like that, and government does not create new rights.
The Food analogy works best in comparison to health care.. The auto Insurance does not.. I can decide NOT to drive, thus I don’t need Insurance, but if you are going to require me to buy auto insurance to help defray the cost to everyone else then it matches perfectly.
The problem with high costs in health Insurance is only partially due to the ‘Uninsured’ using the system and skipping on the bill, one of the main reason for the high cost is the cost of ‘Malpractice Insurance’ the doctors have to pay… example: Mr. J*, filed suit against his doctor for misdiagnosing him (Dr. G* used the procedures outlined by Mr. J’s insurance company and came to a ‘GOOD’ decision based on the results of the tests ‘Required and Allowed’ my the Mr. J’s insurance. In the Dr’s ethic’s hearing he was UNAMASLY found in the right) BUT…. Dr. G’s Malpractice Carrier deemed it ‘Cheaper’ to pay the suit then try to fight it. Now Dr. G’s Premium has been increased due to a ‘Paid Claim’. Dr. G had no choice in the decision weather to fight or pay.
“the government should tax us and provide us with health care like all other civilized nations on earth do” Is that why those Nations Health Care Systems are going broke… Women in those countries diagnosed with breast cancer have a 50% greater chance of dieing before receiving care then in the US… Other ‘Civilized Nations’ like Canada have removed life proven saving drugs from the system because they are too expensive… Since when does the US follow other countries???
If the Federal Government can mandate that everyone must buy Health Insurance, and not just ANY insurance Health Insurance that meets the ‘Governments’ standards – ( This because a few people are cheating the system and causing problems for the rest of us- Those that CAN’T Afford H/I are NOT addressed in the Health Care Bill but only allotted to, to gain sympathy-READ THE BILL) then what’s stopping it from mandating everyone must get rid of their automobiles – (because they are dangerous, they are polluting the environment, killing and maiming people in accidents, a few people are cheating the system –now insurance, Insurance fraud, no licenses’, no registration and causing problems for the rest of us) – and buy a Horse and Buggy that meets the Governments standards (by the way, the government owns the Buggy factory –it’s the only way they can guarantee the standards are meet).
Now we are into Socialism – And as they (Pres. Obama, Senator Max Baucus, Congressman John Yarmuth of Kentucky, & Senator Harry Read) have now admitted : This bill moves is based in Redistribution of Wealth. If that isn’t Socialism, I don’t know what is…..
I really hate Stupid people that only look at the immediate now and not the future…
Everyone thought it was great when Hitler removed firearms from the general public… until they had no way of stopping him from taking over their country!
If “rights” create an obligation for others to provide against their will as this article proposes, then what about my right to speech–I want government to provide me with a radio station, free press– I want a new inkjet, religion–I want tax dollars to build me a church, bear arms –I'll take a AK47-to be secure in my effects–I've a lot of those. If “rights” mean that we can take forcefully from our fellow citizens to provide them, then let's start with the enumerated rights. When providing to others in need is a voluntary act based on concern that is charity. When it is coerced it is violence. Is the solution to problems of healthcare violence?
Hospitals have a billing problem with some uninsured patients and its a sad state of affairs when the best idea our wise men and women can think of is to require everyone to have health insurance. Since I spent most of the last decade either uninsured or covered by a low cost high deductible health insurance plan, universal health care looks a very expensive solution for me. My family was very savvy about our health care costs and now we are going to be penalized for our success. For the low income people already eligible for Medicaid or SCHIP, the universal health care mandate does not help them. The problem has always been to get them to take advantage of existing services. The universal health care mandate does not help our illegal aliens. When you narrow the uninsured patient problem down to the American citizens who earn too much for Medicaid, cannot get health insurance at work, and are unwilling or unable to make any payments for their health care services, this seems to be fairly extravagant solution to a hospital billing problem. This solution comes with a lot of constitutional baggage. When does a requirement to purchase health insurance that is enforced by the IRS cross the line and become a tax. It sure looks like a tax to me. Frankly, the only folks excited about the universal health care mandate are the insurance companies, hospitals, and the Democratic party faithful who want to beat on their chests for five minutes. In the end we still have a health care reform that does very little to reform health care costs. We substitute one set of problems for a different set and call it progress.
