ObamaCare, Individual Mandate Tax and Medicaid Expansion

The individual mandate tax is a bad deal for young people. Their premiums will be much higher than market based, thus enabling the old to pay less as a result of what amounted to congressional arbitrariness and fiat.

Thanks also to the Supreme Court's decision in ObamaCare, the Medicaid expansion option for states will require each state in effect to choose between providing more for public education and insuring more lower income people. And taking funds from a federal government that in fact has no funds, other than borrowed ones, to grant. The federal government's financial cupboard is and has long been empty, regardless of pretending otherwise.

In simple terms, the laws of economics where choice and scarcity prevail haven't been repealed. They can't be. When we spend what we don't have, we have to either borrow more or reduce spending on something else we're currently funding.

We can't have everything, even if our "save the middle class" government says we can.

Now please consider the following two articles.

Health Act's Dismal Economics adds this to the discussion:

"Let the games begin—or rather, let the gaming of the system begin now that the Supreme Court has upheld the law that mandates the purchase of health insurance under the Patient Protection and Affordable Care Act. Other laws have yet to be heard from, including the laws of economics. . . . the reason the Act has to mandate that health insurance be bought by individuals lies in the economics of market pricing.

In a properly functioning market for health insurance, young people would normally pay lower premiums than older people, based on very different probabilities of needing medical care. But under the Affordable Care Act, the young are being asked to subsidize the old, with premiums lowered for the latter and hiked for the former. Hence the need for arm-twisting in the form of an individual mandate.

Whatever teeth that mandate will really possess depends greatly on the mix of incentives. Since the Act requires that no one be denied insurance based on preexisting conditions, there already will be no incentive to buy insurance in advance of any need to use it; once you need medical care, you simply buy in as though you were a customer right from the start.

That strategy wouldn't be very popular if the financial penalty for not buying insurance approached the cost of that insurance. But the penalties are far lower, starting at $95 or 1% of annual income in 2014, whichever is greater, and rising to $695 and 2.5% by 2016. By contrast, annual insurance costs would be about $5,000, at least. And at an assumed $50,000 a year income, pretty good for most people under 35, that 2.5% still comes to just $1,250."

And Reluctance in Some States Over Medicaid Expansion says this in part:

"Millions of poor people could still be left without medical insurance under the national health care law if states take an option granted by the Supreme Court and decide not to expand their Medicaid programs, state officials and health policy experts said Friday.    

Republican officials in more than a half-dozen states said they opposed expanding Medicaid or had serious doubts about it, even though the federal government would pick up all the costs in the first few years and at least 90 percent of the expenses after that.

While upholding the most hotly debated part of the health care overhaul law — a requirement that most Americans have health insurance or pay a penalty — the Supreme Court said in its ruling on Thursday that states did not have to expand Medicaid as Congress had intended — leaving a huge question mark over the law’s mechanism for providing coverage to 17 million of the poorest people.

In writing the law, Congress assumed that the poorest uninsured people would gain coverage through Medicaid, while many people with higher incomes would receive federal subsidies to buy private insurance. Now, poor people who live in a state that refuses to expand its Medicaid program will find themselves in a predicament, unable to obtain either Medicaid or subsidies.

That potential gap will probably lead to ferocious statehouse battles in the coming year, as states weigh whether to accept billions of dollars in federal aid to pay for expanded coverage. The health care industry, sensing the skepticism in some states, is preparing a campaign to persuade state officials to accept the money for coverage of the uninsured.

But already, governors in Kansas, Nebraska and South Carolina, among other states, have said they would have difficulty affording even the comparatively small share of costs that states would eventually have to pay.

Gov. Dave Heineman of Nebraska . . . indicated that he was against expanding Medicaid eligibility.

“As I have said repeatedly, if this unfunded Medicaid expansion is implemented, state aid to education and funding for the University of Nebraska will be cut or taxes will be increased,” Mr. Heineman said.

In South Carolina, . . . a spokesman for Gov. Nikki R. Haley, said, “We’re not going to shove more South Carolinians into a broken system that further ties our hands when we know the best way to find South Carolina solutions for South Carolina health problems is through the flexibility that block grants provide.”

In New Hampshire, State Representative Andrew J. Manuse said he and other Republicans were already working to block the expansion of Medicaid. “We can’t afford it,” Mr. Manuse said. “It’s as simple as that. Thank God the Supreme Court gave us an option.” "

Summary

It's going to take lots of money, and money we don't have at the ready, to insure more people with greater coverage, keep our various governments functioning, keep our public education system from falling apart and continue to pay "unfunded" retiree benefits for Social Security and public sector workers. And then there's Medicare, Medicaid and countless other underfunded government knows best programs as well. And while we're at it, let's not forget the post office, Solyndra and others.

My best guess is that reality will now begin to take center stage in the public discussion. How will we pay for all these goodies, admitting that they're all "nice-to-haves?"

We will now have to make choices about what's "nice-to-have" versus what's "necessary to have?" What we're willing to pay for, in other words.

The days of the free lunch are coming to an end, both here and in Europe.

So my overall take on the week's events is that a very healthy, necessary and long overdue national conversation is beginning.

And although perhaps initiated by the Supreme Court's decision about the "Affordable Care Act," the discussion will go far beyond that ruling.

A few of the discussion items will consist of the following: How big of a government, how to pay for it, what about the young versus old, public sector versus private sector benefits, emphasize private sector economic growth or government growth, how "progressive" will the tax system be, what rights will the states have, will we acknowledge that the federal government in fact has no money to share with the states, and countless other things.

In my opinion, this is all good stuff for We the People to discuss and decide. It's what self governing people should do. 

Thanks to President Obama, the Affordable Care Act, the Congress and the Supreme Court, we're in for some very interesting times --- and choices, too.

Just as it should be.

Thanks. Bob.