Instead of “bending the curve,” Obamacare broke the law. Not only is the new healthcare law fiscally unsustainable, it’s unconstitutional — at least according to a U.S. judge in Virginia.
In the end, of course, it will likely be the Supreme Court that determines the constitutionality of a key piece of President Barack Obama’s healthcare reform. If the majority should rule that Americans can’t be forced to buy insurance or face a fine — as the law would require — the entire plan could implode. But whichever way the high court rules, the massive overhaul will itself need an overhaul, if not a complete scrapping, if America is going to get healthcare spending under control and prevent it from bankrupting the U.S. government.
While the White House is certainly displeased with the Virginia court’s ruling, the result could have been far worse. U.S. District Judge Henry Hudson said that while the mandate itself was unconstitutional, the finding didn’t infect the rest of the law, which could continue to be implemented. Trouble is if the Supreme Court eventually finds the individual mandate portion unconstitutional, Obamacare could still easily unravel.
Much of the reform is built around a simple tradeoff. Insurers are required to accept everyone who applies. In return, everyone has to buy a policy. While this means insurers have to accept folks with expensive pre-existing illnesses, they are theoretically compensated with more customers, both sick and healthy. But without the individual mandate, an adverse selection problem emerges — only sick people currently lacking coverage would have an incentive to seek insurance.
Jonathan Gruber, a healthcare economist at Massachusetts Institution of Technology and government adviser, calculates that such a scenario would reduce the law’s gain in insurance coverage by more than two-thirds — 80 percent of people without insurance would remain that way — and force companies to raise premiums on individuals by 40 percent. As he puts it: “Without the individual mandate, the entire structure of reform would fail.”
In short, the U.S. healthcare system would get even pricier while still leaving vast numbers of Americans without insurance. A more expensive system would mean government healthcare spending would rise even faster.
Even if the White House overturns the Virginia ruling, the system would still require major reform. A detailed review of the law’s fiscal impact by Obama’s own chief healthcare actuary predicts it will save less than originally envisioned. The increase in long-term Medicare hospitalization outlays, for instance, is still scheduled to double to 4 percent of GDP from under 1.7 percent currently. A preliminary forecast estimated the increase at as little as 30 percent.
So even if the law should meet the standard of constitutionality, it fails another standard — of sustainability. And there’s no court of appeal for that.