Saturday, December 26, 2009

CATO Just the Facts on Health Care Insurance Mandate

Five Health Reform Whoppers
by Michael D. Tanner

Michael D. Tanner is a senior fellow at the Cato Institute and co-author of Healthy Competition: What's Holding Back Health Care and How to Free It.

Added to on December 15, 2009

This article appeared on (AOL) on December 14, 2009.
When it comes to health care reform, the White House and its allies on Capitol Hill seem to live in an alternate universe.

The White House Council of Economic Advisers just released a report arguing that the reforms before Congress would reduce the growth in health costs, cut the federal budget deficits and produce thousands of dollars in benefits for the average family. The problem is that just a few days earlier a report from the president's own chief health care actuary concluded that the bill the Senate is considering would actually increase U.S. health spending by $234 billion over the next 10 years and hurt seniors' access to care.

But then, reformers have generally had trouble telling fact from fiction. Among the biggest whoppers:

"Facts," John Adams said, "are stubborn things."
Health care reform will reduce your insurance premiums. According to the Congressional Budget Office, the Senate bill does little or nothing to reduce insurance premiums. Even if the bill passes, premiums will roughly double by 2016, and keep rising after that. But for millions of Americans, the Senate bill will actually make things worse. According to the CBO, the bill would actually increase insurance premiums by 10 to 13 percent for Americans who don't receive insurance from their employers and buy their own insurance. These increases are over and above any increases that would occur if we did nothing.

Middle-class taxes won't be raised. The Senate bill raises at least 15 new or increased taxes totaling more than $493 billion. While some, like the increase in the payroll tax, would primarily hit the wealthy, many would fall solidly on the middle class. For example, the bill includes a 40 percent excise tax on so-called "Cadillac" insurance plans, that is, insurance that is more generous than the government thinks it should be. According to the CBO, roughly 19 percent of workers would initially find their plans subject to the tax. However, because the tax threshold is set to increase at a rate slower than medical inflation, as time goes by more and more middle-class workers will be hit by it.

Middle-class taxpayers would be taxed in other ways as well. The Senate bill would require everyone to buy a government-designed insurance plan, even if it were more expensive than their current policy. Failure to comply brings a penalty of up to $6,750 for a family of four. If the government took money directly from you, then turned around and gave it to an insurance company, everyone would agree that you've been taxed. How is that any different from the government mandating that you pay the insurer directly?

Michael D. Tanner is a senior fellow at the Cato Institute and co-author of Healthy Competition: What's Holding Back Health Care and How to Free It.

More by Michael D. TannerYou can keep your current insurance. The Senate bill contains an individual mandate, that is, a requirement that every American must purchase health insurance. But not just any health insurance will satisfy that mandate. To qualify, a plan would have to meet certain government-defined standards. Those standards may be more expensive than your current plan, may include benefits you don't want and may even have benefits you are morally opposed to. As noted above, failure to comply brings a penalty of up to $6,750 for a family of four.

It will only cost $848 billion. It is true that the CBO officially scored the bill as costing $848 billion. But much of the spending is back-loaded. The bill doesn't start spending until 2014, and only costs $9 billion that year. By 2019, the annual cost hits $196 billion. The minority staff of the Senate Budget Committee reports the cost is closer to $2.5 trillion over 10 years once all budget gimmicks are factored out. If you include costs shifted to individuals, businesses and state governments, the price tag could top $6 trillion.

It will reduce the budget deficit. The CBO does say that the bill would reduce the deficit by $130 billion over the next 10 years (which is less than the deficit the government ran last month alone). However, even that tiny savings depends on budget gimmicks and the willingness of future Congresses to make huge cuts in Medicare spending. In fact, the CBO makes it clear that it will be "difficult" to achieve the predicted savings.


Individual Mandates for Health Insurance: Slippery Slope to National Health Care
by Michael D. Tanner
April 5, 2006
Policy Analysis no. 565

Private insurance companies push for 'individual mandate'
Healthcare: Road to ReformsAs momentum gains for reforms, insurers hope to turn it to their advantage by supporting a proposal that everyone buy coverage. It would be a boost for the industry, which has seen enrollment decline.
June 07, 2009|Lisa Girion
Some may find it hard to believe that the U.S. health insurance industry supports making major changes to the nation's healthcare system.

Why We Need an Individual Mandate for Health Insurance
By Mark Thoma | Nov 13, 2009

Individual mandate insurance is unconstitutional
By KEN KLUKOWSKI | 10/20/09
The Senate Finance Committee-passed health care bill includes an “individual mandate” that Americans must buy an insurance policy or pay a fine, an approach that tracks President Barack Obama’s health care proposals. But if enacted into law, this mandate would be glaringly unconstitutional.

That’s because those refusing to get insurance would be subject to a fine, and refusing to pay would be a misdemeanor crime, punishable by another fine or even jail time.

States wield what is called police power: the authority to make laws for the health, safety and morality of their people. The federal government, on the other hand, has limited jurisdiction. If the Constitution does not grant a specific power to the federal government, then the 10th Amendment reserves it to the states or the people.

Plenty of constitutional provisions grant powers to the federal government. For example, most that involve conditions on persons receiving federal money come from the Tax and Spending Clause. Many of the rest come from the Commerce Clause, which empowers Congress to regulate interstate commerce.

But, as other lawyers have correctly noted, there is no constitutional basis for the individual mandate. People who decline coverage are not receiving federal money, so that mandate can’t fall under the spending part of the Tax and Spending Clause.

It also cannot be a tax. The federal government can levy only certain kinds of taxes. Article I of the Constitution authorizes excise and capitation taxes, and the 16th Amendment created the income tax.

September 25, 2009
Is an Individual Health Insurance Mandate Constitutional?
David Rivkin and Lee Casey this week argued in a Wall Street Journal opinion piece that the mandatory insurance provision in Senator Baucus's health reform bill is unconstitutional.

The argument goes like this:

1. Congress lacks authority under the Commerce Clause to require individuals to purchase insurance, because a "health-care mandate would not regulate any 'activity.'" The authors reference United States v. Lopez and Gonzales v. Raich.

Cato Policy Report, September/October 2007

Hazards of the Individual Health Care Mandate
By Glen Whitman

Glen Whitman is associate professor of economics at California State University, Northridge.

The latest fad in health care reform is the "individual mandate" — a law that requires individuals to purchase health insurance and threatens punishment for those who don't. Massachusetts, under the governorship of presidential hopeful Mitt Romney, has already created a health care policy with an individual mandate as its centerpiece. Gov. Arnold Schwarzenegger has proposed a similar plan for California. And politicians are not alone, as analysts from across the political spectrum have jumped on board. Even analysts who usually favor markets over regulation — like economist Gary Becker, legal scholar Richard Posner, Ron Bailey of Reason magazine, and Robert Moffit of the Heritage Foundation — have voiced support for the individual mandate.

Their support, however, is unjustified. The individual mandate will do little, if anything, to solve the problem of "free riders" whose health expenses are paid for by the rest of us. The mandate will do nothing to decrease the actual cost of health services. Worst of all, the mandate will create a set of political incentives that will likely drive up the cost of health insurance while impeding the adoption of more effective reforms.

Is Free Riding Really the Problem?

Why The Supreme Court Should Strike Down Health Care Reform’s Individual Mandate
John Carney | Dec. 21, 2009,

Medicare and Medicaid

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