Now that -- thanks partly to Republican intransigence about "repeal and replace" -- ACA / Obamacare (which, remember, are the same thing) is in the news again, and, especially when confronted with the Republican alternatives, people have gotten to know and to fall in love with Obamacare all over again, I thought it might be useful to post this column from a couple of years ago about the "mechanics" of Obamacare. Had the Republican repeal effort succeeded, I believe we would have had one more instance of Joni Mitchell's perennial question: "Don't it always seem to go that you don't know what you've got til it's gone?"
In case you think the story of Chicken Little’s cry “The sky is falling!” is something from a fable, you should know that a cognate form of this fable has been acted out in real life every time conservatives and progressives have clashed over any matter involving any significant alteration of the social and economic conditions of American society. That is to be expected: conservatives … well … conservatives conserve. So conservatives said the sky would fall if slavery ended, because formerly enslaved black men would take up arms, kill their former masters, and rape white women; or that if women could vote, they would abandon their husbands and children in favor of lives of prostitution … and they might even smoke, etc., etc. Now similar alarms are being raised about unprecedented levels of ostensibly stultifying and godless government coercion that are certain to arise from the Affordable Care Act (ACA), a.k.a. Obamacare or O'care. Well, walk outside. Look up. You will observe that the sky is still there. It will be there tomorrow. ACA is about as revolutionary as Lawrence Welk playing Form 1040 and Schedule A as sheet music. In fact, far from being revolutionary, O’care is firmly embedded within the near-century-old tradition of using the tax code as an instrument of behavior modification. It’s business as usual, nothing to worry about.
It’s about as innovative as buying a house. You have two basic choices vis a vis housing: live in someone else’s house / apartment, or buy your own house. Rent or buy? That’s an impossible question to answer at that level of generality. But certainly one important factor to take into account are the tax consequences of home ownership. If you elect to buy your own house, then you can leverage the income-tax deductions relating to mortgage interest and real-estate taxes. So, if you buy your own house, these deductions mean that, all other factors being equal, your tax liability will be less, relative to what your tax liability would have been if you had continued living in rental housing. On the other hand, if you elect to continue living in rental housing instead of buying a house, you will not be able to take advantages of these deductions. In that case, and all other factors being equal, the result will be that your tax liability will be greater, compared to what it would have been if you had bought your own house. That is why, at least from a tax standpoint, buying your own house is so advantageous: it amounts to a choice of paying yourself (by purchasing something you own) instead of paying the government (in the form of an additional tax burden).
Note three simple things about this well-known scenario: (1) the tax incentive to buy a house is written into the tax code, so as to (2) encode into the tax laws an incentive to pursue a form of behavior – buying your own house – that, for arguably good and sufficient reasons, Congress believed was socially beneficial for the Nation at large, but (3) does so in such a way as to leave the ultimate decision – rent or buy? – strictly up to the individual. The tax code incentivizes home ownership but does not mandate it.
Now for the other half of the analogy. Under ACA, buying – nor not – health insurance is about as boring as buying a house … which is to say, be careful reading about it, lest you descend into an irreversible coma. You may either buy your own health insurance or you may elect not to do so. If you elect to buy your own health insurance, then your tax liability will be less, relative to what it would have been if you had not bought health insurance, because you will not be assessed the misnamed (see below) “individual-mandate penalty”. This is analogous to buying a house, leveraging the mortgage-interest and real-estate tax deductions, and so reducing your tax liability. Or you may elect to not buy health insurance, in which case, as a result of the … one more time … misnamed “individual-mandate penalty”, your tax liability will be greater.
The three simple things about this scenario correspond to the previous three simple things about buying a house: (1) the tax incentive to buy health insurance is written into the tax code, so as to (2) encode into the tax laws an incentive to pursue a form of behavior – buying health insurance – that, for arguably good and sufficient reasons, Congress believed was socially beneficial for the Nation at large, but (3) does so in such a way as to leave the ultimate decision – buy health insurance or not? – strictly up to the individual. The tax code incentivizes but does not mandate the purchase of health insurance just as the tax code incentivizes but does not mandate buying a house.
