Economy & Budget

Opting out of Obamacare

Opting out of Obamacare

The Supreme Court recently granted Congress far-reaching new taxing authority through its Affordable Health Care Act decision. In the long-term, this is a frightening expansion of power. In the short-term, both parties raced to define the implications of the individual mandate: Is it a tax or just a penalty?

Well, actually, it’s both. And Americans probably don’t care much what the mechanism government uses to collect fines is called. The mandate’s penalty already bears the spiritually pleasing, socialistic euphemism “shared responsibility payment,” and that tells us all we know need to know about the Act’s deceptiveness and intent.

More significantly, the Supreme Court’s ruling atomizes the myth that Obamacare is anything but an expansive and expensive entitlement program that comes with a huge tax increase. And if history is any guide, today’s cost estimates will be dwarfed by reality.

According to the Congressional Budget Office—which can only calculate the narrow data it’s given—the non-tax penalty on Obamacare’s non-mandate will affect 4 million people by the year 2016. Of those paying this ‘untax,’ 75 percent will make less than $120,000—breaking the president’s promise that those making under $250,000 would not have to pay a “penny” more in taxes, which, presumably, includes “shared responsibility payments.”

Then there is the other portion of the Supreme Court’s decision, one that prohibits federal government from punishing states which refuse to participate in expanding Medicaid eligibility, which is an important component of Obamacare’s plan to extend coverage. States, many of which can hardly balance their budgets, can now opt out of this ham-fisted expansion and release themselves from a fresh fiscal burden. In 2014, Obamacare expands Medicaid eligibility to 133 percent of the poverty line for all non-elderly citizens and individuals lawfully resided in the country for five years. This would mean many of Americans living just above the poverty line would be locked out of state programs and join other options offered by Obamacare and fully funded by Washington.

Governor Rick Scott of Florida has already decided to save around approximately $1.9 billion by opting out of the entitlement expansion. Louisiana Governor Bobby Jindal and Wisconsin Governor Scott Walker are two others who have said they will wait for implementation. With plenty of conservative governors around, they won’t be the last.

Driven off the rolls

Is the administration upset about the Medicaid expansion decision? It seems unlikely. After all, it gets us to universal government-based insurance faster. But the cost will rise.

How many others will be driven off their insurance to expanding entitlement programs and federally-subsidized private insurance programs? A McKinsey and Company report last year found that 30 percent of employers said they would “definitely” or “probably” stop offering insurance when Obamacare’s provisions are implemented in 2014. The number rises to 50 percent when employers understand the extent of the law. This means many more people will be looking for subsidized healthcare.

This is all, of course, augmented by many other taxes used to fund Obamacare. This includes a hike in capital gains taxes from 15 percent to 23.8 percent and on dividend payments from 15 percent to 43.4 percent. Then there is a 3.8 percent surtax on income more than $200,000 and a 40 percent tax on “Cadillac” healthcare plans and an effective tax hike that eliminates the ability to pay for over-the-counter drugs from a pre-tax flexible spending account.

And even after all the taxes and mandates, the CBO estimates that by 2021, around 26 million Americans still won’t have health insurance. What will it cost to provide universal coverage using the Obamacare model be? We don’t know. But a person should be highly skeptical about the numbers we’re hearing.

In a study released a few months ago, Chuck Blahous, a Medicare Board of Trustee member named by President Obama, reported that price tag for Obamacare was around $1.15 trillion. It doesn’t lower the deficit as promised but increases it by nearly $530 billion by 2021.

A few years ago, the Senate Joint Economic Committee released a study that looked at initial estimates of programs and their costs in dollars at that time. In 1967, the House Ways and Means Committee predicted that the new Medicare program would cost $12 billion in 1990. It was $110 billion. In 1987, Congress estimated that Medicaid’s hospital subsidies were estimated to cost less than $1 billion in 1992. It was $17 billion.

That’s just two of countless examples.

So even if Obamacare’s coercive individual mandate weren’t technically a tax, it is effectively one of the largest taxes we’ve seen in a long time. And, all signs say, it’s going to get a lot bigger. In the end, someone’s got to pay.

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