Nathan Sass

ObamaCare Ruling – What If?

In Barack Obama, Health Care Reform, Politics on June 21, 2012 at 6:00 AM

The Supreme Court of the United States (SCOTUS) has not yet issued its ruling on the constitutionality of ObamaCare.  However, that ruling is almost certainly going to be issued by next Friday.

SCOTUS has a wide array of options they can exercise in that ruling, but the realistic options are down to three likely candidates.  Lets take a look at them and try to determine what the political and real world impacts of each might be:

1) SCOTUS upholds the “individual mandate”, thereby determining the entire law to be constitutional.

This is the best case scenario for President Obama, politically.  It would validate the flagship legislation of his presidency entirely, allowing him to claim that the arguments of the Tea Party and conservatives were 100% wrong.

It would mean that the full effects of ObamaCare will be inevitable unless the GOP is able to regain the Senate, hold on to the House, win the White House AND pass a repeal with a filibuster-proof margin of 60 Senators.  This is entirely unlikely in the near term.  That means ObamaCare is here to stay for at least 4 more years.

In the real world, away from the political bizzaro world, this ruling would spell the end of private health insurance.  As I have pointed out previously, ObamaCare is designed to create something called “adverse selection”.  That means that only people with large claims costs (people who have major medical conditions, for example) will likely be the only people buying health insurance, and their premiums cannot be raised based on their health status, and they cannot be denied coverage.

In short, people will soon realize (as employers are already) that paying out of pocket if you are healthy and paying the small fine for not having insurance is many times less expensive than paying high premiums for health insurance.  They will also figure out quickly that if they do fall ill with a major medical condition, they can enroll in health insurance at any time, and all their medical costs will have to be covered from that time forward.

Imagine a person who is healthy, carrying no insurance and paying the small fine and minimal doctors bills.  At some point he or she is diagnosed with a treatable cancer.  That person then enrolls in health insurance paying the premium of a healthy person, goes through treatment at the expense of the insurance company, goes into remission, and then drops his or her coverage.

The insurance company would take a massive loss as the premiums for that person do not cover the claims costs, and there are very few “healthy” people paying premiums to spread that cost to.  Multiply this about 10 million times and health insurers will be bankrupt in a very short time.

Put another way, ObamaCare is tantamount to allowing people to buy homeowners insurance WHILE THEIR HOME IS ON FIRE and make the insurance company not only take them, but not allow them to charge more AND pay to rebuild the home.  It’s literally insane.

This destruction is by design, in my opinion, and is intended to create a vacuum in the health insurance market that only government can fill using a single payer government run system.  That is how they plan to get to Canadian style single payer.

2) SCOTUS rules that the individual mandate is unconstitutional but the rest of ObamaCare is left in place.

This is the legal equivalent of Solomon “splitting the baby”.  It leaves almost all of ObamaCare in place, but strips the individual mandate only.

Politically, this puts ObamaCare on life support because the expected revenue from fines evaporates.  This means that ObamaCare will explode the already insane deficits and debt, and would require a new taxation source to remain viable.  Absent that, there would be huge political pressure to repeal the entire law.  Raising taxes to save an already unpopular law would be a tough sell even to democratic legislators.

In the real world, unless ObamaCare is repealed, the impacts I described above are still more than likely to occur.  People will still forgo coverage until they really need it, adverse selection will still be occurring, and health insurance companies will still go broke.

If the Democrats can hold out long enough, repealing ObamaCare will become “too little, too late” as most insurers will have already closed their doors.  We still end up with a health insurance vacuum and government run single payer, just with a ton more national debt to go with it.

This scenario is probably the worst case for the United States long term, as it does not prevent single payer government run health care – complete with the massive amounts of taxation and spending that go with them, PLUS it explodes a debt level that is already reaching Greece-like levels.

3) SCOTUS rules the individual mandate unconstitutional and that the lack of a severability clause requires that all of ObamaCare is deemed therefore to be unconstitutional.

Politically, this is the dream outcome for the Tea Party and conservatives.  In short, it means that all of ObamaCare is out – all 2700 pages of it – including all the regulations put in place by Health and Human Services Secretary Kathleen Sebelius after it was passed.  It means that, legally, ObamaCare never actually happened.

In the real world it means we go right back to the situation we were on March 22, 2010 – the day before President Obama signed ObamaCare into law.  That has good and bad effects.  There are parts of ObamaCare that were less destructive on their own that may be beneficial to the health insurance market, or have proven popular with the public in isolation.

Some of these elements would need to be passed as single issue legislation if they are to be retained.  Covering children to age 26, for example, is popular among the public and the GOP has already crafted legislation to retain that element of ObamaCare.

If the GOP takes the Senate, retains the House, and wins the White House this ruling provides an unprecidented opportunity for real market based reforms to the health care sector.  The issue of excessive inflation in the health care sector of the economy will once again be at the forefront, and the GOP will have a limited time chance to take it on with the ability to control the conversation.

The Democrats will be unable to argue the merits of their plan as it will have only recently been struck down and unviable.  That leaves a pretty free hand to the free market forces on this important issue.

It’s my hope that there are enough lawmakers in the GOP who have finally come to terms with the fact that “insurance” as it exists today is not the solution to medical inflation – it’s the problem.  Whenever people use “other people’s money” to buy something, the prices go up at insane levels as soon as the sellers realize that the buyers are ignoring the prices for what they buy.

This is how we got to $10 aspirin and hospital stays that are more expensive than a night at the Plaza Hotel in New York City.  The only logical solution to this problem is to put people back into the position of traditional consumers who shop based at least in part on price, but without exposing them to bankruptcy or disease and/or death at the same time.

Such a solution is possible, but it will take tremendous political will to totally rethink the way we pay for health care, and there are some very rich and/or powerful groups who will fight such a change – specifically the AMA and insurance companies.

Prediction:

My personal prediction is that the decision will be a 5-4 vote, with Roberts writing for the majority.  The majority will hold that the individual mandate is unconstitutional and that the lack of a severability clause ties the hands of SCOTUS, and requires that the entire legislation be held to be unconstitutional. (Option #3 above).

The majority will hold that Congress can re-pass the remainder of ObamaCare without the mandate, but that the court cannot ignore clear precedent related to severability and carve only that part of the law out.

We’ll know in a week if I’m right, or if they somehow come up with a surprising option #4.

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