What a fatuous justification for an individual mandate – that people who opt not to purchase something are in effect imposing a tax on those who opt to purchase it. This is basic supply and demand – if there's limited demand, price goes up. Not everybody has the same demand for health care services. A mandate seeks to artificially increased demand beyond what the market would normally support.
Suggesting that people who do not share your priorities are punishing you by making it more difficult for you to address them imparts a hostile intent that is not present; it is not a serious argument. Rather, it is a flimsy pretext to guilt people into subsidizing a service for which they have no legitimate need.
I disagree, all a person should have to do is show financial responsibility. Most people would use insurance just like they do on autos. Other means should be allowed such as MSA that would also serve as retirement if not spent on medical. Posting a bond to cover the cost. There are others methods also.
If the IRS collects it on your 1040, its a tax. While medicine and insurance are matters of intrastate commerce, they are a factor in interstate commerce – at least based on precident. Because the matter of subsidies is part of the federal tax code as well, A16 is also applicable.
The Congress and Courts have been very careful about laying out the lattice of federal commercial and tax authority, as the attorneys general are about to find out.
Hey, I'm all for them winning, since their victory won't vacate the entire law, just the mandate (due to a Severability Clause in the Act). This will result in the Death Spiral Howard talks about – which means before any other solution is found, the insurance companies will be lining up for TARP relief and liquidated into a single payer plan under the broad authority of the TARP law.
In other words, regarding mandates – go ahead, make my day.
Hi Howard,
I think you need to give deeper thought on this subject. Equating the purchase of foodstuffs to healthcare is specious, at best.
Food is needed daily, is readily available, and costs relatively little. Healthcare is needed only when something goes wrong and the costs are extremely high.
Furthermore, medicine is a social calling with ethical demands placed on it practitioners. The selling of food is a business whose sole model is based on profit.
Don't confuse Federal mandates on hospitals with the right to health-care. Hospitals are businesses and are subject to numerous Federal, State, and local rules and regulations.
I've heard lots of talk about how the uninsured drive up costs, but I fail to see how the equivalent of pro bono work drives up health care costs. Do you really think it costs a doctor thousands of dollars to perform an MRI? What a joke. It costs next to nothing. Only if you consider the opportunity cost of treating the unisured vice insured would you see additional 'costs'. Besides, I thought all doctors should be doing pro bono work.
Lastly, healthcare costs will continue to rise as long a healthcare providers know they have almost unlimited funds to extort from the health-insurers and governments. There is tons of abuse within the insurance businesses and these are reprehensible, but the true problem lies with those who set the prices, not those who are the middle men.
Regards,
Jason
PS. Constitutional issues are not above anyone's pay grade. The law is written for everyone and intended to be understood by everyone.
The problem with the tax is that it is not a tax on income, therefore does not fall into the safety of the 16th amendment.
As for the necessity of a mandate, that is not sufficient grounds for a federal law. The burden of proof for federal laws is on the federal government to provide what part of the Constitution grants authority. This is because the federal government only has the enumerated powers within the Constitution, and no others.
One wonder whether the attourneys general will also take fire at state laws that require auto insurance, and mortgages that require flood insurance.
Hot thread!
The individual mandate is enforced based on the right to tax. People who have insurance are exempt from the tax. The 16th amendment takes care of the legal agrument. The moral argument against mandates has some merit, however it violates the iron law of necessity – if you have pre-existing condition reform than if there is no mandate or it is too low (which is, in fact, the case) you will have health insurers go broke as soon as this fact is apparent to the stock market.
