Tax or Penalty: Does It Matter?

There's been a lot of talk about the Individual Mandate being a tax. It isn't. The debate over whether it is a penalty or a tax is merely one of semantics. The Individual Mandate is a requirement that everyone not already covered by health insurance buy health insurance. The idea is to prevent freeloaders who refuse to buy health insurance from getting routine medical services from emergency rooms that can't turn them away and passing the cost on to the rest of us taxpayers. It will bring down overall insurance costs.

Republicans wanted to overturn The Affordable Care Act (which they dubbed "ObamaCare") and they sued, claiming the government lacks the power to make people buy insurance. Now, anyone who drives a car is well aware that the government can require you to buy auto insurance. This was kind of a no-brainer. But the case went all the way to the Supreme Court.

The government has a lot of powers, but it can only exercise powers granted to it under the Constitution. Under the 10th Amendment, all other powers not delegated to the federal government by the Constitution, nor prohibited by the states, are reserved to the states or to the citizens. So the legal question became, what clause in the Constitution gave the federal government the power to enact the healthcare law and specifically, to require people to buy insurance? There were only two clauses that might allow it: the Commerce Clause (Article I, Section 8, Clause 3) and the Taxing & Spending Clause (Article I, Section 8, Clause 1).

Now, I believe the Commerce Clause grants the government the authority to do this, but Chief Justice John Roberts, writing the 5-4 majority opinion disagreed with me. He said the government does have that authority, but it comes from the Taxing & Spending Clause, not the Commerce Clause. This is a bad decision because it will have long term consequences for future interpretations of the Commerce Clause, but that's another matter. From a political viewpoint, the Republicans jumped on the ruling to brand the penalty for not buying insurance as a "tax". The Republican spin machine has told us we are all going to be taxed by ObamaCare. That's a lie. Here's the truth. The penalty (what they label a "tax") only affects freeloaders who refuse to buy health insurance - you know, those people who get routine medical services from emergency rooms that can't turn them away, who then pass the cost on to the rest of us taxpayers. If you have health insurance, THERE IS NO TAX. Also, the amount of the penalty can NEVER exceed the cost of the national average premiums for the lowest-cost “bronze” plans offered through the new insurance exchanges created by the Act. So it's the same amount you'd pay in premiums if you had insurance.

There are also exemptions for those who can't afford coverage, taxpayers with incomes below filing threshold, and hardship. The Act says people who don't pay the penalty can't be put in jail and can't be criminally prosecuted. The minimum "tax" for failing to get coverage would be $7.92 for each month of 2014, $28.75 for each month of 2015, and $57.92 for each month of 2016, when the penalty is fully phased in. According to the LA Times, the Individual Mandate "tax" will affect fewer than 2% of the population. That's right, this so-called tax the Republicans have called "the largest tax in history" does not affect 98% of us. That's a fact. Facts are not Democratic or Republican. Facts are not partisan. They simply are what they are - the truth.

Getting Healthcare Right

In my previous post, I explained what the Affordable Care Act is and what it does. I like most of what it does, with three exceptions:

1. The electronic health records requirement scares me. I think this is a bad idea. Health records, like financial records, should not be placed online. There is no way to protect them adequately from hackers or accidental disclosure. This is a huge privacy issue and it should be stricken from the Act. Making it a requirement with no opt-out provision is the most irresponsible act I can recall the government committing in my lifetime.

2. The Act doesn't take effect quickly enough. Most of the important provisions do not go into effect until 2014 and some take until 2020 or beyond to start. All of the provisions should be immediate for two reasons: (1) People need help now and (2) People will not understand what the law does until it actually starts doing it.

3. The Act doesn't go far enough. Nice try, but this is a Band-Aid on a problem that requires major surgery. Our healthcare system is a disaster. It is not a world class healthcare system and compares poorly to every other advanced nation's system. The World Health Organization ranked the U.S. 37th in the world for healthcare, despite the fact that we spend the most per capita by a large margin.We need to start from scratch, not amend the existing system. Some support the Public Option, which would create a government-run health insurance agency to compete with existing private health insurance companies. It's called a Public Option because it gives the public the choice of either a government insurer or private insurer. I don't like this idea because it doesn't go to the root of the problem - insurance companies. The reason healthcare costs are so high, and the reason so many people fail to receive proper care, is because insurance companies act as middlemen, pocketing the lion's share of the money and making decisions about your health that you and your doctor should rightfully be making.

