The Supreme Court’s narrow decision today in favor of the Affordable Care Act reflect’s the court’s willingness to address the biggest economic problem of health care with the simplest tool.
The problem is the free rider problem, where millions of people skip out on health insurance payments, then plead poverty or ignorance when they get sick. The cost of their care is borne by the rest of us. The solution, in its simplest form, is a tax. Buy health insurance or pay into a fund that covers the uninsured.
Faced with the choice, millions of people will now opt to buy health care.
Reading between the lines of Chief Justice’s John Roberts finely hewn prose, it is clear that the court believed the Congress erred when it passed a bill cloaking the health care tax in a so-called “penalty.” The court believed disguising the penalty as a non-tax fee didn’t pass the smell test. But as a tax it stands.
Upholding the act immediately sent the markets lower, as observers suggested the health care mandate will increase costs to employers and make the U.S. economy less competitive. Small businesses will be less eager to hire and entrepreneurs will be discouraged from starting companies. Speaking on CNBC, Kentucky Sen. Rand Paul, a Tea Party member and opponent of the Act, said “our people are aghast at this ruling.” He predicted action in Congress to address the ruling. He also predicted that thousands of employers would dump their health care coverage for employees and put them into government-funded plans.
The other side of the argument is that by addressing the free-rider problem in largely upholding Obamacare, the Supreme Court has greatly leveled the playing field for employers and individuals alike. It has created a framework for reforming a U.S. economy that counts nearly 50 million of its citizens as uninsured and that spends nearly $1 out of five on health care.
As the sage Yogi Berra once said: The future isn’t what it used to be.
When it comes to Obamacare, upholding the law will indeed change the nation’s economic future. What it means for politics remains to be seen.