The most interesting spectacle we shall see is the joining of both liberals and conservatives opposing mandates, albeit for different reasons. Liberals still want single payer and the quickest way to get it is to point out how likely it is to Wall Street that mandates are too low. The insurance companies' only recouse will be TARP, which will liquidate and create a single-payer program (or at least a public option – indeed, AIG probably has an insurance company – the smart move would have been to NOT liquidate it and expand it into one.
Eventually, the consensus will be for Single Payer Catastrophic. I talk about this on my blog (and won't repost it here, since this page will be getting longer until it is shut down). Click on the usual place to read the entry.
Great, great distinction – glad someone called it out…
I have a huge issue with the mandatory coverage. It is a rights issue, and feels wrong in every sense of the word. There is a difference between government programs and being forced onto a private industry. This is health care law is very Randian.
But if I am forced to buy a product I do not want I am going to fight it in the most devastating way…….. I am going to USE IT! Every ache, every pain, every head ache, every sore throat. Drive prices up for everyone until we get real reform. I will encourage others who do not want it to do so. No one is going to save on there insurance because of me. Even a completely socialized system is better than this.
Going back to the grocery store. What if you have a garden? I know a couple Hmong families who completely live off thier gardens and fields. (Plus chickens) Is it fair to charge them extra to help support everyone else in the pool? Now what about those that are healthy and set a small amount of money aside for the “just in case” scenario. (I do, and I am by no means rich) Chances of catastrophic injury are almost nil unless I am in a vehicle (which I do have insurance for that covers me.) I have about enough cash to cover a broken bone, if not I can take out a loan, and pay it off.
“Everyone” doesn't pay for the armed forces. Only about half the population pays income taxes.
I don't have an issue with STATES mandating insurance coverage. I do have an issue with the federal government doing so. This is the reason we have separation defined in the constitution. As demonstrated with both medicare and social security, the federal government has shown a lack of ability to responsibly administer funding for social welfare programs. They would much rather steal the money and apply it to their own special interests. I see no difference with this program. Remember if the federal government goes broke we all have to suffer the consequences.
Fuzzy thinking at it's best. Should we require everyone to pre-pay for food each week, offsetting the cost of food stamps and making sure everyone gets 3 meals a day? Should we require everyone to pay for a bus pass, since most bus systems run at a deficit? Just sign over your paycheck to the government and go pick up whatever you need without restriction at the local grocery store, car lot, hospital, or bank.
How about just having everyone save a portion of their paycheck for retirement? Oh wait, we have that !! Its called social security. Except the government has mismanaged and stolen all that money so it will not be there when you need it. Thus it goes with all government programs.
Everyone in my state (California) who drives cars is forced by the state to buy auto insurance. And the state sets the minimum level of auto insurance you must have. No one is thrilled about the idea of having to pay auto insurance but they do. If we accept the need for everyone to have auto insurance, isn't it even more important that everyone have health insurance?
A way oversimplification, Mr. Gleckman. I'd say anything to do with writing about health insurance is over your pay grade. “Most hospitals…”? A misnomer. And the ones that may treat an uninsured patient, well, their bill collectors will be after the patient's hide. To carry on your inane fable: You may take your groceries out of the store, but some representative of the grocery store is going to be waiting to take your car, your bike, your shoes, whatever you've got, until the bill, with interest, is paid.
And now I'm off to see what the E.M. has to say about this cancerous growth.
Yours truly,
adaylate&a$short
Yes, health care IS a right. So the government should tax us and provide us with health care like all other civilized nations on earth do. Making us by a free market product from a for-profit shareholder, private corporation is not the way to go about doing this and this part IS unconstitutional.
No hospital is required to treat people who cannot pay for the services rendered. EMTALA only requires that any hospital which chooses to accept Medicare as a form of payment must also agree to provide stabilizing emergency care to all comers without regard to financial status. It is the choice of hospitals whether or not to provide free care.
The free rider problem only exists so long as hospitals feel it is to their benefit to accept Medicare.
