A BRIEF SUMMARY OF THE NEW HEALTH CARE LAW

As mentioned in an earlier post, I went to my gym earlier in the week and found out that they were discontinuing offering the tanning bed to members, starting in May.  This was the first ripple from the new health care law - there will be a 10% tax on indoor tanning services, and so my gym is simply dropping the service rather than dealing with the administrative headaches of collecting and reporting the tax.  So, I have been digging around to try to separate the wheat from the chaff in the debate, and find out what else we can expect, and when we can expect it.  Obviously, I cannot capture the entire law and its ramifications in this article - the sea is so large and my boat is so small - but I have tried to distill out the essence.  So here goes:

2010     -No denial of coverage to children based on preexisting conditions. 

             -Children allowed to stay on their parent's insurance plans until age 26.

             -$250 rebate for Medicare beneficiaries who hit “donut hole" ($2,830 annual prescription drug limit)

            - Adults with pre-existing conditions eligible for temporary high-risk pool (superseded in 2014 by health care exchange program)

             -Insurers prohibited from charging co-pays or deductibles for preventive care and medical screenings on NEW insurance plans (existing plans grandfathered till 2018).

             -Insurers are prohibited from dropping policyholders when they get sick

             -New website at Dept. Health and Human Services will provide consumer insurance information for individuals and small businesses in all states

2011     Seniors in “donut hole" ($2,830 annual prescription drug limit) will receive a 50 percent discount on brand name drugs. 

2013      3.8% Medicare Payroll Tax on investment income (interest, dividends, annuities, royalties, capital gains and rents) for individuals who earn more than $200,000 annually and joint filers reporting more than $250,000.

2014     -Everyone must purchase health insurance or face a $695 annual fine; exemptions for financial hardship or religious beliefs

             -Subsidies to purchase insurance for individuals with income up to 400% of the poverty line.

             -Tax penalty ($2000 per employee) on employers (over 50 employees) who do not offer health insurance to their workers. 

             -Medicare Payroll withholding increases from 2.9% to 3.8% on earned income.

             -Qualifying medical expenses income tax deduction increases from 7.5% to 10%

             -No lifetime and annual limits on coverage 

             -No denial of coverage to anyone with preexisting conditions.

             -Exchanges created for small businesses to purchase coverage

             -States expand Medicaid to include childless adults.  Federal Government pays 100 percent of costs for covering newly eligible individuals through 2016. 

2018     -Insurance companies will pay a 40% excise tax on "Cadillac" high-end insurance plans worth over $27,500 for families ($10,200 for individuals). 

             -All insurance plans will provide coverage for preventive care and checkups without co-payment.

The official name of the Act is the "Patient Protection and Affordable Care Act of 2010" in the event you want to google it and look for particular provisions.  Certain provisions of the Act have already been challenged in court - the focus is the "individual mandate" - can the federal government order you to buy health insurance and fine you if you do not?  No legal scholars on either side suggest that the government cannot accomplish virtually all of what this new law proposes - the further regulation of health care and insurance - by passing the law and then raising taxes to pay for it.  However, the new law, while it raises certain taxes, avoids raising income taxes on "the middle class" to pay for the expanded coverage by instead requiring each individual to buy insurance.  The result is that this is not a "tax", but an "individual mandate".  That explanation is sufficient for some, and deficient for others.  The Supreme Court will eventually sort it all out.  

©2010  Douglas P. Humes 

The first ripples in the health care pool ...

I went to my gym this morning to swim.  There is a tanning bed there - but not for long.  It is being discontinued as of May 15th.  The new health care law puts a 10% tax on individuals receiving indoor tanning services.  The tax has to be explained, collected, reported, and the cost of the tax flows directly to the user - the price paid for the service must be increased.  Much easier for a gym like mine, offering it simply as an additional service, to discontinue it.   But what about a business set up solely for tanning?  Will all tanners continue to pay the higher price?  Basic economics principles say no - elasticity of demand as a function of price - and so use will decline, and the businesses on the margin will close.  The tax primarily affects female business owners, who own about two-thirds of tanning salons in the U.S.  Fewer businesses in the industry mean fewer suppliers and manufacturers.  A net loss of jobs at both the retail and wholesale level.  This provision is a tiny little piece of the entire bill - one sentence in the  thousands of pages, but already it has a ripple effect.  It is easy to see the loss here.  What is gained?  And that is the real question that is overlooked in the loud and angry debate - what will the actual effects of the bill be when the laws of economics and individual behavior kick in?  The only thing certain is that no one knows.  

Florida AG and 12 other states file suit against new health care law

"Attorney General Bill McCollum today filed a lawsuit against the U.S. Department of Health and Human Services, U.S. Department of Treasury and the U.S. Department of Labor alleging the Health Care Reform bill signed into law by President Obama this morning is unconstitutional.  The bipartisan lawsuit was joined by 12 Attorneys General and is the first challenge of the new law.  ...The Attorneys General from South Carolina, Nebraska, Texas, Utah, Louisiana, Alabama, Colorado, Michigan, Pennsylvania, Washington, Idaho, and South Dakota joined Florida’s lawsuit, filed today in the United States District Court for the Northern District of Florida."  [source:  http://www.myfloridalegal.com/newsrel.nsf/newsreleases/2426DBDB65C843D7852576EF005DB3A4 ]

Here's a link to the actual complaint that was filed, for those few people who still like to read about the issues before taking sides:  

 http://www.scag.gov/newsroom/pdf/2010/healthcare.pdf

The interesting part will come after the answer has been filed and both sides file briefs, exploring the fault line between the rights of the States under the 10th amendment and the use of the Commerce Clause to justify the individual mandate.  

The 10th amendment:  "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

The Commerce Clause:  The United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes". 

In first year law school, we spent about half of the year in our Constitutional Law class looking at the evolution of the Commerce Clause, from its modest beginnings to basic interstate trade issues, to the New Deal and Franklin Roosevelt's Court Packing plan, and the "switch in time that saved nine," where two justices who had voted with the conservative court switched their votes and created a new majority which became more deferential to Acts of Congress.  The reach of the Commerce Clause broadened in the 1960's for use in attacking segregation in the South - and reached its peak when the Court found that the federal Civil Rights laws reached all the way in to the kitchen at Ollie's Barbecue, a family owned restaurant in Birmingham, Alabama, specializing in barbecued meats and homemade pies, because of "meat that it bought from a local supplier who had procured it from outside the State".  That was the commerce that was being regulated:  hot dogs and buns that "moved in commerce" and arrived at Ollie's Barbecue.  

It certainly led to the right result - seating and service for blacks in all restaurants in the South, but through the back door.  For those who are result driven, and don't care about the path traveled to get there, that is all that matters.  For those who view the Constitution as an agreement between the states and the federal government as to what rights they each have, and a check on government power, the use of the Commerce Clause as a trump card, to be played any time the Federal government wishes to legislate, seems to be a usurpation of rights reserved to the States.  Thoughtful people can hold either view.

Reading the pleadings, the briefs, the opinions, is interesting perhaps for lawyers.  We were trained to think that issues like these should be resolved based on reason and the rule of law.  But the loud and angry mob on both sides of this debate will insist that the only correct result is the one they have emotionally invested in ... and no matter which way the case is decided, there will be a mob to launch personal attacks on the judges who make the decision.   And I know many lawyers who are more comfortable in the mob than in the legal arguments.  A sad commentary on the tenor of our public debate, where we have largely lost the capacity for civil discourse, and respect for our government and its institutions.  We are poorer as a result.