Recently, Stephen Sachs of Duke Law School published an excellent, provocative paper on “The Uneasy Case for the Affordable Care Act,” which raises a point I’ve been fixated on for a while: had Congress used its taxing power, there would be no constitutional question about PPACA. But as Michael Cannon has suggested, the intention of the individual mandate seems to have been to conceal the actual cost to households of the coverage expansion effort. By compelling households to spend their notionally disposable income on a tightly regulated insurance product, the federal government is effectively taxing and spending without explicitly taxing and spending.
Jed Graham offers insight into the real cost of the mandate in a new article on PPACA’s shrinking subsidies:
Already the law would see the burden of premiums gradually shift to individuals after 2018 in a way that the Congressional Budget Office has said “may be difficult to sustain.”
Something would have to give. With fines capped at 2.5% of income — a fraction of premium costs — either subsidies would have to be made more generous, or healthy people would begin to bolt the exchanges, driving up costs for the older and sicker people that remained.
Moreover, the structure of the exchange subsidies will make it much harder to curb the tax exclusion for employer-provided health insurance:
Ending the employer health care exclusion could add 22 million to the subsidized exchanges, roughly doubling current projections, an analysis (for IBD) by John Sheils of the Lewin Group health care consultancy found.
That’s because exchange subsidies, already more generous than the employer tax exclusion for moderate-income households, would become even more of a magnet.
I strongly recommend reading Graham for sober analysis of fiscal policy.