I agree exactly. What if I don't want to pay for the armed forced or other things i'm 'forced' to pay for. I wasn't for the Iraq war, yet I was forced to pay for that. Why do people get all angry about helping others not die, but don't care about murder?
Health for all is an economic necessity – if you discard the sick and old then why bother living in a community at all? Most people will have short periods of sickness, but we've said goodbye to the days of a life expectancy of 40years (well, Zimbabwe hasn't) and we are a whole lot richer because of it.
I notice nobody has questioned the Government's right to force everyone to pay for armed forces, and even to pay for state and federal government? Why is that?
Lets take your grocery analogy to task –b/c this is actually my favorite analogy. Everyone needs to eat, right? Indeed eating is even more important the healthcare. So then, why do we not have food insurance? You know, in case we loose our income and no longer can afford food. Indeed this happens all the time, and we taxpayers are all paying for it in the form of food stamps. Nonetheless food prices aren't going through the roof. Why is that? Well, lets say there were food insurance. But as with health insurance today, it doesn't just cover emergencies, but everyday care –got to make sure people are getting good food! Now you can go to the grocery store and the first thing you will notice is that there are no prices on anything. Of course not, insurance is covering it. So you fill our cart with whatever and as much as you want. Except, wait, you can only get things on your plan. So no Kellogg's cereal for you! Oh well, guess you can eat General Mills. So after you gather all this food, you roll through checkout where the grocery clerk checks over your food selection to make sure it meets all the insurance requirements –lots of paperwork involved. But no money is needed, except for a small co-pay if you have that kind of plan. Of course you paid for the food with your premium, which isn't cheap, but hey you got a hell of a lot of food! You notice some poor man in that uninsured line complaining about the cost of apples –something about $50 apples. You rarely look at the details of your monthly food statement of course, but when you do you notice that apples are indeed about $50 for the uninsured, though your insurance company only paid the grocer a negotiated price of $5 for your apples. So now you are really feeling bad for that uninsured person. They can't afford food! What to do. Over the years your premiums keep going up. It's getting too expensive. You hear that that reason is b/c people who can afford it are not buying food insurance, driving up your premium when they get desperately hungry and get their emergency food (er… stamps?). So what to do? Ah. No problem. We make them buy food insurance. And while we're at it, for all those poor people who can't afford it we give tax credits, so they can buy insurance too. All fixed! Right? Right?
What is wrong with this guy? If this is how christians prioritize their values-with money taking precedent over empathy-then I am ever more thankful to be a 'heathen'.
Also, if insurance were like a casino, there's an easy way to win. Just buy some life insurance, keep it for a year or two, then commit suicide.
And yet, people buy life insurance and do not hope to “come out ahead” in the end.
You're wrong. Insurance isn't a casino. Its risk management. You're not hoping to come out ahead on insurance — you're just trying to spread the costs out predictably.
Insurance is more like having your heating bill on a budget amount where you pay the same amount every month, rather than paying more in the winter and less in the summer.
I'm sure there's some validity to what you're saying, but my main problem is the following. Insurance companies work much like casinos, people put up money hoping to “outsmart the system” and gain something in return (more money/cheaper healthcare). In the end, however, the house always win. Neither casinos nor insurance companies would be in business of gambling or insurance were a worthwhile proposition. This bill makes it legal to force people to gamble. In your grocery store analogy, it forces people to buy food, even if they're not hungry.
Howard, you explained well how the mandate for emergency care creates economic forces to impose further mandates. That's what happens when you impose non-market solutions on a problem: the market pushes back.
However I think your argument is beside the point. The state legislators are resisting the concept of a federal mandate to purchase insurance because it's an unprecedented attempt to control private decisions. (Does the right to privacy not apply to one's medical decisions, including the decision of how to pay for one's medical care?)
This particular fight is about principle, not dollars. No economic case will make any difference to either side. The outcome will be decided by raw political power and ultimately by public opinion. Economists and policy wonks might as well step aside, because nobody cares what we think.