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3 Pitfalls of ObamaCare

Category : News to Muse, Personal Finance

Americans  anxiously awaited – for the last several months — for this historic day. Supreme court’s verdict on the constitutionality of the individual mandate  has added a new dimension to the core principles our country stands for — it has incinerated ideals of freedom and personal responsibility.

While news-media has focused on the new battleground this verdict provided for both Presidential contenders, it’s worth thinking about the nuances of what the Chief Justice Roberts said to cast the deciding vote.

The individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause … In this case, however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance. Such legislation is within Congress’s power to tax. -- Chief Justice John Roberts

1.  Taxing power of the federal government.

Affordable care will provide insurance to those who are currently uninsured. However, CBO(Congressional Budget Office) has estimated that this law will add over $2 trillion in additional cost over 10 year period. It is important to note that CBO has revised cost estimate several times in the past six months. It also claims that over 75% of the cost to cover those who are uninsured will come from the additional tax revenue by taxing families making less than $200,000 a year. Simply put, taxes will go up for most of the middle class families. Your invisible partner for life will demand more income from your paycheck going forward.

If federal government can mandate  insurance premium by imposing tax, it can also mandate additional laws to force behavior change by imposing additional taxes.  This notion of our government’s power to tax and spend goes against the philosophy of our founding fathers.

2. Healthcare cost will go up.

It is good that those with pre-existing conditions will get coverage, but insurance companies will pass the cost to all Americans. It is estimated that insurance premiums will rise by 10-15% in the first several years once the healthcare law gets implemented in its entirety by 2014.

It’s also possible that many employers will choose to drop insurance coverage for their employees as it may be cheaper to pay penalty of around $1000 per employee than to provide insurance. This will likely force more people to seek coverage through the exchange regulated by the government.

The bill will also be a drag on the economy as small businesses may not hire 51st employee to stay away from providing health care for their employees. Any businesses with 50 or fewer employees are not required to provide heath insurance for their employees.

It’s a win for the major insurance companies as they will get more business due to the mandate. However, the cost will likely be paid by middle class families who are already struggling to keep their ends meet in this tough economy.

3.  No mandate for illegals.

It’s important to remember that — while most law-abiding citizens will have to buy health insurance — the underground economy will run scratch free. I believe that fair tax can not only skyrocket our crippling economy, but also provide more revenue to the federal government’s coffers to pay for this landmark healthcare bill.

No one argues the fact that our healthcare system is a runaway train, and something has to be done to control skyrocketing premiums. Nonetheless, it still remains to be seen if this bill can contain the healthcare cost at all. Ironically, benevolence of our government relies on additional tax revenue from those who are already paying more than fair share of their income. Do you agree?

Readers: Do you feel that this verdict has long-term implications on the fundamental principles of freedom and liberty? 

The Constitution is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government – lest it come to dominate our lives and interests. – Patrick Henry

(Photo courtesy: Talk Radio News Services)

 

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Comments (11)

I still trying to digest what it means to me and my family from different sources. You provided more calrity with those bullet point – very good. One theme is though common, it’s a tax.

That’s the scary part — it’s a tax!

Oh man, I love taxes. I wish they would tax us more!

lol.

I’m so tired of this regime. I can’t wait until November.

What concerns me is that Chief Justice allowed this mandate by calling it taxes instead of penalty. It may allow our government to impose additional taxes to regulate our behavior going forward.

Okay…don’t hate me, but I’m about to disagree! I know that in many states, particularly in the central south/southwest, a major reason that health care costs are so high is that illegals go to the ER if it’s serious either way. And doctor’s can’t turn them down if they need medical attention. A lot of times these bills can’t be paid. So the cost of health care goes up to cover it. Then the cost is passed to the insurance company, who has to raise their premium, forcing more people out of the system who will likely do the same thing in an emergency. And so they cycle goes. So is it fair that illegals won’t be subjected to the same tax? Absolutely not. But if they’re not included, there’s a lot of states where this bill won’t even matter.

The same thing with people for preexisting conditions. They often are not able to get the preventative care they need at a reasonable cost, or the insurance that could provide them with it. So they wait till it gets really bad (life-threatening) and then get treated. It would be more cost efficient to give them preventative or maintenance care than to have them go to the hospital to save their life IN MOST CASES.

By covering these people, you have more people paying in, more people getting preventative care, and more bills getting paid…hopefully either stabilizing or possibly even reducing the cost of health care long term.

As far as the taxes go…as far as I understand it, it is mandated that you must pay, but if you don’t there aren’t any consequences. They’re hoping people will pay out of respect for the law. I feel like you should have to pay, personally. Because if you find yourself in a car accident with injuries you can’t pay for, you’re still going to end up in the ER. But that’s just me. I respect that people have differing opinions.

The other thing to remember about this particular bill is that it’s a HUGE compromise on both sides. No one really wanted this one. But something needed to happen. So both sides caved a lot. I think it’s a stepping stone, but not a red OR blue “ideal.”

Agreed. But, I am afraid that this massive bill won’t address issues with illegals. If you are not American citizen then there won’t be a way for IRS to tax you. That’s one of the pitfalls I have mentioned.

I think something has to be done to fix healthcare, but I am not sure if bureaucrats in Washington can fix this critical part of our economy.

Like lots of other people, I’m not thrilled with the Supreme Court’s decision to uphold Obamacare. There are a lot of speculation that it will raise taxes, and cause other economic issues.

The idea behind Obamacare is to match it with the free national healthcare system overseas, but that system is very problematic.

CBO has estimated that 75% of the $2 trillion cost will be taxed to families making less than $200,000 a year. This is the largest tax increase in our nation’s history.

Hi Shilpan,

People tell me that the U.S. health care model is based on a free market, but it seems more like a massive corporate machine to me. Is it giving the free market a bad name?

I sometimes like to compare law to code. In my profession as a software developer, we try to refactor our code to make it easier to understand and maintain, as well as more efficient.

Sometimes, a project just goes so far into the abyss for some reason or another, and there’s no possibility of reform. If you fix one problem, you still have 10000 other problems, and worse, every problem depends on each other. If you fix one thing you might break something else.

When a project has gotten to this point, sometimes the best thing to do is salvage what you can, flush the rest, and build a new project on sounder principles.

Do you think that the U.S. health care model is also in need of a similar regulatory reset, and is such a thing even possible within the current governmental framework?

Kevin,

The system has gotten out of control. It is true that 32 million Americans are without insurance, but many of those uninsured have chosen that route due to the outrageous premium.

So, at the crux of the issue, cost is increasing rapidly. As you’ve mentioned, major corporations(insurance companies, drug makers) have lot to do with the cost. But, outrageous lawsuits against doctors have increased their malpractice premiums astronomical in the recent years. Consumer always pays for the entire cost of the food chain in any industry.

I am now afraid that the government has given more favors to the insurance companies as they will have more people buying insurance due to mandate. I don’t see any provision to control cost as it is not possible without a major overhaul of the system.

Instead of making massive changes, government should have adopted free market principles to make systemic changes — tort reform, allow insurance companies to compete in all the states, provide tax benefits to major hospital chains to implement more technology etc.

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