The Health Care Mandate: If it seems Like a Tax it is a Tax-Becker

In the past I supported a health care mandate that would require everyone to have minimal insurance against catastrophic health events, such as cancers, that are very expensive to treat. Catastrophic insurance alone is pretty cheap since they are rare for younger persons, the main ones not covered either by private insurance, Medicare or Medicaid. Since the great majority of individuals and families could afford to pay for such catastrophic coverage, only the real poor need have this coverage subsidized by the federal government.

The argument I gave in support of such a mandate is that individuals without insurance who develop a catastrophic medical condition would impose significant burdens on those with insurance by raising the cost of insurance to everyone. But research (see the Urban Institute’s report in 2008 by Hadley, Holahan, Coughlin, and Miller, “Covering the Uninsured in 2008: Current Costs, Sources of Payment, and Incremental Costs”) convinced me that while in principle this is a concern, the medical care provided to the many uninsured in America has had only a small effect on the cost of private health insurance.These authors find that private insurance premiums were raised by no more than 1.7% because of the shifting of the costs of the uninsured to private insurers. Partly for this reason I have changed my position on the health care mandate, and no longer believe it is worth the cost of getting the government involved in mandating health insurance for everyone.

The form the health care mandate takes in the Affordable Care Act also influenced my change in position on these mandates. This Act does not simply mandate catastrophic insurance coverage, but mandates a far more extensive coverage that can hardly be justified by the need to protect individuals against the cost of serious illnesses. Moreover, instead of just subsidizing the poor, this Act also subsidizes individuals and families with incomes that are several times above the poverty line. As frequently happens in the political implementation of possibly good policies, the actual mandate and many other programs under this Act are likely to do more harm than good.

I am not a lawyer, and cannot judge the constitutionality of the mandate or other aspects of the Affordable Care Act. Of course, many programs are perfectly constitutional even if they do a great deal of damage. Without directly discussing the constitutionality of the mandate I can discuss whether combining the health care mandate with a penalty for those who do not participate can legitimately be called a tax, as argued by Justice Roberts in the majority opinion.

Clearly, the concept of a tax includes compulsory contributions to government revenues, such as levies on personal incomes, earnings (such as social security), or corporate profits. However, certain levies that are called taxes contribute to government revenues, but their main purpose may be to affect certain types of behavior and activities. Examples include taxes on cigarettes that aim to discourage smoking, or taxes on carbon emissions (Pigovian taxes) levied to reduce the greenhouse gases that enter the atmosphere.

Other levies that change behavior are not usually called taxes, although they have the same kind of impact on behavior as taxes. For example, drivers that are caught exceeding the speed limit are “fined”, although one could equally well say they are “taxed” for exceeding speed limits. The main purpose of these fines may be to encourage drivers to obey speed limits, although the revenue from the fines may also be part of the purpose, as in “speed traps”. Following the same logic, one can then say that consumers who buy cigarettes are in effect fined for each cigarette they buy, where the “fine” is the size of the government levy imposed on each cigarette consumed.

Consider in this context the health care mandate, which involves a financial penalty for persons who do not buy the mandated health care insurance. Without any stretch in language, one can say they would be “fined” for not obeying the mandate. But then following the logic of the cigarette tax and speedy driving examples, one could also legitimately say that individuals would be “taxed” if they do not buy the mandated health package.

The Affordable Care Act has many very bad features, including the health care mandate. But if the constitutionality of this Act depends on whether the financial penalty for not buying the mandated health care package is a “tax”, I go with Justice Roberts, and against the dissenting opinion by Justices Scalia, Kennedy, Thomas, and Alito, in concluding that this penalty can indeed be considered a “tax”.

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[Jimbino]

The healthcare mandate is a tax on Amerikan citizenship: illegal aliens, foreign tourists and temporary residents (as well as Muslims and Amish) in Amerika will not have to pay it or participate in Obamacare in any way. On the other hand, an Amerikan tourist or temporary resident overseas will be subject to the mandate, regardless of the fact that Medicare, Medicaid and Obamacare are not available to him at all if he gets sick or injured while out of the country.

For young people and healthy people generally, the tax can be seen as a compulsory option: the option to abstain from Obamacare, only to subscribe and start paying insurance premiums when subsidized medical care becomes necessary. Considering that this penalty tax option is a bargain for almost all young adults and healthy seniors, I expect the appearance of a "death spiral," which will, no doubt, result in Congress' raising the penalty tax substantially.

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[David Peterson]

Obamacare won't work because it focuses on the demand-side, regulating demand, basically. There is no percentage in that. Even if you can manipulate demand in a way that keeps the price down, you are still causing a dead weight loss because consumers aren't getting what they want.

The only real way to fix the healthcare system is by policies directed to the supply-side. In particular, we need a lot more physicians. Countries like France and Germany, which are often held up as examples of socialist efficiency for the US to follow do have better healthcare systems, but it's not because of socialism. Rather, it is because they have twice as many doctors per capita as the US.

The problem is that the number of medical schools and their admissions is restrained by the Liaison Committee on Medical Education, which is an organization run by the AMA, teaching hospitals, and medical schools, which is designed to restrict the availability of medical school education. These restrictions need to be relaxed so that we can educate more medical students.

Of course, investment in the entire healthcare industry is skewed due to the bottleneck at the physician level. If you don't have doctors, then you can't build hospitals. If you don't have hospitals, then you can't operate various types of healthcare equipment. All of these restrictions ultimately end up reflected in the price of healthcare, and from there, are added to the cost of healthcare insurance.

[Tim Fowler]

Even though it was written as a mandate, its not a huge stretch to consider it a tax. What is a stretch is to consider it a constitutional tax. If its a tax, its still not an indirect/excise tax, or an income tax, or a tax "apportioned among the states according to population", so it should be considered and unconstitutional tax.

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