With Republicans set to take over control of the Senate in January, there is renewed talk of their plans to fight President Obama’s healthcare law.
Given that Obama will be wielding a veto pen next year, the focus has shifted to whether Republicans could roll back pieces of the law — maybe even with bipartisan support.
In an editorial for its Nov. 23 print edition, the New York Times slammed the idea of repealing the medical device tax, the employer mandates, the insurer bailout, and the individual mandate.
Much of the editorial was misguided, but to the extent that it did raise legitimate points about the consequences of repealing certain measures in isolation, that only reaffirmed the case for fully repealing the law.
Let’s start with the tax on medical device makers. Because so many device makers are in Democratic states, repealing this aspect of Obamacare has attracted broader bipartisan support than any other proposed change to the law. The Times argued that “there is no good reason to eliminate the tax” and followed up by citing a Congressional Research Service report.
But the CRS analysis itself reached the opposite conclusion: “Viewed from the perspective of traditional economic and tax theory, however, the tax is challenging to justify.”
The reason is that, in general, it is better to spread taxes as broadly as possible rather than target tax specific goods or services. But when the government does impose excise taxes, it tends to use them to discourage the use of certain goods such as cigarettes — a condition that does not apply to the medical device tax, CRS notes.
It is true, as the Times mentioned, the CRS estimated that the economic impact of the tax wouldn’t be huge overall, but the report also concluded that “the tax also imposes administrative and compliance costs that may be disproportionate to revenue” and that “most of the tax will fall on consumer prices, and not on profits of medical device companies.” In other words, major corporations will largely be able to pass on the cost of the tax to patients in need of MRIs, pacemakers, heart valves and a litany of other devices. Perhaps the one positive thing that can be said of the tax is that it only represents $29 billion of the $1 trillion in tax hikes in Obamacare.
The Times argued against repealing Obamacare’s employer mandate, but suggested a reform “requiring employers to spend a minimum percentage of payroll on health benefits, with provisions to ensure that low-wage workers benefit.” But this would create a boatload of problems.
Just as an example, what size businesses would be hit by this requirement? Apply it broadly, and it’s a massive compliance tax on small businesses. Apply it only to businesses with, say, more than 50 employees, and the marginal cost of going from 49 to 50 employees is massive. Tying the requirement to a percentage of payroll is also an incentive for businesses to limit the size and compensation of their workforces.
The editorial noted that scrapping the employer mandate would increase federal spending as workers look to the government to purchase insurance, but that’s only because of the hundreds of billions of dollars of subsidy money available through Obamacare.
The editorial also addressed two other scenarios — repealing the individual mandate and repealing a program that would bailout insurers that rack up excessive losses during the first three years of Obamacare’s implementation. Repealing the bailout provision, known as the “risk corridors” program, would, according to the Times, “drive up premiums on the exchanges, because insurers would have to raise premiums to offset the additional risk.” And repealing the individual mandate would “send premiums soaring.”
In reality, insurers are taking on “additional risk” because Obamacare is forcing them to do so. That, in turn, is making insurers raise premiums for younger Americans, which makes insurance less attractive to them. This necessitates a mandate requiring them to purchase insurance that they don’t want and creates the need for a program that would bail out insurers in case too many young people decide they would rather pay a penalty than purchase insurance.
The overarching point of the editorial is that if certain burdensome provisions of Obamacare are repealed, negative consequences would result. But those consequences wouldn’t exist in the first place were it not for Obamacare — which is a pretty good argument for repealing the whole darn thing.
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