Published by WallStreetWeather.net
When is a "mandate" not a mandate? When it’s totally unenforceable.
For more than two years Republicans have been questioning the Individual Responsibility Section of the Patient Protection and Affordable Care Act (a.k.a. “Obamacare”). President Obama has insisted that the Constitution’s “necessary and proper” clause allows for the “mandate” that all U.S. citizens have health insurance starting in 2014.
It appears that both sides of the argument are moot. The penalty in the law for not purchasing health insurance is not criminally enforceable. Nor can the government put a lien or levy on any property of an individual who does not purchase health insurance and refuses to pay the penalty.(1) In searching the 974 page PDF document of the law, the word “mandate” is only mentioned three times and in none of these instances is it in the context of individual responsibility.(2)
Never has so much time and money been wasted arguing about something that is an illusion with no basis in reality whatsoever! The “mandate” is nothing but political propaganda. President Obama never wanted to have a “mandate” in the first place. What he got as a compromise with the health insurance industry is a “mandate” that is unenforceable. The President never chose the unenforceability of the requirement to purchase health insurance as a legal defense.
From the Republicans perspective, the penalty is not significant enough to overcome individuals from gaming a guaranteed issue health insurance system. They argue economically it’s cheaper to pay the penalty and only purchase insurance when you perceive significant medical expenses are looming. The counterargument is that a delay in purchasing insurance would not account for a severe accident, heart attack or other urgent care situations that occur before insurance could be brought into effect.
For the sophisticated, it’s a matter of calculating how much of their assets (if any) would be at risk by forgoing insurance. What’s more difficult to understand is why the Administration has never rebutted the Republicans by saying no one is being forced to purchase insurance. Individuals have the free will to choose to purchase insurance or pay a penalty. (And being non enforceable, the penalty doesn’t even have to be paid!) So as you can see, the “mandate” is a mirage.
Another interesting perspective to analyze is the difference between a tax, a penalty, a credit, and a deduction. Is a tax deduction for home mortgage interest the same as a penalty for not taking out a mortgage? Is the $7,500 tax credit for purchasing an electric vehicle the same as a $7,500 penalty for the individual who does not purchase an electric vehicle? I see no difference whatsoever between a penalty for not acting and an incentive for acting. Therefore, in the words of the 26 states, there is no difference between ACTIVITY and INACTIVITY! The current tax code incentivizes and penalizes both activities and inactivities routinely. Yet neither political party is outraged by the abusiveness of the tax code in behavioral economics.
As the Supreme Court begins oral arguments March 26, there appears to be a logical progression to the order that the Court is addressing the issues. The Court will address whether the penalty is a tax first, then the individual responsibility issue, followed by the severability issue, and conclude with the expansion of Medicaid. If it turns out that the penalty is unenforceable, then individual responsibility may not even be an issue.
(1) Click here for the full text of The Affordable Care Act; go to page 162 of the PDF file and scroll down the page to the section: “Subtitle F – Shared Responsibility for Health Care Part I - Individual Responsibility SEC. 1501 Requirement To Maintain Minimum Essential Coverage.”
Additionally, anyone who is not a U.S. citizen is not required to purchase health insurance (and is therefore exempt from the penalty.) There is also a “religious conscience exemption.” (Although they are not specifically named, this exemption from insurance and the penalty would apply to religious groups such as the Amish.) There is also a “hardship” exemption “to be determined by the Secretary of HHS.”
(2) The word “mandate” can be found on PDF pages 529, 695, and 696.