After SCOTUS decision, watch Obamacare costs

After SCOTUS decision, watch Obamacare costs

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The Court's opinion in King v. Burwell might be great for the 11 million who could have lost insurance coverage, but what does it mean for the 275 million who are paying for it?

Obamacare fines
Obamacare fines

WASHINGTON, June 29, 2015 — The Supreme Court has decided; President Obama can interpret the Affordable Care Act (ACA) as it suits him. So let’s take a good look at what Obamacare will cost the economy—that is, what it will cost us.

On the good side, it appears that about 6.4 million Americans will continue to have their health insurance bill partially paid by the taxpayers. They would have been forced out of Obamacare, but the court said that, regardless of the plain language of the law, enrollees on federal exchanges will continue to receive subsidies. Thus Obamacare will survive.

Had SCOTUS ruled for the plaintiffs, Obamacare would have eventually collapsed. So the law stays intact at least until 2017, when a new president and a new Congress will be able to change it to benefit the majority of Americans. The current law benefits maybe 15 million Americans and clobbers the other 275 million who pay for their health insurance.

How bad it is for the rest of us?

The law imposes an additional 0.9 percent Medicare tax on salaries and raises the top tax rate on dividends and capital gains to 23.8 percent. Additional tax burdens are placed on Americans by changing flexible spending accounts, reducing itemized deductions, penalizing employer reimbursements and adding numerous other taxes on specific products..

Starting next year, the employer mandate kicks in for all businesses with at least 50 employees who work at least 30 hours per week. The result of this is that employers are hiring more part-time workers. Prior to the passage of the ACA there were about 4 million part-time workers; today there are about 7 million.

Economic growth has averaged just over 2 percent annually since the ACA was passed.  That is less than half the growth rate the U.S. experienced after the deeper 1981 recession. The employer mandate discourages companies from hiring workers and expanding output. As a result the economy grows slowly.

The other problem is the cost of health insurance for those who do pay for it. Because of ACA’s subsidies, reduced competition in the marketplace and the requirement that policies provide coverage that people do not want or need, health insurance premiums are skyrocketing. Some states could see annual premiums increase up to 50 percent next year with even more increases due in future years.

It is simply not mathematically possible to cover an additional 11 million people who are not fully paying for health insurance without having huge increases in premiums for all other paying Americans. And the quality of care will suffer since there is no provision to increase the number of health care providers.

We were promised that the ACA would reduce the number of people using emergency rooms for primary care. The numbers show that emergency room usage has increased since the law was passed.

Worse will be the long run. Employers will find it is less expensive to pay a fine of $3,000 per employee than to provide health insurance at an annual cost of $10,000 or more. Eventually this could result in a single payer system that eliminates all competition. Every example of actions like this result in much higher prices and much lower quality of service.

People who contribute nothing to the economy and don’t earn enough to pay for essentials already believe they are entitled to them. Food stamp spending continues at record high levels, even with the number of Americans employed increasing. Welfare payments are similarly at record high levels. And now health care subsidies will be another substantial entitlement.

The long-term problem with people receiving health insurance, food stamps, welfare payments and even extended unemployment benefits is that the recipients believe that are truly entitled to them. Greece, where the government has given so many benefits to people who have not earned them, is on the verge of economic collapse.

In order to pay for the entitlements, Greece raised the tax rates on those individuals who contribute most to the economy. The higher tax rates reduced capital formation and slowed economic growth. The increase in government spending due to these entitlements, coupled with low tax revenue due to the slow growth meant that Greece had to borrow money.  Now it can’t pay the interest on the debt and is about to default.

The government in Greece wants to reduce some of those entitlements, but those who are dependent on the handouts are protesting loudly, making the spending cuts more difficult.

If the U.S. continues on the path of providing benefits to people who do not earn them and continues to over-tax the biggest contributors to the economy, we may end up just like Greece. Obamacare’s proponents may have won in court, but the majority of the country will suffer an economic loss.

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