In a potentially stunning development, Texas US District Judge Reed O’Connor has ruled that the Affordable Care Act (ACA), also known as Obamacare, is unconstitutional. O’Connor noted that on two occasions, the Supreme Court ruled the ACA was constitutional. Now he reasons, however, that a key element in that healthcare legislation has changed its underlying legal premise.
When is a tax not a tax?
In 2010, opponents of Obamacare argued that forcing Americans to buy insurance, or pay a penalty, violated the interstate commerce clause and was therefore unconstitutional. But in a 2012 ruling, the Supreme Court held that forcing Americans to purchase health insurance or pay a penalty, was akin to levying a tax. Levying a tax is not unconstitutional. Therefore, Obamacare was legal.
This unexpected move by Chief Justice Roberts conveniently endorsed the political slight-of-hand employed by the Democrats — no Republicans voted for the ACA — to pass Obamacare without “raising taxes.” That was because they termed the widely-hated “invidual mandate” a fee, not a tax.
The objection of the GOP, along with suits filed by numerous state attorneys-general, asserted, correctly, claimed that since the ACA’s mandatory coverage and/or penalty fee was not a tax, according to the Democrats, Obamacare was invalid. But Justice Roberts and a slim Supreme Court majority, bailed the Democrats out by calling the individual mandate / fee a tax, thus allowing the Democrats to claim innocence regarding the tax and the terminology.
Eliminating the Obamacare tax
Last year, the now GOP-led Congress cleared up at least one major ambiguity. After failing to repeal the ACA in its entirety due to the stubborn opposition of a single Republican Senator — John McCain — the GOP managed to repeal the individual mandate (along with the penalty fee for refusing coverage). This meant that Americans were no longer forced to purchase health insurance. In addition, even if they did not purchase coverage, no hefty penalty would be imposed for opting out of ACA coverage.
In effect, the Obamacare tax — the lifeline of this legislation — ceased to be. So in Judge O’Connor’s view, that rendered the entire ACA unconstitutional, just as President Trump said. O’Connor’s ruling also potentially invalidated the Supreme Court’s 2012 ruling as well.
What comes next for Obamacare?
When Congress repealed the individual healthcare mandate in 2017, President Trump proclaimed, “We have essentially repealed Obamacare.” Although Judge O’Connor’s ruling permits adequate time for repealing his decision before it goes into effect, Congress will eventually have to come up with a new health care plan. Or go back to having no national plan at all.
Congress will likely come up with something that concentrates on health insurance cost and coverage rather than more narrowly finding a solution to the healthcare cost problem. While a majority of Americans have always opposed Obamacare, they still desire some kind of cost-effective alternative coverage that could address this issue. Currently, Americans spend more than $10,000 per person for healthcare, far more than any other country. That’s why most Americans would still support some kind of reasonable, non-coercive legislation to solve this continuing problem.
Even with the ACA in effect, more than 30 million Americans remain without health insurance. They still face costly medical bills if they become sick or injured. ACA did raise the percentage of Americans owning health insurance coverage from 85% of the population to 91%. Thus, the ACA helped about 6% of the individuals, or about 20 million Americans.
Meanwhile, however, hundreds of millions of Americans saw much higher premiums and much less choice. Thus, at least on the economic level, the ACA was just another, more subtle, way for the Obama administration to redistribute wealth. But this was carefully disguised as “universal health coverage.” The motivation behind the legislation, however, was quite different.
Is there a real free market solution to the problem of healthcare costs and coverage?
To implement a free market solution to America’s ongoing healthcare dilemma, the nation must examine the issue at its most basic level.
There are two primary problems that have plagued US healthcare for decades.
- The prices for healthcare are still too high.
- There are tens of millions of Americans who do not have health insurance. As a result, they do not receive quality health care.
In other words, the price of healthcare is too high and the healthcare choices available to the average American remains too low. If this or a similar dilemma confronted any other market, the solution would be obvious. The industry involved would take action to increase the supply of the product or service. Increased supply would put downward pressure on price and increase the quantity available. It’s a matter, once again, of supply and demand.
Supply and demand at the pump
Look at the current situation with gasoline. At one time, the price of gas at the pump exceeded $4 per gallon. As seen before during the 1970s gas crisis, a shortage of product led to rationing.
Although there was a recent upward blip in US gasoline prices, they’re now back on their way down again, will the price of crude oil pulling back to the $50 bbl. range for West Texas Intermediate after an earlier run-up to ~$80 bbl.
So why is gasoline currently priced at under $2.50 per gallon (in most states) with unexpectedly abundant supplies available? Because new American technology enabled us to find and secure more oil, the supply of oil and gas vastly increased. That simultaneously brought the price of oil down around the world and also ended shortages.
Supply and demand in healthcare
The US could deploy a similar market-based solution to address and ultimately solve the nation’s healthcare problem. That solution is to vastly increase the supply of doctors and other medical professionals in this country. The increase in supply would bring about competition. This always improves the quality of service, increases the quantity of that service available to the market, and dramatically reduces the price. In passing the Obamacare legislation, the Democrat-led Congress never even considered this sensible approach.
This supply-based solution would increase the number of US medical schools and other healthcare education facilities. Eventually, as the new professionals entered the market, the competition for patients would bring the desired results of lower prices, higher quality and greater coverage.
Programs like Medicare for the elderly, like Medicare for the elderly or Medicaid for the poor would also see a positive effect. The cost to the government — and the taxpayers — of these plans would gradually drop, since prices for medical services would fall.
This plan might be coupled with Health Savings Accounts plus less regulation of insurance companies’ marketing territories. This would give consumers more control over how their individual healthcare dollars are spent. That is a true market-based solution.
What about quality healthcare?
Some diehard Obamacare supporters argue the quality of healthcare will suffer. That’s because there may not be enough qualified students who could become medical professionals. Poppycock. Due to a lack of available space, today’s medical schools regularly turn away thousands of qualified applicants. Many could have become excellent doctors.
Simple economics tells us the answer to rising prices and product or service shortages is always to increase the supply. This is true for all markets including healthcare.
Admittedly, the healthcare service market is different from other markets. In other markets, if a consumer does not receive service, it is not a life or death situation. But still, the principles of economics apply, even to healthcare. An increased supply of facilities and medical professionals to staff them could clearly form the basis of a permanent fix.
Sometimes the solutions to seemingly complex problems are not as difficult as they seem.
Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.