Opinion: Columnists

Manhattan Moment: Obamacare may be constitutional, but it is bad policy

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In his decision yesterday, Chief Justice John Roberts wrote that "we do not consider whether the [Patient Protection and Affordable Care Act] embodies sound policies." That is, to put it mildly, an understatement.

While it may be constitutional, Obamacare remains fundamentally flawed legislation that creates a massive health care entitlement, slashes hundreds of billions of dollars from Medicare (endangering seniors' access to care) and imposes hundreds of billions in taxes on the economy -- hardly a recipe for escaping our current economic doldrums. Sooner or later, Congress will be forced to repeal and replace it.

Let's review what we know to date about the law. In his campaign to pass it, President Obama argued that the PPACA was critical to "bending the curve" of runaway U.S. health care spending. But just two months after the law passed, the director of the nonpartisan Congressional Budget Office noted that "rising health care costs will put tremendous pressure on the federal budget during the next few decades and beyond. In the CBO's judgment, the health legislation enacted earlier this year does not substantially diminish that pressure." Indeed, we have since learned that the PPACA will increase, not decrease, U.S. health care spending.

Passage of the law also involved new lows in Congress's perennial fiscal shell games. The law's initial budget estimate of $940 billion was heavily backloaded and included just six years of full implementation costs. The most recent CBO estimate -- which still only includes eight years of implementation -- puts the law's price tag at $1.76 trillion by 2022. That cost is simply unsustainable.

The law only avoids spending much more than that by slashing hundreds of billions of dollars from reimbursements to Medicare providers. Medicare's own actuaries predict that, by 2019, Medicare payment rates will fall below those paid by Medicaid, which are just a fraction of those offered by private insurers. Eventually, they estimate that reimbursements would fall to "one-third of the relative current private health insurance prices and half of those for Medicaid" -- leaving a full 40 percent of Medicare providers "unprofitable" by 2050. Obviously, seniors would lose access to services offered by those providers, leading to a full-blown crisis.

The law also includes new taxes on employers (with more than 50 employees) that don't offer "creditable" coverage, taxes on medical device manufacturers (that will slash jobs in that vital industry), and taxes on pharmaceutical and insurance companies that will be passed along to consumers in the form of higher prices and premiums. New insurance regulations will also sharply raise the costs of health insurance for young and healthy Americans. Rather than paring back or rationalizing the myriad regulations and tax incentives that make health care our least efficient industry, Obamacare will add new layers of complexity and confusion.

Finally, the individual mandate that commanded the Supreme Court's attention is unlikely to be the linchpin holding the law together in the long term. As Roberts wrote, "for most Americans the amount due [if they don't buy insurance] will be far less than the price of insurance. ... It may often be a reasonable financial decision to make the payment rather than purchase insurance."

Indeed, many young and healthy Americans will likely take the course Roberts outlines -- paying a small fine in the knowledge that insurance will be available at to them at subsidized rates if they ever become seriously ill. Under this turn of events, healthy people will flee insurance markets, leading to much higher taxpayer costs for the sick people left in state health exchanges. In short, the court's ruling may yet turn out to be a Pyrrhic victory for the president and Democrats.

Obamacare will be heading back to Congress. Conservatives must be prepared with a better, market-based alternative when it does.

Paul Howard is the director of the Center for Medical Progress at the Manhattan Institute and managing editor of MedicalProgressToday.com.

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