Freedom Line Blog

In my column last week, I outlined how ObamaCare’s Medicaid expansion is a way to sneak in socialized medicine by making it cheaper to accept government health insurance instead of paying for it (directly) oneself.

But the Medicaid expansion is only half of ObamaCare’s formula for moving most of America onto a federally-run health system.

The other half is made up of the so-called state-based health insurance exchanges that are subsidized (and regulated) by the federal government.  With the individual mandate in place, people that fail to qualify for Medicaid will most likely be forced into the exchanges.  (ObamaCare purposefully makes it cheaper for employers to pay a fine rather than cover employees.)

Writing in the New York Times on Saturday, Tyler Cowen, an economics professor at George Mason University, explains how to make the best of the very bad possibility that President Barack Obama is reelected and ObamaCare continues to be implemented, albeit with the inevitable cost overruns.

There is one way this might work: by limiting the subsidies for insurance. Note that the law itself mandates cuts if those subsidies exceed a certain percentage of gross domestic product by 2018. Most likely, the reform could not stop there, because the insurance cost burden for many Americans would feel intolerably high without the subsidies.

The next step, therefore, would lower costs by limiting the mandate to covering catastrophic conditions. Yet a further step would remove the mandate for noncatastrophic coverage, thus giving people more control over how much they want to spend on health care versus other priorities.

We would then have government-subsidized and mandated catastrophic insurance, and a freer market for other health care expenditures. We might even return to a health savings account approach on the noncatastrophic side.

That’s far from a perfect outcome, but it’s probably the most positive path that can be achieved.

Let’s hope it doesn’t come to that.

In a presidential election year like 2012, it’s easy for national issues to crowd out state and local concerns at the ballot box.  But thanks to Obamacare’s costly mandate on states to create health insurance exchanges, fiscal conservatives running for state offices can easily make opposition to more government a central plank in their campaign platform.

According to Cato Institute scholar Michael F. Cannon, outside of the U.S. Supreme Court’s potentially striking down Obamacare’s individual mandate, the most important health policy battle to be waged is state government opposition to creating Obamacare’s state-based health insurance exchanges.

As I’ve written previously these exchanges are a subtle way to coerce states into spending millions of dollars to set-up a government-controlled, taxpayer-subsidized “market” for health insurance.  Thereafter, when Obama’s bureaucrats at HHS decide the state version isn’t performing exactly the way they want, Obamacare grants HHS the power to take over any state’s exchange and run it from Washington, D.C.  Thus, the bait-and-switch is yet another way for Obamacare to hide its impact on the federal budget deficit by shoving some of its start-up costs onto the states.

Cato’s Cannon outlines a different strategy, with talking points that to me seem ready-made for a state campaigner’s website:

Jobs. Refusing to create an exchange will block Obamacare from imposing a tax on employers whose health benefits do not meet the federal government’s definition of “essential” coverage. That tax can run as high as $3,000 per employee. A state that refuses to create an exchange will spare its employers from that tax, and will therefore enable them to create more jobs.

Religious freedom. In blocking that employer tax, state officials would likewise block Obamacare’s effort to force religious employers to provide coverage for services they find immoral — like contraception, pharmaceutical abortions, and sterilization.

The federal debt. Refusing to create exchanges would also reduce the federal debt, because it would prevent the Obama administration from doling out billions of dollars in subsidies to private insurance companies.

The U.S. Constitution. The Obama administration has indicated that it might try to tax employers and hand out those subsidies anyway — even in states that don’t create an exchange, and even though neither Obamacare nor any other federal law gives it the power to do so. If that happens, the fact that a state has refused to create an exchange would give every large employer in the state — including the state government itself — the ability to go to court to block the administration’s attempt to usurp Congress’s legislative powers.

A lower state tax burden. States that opt to create an exchange can expect to pay anywhere from $10 million to $100 million per year to run it. But if states refuse, Obamacare says the federal government must pay to create one. Why should states pay for something that the federal government is giving away?

Bye-bye, Obamacare. That is, if the feds can create an exchange at all. The Obama administration has admitted it doesn’t have the money — and good luck getting any such funding through the GOP-controlled House. Moreover, without state-run exchanges, the feds can’t subsidize private insurance companies. That by itself could cause Obamacare to collapse.

There is no reason a state should agree to spend millions of dollars laying the groundwork for a federal takeover of health care.  Fiscal conservatives running for office this cycle should articulate this argument well and often.

Remember when in June 2009 President Barack Obama promised that under his health care reform bill, “If you like your doctor, you will be able to keep your doctor, period.  If you like your health care plan, you’ll be able to keep your health care plan, period.  No one will take it away, no matter what”?

Byron York makes this contradictory observation:

On the one hand, the new law orders the establishment of health care “exchanges” through which anyone can purchase government-subsidized coverage. On the other hand, the law levies fines on employers who fail to offer coverage to their employees — but sets the fine far below the cost of coverage. In 2010, the average employer paid $4,150 to cover a single employee and $9,773 for family coverage. (Both figures are about double what they were in 2000.) The new law sets fines for employers who don’t cover their workers at $2,000.

So when it takes effect in 2014, the law will give employers a choice: Continue to offer increasingly expensive health coverage, or pay a relatively small fine, save a lot of money, and let employees buy their own subsidized coverage on the exchange. The incentive seems pretty clear.

So too does the bold-faced lie Obama told (yet again) in the health care reform debate.  Whichever GOP candidate gets nominated for president should make this issue one of the main talking points of the general election.