April 2, 2012 2:00pm by David Farrar

Guest Post: US Healthcare – Obamacare before the Supreme Court

For those not paying attention to the titles and the tagline – note that this is a guest post from PaulL, long time commenter here, not from DPF.

Obamacare is before the Supreme Court at the moment, with the potential that it could be struck down. What is the argument, and why does this matter?

Firstly, I don’t claim to be an expert, merely an interested lay person. I’m sure many who comment on Kiwiblog may have something to contribute, and this thread should give a place to do so.

Obamacare was enacted as an individual mandate. Americans would be obliged to buy health insurance, if they did not they would attract a penalty, said penalty to be collected by the IRS. The Democrats could in concept have enacted instead a public health insurance system paid for by taxes, as much of the western world has, but they didn’t have sufficient political support to pass a bill with that structure, so instead they added compulsion on top of an existing insurance-based system.

A number of Republican states have taken exception to this mechanism, and are asking the Supreme Court to strike down aspects of the legislation on the basis that the Federal government doesn’t have the ability under the Constitution to compel citizens to engage in commerce. This argument hinges around the extent to which the Federal government is permitted to regulate commerce – whilst the Federal government has wide tax powers, it has more limited powers to regulate commerce.

The interesting bit of this to me is the political tradeoffs involved. It is quite possible to rewrite this legislation as a tax and rebate – citizens could have been subject to a tax to pay for their healthcare, with said tax being refunded as a credit if they purchase private health cover. The actual fiscal effect on citizens is the same – they need to buy health insurance, if they don’t there is an amount to pay to the government. And that construct apparently would be very constitutional. The problem is that Americans (rightly, in my assessment) have a strong aversion to new taxes, and if the law was written that way it would not have passed.

The Democrats are stuck – despite this penalty being collected by the IRS they argued strongly at time of the law being passed that it was not, in fact, a tax. Now, in front of the Supreme Court, they’d much rather be arguing that it was a tax, as that would make it much more sustainable. But they’d be accused of speaking with forked tongues if they did so.

This is important politically – if bits of Obamacare are found to be unconstitutional, the headlines that go with that would have negative impacts on Obama irrespective of the details of the political chicanery that got to this point, and irrespective of the value or otherwise of Obamacare. A decision should come down from the Supreme Court in June/July, which will be in prime campaigning season for the Presidential election.

This is also potentially important for health care in the USA. I’d personally argue that the bits of the legislation that make health insurance more affordable are the important bits, the bits that force people to buy it seem to me to be unreasonable extensions of government power (in the US context). I can understand the government taking measures to make health insurance more affordable, but if, even once it is made more affordable, people don’t want to buy it, why would the government be forcing them to do so? If the penalty is struck down, that doesn’t prevent the remainder of the legislation from continuing to have effect.

Certainly this will be an interesting circus as it moves along, and one that potentially will have the effect of denying oxygen to Obama at a key point in campaigning.