Supreme Court should nix ObamaCare subsidies, instigate reform

The Supreme Court could improve American health care by striking down federal subsidies offered through—the federal exchange that sells insurance in states without government-run marketplaces.

Most Americans never wanted the Affordable Care Act. A recent Gallup poll found 56 percent disapprove of the law, and more than 30 states either have not set up exchanges or failed to establish a fully workable website.

The Competitive Enterprise Institute, which recruited four Virginia residents to bring suit, argues the Administration cannot offer subsidies through the federal exchange, because the specific wording of the ACA provides for subsidies only through state exchanges.

If the Supreme Court concurs, millions of Americans would either have to pay full price for health insurance or lose their coverage. However, private citizens would no longer face stiff taxes if they failed to purchase insurance, and businesses with more than 50 employees would no longer be required to provide coverage.

The entire ACA-inspired health care system would be upended but it needs to be.

The law has not kept its promises—some cynically made—and has created enormous burdens on the economy.

Americans were promised they could keep the health insurance plans they like, but millions lost serviceable policies that were declared illegal or made impractical for insurance companies to continue. Without ACA subsidies and its nitpicking rules, insurance companies would have a strong incentive to reintroduce those or similar policies.

ACA was supposed to lower costs. Yet economist and ACA architect Jonathan Gruber has acknowledged the administration was warned the law was thin on cost containment.

In many jurisdictions, the number of insurance companies offering ACA approved insurance plans fell so low that informal monopolies formed with local hospitals that push up rather than reduce costs and subscriber rates.

Many of the health insurance plans Americans could afford through the federal exchange have deductibles and copays so high as to render them useless.

In the 28 states that have adopted ACA extensions of Medicaid, many able bodied men are jobless and not seeking employment in part because that program gives them free health insurance. Millions of men between the ages of 25 and 65 are on the sidelines, collecting other government largess, not paying taxes and imposing enormous costs on the economy.

Obama is using the ACA to offer businesses a $3000 subsidy to hire immigrants. Those granted work permits under his temporary amnesty program are not eligible for ACA subsidies and businesses are not compelled to offer them health insurance or pay a penalty as is the case for U.S. born workers.

The ACA intrudes unconscionably on privacy and imposes terrible bureaucratic burdens. The Internal Revenue Service now tracks the health insurance decisions of every citizen and business, and forms for decisions are mind numbingly long for items such as a taxpayer request for a waiver from the individual mandate.

Democrats rammed the ACA through Congress without significant Republican input or support, and Obama refuses to consider meaningful fixes and alternatives.

A Supreme Court decision affirming the CEI position would force both sides to comprise—lest they face the wrath of voters who lost federal assistance for purchasing health care altogether.

Senators Richard Burr (R, North Carolina), Orrin Hatch (R, Utah) and Representative Fred Upton (R, Michigan) have proposed keeping parts of the ACA but junking the individual mandate and offering tax credits to low income individuals and block grants to states to craft reasonable Medicaid programs for those who can’t afford health insurance.

No doubt states would not offer free health care to just anyone who decides not to work. Rather closer to the real challenges to providing affordable health care coverage and limited in what they could spend by federal grants, states would craft solutions that genuinely contained costs—instead of encouraging monopolies and open-ended unrestrained subsidies to health insurance executives and hospitals.

Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.