The Good, The Bad, And The Unconstitutional

There are good laws, there are bad laws, and there are unconstitutional laws. One could argue that all unconstitutional laws are bad, but that does not mean all bad laws are unconstitutional.

I happen to believe that the Patient Protection and Affordable Care Act, widely though somewhat unfairly called “Obamacare” (“Democare” would be more accurate), is a very bad law. I think it will ruin the economics of health insurance by allowing healthy people to put off buying insurance until they are sick. I think it will lead many small businesses to drop health insurance for their employees entirely; I have already done that in my business. I think it will drive costs higher, not lower as its backers insist.

But I don’t think the law is unconstitutional, and I don’t think the Supreme Court, which is hearing three days of arguments this week, will strike it down. I don’t even think the law will survive on just a 5-4 vote. I doubt more than two or three justices will seek to overturn it.

This does not mean the Supreme Court will conclude that the health care overhaul is wise or good for the country. That’s not the role of a court. The only question is whether Congress was within its powers to write the statute that it wrote. And, unfortunately, it almost certainly was.

The key issue is the law’s mandate that all citizens obtain health insurance coverage or pay a penalty. Opponents say Congress overstepped the bounds of its constitutional authority. The law’s supporters argue that the mandate is within the power of Congress to tax and to regulate interstate commerce.

Interestingly, there likely would be less legal ambiguity if Congress had taken the more radical route of establishing a single-payer, national health care system, as many Democrats wanted. In that case, Congress would simply have been levying taxes to pay for a public good, as it already does in order to provide other government programs, including Medicare. While Medicare works by paying private practitioners, not by hiring doctors directly, that distinction holds little legal importance. In fact, for certain subsets of the population, including veterans and residents of some tribal reservations, the government already does provide health care directly through federally funded facilities. Many people would, and did, argue that a national health care system is not a good way to deliver the medical services Americans demand, but few would say it is unconstitutional. Medicare itself has never faced a serious constitutional challenge, and it has been on the books for nearly 50 years.

What makes the Affordable Care Act different is that, instead of requiring citizens to pay for health care collectively through taxes, it requires them to pay for it individually through premiums.

Those who consider the law unconstitutional call this an unprecedented intrusion into the private sphere. Never before, they say, has the government told people how they must spend their own money.

The problem with this line of argument is that it’s not true. If you have children, the government will enforce a certain standard of care for them. You have no choice but to feed, clothe and shelter your children – all of which costs money – lest the government take your children away and house them someplace else. The government will help you do these things if you can’t do it yourself, just as the new health law will subsidize the mandatory insurance purchase for those who cannot afford it.

The government requires me to buy seat belts as part of the price of a new car. It prohibits me from buying medications not deemed safe and effective by the Food and Drug Administration, and it even prohibits me from buying medications that are perfectly legal abroad and bringing them back the States. It prevents adults under age 21 from purchasing and consuming alcoholic beverages that are freely available to other adults. It prohibits selling cigarettes to minors and advertising cigarettes on television. All of these intrusions either require a purchase or prohibit a purchase. All are constitutionally allowed.

There also is not much difference between the insurance mandate of the Affordable Care Act and the theoretical operation of Social Security. In each instance individuals are required to pay for some benefit themselves – health insurance coverage or retirement funding – in order to avoid ending up in a situation of such misery that the government would be forced to provide for them. Of course, in practice, Social Security has become simply a welfare system in disguise, rather than a true individually-funded personal benefit managed by the government. But that’s irrelevant to the question of whether it would be constitutional if it operated in the way it is supposed to. Most people agree that it would be. And most Republicans would argue that it would also be legal, as well as preferable, for Social Security to require investment in privately run accounts, so individuals would truly save for their own retirements. This is hardly different from the health care insurance mandate.

Many Republicans know – regardless of whether they will say it – that everyone can and should be made responsible for providing for their own health coverage. And I suspect that many Democrats know – though almost none of them would say it – that the Affordable Care Act was hastily crafted and poorly thought out, with unanticipated consequences galore that are only beginning to emerge in thousands of requests for waivers and in the controversy over birth control coverage.

But the two parties have painted themselves into opposite, though equally inescapable, corners. Republicans are so committed to repealing the law that they cannot back up and admit that we still need to control costs and to bring millions of uncovered Americans into the health care payment system. The Republicans, therefore, are unable to propose any alternative solutions. Meanwhile, Democrats have put too much into the fight for the law to acknowledge that it is deeply flawed.

A Supreme Court ruling overturning the law would essentially be a call for a do-over. It would bail out both sides, giving them a chance to start fresh. A lot of people probably would like this. But that’s just not what courts are for.

The Supreme Court will likely rule by June. I think a do-over is not in the cards. The law that was passed is the one we’re stuck with. Now we have to figure out how to live with it.

About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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