And speaking of mandating and not mandating, please note: there is no "individual mandate". A "mandate" is an absolute categorical command to engage in a certain type of behavior, e.g., a subpoena to testify in court is a true mandate. A true mandate, properly so-called, is not a case of "do-it-or-not'. A true mandate is a case of "do-it-or-else". The so-called "individual mandate" is in the former, not the latter, category. Ditto the equally-misnamed "employer mandate", though that is a rant for another time.
But what about penalizing people for not buying health insurance? I could as well ask the same question about buying a house. If you own a house, take your previous year’s tax return, back out the mortgage-interest and real-estate tax deductions, and recalculate what your tax liability would have been if you did not own a house. Subtract your actual tax liability from that. The difference is the additional tax you would have paid for not being a home owner. In other words, that additional tax -- that "delta-dollars" -- represents the “penalty” you would have paid for choosing to live in an apartment. Bottom line: there is no more of a penalty for not buying health insurance than there is a penalty for not buying a house. Or more accurately: if one is a penalty, then so is the other. If the tax code “coerces” you to buy health insurance, then – in the very same sense and to the very same degree – the tax code “coerces” you to buy a house. So conservatives should be howling as grievously about the latter as about the former. (In fact, they should be howling grievously about all the Schedule A deductions, all of which are incentives to engage in a certain type of behavior, e.g., contributing to charity: the tax code is chock-full of such faux "penalties".) That conservatives do not thus caterwaul belies either their understanding of the law or just plain mendacity. That is why the “penalty” is mis-named. As the Supreme Court determined in NFIB v. Sebelius, the “penalty” is not a “penalty”. It is a tax.
Well ... are you bored until you weep yet? If so, then ... good! ... Your boredom means that you are getting the hang of how un-revolutionary O'care is. Obamacare is merely one more step in an almost-century-old strategy whereby the government manipulates the tax code to encourage socially constructive behavior -- without abrogating individual choice. Again: the key word is "incentive" not "coercion". (There is a lot of coercion in the tax code, of course, e.g., if your income exceeds a certain threshold, you are coerced into paying taxes in the first place, and you are coerced into not counting your daughter's Guinea pig as a dependent.) Oh, to be sure, the consequences of ACA will indeed be significant. The previously unbreakable bond between health insurance and employment will be dissolved, and health care will be universal -- basically an entitlement like Social Security and Medicare that will mean additional security -- not an absolute guarantee ... if you want one of those, go buy a fridge from Sears ... but at least an end to the prospect of bankruptcy and penury because of a single serious illness. (This issue of security is, I think, what actually torments conservatives within the secret, usually unacknowledged, recesses of their hearts: the prospect that the vicissitudes of chance -- which many of them see as a vehicle for the outworking of DIvine Providence -- will no longer have a monopoly on people's lives. Either that, or conservatives have a clandestine nostalgia for a kind of "soft slavery" that de facto binds people to the plantations of the 20th and 21st centuries, colloquially known as "corporations". My money says the latter ... but never mind.) Even in the present law, there is still ample kowtowing and knuckling-under to Big Pharma and Big Medicine, and in the best of all possible worlds, we would have instituted something like "Medicare for all". (The biggest mistake ACA makes is trying to treat health care / insurance as a kind of bastardized, neither-fish-nor-fowl hybrid of public utility and private business.) Nevertheless, as Dr. King said, quoting the old slave hymn "We ain't what we ought to be, and we ain't what we gonna be, but thank God we ain't what we was!"
James R. Cowles
Chicken Little ... Dave Walker,2006 ... CC 2.0 Generic
Code of Federal Regulations ... CoolCaesar, English Wikipedia ... CC by SA 3.0
Blood pressure cuff ... Flickr ... Public domain