We need to take insurance companies completely out of the picture. To do this, we need to change our current healthcare system to a Single Payer system. Medicare is an example of a Single Payer system. Instead of paying a large premium to an insurance company, you pay a small premium to a government agency pool (like Medicare). (It's a smaller payment because the administrative costs run about 3% versus 70%.) The bills go to the agency, which pays them less your deductible and co-payment (20% under Medicare). This eliminates waste and makes medical services affordable for all. If you're under 65, you probably don't understand Medicare (which is not the same as Medicaid, a program for low income people). But ask your grandparents or other seniors what they think of Medicare and if they are willing to give it up. There's a reason why they don't want to give it up -- it works!

So, if I had my way, we'd amend The Social Security Act Amendments of 1965, which created Medicare, by removing two words: "over 65". No need for a 906-page Affordable Care Act. Just delete those two words from existing law and establish "Medicare For All". It's that simple. Yes, it will cost money, but it will also save trillions of dollars in the long term. If we can afford to spend billions of dollars to kill strangers in Iraq and Afghanistan, how about spending the money to save American lives right here?

The Truth About ObamaCare

A lot has been written about ObamaCare but you probably still don't know anything about it. So before you decide to embrace it or hate it, take the time to learn what it is, what it does, and what it does not do. In this post and the next two, I'm going to lift the hood on the Affordable Care Act and show you the truth... then, you can decide. I've broken this down into five categories: how the law affects Insurance Companies, Consumers, Rural Citizens, Medicare & Medicaid, and Taxpayers.

Here's what the Affordable Care Act does:

Insurance Companies

• holds insurance companies accountable for unreasonable rate hikes.
• gives you a way to appeal insurers' coverage determinations or claims and establishes an external review process.
• bans insurers from discriminating based on your pre-existing conditions or gender.
• bans insurance companies from denying coverage to children under age 19 due to a pre-existing condition.
• bans insurance companies from rescinding coverage; previously, insurers could search for an error or technical mistake on your application and use it to deny payment. 
• bans insurers from imposing lifetime dollar limits on essential benefits, like hospital stays.
• requires new plans cover certain preventive services, like mammograms and colonoscopies, without charging a deductible, co-pay, or coinsurance. 
• bans insurers from dropping or limiting coverage because you choose to participate in a clinical trial.

Consumers

• provides free preventive care for seniors. 
• brings down health care premiums by requiring insurers give customers rebates if their "administrative costs" are too high.
• reduces paperwork and administrative costs by requiring electronic health records. 
• permits young adults to stay on their parents’ plan until they turn 26.
• provides new coverage options to anyone uninsured for at least six months because of a pre-existing condition.
• sets up an easy-to-use website where you can compare health insurance coverage options and pick the coverage that works for you.
• creates a program to give financial help to employment-based plans to continue coverage to those who retire between ages 55 and 65, as well as their spouses and dependents. 
• starting in 2014 if your employer doesn’t offer insurance, you'll be able to buy it directly in an Affordable Insurance Exchange.
• requires most individuals who can afford it to get basic health insurance coverage or pay a fee to help offset the costs of caring for uninsured Americans. This is the "individual mandate".

Rural Citizens

• funds scholarships and loan repayments to attract primary care doctors and nurses to under-served areas.
• increases payment to rural health care providers to help them continue to serve their communities. 

Medicare, Medicaid, and CHIP

• closes the gap in Medicare prescription drug coverage (the “donut hole”) in 2020, and grants a 50% discount on drugs until then.
• creates new tools to combat fraud in Medicare and Medicaid programs.
• increases Medicaid payments for primary care doctors.
• allows those earning less than $14,000 to enroll in Medicaid
• allows states to cover more people on Medicaid, if they choose to do so.
• provides more funding for the Children’s Health Insurance Program (CHIP)

Taxes

• gives Small Business Health Insurance Tax Credits to 4 million eligible small businesses to help them provide insurance benefits to their workers.
• gives tax credits to make insurance affordable for the middle class - people with income between 100% to 400% of the poverty line not eligible for other  coverage. (In 2010, 400% of the poverty line equaled $43,000 for an individual or $88,000 for a family of four.) 

In my next post, I'll tell you what I like about the Affordable Care Act and what I don't like about it. I'll also clear away the confusion on whether the Individual Mandate is a tax, what the "Public Option" is, and what "Single Payer" means.