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The economic case against ObamaCare |
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The economic case against ObamaCare


ObamaCare is a classic case of a misguided and badly implemented government program. It restricts freedom of choice and imposes a series of bad new taxes. While taxes are needed to subsidize those ObamaCare participants who do not pay the full cost of their ObamaCare insurance, the selected taxes violate the accepted principles of taxation in every instance. Moreover, the law mandates coverages that increase the cost to those who do not want those coverages.

Not a single Republican voted for ObamaCare. Obviously, the Democrats, who controlled both houses of the Congress at the time, did not need or even want any Republican support for it. They wanted full credit for it. They’re now getting it.

From an economist’s point of view, the major defects of the law are:

• Its discouragement of competition in the health care industry

• The inequitable taxes it imposes to finance the health care system and its disregard of the principles of taxation developed by economists over many decades

• Its numerous fascist-like interventions in private-sector decision making

• The fact that it increases the cost of health care now and even more in the future

• Its negative effects on employment, particularly in a depressed economy

• Its negative effect upon medical advances, research and productivity.

Because ObamaCare prescribes what the insurance policies must cover, consumers have little choice in selecting a plan. As a result, insurance companies cannot compete by offering alternative policies. Consumer freedom of choice is nonexistent.

Among the worst of the taxes it imposes:

• A 2.3 percent tax on manufacturers of medical devices. It will raise costs of producing the product and, thus, raise insurance premiums.

• An excise tax on charitable hospitals failing to comply with ObamaCare. This apparently is directed against Catholic hospitals and those of other denominations that oppose abortions and providing contraceptives.

• A tax on brand-name drugs. Do we want to discourage invention of new drugs?

• A 3.8 percent Medicare tax, imposed on investment income over $200,000 for single people, $250,000 for married couples filing jointly. It is revealing of President Obama’s and leftists’ contempt for private investment, the only real source of productive jobs.

• A 40 percent tax on “Cadillac” plans, imposed on premium health plans beginning in 2018. Obama and the “progressive” Democrats cannot abide diversity of outcomes. Everyone should be equally poor since they cannot be equally rich under socialism. Everyone must suffer alike. And, of course, individuals should not be permitted to decide how to spend their money.

• End of the over-the-counter deduction. OTC medicines no longer will qualify for the medical deduction nor will expenses for flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs) and Archer Medical Saving accounts (MSAs).

Among the interventions in private-sector functioning:

• All businesses with more than 50 full-time-equivalent employees must provide health insurance to full-time employees. ObamaCare imposes a $2,000 per employee fine if the firm fails to enroll its employees. It’s an incentive for small businesses to remain small.

• ObamaCare limits the ability of insurance companies to tailor their plans to the customers’ needs.

ObamaCare is having a severe negative effect on the economy. Its obvious anti-private enterprise biases and its enormous cost are making this country less attractive for private investment.

The economic recovery has been very weak. Big and small business investment has been weaker than in any previous recovery. The media reported a lot of anecdotal evidence of businesses hiring larger numbers of part-time workers to avoid the costly impact of ObamaCare. It appears to be backed up by recent government statistics.

The character of ObamaCare with its anti-free market biases and its mandated coverages affects adversely private decisions to invest and innovate — the primary forces that create jobs, increase productivity and raise living standards.

Ray Richman is a professor emeritus of public and international affairs at the University of Pittsburgh.

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