Thursday, June 28, 2012

States Win Interesting Powers in ACA

The highly anticipated Supreme Court decision regarding the Affordable Care Act has come down as a split decision. The individual mandate is upheld not under the Commerce Clause but as a tax. By 2016, the tax will be 2.5% of gross income. So, for a household income of $150,000, you can expect to pay $3,750 if you go without health insurance. This figure is less than the cost of today's health insurance for a family of four. However, what about a single person working in Silicon Valley? If they are young, single, and make $150,000 a year, plus do not feel the need for health insurance, then they will be required to pay a tax of $3,750. The question becomes whether this $3,750 can be levied or not, because the tax cannot be more than the cost of insurance in the zip code where this person resides. For example, if the average health insurance cost in this person's zip code is $2,400, then the tax is limited to this $2,400 amount. I have a question. Who is going to figure this out for every person in America? I presume the IRS.

The second part of the decision that was struck down was that the States risk losing 100% of their Federal funds for Medicaid. The Supreme Court held that this clause was unconstitutional and termed it was like "holding a gun to the head" of the states to comply. This brings up a very interesting predicament. What if a state says that they do not want to expand Medicaid to allow those under 133% of the poverty level to obtain Medicaid coverage? What is the potential effect of this? It would seem that it would keep the status quo as it is now. These people would continue to go to the Emergency Room for their minor illnesses and continue to clog up the system.

Also, how would "everyone" obtain health insurance coverage if these people, those under 133% of the poverty level were in a state that refused to expand Medicaid to cover them? This certainly presents an interesting dilemma.

Other factors of this Affordable Care Act are some taxes that go into effect, because of it. There is a 3.8% tax on capital gains. If the current tax rates are allowed to expire at the end of this year, then the capital gains rate will climb at the highest level to 43.4%. It is 20% today.

An interesting quote from the opinion was this one. "But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people."

Perhaps the most telling quote in the decision is this one, however. "It is not our job to protect the people from the consequences of their political choices."

The voters voted for their elected officials and the ACA is the result of those voters decisions. Look on the bright side. Voters can choose a new direction this November.