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The Health Care Debate Decided…For Now

The Health Care Debate Decided…For Now

What it means for you


The Supreme Court ruled last week that the Patient Protection and Affordable Health Care Act (“the Bill”)–a controversial piece of legislation that aimed to provide all Americans with affordable health care–is constitutional. The Bill was written during President Obama’s first two years in office and signed into law on March 23, 2010, despite no support from Republicans and votes from only two Independents.

The Controversy

The Bill was passed in the midst of much opposition and controversy while the Democrats were in control of both houses of Congress. Almost immediately after the Bill was signed, 26 states joined to challenge its constitutionality, based mainly on whether the Individual Mandate–the provision that requires an individual to purchase health insurance or pay a fine–was an abuse of Congressional power under the Constitution’s Commerce Clause.

Supporters of the Individual Mandate claim that when everyone carries health insurance, the costs are spread around and this could lower the overall costs of health insurance. The idea is that people should not be allowed to opt out of the system until they need health care, because, by that time, they will likely be very sick; this will increase costs for the people who do carry health coverage. Opponents of the bill claim that the federal government should not have the right to force an individual to take on an additional expense, which should be a personal decision.

Before the Supreme Court heard the case, the law went before four different federal appeals courts, with varied results. Two courts voted to uphold the law, another court struck down the individual mandate, and the fourth court put off making its decision until penalties for failing to buy health insurance take effect in 2014.

The Ruling

There were two main issues before the Supreme Court. The main focus was on whether the Individual Mandate improperly expanded the power of Congress in violation of the Commerce Clause. The Majority determined that the Individual Mandate was not a penalty, but a tax that the federal government had the power to enforce. Writing for the Majority, Chief Justice John Roberts stated,“The individual mandate does not regulate existing commercial activity. It instead compels individuals to becomeactive in commerce bypurchasing a product, on the ground that their failure to do so affectsinterstate commerce.” The Court went on to say,“Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.”

The other challenge before the Court concerned the expansion of Medicare, which the Court found constitutional, but also noted that the federal government should not threaten states that do not comply with the new regulations with loss of funding.

What’s in the Bill?

With the Supreme Court upholding the Bill, the provisions will be instituted in the next few years, unless the political climate changes and a new Republican government votes to repeal the Bill. Some of its more significant provisions include:

- Expanding health insurance so that children up to age 26 may be covered by their parents’ policy. It will also prohibit insurers from penalizing or dropping coverage for individuals with pre-existing health conditions. While the majority of these provisions are set to be instituted in 2014, many insurance companies have already made changes in their policies to allow for expanded coverage under the Bill.

- Expanding Medicaid coverage to more poor families.

- Closing the Medicare “donut hole” by providing rebates and discounts to seniors.

- Creating an insurance exchange, which would allow families and small businesses to compare insurance plans and costs within their states and also offer government subsidized options. The exchanges are set to begin service in 2014.

- Requiring that all employers with 50 or more full-time workers provide health insurance for all employees or face a penalty.

- Requiring that individuals not covered by Medicaid or an employer pay for their own health insurance or pay a penalty (the Individual Mandate).

The Price Tag

The cost for the bill came in at a little under $1 trillion–about $980 billion total. To finance it, Congress imposed the following tax cuts and revenue raisers:

- Almost 50% of the Bill would be paid for by imposing Medicare cutbacks and reducing outlays to doctors and hospitals.

- The rest of the Bill will be funded by additional taxes. For families who make $250,000 or more a year ($200,000 for single filers), the Bill creates a new tax on “investable income” of an additional 3.8 percent. This includes income from capital gains, real estate, rent, royalties, ordinary income distributions and distributions from variable annuities. So, to the extent that a family earns more than $250,000 in income and investments, anything above that threshold would be subject to the additional 3.8 percent tax (on top of the usual capital gains/ordinary income/dividend income tax rates).

- In addition, the Bill increases the Medicare tax on wages above $250,000 by .9 percent.  This would be added to the tax already imposed on Medicare above the threshold income limit. The Medicare tax and the tax on investment income will be in effect in 2013.

- The Bill will also raise revenue by imposing an excise tax on high-end insurance plans for executives, known as “Cadillac Plans.”

- A 10 percent tax on services at tanning salons.

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